Operating earnings may decline at Brazilian drugmaker Hypermarcas SA and apparel producer and retailer Cia Hering SA if the government moves forward with a plan to unify and redistribute state value-added taxes on interstate transactions, Bank of America Merrill Lynch analysts wrote in a report on Friday.
Hypermarcas, the nation’s No. 1 diversified drugmaker, might lose incentives equal to 20 percent of earnings and would require a 3 percent price increase over the course of eight years to fully offset the impact.
In the case of Hering, analysts led by Robert Ford estimate that total state tax incentives could represent 5 percent of gross sales and 29 percent of net income next year.
The bank has a “buy” recommendation on shares of Hypermarcas and a “neutral” rating on Hering.