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Volume 6 No. 217


A new bill passed by the Brazilian Congress, which would share out oil revenues amongst the country's 27 states, "could compromise" the state of Rio de Janeiro's ability to host the mega sporting events coming up in the next few years, according to Viana, Sorosini & Barros of GLOBO. The bill still needs President Dilma Rousseff's signature before it can be made into law. Rio de Janeiro state Governor Sergio Cabral was quick to criticize congress' decision. Cabral said, "A law project like this would create a collapse in the public finances of the state. It's absolutely not viable. We are going to close our doors, we won't do the Olympics, we won't do the World Cup." State projections indicate Rio would lose R$116.7B ($57B) through '30 if Dilma signs the bill. Cabral said that he was confident the president would veto it. Cabral said, "I am absolutely calm about the fact that the president will veto it. She already announced it publicly. The law project is unconstitutional" (GLOBO, 11/8). BLOOMBERG's Rabello & Colitt reported that the royalties bill has been stalled since '09 because oil-producing states, especially Rio and Espirito Santo, have "resisted demands from other states for a bigger share of the bonanza." Consulting company Perspectiva Political analyst Andre Pereira said that the president will "face pressure from all sides." Pereira said, "She’s between a rock and a hard place, having to choose between upsetting a few close allies and a lot of non-producing states. This battle won’t be over soon" (BLOOMBERG, 11/7).

Adidas "has trimmed its '12 sales forecast amid a continuing sales slump at Reebok, whose sales have fallen sharply for a second quarter," according to Victoria Bryan of REUTERS. The world's second-largest sportswear group after U.S. rival Nike said on Thursday that "it now expected '12 sales to rise by a high single-digit percent, compared with a previous forecast for a rise of almost 10%." Adidas also reported third-quarter operating profit of €494M ($630M) and sales up 4% to €4.17B ($5.3B), in line with expectations for €490M ($624M) and €4.16B ($5.3B)." Reebok "has had a torrid year in which its toning shoes fell out of favor, it discovered fraud at an Indian unit, and lost a major American football contract." Adidas "has performed better than rivals Nike and Puma this year, taking market share in hotly contested countries such as China." The "one black mark on its record has been Reebok, whose sales fell 25% in the third quarter, following a 26% fall in the second quarter." Adidas shares, up nearly a third in value this year, were down 3.2%  by 10:10am GMT, "the biggest faller on the DAX index of leading German companies" (REUTERS, 11/8).

LOCKOUT WOES: In London, James Wilson reported that "Reebok is also being hit" by a player lockout in the NHL, "where it is an official supplier." Adidas said that "sales were being affected during the current quarter, one of the most important for the sport." The NHL dispute was one of several factors that Adidas said "would hit fourth-quarter sales, including its 'clean-up' in India and poor comparisons with a period when Olympics products started hitting shops last year." Adidas CEO Herbert Hainer said, "This is a material headwind for our smallest quarter. We expect to be able to offset most of these headwinds. Based on that, we have made some small adjustments to our full-year guidance" (FINANCIAL TIMES, 11/8). REUTERS' Bryan also reported that "adidas is seeing the first signs of success at its struggling Reebok brand." Hainer said, "Classics are doing well, Kids is doing well, I'm quite convinced we will be back to growth in 2013" (REUTERS, 11/8). The HAMBURGER ABENDBLATT reported that "due to a traditionally weaker fourth quarter adidas still forecasts a profit between €770M-785M ($980M-999M), which equals growth of 15-17% in comparison to '11" (HAMBURGER ABENDBLATT, 11/8).

CATCHING UP IN CHINA: In N.Y., Nicky Redl wrote that in Greater China, adidas' "sales raced ahead by 11% on a currency neutral basis," and company officials said that "they expect this positive regional development to continue." Nine-month sales in China "increased 30% on the year, and 16% on a currency neutral basis." Adidas’ main rival Nike, meanwhile in September, reported "its second straight quarter of declining overall profit, as slower growth in China and a surge in marketing costs weighed on its bottom line." Nike’s "future orders in China fell 6%, indicating a further drop in demand." At 10% in the first half of the year, adidas’ percentage of sales generated in the region "is only slightly smaller than Nike’s" (WALL STREET JOURNAL, 11/8).

Spanish tax agency AEAT "has recouped €132.9M ($169.5M)" from several clubs in Spain's top two football divisions since the start of the year, according to the EFE. According to AEAT officials, Spanish clubs still owe the agency around €700M ($892.8M). The strategy for the AEAT in relation to the football sector is to "prevent the debt numbers from increasing while reducing the already existing ones" (EFE, 11/6). BLOOMBERG's Alex Duff reported that back in April, the European Commission said that it was examining whether Spanish clubs were "improperly receiving state aid under agreements that delay tax payments." During the same time period, La Liga club Atletico Madrid CEO Miguel Angel Gil said in an interview that the club was paying €15M ($19.1M) a year of a €115M ($146.7M) tax debt. On Wednesday, Gil said that the club was not one that had seen its income seized by the AEAT, adding it had "met all its tax repayment deadlines." An AEAT official was questioned regarding which clubs had revenue seized, but said that he could not "comment on individual cases" due to government policy. Spanish PM Mariano Rajoy said that "football clubs are going to pay their tax debts like everyone else" (BLOOMBERG, 11/7).