Corinthians’ finances in 2021: under new management, football performance improves, but financial crisis remains severe | sport business

– Not thinking about a title, it would be to hear that we managed to put the financial part in order, that Corinthians no longer has any type of difficulty in honoring its debts. Not that we have the debt paid, because this is practically impossible to happen in the next two years, but that the next president takes the club with the healthier financial part – replied the manager.

Duilio said several times in the course of the interview that the most recent balance sheet numbers, referring to 2021, would show that the work has started to bear results. The manager has been restructuring the club since he took office, with the support of consultancies such as Falconi and KPMG.

The ge goes through the most recent financial statements, cited by Duilio at the time of the interview, to check the situation of Alvinegra’s finances. This report is part of the annual series on the finances of Brazilian football, with figures corresponding to last year.

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Corinthians finances — Photo: Infoesporte

A more comprehensive look at Corinthians accounts shows a worrying picture. The ratio between revenue (everything collected each year) and indebtedness (what there was to pay on the last day of each year) shows difficulties in honoring commitments.

Although the Parque São Jorge club has raised its revenue in 2021, with some reasons for happiness, debts remain at a very difficult level to deal with – both in their gross value, R$ 1 billion, as can be discovered through the detailing.

A detail: the alvinegra board says that it reduced its indebtedness last year from R$949 million to R$912 million. The difference in numbers is explained by the calculation adopted. In the ge series, debt is equal to total obligations, minus the amount available in cash.

The relationship between Corinthians’ revenues and debts

Source: Financial statements

A fact common to all clubs, Corinthians registered broadcasting rights above what it would have under normal circumstances, because of the pandemic. As the 2020 Brazilian Championship only ended in 2021, a relevant part of its payments was postponed to the next balance sheet, which makes reading a little difficult.

The consequences of this accounting are varied. It is necessary to assess the growth of transmission revenue with caution, for example, because the last two years have been hampered by this anomaly. In addition, due to having an atypical value in billing, the net result (profit or loss) for the year was pulled up.

Also along this line, which includes awards and payments conditioned to performance, Corinthians will soon see the results of recent investments to improve football. In 2021, the club achieved fifth place in the Brasileirão and a spot in Libertadores. Financially, both competitions will yield much more in 2022.

Corinthians’ billing profile in 2021

Source: Financial statements

In the commercial and marketing department, there is a positive highlight. Last year, Corinthians almost doubled its revenue from sponsorships and licensing, compared to the previous season, and soared as one of the clubs that earn the most in this line.

There is only one asterisk regarding sponsorships. In this revenue, the club accounted for about R$ 18 million referring to the contract with Taunsa. However, the company did not make the payments and, today, it is being charged by the alvinegra board. That is, the amount appears correctly in the billing, but did not reach the bank account, because there was a default.

In revenues related to the fans, such as ticket offices and supporters, the club is still affected by the pandemic, as it was unable to receive fans at the Neo Química Arena for much of 2021.

With the passing of the pandemic and also after restructuring the stadium business – which involves renegotiating the debt with Caixa and allocating these revenues – the need arises for Corinthians to significantly improve its performance in this area. With the second largest crowd in the country, the club is behind the main opponents.

Finally, in the transfers of athletes, there was a significant reduction in relation to the previous year. The association had achieved R$126 million net (after deductions for third-party participations and commissions) in 2020, and this amount dropped to R$27 million in 2021.

In all texts on finance, the ge makes the comparison between budget and financial statements. The idea is to put in parallel the projections made by the directors and the results obtained by them after one year. In this case, it will not be possible. The club did not publish the budget.

In the analysis of indebtedness, the general numbers are still frightening. Corinthians rounded off its debt by R$1 billion. Although the total value has stabilized and there is some good news, such as successful renegotiations, the scenario is still very challenging.

By classifying these obligations according to maturity, R$564 million is payable in the short term, that is, in less than one year. These creditors expect to receive from the club in 2022.

Corinthians does not reach that much in terms of revenue and still has all its costs to pay, so it is safe to say that it will be impossible to fulfill all commitments. The solution will be to renegotiate terms, seek borrowed money, roll over the debt, so that it can be paid later.

Corinthians’ indebtedness profile by maturity

Source: Financial statements

Faced with financial needs, Corinthians has been turning money into loans. In 2021 alone, BRL 158 million in new credits entered, while payments on previous loans totaled BRL 181 million. This is the job of the finance department to organize the cash flow and meet the demands, as far as possible.

In this banking part, the club owes financial institutions such as Daycoval, BMG, Bradesco and Santander. And there are also pending issues with ball managers, such as Giuliano Bertolucci, Carlos Leite and André Cury. Giuliano was the most benevolent in accepting payment only after 2023.

In relation to taxes not paid in the past, the alvinegra board signed a new agreement with the government, through the Emergency Program for the Recovery of the Events Sector (Perse). In total, R$ 187 million were renegotiated. The reorganization of these payments was important to alleviate short-term charges and lengthen them.

In addition to this most recent renegotiation, there are still taxes in installments via Profut. The sum of all these amounts exceeds R$ 400 million, the heaviest part of the Corinthian debt.

In the labor area, Corinthians took a leap. The amount owed in wages and labor charges is still significant, but image rights were reduced by more than BRL 74 million between 2020 and 2021. Reducing this debt has a direct impact on the locker room, as it is the players of the main squad who are on the other. side of the negotiating table.

Finally, in the chart below, the column “others” brings together suppliers of products and services, clubs from which the board has purchased players in installments and agents. The value is very high and has been growing year after year.

Corinthians’ indebtedness profile by type in 2021

Source: Financial statements

Duilio Monteiro Alves assumed the presidency of Corinthians in 2021. The legacy of his predecessor was negative in several aspects. Andrés Sanchez sold the naming rights and advanced in the restructuring of the stadium business, but, at the club, he let the debt rise to a very dangerous level and had contestable decisions and results on the field. Duilio has accompanied him throughout this journey, as his football director.

In his first year as president, Duilio came up with a strategy that is commonplace in football history and doesn’t always work. He would make investments to qualify the team, in the expectation that good results would help to pull in revenue, which in turn would improve the ability to pay debts. In theory, it would work like this.

This philosophy was put into practice with reinforcements such as Paulinho, Willian, Giuliano and Róger Guedes. Not all of them cost to be hired, but all came with high salaries and images. As much as layoffs have helped to compensate them, the payroll is at R$ 234 million, the fifth largest in the country. The strategy also has costs.

In practice, what you see after 2021 is that the sports sphere has really improved. Fifth place in the Brazilian Championship increased the financial transfer, in the part linked to performance, and placed the club in the 2022 Libertadores, with dollar prizes that make a difference in the budget. Financially, this project needs to prove itself.

Looking at all the numbers with optimism, it is possible to conclude that there is merit in not letting the crisis get worse. And only. Corinthians failed to reduce its indebtedness, failed to improve its profile in terms of payment deadlines, and did not record a revenue high enough for financial recovery to begin.

Believing that things are going well as they are is too optimistic. Sooner or later, with demands from creditors, accompanied by lawsuits, executions and blocking of funds, the club will have to face reality. Basic players will need to be sold, or relevant people will leave the starting lineup, or it will be difficult to keep salaries up to date. One way or another, field performance will be at risk.

Duilio still has time. He is now halfway through his administration, having made public the results of just one season, in which there were additional challenges because of the pandemic. If the manager wants to fulfill what he said to Milton Leite in that interview, reach the end of his term with Corinthians reorganized and healthy, he will need to have extraordinary years, off the field, in 2022 and 2023.

About Abhishek Pratap

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