Bloomberg News

Fibria Gains on Stronger Currency, Commodity Prices Outlook

October 27, 2011

(Updates with closing prices in second paragraph.)

Oct. 27 (Bloomberg) -- Fibria Celulose SA, the world’s largest pulp producer, jumped the most in three weeks on speculation a stronger Brazilian real will reduce the cost of paying its foreign debt and after a new plan to contain Europe’s debt crisis boosted the outlook for commodity prices.

Fibria rose 5.5 percent to 15.61 reais at the close of trading in Sao Paulo. The real strengthened 2.8 percent to 1.7099 per U.S. dollar, the strongest level since Sept. 15. The Standard & Poor’s GSCI index of 24 raw materials jumped as much as 3.5 percent.

“The new rescue plan for Europe improves the outlook for all commodities, including pulp,” Pedro Galdi, head strategist at SLW Corretora brokerage, said in a telephone interview from Sao Paulo. “The stronger real should help Fibria to reverse the negative impact the currency had on its balance sheet in the third quarter.”

European leaders persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the rescue fund, responding to global pressure to step up the fight against the financial crisis.

Fibria posted a loss of 1.11 billion reais ($640 million) in the third quarter, the biggest since the merger that created the pulp producer in 2009, according to a regulatory filing yesterday.

The quarterly financial loss was 2 billion reais, including 558 million reais in currency hedge losses, after the Brazilian real slumped 17 percent in the period. The real’s decline increases the value of the company’s dollar-denominated debt in local currency and is considered a loss under Brazil accounting rules.

--Editor: Brendan Walsh

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net


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