Bloomberg News

Pao de Acucar Profit Falls 1.5% After Integration Expenses

November 07, 2011

(Updates with shares in third paragraph and analysts comment in fifth.)

Nov. 4 (Bloomberg) -- Cia Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, said third-quarter profit fell 1.5 percent amid one-time expenses related to the integration with Casas Bahia and Ponto Frio.

Net income declined to 133.5 million reais ($76.8 million), from 135.5 million reais a year earlier, the Sao Paulo-based company said in a regulatory filing yesterday. Profit before one-time items was 154.9 million reais, above the 142.5 million- real average estimate of six analysts surveyed by Bloomberg.

Pao de Acucar fell 0.2 percent to 64.86 reais in Sao Paulo trading at 11:39 a.m. New York time. The shares have fallen 6.4 percent this year, compared with a 16 percent drop in the Bovespa benchmark index.

Profit was impacted by 62.1 million reais in expenses related to the integration with Globex Utilidades SA, including the replacement of front-office systems, the company said in the statement.

“So far the turnaround at Globex is progressing as we expected with regard to margin expansion and financing discipline,” Banco Santander SA analysts Tobias Stingelin, Paulo Eduardo Albano and Joaquin Ley wrote in a report e-mailed to clients today. Santander has a “buy” recommendation on the stock.

The company’s investment will probably end 2011 between 1.2 billion reais and 1.3 billion reais, executive vice president Hugo Bethlem said in a conference call today. The company had set 1.4 billion reais as the maximum investment level slated for 2011, according to a press officer at the company.

Better Default Rates

The retailer’s defaults rates are expected to improve in 2012, Treasury Director Aymar Giglio said in the call.

“We are quite confident our default indicators will continue to improve,” Giglio said, without providing details.

Consumer loan defaults, or payments overdue for more than 90 days, held at a 15-month high of 6.8 percent in September, the central bank said on Oct. 26

The acquisition of Globex’s Ponto Frio chain and Casa Bahia Comercial Ltda. in the past two years made Pao de Acucar Brazil’s biggest home-appliance retailer. The conclusion of the acquisition allows Pao de Acucar to have “more aggressive cash generation and revenue growth” due to a bigger exposure to non- food sales, Banco Fator Corretora analyst Renato Prado said in an Oct. 25 phone interview from Sao Paulo.

“There has been a clear change in the last two years,” Prado said. “When the group had a 75 percent focus on food, it was very limited in periods of economic expansion. Now the potential is much bigger.” Banco Fator has a “buy” recommendation to the stock.

Net sales in stores open for more than one year rose 10.6 percent in the third quarter, compared with the same period last year. Net sales rose 56 percent to 11.1 billion reais, including Casas Bahia operations, the retailer said in an Oct. 11 statement sent to Brazil’s securities regulator.

Margins on earnings before interest, taxes, depreciation and amortization fell to 6.5 percent in the third quarter, from 6.9 percent the same period last year.

--Editors: Adriana Brasileiro, Helder Marinho

To contact the reporter on this story: Fabiola Moura in New York at

To contact the editor responsible for this story: Helder Marinho at;

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