UPDATE 1-Brazil's Cielo beats estimates on strong volumes

Tue May 6, 2014 8:42pm EDT

(Recasts to add details on earnings, background from paragraph 1)

SAO PAULO May 6 (Reuters) - Cielo SA, Brazil's largest card payment processor, beat first-quarter profit estimates on Tuesday as transaction volumes and equipment rentals came in atypically high in what usually is a weak quarter.

The Barueri, Brazil-based company earned net income of 805.9 million reais ($361.3 million) in the quarter, well above the average estimate of 737 million reais in a Reuters poll of five analysts. Profit jumped 11.5 percent from the prior quarter and 25.3 percent from a year earlier, according to a securities filing.

Transaction volumes surged on an annual basis, but fell on a quarterly basis because of a seasonal decline in retail and commercial activity. Chief Executive Officer Romûlo Dias stepped up efforts to limit cost growth, helping push operating margins to the highest in a year.

Net revenue rose 17.5 percent from a year earlier, while costs rose 18.4 percent and sales, general and administrative expenses climbed 28.3 percent. Net revenue, at 1.82 billion reais, fell short of the 1.95 billion reais that analysts estimated in the poll.

Rental of payment processing equipment, known as POS, had an increase of 7.4 percent on an annual basis and of 2 percent on a quarterly basis, the filing said. Prepayments of receivables rose 80 percent on an annual basis, helping drive net income higher.

Earnings before interest, tax, depreciation and amortization, a gauge of operational profitability known as EBITDA, rose 16.7 percent to 1 billion reais in the quarter. The poll predicted EBITDA of 927 million reais.

EBITDA rose to 55.1 percent of revenue in the first quarter, the highest so-called EBITDA margin in a year, the filing showed. In the poll, the expected margin was 55.8 percent.

Management will host a conference call with analysts to discuss first-quarter earnings early on Wednesday.

($1 = 2.23 Brazilian reais) (Reporting by Guillermo Parra-Bernal; Editing by David Gregorio and Eric Walsh)

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