(Adds background, details on performance starting from
SAO PAULO, July 29 Cielo SA, Brazil's
largest card payment processor, missed second-quarter profit
estimates as rising general, administrative and financial
expenses offset robust volume growth and revenue from
Net income at the Barueri, Brazil-based company fell to 797
million reais ($357.3 million) in the quarter, down 1.1 percent
from the prior three months, according to a securities filing
late on Tuesday. A Reuters poll of seven analysts estimated
average profit of 807 million reais for the quarter.
Results from the past quarter may mark the start of a new
cycle of headwinds for Cielo, whose stock has been a favorite
among financial industry analysts for the past two years.
Revenue, operational earnings and proceeds from prepayments fell
short of expectations, while general and administrative expenses
topped forecasts by a large margin.
Among those potential headwinds, regulators could end the
remaining exclusivity agreements in the sector, dampening future
revenue sources. Concern is growing among analysts that expenses
per transaction will keep rising going forward, and that
competition from the payment processors controlled by lenders
Itaú Unibanco Holding SA and Banco Santander Brasil
SA will intensify next year.
Management will discuss second-quarter results with
investors at a conference call on Wednesday.
On a quarter-on-quarter basis, operational performance was
the weakest in a year, although profit and earnings before
interest, tax, depreciation and amortization - a gauge of
operational profitability known as EBITDA - posted healthy
increases, the filing said.
Net revenue rose 1.3 percent to 1.841 billion reais,
compared with the poll's forecast of an 8 percent jump, with
transaction volumes for debit and credit card payments as well
as more equipment rentals propelling scant revenue gains.
A 6.7 percent climb in operational costs stemmed from a jump
in transaction volumes and more information technology
investments, the filing said. Sales, general and administrative
expenses jumped 10 percent from the first quarter, totalling
285.2 million reais.
Thus, rising costs and expenses drove EBITDA down 4.6
percent down to 956 million reais in the quarter. Analysts in
the poll expects EBITDA of 991 million in the quarter ended in
June. Prepayment of receivables propped up non-operating income,
after posting a 14 percent jump on a sequential basis, the
EBITDA fell to an average 51.9 percent of net revenue in the
quarter, from 55.1 percent in the previous three months and 53.4
percent in the poll.
($1 = 2.23 Brazilian reais)
(Reporting by Guillermo Parra-Bernal and Aluísio Alve; Editing
by Lisa Shumaker)