October 21, 2008 / 2:08 PM / 11 years ago

Gol reveals losses on currency fall, fuel hedges

SAO PAULO, Oct 21 (Reuters) - Airline Gol Linhas Aereas (GOLL4.SA) (GOL.N) said late on Monday that the Brazilian currency’s plunge against the dollar had raised its debt balance by 225 million reais ($103 million).

The company also said it lost a net 48 million reais as a result of losses on hedge positions for fuel. It had hedged about 55 percent of its expected fuel consumption for the third quarter at an average price of $132 per barrel of oil.

It said the hedge losses outweighed gains it made from currency hedges shielding it from the dollar’s rise.

Brazil’s currency, the real BRBY weakened by nearly one-third since reaching a nine-year high in early August, causing massive currency losses for companies like pulp producer Aracruz Celulose ARCZ6.SA (ARA.N), meat processor Sadia SDIA4.SA and industrial conglomerate Votorantim Group.

The Sao Paulo stock and derivatives exchange BM&F Bovespa BVMF3.SA has increased deposit requirements from clients to cover losses in derivatives and securities trade, the head of the exchange told Reuters on Monday.

Gol said it liquidated during the third quarter all the hedge positions in fuel it had on June 30. It also had 19 percent of its expected fuel consumption for the fourth quarter hedged at a price of $133. A barrel of oil was trading at $73 on Tuesday.

Gol’s bottom line has suffered since it bought Brazil’s former flagship airline Varig last year. The company is trying to overhaul Varig, which was on the verge of collapse after years of mismanagement, and bring the cost structure at the acquisition down in line with its own.

But sky-high fuel costs have made it more difficult to turn Varig around and keep Gol’s own costs low. In August, Gol cut back its fleet plan for the next two years and eliminated dividends for the rest of 2008 to further reduce costs.

Gol’s shares were up 0.31 percent at 9.86 reais in early Tuesday trade. It is due to release its third quarter results on Oct. 27.

$1=2.190 Reporting by Alberto Alerigi; writing by Stuart Grudgings, editing by Dave Zimmerman

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