Fibria falls as pulp price outlook disappoints investors

Fibria falls as pulp price outlook disappoints investors

Fibria SA, the world’s largest producer of eucalyptus pulp, does not expect global pulp prices to rise sharply in the short term despite a clear recovery in Chinese demand for the commodity.

Shares fell as Fibria‘s management failed to quiet concerns that a tepid market and strengthening local currency would weigh on one of Brazil’s biggest exporters, despite strong second-quarter results.

Fibria’s net income rose 21 percent from a year earlier to 745 million reais ($229 million), as a stronger Brazilian currency lowered the cost of servicing foreign debts and building a huge new plant in midwest Brazil.

The nearly 11 percent rise in Brazil’s currency, the real , last quarter reduced the value of Fibria’s foreign-denominated debts by almost 1 billion reais and cut the projected cost of the Horizonte II plant by 800 million reais.

Still, the stronger real reduced the competitiveness of Fibria’s export-focused business, which hit record profitability last year as real slipped to a 12-year low.

Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, fell 33 percent in the second quarter from a year earlier to 786 million reais.

Henri Philippe van Keer about the Chinese demand

Fibria’s head of sales, Henri Philippe van Keer, told that stronger Chinese demand was “a good sign,” but the market was not poised for the kind of rally seen in recent years. Pricing concerns hurt shares of Fibria and Klabin SA , Brazil’s largest paper maker, which fell 3 percent as Fibria lost 1 percent.

Fibria announced that a stronger real had cut the cost of importing machinery for Horizonte 2 and confirmed it is investing 4.4 billion reais in the plant this year, down from 5.4 billion reais in prior forecasts.

Fibria is also putting off 500 million reais of planned investments in logistics this year because excess rail capacity in Brazil could make it more efficient to lease rather than invest in trains, Chief Executive Officer Marcelo Castelli told.

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