Oct. 8 (Bloomberg) -- Votorantim Celulose & Papel SA, the Brazilian pulp maker that agreed to buy rival Aracruz Celulose SA, led stock market declines in its industry on speculation third-quarter profit will be hurt by currency losses.

VCP slumped 14 percent to 19.10 reais in Sao Paulo trading. Aracruz dropped 7 percent to 3.30 reais, extending its loss to 52 percent in five sessions.

``We expect negative financial results to magnify weak operating third-quarter 2008 performance,'' Banco Santander analyst Felipe Reis wrote in a note. Aracruz is likely to post the largest financial loss among pulp and paper companies on foreign exchange derivatives losses, Reis wrote, calling the third quarter a ``quarter to forget.''

``The bottom line of most of these companies is expected to reflect financial losses driven by losses from derivatives and FX variations on U.S. dollar-denominated debt (as the real depreciated 20 percent during the third quarter),'' he wrote.

Aracruz said last week that it may lose about $1 billion from derivative investments.

Suzano Papel & Celulose SA, Latin America's second-biggest pulp exporter, fell 2.8 percent to 13 reais.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

Last Updated: October 8, 2008 16:42 EDT