Pao de Acucar Profit Falls 1.5% on Integration Expenses

Cia Brasileira de Distribuicao Grupo Pao de Acucar (PCAR5), Brazil’s biggest retailer, said third-quarter profit fell 1.5 percent, impacted by one-time expenses related to the company’s integration with Casas Bahia and Ponto Frio.

Net income declined to 133.5 million reais ($76.8 million), from 135.5 million reais a year earlier, the Sao Paulo-based company said today in a regulatory filing. Profit before one- time items was 154.9 million reais, above the 142.5 million-real average estimate of six analysts surveyed by Bloomberg.

Profit was impacted by 62.1 million reais in expenses related to the integration with Globex, including the replacement of front-office systems, the company said in the statement.

The acquisition of Globex Utilidades SA (GLOB3)’s Ponto Frio chain and Casa Bahia Comercial Ltda. in the last two years made Pao de Acucar Brazil’s biggest home-appliance retailer. The conclusion of the acquisition allows Pao de Acucar to have “more aggressive cash generation and revenue growth” due to a bigger exposure to non-food sales, Banco Fator Corretora analyst Renato Prado said in an Oct. 25 phone interview from Sao Paulo.

“There has been a clear change in the last two years,” Prado said. “When the group had a 75 percent focus on food, it was very limited in periods of economic expansion. Now the potential is much bigger.” Banco Fator has a “buy” recommendation to the stock.

Net sales in stores open for more than one year rose 10.6 percent in the third quarter, compared with the same period last year. Net sales rose 56 percent to 11.1 billion reais, including Casas Bahia operations, the retailer said in an Oct. 11 statement sent to Brazil’s securities regulator.

Margins on earnings before interest, taxes, depreciation and amortization fell to 6.5 percent in the third quarter, from 6.9 percent the same period last year.

Pao de Acucar shares rose 0.6 percent to 65.01 reais in the Sao Paulo stock exchange. The shares have fallen 6.2 percent this year, compared to a 16 percent drop in the Bovespa benchmark index.

To contact the reporter on this story: Fabiola Moura in New York at

To contact the editor responsible for this story: Helder Marinho at;

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