Cielo Profit Beat Analysts’ Estimates on Transaction Growth

Cielo SA (CIEL3), Brazil’s biggest card- payment processor, said second-quarter profit rose 30 percent on increasing volume of transactions as it boosted market share.

Net income advanced to 549 million reais ($270 million) from 424 million reais a year earlier, the Barueri, Brazil-based company said in a regulatory filing yesterday. The average estimate for profit excluding some items was 537 million reais, according to a Bloomberg survey of 11 analysts.

Chief Executive Officer Romulo de Mello Dias increased market share as Redecard SA (RDCD3), the smaller rival that Itau Unibanco Holding SA (ITUB4) is seeking to buy out, is focused on cutting costs and increasing prices. Cielo ended the second quarter with a market share of 61 percent in credit- and debit-card volume, up from 60 percent in the previous three months and up from 58 percent a year earlier, according to the statement.

“Higher market share and earnings surprise were the main reasons for our bullish view on Cielo since reporting first- quarter,” Fabio Zagatti, Henrique Caldeira and Roberto Savaris, Sao Paulo-based analysts at Barclays Plc, wrote in a report July 20.

The company’s total credit- and debit-card volume climbed 23 percent to 91.7 billion reais from a year earlier, it said in the statement. Operating expenses reached 224 million reais, up 94 percent from a year earlier, led by increased spending on marketing.

In February, Itau offered 35 reais a share, or 11.8 billion reais, to buy the 49 percent of Redecard it doesn’t already own.

Cielo rose 0.2 percent to 62.64 reais in Sao Paulo trading yesterday. The shares have gained 56 percent this year, the best performance in the Bovespa benchmark index, which has fallen 7.3 percent. Redecard fell 0.2 percent yesterday and the shares have gained 13 percent this year.

To contact the reporters on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net; Jose Sergio Osse at josse1@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net Helder Marinho at hmarinho@bloomberg.net

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