Cosan, Ultrapar Fall on Concern Over Price Cuts: Sao Paulo Mover

Cosan SA Industria & Comercio and Ultrapar Participacoes SA (UGPA3) slumped as IstoE magazine reported that Brazil may have state-run Petroleo Brasileiro SA (PETR4)’s gas station chain reduce prices in an effort to force competing companies to follow suit.

Cosan fell 4.5 percent to 36.86 reais at the close of trading in Sao Paulo. Ultrapar slid 7.2 percent to 42.70 reais, the steepest one-day decline since August 2011. The benchmark Bovespa index gained 0.7 percent.

President Dilma Rouseff’s administration is analyzing the possibility of ordering Petrobras Distribuidora, the Brazilian oil company’s distributor, to cut gasoline and diesel prices in gas stations to force Cosan’s subsidiary Raizen and Ultrapar’s Ipiranga chain to lower fuel prices, IstoE magazine columnist Guilherme Barros reported on Oct. 12, without saying where he got the information.

“Cosan and Ultrapar would have to follow, otherwise they would lose market share, because for drivers it does not matter so much fuel brand, but prices,” Erick Scott Hood, an analyst at brokerage SLW Corretora, said by phone from Sao Paulo. “And a reduction could affect those companies’ earnings.”

Brazil’s Finance Ministry declined to comment in an e- mailed response to questions from Bloomberg News. The country’s Mines and Energy Ministry’s press office didn’t immediately respond to an e-mail seeking comment. Petrobras Distribuidora’s press official couldn’t be reached by phone for comment.

Cosan gained 37 percent this year, while Ultrapar surged 33 percent during that same period.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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