Ence Said to Study Acquisitions Abroad After Cash Increases

Ence Energia & Celulosa SA (ENC) is considering acquisitions abroad after profit and cash jumped and regulatory changes in Spain deterred the paper-pulp maker from investing at home, a person with knowledge of the matter said.

Ence’s cash surged to 141.1 million euros ($184.5 million) at the end of the first quarter from 47.8 million euros on Dec. 31, the company said today in a filing. The Madrid-based maker of pulp from eucalyptus trees, which has expanded into biomass energy, has studied and ruled out three target companies in countries including the U.K. and Italy, the person said, asking not to be identified because the deliberations are private.

Ence, which boosted cash after selling Uruguayan assets and delaying biomass-fueled power projects in Spain, is looking into foreign acquisitions until renewable-energy regulations at home become clearer, the person said. The company sold 250 million euros of senior secured notes and signed a 90 million-euro revolving credit facility earlier this year.

Spain’s government, struggling to curb deficit spending and cap increases in power bills, has reduced aid to renewable- energy producers, including by ending all subsidies for new projects in January 2012.

Ence is studying several alternatives to expand in Europe’s biomass industry, according to a Madrid-based company official who asked not to be identified because of the sensitivity of the information.

Profit Gains

First-quarter net income almost doubled to 13.1 million euros from 6.6 million euros a year earlier as earnings before interest, tax, depreciation and amortization climbed 42 percent to 43.5 million euros. That beat the 43.3 million-euro average estimate of five analysts surveyed by Bloomberg.

Ence rose 3.1 percent in Madrid trading, the biggest jump in three months. The shares closed up 6.5 cents at 2.15 euros, bringing their three-day gain to 8.3 percent, the biggest such increase since January and valuing the company at 560 million euros.

Earnings were driven higher by lower production costs, while cellulose prices were buoyed by demand from countries including China, the person said. Revenue from cellulose advanced 5.2 percent to 150.6 million euros, while adjusted energy sales fell 2.5 percent to 386,326 megawatt-hours.

The company closed its sale of assets in Uruguay on March 7 to a U.S. investment fund for $77.3 million, according to today’s earnings report. They included forest land with eucalyptus plantations and facilities for processing the wood.

Spain remains an important market for biomass producers, Ence said yesterday, citing the industry’s future role in energy production and its potential to create jobs in rural areas.

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Todd White in Madrid at twhite2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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