Shares of CTEEP, as the utility is known, declined 5.1 percent to 31.73 reais at the close in Sao Paulo, the most in four months. Brazil’s benchmark Ibovespa index fell 1 percent.
CTEEP reported a third-quarter loss of 245.3 million reais ($112.5 million) in a filing yesterday, its biggest deficit in Bloomberg data going back to 2005. The company set aside 516.3 million reais to cover possible losses related to a lawsuit against Sao Paulo state that sought reimbursement for some labor costs. The company said in the filing that a Brazilian court had dismissed its suit.
Booking the loss may be a sign that CTEEP believes “the possibility of collecting those amounts is lower now,” Marcelo Britto, Kaique Vasconcellos and Marcello Scarparo, analysts at Citigroup Inc., wrote in a note to clients today. Citigroup cut its recommendation on the stock to the equivalent of hold from buy.
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