Cielo Profit Beat Analysts’ Estimates on Transaction Growth

Cielo SA, Brazil’s biggest card-payment processor, said second-quarter profit rose 30 percent as transaction volume increased and 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, the smaller rival that Itau Unibanco Holding SA is seeking to buy out, 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 58 percent a year earlier, according to the statement.

“Cielo reported strong results in the second quarter, mainly driven by the continued impressive growth in financial volumes,” Federico Rey-Marino, Francisco Pereyra and Santiago Ruiz Guinazu, equity analysts at Raymond James, wrote in a report today. “Cielo continues to gain market share over its main competitor, and is growing well above the industry average.”

Cielo fell 2.6 percent to 61 reais in Sao Paulo, its biggest decline since May 23, compared with a 0.3 percent gain for Redecard. The Bovespa benchmark index advanced 2.7 percent.

Card Volume

Cielo’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.

Brazil’s card-payment industry will be “challenging” after Itau completes the acquisition of Redecard as it will gain more “flexibility,” CEO Dias said on a conference call today.

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