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Eletrobras Gains as Quarterly Loss Lower Than Forecast

May 16 (Bloomberg) -- Centrais Eletricas Brasileiras SA, Brazil’s largest electrical utility by revenue, rallied after reporting a first-quarter loss that was less than some analysts had estimated.

Preferred shares of Eletrobras, as the company is also known, surged 13 percent to 9.39 reais at the close of trading in Sao Paulo. Trading volume was 2.7 times the three-month daily average. It was the best performer on the Ibovespa equity benchmark, which slipped 0.3 percent.

Brazilian utilities’ earnings have been crimped by President Dilma Rousseff’s decision last year to force them to lower rates. Eletrobras’s first-quarter net loss of 35.8 million reais ($17.5 million) compares with Citigroup Inc.’s estimated loss of 180 million reais, according to a research note the bank published today.

“Even weak, the numbers came out a little better than anticipated,” Pedro Galdi, an analyst at brokerage SLW, said by telephone from Sao Paulo. “But we’re still going to see more negative effects of the government’s pressure in the coming quarters.”

The company’s quarterly earnings report filed with Brazil’s securities regulator after the close of trading yesterday was the first to reflect the rate cuts. Revenue fell 27 percent to 6.8 billion reais in the three months through March, data compiled by Bloomberg after the company released results show. Eletrobras didn’t provide details on the new rate structure in the filing.

Cost Cutting

The state-run utility unveiled in March a plan to cut costs by as much as 30 percent to resume profitability. The loss in the period ended in March was the first since the third quarter of 2011.

The company’s expenses will still exceed its revenue “for at least four years down the road even if the cost cutting plan axes 30 percent of its expenditures,” Citigroup analysts Marcelo Britto and Kaique Vasconcellos wrote in their note.

The Rio de Janeiro-based utility has tumbled 54 percent since Rousseff detailed the electricity-rates policy on Sept. 11. The Bovespa Electric Energy Index of 16 stocks slid 9.7 percent.

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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