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Localiza Rises as Growing Car Market Cuts Depreciation Costs

Localiza Rent a Car SA, Latin America’s largest car-rental company, rose as profit increased to a record in the second quarter, beating analyst estimates as a growing Brazilian car market helped reduce depreciation costs.

The shares added 1.9 percent to 31.60 reais at the close of trading in Sao Paulo. The benchmark Ibovespa gained 1.1 percent. Belo Horizonte, Brazil-based Localiza’s adjusted net income jumped tenfold in the three months through June from the year-earlier period to 103.4 million reais, data compiled by Bloomberg show. The average estimate of six analysts surveyed by Bloomberg was 87.5 million reais.

Car sales remained strong in Brazil in the quarter, helping Localiza to resell vehicles from its fleet to minimize depreciation expenses, Roger Oey, an analyst at BES Investimento do Brasil SA, wrote today in a note to clients.

Car-depreciation costs in the second quarter fell by 69 percent from a year earlier to 51.4 million reais, Localiza said in a regulatory filing yesterday after the market closed. The company also benefited from a 38 percent decline in financial costs to 21.2 million reais ($9.5 million).

Localiza swapped part of its floating-rate debt to fixed rates, which “allowed it to reduce the negative effect on net financial expenses from recent hikes” in benchmark Brazilian short-term interest rates, according to Oey.

The lower costs helped the company overcome a worse-than-expected 3 percent increase in revenue to 813.1 million reais. The average estimate among seven analysts surveyed by Bloomberg was for revenue of 830.7 million reais.

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