World's Worst Currency Tumble Spurs Rally in Top Pulp Producers

  • Brazil's real leads losses among 16 global major currencies
  • Fibria and Suzano advance amid improved export outlook

The slide in Brazil’s real to a four-month low spurred a rally in two of the world’s largest pulp producers amid prospects for stronger export revenue.

Fibria Celulose SA and Suzano Papel e Celulose SA, which sell the raw material used to make tissue and toilet paper, climbed at least 3.1 percent. Both companies get most of their sales outside Brazil. The real extended its drop in the past year to 37 percent, the biggest among major currencies tracked by Bloomberg.

Shares of Fibria and Suzano have bucked the decline of the Brazilian equity market over the past 12 months even as a recession in Latin America’s largest economy deepens and China’s slowdown jeopardizes demand for commodities. The real has tumbled on speculation that President Dilma Rousseff’s government will fail to revive the nation’s finances and restore credibility amid a widening corruption probe. While the shares have given up part of their gains from last year, the currency drop has fueled optimism about the outlook for the pulp producers.

The real depreciation will probably offset the impact of a downward trend for pulp prices, which is expected to persist throughout 2016, Alan Glezer, an analyst at the investment banking unit of Banco Bradesco SA, said in a note to clients earlier this month. His top pick in the industry is Suzano.

All but one of the 15 analysts tracked by Bloomberg recommend buying the company’s shares, forecasting an average 64 percent return over the next year. About 60 percent of analysts have the same rating for Fibria.

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