Fibria, Suzano Rally as Goldman Sachs Says Buy: Sao Paulo Mover

Suzano Papel e Celulose SA and Fibria Celulose SA, Brazil’s best-performing paper-industry companies this year, rallied as Goldman Sachs Group Inc. recommended buying the stocks, citing higher pulp demand and lower supply.

Fibria advanced 3.4 percent to 27.05 reais at the close of trading in Sao Paulo trading, the biggest gain today on the MSCI Brazil/Materials Index, which fell 0.3 percent. Suzano added 2.1 percent to 8.76 reais. The Ibovespa benchmark gauge slid 0.2 percent.

Goldman Sachs boosted its recommendation on both stocks from the equivalent of hold, citing a 26 percent increase in Brazilian pulp sales to China in August. Fibria and Suzano will also gain as the decision by Chile’s Empresas Copec SA and Finland’s Stora Enso Oyj to postpone the opening of a plant in Uruguay to the first quarter of 2014 reduces supply, according to Goldman Sachs.

Fibria and Suzano “are best positioned to benefit from improved demand,” Marcelo Aguiar, Diogo Miura and Humberto Meireles, analysts at Goldman Sachs, wrote in a research note. “Both stocks have already significantly outperformed the market year-to-date, but this has largely reflected depreciation of the Brazilian currency and higher pulp prices in 2013.”

Suzano has gained 25 percent this year and Fibria advanced 20 percent while the real weakened 7.1 percent.

Goldman Sachs recommended selling Klabin SA, the paper industry’s worst performer this year, on concern the company’s plan to raise as much as 1.7 billion reais ($771 million) in a public offering to help pay for a new plant will dilute the value of existing shares.

“While we also see potential for management to pursue alternative financial measures, such as financing partners or hybrid forms of debt and equity, we lack visibility on a potential structure and remain cautious,” Goldman Sachs’s analysts wrote.

Klabin gained 0.5 percent to 11.66 reais, trimming this year’s decline to 8.8 percent.

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