Eletropaulo Advances Most Since June on Surprise Profit

Eletropaulo Metropolitana SA, the Brazilian power distribution unit of U.S.-based AES Corp., gained the most in five months after the company posted a surprise profit as it reduced costs.

Shares rose 9.2 percent to 9.50 reais at the close of trading in Sao Paulo, the most since June 14. Trading volume was 2.8 times the daily average of the past three months. The Ibovespa Brazilian equity benchmark dropped 1.2 percent.

Eletropaulo reduced its third-quarter personnel and materials expenses by 11 percent from last year, according to a regulatory filing after the market closed yesterday. The company also said it paid 1.7 percent less than a year ago for the energy it purchased for distribution.

The expense reductions “signal that the company is trying to adapt to its new reality after a rate review,” Ricardo Correa, director of analysis at the Rio de Janeiro-based brokerage Ativa Corretora, wrote in a note to clients today.

Brazil’s power regulator ordered Eletropaulo to reduce the rates it charges customers by an average 2.3 percent last year and didn’t allow an increase this year.

Adjusted net income doubled to 27 million reais ($11.8 million) in the three months through September from the same period a year earlier, according to data compiled by Bloomberg after the company released results yesterday. The average estimate among analysts surveyed by Bloomberg was for a loss of 130.5 million reais.

Eletropaulo has the worst recommendation consensus among Brazilian power utilities, with 10 sells, three holds and one buy, data compiled by Bloomberg show.

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