Kroton Posts Higher Profit as Company Renegotiates Contracts

Kroton Educacional SA, Brazil’s biggest education conglomerate, posted higher first-quarter profit after the company renegotiated all of its contracts to control costs amid the country’s recessionary economy.

Adjusted net income rose to 505.9 million reais ($144.8 million), an 11 percent increase from a year earlier, according to a statement Thursday. Revenue dropped 1.5 percent to 1.27 billion reais and compared with estimates of 1.34 billion reais.

“From rentals to desks, we are renegotiating all our contracts,” Investor Relations Officer Carlos Lazar said in a phone interview. “Our scale gives us power in these negotiations and the current macroeconomic environment also helps these agreements.”

The education sector has been hit by the economic crisis as shrinking tax revenue led the government to limit subsidies for students. Brazil’s economy shrank 3.8 percent in 2015 and is expected to decline a further 3.9 percent in 2016. The company expects sales to increase 1.4 percent this year, as price increases and enrollment expansion are limited by Brazil’s worst recession in at least a century.

Kroton rose as much as 3.8 percent in Sao Paulo and was up 3.3 percent to 12.40 reais at 2:13 p.m.

Kroton will continue to focus on cost-cutting and savings at recent acquisitions to achieve 7.7 percent profit growth this year, Lazar said.

“Some things we control and other things we don’t,” he said. “What we control very well is our internal structure and our costs.”

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