UPDATE 1-Cielo says card joint venture will help earnings within 9 months

jueves 29 de enero de 2015 13:09 GYT
 

(Adds details on guidance, earnings performance, CEO comments throughout)

SAO PAULO Jan 29 (Reuters) - Cielo SA's card processing joint venture should start adding to its earnings-per-share within the next nine months, Chief Executive Officer Rômulo Dias said on Thursday.

The 11.6 billion real ($4.4 billion) venture to develop the Arranjo Ourocard card product with shareholder Banco do Brasil SA will render over 1 billion reais in annual brand fees payable, Dias said in a conference call to discuss Cielo's fourth-quarter results. Cielo owns 70 percent of the venture.

Cielo, Brazil's largest card payment processor, is doubling down on the venture in an effort to overcome the impact of the country's stagnant economy. With incumbents and new players seeking to grab market share, the company hopes cost controls and its comparative advantages over competitors will protect its position in the $400 billion-a-year card payment market.

Cielo set a target of 0.49 reais to 0.51 reais in costs per transaction at the company's Brazilian operations this year, down from about 0.54 reais last year, Dias added.

Non-recurring costs associated with the establishment of the venture, which was announced in November, have already been booked except for some legal advisory and debt issuance fees, he noted. About 34 million reais worth of one-time expenses related to the venture were already booked in the fourth quarter.

Dias expects growth in card transaction volumes in Brazil of between 11 percent and 13 percent this year. Financial volumes should also feel the pinch of accelerating inflation, a tougher job market and a widespread economic downturn, he added.

Cielo missed fourth-quarter profit estimates on Wednesday as expenses spiked and transaction volume growth began to show the impact of weak consumer confidence in Latin America's largest economy. Net income totaled 805.6 million reais ($312.8 million) in the quarter, below the 820 million reais estimate in a Reuters poll of six analysts.

Cielo's shares gained 2.7 percent to 40.15 reais on Thursday. (Reporting by Guillermo Parra-Bernal and Aluísio Alves; Editing by Chizu Nomiyama and Paul Simao)