(Adds CFO comments on M&A, debt ratios, updates share performance)
By Alberto Alerigi
SAO PAULO, Oct 23 (Reuters) - Brazil’s Fibria Celulose SA, , the world’s largest producer of eucalyptus pulp, has found Asian markets resistant to a recent price hike, a senior executive said on Friday, suggesting an end or pause to a three-year wood pulp rally.
Fibria’s head of sales, Henri Philippe van Keer, said on a call to discuss third-quarter earnings that the company had started implementing a $20 per ton price increase globally last month. Despite solid demand in Asia, clients there have resisted higher prices, he added.
“We could see a reversion of that increase or we could see a consolidation. It will depend on other players in the market,” van Keer told journalists, adding that Fibria will try to fully implement the September price hike before considering another.
Weaker demand from a slowing Chinese economy has battered the price of several Brazilian commodities, such as iron ore, but wood pulp has resisted the rout so far.
Chief Financial Officer Guilherme Cavalcanti also said that a merger or acquisition in Brazil’s wood pulp market would be an “attractive” possibility for growth.
Strong cash flow leaves the door open for dealmaking even as the company pays extraordinary dividends, he said.
Fibria is still targeting a ratio of net debt equal to 2-2.5 times 12-month earnings before interest, taxes, depreciation and amortization, or EBITDA, Cavalcanti said, adding that the ratio could rise to 3.5 in expansionary years.
Earlier in the day, Fibria posted a quarterly loss of 601 million reais ($155 million) as a tumbling local currency drove up the cost of foreign debts, according to a securities filing.
The net loss was bigger than a shortfall of 359 million reais a year earlier, although operating profit more than doubled in the period.
Rising global pulp prices in dollars, combined with a sharp drop in Brazil’s currency, the real, drove up Fibria’s net revenue 60 percent in reais. EBITDA excluding one-time expenses soared 153 percent to 1.551 billion reais.
Rising debt costs in reais have an immediate accounting impact on earnings, while the benefits of a stronger dollar are sustained and accumulative for Fibria.
Shares of Fibria rose as much as 5 percent in early Friday trading, but trimmed gains to less than 1 percent by midday. The stock has rallied 73 percent so far this year, as the Brazilian currency lost 32 percent against the dollar.
$1 = 3.88 Brazilian reais Writing and additional reporting by Brad Haynes; Editing by W Simon