UPDATE 1-Brazil's Cetip beats profit estimates on strong revenue
(Adds details on the quarter)
SAO PAULO Nov 5 (Reuters) - Net income at Cetip SA Mercados Organizados, Latin America's largest securities clearinghouse, beat estimates in the third quarter as robust revenue growth and hefty tax credits offset higher expenses in the loan liens unit.
São Paulo-based Cetip earned 130 million reais ($34.3 million) in profit last quarter, compared with 123 million reais estimated in a Reuters poll of seven analysts. Profit climbed 9.7 percent on a quarterly basis and soared 20 percent from a year earlier, according to a securities filing on Thursday.
The results underscore Cetip's resilient business model, with revenues from registration and custody of securities withstanding the impact of Brazil's worst recession in 25 years. Whereas Cetip limited exposure to flagging credit markets, changes in registration terms for loan lien contracts stoked sales, general and administrative expenses last quarter.
Net revenue totaled 312 million reais, well above the poll's estimate of 294 million reais. Sales, general and administrative expenses jumped to 135 million reais on a quarterly basis, 12.5 percent more than the poll's 116 million estimate because of the contractual changes in liens contracts.
Cetip's revenue mix will keep protecting earnings from the impact of Brazil's recession in the coming quarters, Chief Financial Officer Willy Jordan said in an interview. Borrowing costs at a nine year-high in Brazil are helping boost the stock of outstanding fixed-income securities, bolstering double-digit growth in registration and custody income.
"Our business model allows some products to thrive in a downturn while others sag, that's where our profit resilience comes from," Jordan said.
Last quarter, debt-servicing and other non-operational expenses surged as the currency plunged, hurting profit. Non-operational expenses were a net 87 million reais last quarter, compared with the poll's expected shortfall of 17 million reais.
Earnings before interest, tax, depreciation, amortization and stock options, a gauge of operational profits known as adjusted EBITDA, were 204 million reais in the third quarter, above the poll's estimate of 192 million reais.
Management plans to discuss third-quarter results on a call with investors on Friday.
($1 = 3.7909 Brazilian reais) (Reporting by Guillermo Parra-Bernal; editing by Ken Wills and Bernard Orr)
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