SAO PAULO, Nov 6 (Reuters) - Cielo SA, Brazil's largest card payment processor, expects costs per transaction to finish the year above the high end of its target range, a sign the impact of the country's fastest inflation in 12 years and soaring payroll costs is unlikely to abate soon.
In the third quarter, total costs and operational expenses at Cielo's Brazil-based business rose 4.9 percent to 0.52 reais per transaction due to costlier processing and branding. For Cateno, a card venture between Cielo and Banco do Brasil SA, so-called unit costs rose 7.1 percent from the prior quarter.
Barueri, Brazil-based Cielo has targeted unit costs between 0.49 reais and 0.51 reais this year. Chief Executive Officer Rômulo Dias, on a Friday conference call to discuss third-quarter results, said the company is working to boost efficiency and generate "new avenues of growth" to offset rising costs.
The company is trying to navigate through the nation's economic ups-and-downs, Dias said, adding that industry expectations for 9 percent growth in credit and debit card usage this year "will be challenging to meet."
His remarks indicated that a slump in consumer spending, which hit a decade low this year, is filtering down to transaction volume growth as well as Cielo's ability to reprice merchant discount rates.
Cielo shares dropped 2.1 percent to 37.17 reais on Friday.
On Thursday, Cielo posted third-quarter net income that beat estimates as stronger-than-expected revenue from prepayment of receivables rose at a faster pace than expenses.
Net income totaled 918.5 million reais ($242 million) last quarter, compared with an average estimate of 909 million reais in a Reuters poll of eight analysts. Profit rose 1.2 percent from the prior three months and 11.9 percent on an annualized basis.
Still, volume growth for card transactions slowed last quarter and cost growth outpaced revenue growth for the second time in six quarters.
To reduce Cielo's increasing dependence on receivables discounting, which rose to a record 40 percent of profit in the quarter, Dias is focusing on growth at Cateno and grabbing additional market share from rivals.
Market share rose to 54.5 percent at the end of September from 53.5 percent in the second quarter, Dias noted. ($1 = 3.7825 Brazilian reais) (Reporting by Aluísio Alves and Guillermo Parra-Bernal; Editing by Jeffrey Benkoe)