UPDATE 1-Brazil sugar group Sao Martinho says expansion not a priority

martes 10 de noviembre de 2015 15:35 GYT

(Adds comments from director, details from call)

SAO PAULO Nov 10 (Reuters) - Brazil's sugar and ethanol group Sao Martinho SA has no intention of investing in capacity expansion or acquisitions at the moment, preferring to allocate cash to reduce its debt load, investor relations director Felipe Vicchiato said on Tuesday.

The company, which reported a quarterly net profit of 21 million reais on Monday, said in a phone conference with analysts that margins improved significantly in the past few months but not enough to allow it to plan capacity increases.

"Assuming prices will remain in current levels, which are interesting, our choice will be to allocate cash to reduce debt," Vicchiato said. "After that, we will look to pay dividends."

Sao Martinho's debt increased to 3.23 billion reais ($852 million) at the end of September, compared with 2.56 billion reais ($675 million) in March, largely due to the local currency depreciation.

According to the company, 48 percent of its debt is denominated in dollars.

"Capex for expansion would still be too high to make it feasible right now," Vicchiato said.

Sao Martinho said returns will be good in the next few months as current hedging is valuing its sugar at around 1,200 reais per tonne, compared to a production cost of nearly 800 reais.

The company, which plans to crush 5 percent more cane this year, or 19.5 million tonnes, said it hedged 26 percent of its sugar production for the new crop (2016/17) at an average price of 13.52 cents per pound.

($1 = 3.79 Brazilian reais) (Reporting by Marcelo Teixeira; Editing by Chizu Nomiyama and Bill Trott)