UPDATE 2-Fibria falls as pulp price outlook disappoints investors
(Recasts with comments, share reaction, details of delayed investment)
By Brad Haynes
SAO PAULO, July 25 (Reuters) - Fibria SA, the world's largest producer of eucalyptus pulp, does not expect global pulp prices to rise sharply in the short term despite a clear recovery in Chinese demand for the commodity, executives said on Monday.
Shares fell as Fibria's management failed to quiet concerns that a tepid market and strengthening local currency would weigh on one of Brazil's biggest exporters, despite strong second-quarter results.
Fibria's net income rose 21 percent from a year earlier to 745 million reais ($229 million), as a stronger Brazilian currency lowered the cost of servicing foreign debts and building a huge new plant in midwest Brazil.
The nearly 11 percent rise in Brazil's currency, the real , last quarter reduced the value of Fibria's foreign-denominated debts by almost 1 billion reais and cut the projected cost of the Horizonte II plant by 800 million reais.
Still, the stronger real reduced the competitiveness of Fibria's export-focused business, which hit record profitability last year as real slipped to a 12-year low.
Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, fell 33 percent in the second quarter from a year earlier to 786 million reais.
"The outlook remains challenging in the short term due to low pulp prices, a stronger currency, weak cash flow and rising leverage," a trading desk note by Banco BTG Pactual said. Continuación...