March 16, 2017 / 11:28 AM / a year ago

Brazil's Estácio profit beats estimates as expenses slump

SAO PAULO, March 16 (Reuters) - Estácio Participações SA , Brazil’s No. 2 for-profit education firm, beat fourth-quarter profit estimates on a drop in sales, general and administrative expenses and a jump in revenues. In a Thursday securities filing, Estácio said net income totaled 124.3 million reais ($40 million) last quarter, up 133 percent from the same period a year earlier and slightly above an average consensus estimate of a 122.9 million reais compiled by Thomson Reuters.

Expenses fell 44 percent to 151.2 million reais, coming in well below estimates, as Estácio removed provisions it made in the third quarter for potential credit losses related to the Fies state student loan program.

Average monthly tuition fees rose 9 percent while Estácio’s base of enrolled students climbed 2 percent - suggesting it continues to weather the impact of Brazil’s harshest recession ever.

The numbers reflect Chief Executive Officer Pedro Thompson’s steps to boost student loyalty as regulators analyze a takeover proposal from rival Kroton Educacional SA, which would create the world’s No. 1 college operator.

Under Thompson, Estácio overhauled fee collection practices and offered refinancing for students in financial distress.

“Reducing delinquencies brings about a benefit for the company in terms of profitability, because our cost structure is better deployed and optimized,” Estácio said in the filing.

Revenue rose 8.2 percent in the quarter, higher than expectations, helping cash flow from operations jump 23.9 percentage points on an annual basis.

Earnings before interest, tax, depreciation and amortization, a gauge of operational profit known as EBITDA, more than doubled on an annual basis to 217.2 million reais, well above consensus estimates of 133.5 million reais.

Depreciation and amortization rose 14 percent while taxes more than quadrupled last quarter, limiting profit gains.

Debt servicing and other financial expenses topped income from investments by 25.3 million reais last quarter, reflecting an adjustment in the value of accounts receivables related to the Fies program for 2015.

Management plans to discuss fourth-quarter results with investors at a conference call later in the day.

$1 = 3.1063 reais Reporting by Guillermo Parra-Bernal and Ana Mano Editing by W Simon

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