July 30, 2018 / 9:19 PM / 19 days ago

UPDATE 2-Brazil's Cielo misses profit estimate amid fierce competition

(Adds expenses, EBITDA, details about competition)

By Carolina Mandl

RIO DE JANEIRO, July 30 (Reuters) - Cielo SA, Brazil’s largest credit and debit card processor, missed analysts’ second-quarter profit estimate on Monday as increased competition among payment solution companies hurt its margin.

Cielo posted a recurring net income of 817.5 million reais ($219.33 million) in the second quarter, nearly 13 percent below the consensus of analysts polled by Thomson Reuters and 17.8 percent below its profit a year earlier.

The company also missed estimates for earnings before interest, taxes, depreciation and amortization, a common gauge of operational profitability known as EBITDA, posting 1.147 billion reais in the quarter, below a consensus of 1.462 billion reais.

To compete with newcomers such as PagSeguro Digital Ltda and Stone Pagamentos SA, Cielo doubled marketing expenses in the quarter, to 93.7 million reais.

The number of credit card readers at stores using Cielo, which had been falling since the fourth quarter of 2015, rose 0.5 percent in the April to June period to 1.6 million, according to a securities filing, helped by Cielo’s decision to begin selling the machines instead of only renting them out.

Prepayment of receivables, through which Cielo helps retailers settle their commercial bills more rapidly, also declined 29.4 percent in the quarter from one year earlier, to 405.2 million reais.

On Monday, the card processor said in a securities filing it would pay out 3.5 billion reais ($939.09 million) in dividends for fiscal 2018, in two installments.

The company also said it would pay dividends every quarter, effective immediately, instead of twice a year.

Cielo is seeking a new chief executive after Eduardo Gouveia stepped down earlier this month for personal reasons, after just 18 months at the helm.

Chief Financial Officer Clovis Coggetti Jr. was named as interim CEO. A new CEO is expected to be chosen within 60 days. ($1 = 3.7270 reais) (Additional reporting by Aluisio Alves; Editing by Diane Craft and Richard Chang)

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