SAO PAULO (Reuters) - Localiza Rent a Car SA (RENT3.SA), Brazil’s biggest car rental company, posted an unexpected 17 percent rise in first-quarter profit due to rapid fleet growth and falling interest rates.
Net income rose from a year earlier to 120 million reais ($38 million), according to a securities filing on Wednesday. Earnings beat an average forecast of 103 million reais from analysts surveyed by Thomson Reuters.
The strong performance may reinforce some investors’ bets on Brazilian transportation stocks as a leading sector in a gradual recovery from the country’s worst recession on record. Localiza shares are up 29 percent in 2017, after a record high last week.
Car rental volumes rose 25 percent from a year earlier, near the 27 percent expansion of the car rental fleet. Average daily rates slipped 5 percent, but growing rental volumes diluted fixed costs, delivering stronger operating margins.
Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 15 percent to 297 million reais, better than an average forecast of 277 million reais. EBITDA as a share of car rental revenue rose to 36.6 percent in the quarter from 34.5 percent a year earlier.
Lower interest rates meant that financial expenses rose just 11 percent from a year earlier, despite a 34 percent jump in net debt as the company added some 22,500 cars to its fleet.
($1 = 3.17 reais)
Reporting by Brad Haynes; Editing by Bill Trott