February 23, 2017 / 2:20 PM / 3 years ago

UPDATE 2-Via Varejo swings to profit on tax break, online integration

(Adds conference call details in paragraphs 5-8)

SAO PAULO, Feb 23 (Reuters) - Via Varejo SA, Brazil’s largest appliance retailer, posted pro forma fourth-quarter net income of 13 million reais ($4 million) on Thursday, boosted by a hefty tax benefit along with cost savings from the integration of online unit Cnova Brasil.

The company swung to a profit, when accounting for a full three months of online and brick-and-mortar operations, from a net loss of 474 million reais in the year-earlier period. Analysts’ consensus estimate was for a net loss of 206 million reais, according to Thomson Reuters.

When only the two months of integrated online operations were included, Via Varejo’s quarterly net profit was 75 million reais.

Units of Via Varejo, a blend of preferred and common shares, rose 3 percent on the Sao Paulo stock exchange.

Executives said the company would continue to benefit from the overhaul of its online sales platform and logistics processes during the recent integration.

“Conclusion of this work helped us cut costs, which will positively impact on the company’s profitability going forward,” Chief Executive Peter Estermann said during a conference call to discuss the results.

Still, management said the first half of 2017 will be challenging because of economic weakness in Brazil, and it has not decided whether to open new stores in the second half of the year.

Via Varejo executives said they did not expect a significant impact from a future sale of a controlling stake in the company by Grupo Pão de Açúcar. That stake was put on the market last year.

Earnings before interest, taxes, debt and amortization, a gauge of profitability known as EBITDA, rose tenfold from a year earlier on a pro forma basis to 469 million reais.

Via Varejo booked 406 million reais in tax credits in the fourth quarter from the first nine months of 2016. The tax break on electronics has lowered the cost of goods for retailers, boosting their gross profit margins.

Via Varejo had held off using the incentives due to legal uncertainties, but a senior executive told Reuters in October that the benefit would have boosted EBITDA by more than 300 million reais from January to September of last year.

Via Varejo posted a net loss of 90 million reais in the third quarter as Brazil’s prolonged recession eroded consumer confidence and demand for electronic goods.

The head of the company’s e-commerce unit, Flavio Dias, told Reuters in a separate interview that online sales should grow in the first quarter after a 10 percent drop in the last three months of 2016. ($1 = 3.08 reais) (Reporting by Ana Mano and Paula Laier; Editing by Jeffrey Benkoe and Paul Simao)

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