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Brazil's Hypermarcas returns to profit as debt costs sink

By Guillermo Parra-Bernal and Vivian Pereira

SAO PAULO (Reuters) - Hypermarcas SA , Brazil's largest diversified drugmaker, returned to profit in the third quarter as revenue grew slightly above expectations and debt-servicing and currency hedging costs tumbled from the year-earlier period.

The results were the latest showing that a year-long slowdown in the consumer goods industry is finally easing, with producers of cosmetics, generic drugs and household goods such as Hypermarcas likely to benefit most from Brazil's improving growth trends. Hypermarcas had lost money for two of the past three quarters.

Surging pharmaceutical sales and the integration of acquisitions helped the São Paulo-based producer of Engov hangover pills and Bozzano shaving cream post net income of 68.38 million reais ($33.4 million) in the third quarter, according to a securities filing late on Friday. The result compared with a loss of 190.5 million reais a year earlier.

Third-quarter profit beat the 53 million reais estimate in a Reuters poll of analysts. Management will discuss third-quarter earnings in a conference call with investors early on Monday.

Chief Executive Claudio Bergamo's efforts to streamline operations has restored profitability after a spree of acquisitions in the past four years boosted debt and made Hypermarcas too exposed to an economic slowdown. Bergamo picked pharmaceutical goods and beauty care as the firm's focus, shunning the slower-growing foods and household goods units.

In a separate statement released late on Friday, Management also set an estimate of earnings before interest, tax, depreciation of around 950 million reais for next year, up from guidance of at least 850 million reais in the indicator, known as EBITDA, for this year. EBITDA is a measure of a company's ability to generate profits from its core business.

Lower debt and stronger cash flow generation, coupled with a stable currency, helped Hypermarcas post a net financial shortfall of 54.9 million reais, compared with a deficit of 331.8 million reais a year earlier. The net financial result line is calculated by the difference between debt-servicing and currency hedging expenses and non-operating income, such as gains from financial investments.

Revenue jumped to 992.9 million reais from 832.8 million reais a year earlier, a gain of 19 percent on a year-on-year basis, the company said. Sales of pharmaceutical products, which accounted for about 54 percent of the company's net revenue in the quarter, soared 39 percent, while those of beauty care goods rose 2.2 percent on a year-on-year basis.

The Reuters poll had predicted revenue at 987 million reais for the third quarter.

EBITDA almost quadrupled to 226.6 million reais last quarter from 66.3 million reais in the third quarter of 2011. The EBITDA margin, or how much operating profit was generated from sales, soared to 23 percent from 7.9 percent a year earlier.

EBITDA was expected to come in at 209 million reais in the Reuters poll, below the number reported by the company.

Shares of Hypermarcas, which shed 2.1 percent on Friday and closed the session at 15.32 reais, are up 80 percent so far this year.

($1 = 2.05 Brazilian reais)

(Reporting by Guillermo Parra-Bernal and Vivian Pereira; Editing by Vicki Allen)

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