* Aracruz returns to profit after 3 quarterly losses
* Quarterly profit more than doubles, beats expectations
* Stronger Brazilian real helps reduce financial expenses
* Shares rise 1 percent to 3.13 reais (Adds executives' comments, output guidance)
By Guillermo Parra-Bernal
SAO PAULO, July 16 (Reuters) - Brazil's Aracruz Celulose, the world's largest producer of bleached eucalyptus pulp, reported its first quarterly profit in a year as a stronger local currency trimmed debt-related expenses and sales rose.
Net income more than doubled to 595.5 million reais ($306.9 million), or 0.58 reais per share, in the second quarter from 262.1 million reais, or 0.25 reais a share, a year earlier, the company said in a securities filing on Thursday.
The results beat the median 514 million-real estimate compiled by Reuters from analysts at four banks and brokerages.
A 16 percent gain by Brazil's currency, the real, in the quarter reduced debt-servicing and other financial expenses for Aracruz. As a result, the Sao Paulo company's net financial income jumped to 895 million reais from 242 million reais a year earlier.
About 69 percent of Aracruz's 7.54 billion-real debt is denominated in dollars.
The company also benefited in the second quarter from resilient sales in Asian markets and efforts to keep a lid on operating costs, Chief Financial Officer Marcos Grodetzky said in a conference call with analysts.
Aracruz was one of several Brazilian companies to report hefty foreign exchange-related losses at the end of last year, when the country's currency plunged 33 percent against the dollar as the global financial crisis escalated.
"The company is managing to cope relatively well with the impact of the crisis, while trimming its debt," said Jayme Alves, a paper and pulp analyst with Spinelli Corretora in Sao Paulo.
Aracruz's net debt dropped from 8.6 billion reais in the first quarter, but more than tripled from 2.25 billion reais a year earlier. Challenging market conditions and a plan to further reduce debt forced Aracruz to postpone some investments, Grodetzky said.
Aracruz shares were up 0.97 percent at 3.13 reais in early afternoon trading after jumping 6.5 percent on Wednesday.
Earnings before interest, taxes, depreciation and amortization, a measure of cash flow known as EBITDA, tumbled 42 percent to 205.9 million reais from a year earlier, mainly because of a decline in pulp prices overseas, the company said. EBITDA was 247.4 million reais in the first quarter.
The four analysts consulted by Reuters had a median EBITDA forecast of 179 million reais. The ratio of EBITDA to revenue, known as the EBITDA margin, declined to 26 percent in the second quarter from 40 percent a year earlier.
Aracruz reported a loss of 1.7 million reais for the first quarter and a record 2.98 billion-real loss for the last quarter of 2008.
SALES JUMP
Last year's derivatives-related losses led Aracruz to agree to a takeover by Brazilian rival Votorantim Celulose e Papel, with the approval of the Brazilian government. The company resulting from the deal will become the largest supplier of pulp to papermakers and control about a third of the world's eucalyptus pulp market.
On July 1, Aracruz approved the terms of a proposed share swap with VCP. The company also said on Thursday it will create a committee to oversee risk assessment and cash management practices.
Aracruz's results underscore the cost advantages and high forestry potential that Brazilian pulp makers have relative to rivals in North America and Europe. Brazilian pulp makers are operating at full capacity and opening new factories, even as the global market is facing its worst downturn in six decades, Goldman Sachs analysts led by Marcelo Aguiar wrote recently.
Sales volumes of pulp jumped 8 percent to a record 832,000 tonnes for the second quarter, driven by a 66 percent increase in Chinese purchases. Aracruz trimmed the cost of producing pulp to 423 reais per tonne as raw materials prices tumbled.
Still, net revenue fell 12 percent to 780.4 million reais from a year earlier and was down 9 percent from the first quarter. The company said a stronger real, along with a slight reduction in production and an average 36 percent decline in pulp prices, pushed revenue down.
Aracruz sells 98 percent of its production overseas.
Production is forecast to rise to 3.2 million tonnes this year from 3.1 million tonnes in 2008, sales director Joao Felipe Carsalade said. Output may remain stable in 2010.
Recovering pulp prices and sales, mainly in China, will help the company generate the cash it needs to service 1.3 billion reais that mature within the next 18 months, Grodetzky and other officials said on the conference call.
Aracruz held 614 million reais in cash as of June 30, 70 percent of which was in real-denominated instruments.
Edmo Chagas, an analyst with UBS, said weak global demand and depressed prices in some developed markets might hinder Aracruz's ability to generate the cash it needs to trim debt fast.
($1=1.934 reais) (Reporting by Guillermo Parra-Bernal) (Additional reporting by Alberto Alerigi Jr, Gabriela Mello and Stella Fontes; editing by Phil Berlowitz and Andre Grenon)