* Aracruz returns to profit after 3 straight losses
* Quarterly profit more than doubles, beats expectations
* Stronger Brazilian real helps reduce financial expenses
* Shares up 1.6 percent (Recasts, adds estimates, details, company comment)
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 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 BRBY>, 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.
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 numbers should be well received by markets because they show a company managing to cope well with the impact of the crisis and improving its debt position," said Jayme Alves, a paper and pulp analyst with Spinelli Corretora in Sao Paulo.
Shares of the company were up 1.6 percent at 3.15 reais in morning trading after jumping 6.5 percent on Wednesday.
In the second quarter, the company also benefited from operating results, it said in a statement signed by Chief Financial Officer Marcos Grodetzky.
Aracruz 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 despite the global market facing its worst downturn in six decades, Goldman Sachs analysts led by Marcelo Aguiar wrote recently.
Earnings before interest, taxes, depreciation and amortization, a measure of cash generation 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 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.
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. The company trimmed the cost of producing pulp to 423 reais per tonne as the cost of raw materials 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.
Yet the company said the future for the global pulp market remains "uncertain" as the summer holiday season in the Northern Hemisphere as well as the global economic recession will continue to weigh on demand for paper.
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.
Aracruz held 614 million reais in cash as of June 30, 70 percent of which was held in real-denominated instruments. Short-term debt maturities were 800 million reais in the quarter.
Aracruz's net debt dropped from 8.60 billion reais in the first quarter, but more than tripled from 2.25 billion reais a year earlier.
($1=1.934 reais) (Additional reporting by Alberto Alerigi Jr, Gabriela Mello and Stella Fontes; Editing by Phil Berlowitz)