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Has Aracruz Celulose (ARA) found a bottom?

Today's Financial News - Posted October 7, 2008

After sacrificing its CFO in the Brazilian currency crisis last month, Aracruz Celulose (ARA) stock was down for the count. But today shares aren’t continuing their crash. Have we seen a bottom in ARA?

by Stephanie Grimmett

Baltimore — (TFN):  Brazilian pulp manufacturer Aracruz Celulose (NYSE:ARA) fired its chief financial officer a couple of weeks ago in its country’s own version of a financial crisis.

In Brazil, it wasn’t bad credit that sent stocks tumbling and massacred the executive ranks. It was the country’s currency, which tumbled, exposing idiotic gambles by CFOs and their staff and turning company boards into financial firing squads.

But Brazil’s currency crisis, and the subsequent collapse in Brazilian share prices, was just insult heaped on injury for Aracruz, which began watching its share price erode as far back as June.

In mid-September, Aracruz agreed to a merger with Votorantim Celulose e Papel (NYSE:VCP). The two companies will form the largest eucalyptus pulp manufacturer in the world, controlling nearly a third of global market. VCP plans to double the investment in Aracruz to 56% and will pay 2.71 billion reais ($1.24 billion) for its second 28% stake in Aracruz in the last three months.

For any other stock from any other country at any other time, this would be good news. But the price VCP is paying is far below market. And investors are a.) terrified of the market in general right now and b.) extra terrified of anything coming out of Brazil.

But today, Aracruz may have found a bottom. The stock has managed to flutter around yesterday’s close price of $18.30, even pushing as high as a 10.5% gain early this morning. Gains have trailed off since its early pop, but unless we get more bad news today (please, please, please don’t say anything else, Mr. Bernanke) the stock could be at the end of its two-month plummet. Now everyone hold your breath.

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Posted by Stephanie Grimmett · Filed Under Gold and Resources 

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