Jan 8, 2013
Natura fall as Brazil tax watchdog imposes fines
Jan 8, 2013
SAO PAOLO - Shares of miner MMX Mineração SA and cosmetics producer Natura SA tumbled on Tuesday after Brazil's tax watchdog unexpectedly fined them a combined 4.39 billion reais ($2.16 billion).
Both companies were notified by the Brasilia-based Receita Federal of tax offenses amid efforts by the government to increase vigilance on the largest taxpayers as a weakened economy has weighed down on tax collections.
MMX, based in Rio de Janeiro, said the fine has no legal basis, and hopes it will be reversed. The value of the fine, which equals about 80 percent of the company's current market value, has not been provisioned and has no immediate financial impact, MMX said in a securities filing.
In recent weeks, Receita Federal also fined pulp producer Fibria SA and logistics company Santos Brasil Participações SA a combined 2 billion reais.
"The notices have come out of the blue and are leaving markets scared," said a São Paulo-based trader who declined to be identified.
Shares of Natura tumbled 3.3 percent to 55.99 reais, the biggest intraday decline in the stock since Aug. 30. MMX fell as much as 4 percent in early Tuesday trading, extending a 35.5 percent drop in the past 12 months.
According to a securities filing, Natura on Monday received two notices from the tax watchdog challenging tax practices in the treatment of industrial and social security taxes dating back to 2008. A company representative declined to comment beyond the filing.
Natura, Brazil's No. 1 maker of cosmetics, is unlikely to provision for the potential tax payment and may only take charges related to lawyers' fees, analysts said.
"Despite the large value of the payment being demanded, we do not see a reason for the market to be alarmed, at this point in time," Deutsche Bank Securities analyst Renata Coutinho said of Natura. "We recall that in 2005 the company faced a similar challenge and the decision was favorable to Natura, as the company was in compliance with the law."
MMX Mineração SA, the mining company owned by Brazilian billionaire Eike Batista, faces a potential fine for paying less in income tax than required since 2007, according to a securities filing on Tuesday.
An official with the tax watchdog was not immediately available to comment on the cases.
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