Usiminas Drops After Quarterly Loss More Than Doubles
Usinas Siderurgicas de Minas Gerais SA, the second-largest Brazilian steelmaker by output, fell to the lowest in almost two weeks after posting a bigger-than- expected quarterly loss.
The first-quarter loss more than doubled to 70.8 million reais ($37.6 million) from 26.1 million in the year-earlier period, based on international accounting standards, the steelmaker said yesterday after markets closed. Usiminas was expected to post a loss excluding some items of 150,000 reais, the average of four analyst estimates compiled by Bloomberg.
“Once again, Usiminas delivered poor results and failed to meet market expectations of a modest quarter-over-quarter recovery,” Banco Santander SA’s Sao Paulo-based analysts Felipe Reis and Alex Sciacio said in a note to customers today. “We continue to see a challenging scenario for the company going forward.”
Net sales fell 5.8 percent to 2.89 billion reais in the period, while financial expenses grew 22 percent as the real weakened 2 percent against the dollar in the first three months of the year, the company said. Quarterly crude steel output declined 6.2 percent to 1.67 million metric tons from last year.
Usiminas is facing “a difficult and complex situation” Chief Executive Officer Julian Eguren said today in a conference call with analysts, citing a strong Brazilian currency and competition from imported steel.
The company expects to invest about 2.5 billion reais this year, reducing its spending in the steel business and boosting investments in its mining unit, Eguren said.
Fighting a Glut
Brazilian steelmakers are fighting a global supply glut at a time when growth in Latin America’s biggest economy slows down. Sales of cars in Brazil fell 1.8 percent in March after a 9 percent drop in February. Usiminas is the biggest supplier of steel to Brazilian carmakers.
Eguren, who took over from Wilson Brumer on Jan. 17 after the Techint Group joined the company’s controlling shareholders, is seeking to improve operations as steel profit margins slumped to 4 percent last year from 16 percent in 2010. Techint, through its Ternium SA and Tenaris SA units, on Nov. 27 agreed to pay 5.03 billion reais for a 27.7 percent voting stake in Usiminas, teaming up with Nippon Steel Corp. to control Usiminas. Eguren was Ternium’s executive president in Mexico before the appointment.
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