Usiminas Quarterly Loss Smaller Than Expected on Higher Sales

Usinas Siderurgicas de Minas Gerais SA, Brazil’s biggest maker of steel for the auto industry, posted a second-quarter net loss that beat analysts’ estimates as higher shipments pushed up sales.

A net loss of 101.7 million reais ($49.8 million) compared with profit of 111.6 million reais a year ago, the company said in a statement late yesterday. The average adjusted loss estimate among seven analysts in a Bloomberg survey was 221.3 million reais.

Usiminas, as the Belo Horizonte, Brazil-based company is known, said net sales climbed 6.6 percent to 3.23 billion reais in the period, while the cost of goods sold soared 18 percent. Quarterly steel sales volume rose 19 percent to 1.89 million metric tons from last year, Usiminas said.

Revenue rose mainly on “greater sales volume in the steel business,” Usiminas said in the statement, which was released after yesterday’s close of regular trading. “In the export market there was an increase in reais, due to the dollar appreciation, and stable prices on the domestic market.”

Usiminas, which had losses in three of the past six quarters, is facing higher production costs at a time of contraction in the Brazilian car industry, its biggest client. Industrial production in Latin America’s biggest economy fell in May for a third straight month, as a weaker currency and government measures to boost sales of cars and other durable goods failed to spur demand.

Vehicle Slump

Production of vehicles in the first half of 2012 fell 9.4 percent to 1.55 million from a year ago, according to the Brazilian carmakers’ association known as Anfavea.

The earnings report from Usiminas, the second-largest Brazilian steelmaker by output, follows a net loss of 70.8 million reais in the first quarter and is the worst quarterly result since the first quarter of 2009, when it lost 111.9 million reais, according to data compiled by Bloomberg.

Usiminas jumped to the highest in more than a month yesterday after Goldman Sachs Group Inc. recommended buying the stock. The company is Goldman Sachs’s new top pick within Latin American steel stocks, analysts led by Marcelo Aguiar in Sao Paulo said in a note to customers after raising their recommendation from sell. Usiminas stands to profit from a recovery in Brazil’s flat steel demand and an operational “turnaround” after the entrance of the Techint Group in the controlling shareholder group, they said.

“We expect Usiminas to outperform peers and the broader market in the next 12 months as in our view operating turnaround will begin to materialize throughout the second half of 2012,” the analysts wrote. “Risk/reward has become compelling for Usiminas shares.”

Preferred shares of Usiminas gained 5.7 percent to close at 7.01 reais in Sao Paulo yesterday, the highest since June 20. The company’s voting shares climbed 6 percent, leading gains in the Brazilian benchmark Bovespa index.

Gerdau SA, based in Porto Alegre, Brazil, is Latin America’s largest steelmaker.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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