Usiminas Sinks as Boardroom Discord Looms for Brazil Steelmakerby
Brazil approved rival's petition to nominate board members
Paces declines on BI Global Steel Producers stock index
Usiminas slumped the most in almost six weeks as the prospect of more boardroom upheaval eroded confidence that the Brazilian steelmaker can steer its way back to profitability.
The Belo Horizonte-based company was the worst performer among peers tracked by Bloomberg on Monday after antitrust agency, Cade, approved a petition by minority shareholder and rival steelmaker CSN to nominate board members for election at an April 28 meeting. The approval, which Usiminas is appealing, stands to heighten tension as Nippon Steel & Sumitomo Metal Corp. and Ternium, which control the steelmaker via a shareholder pact, are engaged in a long-running battle over how to manage the company.
"Cade seems to have favored CSN,” Rafael Ohmachi, an analyst at Guide Investimentos, said by telephone. “CSN says that these members are independent and have no conflict of interest, but companies are always worried about these things, especially when it comes from a direct competitor.”
The shares lost 10 percent to 2.33 reais at 2:25 p.m. in Sao Paulo Monday, the steepest drop since March 15. Separately, Usiminas reported earnings that exceeded analysts’ estimates as higher iron-ore volume and prices offset slumping steel demand. Shares also fell along with industrial metal prices.
Usinas Siderurgicas de Minas Gerais SA, as it’s formally known, had adjusted earnings before interest, taxes, depreciation and amortization of 51.6 million reais ($14.5 million) in the first quarter, it said in a statement. The average estimate of four analysts tracked by Bloomberg was for a loss before items of 28.7 million reais.
As Brazil’s recession hobbles the construction and automotive sectors, Usiminas increased sales of iron ore by 45 percent as prices surged amid signs of stabilizing Chinese demand for the steel-making ingredient. A benchmark iron ore price has rebounded 52 percent this year to about $66 a metric ton.
On a net basis, Usiminas reported a loss of 153 million reais, narrowing from a 247 million-real loss a year earlier.