Usiminas posts first profit in 7 quarters on cost cuts

Reuters

By Guillermo Parra-Bernal

SAO PAULO, Oct 30 (Reuters) - Usiminas, Brazil'slargest maker of steel products for carmakers, posted a profitfor the first quarter in seven, bolstered by stringent cost andexpense controls, rising output and higher local prices.

The company, known formally as Usinas Siderúrgicas de MinasGerais SA, said it had earned net income of 115 million reais($53 million) in the third quarter, according to a securitiesfiling on Wednesday. Capital expenditures and financial expensesfell too, contributing to profits, the filing added.

Analysts were split on trends for the Belo Horizonte,Brazil-based company. According to the forecasts of six analystsin a Thomson Reuters poll, the company earned 94 million reais.A seventh analyst in the poll estimated a net loss of 52 millionreais.

Key indicators showed Chief Executive Officer JuliánEguren's turnaround efforts are bearing fruit. Adjusted earningsbefore interest, taxes, depreciation and amortization rose tothe highest level in about three years, while the steelmakingdivision had a resilient sales mix and growing margins.

In addition, Usiminas' raw steel output rose 1.9 percent ina quarter-on-quarter basis despite Brazil's economic slowdown.

Management will discuss results in a conference call withinvestors later in the day.

Net revenue slipped 1.4 percent to 3.198 billion reais,missing the poll's estimate of 3.33 billion reais after saleslost momentum. Sales volumes fell 0.4 percent from the priorquarter, while average prices for most products rose.

Cost of goods sold fell 4.4 percent to 2.74 billion reaisfrom the second quarter and well below the poll's forecast of2.94 billion reais.

Sales, general and administrative expenses dropped about 14percent in a quarter-on-quarter basis, reflecting Eguren'sefforts to streamline staff, improve factory efficiency andreduce energy costs. Financial expenses also declined,reflecting a stable Brazilian currency in the quarter, thefiling said.

Eguren also has been dealing with a rigid cost structurethat includes a lack of proprietary energy and mining assets andan aging mill infrastructure. A former executive at Ternium SA, he was named CEO in 2012 right after theItalian-Argentine steel group bought a controlling stake inUsiminas.

Adjusted EBITDA, which excludes Usiminas' participation inother companies, surged 22 percent from the second quarter to538 million reais, the highest level since at least the fourthquarter of 2010. It rose to 16.8 percent of revenue, comparedwith 13.6 percent in the second quarter.

Analysts in the poll had looked for EBITDA of 488 millionreais and a margin of 14.7 percent.

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