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CEMIG 2015 Earnings Lag, Higher Costs Offset Sales Growth

Zacks Equity Research

Companhia Energetica de Minas Gerais CIG, also known as CEMIG, reported weak fourth-quarter 2015 results. The company’s net income in the quarter declined 73% year over year to R$306 million (US$79.5 million).
Meanwhile, for 2015, the company’s net income was R$2,492 million (US$748.3 million), down 21% year over year. Earnings per share stood at R$1.98 or 59 cents per American Depository Receipt (“ADR”).

Adjusted net income for the year declined 38.61% year over year to R$1,918.7 million (US$576.2 million). Adjusted earnings were R$1.52 per share or 46 cents per ADR, below the Zacks Consensus Estimate of 60 cents.


In the quarter, CEMIG generated net revenue of R$5,267 million (US$1,368.1 million), reflecting a year-over-year decline of 17%.

In 2015, the company’s net revenue totaled R$21,292 million (US$6,394 million), up approximately 9% year over year. The company sold 56,904 Gigawatt hours (GWh) of electricity, down 10.35% year over year. Electricity sales to final consumers accounted for 80.9% of total electricity sold in the year.

In the quarter, CEMIG’s operating expenses grew 7% year over year to R$5,133 million (US$1,333.2 million), representing 97.5% of net revenue versus 75.9% in the year-ago quarter. Operating expenses rose roughly 26.8% year over year in 2015.

Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 77% year over year to R$496 million (US$128.8 million); while EBITDA margin stood at 9.4% versus 34.7% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting fourth-quarter 2015, CEMIG had cash and cash equivalents of R$925 million (US$233.6 million) versus R$1,606 million (US$391.7 million) at prior-quarter end. Loans and financings increased 5.9% sequentially to R$1,792 million (US$452.5 million).

In 2015, CEMIG generated cash of R$3,007 million (US$903 million) from its operating activities, down 19% year over year. Capital spent on fixed and intangible assets grew 18% to R$1,083 million (US$325.2 million).

During the period, the company paid approximately R$796 million (US$239 million) as interest on equity and dividends.

CEMIG is one of the largest integrated electric utilities in Brazil, with approximately 97% of its installed generation capacity being hydroelectric power. With a market capitalization of $2.9 billion, CEMIG currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the electric utility industry include Atlantic Power Corporation AT, Black Hills Corporation BKH and RWE AG RWEOY. All these stocks sport a Zacks Rank #1 (Strong Buy).

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