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Cemig's Q2 Earnings Up Y/Y; Miss Estimates

Zacks Equity Research

Brazil-based integrated electric utility, Companhia Energetica de Minas Gerais (CIG), also known as Cemig, reported its financial results for second quarter 2013 on Aug 14, 2013. Net earnings in the quarter were R$617 million ($299.5 million), up 2% year over year.

Earnings per share were R$0.64 or 31 cents per ADR, up 1.6% year over year but were roughly 47.5% below the Zacks Consensus Estimate of 59 cents per ADR.


Cemig generated net revenue of R$3,439 million ($1,669.4 million) in the second quarter 2013, down 1% compared with the year-ago revenues. The decline can be attributed to fall in sales to end customers, declines in TUSD (tariff for use of the distribution system), revenues from Transmission network and construction revenues.

Electricity sold by Cemig in the quarter increased 2.3% year over year to 14,901 GWh.


Cemig’s operational costs and expenses in the quarter totaled R$2,658 million ($1,290.3 million), up 6% year over year. The expenses soared because of higher expenses on post-retirement benefits, materials costs, and purchased energy costs, among others. While few others, including royalties, charges for use of basic transmission network, among others fell on a year-over-year basis.

EBITDA grew 3% year over year to R$1,252 million ($607.8 million) in the quarter. EBITDA margin was 36.4% versus 35.1% in the year-ago quarter. Operating margin in the quarter came in at 22.7% compared with 27.5% in the year-ago quarter.

Balance Sheet/Cash Flow

Exiting the second quarter 2013, Cemig’s cash and cash equivalents slipped 20.1% sequentially to roughly R$2,041 million ($1,020.5 million). Long-term debts declined 13.6% sequentially to R$2,284 million (US$1,024.2 million).

Cemig generated R$1,566 million ($760.2 million) cash flow from operating activities, up 95.3% year over year. A drastic increase was witnessed in spending on addition of fixed and intangible assets; while capital expenditure in the quarter were R$2,349 million ($1,140.3 million) compared with R$427 million in the year-ago quarter.

Cemig is one of the largest integrated electric utilities in Brazil with approximately 97% of the company’s installed generation capacity being hydroelectric power. The stock currently has a Zacks Rank #4 (Sell).

Other stocks to watch out for in the industry are Huaneng Power International, Inc. (HNP), with a Zacks Rank #1 (Strong Buy), while Alliant Energy Corporation (LNT) and UNS Energy Corporation (UNS) carry a Zacks Rank #2 (Buy).

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