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Usiminas posts first profit in 7 quarters on cost cuts

By Guillermo Parra-Bernal

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

The company, known formally as Usinas Siderúrgicas de Minas Gerais SA, said it had earned net income of 115 million reais ($53 million) in the third quarter, according to a securities filing on Wednesday. Capital expenditures and financial expenses fell 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 analysts in a Thomson Reuters poll, the company earned 94 million reais. A seventh analyst in the poll estimated a net loss of 52 million reais.

Key indicators showed Chief Executive Officer Julián Eguren's turnaround efforts are bearing fruit. Adjusted earnings before interest, taxes, depreciation and amortization rose to the highest level in about three years, while the steelmaking division had a resilient sales mix and growing margins.

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

Management will discuss results in a conference call with investors 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 sales lost momentum. Sales volumes fell 0.4 percent from the prior quarter, while average prices for most products rose.

Cost of goods sold fell 4.4 percent to 2.74 billion reais from the second quarter and well below the poll's forecast of 2.94 billion reais.

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

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

Adjusted EBITDA, which excludes Usiminas' participation in other companies, surged 22 percent from the second quarter to 538 million reais, the highest level since at least the fourth quarter of 2010. It rose to 16.8 percent of revenue, compared with 13.6 percent in the second quarter.

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