Usiminas posts Net Profit of 125% in Second Quarter
Company reported breakthrough results for all its business units
Usiminas ended the second quarter of the year with a 125% increase in net income. The total amount between April and June was R$ 171 million, compared to a net profit of R$ 76 million in the previous quarter. In the same period, the Company's consolidated Adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) reached R$ 576 million, an increase of 18% compared to the first quarter of the year, when Adjusted Ebitda was R$ 488 million. The increase is mainly associated to higher steel sales volumes and higher iron ore and steel prices.
In the second quarter, Usiminas total steel sales reached 1.1 million tons, 4% up, over the first three months of the year. A total amount of 949 thousand tons was traded in the domestic market (7.2% increase compared to 1Q19) and 110 thousand tons in the foreign market (7.5% reduction when compared to 1Q19). According to information released by “Brazil Steel Institute”, apparent consumption of flat steel products in the country reached 6.2 million tons in the first six months of 2019, 1.4% up over the same period last year.
Usiminas CEO, Sergio Leite, points out that, the company has been concentrating all its efforts to continue presenting solid results, as recent indicators of economic activity in the country are below expectations. “Economic recovery remains slow. Central Bank's Economic Activity Index, “IBC-Br”, indicated a 0.06% drop in the first four months of the year and Focus Bulletin shows that after falling 19 consecutive times, the country's GDP projection is currently below 1%”.
Mr. Leite emphasizes that, even in this scenario, Usiminas has reached a production of rolled products at Ipatinga and Cubatão plants of 1.1 million tons, 4% up, over the first quarter. “Our goal is to surpass results, regardless the difficulties and complexity of the economic scenario”, he says.
In terms of investments, the company ended the second quarter with an increase of 19% compared to the previous quarter. Usiminas Capex in the period reached R$ 105 million with investments directed mainly to sustaining Capex, safety and environment.
At Usiminas Mining (Musa), the second quarter of the year also ended with a 30% increase in production. During this period, Musa produced 1.7 million tons, compared to 1.3 million tons in the previous quarter. Sales decreased slightly, by around 7%, due to lower export volumes, partially offset by domestic sales to third parties.
Musa's net revenues totaled R$ 441 million in the second quarter of the year, 5.5% up from the first quarter, mainly due to higher iron ore prices. Adjusted EBITDA stood at R$ 190 million, 25% up, over 1Q19. Adjusted EBITDA margin was 43% in the second quarter, compared to 36% in the first three months of the year.
At “Soluções Usiminas”, a company which operates in steel distribution and processing markets, net revenues increased 5.7% in the second quarter compared to the first quarter, mainly due to higher sales and service prices. It reached an amount of R$ 930 million in 2Q19 and R$ 879 in 1Q19.
“Solutions Usiminas” Adjusted EBITDA increased by 117% in the second quarter, when compared to the previous quarter. It was R$ 37 million in 2Q19 and R$ 17 million in the first quarter. Adjusted EBITDA margin stood at 4% in the period, compared to 2% in the previous quarter (1Q19).
“Usiminas Mecânica” recovered in the quarter. The company, one of the largest in the country in the production of capital goods on demand, had net revenues of R$ 96 million in the second quarter, against R$ 62 million in 1Q19. An increase of around 54%, mainly due to projects in the mining, steel and equipment sectors.
“Usiminas Mecânica” Adjusted EBITDA was positive at R$ 800 thousand, compared to the negative R$ 1.3 million registered in the first quarter of the year. Adjusted EBITDA margin was a positive 0.8% in 2Q19, compared to a negative 2.1% in the first quarter of the year.
Last July 15, Usiminas received another upgrade in its credit rating. This time, the international rating agency Standard and Poor's (S&P) raised the company's grade from B to B + with a stable outlook. According to S&P´s analysts, the issuance of bonds offered by Usiminas on 07/18 will bring more financial flexibility and greater liquidity to the company. They have also assessed that “the company will gradually deleverage over the next few years due to strong free cash flow from operations, even with higher investments, while keeping adequate liquidity levels.”
In June, S&P had already made a positive assessment of Usiminas by announcing the maintenance of its credit note, even in a challenging scenario. With the new upgrade, Usiminas has completed four announcements of rating improvements. Previously, the company had already registered upgrades in its credit memo from Moody's and Fitch.