Usiminas recorded Adjusted EBITDA of R$ 453 million
The company keeps consistent results trajectory in the third quarter of the year
Usiminas kept the trajectory of consistent results presented in recent months in the third quarter of this year. Consolidated EBTIDA (earnings before interest, taxes, depreciation and amortization) of the company totaled R$ 453 million in the period. Adjusted EBITDA of R$ 549 million was recorded in 2Q17, without considering the effects of the agreement with “Porto Sudeste”, in the amount of R$ 201 million. Consolidated Adjusted EBTIDA in the first half of 2017 was R$ 1.7 billion, compared to R$ 426 million in the same period of 2016.
Adjusted Steelmaking EBITDA margin reached 17% from July to September, compared to 20% in the previous three months. In the consolidated first nine months of the year, Adjusted EBITDA margin bounced from 7% in 2016 to 23% in 2017. Net income reached R$ 75.9 million in 3Q17, compared to R$ 175.7 million from April to June. It should be noted that net income from January to September 2017 reached R$ 360 million. In the same period of the previous year, the company recorded a net loss of R$ 382 million.
Among the factors that contributed to the sustainability of the figures presented, there is an increase in sales of steel, especially for the domestic market, in the order of 5% in relation to the previous quarter. In total, including exports, 1.016 million tons were traded in the 3Q17, against 990 thousand tons in 2Q17, an increase of 3%. Net revenue increased from R$ 2.6 billion in 2Q17 to R$ 2.7 billion in the third quarter. The mining units – with the resumption of iron ore exports and the increase in sales to Ipatinga Power Plant , Steelmaking and Steel processing (Soluções Usiminas) were the ones that contributed the most to the increase, driven by rises in sales volume.
In the assessment of Usiminas CEO, Sergio Leite, the numbers registered in the third quarter of this year indicate a sustainable trajectory of the company's results. “Since the second quarter of 2016, when we recorded a Consolidated Adjusted EBTIDA (in the previous 12 months) of R$ 196 million, we are on an upward curve. It is a reflection of the new stage of the company, with established management goals, focused, mainly, on the generation of results and the search for excellence in customer service and improvement of the organizational atmosphere, among other factors”, he says. According to Mr. Sergio Leite, although the domestic economy scenario is still of “moderate recovery”, the company is on right track.
With regard to investments, the company's CAPEX totaled R$ 51.7 million in the third quarter, 51.6% higher than in the previous three months. The main contributions made were sustaining CAPEX (investment support), 82% in the Steelmaking Unit, 10% in the Mining Unit, 7% in the Steel Transformation Unit and 1% in the Capital Goods Unit. In the first nine months of 2017, investments totaled R$ 109 million, against R$ 158 million in the same period of the previous year.
On September 30 2017, the company's consolidated gross debt was R$ 6.9 billion, a reduction of R $ 89.3 million compared to that of 06/30/17. In 3Q17, the dollar depreciated against the BR Real by 4.2%, which positively impacted the portion of foreign currency debt, which corresponded to 25% of total debt on that date.
In the same period (3Q17), Usiminas also took an important step in its financial revitalization process. On August 31, the company received definitive approval from its creditors to effect the full settlement of bonds maturing in January 2018, fulfilling one of the main determinants of the debt renegotiation process.
It should also be noted that Usiminas will pay in advance, in December 2017, US $ 90 million to its creditors. In the agreement negotiated with the banks in September 2016, the first amortization of the principal amount of the debt would be made only in September 2019. “These measures allow Usiminas to work on its long-term planning and reinforce solidity and confidence in Usiminas, fundamental for the future of the company”, says Sergio Leite.
In its business units, Usiminas recorded in the mining area a production volume of 1.1 million tons of iron ore, an increase of 53% when compared to the second quarter of 2017. The volume of sales in turn was of 904 thousand tons, an increase of 44% in relation to 2Q17, mainly due to the export of 175 thousand tons and higher sales to Ipatinga Plant, by 13%. Net revenue accounted for R$ 121.4 million, up 36.2% when compared to the previous quarter (2Q17), when revenue was R$ 89.1 million.
In “Soluções Usiminas”, an area operating in the distribution, services and small diameter pipes, net revenue last quarter reached R$ 673.3 million, 14.2% higher than in the second quarter of the year, due to the higher volume increase on the average price in the domestic market. Adjusted EBITDA in the period was R$ 18.3 million, against R$ 27.3 million in the previous quarter.
In the area of capital goods, Usiminas Mecânica had net revenues of R$ 73.8 million, against R$ 80.4 million in 2Q17, a reduction of 8.3%, reflecting the stagnation of the oil, gas and infrastructure market. Gross profit reached R$ 7.3 million in 3Q17, against R$ 5.3 million in 2Q17, 37.7% higher than in 2Q17, due to better margins found in equipment projects.
Automotive Market Relevance
Another highlight of the company in the period was achieving recommendation for certification in the new quality management standard for suppliers of the automotive sector, the IATF 16949:2016. Usiminas is one of the first Brazilian companies and one of the pioneers in the world steel market to obtain the recommendation. Developed by the International Automotive Task Force (IATF), the standard is focused on serving the automotive market and is considered a prerequisite for supply to this segment
According to Usiminas CEO, Sergio Leite, “the achievement reinforces Usiminas' leading role in meeting the demands of the automotive industry”. By the end of this year, he said, Usiminas should launch two types of steel focused on this market. In 2016, the steelmaker presented four new products for the segment, some of them unprecedented and unique in the country, in an effort to locally produce steels with high technological content.
In the capital market, Usiminas' common share ended the third quarter at R$ 10.05 and the preferred one at R$ 7.78, an appreciation of 13.8% and 69.1%, respectively. In the same period, “Ibovespa” recorded an appreciation of 18.1%. Usiminas shares are traded on the stock exchanges of São Paulo, New York (ADR level I) and Madrid.
The quarter was also marked by the increase in Usiminas credit risk of by two of the leading rating agencies in the global market. In September, “Standard and Poors” upgraded the company's rating from CCC + to B- rate on its ability to honor financial obligations in full and on time. More recently, it was “Fitch's” turn to announce the increase in CCC's rate to B, a significant improvement in the company's credit profile, “supported by a reduction in indebtedness and manageable refinancing risks.”
Usiminas is the leader in the Brazilian flat steel market and one of the largest steel complexes in Latin America. The company has business and logistics units in six Brazilian states and is present throughout the steelmaking chain, from the extraction of ore, through the production of steel to its transformation into products and capital goods. Today it has the largest and most innovative Center for Research and Development in the steel industry in the continent.
Due to its environmental management, Usiminas was the second steel mill in the world certified with ISO 14001, generating higher productivity with lower consumption. The company also contributes to the development of the communities in its area of influence through the “São Francisco Xavier Foundation” and the “Usiminas Cultural Institute”, with projects in the areas of health, education and culture.