UPDATE 2-Usiminas quarterly net tumbles, sees capex down

* Net, EBITDA tumble on weak sales, higher costs

* Plans to restart two of three idle furnaces

* Usiminas CFO sees capex down 17 pct this year (Recasts, adds CEO, CFO comments, details on capex)

By Reese Ewing and Guillermo Parra-Bernal

SAO PAULO, July 23 (Reuters) - Usiminas (USIM5.SA), Brazil's second-biggest steelmaker, said second-quarter profit fell 63 percent as demand for steel remained weak and its operating costs high.

Net income plunged to 369 million reais ($194 million) from 988 million reais a year earlier, it said in a regulatory filing late on Wednesday, but that was above the average forecast of 299 million reais of nine analysts polled by Reuters.

It was also a return to a profit after Usiminas posted a net loss of 112 million reais in the first quarter.

Due to expectations that local demand and exports are poised to increase, it will activate two of the three blast furnaces it has kept idle since late last year, Chief Executive Marco Antonio Castello Branco told analysts and reporters in a conference call on Thursday. He said in May the company would keep the three blast furnaces idle until the end of 2009.

"We are being realistic since we have just gone through one of the roughest periods in our history," Castello Branco said. "If the steel industry is wise enough not to fall into the trap of oversupply, we should be back in the black in the long run."

As a result, Usiminas will reassess investment plans for this year, Chief Financial Officer Ronald Secklemann said in the same call.

Capital expenditures likely will drop by about 17 percent to about 2.4 billion reais from an original estimate of 2.9 billion reais at the start of the year, Secklemann said.

Among plans it decided to suspend was construction of the 5-million-tonne Santana do Paraiso plant as global demand is unlikely to return to the levels seen in the past two years.

The restart of the furnaces "is a positive sign and faster than we anticipated ... as it is evidence the company believes in a significant pick-up in shipments" in the second half, Merrill Lynch analysts led by Felipe Hirai wrote in a note to clients.

Usiminas shares rose for an eighth day on Thursday, adding 3.4 percent to 42.94 reais.

Steel sales by volume plunged 38 percent to 1.19 million tonnes in the second quarter, from 1.92 million tonnes in the year-earlier period. Usiminas said the contraction in demand on the local market occurred in all segments.

Usiminas kept unchanged its original estimate for volume sales at 6 million tonnes this year.

Prices may rise slightly in the third quarter, although demand may tumble about 30 percent in the third quarter from a year earlier, Secklemann said.

Net revenue fell 39 percent to 2.41 billion reais, with costs of sales dropping by 20 percent to 2 billion reais as the company streamlined operations, bought less raw materials and shed staff.

As a result of the decline in sales locally and overseas, Usiminas cut about 2,500 jobs, representing an additional 79 million reais in charges in the quarter.

EBITDA DIVES

Bradesco BBI analysts Raphael Biderman and Gina Montone said in a July 17 report that second-quarter results for Usiminas "should be atypical" and that "sizable improvements" were possible in the second half of 2009.

A drop in coal costs as well as further reductions in operating expenses should deliver cost savings of 1.37 billion reais by the end of next year, the analysts said.

Usiminas, Brazil's biggest flat steel producer, said earnings before interest, taxes, depreciation and amortization -- an indication of cash flow known as EBITDA -- fell 92 percent to 117 million reais.

Analysts' average forecast for EBITDA was 263 million reais.

Net profit for the first half of 2009 fell 85 percent to 257 million reais. ($1=1.895 reais) (Editing by John Wallace and Brian Moss)