UPDATE 1-Brazil's Usiminas posts bigger-than-expected loss; EBITDA soars

Mon Feb 18, 2013 5:53pm EST

* Loss at 283.1 mln reais tops Reuters poll estimate

* EBITDA, inventory, mining unit post strong numbers

* Company to discuss results at Tuesday investor call

By Guillermo Parra-Bernal

SAO PAULO, Feb 18 (Reuters) - Brazilian steelmaker Usinas Sider├║rgicas de Minas Gerais SA posted a bigger-than-expected loss in the fourth quarter as the weakest local market for steel in years offset strong iron ore sales and the impact of a massive turnaround in operations.

Usiminas, as the Belo Horizonte-based company is known, lost 283 million reais ($144 million) in the fourth quarter, more than the 114 million reais loss estimates by seven analysts in a Thomson Reuters poll. The company lost money for a fourth consecutive quarter - the worst string of quarterly results in a decade.

Production and sales of products ranging from plates to rolled steel fell, revenue fell for the first time in five quarters and capital expenditures slipped.

But signs of a gradual recovery sprouted, as shown by a surge in operational earnings before interest, tax, depreciation and amortization, as well as the robust performance of the company's mining division and a decline in inventory.

The results underpin Chief Executive Julián Eguren's efforts to ease Usiminas' most pressing shortcomings -- a rigid cost structure that is too vulnerable to its lack of proprietary energy and iron ore assets, and an aging mill infrastructure. Eguren, a former executive at Italian-Argentine steel group Ternium S.A., took over as CEO late last year when the latter bought a controlling stake in Usiminas.

"In order to face these challenging conditions, Usiminas is focusing all of its efforts in cutting costs and augmenting operational efficiency so as to pursue better competitiveness in its activities," the company said.

Net revenue slid 5.4 percent to 3.21 billion reais on a sequential basis, missing estimates of 3.31 billion reais in the Reuters poll. Costs of goods sold fell 5.6 percent, thanks to the lower price of raw materials and a 1.8 percent drop in output, the company said.

Earnings before interest, tax, depreciation and amortization, a gauge of operational profit known as EBITDA, soared 51 percent to 226 million reais after iron ore sales almost doubled. Mining responded for about three-fourths of Usiminas' EBITDA in the fourth quarter, the company said.

In contrast, the performance of Usiminas' steel unit was disappointing: EBITDA at the company's mills fell to 20 million reais in the quarter from 57 million reais in the prior three months - yielding a profit margin of a meager 1 percent.

EBITDA came roughly in line with the poll's estimate of 221 million reais. Usiminas' EBITDA rose to a better-than-expected 7.1 percent of revenue, compared with an expected margin of 6.7 percent in the poll.

Tax debts magnified the company's fourth-quarter loss, Usiminas said. A surge in financial income helped offset a jump in debt-servicing costs in the quarter.

Management will discuss fourth-quarter earnings at a conference call on Tuesday.

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