| SAO PAULO
SAO PAULO May 20 Net income at Votorantim
Industrial SA fell in the first quarter in the wake of a $880
million bond buyback that helped Brazil's largest industrial
conglomerate significantly reduce debt.
The São Paulo-based group, whose interests range from cement
and metals and mining to steel and pulp, earned a net profit of
8 million reais ($3.6 million) in the first three months,
compared with a profit of 199 million reais a year earlier,
according to a statement on Tuesday. Despite the result,
operational profit rose at each of the group's five different
business segment, the statement said.
Without the impact of the debt repurchase, net profit would
have been 408 million reais, representing a jump of 105 percent
on a year-on-year basis, the statement said.
Revenue rose 11 percent to 6.6 billion reais from 5.9
billion reais in the year-earlier period.
In March, Votorantim Industrial finished a tender for $586
million of its bonds due in 2019 and $294 million of notes
issued by unit Cia Brasileira de Aluminio SA, lowering net debt
to 22.2 billion reais, or the equivalent of 2.98 times earnings
before interest, tax, depreciation and amortization. EBITDA, as
the operational profit is commonly known, measures the ability
of a firm to generate cash from its core business.
According to the statement, consolidated EBITDA at the
conglomerate surged 41 percent to 1.5 billion reais at the end
of March, in the wake of rising prices and sales volumes, a
weaker Brazilian real that helped prop up
dollar-denominated revenues and a curb in sales, general and
administrative expenses. Votorantim Industrial, a privately held
conglomerate, is controlled by the Ermirio de Moraes family.
"The results are a proof of our companies' consistent
operational performance," Chief Executive Officer Jõao Miranda
was quoted in the statement as saying. "We are in a permanent
search for efficiency in our operations as well as for
In spite of the profit tumble, the results underscore the
group's efforts to adapt their business to challenging global
and domestic conditions as the Ermirio de Moraes family enhances
governance in the conglomerate. The group took advantage of
faster cash generation and smaller-than-expected volatility in
capital markets to repurchase expensive debt.
"We evaluated the timing for the debt repurchase plan and we
concluded that it was the right timing, because we wanted to cut
our foreign currency-denominated liabilities and we found a
receptive market for funding in reais," Sérgio Malacrida, head
of treasury and investor relations, said in the statement. The
conglomerate's cash holdings ended up the quarter at 4.8 billion
reais, which Malacrida called a "comfortable level."
A year earlier, Votorantim Industrial's net debt ratio had
reached 3.60 times EBITDA. Capital spending in the quarter
totaled 465 million in the quarter, with 20 percent of that
amount funneled into projects to expand the businesses,
especially the cement unit.
($1 = 2.20 Brazilian reais)
(Reporting by Guillermo Parra-Bernal and Alberto Alerigi Jr;
Editing by Chizu Nomiyama)