May 21, 2020 / 12:34 PM / 14 days ago

Brazil's Votorantim posts $597 mln Q1 loss, hit by Nexa mine

SAO PAULO, May 21 (Reuters) - Votorantim SA, one of Brazil’s biggest diversified holding companies, posted a first-quarter net loss of 3.4 billion reais ($597 million), reversing a 4.4 billion real profit from a year earlier, as a weaker currency boosted debt servicing costs.

The quarter’s results were also hit by a $485 million impairment charge for reduced cash generation expectations for its Nexa Resources SA unit’s Cerro Pasco zinc mine in Peru, Votorantim said in a statement.

Mainly due to a sharp depreciation in the Brazilian real, Votorantim’s net debt - much of it denominated in dollars - skyrocketed more than 60%, ending March at 16.2 billion reais. That is equivalent to 3.55 times adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), up from a multiple of 1.95 in December.

The holding’s Votorantim Cimentos and Nexa units also decided to draw down revolving credit lines totaling $500 million. While Votorantim Cimentos used the proceeds to prepay bonds and extend its debt maturities, Luxembourg-domiciled Nexa boosted its cash position to help weather the coronavirus pandemic.

Votorantim Chief Financial Officer Sergio Malacrida said the indebtedness ratio is likely to fall by end-year, as a weaker real will tend to favor most of the group’s sales in the coming quarters. Still, he declined to provide an estimate, as the consequences of the virus outbreak on demand remain unclear.

Still, Votorantim’s first-quarter revenues rose 2% year-on-year, to 6.8 billion reais, as higher cement sales and a weaker Brazilian currency offset lower metal prices.

Malacrida said operations in Peru and Argentina, which had been partially halted in the first quarter due to the coronavirus-related lockdown, are resuming operations. nL1N2BI2X0 ($1 = 5.6929 reais) (Reporting by Carolina Mandl Editing by Chizu Nomiyama)

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