February 14, 2020 / 1:23 PM / 10 days ago

UPDATE 2-Brazil steelmaker Usiminas' profits slide, hitting shares

(Recasts to add shares performance, executives’ comments and analysts’ views)

By Alberto Alerigi Jr.

SAO PAULO, Feb 14 (Reuters) - Brazilian steelmaker Usiminas SA on Friday posted a one-third drop in quarterly net profit driven by higher costs and poor results in its steel business unit, sending its shares down nearly 5%.

In a securities filing, the company reported a net income of 268 million reais ($61.6 million) in the fourth-quarter, reversing a loss of 139 million reais in the previous quarter, though 33% lower year-on-year.

Analysts, on average, expected net income of 52.3 million reais, Refinitiv Eikon data showed.

Separately, Usiminas unveiled planned 2020 capital expenditures of 1 billion reais ($231 million), 45% more than in 2019 and more than double 2018 capex of 463 million reais, with plans to renovate its blast furnace in Southeastern city of Ipatinga.

Earnings before interest, taxes, depreciation and amortization, a gauge of the company’s operating performance also known as EBITDA, grew by 22% from the fourth-quarter of 2018 to 447 million reais, above an estimate of 387 million reais compiled by Refinitiv.

But the EBITDA figure was boosted by a 117 million-real non-recurring gain from state-run power company Eletrobras SA , analysts at BTG Pactual said.

“Usiminas’ earnings quality has been an issue to us and we still find it difficult to understand what the company will look like 3-5 years down the road,” BTG Pactual analysts wrote in a report on Friday.

Usiminas’ preferred shares were trading down 4.6% in early afternoon at 9.87 reais, among the worst performers on Brazil’s Bovespa stock index, which was 0.96% lower.

The steelmaker still expects to receive another 1.2 billion reais from Eletrobras, pending a court decision, Chief Financial Officer Alberto Ono said in a call with analysts.

He added that the company is succeeding in cutting costs in the first quarter. In the fourth-quarter, the cost of goods sold climbed 17% year-on-year to 3.58 billion reais.

Usiminas’ steel sales declined 2%, while iron ore sales jumped 65%.

Chief Commercial Officer Miguel Homes Camejo added steel contracts with U.S. and European automakers for sales going forward were signed at higher prices.

“International indicators point to a positive price trend in the last two months, and though coronavirus has weakened this trend a bit, prices are still higher than at the end of last year,” Camejo told analysts.

$1 = 4.3503 reais Reporting by Alberto Alerigi Jr; Writing by Gabriela Mello Editing by Jason Neely and Steve Orlofsky

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