Brazil’s Usiminas Q2 net profit falls 77% after forex losses

Net revenue totaled 8.53 billion reais, down 11% year-on-year but beating the 8.34 billion forecast by analysts.

Usiminas said currency volatility had led to a 306 million-real loss in the second quarter, against a 482.9 million-real net gain from foreign exchange moves a year ago.

Shares in the company were up 0.2% at 9.06 reais in early trade, roughly in line with Brazil’s Bovespa stock index.

Sales at Usiminas’ steel division dropped 17% after lower production as blast furnace No.2 has been halted for repair work since September 2021. Higher prices, however, improved operating margins.

Looking ahead, the company said its board of directors had given approval for blast furnace No.2 to resume operations by the end of October. Still, it said its Ipatinga coking plant might have to reduce production.

Usiminas said it expects its third-quarter steel sales to be between 950,000 tonnes and 1.05 million tonnes, below the 1.1 million tonnes reported in June. In the same period in 2021, sales reached 1.2 million tonnes.

In the mining division, second-quarter iron ore sales rose 16% from a year ago and also increased versus a sluggish first quarter when heavy rainfall in Brazil limited output.

“The quarter was marked by strong steel results mainly as the company implemented price hikes for the automotive sector,” analysts at JPMorgan said.

BTG Pactual viewed the results as better than feared given the company’s operational issues but said they were still below potential. It made a “buy” call based on Usiminas’ discounted valuation – the stock has plunged almost 40% year-to-date.

($1 = 5.1838 reais)

(Reporting by Gabriel Araujo; editing by Barbara Lewis)