Steel Giant in the Red: Usiminas Faces Setbacks in Q2 of 2024

Usiminas (USIM5) reported a R$100 million ($17.7 million) net loss for Q2 2024, a notable decline from previous periods.

Previously, the company enjoyed a profit of R$287 million ($50.8 million) last year and R$36 million ($6.4 million) in the prior quarter.

The group attributes this reversal to a worsening operational performance and the real’s depreciation against the dollar, affecting its debts.

Consequently, adjusted EBITDA fell to R$247 million ($43.7 million), a sharp 41% quarterly and 33% annual decline.

Expectations were higher; some analysts had projected an adjusted EBITDA of R$271 million ($47.9 million) and a net profit of R$23 million ($4.1 million).

BTG Pactual predicted a negative market reaction due to the 40% miss, primarily from weaker steel unit performance.

The disappointing quarter, coupled with vague cost-reduction plans, could erode recent gains.

Investors might now brace for a protracted recovery to an EBITDA surpassing R$3 billion ($530.1 million).

Additionally, the adjusted EBITDA margin stood at just 4%, dropping 2.8 percentage points quarterly and 1.4 points annually.

Despite setbacks, Usiminas saw a modest 2% revenue increase to R$6.3 billion ($1.1 billion), though this was an 8% year-over-year decrease.

Steel sales remained stable at 1 million tons, consistent with the last quarter and up 7% from the previous year. In contrast, iron ore sales rose 3% quarterly but fell 16% annually to 2 million tons.

These financial challenges reflect the steel industry’s instability, driven by variable market demands and global economic conditions.

This downturn underscores significant challenges for Brazil’s heavy industries, suggesting potential shifts in market strategies and investment priorities.

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