After a 23% drop on Friday, Usiminas (USIM5) shares have experienced another decline this Monday (29), falling about 5% by 12:15 PM, priced at R$ 6.01, still as a consequence of the results released at the end of last week and the future challenges.
Guilherme Nippes, steel analyst at XP, participated in this Monday’s Morning call at XP, and provided an analysis of the steelmaker’s performance in the second quarter of the year and what can be expected in the third quarter earnings report of 2024.
“Usiminas’ results in the second quarter came in below expectations, still reflecting the challenging steel segment, which was partially mitigated by the performance of the mining sector,” he said.
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Performance of Blast Furnace 3 Mitigated Worse Results
What stood out the most in the last period’s earnings report were the costs. “For the steel industry, the cost per ton increased compared to the previous quarter. This was driven by the rise in plate prices used in steel production, in addition to the devaluation of the real,” he explained.
According to the analyst, the performance of Blast Furnace 3 at the Ipatinga (MG) plant, which was refurbished last year, partially offset the company’s negative result.
Nippes highlighted that the company’s expectation is for an improvement in volumes in the third quarter, especially in the domestic market. In addition, potential price adjustments are anticipated given the devaluation of the real.
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“This ultimately impacts raw material costs, and part of this should be passed on to the market,” he pointed out.
Costs Are Expected to Remain Pressured
“But the cost indicators are expected to remain highly pressured. The market’s expectation was for a sequential reduction in costs over the coming quarters, but the expectation now is that the steelmaker should see an improvement driven by the stabilization of Blast Furnace 3, although this will be partially offset by the devaluation of the real,” he emphasized.
”The currency, being important from a cost perspective, should continue to impact the steel industry throughout the third quarter,” he stated. On the mining side, Usiminas expects stable volumes in the period from July to September.
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Limited Ebitda
“Investors expected a better detailing of cost improvement potential in the third quarter, which did not happen, causing a significant drop in shares,” he said.
“In this sense, the devaluation of the real is expected to play another negative role throughout the third quarter. This negative performance of the real ultimately limits the potential increase in Ebitda throughout the third quarter. This also ends up disappointing the market,” he concluded.