OREANDA-NEWS. November 14, 2011. Notwithstanding the slackening scenario, the net income remains stable; investments grew 31% from the previous quarter levels.      

New RH3 vacuum degasser at Ipatinga Mill (MG), one of the projects to come on stream soon,

in line with Usiminas’ investment plan.  

The Brazilian steel industry had to cope with several challenges during the third quarter 2011. The slower industrial activity and an increasing destocking move led to lower demand in the period. Moreover, the steel industry was impacted also by the growing direct (+27.5%) and indirect (+9.7%) steel imports during the quarter when compared to 2Q11. As a result, steel shipments to domestic customers declined 2% from the previous quarter levels. Specifically in the flat steel segment, such a decline reached 10%.

In spite of this slackening scenario, Usiminas managed to keep its profit stable in 3Q11 at BRL  154 million (down 2% from 2Q11). The EBITDA in the period amounted to BRL  343 million (down 6% from 2Q11) and the EBITDA margin achieved 11.5% (-0.66 p.p. from 2Q11).

The net revenue was stable too. It amounted to BRL  3.0 billion (down 1% from 2Q11), notwithstanding the lower sales volume (down 11% from 2Q11), which totaled 1.4 million tonnes. Out of this volume, 1.2 million tonnes were shipped to domestic customers and 243,000 tonnes to foreign customers.

The crude steel output of Ipatinga and Cubatao mills totaled 1.55 million tonnes in the period, following the general downward trend seen in the Brazilian crude steel production when comparing the 2nd and 3rd quarters. Usiminas output drop (-17% from 2Q11) was due not only to the slower shipments, but also the 20-day scheduled shut down of one blast furnace at Cubatao mill for maintenance.

Investiments

Usiminas’ consolidated investment amounted to BRL  688 million in the 3rd quarter, up 31% from 2Q11 figures. “In spite of the unfavorable picture, Usiminas adopted strict financial discipline in order to maintain its investment plan and improve its competitiveness”, Usiminas CEO Wilson Brumer said.

The new hot strip mill at Cubatao Mill and the new vacuum degassing plant (RH3) at Ipatinga Mill are among the projects to be completed soon.

The new rolling mill will add 2.3 million tonnes/year to the company’s hot-rolled steel production capacity to meet the requirements of a number of industries, like large-diameter tubes, auto parts, industrial equipment and machinery, and civil construction. Out of the overall investment of BRL  2.5 billion, around BRL  2.2 billion have already been expended. With its start-up scheduled for the first half 2012, the new rolling mill is in the pre-operating test stage, whereas the civil works and erection services are in their final stage.

The new RH3 vacuum degasser is designed to process 800,000 tonnes/year of degassed molten steel. The resulting product is upgraded steel with improved stampability properties, higher cleanliness and increased mechanical strength intended for the automotive and shipbuilding industries. The total investment amounts to BRL  152 million and the new plant is planned to be started up during the last quarter 2011. The tests started in September, and the plant is in the final stage of erection services and civil works.

Improved management efficiency

The company has just restructured its administrative sectors with an aim to make the internal processes faster and simpler, which included the reduction of hierarchical levels to just four. The reduction in administrative expenses is expected to reach more than BRL  100 million/year.

Moreover, a thorough revision was made of all the contracts with third parties, with a focus on a more efficient internal management. At the same time, Usiminas kicked off a real estate optimization plan, which contemplates a revenue of around BRL  300 million from the disposal of non-operating estates.

Iron ore

Mineracao Usiminas increased its iron ore output by 3% from 2Q11 to 1.67 million tonnes. A number of infrastructure expansion and adaptation investments are being implemented under the company’s expansion project, which foresees the production capacity to be increased from 7 million to 29 million tonnes/year by 2015.

Specific investments in the mining area totaled BRL  194 million during the year with an aim to expand the mining capacity, including the acquisition of movable mining equipment, adaptations and improvements of existing plants and construction of new processing plants.