OREANDA-NEWS. Net Revenues - Prices both in the domestic and international markets reflect the international commodity index converted to US dollars. Net revenues totaled BRL 450.8 million in 1H14, an increase of 22.6% compared to 1H13 (BRL 367.8 million) basically due to prices in US dollars having increase by 8.7% complemented by exchange rate variation of 13,8%.

Sales Volume - 125.7k tons of ferroalloys were sold in the first semester, representing an increase of 2.8% over the same period of last year (122.3k tons). Due to the possibility of diversifying products in the same facility it was possible to capture opportunities in the ferrosilicon 75 market as some producers reduced their production to sell their electricity in the energy spot market.

Production - The Company has been working at 80.4% of its production capacity as it increased the production of ferrosilicon 75 to meet a market opportunity created by an unmet demand in the domestic market. Production totaled 140.1k tons in 1H14 representing an increase of 4.5% compared to 134.1k tons produced in 1H13.

Cost - The cost of goods sold in 1H14 increased 9.1% to BRL 342.6 million, while net revenues increased 22.6%. Thus, there was an improvement in the gross margin of BRL 42.2 million in 1H14 compared with the same period of last year.

Adjusted EBITDA - BRL 100.0 million in 1H14, representing a 22.2% margin of the net revenues, while this result was BRL 46.7 million in 1H13 (12.7% margin).

Finance income - Net financial income totaled BRL 11.7 million (BRL 7.3 million in 1H13) due to the growth of invested balance funds. Cash and cash equivalents, including investments, totaled BRL 308.8 million.

Net Income - Totaled BRL 57.0 million in 1H14, an increase of 105% compared to 1H13 (BRL 27.8 million).

Investments - Investments in 1H14 totaled BRL 44.8 million (BRL 57.2 million in 1H13), in accordance to the annual capital budget. The main projects were the conclusion of the construction of the 14th electric furnace in metallurgy, increase in eucalyptus forestry and the construction of rectangular furnaces to improve the productivity of charcoal.

Market

The accumulated crude steel world production published by the WSA (World Steel Association) totaled 821.3 Mt in 1H14 representing an increase of 2.5% compared to 1H13, highlighted by the growth of 3.8% in the EU countries and 4.5% in China. In Brazil a reduction of industrial activity has affected the domestic steel industry, accumulating a production in 1H14 of 16.7 Mt of crude steel and 12.5 Mt of rolled steel, down 1.5% and 4.5%, respectively, over the same period of 2013. The period has been difficult to Brazilian steelmakers with the lower demand from main markets such as automotive, a discrepancy in the exchange rate and a supply surplus of steel over the world.

In the Brazilian market Ferbasa has managed to increase its sales and margins of ferrosilicon 75 as some companies have reduced their ferroalloy production, opting to resell their contracted electricity in the energy spot market.

Russia became in June the largest exporter of ferrosilicon 75 to Brazil, with 2.015 tonnes. Due to the approval of an antidumping duty of 22.84% by the USA to Venezuela, Brazil became a potential market for the redirection of Venezuelan ferrosilicon 75.

The growth of the world production of stainless steel in most markets should lead to a new record in 2014, once again driven by China. The Brazilian market, despite its economic scenario, improved and should close 2H14 with a production increase near 10% compared to 1H14. We believe that this increase derives from the Brazilian consumption growing at a historical rate of 6.5% p.a. Globally we have observed a ferrochrome market with lower prices in China during the last five years and also lower levels of inventories based on weeks of consumption. Base on the historical behavior at a global level, after a long round of negotiations, the benchmark price of high carbon ferrochrome has been reduced by 2.5% for 3Q14, set at USD cents 119/lbCr.

Ferbasa is the largest producer of ferroalloys in Brazil and the only integrated ferrochrome producer in the Americas, exercising the activities of mining, forestry and metallurgy. It was founded by Mr. Jose Carvalho who transferred in 1975 most of his shares to a foundation bearing his name. This foundation is a philanthropic entity running 12 schools attended by approximately 6,000 children and adolescents in the Northeast States of Sergipe, Pernambuco and Bahia.

Ferbasa owns approximately 85% of Brazil's reserves of chromite (ferrochrome's raw material) which combined with a sustainable charcoal in a metallurgical plant with 14 electric furnaces produces high quality alloys of chromium and silicon. Ferbasa is constantly seeking efficiency in its processes and the highest quality in everything it does.

Its flexibility to rapidly turn on and off its furnaces avoids extra electricity costs at peak hours and helps Ferbasa adjust to market demand in a competitive environment. These conditions turn Ferbasa a market leader, strengthening its ethical and social values.