Usiminas (USIM5) is the first company in the steel and mining sector to report its results for the first quarter of 2023 this Thursday (20th). And the company should post better results after a difficult fourth quarter — and steel should be the positive highlights of the quarter for analysts.
To Usiminas, Vale (VOUCH3) will release its numbers on April 26. Gerdau (GGBR4) and Metalúrgica Gerdau (GOAU4) publish their balance sheets on May 3rd as well as CSN (CSNA3) and CSN Mineração (CMIN3). The CBA (CBAV3), finally shows his result on day 8.
“We forecast mixed trends for first-quarter results at Brazilian mining and steel companies,” analysts at Itaú BBA say in a report. “Usiminas should be the best quarterly earnings performer given better mining and steel performances,” they add.
According to the bank, the steelmaker should boost earnings from the mining arm as the average price of iron ore rose quarter-on-quarter, mainly on China’s reopening.
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In addition, steelmakers in general should also see better margins, mainly due to the decline in the price of bituminous coal used in blast furnaces – which should more than offset weaker steel prices. Last November, a ton of coking coal traded for $3.32 thousand, compared to $2.57 thousand in February and $1.76 thousand in March.
“We expect Usiminas to present a better quarter with consolidated earnings before interest, taxes, depreciation and amortization (Ebitda) of R$712 million, up 23% for the quarter. For the steel division, due to lower slab prices, we expect slightly higher volumes, lower prices and slightly lower production costs per ton per ton,” comments XP Investimentos.
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According to experts, the lower slab price should affect Usiminas’ performance in the domestic market as the steelmaker has signed rebate agreements with the automotive industry. On the external side, the end of work on the Nestor-Kirchner gas pipeline in Buenos Aires is likely to reduce steel demand.
In terms of volume, Usiminas is expected to bring a range of total shipments within its forecast, ranging between 950,000 and 1,050 tons, with around 900,000 for the domestic market and 110,000 for the foreign market. “In mining, we forecast our sales to be 1.9 thousand tonnes versus 2,000 in the fourth quarter, solidifying a 17.8% decline due to weaker seasonality and higher rainfall impacting mine productivity,” he adds Genial
According to Refinitiv’s consensus, the company’s revenue is expected to be R$7.6 billion, Ebitda R$752.2 million and net profit R$346 million.
Gerdau and CSN
Still in the steel industry, analysts believe Gerdau should lag behind Usiminas in quarter-over-quarter performance improvement. Itaú BBA, for example, expects Ebitda growth of 13%, as does BBI, which will reach R$ 4.1 billion.
“We expect 13% ebitda growth on a quarterly basis on positive results in the businesses in Brazil with better volumes and costs and in North America with higher volumes and fixed cost dilution. We expect volumes to rise approximately 17.5% on a quarterly basis and realized prices to trend down, although the spread The still-strong metal should keep margins high,” said Erste Bank analysts.
In the United States, economic momentum and Joe Biden’s infrastructure packages continue to drive prices higher. In Brazil, long steel shipments to the domestic market are expected to increase 13% qoq after a weak fourth quarter performance. Domestic prices are likely to stagnate due to a better product mix. But the production costs, as with Usiminas, should fall.
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At CSN, the improvement trend is somewhat smaller. BBA expects the company to post Ebitda up 1% on a quarterly basis and BBI up 4%.
“Iron ore results are driving the first quarter, while steel and cement are expected to be weaker due to lower demand in Brazil, particularly in January and February. For steel, domestic shipments are expected to fall by 8%, partially offset by stronger price realization. Exports are expected to increase by 17%,” explains BBI.
Gerdau should stand out above all by the fact that its activities are increasingly focused on the United States. In the fourth quarter, the North American operation was responsible for 52.7% of the company’s Ebitda.
Refinitiv expects Gerdau to post sales of R$19.2 billion, EBITDA of R$3.9 billion and net profit of R$2.1 billion. For CSN, in the same order, the forecasts are R$11.4 billion, R$3.2 billion and R$834.9 million.
CSN Mineração, Vale and CBA
CSN’s arm, CSN Mineração, should have weakened its results on a quarterly basis. Despite the high ore price, sales volume should decrease due to lower production due to the rains and the Company should have higher costs as fixed costs have been less diluted.
“We expect a slightly weaker result with an adjusted EBITDA of R$1.7 billion, down 3% on a quarterly basis, despite higher realized prices, with a 20% increase for ore, sales should come in at 8.5 thousand tons remain, down 13%, and CSN should have higher cash costs,” comments XP.
For Vale, the projections follow the same line. XP also comments that lower volumes due to seasonality and higher costs should weigh on Ebitda by 4%.
“Seasonally weaker supplies and higher costs offset healthier commodity prices. Iron ore shipments should decrease seasonally, also impacted by heavier than normal rainfall in the port of Ponta da Madeira (which impacted exports more than production),” BBI adds.
Vale’s operational preview was released on Tuesday (18) and failed market expectations. The mining giant reported production of 66.8 million tons of ore and sales volume of 45.9 million tons. For comparison purposes, BBI expected delivery of 57 million tonnes.
After the operational data, Morgan Stanley revised downward the estimate for Vale’s Ebitda from 4% to 8% in 1Q23, below the consensus of $4.3 billion, due to lower shipments. BBA revised its Ebitda estimate to $3.7 billion in the first quarter of this year from $4.1 billion.
Vale also failed in base metals. In copper, for example, sales were 25% below the Goldman Sachs consensus.
Finally, a result can be expected for the CBA, which is also not encouraging.
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“We are forecasting an Ebitda decline of 27% compared to the fourth quarter, mainly due to lower aluminum volumes and higher costs for the company,” says the BBA. “For the aluminum division, we expect an EBITDA decline of 4% for the quarter due to a combination of: slightly lower sales volumes, primarily due to weaker seasonality; lowest achieved prices; and higher cost per case per ton sold, impacted by still high soda and cola prices,” says XP.
For CSN Mineração, Refinitiv revenue consensus is BRL 3.6 billion, Ebitda is BRL 1.6 billion and net income is BRL 833 million. In Vale’s case, the forecasts are $9.4 billion, $4.4 billion, and $2.8 billion, in the same order. For CBA finally R$1.9 billion, R$134 million and a net loss of R$26.2 million.