(Adds share price, analyst and executive comments)
By Stephen Eisenhammer
RIO DE JANEIRO, July 24 (Reuters) - Brazilian steelmaker Usiminas reported lower-than-expected quarterly profit and gave a bleak outlook for the year as iron ore prices fell and flat steel demand faltered.
Usinas Siderúrgicas de Minas Gerais SA, as the company is officially known, said on a conference call that it did not expect steel sales to improve in the third quarter as demand in Brazil continues to waver.
“2014 is a year full of uncertainty,” Commercial Vice President Sergio Leite said, adding that the extent of the slump in Brazil’s automotive sector was “something we haven’t seen for a long time.”
The company posted second-quarter net income of 129 million reais ($58.1 million).
The profit was an improvement from a year-earlier net loss of 22 million reais, but was down 42 percent from the prior quarter and came in 9.8 percent below the average estimate in a Reuters poll of analysts.
The company’s shares fell as much as 3.2 percent as analysts focused on the poor performance of Usiminas’ mining division.
The division’s earnings before interest, taxes, depreciation and amortization fell 62 percent from the first quarter, as iron ore prices hit 22-month lows.
Banco BTG Pactual SA analyst Leonardo Correa called the division a “negative highlight” in a note to clients but said he expected improvements. He maintained a “buy” rating on the stock, which he described as “very cheap.”
Usiminas mining director Wilfred Bruijn told analysts and investors that improvement in the division depended on operations starting at the Sudeste port run by Swiss trader Trafigura.
The port is supposed to start up later this year and will allow Usiminas, which has a contract to export through it, to have better access to the international market.
Productivity and investment in Brazil have been hit by multiple public holidays held over the soccer World Cup in June and July as well as the uncertainty created by the upcoming presidential election in October.
Fears are growing, however, that the productivity drop may be more deep-rooted. Brazil’s auto output fell 23 percent in June from May. This year’s production of cars, trucks and buses is now expected to be 10 percent lower than in 2013.
Earlier this week, Sindisider, a trade group for steel distributors in Brazil’s largest metropolitan regions and producing areas, cut its growth forecast for domestic flat steel sales this year to 1 percent from 4 percent.
Usiminas shares were down 2.6 percent at 7.82 reais in Sao Paulo after falling as low as 7.77 reais.
$1 = 2.22 Brazilian reais Reporting by Stephen Eisenhammer; Editing by Franklin Paul and Lisa Von Ahn