(Adds detail and context)
By Stephen Eisenhammer
RIO DE JANEIRO, Oct 29 (Reuters) - Brazilian steelmaker Usiminas posted a net loss of 24 million reais ($9.8 million) in the third quarter, as economic weakness in Latin America’s largest economy hurt steel demand.
Usinas Siderurgicas de Minas Gerais SA, as the firm is formally called, said a sharp fall in iron ore prices also hit its bottom line.
The swing into the red comes at a difficult time for the company, which predominantly supplies flat steel to Brazil’s auto-industry, as it reels from a boardroom battle between its two largest shareholders that resulted in the resignation of its chief executive last month.
Former CEO Julian Eguren had been widely heralded for leading a turnaround at the steelmaker, but was pushed out by major shareholder Nippon Steel & Sumitomo Metal Corp over accusations of receiving illegitimate payments.
The other main shareholder Ternium SA, where Eguren was an employee before Usiminas, objects to his dismissal and has pushed for him to be reinstated.
A net loss in the quarter is in sharp contrast to a 115 million reais profit in the same period last year when the market was beginning to gain confidence in Usiminas as a turn-around story after years of volatile results.
The company posted a 34 percent drop in adjusted EBITDA to 357 million reais. Net revenue for the quarter was 2.91 billion reais. A Reuters poll of analysts had forecast EBITDA of 398.4 million reais.
Brazil’s steel industry had hoped demand would pick up once the World Cup and related public holidays finished, but it continues to falter. In the auto sector, a vital customer for Usiminas, production is down 16 percent this year with the industry forced to make hefty job cuts.
With lower demand in Brazil, Usiminas moved to export more steel in the third quarter, with exports increasing 52.9 percent compared to the previous quarter. However, a global oversupply of the metal used in everything from cars to skyscrapers means Brazilian companies are forced to sell their steal abroad for less than they can at home.
The falling iron ore price also hurt Usiminas. The spot price .IO62-CNI=SI for the main ingredient in steel has fallen 40 percent this year as a glut of new capacity from Australia coincided with a slowing of demand in China.
Usiminas’ mining division posted a 11.5 million reais loss compared to a 71.6 million reais profit in the previous quarter.
The steelmaker also pointed to a weaker Brazilian real during the quarter for increasing the cost of servicing its dollar-denominated debt and weighing on its bottom line.
($1 = 2.46 reais)
Reporting by Stephen Eisenhammer Editing by W Simon and Chizu Nomiyama