Usiminas Earnings Call: Profitability Rebounds Amid Headwinds

Usinas Siderurgicas de Minas ((USNZY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Usinas Siderúrgicas de Minas’ latest earnings call struck a cautiously positive tone, as management highlighted a sharp rebound in profitability and cash generation but stressed that structural headwinds remain. They framed the quarter as proof that operational adjustments are working, yet warned that import pressure, weaker volumes and rising input costs could limit how much of these gains can be sustained.

EBITDA Rebounds Despite Softer Volumes

Usiminas reported consolidated EBITDA of BRL 653 million for Q1 2026, a robust 56% jump compared with Q4 2025 that underscored a clear recovery in margins. The improvement came even as steel sales volumes declined around 7% quarter over quarter, showing that mix and pricing gains more than offset the lower tonnage.

Revenue per Ton and Export Mix Lift Margins

Net revenue per ton in the steel segment rose nearly 5% versus the previous quarter, helped by a richer mix tilted toward automotive grades and coated products. Export revenues were also about 9% higher, with the company gaining share in the Argentinian auto market and strengthening ties with carmakers, supporting overall margin expansion.

Solid Cash Generation and Strong Liquidity

Operating cash flow reached BRL 370 million in the quarter and translated into free cash flow of BRL 84 million, reinforcing balance sheet resilience. Usiminas maintained a net cash position and stable net debt to EBITDA, signaling that despite volatile markets the company still has ample financial flexibility to fund operations and key projects.

CapEx Disciplined as Efficiency Projects Advance

Capital expenditures totaled BRL 285 million, down 23% from the prior quarter as peak spending on major works eased. Even with lower CapEx, management emphasized that priority initiatives such as PCI, coke battery retrofits and gas holders remain on track and are already starting to yield initial operational benefits.

Cost Savings from Maintenance and COGS Control

Cost of goods sold per ton edged lower, supported by reduced spending on major repairs and ongoing efficiency efforts across the plants. Management estimated that maintenance-related savings reached about US$15 per ton and indicated that most of these gains should be structurally retained rather than one-off.

PCI Project to Boost Coke and Furnace Efficiency

The PCI plant is expected to be completed in the second half of 2026, with partial benefits already appearing in the first half as systems ramp up. Once fully operational, the project should cut external coke purchases and improve blast furnace performance, gradually lowering unit costs and supporting margins through the cycle.

Commercial Strategy: Value Over Volume

Usiminas is intentionally prioritizing profitability instead of chasing volume, redirecting efforts toward higher-value segments like automotive and coated or galvanized steel. From April 1, the company implemented around 5% price adjustments in spot distribution to help counter a rising cost base, while maintaining a disciplined approach to contract pricing.

Steel Volumes Drop on Strategy and Weather

Steel sales fell about 7% quarter on quarter, a decline management framed as largely deliberate as it pulled back from low-margin business. Weather disruptions also contributed, with heavy rains affecting production and logistics, but the company argued that the trade-off is acceptable given the higher profitability of its targeted mix.

Mining Volumes Hit by Seasonal Rains

Mining sales volumes dropped 21% in the quarter as intense rains hampered extraction and transport activities in key areas. Usiminas chose to prioritize higher-grade ore zones under these conditions, which limited tonnage and revenue but preserved quality and pricing integrity in its mining portfolio.

Import Surge Creates Inventory Overhang

Management flagged a steep rise in steel imports, up about 78% year on year and roughly 30% versus Q4, coming from regions such as South Korea and Vietnam. This wave of imports has swollen inventories in the domestic market, weighing on apparent consumption and complicating the company’s efforts to push through price increases.

Rising Raw Material and Freight Costs Loom

The company expects higher costs for slabs, coke, coal and freight to begin biting more clearly from the second quarter onward. While Usiminas has moved to raise prices by about 5% in the spot distribution channel, executives admitted it is uncertain whether the market will absorb the full pass-through of these cost pressures.

Net Revenue Dented by Lower Commodity Sales

Despite stronger pricing in steel, consolidated net revenue was constrained by weaker volumes in both iron ore and certain steel products. The higher revenue per ton in steel was not enough to fully offset the drop in commodity-related sales, highlighting the company’s sensitivity to volume swings in its mining arm.

FX and Deferred Tax Gains Are Nonrecurring

Net income was flattered by a BRL 110 million foreign-exchange gain and about BRL 450 million in noncash deferred tax credits linked to currency moves. Management stressed that these items are driven by exchange-rate fluctuations and should not be seen as structural earnings drivers when investors assess underlying performance.

Working Capital Still a Near-Term Drag

Operating cash flow was partly tempered by a BRL 120 million increase in working capital due to lower accounts payable and higher receivables. While Usiminas cut its trading exposure by BRL 67 million, executives acknowledged that working capital management remains a key focus area in the short term.

Macroeconomic and Geopolitical Risks Cloud Outlook

Management pointed to geopolitical tensions and their impact on oil, gas and freight markets as a new source of volatility for coming quarters. Higher energy and shipping costs risk feeding back into inflation and supply chain turbulence, adding another layer of uncertainty around costs and global steel demand.

Guidance: Stable Results Amid Cost Headwinds

Looking ahead to the second quarter, Usiminas guided for relatively stable consolidated results compared with Q1, even as it braces for higher oil, gas, energy and freight expenses. The company expects steel volumes to stay broadly flat while mining volumes should recover in drier periods, with price hikes, maintenance savings and gradual PCI benefits helping to cushion cost inflation.

Usiminas’ earnings call painted a picture of a steelmaker regaining profitability through mix, pricing and efficiency, yet operating in a tougher external environment. For investors, the story is one of improving operational quality but with significant challenges from imports, input costs and macro risks, making execution on the company’s value-over-volume strategy crucial in the quarters ahead.