Release of the 2Q17 Results

Transcription

1 Public Disclosure - Belo Horizonte, July 28, Usinas Siderúrgicas de Minas Gerais S.A. - Usiminas (B3: USIM3, USIM5 e USIM6; OTC: USDMY and USNZY; LATIBEX: XUSIO and XUSI) today releases its second quarter (2Q17) results. Operational and financial information of the Company, except where otherwise stated, are presented based on consolidated figures, in Brazilian Real, according to International Financial Reporting Standards (IFRS). All comparisons made in this release take into consideration the first quarter of 2017 (1Q17), unless stated otherwise. Release of the 2Q17 Results The main operational and financial indicators were: Steel sales volume of 990 thousand tons; Iron ore sales volume of 629 thousand tons; Adjusted consolidated EBITDA of R$750 million and Adjusted EBITDA margin of 29%; Working capital on 06/30/17 of R$3.1 billion; Cash position on 06/30/17 of R$2.0 billion; Investments of R$34 million. Highlights R$ million - Consolidated 2Q17 1Q17 2Q16 Chg. 2Q17/1Q17 1H17 1H16 Chg. 1H17/1H16 Steel Sales Volume (000 t) % 1,919 1,802 7% Iron Ore Sales Volume (000 t) % 1,272 1,761-28% Net Revenue 2,569 2,351 2,028 9% 4,920 4,069 21% COGS (2,187) (1,870) (2,025) 17% (4,057) (4,107) -1% Gross Profit (Loss) % 863 (38) - Net Income (Loss) (123) 62% 284 (275) - EBITDA (Instruction CVM 527) % 1, % EBITDA Margin (Instruction CVM 527) 28% 23% 3% p.p. 25% 3% + 22 p.p. Adjusted EBITDA % 1, % Adjusted EBITDA Margin 29% 23% 3% p.p. 26% 3% + 23 p.p. Investments (CAPEX) % % Cash Position 1,951 2,416 2,713-19% 1,951 2,713-28% Market Data 06/30/17 BM&FBOVESPA: USIM5 R$ 4.57/share USIM3 R$8.83/share USA/OTC: USNZY US$1.35/ADR LATIBEX: XUSI 1.11/share XUSIO 2.39/share Index Consolidated Results Performance of the Business Units: - Mining - Steel - Steel Processing - Capital Goods Highlights Capital Markets Balance Sheet, Income and Cash Flow Statements 2Q17 Results 1

2 Economic Outlook The good pace of economic activity and maintenance of the confidence levels over the 2Q17 sustained the more optimistic forecasts for the global economy in The International Monetary Fund raised its forecast to 3.5% growth in the year. Domestically, the disclosure of the GDP in the 1Q17 put an end to the sequence of eight negative results, confirming the perception that economic growth is beginning to recover from the crisis initiated in the second quarter of Nevertheless, the worsening of the political crisis in mid May increased the risks of recovery occurring more slowly. Also, political instability has delayed the processing of the reforms, increasing uncertainty about the perspective of stabilization of the public debt. In spite of this, the dollar appreciated only moderately, with the average quotation increasing from R$3.15/US$ in the 1Q17 to R$3.21/US$ in the 2Q17. Inflation continued to fall more quickly than expected, reaching 3.0% cumulatively in the first half of This has fed the expectation of maintenance of the pace of the benchmark interest rate - Selic cut in the coming meetings of the Copom. According to the Focus Report of Banco Central do Brasil (06/30/17), the expectation is that interest will fall to 8.5%/yr by the end of Brazilian industry has begun to show the first signs of a recovery. With available data through May, Industrial Production (IBGE) has increased 0.5% in the five-month comparison of this year with the same period in Industrial sectors with steel intensive consumption had even more significant gains. Capital goods production increased 3.5% and durable goods, 11.0%. In June, industrial business remained confident, however, there was a reduction in the Confidence Index between May and June, impacted by the worsening of the political crisis. 2Q17 Results 2

3 Economic and Financial Performance Comments on the Consolidated Results Net Revenue Net revenue in the 2Q17 was R$2.6 billion, against R$2.4 billion in the 1Q17, a 9.3% increase, due to greater sales volume and higher prices in the Steel and Steel Processing Units. Net Revenue Breakdown 2Q17 1Q17 2Q16 1H17 1H16 Domestic Market 86% 90% 89% 88% 87% Exports 14% 10% 11% 12% 13% Total 100% 100% 100% 100% 100% Cost of Goods Sold - COGS COGS in the 2Q17 totaled R$2.2 billion, against R$ 1.9 billion in the 1Q17. For detailed information, see the Business Unit sections of this release. In the 2Q17, gross margin was 14.9%, against 20.4% in the 1Q17, shown below. Gross Margin 2Q17 1Q17 2Q16 1H17 1H % 20.4% 0.1% 17.5% -0.9% Operating Expense and Income In the 2Q17, sales expenses were R$65.6 million, against R$52.2 million in the 1Q17, a 25.7% increase, mainly due to higher provisions for doubtful accounts, which totaled R$16.3 million in the 2Q17, against R$3.9 million in the 1Q17. General and administrative expenses in the 2Q17 totaled R$96.6 million, against R$93.1 million in the 1Q17, mainly due to the increase of 7.6% in expenses with in-house and third party labor. Other operating expenses and income accounted income of R$146,7 million in the 2Q17, against expense of R$150.7 in the 1Q17, mainly due to: Recognition of R$201,1 million (net of expenses) from the agreement with Porto Sudeste in the 2T17. There wasn t that effect in the 1T17; Higher result in the sale of surplus electrical energy, which accounted a gain of R$18.7 million in the 2Q17, against a loss of R$22.7 million in the 1Q17; Lower expenses with provision for contingencies, which were R$13,8 million in the 2Q17, against R$49.9 million in the 1Q17; Higher tax credits by R$23.1 million in the 2Q17; Higher result of the Reintegra Program, which was R$6.6 million in the 2Q17, against R$4.5 million in the 1Q17. Thus, operating expenses and income were R$15,6 million in the 2Q17, against R$296.1 million in the 1Q17. In this manner, the Company s operating margin showed the following performance: EBIT Margin 2Q17 1Q17 2Q16 1H17 1H % 7.8% -14.4% 11.1% -15.0% 2Q17 Results 3

4 Adjusted EBITDA Adjusted EBITDA is calculated from net income (loss), reversing income tax and social contribution, financial result, depreciation, amortization and depletion, and equity in the results of Associate, Joint Subsidiary and Subsidiary Companies, not including impairment of assets. The adjusted EBITDA includes the proportional participation of 70% of Unigal and other joint subsidiary companies. EBITDA Breakdown Consolidated (R$ thousand) 2Q17 1Q17 2Q16 1H17 1H16 Net Income (Loss) 175, ,318 (123,357) 284,028 (274,734) Income Tax / Social Contribution 34,922 58,855 (18,675) 93,777 (34,035) Financial Result 171,294 54,581 (114,621) 225,875 (216,174) Depreciation, Amortization 328, , , , ,359 EBITDA - Instruction CVM , ,095 60,620 1,238, ,416 Equity in the Results of Associate and Subsidiary Companies (15,278) (37,080) (36,655) (52,358) (88,500) Joint Subsidiary Companies proportional EBITDA 54,603 41,754 44,212 96,357 89,809 Impairment of Assets - - (393) - 7,637 Adjusted EBITDA 749, ,769 67,784 1,282, ,362 Adjusted EBITDA was R$749,9 million in the 2Q17, against R$532.8 million in the 1Q17, mainly due to the R$201,1 million recognition from the agreement with Porto Sudeste and the better performance in the Steel Unit. It s worth to highlight that even without the amount received by the Mineração Usiminas, the EBITDA would have totaled R$550,8 million, the best result in 13 quarters. For more information, see the Business Unit sections of this release. Adjusted EBITDA margin in the 2Q17 was 21.4%, against 22.7% in the 1Q17, as shown below: Adjusted EBITDA Margin 2Q17 1Q17 2Q16 1H17 1H % 22.7% 3.3% 26.1% 2.9% Financial Result In the 2Q17, financial results accounted expenses of R$171.3 million, against expenses of R$54.6 million in the 1Q17, mainly due to exchange variation losses of R$77.2 million in the 2Q17, against gains of R$55.6 million in the 1Q17, due to depreciation of the Real against the Dollar of 4.4% in the 2Q17, against appreciation of 2.8% in the 1Q17. That effects were partially compensated by lower interest on loans due to a reduction in the interest rates. Financial Result - Consolidated R$ thousand 2Q17 1Q17 2Q16 Change 2Q17/1Q17 1H17 1H16 Change 1H17/1H16 Net Currency Exchange Variation (77,169) 55, ,090 - (21,552) 675,047 - Swap Transactions Market Cap. (701) 1,299 (165,904) (294,955) - Interest on Financial Asset and Monetary Effects 109, , ,983 7% 211, ,163 23% Other Financial Income 47,108 56,525 63,393-17% 103, ,425-9% Interest and Monetary Effects over Financing and Taxes Payable in Installments (194,799) (218,796) (166,918) -11% (413,595) (343,831) 20% Other Financial Expenses (55,057) (51,852) (60,023) 6% (106,909) (105,675) 1% FINANCIAL RESULT (171,294) (54,581) 114, % (225,875) 216, Appreciation / - Depreciation of Exchange Rate (R$/US$) -4.4% 2.8% 9.8% p.p. -1.5% 17.8% p.p. 2Q17 Results 4

5 Equity in the Results Equity in the results of affiliates and jointly-controlled companies was R$15.3 million in the 2Q17, against R$37.1 million in the 1Q17, mainly due to the recognition of a negative result of Codeme in the 2Q17, partially compensated by better results in MRS Logística and Unigal. Net Profit (Loss) The Company accounted a net profit of R$175,7 million in the 2Q17, against R$108.3 million in the 1Q17, mainly because of the R$132,2 million net of expenses recognition from the agreement with Porto Sudeste (MUSA), partially compensated by the negative exchange effects in the period. Working Capital In the 2Q17, working capital was R$3.1 billion, against R$2.6 billion in the 1Q17, a R$470 million increase, mainly due to: the decrease of the open balance of Payables by R$245 million, mostly related to slab purchase from third party; the increase of the Other Assets by R$171 million, in function of the recognition of R$201 million to be received by Mineração Usiminas (Porto Sudeste Agreement), partially compensated by the reduction on tax recoverable by R$40 million; the increase in Accounts Receivable by R$160 million, due higher prices in the period, highlighting that there were no increase in the average debt maturity payment time. Investments (CAPEX) In the 2Q17, CAPEX totaled R$34.1 million, 45.8% higher when compared to the 1Q17, which was R$23.4 million. Investments were applied in sustaining CAPEX, with approximately 75% in the Steel Unit, 14% in the Mining Unit, 7% in the Steel Processing Unit and 4% in the Capital Goods Unit. Indebtedness On 06/30/17, gross consolidated debt was R$6.95 billion, stable when compared to that on 03/31/17, which was R$6.88 billion. In the 2Q17, there was depreciation of the Real against the Dollar of 4.4%, which negatively impacted the Dollar debt portion, which on the date corresponded to 26% of total debt. Debt composition by maturity was 9.1% short term and 90.9% long term. Net consolidated debt on 06/30/17 was R$5.0 billion, against R$4.5 billion on 03/31/17. The Net debt/ebitda ratio ended the 2Q17 at 2,8x, against 3.9x in the 1Q17. The following chart demonstrates the consolidated debt indexes: R$ thousand 30-Jun Mar-17 Change 30-Jun-16 % Short Term Long Term TOTAL TOTAL Jun17/Mar17 TOTAL Local Currency 35,523 5,107,507 5,143,030 74% 5,161,235 0% 4,201,719 22% TJLP 1, , , ,799 0% 380,318-1% CDI 22,256 4,700,707 4,722,963-4,731,318 0% 3,618,234 31% Others 11,366 31,286 42,652-51,118-17% 203,167-79% Foreign Currency* 594,953 1,211,669 1,806,622 26% 1,718,079 5% 3,035,945-40% Gross Debt 630,476 6,319,176 6,949, % 6,879,314 1% 7,237,664-4% Cash and Cash Equivalents - - 1,951,286-2,415,637-19% 2,712,903-28% Net Debt - - 4,998,366-4,463,677 12% 4,524,761 10% (*)99.8% of total foreign currency is US dollars denominated Total Indebtedness by Index - Consolidated 2Q17 Results 5 Change Jun17/Jun16

6 The graph below demonstrates the cash position and debt profile (principal only) in millions of Real on 06/30/17: Duration: R$: 53 months US$: 48 months 1, ,082 1,082 1,082 1, , Cash Local Currency Foreign Currency Debt renegotiation/ Comments: Reduction in the Capital of Mineração Usiminas MUSA: On 03/03/17, the General Extraordinary Shareholders Meeting unanimously approved the reduction in the capital of MUSA in the amount of R$1.0 billion, of which R$700 million was delivered to the Company on 05/19/17, proportional to its stake in the Musa s capital. Waiver of the Exchange of 2018 Notes: On 06/30/17, Usiminas obtained a waiver from the Brazilian private banks and the Brazilian Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), pursuant to which Usiminas is exempted from its obligation to carry out an exchange offer for the notes due in 2018 issued by its subsidiary Usiminas Commercial Ltd., but which effectiveness will be terminated in the event that Usiminas fails to obtain a similar, permanent waiver from the Japanese Banks and the Debenture Holders (in each case, as defined in the Material Fact press releases of September 9 and 12, 2016). The Japanese Banks and the Debenture Holders, in turn, have granted an extension of the deadline for Usiminas to carry out the Exchange Offer until August 31, 2017, in order to allow for their review of a permanent waiver of the obligation to carry out the Exchange Offer. 2Q17 Results 6

7 Performance of the Business Units Intercompany transactions are on arm s-length basis (market prices and conditions) and sales between Business Units are carried out as sales between independent parties. Usiminas - Business Units Mining Steel Steel Processing Capital Goods Mineração Usiminas Ipatinga Mill Soluções Usiminas Usiminas Mecânica Cubatão Mill Unigal Income Statement per Business Units - Non Audited - Quarterly R$ million Mining Steel* Steel Processing Capital Goods Adjustment Consolidated 2Q17 1Q17 2Q17 1Q17 2Q17 1Q17 2Q17 1Q17 2Q17 1Q17 2Q17 1Q17 Net Revenue ,458 2, (647) (626) 2,569 2,351 Domestic Market ,100 1, (647) (626) 2,212 2,110 Exports COGS (53) (53) (2,111) (1,798) (548) (512) (75) (82) (2,187) (1,870) Gross Profit (Loss) (47) (51) Operating Income (Expenses) 151 (42) (133) (218) (22) (26) (13) (11) 1 1 (16) (296) EBIT (8) (10) (46) (50) Adjusted EBITDA (2) (4) 211 (16) Adj.EBITDA Margin 253% 48% 20% 21% 5% 7% -2% -5% 0% 3% 29% 23% *Consolidated 70% of Unigal Income Statement per Business Units - Non Audited - Semi-annually R$ million Mining Steel* Steel Processing Capital Goods Adjustment Consolidated 1H17 1H16 1H17 1H16 1H17 1H16 1H17 1H16 1H17 1H16 1H17 1H16 Net Revenue ,676 3,517 1, (1,273) (843) 4,920 4,069 Domestic Market ,078 3,046 1, (1,273) (843) 4,321 3,524 Exports COGS (106) (186) (3,909) (3,567) (1,061) (808) (157) (293) 1, (4,057) (4,107) Gross Profit (Loss) (50) (98) (97) 863 (38) Operating Income (Expenses) 109 (92) (351) (408) (48) (52) (24) (26) 2 3 (312) (576) EBIT 200 (70) 417 (458) 48 3 (18) 6 (96) (94) 551 (613) Adjusted EBITDA (6) 18 (16) (21) 1, Adj.EBITDA Margin 140% 4% 21% 3% 6% 2% -4% 6% 1% 2% 26% 3% *Consolidated 70% of Unigal 2Q17 Results 7

8 I) M I N I N G In the 2Q17, iron ore prices decreased significantly in the international market, reduction of approximately 26% in comparison with the 1Q17, with a quarterly average price of US$62.98/t. The already expected increase in the supply of Australian ore, allied to India s increment in exports, due to its reduction of the export tax, and greater availability of Chinese iron ore concentrates, (which resumed production due to the high prices of the previous two quarters), decisively contributed to this prices behavior. On the consumption side, continued good financial results obtained by Chinese steel also helped to maintain the demand for iron ore, even with the inventories in Chinese ports having reached a historical peak in the period, arriving at 145 million tons. In terms of outlook, the optimism observed in the 1Q17 has cooled off, with prices undergoing natural correction due to the supply situation versus demand presented. Additionally, most of the steel plants have looked for better quality ores, seeking to improve productivity and reduce cost, in view of the good prices observed in the steel market. Operational and Sales Performance - Mining In the 2Q17, production volume was 689 thousand tons, stable when compared to 1Q17, which was 681 thousand tons. Sales volume accounted in the 2Q17 was 629 thousand tons, against 643 thousand tons in the 1Q17, basically to the Steel Business Unit. Production and sales volume are shown in the table below: Iron Ore Thousand tons 2Q17 1Q17 2Q16 Change 2Q17/1Q17 1H17 1H16 Chg. 1H17/1H16 Production % 1,370 1,392-2% Sales - Third Parties - Domestic Market % % Sales - Exports Sales to Usiminas % 1,211 1,207 0% Total Sales % 1,272 1,761-28% Comments on the Business Unit Results - Mining In the 2Q17, net revenue accounted was R$89.1 million, against R$108.3 million in the 1Q17, a 17.7% decrease, due to a 8.5% decline in the PLATTS iron ore price (62% Fe, CFR China), adjusted for the period of sales price formation of Mineração Usiminas (US$75.6/t in the 2Q17, against US$82.5/t in the 1Q17), by a 2.2% decrease in sales volume and by the average appreciation of 2.2% of the Real against the Dollar in the period of reference for invoicing. In the 2Q17, cash cost per ton was R$73.2/t, against R$61.8/t in the 1Q17, an 18.4% increase, mainly due to the restarting of operations of two plants (Flotation and Eastern Mine), basically with maintenance, contracting and training of personnel. In the 2Q17, Cost of Goods Sold (COGS) was R$53.2 million, against R$53.0 million in the 1Q17. COGS per ton was R$84.0/t, against R$82.0/t in the 1Q17, a 2.4% increase, mainly due to provisions for profits and results sharing (PRS). In the 2Q17, net operating expenses were R$151,0 million positive, against R$42.5 million negative in the 1Q17, an increase of R$193,4 million, mainly due to the recognition of R$201,1 million net of expenses from the Porto Sudeste Agreement, partially compensated by preoperating expenses, for the restarting of operations of two plants, which were re-classified as operating expenses. Additionally, in the 2Q17, the result with the sales of surplus electrical energy was R$0.4 million, against R$0.1 million in the 2Q17. Thus, in the 2Q17, Adjusted EBITDA was R$225,8 million, against R$51.5 million in the 1Q17, a 338,3% increase. Adjusted EBITDA margin was 253,4% in the 2Q17, against 47.6% in the 1Q17. 2Q17 Results 8

9 Investments (CAPEX) Investments in the 2Q17 were R$4.7 million, against R$2.6 million in the 1Q17, mainly applied to sustaining CAPEX. Agreement with Porto Sudeste On 05/27/15, Mineração Usiminas notified Porto Sudeste do Brasil S.A. (presently named MMX Porto Sudeste Ltda.) about the immediate rescission of the service contract of port operation receiving, handling, stocking and shipment of ore belonging to Mineração Usiminas at the Porto Sudeste Terminal in the Take or Pay and Delivery or Pay modalities by reason of constant nonperformance on the part of Porto Sudeste, of its obligation to conclude and put into operation, as well as by the non-payment of contractual fines. The Company took the necessary measures to safeguard its rights, including an arbitration process, claiming payment of the fines, reimbursement of opportunity costs, in addition to damages foreseen by contract. The aforementioned contract was signed with a five-year term in effect as of the first shipment, initially forecast for April On 06/06/17, Mineração Usiminas signed an agreement with Porto Sudeste to end the arbitration process, resulting in the cancellation of the aforementioned contract and the waiver of all rights that both parties could still retain in relation to the contract. On the same date, a new contract was also signed for port operation services, which provides that Mineração Usiminas will have the right, but not the obligation, to move a total volume of up to 17.5 million tons of iron ore per year through the port terminal of Porto Sudeste, located in the municipality of Itaguaí, RJ. Porto Sudeste paid R$205.1 million to Mineração Usiminas on 07/12/17. Stake in MRS Logística Mineração Usiminas holds a stake in the MRS Logística through its subsidiary UPL Usiminas Participações e Logística S.A. MRS Logística is a concession that controls, operates and monitors the Brazilian Southeastern Federal Railroad Network (Malha Sudeste da Rede Ferroviária Federal). The company operates in the cargo railway transportation segment, connecting the states of Rio de Janeiro, Minas Gerais and São Paulo, and its core business is transporting, with integrated logistics, general cargo, such as iron ore, finished steel products, cement, bauxite, agricultural products, pet coke and containers. MRS transported 44 million tons in the 2Q17, volume 10.7% growth in relation to the 1Q17, resulting mainly from seasonality of the periods. 2Q17 Results 9

10 II) S T E E L Preliminary figures from the World Steel Association show a crude steel production of 836 million tons in the first six months of 2017, a 4.5% growth over the same period in the previous year. There was growth in practically all the main producing countries, and the greater contribution came from China, which registered volume of 419,7 million tons, 4.6% higher when compared to the same period of Steel consumption in that country has responded to stimuli through infrastructure spending and should once again grow in 2017, according to the forecast from World Steel Dynamics. Chinese exports, increasingly restricted due to the imposition of trade restrictions, were reduced when compared to The Chinese government announced the cut of around 40 million tons of crude steel production capacity in This is equivalent to around 85% of the annual goal, which foresees closing of 50 million tons of capacity. Global aversion to investments has made a stronger demand recovery more difficult, thus maintaining the situation of global overcapacity practically unchanged. In Brazil, according to data from the Brazilian Steel Institute (IABr), crude steel production reached 16.7 million tons, a 12.4% increase in the first six months of 2017, with a highlight for the increase in flat rolled steel, which grew 17.0%. In the period, domestic apparent steel consumption of flat steel products was 5.0 million, a 12.9% increase over the same period in Production - Ipatinga and Cubatão Plants Crude steel production was 769 thousand tons in the 2Q17, against 737 thousand tons in the 1Q17. In the 2Q17, rolled production in the Ipatinga and Cubatão plants totaled 1.0 million tons, 3.6% higher over the 1Q17, which was 965 thousand tons. Production of Crude and Rolled Steel Thousand tons 2Q17 1Q17 2Q16 Change 2Q17/1Q17 1H17 1H16 Chg. 1H17/1H16 Total Crude Steel % 1,506 1,570-4% Total Rolled Steel 1, % 1,965 1,699 16% Sales In the 2Q17, total sales were 990 thousand tons, against 930 thousand tons in the 1Q17. In the domestic market, sales volume was 840 thousand tons in the 2Q17, a 2% growth in relation to the 1Q17, which was 825 thousand tons. Export sales were 149 thousand tons in the 2Q17, against 105 thousand tons in the 1Q17, a 43% increase. In the 2Q17, the sales in the domestic market was 85% and 15% in the exports. The progress of the sales volume is shown below: Q16 3Q16 4Q16 1Q17 2Q17 Domestic Market Exports 2Q17 Results 10

11 The main export destinations are as follows: Sales Volume Breakdown Thousand tons 2Q17 1Q17 2Q16 Change 2Q17/1Q17 1H17 1H16 Change 1H17/1H16 Total Sales % % % 6% 1, % 1, % 7% Heavy Plates % % % 13% % % -6% Hot Rolled % % % 9% % % 11% Cold Rolled % % % 4% % % 17% Galvanized % % % 11% % % 2% Slabs 10 1% 23 2% 20 2% -56% 33 2% 50 3% -34% Domestic Market % % % 2% 1,666 87% 1,540 86% 8% Heavy Plates % % % 9% % % -5% Hot Rolled % % % 6% % % 21% Cold Rolled % % % -2% % % 9% Galvanized % % % 1% % % 5% Slabs 10 1% 20 3% 20 3% -48% 30 2% 40 3% -25% Exports % % % 43% % % -3% Heavy Plates 9 6% 5 5% 7 6% 82% 14 5% 17 7% -20% Hot Rolled 16 10% 10 9% 21 18% 66% 25 10% 61 23% -59% Cold Rolled 70 47% 54 52% 41 35% 28% % 75 29% 65% Galvanized 55 37% 32 31% 47 41% 69% 87 34% 97 37% -11% Slabs 0 0% 3 3% - 0% - 3 1% 10 4% -67% Comments on the Business Unit Results Steel Net revenue in the Steel Unit was R$2.5 billion in the 2Q17, 10.8% higher when compared to the 1Q17, which was R$2.2 billion, due price increases by 4.1% in the domestic market and 5.6% in the export market, in addition to higher export volume by 42%. In the 2Q17, cash cost per ton of slabs was R$1,727/t, against R$1,614/t in the 1Q17, a 7.0% increase comparing the periods, mainly due to higher costs (coal by 16.2%, purchased slab by 13.8%, labor by 12% and energy and fuel by 3.1%, in addition to an average exchange depreciation of 2.3%). Cost of Goods Sold (COGS) was R$2.1 billion in the 2Q17, against R$1.8 billion in the 1Q17. COGS-per-ton was R$2,133/t in the 2Q17, against R$1,933/t in the 1Q17, mainly due to higher cost of flat products sold as a consequence of higher raw materials prices (coal, ore and slab), observed in Additionally, higher amount of value-added products were sold, with a highlight for galvanized products. Sales expenses were R$47.0 million in the 2Q17, 46.9% higher to those in the 1Q17, which were R$32.0 million, mainly due to higher provision for doubtful accounts, which were R$14.1 million in the 2Q17, against a reversal of the provision of R$1.0 million in the 1Q17. 2Q17 Results 11

12 General and administrative expenses totaled R$72.1 million in the 2Q17, stable when compared to the 1Q17, which were R$71.5 million. Other operating expenses and income totaled R$13.7 million in the 2Q17, against R$114.3 million in the 1Q17, an 88.0% decrease, due to: Higher result in the sale of surplus electrical energy in the 2Q17, which accounted a gain of R$18.3 million, against an loss of R$22.8 million in the 1Q17; Lower provisions for contingencies by R$41.6 million; Higher tax credits by R$23.1 million in the 2Q17; Higher revenue with the Reintegra Program, which R$6.6 million in the 2Q17, against R$4.5 million in the 1Q17. Thus, operating expenses and revenues totaled R$132.8 million in the 2Q17, against R$217.8 million in the 1Q17. Adjusted EBITDA reached R$498.0 million in the 2Q17, against R$464.9 million in the 1Q17. Adjusted EBITDA margin was 20.3% in the 2Q17, against 21.1% in the 1Q17, a 80 basis points decrease. Investments (CAPEX) In the 2Q17, investments totaled R$25.5 million, against R$18.0 million in the 1Q17, applied to sustaining CAPEX. 2Q17 Results 12

13 III) S T E E L P R O C E S S I N G Soluções Usiminas SU Soluções Usiminas operates in the distribution, services and small-diameter tubes markets nationwide, offering its customers high value-added products. It serves several economic segments, such as automotive, auto parts, civil construction, distribution, electro-electronics, machinery and equipment and household appliances, among others. In the 2Q17, sales in the Distribution, Services/Just-in-Time and Tubes segments were responsible for 36%, 55% and 9% of total sales volume. Comments on the Business Unit Results Steel Processing In the 2Q17, net revenue was R$589.7 million, 4.0% greater in comparison with the 1Q17, which was R$567.0 million, due to higher product sales and services volume by 1.2%, as well as higher average price in the period by 2.8% in function of a better product mix sold in the 2Q17. Cost of goods sold in the 2Q17 was R$548.5 million, against R$512.1 million in the 1Q17, a 7.1% increase due to higher sales volume and better product sales mix sold in the period. Operating expenses were R$21.9 million in the 2Q17, against R$26.1 million in the 1Q17, a 16.2% decrease, mainly due to reversal or reduction of provisions, such as doubtful accounts and contingencies. Thus, Adjusted EBITDA in the 2Q17 was R$27.3 million, against R$36.9 million in the 1Q17, a R$9.6 million decrease. Adjusted EBITDA margin was 4.6% in the 2Q17, against 6.5% in the 1Q17, a 190 basis points decrease. IV) C A P I T A L G O O D S Usiminas Mecânica S.A. Usiminas Mecânica is a Brazilian capital goods company dedicated to the fabrication and assembly of metallic structures, shipbuilding and offshore platforms, oil and gas, industrial assembly and equipment fabrication, foundry and railcar manufacture. Main Contracts In the 2Q17, the main contracts were with the oil and gas industry, bridges and industrial equipment. Comments on the Business Unit Results Capital Goods In the 2Q17, net revenue was R$80.4 million, 2.7% lower than in the 1Q17, which was R$82.7 million, due to the decrease in the portfolio as consequence of the stagnation in infrastructure projects in the country. Gross profit was R$5.3 million in the 2Q17, against R$0.5 million in the 1Q17, an increase of R$4.7 million, due to better results obtained in the industrial equipment segment. Adjusted EBITDA in the 2Q17 was a negative R$1.6 million, against a negative R$4.2 million in the 1Q17, result of better margins in the industrial equipment segment and the reduction of fixed cost in the period. Adjusted EBITDA margin in the 2Q17 was a negative 2.0%, against a negative 5.0% in the 1Q17, an improvement of 300 basis points. 2Q17 Results 13

14 Highlights BVC Audit for Certification of IATF :2016 (Automotive Sector) and Maintenance of ISO 9001:2015: The audit was successfully concluded: The Company will soon receive the new certificate, which will place it once more as a pioneer in certifications for excellence in customer services. The Usiminas certification project in the new standard, which involved several areas in Ipatinga, Cubatão, Belo Horizonte, Distribution Centers, Port and São Paulo, was led by the Quality Assurance Team, with fundamental participation of Usiminas Quality Engineers and Auditors. Usiminas Sustainability Program Paths of the Valley receives award at FIEMG event: The initiative of the Minas Gerais Industrial Federation (FIEMG) and the State Environmental Foundation (FEAM) encourages and discloses development of projects aiming at eco-efficiency in production processes, with the less intensive use of natural resources and lower environmental degradation. Usiminas is a finalist in the REI Award (Recognition of Excellence and Innovation), in the Inputs Category: Usiminas was one of the finalists in the Inputs category, with development of the Dual Phase 1200 steel grade, an award promoted by the Automotive Business magazine. Usiminas is awarded by Honda Motorcycles in the category Excellence in Quality and Delivery : During the Annual Suppliers Meeting held on May 5 th, Usiminas was awarded by Honda Motorcycles in the category Excellence in Quality and Delivery. Usiminas has a long standing partnership with Honda do Brasil and, currently, suppliers six steel grades to the motorcycle segment coming from the Ipatinga and Cubatão plant for use in tubes of the motorcycles produced by the manufacturer. Usiminas is awarded as best raw materials supplier of Fiat Chrysler Automobiles: Usiminas was awarded as best raw materials supplier of Fiat Chrysler Automobiles (FCA) during the Annual Supplier Conference & Awards ceremony of the auto maker, held in Belo Horizonte at the end of May. The winners of the 16 categories were chosen based on the evaluation of performance indicators of the last year in the areas of quality, delivery, cost, guarantee and partnership. Usiminas wins the Excellence Award in Quality at Gestamp Automotive, one of the main companies in the auto parts segment: Usiminas was one of the winners with the Award for Excellence in Quality by the performance shown over the last year. The company was evaluated by indicators, such as service (sales and technical assistance), material performance, delivery and quality audits. During the entire award period, Usiminas obtained a GQI (General Quality Indicator) above 95%. Soluções Usiminas wins unprecedented award from Honda: Soluções Usiminas is the first steel service center awarded by Honda in almost two decades of the Annual Suppliers Meeting promoted by the Japanese manufacturer. The Company, a subsidiary of Usiminas dedicated to steel processing and distribution, received the trophy in the Business Highlight category, the main category in the automobile maker s 19 th edition of the event. 2Q17 Results 14

15 Capital Markets Usiminas Performance Summary - BM&FBOVESPA (USIM5) 2Q17 1Q17 Change 2Q17/1Q17 2Q16 Change 2Q17/2Q16 Number of Deals 583, ,202-16% 738,205-21% Daily Average 9,557 11,165-14% 11,718-18% Traded - thousand shares 894,325 1,010,930-12% 1,741,154-49% Daily Average 14,661 16,305-10% 27,637-47% Financial Volume - R$ million 3,675 4,872-25% 3,665 0% Daily Average % 58 4% Maximum % % Minimum % % Closing % % Market Capitalization - R$ million 5,727 5,589 2% 1, % Performance on the BM&FBOVESPA Usiminas common shares (USIM3) closed the 2Q17 quoted at R$8.83 and its preferred shares (USIM5) at R$4.57. In the 2Q17, USIM3 and USIM5 appreciated 5.4% and 2.9%, respectively. In the same period the Ibovespa presented a 3.2% depreciation. Foreign Stock Markets OTC New York Usiminas has American Depositary Receipts (ADRs) traded on the over-the-counter market: USDMY is backed by common shares and USNZY, by Class A preferred shares. On 06/30/17, USNZY ADRs, which have higher liquidity, were quoted at US$1.35, presenting a depreciation of 1.5% in the quarter. LATIBEX Madrid Usiminas shares are traded on the LATIBEX the Madrid Stock Exchange: XUSI as preferred shares and XUSIO as common shares. On 6/30/17, XUSI closed quoted at 1.11, depreciating 15.1% in the quarter. XUSIO shares closed quoted at 2.39, registering a depreciation of 4.0% in the quarter. 2Q17 Results 15

16 For further information: GERÊNCIA DE RELAÇÕES COM INVESTIDORES/INVESTOR RELATIONS MANAGER Leonardo Karam Rosa Press: please contact through Visit the Investor Relations site at: or Access on your mobile phone: m.usiminas.com/ri 2Q17 Conference Call Results - Date 07/28/2017 In Portuguese - Simultaneous Translation into English Brasília time: at 11:00 a.m. New York time: at 10:00 a.m. Dial-in Numbers: Dial-in Numbers: Brazil: (+55 11) / USA: (1 786) Audio replay available at (55 11) / Pincode for replay: # - Portuguese Pincode for replay: # - English Audio of the conference call will be transmitted live via Internet See the slide presentation on our website: Statements contained in this release, relative to the business outlook of the Company, forecasts of operating and financial income and references to growth prospects are mere forecasts and were based on the expectations of Management in relation to future performance. These expectations are highly dependent on market conduct, the economic situation in Brazil, its industry and international markets and, therefore, are subject to change. 2Q17 Results 16

17 Balance Sheet - Assets - Consolidated IFRS - R$ thousand Assets 30-Jun Mar Jun-16 Current Assets 6,701,272 6,893,598 6,739,085 Cash and Cash Equivalents 1,951,286 2,415,637 2,712,903 Trade Accounts Receivable 1,265,246 1,173,118 1,233,438 Taxes Recoverable 265, , ,585 Inventories 2,802,379 2,814,559 2,305,591 Advances to suppliers 9,058 6,617 8,709 Financial Instruments 89,497 68,652 58,746 Other Securities Receivables 318, , ,113 Non-Current Assets 19,314,860 19,410,970 20,117,670 Long-Term Receivable 4,193,720 4,068,519 4,432,189 Deferred Income Tax & Social Contribution 3,061,289 3,040,718 3,361,515 Deposits at Law 700, , ,730 Accounts Receiv. Affiliated Companies 3,302 3,623 4,300 Taxes Recoverable 106,763 96,074 83,011 Financial Instruments ,670 Others 321, , ,963 Investments 1,164,854 1,150,372 1,157,844 Property, Plant and Equipment 13,259,162 13,488,122 14,191,715 Intangible 697, , ,922 Total Assets 26,016,132 26,304,568 26,856,755 Balance Sheet - Liabilities and Shareholders' Equity - Consolidated IFRS - R$ thousand Liabilities and Shareholders' Equity 30-Jun Mar Jun-16 Current Liabilities 2,281,035 2,458,976 5,843,359 Loans and Financing and Taxes Payable in Installments 630, ,555 3,075,907 Suppliers, Subcontractors and Freight 703, , ,326 Wages and Social Charges 211, , ,170 Taxes and Taxes Payables 126, , ,447 Accounts Payable Forfaiting 327, , ,837 Financial Instruments 92,199 71, ,314 Dividends Payable 22,000 22, Customers Advances 53,358 55,094 80,077 Others 114, , ,141 Long-Term Liabilities 8,464,035 8,445,852 6,303,747 Loans and Financing and Taxes Payable in Installments 6,319,176 6,269,759 4,161,757 Actuarial Liability 1,088,014 1,139,376 1,184,437 Provision for Legal Liabilities 679, , ,918 Financial Instruments ,838 Environmental Protection Provision 150, , ,838 Others 226, , ,959 Shareholders' Equity 15,271,062 15,399,740 14,709,649 Capital 13,200,295 13,200,295 12,200,295 Reserves & Revenues from Fiscal Year 640, , ,997 Non-controlling shareholders participation 1,430,309 1,675,314 1,592,357 Total Liabilities and Shareholders' Equity 26,016,132 26,304,568 26,856,755 2Q17 Results 17

18 2Q17 Results 18 Income Statement - Consolidated IFRS R$ thousand 2Q17 1Q17 2Q16 Change 2Q17/1Q17 Net Revenues 2,569,485 2,350,838 2,028,012 9% Domestic Market 2,211,682 2,109,663 1,795,984 5% Exports 357, , ,028 48% COGS (2,187,259) (1,870,099) (2,025,315) 17% Gross Profit 382, ,739 2,697-20% Gross Margin 14.9% 20.4% 0.1% -5,5 p.p. Operating Income (Expenses) (15,578) (296,065) (296,005) -95% Selling Expenses (65,602) (52,193) (55,746) 26% Provision for Doubtful Accounts (16,330) (3,923) (5,778) 316% Other Selling Expenses (49,272) (48,270) (49,968) 2% General and Administrative (96,644) (93,141) (86,152) 4% Other Operating Income (expenses) 146,668 (150,731) (154,107) -197% Reintegra Program 6,596 4, % Provision for Contingencies (13,839) (49,911) (3,579) -72% Result of the Non Operating Asset Sale/Write-Off (586) 1, Result of the Sale of the Surplus Electric Energy 18,716 (22,701) (44,465) - Temporary Equipments Shutdown (includes depreciation) (103,307) (105,241) (126,375) -2% Impairment of Assets Porto Sudeste Agreeement (net of expenses) 201, Tax credit on imports PIS/COFINS 71,517 48,396 53,215 48% Other Operating Income (Expenses), Net (33,535) (27,207) (34,369) - EBIT 366, ,674 (293,308) 99% EBIT Margin 14.2% 7.8% -14.4% p.p. Financial Result (171,294) (54,581) 114, % Financial Income 156, , ,376-2% Financial Expenses (250,557) (269,349) (392,845) -7% Net foreing exchange gain and losses (77,169) 55, ,090 - Equity in the Results of Associate and Subsidiary Companies 15,278 37,080 36,655-59% Operating Profit (Loss) 210, ,173 (142,032) 26% Income Tax / Social Contribution (34,922) (58,855) 18,675 - Net Income (Loss) 175, ,318 (123,357) 62% Net Margin 6.8% 4.6% -6.0% p.p. Attributable: Shareholders 117,073 88,901 (129,432) 32% Minority Shareholders 58,637 19,417 6, % EBITDA (Instruction CVM 527) 710, ,095 60,620 35% EBITDA Margin (Instruction CVM 527) 27.7% 22.5% 3.0% p.p. Adjusted EBITDA - Joint Subsidiary Companies proportional EBITDA 749, ,769 67,784 41% Adjusted EBITDA Margin 29.2% 22.7% 3.3% p.p. Depreciation and Amortization 328, , ,273 7% Income Statement - Consolidated IFRS R$ thousand 1H17 1H16 Chg. 1H17/1H16 Net Revenues 4,920,323 4,068,902 21% Domestic Market 4,321,345 3,523,733 23% Exports 598, ,169 10% COGS (4,057,358) (4,106,785) -1% Gross Profit 862,965 (37,883) - Gross Margin 17.5% -0.9% +18,4 p.p. Operating Income (Expenses) (311,643) (575,560) -46% Selling Expenses (117,795) (135,436) -13% Provision for Doubtful Accounts (20,253) (22,688) -11% Other Selling Expenses (97,542) (112,748) -13% General and Administrative (189,785) (175,896) 8% Other Operating Income (Expenses) (4,063) (264,228) -98% Reintegra Program 11, % Provision for Legal Liabilities (63,750) (16,317) 291% Result of the Non Operating Asset Sale/Write-Off ,855-99% Result of the Sale of the Surplus Electric Energy (3,985) (85,262) -95% Temporary Equipments Shutdown (includes depreciation) (208,548) (245,126) -15% Impairment of Assets - (7,637) - Acordo com Porto Sudeste 201, Tax credit on imports PIS/COFINS 119,913 53, % Other Operating Income (Expenses), Net (60,742) (36,390) 67% EBIT 551,322 (613,443) - EBIT Margin 11.1% -15.0% p.p. Financial Result (225,875) 216,174 - Financial Income 315, ,588 11% Financial Expenses (519,906) (744,461) -30% Net foreing exchange gain and losses (21,552) 675,047 - Equity in the Results of Associate and Subsidiary Companies 52,358 88,500-41% Operating Profit (Loss) 377,805 (308,769) - Income Tax / Social Contribution (93,777) 34,035 - Net Income (Loss) 284,028 (274,734) - Net Margin 6% -6.7% p.p. Attributable: Shareholders 205,974 (282,202) - Minority Shareholders 78,054 7, % EBITDA (Instruction CVM 527) 1,238, , % EBITDA Margin (Instruction CVM 527) 25.2% 2.7% p.p. Adjusted EBITDA - Joint Subsidiary Companies proportional EBITDA 1,282, , % Adjusted EBITDA Margin 26.1% 2.9% p.p. Depreciation and Amortization 634, ,359 0%

19 Cash Flow - Consolidated IFRS R$ thousand 2Q17 1Q17 2Q16 Operating Activities Cash Flow Net Income (Loss) in the Period 175, ,318 (123,357) Financial Expenses and Monetary Var. / Net Exchge Var. 103,431 4,178 (90,664) Interest Expenses 150, ,519 88,477 Depreciation and Amortization 328, , ,273 Losses/(gains) on Sale of Property, Plant and Equipment 586 (1,408) (883) Equity in the Results of Subsidiaries/Associated Companies (15,278) (37,080) (36,655) Impairment of Assets - - (393) Difered Income Tax and Social Contribution (17,561) 30,605 (20,855) Constitution (reversal) of Provisions 36,159 73,428 (9,422) Actuarial Gains and losses 7,276 7,273 (372) Stock Option Plan (441) 295 (5,515) Total 769, , ,634 (Increase)/Decrease of Assets Accounts Receivables Customer (166,760) (85,924) 51,725 Inventories (52,898) (253,094) 192,095 Recovery of Taxes 49,529 2,125 37,836 Judicial Deposits (13,218) (16,947) (17,311) Accounts Receiv. Affiliated Companies Others (208,586) 25,957 44,097 Total (391,612) (327,664) 308,444 Increase /(Decrease) of Liabilities Suppliers, Contractors and Freights 20,281 (163,220) 15,643 Amounts Owed to Affiliated Companies 4,409 (23,086) 4,697 Customers Advances (1,736) 19,288 21,075 Tax Payable 1,671 57,850 (18,918) Securities Payable Forfaiting (279,310) 249,782 (21,351) Actuarial Liability Payments (65,724) (59,582) (21,575) Others (1,578) (3,782) (50,474) Total (321,987) 77,250 (70,903) Cash Generated from Operating Activities 55, , , Interest Paid (183,716) (234,033) (126,129) Income Tax and Social Contribution (5,637) (14,760) (3,835) Net Cash Generated from Operating Activities (133,537) 185, ,211 Investments activities cash flow Marketable Securities (394,014) 1,025,604 (923,314) Fixed Asset Acquisition (32,362) (22,674) (36,772) Fixed Asset Sale Receipt 1 1,693 54,699 Dividends Received 12,543 1,274 1,624 Purchase of Software (1,689) - (683) - (4,575) - Net Cash Employed on Investments Activities (415,521) - 1,005,214 - (908,338) - Financial Activities Cash Flow Settled Credits assignments - - (109,975) Payment of Loans, Financ. & Debent. (8,065) (4,892) (12,741) Shares Issued / Capital Increase ,454 Payment of Taxes Installments (341) (335) (316) Swap Operations Liquidations (199) (2,525) (20,786) Dividends and Interest on Capital (3,643) - - Capital Gain / Reduction (300,000) - - Net Cash Generated from (Employed on) Financial Activities (312,248) (7,752) 746, Exchange Variation on Cash and Cash Equivalents 2,941 1,063 (9,554) Net Increase (Decrease) of Cash and Cash Equivalents (858,365) 1,183,787 53, Cash and Cash Equivalents at the Beginning of the Period 1,903, , ,636 Cash and Cash Equivalents at the End of The Period 1,045,292 1,903,657 1,497, RECONCILIATION WITH BALANCE SHEET Cash and Cash Equivalents at the Beginning of the Period 1,903, , ,636 Marketable Securities at the Beginning of the Period 511,980 1,537,584 1,112,991 Cash and Cash Equivalents at the Beginning of the Period 2,415,637 2,257,454 1,735,627 Net Increase (Decrease) of Cash and Cash Equivalentes (858,365) 1,183,787 53,962 Net Increase (Decrease) of Marketable Securities 394,014 (1,025,604) 923,314 Cash and Cash Equivalents at the End of the Period 1,045,292 1,903, ,598 Marketable Securities at the End of the Period 905, ,980 2,036,305 Cash and Cash Equivalents at the End of the Period 1,951,286 2,415,637 2,712,903 2Q17 Results 19

20 2Q17 Results 20 Cash Flow - Consolidated IFRS R$ thousand 1H17 1H16 Operating Activities Cash Flow Net Income (Loss) in the Period 284,028 (274,734) Financial Expenses and Monetary Var. / Net Exchge Var. 107,609 (145,075) Interest Expenses 343, ,979 Depreciation and Amortization 634, ,359 Losses/(gains) on sale of property, plant and equipment (822) (2,855) Equity in the Results of Subsidiaries/Associated Companies (52,358) (88,500) Impairment of Assets - 7,637 Difered Income Tax and Social Contribution 13,044 (41,296) Constitution (reversal) of Provisions 109,587 (6,850) Actuarial Gains and losses 14,549 (722) Stock Option Plan (146) (4,306) Total 1,453, , Increase/Decrease of Assets - - Accounts Receivables Customer (252,684) 179,288 Inventories (305,992) 480,828 Recovery of Taxes 51,654 89,225 Judicial Deposits (30,165) (30,155) Accounts Receiv. Affiliated Companies Others (182,629) 11,304 Total (719,276) 730,602 Increase /(Decrease) of Liabilities Suppliers, contractors and freights (142,939) 31,755 Amounts Owed to Affiliated Companies (18,677) (19,565) Customers Advances 17,552 39,278 Tax Payable 59,521 19,098 Securities Payable Derived from Suppliers (29,528) (205,977) Actuarial Liability payments (125,306) (72,959) Others (5,360) (188,253) Total (244,737) (396,623) - - Cash Generated from Operating Activities 489, , Interest Paid (417,749) (366,244) Income Tax and Social Contribution (20,397) (7,970) - - Net Cash Generated from Operating Activities 51, ,402 Investments activities cash flow Marketable Securities 631,590 (812,120) Fixed asset acquisition (55,036) (101,631) Fixed asset sale receipt 1,694 57,063 Dividends Received 13,817 2,479 Software Purchase (2,372) (9,151) - - Net Cash Employed on Investments Activities 589,693 - (863,360) - Financial Activities Cash Flow Assigned Credits - 43,832 Settled Credits assignments - (197,462) Inflow of Loans, Financing and Debentures - - Payment of Loans, Financ. & Debent. (12,957) (102,845) Shares Issued / Capital Increase - 871,454 Payment of Taxes Installments (676) (868) Swap Operations Liquidations (2,724) (51,509) Dividends and Interest on Capital (3,643) (2) Capital Gain / Reduction (300,000) - Net Cash Generated from (Employed on) Financial Activities (320,000) 562, Exchange Variation on Cash and Cash Equivalents 4,004 (20,316) - - Net Increase (Decrease) of Cash and Cash Equivalents 325,422 (123,674) - - Cash and Cash Equivalents at the Beginning of the Period 719, ,272 Cash and Cash Equivalents at the End of The Period 1,045, , RECONCILIATION WITH BALANCE SHEET - - Cash and cash equivalents at the beginning of the period 719, ,272 Marketable securities at the beginning of the period 1,537,584 1,224,185 Cash and cash equivalents at the beginning of the period 2,257,454 2,024,457 Net increase (decrease) of cash and cash equivalentes 325,422 (123,674) Net increase (decrease) of marketable securities (631,590) 812, Cash and cash equivalents at the end of the period 1,045, ,598 Marketable securities at the end of the period 905,994 2,036,305 Cash and cash equivalents at the end of the period 1,951,286 2,712,903