Release of the 3Q15 Results

Transcription

1 Public Disclosure - Belo Horizonte October 29 th, Usinas Siderúrgicas de Minas Gerais S.A. - Usiminas (BM&FBOVESPA: USIM3, USIM5 e USIM6; OTC: USDMY and USNZY; LATIBEX: XUSIO and XUSI) today releases its third quarter (3Q15) 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 second quarter of 2015 (2Q15), except where stated otherwise. Release of the 3Q15 Results The main operational and financial indicators were: Steel sales volume of 1.2 million tons; Iron ore sales volume of 775 thousand tons; Consolidated Adjusted EBITDA negative in R$65.3 million and Adjusted EBITDA margin of -2.7%; Working capital on 09/30/15 of R$2.4 billion; Investments of R$156.5 million; Cash position of R$2.4 billion. Main Highlights R$ million - Consolidated 3Q15 2Q15 3Q14 Chg. 3Q15/2Q15 9M15 9M14 Chg. 9M15/9M14 Steel Sales Volume (000 t) 1,179 1,275 1,401-8% 3,710 4,294-14% Iron Ore Sales Volume (000 t) 775 1,206 1,238-36% 3,120 4,462-30% Net Revenue 2,424 2,677 2,908-9% 7,781 9,156-15% COGS (2,534) (2,571) (2,783) -1% (7,542) (8,178) -8% Gross Profit (Loss) (110) % Net Income (Loss) (1,042) (781) (24) 33% (2,058) EBITDA (Instruction CVM 527) (97) (755) % (498) 1,530 - EBITDA Margin (Instruction CVM 527) -4.0% -28.2% 11.8% b.p -6.4% 16.7% b.p Adjusted EBITDA (65) ,561-65% Adjusted EBITDA Margin -2.7% 8.5% 12.3% b.p 7.0% 17.1% b.p Investments (CAPEX) % % Cash and Cash Equivalents 2,397 2,889 3,057-17% 2,397 3,057-22% Market Date on 9/30/15 Index BM&FBOVESPA: USIM5 R$3,35/share USIM3 R$8,26/share EUA/OTC: USNZY US$0,85/share LATIBEX: XUSI 0,78/share XUSIO 1,88/share Consolidated results Performance of the Business Units: - Mining - Steel - Steel processing - Capital goods Events Subsequent to closing of the Quarter Highlights Capital markets Balance sheet, Income and Cashflow Statements 3Q15 Results 1

2 Economic Outlook Among the developed countries, the United States continued to have the best performance in the 3Q15, in spite of the signs of a reduction in the rithm after the strong growth acceleration in the previous quarter, which achieved an annualized rate of 3.9%. According to the World Economic Outlook Report from the International Monetary Fund IMF as of October 2015, the growth outlook for the American economy in 2015 is 2.6%. Economic activity in the Eurozone continued to be resistent, sustaining a moderate growth rate, besides the risks related to China and to emerging markets. Consumer confidence was stable at a hight level and business confidence continued to be positive. Job creation and retail sales have also sustained the moderate growth. In China, recent data shows that growth has been weakening and the industrial purchasing manager indicator in September signaled an even slower rhythm in industrial production in the 3Q15. The IMF maintained its forecast of a 6.8% growth for 2015 for the Chinese economy. In the Latin America, the main economies faced problems, without any signs of recovery in most countries. Depreciated currency, in part due to the decrease in commodities prices in the global market, have been pressuring inflation and reducing the government s stimulus policies. In Brazil, signs of a very weak economic activity suggest that the recession has continued in the 3Q15, after a decrease of 1.9% in the 2Q15, when compared with the previous quarter. The scenario of high interest and inflation rates, fast deterioration of labor market and developments of Petrobras investigation are some of the factors that have deteriorated the economic enviroment, causing a decline in growth expectations for 2015, from 0.2% at the beginning of the year to -2.9% at the end of the 3Q15. The Brazilian industry faces an even more challenging scenario. According to the Industrial Research of Brazilian Geography and Statistics Institute IBGE, the industrial production in August recorded the 18 th consecutive decline compared with the same month of the previous year and reached a fall of 6.9% from January to August of this year. With high inventory levels and consumer and business economic confidence indicators at historic low levels, there are no signs of imminent economic recovery in the period. Industry segments intensive in steel consumption also had even more significant decreases in the period. 3Q15 Results 2

3 Economic and Financial Performance Comments on Consolidated Results Net Revenue In the 3Q15, net revenue was R$2.4 billion, 9.4% lower than that in the 2Q15, which was R$2.7 billion, mainly due to an 11.6% decline in steel sales volume in the domestic market, which represents higher value-added products than exports, and the reduction of 35.8% in iron ore sales volume. Net Revenue Breakdown 3Q15 2Q15 3Q14 9M15 9M14 Domestic Market 73% 76% 82% 79% 86% Exports 27% 24% 18% 21% 14% Total 100% 100% 100% 100% 100% Cost of Goods Sold - COGS In the 3Q15, COGS totaled R$2.5 billion, against a R$2.6 billion in the 2Q15. For detailed information, see each Business Unit section in this document. Gross margin was a negative 4.5%, while in the 2Q15, it was a positive 3.9%, a decrease of 840 basis points, as per the chart below: Operating Expense and Income Gross Margin 3Q15 2Q15 3Q14 9M15 9M14-4.5% 3.9% 4.3% 3.1% 10.7% Sales expenses were R$82.7 million in the 3Q15, against R$60.5 million in the 2Q15, an increase of 36.5%, mainly due to the reconignition of provision for losses on doubtful accounts and higher distribution costs impacted by the foreign exchange depreciation. General and administrative expenses totaled R$101.2 million in the 3Q15, against R$107.8 million in the 2Q15, a 6.2% decrease, mainly due to a 17.9% reduction in general expenses and a 9.3% decline in third party services. In the 3Q15, other operating expenses totalized R$147.5 million, against R$1.0 billion in the 2Q15, mainly in function of the impairment of assets in the value of R$985.0 million, accounted for in the Mining Unit in the 2Q15 (See the complete information in the Mining Business Unit section in the Earnings Release of the 2Q15). If excluded these impairment effects in the 2Q15 from other operating expenses, an increase of 224.1% would be accounted for in the 3Q15, mainly in function of the increase in expenses with temporary equipments shutdown, which was R$71.0 million in the 3Q15, against R$31.0 million in the 2Q15 and of the negative result of the asset sale and write-off of R$11.1 million in the 3Q15, against a positive R$4.1 million in the 2Q15. Additionally, there was an expense of R$2.2 million in the sale of surplus electric energy in the 3Q15, against a revenue of R$40.9 million in the 2Q15. Thus, net operating expenses totaled R$331.3 million in the 3Q15, against R$1.2 billion in the 2Q15. In this manner, the Company's operating margin is presented below: EBIT Margin 3Q15 2Q15 3Q14 9M15 9M % -40.9% 1.0% -19.3% 6.2% 3Q15 Results 3

4 Adjusted EBITDA Adjusted EBITDA is calculated from net income (loss), reversing profit (loss) from discontinued operations, income tax and social contribution, financial result, depreciation, amortization and depletion, and equity in the results of Associate, Joint Subsidiary and Subsidiary Companies. The adjusted EBITDA includes the proportional participation of 70% of Unigal and others joint subsidiary companies. EBITDA Breakdown Consolidated (R$ thousand) 3Q15 2Q15 9M15 9M14 Net Income (Loss) (1,042,156) (780,798) (2,058,334) 325,809 Income Tax / Social Contribution (223,219) (319,383) (620,673) 70,701 Financial Result 820,075 40,629 1,221, ,070 Depreciation, Amortization 348, , , ,824 EBITDA -Instruction CVM 527 Equity in the Results of Associate and Subsidiary Companies (96,573) (755,210) (497,904) 1,530,404 4,260 (33,991) (41,702) (139,633) Joint Subsidiary Companies proportional EBITDA 28,640 31,361 97, ,504 Impairment of Assets (1,674) 985, ,372 - Adjusted EBITDA (65,347) 227, ,393 1,561,275 In the 3Q15, Adjusted EBITDA totaled a negative R$65.3 million against a positive R$227.2 million in the 2Q15, mainly due to the decline in steel sales volume and prices in the domestic market in the Steel Unit and to the decline in iron ore sales volume in the Mining Unit. The positive highlight of the quarter was for the Capital Goods Unit, which generated a positive EBITDA for the 8 th consecutive quarter, even facing an unfavorable economic and political scenario for the segment. In the 3Q15, Adjusted EBITDA margin was -2.7%, against 8.5% in the 2Q15. See the complete information related to the assets impairment in the Mining Business Unit section of the 2Q15 Earnings Release. The Adjusted EBITDA margins are indicated below: Adjusted EBITDA Margin 3Q15 2Q15 3Q14 9M15 9M14-2.7% 8.5% 12.3% 7.0% 17.1% 3Q15 Results 4

5 Financial Result In the 3Q15, net financial expenses totaled R$820.1 million, against R$40.6 million in the 2Q15, in function of the strong depreciation of the Real against the Dollar of 28.1% in the quarter, against an appreciation of the Real against the Dollar of 3.3% in the 2Q15, which impacted the dollar denominated debt, partially compensated by higher results of the swap transactions. The dollar denominated debt represented 49% of the total debt in the 3Q15. Financial Result - Consolidated R$ thousand 3Q15 2Q15 3Q14 Change 3Q15/2Q15 9M15 9M14 Change 9M15/9M14 Net Currency Exchange Variation (834,420) 85,830 (163,986) - (1,139,405) (57,300) 1888% Swap Transactions Market Cap. 168,093 (35,265) 50, , % Income and Inflationary Variation over Financial Applications 66,115 46,374 45,355 43% 155, ,596 6% Other Financial Income 44,532 47,350 39,954-6% 139, ,049 - Interest and Inflationary Variation over Financing and Taxes Payable in Installments (182,703) (140,191) (119,603) 30% (439,366) (351,408) 25% Other Financial Expenses (81,692) (44,727) (84,591) 83% (164,230) (162,978) - FINANCIAL RESULT (820,075) (40,629) (232,452) 1918% (1,221,604) (309,070) 295% + Appreciation / - Depreciation of Exchange Rate (R$/US$) -28.1% +3,3% -11.3% % -4.6% - Equity in the Results of Associate and Subsidiary Companies In the 3Q15, equity in the results of associate and subsidiary companies was a negative R$4.3 million, against a positive R$34.0 million in the 2Q15, a reduction of R$38.3 million, mainly in function of the net loss of Unigal in the period, due to the foreign exchange depreciation of 28.1% in the quarter, which impacted the dollar denominated debt, that represented 99% of the total debt. Net Profit (Loss) In the 3Q15, the Company accounted for a net loss of R$ million, against a net loss of R$780.8 million in the 2Q15, which was impacted by the impairment of assets in the Mining Unit. Additionally, the 3Q15 was affected by the negative effect of the net financial expenses in the amount of R$820.1 million, as a result of the strong foreign currency depreciation and of the weaker operational performance in the Steel and Mining Units. Working Capital The Company presented a working capital of R$2.4 billion in the 3Q15, a reduction of R$270.6 million when compared with the 2Q15, which was R$2.7 billion, due to the reduction in the volume and in million of Reais of steel and raw materials, partially compensated by the reduction in payable accounts to suppliers in the period. It is worth mention the reduction of 18.0% in inventories of steel tons. Investments (CAPEX) In the 3Q15, CAPEX totaled R$156.5 million, against R$226.1 million in the 2Q15, a reduction of 30.8% when compared with the 2Q15, a result of the Company's strategy to control CAPEX and of the reduction of maintenance CAPEX due to the temporary equipments shutdown at the plants. The main investments were spent with sustaining CAPEX. Approximately 79% was applied to the Steel Unit, 15% to the Mining Unit, 5% to the Steel Transformation Unit and 1% to the Capital Goods Unit. 3Q15 Results 5

6 Indebtedness Consolidated gross debt was R$8.1 billion on 09/30/15, against R$7.6 billion on 06/30/15, an increase of 6.7%, mainly in function of the strong depreciation of the Real against the Dollar of 28.1% in the quarter, which impacted the debt in Dollar, corresponding to 49% of total debt on 09/30/15. Debt composition by maturity date was 22% in the short term and 78% in the long term. The net debt/ebitda ratio on 09/30/15 was 6.8 times. On 09/30/15, there was not any covenants mesurament according to the current loan and financial contracts. The chart below shows consolidated debt indicators: R$ thousand 30-Sep Jun-15 Change 31-Dec-14 % Short Term Long Term TOTAL TOTAL Set15/Jun15 TOTAL Local Currency 1,078,755 3,097,871 4,176,626 51% 4,277,111-2% 4,265,226-2% TJLP 150, , , ,697-10% 618,078-26% CDI 895,723 2,689,200 3,584,923-3,631,126-1% 3,573,921 0% Others 32, , , ,288-2% 73,227 86% Foreign Currency (*) 726,720 3,207,444 3,934,164 49% 3,327,611 18% 2,436,521 61% Gross Debt 1,805,475 6,305,315 8,110, % 7,604,722 7% 6,701,747 21% Cash and Cash Equivalents - - 2,396,616-2,889,080-17% 2,851,903-16% Net Debt - - 5,714,174-4,715,642 21% 3,849,844 48% (*) 99% of total foreign currency is US dollars denominated Total Indebtedness by Index - Consolidated Change Set15/Dec14 The graph below presents the cash position and debt profile in million of Reais on 09/30/15: 2,397 Duration: R$: 39 meses US$: 35 meses 415 1,748 1,958 2, ,651 1,981 1, , Cash 4Q on Local Currency Foreign Currency 3Q15 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 Elimination and Adjustment Consolidated 3Q15 2Q15 3Q15 2Q15 3Q15 2Q15 3Q15 2Q15 3Q15 2Q15 3Q15 2Q15 Net Revenue ,094 2, (460) (538) 2,424 2,677 Domestic Market ,463 1, (460) (538) 1,765 2,040 Exports COGS (65) (122) (2,267) (2,317) (475) (464) (186) (194) (2,534) (2,571) Gross Profit 24 (12) (173) (0) (14) (110) 105 Operating Income (Expenses) (90) (1,022) (208) (133) (20) (28) (15) (16) 1 1 (331) (1,199) EBIT (66) (1,035) (381) (50) (11) (16) (13) (441) (1,094) Adjusted EBITDA (24) (6) (82) 206 (4) (9) (65) 227 Adj.EBITDA Margin -27% -5% -4% 9% -1% -2% 10% 11% % 8% *Consolidates 70% of Unigal Income Statement per Business Units - Non Audited - Accumulated R$ million Mining Steel* Steel Processing Capital Goods Elimination and Adjustment Consolidated 9M15 9M14 9M15 9M14 9M15 9M14 9M15 9M14 9M15 9M14 9M15 9M14 Net Revenue ,051 8,472 1,500 1, (1,743) (2,342) 7,781 9,156 Domestic Market ,457 7,294 1,494 1, (1,743) (2,342) 6,154 7,838 Export Market ,594 1, ,627 1,319 COGS (298) (403) (6,900) (7,713) (1,466) (1,698) (565) (540) 1,687 2,176 (7,542) (8,178) Gross Profit (56) (166) Operating Income (Expenses) (1,127) (88) (494) (194) (72) (96) (49) (38) 3 3 (1,738) (413) EBIT (1,110) 164 (343) 565 (38) (27) (53) (163) (1,499) 566 Adjusted EBITDA ,277 (16) (17) 541 1,561 Adj.EBITDA Margin 4% 39% 7% 15% -1% 0% 10% 8% - - 7% 17% *Consolidates 70% of Unigal 3Q15 Results 7

8 I) M I N I N G The 3Q15 presented relative iron ore price stability in the international market, mainly due to a more constant volume in the Chinese ports in approximatelly 80 million tons, and the lack of announcements of players exiting the market, due to the expectation of price level stability. According to CRU Metals expectation, the possible price level between US$40/t and US$55/t (62% Fe, CFR China) may test the feasibility of smaller players, mainly in China and in the export markets, in the coming semesters. The average PLATTS price was US$55.0/t in the 3Q15, against US$58.5/t in the 2Q15 (62% Fe, CFR China), a decline of 6.0%. Operational and Sales Performance - Mining Production volume totaled 738 thousand tons in the 3Q15, against 1.0 million in the 2Q15, a 26.9% decrease, in order to balance production and sales, aligned with the strategy of controlling working capital and reducing inventories. In the 3Q15, sales volume was 775 thousand tons, against 1.2 million tons in the 2Q15, a 35.7% decrease, mainly due to the reduction in sales to the Steel Unit, which reduced its steel production in 16.0% in the 3Q15 when compared with the previous period. Production and sales volumes are shown in the following chart: Iron Ore Thousand tons 3Q15 2Q15 3Q14 Chg. 3Q15/2Q15 9M15 9M14 Chg. 9M15/9M14 Production 738 1,009 1,434-27% 3,208 4,616-31% Sales - Third Parties - Domestic Market % % Sales - Exports % Sales to Usiminas 734 1,071 1,039-31% 2,853 2,988-5% Total Sales 775 1,206 1,238-36% 3,120 4,462-30% Impairment of Assets In the 3Q15, there was no impairment of assets, however, in the 2Q15, due to the worsening in the expectations for the future iron ore prices, the Company registered an impairment of R$985.0 million in the value of its mining rights. The value in use of the Mining Unit was updated to reflect the management s best estimates on future iron ore prices, based on market projections. (See the complete information in the Mining Business Unit section in the Earnings Release of the 2Q15). Comments on the Business Unit Results - Mining In the 3Q15, net revenue totaled R$88.6 million, against R$109.2 million in the 2Q15, a decrease of 18.9%, mainly due to a 35.8% decrease in sales volume. This result was partially compensated by the foreign exchange depreciation of 6.4% on average (the foreing exchange rate accounted for in the Mining Unit revenue is the average rate regarding the previous month) and by a 1.0% increase in the PLATTS iron ore price (62% Fe, CFR China), on average, adjusted for the period of sales pricing regarding Mineração Usiminas. Additionally, there was a reclassification in the deductions from gross revenue, regarding domestic freight contracts with take or pay conditions, went from gross revenue to operational expenses. Due to this reclassification, the gross revenue was impacted by a positive R$4.9 million in the 3Q15, against a negative R$11.6 million in the 2Q15. The cash cost per ton was R$51.3/t in the 3Q15, stable in relation to the 2Q15. During the 3Q15 Results 8

9 3Q15, the labor force adequation was intensified, in order to reflect the current market conditions. COGS per ton was reduced by 17.6% in relation to the one presented in the 2Q15, mainly due to the accounting reclassification regarding the depreciation of plants shutdown, which went from COGS to other operating expenses in the amount of R$26.3 million. Excluding this reclassification effect, COGS per ton increased 4.0% in relation to the previous quarter, manly due to the lower dilution of fixed costs, in reason of lower sales volume in 35.7%. Net operating expenses totaled R$89.9 million in the 3Q15, against R$1.0 billion in the 2Q15, in function of the impairment of assets accounted for in the amount of R$985.0 million in the 2Q15. Excluding the impairment effect, in comparison with the 2Q15, it was registered an increase of R$51.0 million in net operating expenses, in function of the depreciation of temporary plants shutdown in the amount of R$26.3 million, of lower sale revenue of surplus electric energy, which were R$3.9 million in the 3Q15, against R$9.9 million in the 2Q15, and of higher provision for domestic freight contracts with take or pay conditions, which was R$32.6 million in the 3Q15, against R$31.1 million in the 2Q15. Adjusted EBITDA was a negative R$23.6 million in the 3Q15, against a negative R$5.8 million in the 2Q15. Adjusted EBITDA margin was -26.6% in the 3Q15, against -5.3% in the previous quarter. Investments (CAPEX) In the 3Q15, investments totaled R$22.9 million, against R$18.9 million in the 2Q15, related to sustaining CAPEX. 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 railway transportation segment, connecting the states of Rio de Janeiro, Minas Gerais and São Paulo, and its core business is transporting, with integrated logistics, cargo in general, such as iron ore, finished steel products, cement, bauxite, agricultural products, pet coke and containers. MRS transported 43.2 million tons in the 3Q15, an increase of 1.7 million tons in relation to the 2Q15, mainly due to an 8.9% increase in cargo in general volume, highlighting agricultural products and conteiners. I) S T E E L The 3Q15 faced a strong deterioration in the international prices, which reached historic lows and amounts close to the operational costs regarding most of the global steel industry. The increase in the Chinese exports contributed to this, reaching an annualized volume of 120 million tons in August, equivalent to 33% of global exports. The growth in the Chinese exports occurs simultaneously with the slowdown in economic activity and the downfall in the apparent consumption forecasted for The slowdown in the economic acitivity in China and also in the emerging countries led the World Steel Association (WSA) to revise downward its steel consumption forecast in 2015 to billion tons. In Brazil, according to the Brazilian Steel Institute - IABr, crude steel production in the 3Q15 was 2.5 million tons, 5.5% lower than that registered in the 2Q15. In the accumulated figures through September, it decreased 1.2%. The flat steel products presented a decline of 6.7%, when comparing the 3Q15 with the 2Q15 and of 4.8% in the accumulated figures through 3Q15 Results 9

10 September. Usiminas forecasts that the Brazilian flat steel consumption has been of 2.4 million tons in the 3Q15, against 2.7 million tons in the 2Q15, a 12.1% decrease, with 85% being supplied by the domestic mills and 15% by imports, which continued at a high level in spite of the strong foreign exchange depreciation. The strong fall in consumption occurred in all segments in general as a consequence of the strong slowdown in the industrial activity in the period. The lack of visibility of the economic outlook and less optimistic forecasts regarding the short term economic recovery, led customers to reduce their purchases, adjust their inventories and delay investments. The negative highlights in comparision with the 2Q15 were the decline of 28.1% in sales to the industrial segment, 10.1% for distribution segment and 9.5% for automotive segments. Below are listed the main flat steel consuming segments and their behavior in the Brazilian market during the 3Q15: Automotive: The economic outlook strongly affected by the results of the automotive industry in the country. In the 3Q15, according to data released by the National Association of Vehicle Manufacturers - ANFAVEA, vehicle production recorded a 25% decline when compared with the 3Q14 and 1% downfall in relation to the 2Q15. Heavy vehicles continued to show even greater declines: 50% negative in relation to the 3Q14 and 9% negative, when compared with the 2Q15. The deterioration in the domestic economy, associated with the weak results, has led ANFAVEA to review its 2015 sales and production forecasts downward for the third time until the end of this year, to -27% and -23%, respectively. Industrial: Tendências Consulting estimates that investments, measured by Gross Fixed Capital Formation, declined 20.2% in the 3Q15, when compared with the 3Q14. This is the sixth consecutive decline in the comparison and the strongest one. According to the Brazilian Machinery and Equipment Association - ABIMAQ, through August 2015, revenue in the machinery and equipment segment declined 7.4%. Only in August, companies represented by ABIMAQ had its revenues decreased by 10.7% when compared with the same month in The entity foresees a domestic sales contraction that will lead the revenues in the Capital Goods Industry to its third consecutive year of retraction. House Appliances: According to the Industrial Survey performed by the Industrial Research of Brazilian Geography and Statistics Institute IBGE, the Home Appliance segment registered a decline of 22.2% in the accumulated production figures in the first eight months of 2015 in relation to the same period of the previous year. The segment continued to be affected by the slower pace of growth in family income and by lower consumer confidence index. The electroelectronics segment presented a decline of 13.0% in production, considering the same basis of comparison. Civil Construction: The civil construction market continued its slowdown in the 3Q15. According to Tendências Consulting, the production of typical inputs to civil construction had a decrease of 5.3% in the 3Q15, against the 2Q15, and a decline of 12.3% when compared with the 3Q14. The outlook of an overall deterioration in the domestic activity, with rising political risks, impacts from the Petrobras investigation and the country s loss of investment grade by Standard & Poor's has led Tendências Consulting to revise downward its forecast for typical inputs to civil construction production for 2015 to a decline of 10.9%, versus 9.9% previously. Distribution: According to the Steel Distributors National Association INDA, flat steel sales in the distribution network receded 7.8% in the 3Q15 when compared with the 2Q15. Additionally, purchases reduced 16.6% comparing these periods. According to the sales forecast of September, in the end of 3Q15, inventories remained stable at 954 thousand tons and inventories turnover declined to 3.8 months, against 4.2 months in the end of 2Q15. 3Q15 Results 10

11 Production - Ipatinga and Cubatão Plants Crude steel production at the Ipatinga and Cubatão plants was 1.1 million tons in the 3Q15, a reduction of 16.0% in relation to the 2Q15, in order to adjust the production rithm with the decrease in steel demand, aligning with the strategy of controlling working capital and reducing inventories. Production (Crude Steel) Thousand tons 3Q15 2Q15 3Q14 Chg. 3Q15/2Q15 9M15 9M14 Var. 9M15/9M14 Ipatinga Mill % 2,161 2,627-18% Cubatão Mill % 1,658 2,031-18% Total 1,114 1,326 1,407-16% 3,819 4,658-18% Sales In the 3Q15, total sales reached 1.2 million tons of steel, a 7.5% decrease in relation to those in the 2Q15, which were 1.3 million million tons. Sales to the domestic market totaled thousand tons, 11.6% lower than in the 2Q15, as a consequence of weak demand in steel consuming segments. Exports increased 0.8%, totaling thousand tons. Out of the total sales, 64% was destined to the domestic market and 36% to exports. 1,401 24% 1,247 1,256 1,275 12% 19% 33% 1,179 36% 76% 81% 88% 67% 64% 3Q14 4Q14 1Q15 2Q15 3Q15 Exports Domestic Market 3Q15 Results 11

12 The main export destinations are shown in the charts below: 3Q15 9M15 USA USA Mexico Argentina 17% 28% Turkey 3% 2% 11% 27% Turkey 4% Argentina 3% Mexico 5% Thailand 8% Vietnam 6% Vietnam 9% Thailand 7% 8% 10% 16% Taiwan Germany 16% 20% Taiwan Germany Others Others Sales Volume Breakdown Thousand tons 3Q15 2Q15 Change 3Q15/2Q15 Total Sales 1, % 1, % 1, % -8% 3, % 4, % Heavy Plates % % % -20% % % Hot Rolled % % % 4% 1,218 33% 1,463 34% Cold Rolled % % % 2% % 1,015 24% Galvanized % % % -2% % % Processed Products 2 0% 4 0% 9 1% -43% 14 0% 48 1% Slabs % % 120 9% -34% 337 9% 156 4% Domestic Market % % 1,063 76% -12% 2,708 73% 3,567 83% Heavy Plates % % % -27% % % Hot Coils % % % -11% % 1,239 29% Cold Coils % % % -3% % % Galvanized % % % 0% % % Processed Products 2 0% 4 0% 7 1% -43% 14 0% 44 1% Slabs 15 1% 23 2% 21 2% -36% 56 2% 50 1% Exports % % % 1% 1,002 27% % Heavy Plates 37 3% 27 2% 84 6% 39% 91 2% 201 5% Hot Rolled % % 89 6% 24% % 223 5% Cold Rolled 33 3% 23 2% 38 3% 45% 82 2% 119 3% Galvanized 27 2% 31 2% 25 2% -12% 79 2% 73 2% Processed Products - 0% - 0% 2 0% - - 0% 4 0% Slabs % % 99 7% -33% 281 8% 105 2% 3Q14 9M15 9M14 Change 9M15/9M14-14% -22% -17% -20% -11% -72% 116% -24% -13% -40% -19% -13% -69% 12% 38% -55% 111% -31% 8% - 168% Comments on the Business Unit Results - Steel In the 3Q15, net revenue in the Steel Unit totaled R$2.1 billion, against R$2.4 billion in the 2Q15, a 12.8% decrease, due to the downfall of 11.6% in sales volume in the domestic market and a decrease of 5.2% in steel prices, on average, in the Brazilian market, in function of the higher sales to the distribution segment, which purchases lower value-added products. In the 3Q15, cash cost per ton was stable at R$1,490.6, in relation to the previous period, pointing out the following: - decrease of 9.1% in iron ore, in function of using lower value-added iron ore mix and of lower market prices of this comoditie, in spite of the appreciation of the Dollar against the Real of 15.1%; - decrease of 2.7% in coal and coke, in function of higher consumption of self-generated coke and of lower market prices of this comoditie, in spite of the appreciation of the Dollar against the Real of 15.1%; 3Q15 Results 12

13 - increase of 16.9% in energy and fuels, due to the increase of electrical energy tariffs and higher natural gas prices; - increase of 17.4% in own labor cost, due to higher expenses regarding workforce adjustment and less dilution of fixed cost in function of lower in production volume; - foreign exchange rate depreciation of 15.1%, on average, affecting costs in dollar, witch represents around 40% of cash cost. COGS per ton totaled R$1,923.1, an increase of 5.8% when compared with the 2Q15, mainly due to the sale of products produced in previous periods and to an increase in depreciation and costs with idle capacity of equipments. Sales expenses totaled R$59.9 million in the 3Q15, against R$40.0 million in the 2Q15, a 49.7% increase, mainly due to the reconignition of provision for losses on doubtful accounts and higher distribution costs impacted by the exchange depreciation. General and administrative expenses totaled R$75.9 million, in line with those in the 2Q15, which were R$76.0 million. Other operating expenses totaled R$72.2 million, against R$17.4 million, mainly in function of expense with the sale of surplus electric energy, which was R$6.0 million in the 3Q15, against a revenue of R$31.1 million in the 2Q15, and higher expenses with temporary equipments shutdown in the amount of R$44.7 million in the 3Q15, against R$31.0 million in the 2Q15. In this manner, in the 3Q15, net operating expenses totaled R$208.0 million, against R$133.5 million in the 2Q15. Adjusted EBITDA in the 3Q15 totaled a negative R$81.8 million, against a positive R$205.5 million in the 2Q15, a reduction of R$287.3 million, as a result of lower volume and prices in the domestic market, higher COGS and higher operating expenses. Adjusted EBITDA margin was 3.9% negative in the 3Q15, against 8.6% in the 2Q15, a reduction of 1250 basis points. Investments (CAPEX) Investments totaled R$124.3 million in the 3Q15, against R$191.9 million in the 2Q15, a result of the Company's strategy to control CAPEX and of the reduction of maintenance CAPEX due to the temporary equipments shutdown at the plants. The main investments were spent with environment projects, safety and sustaining CAPEX. II) 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, autoparts, civil construction, distribution, electro-electronics, machinery and equipment and household appliances, among others. Sales of the Distribution, Services/Just-in-time and Tubes Business Units were responsible for 53%, 40% and 7%, respectively, of the volume sold in the 3Q15. 3Q15 Results 13

14 Comments on the Business Unit Results - Steel Processing The outlook of the distribution segment continued to face strong competition with imports. The decline in the international steel prices and the higher levels of import volumes in Brazil have pressured the distributor margins. In the 3Q15, net revenue was R$484.2 million, 1.8% higher than in the 2Q15, which was R$475.8 million, in function of a 10.4% increase in sales and services volume. Cost of goods sold totaled R$475.4 million in the 3Q15, against R$463.6 million in the 2Q15, a 2.6% increase, manly as a result of the increase in sales volume. Operating expenses were R$19.5 million in the 3Q15, against R$28.0 million in the 2Q15, a 30.2% reduction, in function of operational adjustments and the units reconfiguration in order to attend the current level of demand. In the 3Q15, Adjusted EBITDA was a negative R$3.5 million, against a negative R$8.9 million in the 2Q15. Adjusted EBITDA margin was -0.7% in the 3Q15, against -1.9% in the 2Q15. III) C A P I T A L G O O D S Usiminas Mecânica S.A. Usiminas Mecânica is a capital goods company in Brazil, which operates in the following business areas: steel structures, shipbuilding and offshore, oil and gas, industrial equipment and assembly and foundry and railcars. Highlights The main contracts signed were with Nuclep, Petrobrás and Arteleste, beyond additions to amendment contracts signed with the Steel Unit. The order book in the 3Q15 was lower than in the 2Q15, totaling approximately R$500 million, in function of stagnation of oil and gas projects and infrastructure segments in the country. Comments on the Business Unit Results - Capital Goods In the 3Q15, net revenue was R$217.4 million, against R$229.7 million in the 2Q15, a reduction of 5.4%, due to the conclusion of the MRS railcar project during the 2Q15. Gross profit in the 3Q15 was R$31.1 million, 12.6% lower than in the 2Q15, which was R$35.6 million, since the costs had not been reduced in the same level of net revenue. In the 3Q15, Adjusted EBITDA was R$22.6 million, against R$25.8 million in the 2Q15. Adjusted EBITDA margin was 10.4% in the 3Q15, against 11.2% in the 2Q15. 3Q15 Results 14

15 Event Subsequent to closing of the Quarter Temporarily interruption of the activities of the primary areas of Cubatão Plant: At a meeting held on October 28th, 2015, the Board of Officers decided to temporarily interrupt the activities of the primary areas of the Cubatão/SP Plant. The deactivation process will be gradual and will involve sinter and coke plants, blast furnaces (one of which had already paralyzed its activities since May 2015) and steelworks, as well as all the activities associated with such equipments. Such adjustment intends to reposition Usiminas into a new level of scale and competitiveness before an economic context of progressive deterioration of the steel market. In this scenario, the Cubatão Plant will cease to produce slabs, but its hot and cold rolling lines will remain active, as well as the activities related to its port terminal. The heavy plates rolling line will remain temporarily suspended. Highlights Temporarily shutdown of the heavy plate mill at Cutatão Plant: Due to the shutdown of the two blast furnances, as announced in the 2Q15, and to the weak steel demand in the domestic market, Usiminas temporarilly suspended operation of its heavy plate mill at Cubatão, in order to reduce its production. Usiminas has two heavy plate mills, one in Ipatinga, Minas Gerais State and the other one at Cubatão, São Paulo, each with a one million ton annual capacity. Then, Ipatinga Plant will concentrate production and customer service since it has accelerated cooling technology, that allows the production of heavy plates with higher technology content in order to supply to a wide range of markets, such as shipbuilding, oil and gas, heavy equipment and machinery, construction and energy segments. Transparency Trophy 2015: The National Association of Finance, Administration and Accounting Executives (ANEFAC), in partnership with the Institute of Accounting, Actuarial and Financial Research (FIPECAFI) along with Serasa Experian, recognized Usiminas for the 8 th consecutive year, among the ten most transparent companies in Brazil in the publicly traded company category, with revenue above R$5 billion. Financial statements from 2014 were evaluated in technical issues, such as compliance to accounting principles, Opinion of External Auditors, general presentation and disclosure of relevant aspects in addition to those required by the existing regulation. Ranking of the "100 most Innovative Companies in Brazil": Usiminas is one of the "100 most Innovative Companies in Brazil" in a Ranking released by Valor Econômico newspaper in partnership with Strategy& Consulting, from PwC Group. Usiminas holds the 46th position in the general ranking. This is the first Brazilian survey that evaluates innovation in companies operating in Brazil in different economic activities. Three pillars of the innovation chain were evaluated: intention, efforts and results. Based on qualitative and quantitative indicators, in a model especially developed to the Brazilian context, the edition pointed out companies that adopt the best policies for innovation, their investments in the local market and the achieved results. 3Q15 Results 15

16 Capital Markets Usiminas Performance Summary - BM&FBOVESPA (USIM5) 3Q15 2Q15 Change 3Q15/2Q15 3Q14 Change 3Q15/3Q14 Number of Deals 555, ,667 11% 811,778-32% Daily Average 8,680 8,208 6% 12,489-30% Traded - thousand shares 528, ,804 15% 442,550 19% Daily Average 8,257 7,505 10% 6,808 21% Financial Volume - R$ million 2,003 2,462-19% 3,566-44% Daily Average % 55-44% Maximum % % Minimum % % Closing % % Market Capitalization - R$ million 3,396 4,177-19% 6,458-47% Performance on the BM&F BOVESPA On 09/30/15, Usiminas Common shares (USIM3) closed quoted at R$8.26 and its Preferred shares (USIM5) at R$3.35. In the quarter, USIM3 depreciated 37.7% and USIM5, 18.7%. In the same period, the IBOVESPA index depreciated 15.1%. 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 09/30/15, USNZY ADRs, that have higher liquidity, were quoted at US$0.85 and depreciated 37.5% 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 09/30/15, XUSI closed quoted at 0.78, depreciating 36.1% in the quarter. XUSIO shares closed quoted at 1.88, depreciating 51.4% in the period. 3Q15 Results 16

17 For further information: INVESTOR RELATIONS DEPARTMENT Cristina Morgan C. Drumond Leonardo Karam Rosa Diogo Dias Gonçalves Renata Costa Couto Press: please contact us through Visit the Investor Relations site: or access on your mobile: m.usiminas.com/ri 3Q15 Conference Call - Date 10/29/2015 In Portuguese - Simultaneous Translation into English Brasília time: at 12:00 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. 3Q15 Results 17

18 Balance Sheet - Assets - Consolidated IFRS - R$ thousand Assets 09/30/ /30/2015 Current Assets 7,584,430 8,560,921 Cash and Cash Equivalents 2,396,616 2,889,080 Trade Accounts Receivable 1,364,568 1,357,433 Taxes Recoverable 345, ,277 Inventories 3,106,307 3,595,707 Advances to suppliers 24,934 17,611 Financial Instruments 149, ,699 Other Securities Receivables 196, ,114 Non-Current Assets 22,002,302 21,752,966 Long-Term Receivable 4,212,599 3,805,774 Deferred Income Tax & Social Contribution 2,727,748 2,481,044 Deposits at Law 565, ,420 Accounts Receiv. Affiliated Companies 4,537 4,630 Taxes Recoverable 84,048 87,418 Financial Instruments 537, ,582 Others 293, ,680 Investments 1,133,587 1,145,575 Property, Plant and Equipment 15,262,483 15,408,654 Intangible 1,393,633 1,392,963 Total Assets 29,586,732 30,313,887 Balance Sheet - Liabilities and Shareholders' Equity - Consolidated IFRS - R$ thousand Liabilities and Shareholders' Equity 09/30/ /30/2015 Current Liabilities 4,615,940 4,718,708 Loans and Financing and Taxes Payable in Installments 1,805,475 1,723,993 Suppliers, Subcontractors and Freight 1,719,521 2,069,668 Wages and Social Charges 343, ,435 Taxes and Taxes Payables 113,906 98,461 Related Companies 238, ,279 Financial Instruments 216, ,731 Dividends Payable Customers Advances 54,653 69,897 Others 123, ,103 Long-Term Liabilities 8,367,978 7,916,813 Loans and Financing and Taxes Payable in Installments 6,305,315 5,880,729 Actuarial Liability 1,226,822 1,213,051 Provision for Legal Liabilities 511, ,267 Financial Instruments 198, ,335 Environmental Protection Provision 94,638 92,149 Others 31,072 31,282 Shareholders' Equity 16,602,814 17,678,366 Capital 12,150,000 12,150,000 Reserves & Revenues from Fiscal Year 2,598,434 3,661,445 Non-controlling shareholders participation 1,854,380 1,866,921 Total Liabilities and Shareholders' Equity 29,586,732 30,313,887 3Q15 Results 18

19 Income Statement - Consolidated IFRS R$ thousand 3Q15 2Q15 3Q14 3Q15 Results 19 Chg. 3Q15/2Q15 Net Revenues 2,424,262 2,676,762 2,907,816-9% Domestic Market 1,764,747 2,039,974 2,392,386-13% Exports 659, , ,430 4% COGS (2,533,957) (2,571,385) (2,782,955) -1% Gross Profit (109,695) 105, ,861 - Gross Margin -4.5% 3.9% 4.3% -850 b.p Operating Income (Expenses) (331,345) (1,198,920) (95,682) -72% Selling Expenses (82,650) (60,535) (63,821) 37% Provision for Doubtful Accounts (14,725) (1,917) (1,541) 668% Other Selling Expenses (67,925) (58,618) (62,280) 16% General and Administrative (101,168) (107,821) (111,565) -6% Other Operating Income (expenses) (147,527) (1,030,564) 79,704-86% Reintegra Program (Brazilian Government Export Benefit) 5,812 6, % Net Cost of Actuarial Obligations (4,123) (4,101) (1,289) 1% Provision for Legal Liabilities (21,018) (12,360) (22,380) 70% Result of the Non Operating Asset Sale/Write-Off (11,084) 4,085 2,148 - Result of the Sale of the Surplus Electric Energy (2,161) 40, ,401 - Temporarily Equipments Shutdown (71,030) (31,020) - 129% Impairment of Assets 1,674 (985,046) - - Other Operating Income (Expenses), Net (45,597) (49,200) (23,176) -7% EBIT (441,040) (1,093,543) 29,179-60% EBIT Margin -18.2% -40.9% 1.0% b.p Financial Result (820,075) (40,629) (232,452) 1918% Financial Income 360,612 52, , % Financial Expenses (1,180,687) (93,302) (479,770) 1165% Equity in the Results of Associate and Subsidiary Companies (4,260) 33,991 35,101 - Operating Profit (Loss) (1,265,375) (1,100,181) (168,172) 15% Income Tax / Social Contribution 223, , ,742-30% Net Income (Loss) (1,042,156) (780,798) (24,430) 33% Net Margin -43.0% -29.2% -0.8% b.p Attributable: Shareholders (1,029,615) (602,187) (26,095) 71% Minority Shareholders (12,541) (178,611) 1,665-93% EBITDA (Instruction CVM 527) (96,573) (755,210) 344,489-87% EBITDA Margin (Instruction CVM 527) -4.0% -28.2% 11.8% b.p Adjusted EBITDA - Joint Subsidiary Companies proportional EBITDA (65,347) 227, ,516 - Adjusted EBITDA Margin -2.7% 8.5% 12.3% b.p Depreciation and Amortization 348, , ,209 15% Income Statement - Consolidated IFRS R$ thousand 9M15 9M14 Chg. 9M15/9M14 Net Revenues 7,781,446 9,156,434-15% Domestic Market 6,154,427 7,837,779-21% Exports 1,627,019 1,318,655 23% COGS (7,542,142) (8,177,820) -8% Gross Profit 239, ,614-76% Gross Margin 3.1% 10.7% -760 b.p Operating Income (Expenses) (1,738,409) (412,667) 321% Selling Expenses (194,339) (218,695) -11% Provision for Doubtful Accounts (15,457) (1,951) 692% Other Selling Expenses (178,882) (216,744) -17% General and Administrative (331,460) (367,308) -10% Other Operating Income (Expenses) (1,212,610) 173,336 - Reintegra (Brazilian Government Export Benefit) 19, Net Cost of Actuarial Obligations (12,381) (3,881) 219% Provision for Legal Liabilities (64,661) (70,939) -9% Result of the Non Operating Assets Sale/Write-Off (6,626) 29,359 - Result of the Sale of the Surplus Electric Energy 66, ,381-77% Temporarily Equipments Shutdown (102,050) - - Impairment of Assets (983,372) - - Other Operating Income (Expenses), Net (129,639) (69,584) 86% EBIT (1,499,105) 565,947 - EBIT Margin -19.3% 6.2% b.p Financial Result (1,221,604) (309,070) 295% Financial Income 782, , % Financial Expenses (2,003,752) (652,481) 207% Equity in the Results of Associate and Subsidiary Companies 41, ,633-70% Operating Profit (Loss) (2,679,007) 396,510 - Income Tax / Social Contribution 620,673 (70,701) - Net Income (Loss) (2,058,334) 325,809 - Net Margin -26.5% 3.6% b.p Attributable: Shareholders (1,879,262) 272,934 - Minority Shareholders (179,072) 52,875 - EBITDA (Instruction CVM 527) (497,904) 1,530,404 - EBITDA Margin (Instruction CVM 527) -6.4% 16.7% b.p Adjusted EBITDA - Joint Subsidiary Companies proportional EBITDA 541,393 1,561,275-65% Adjusted EBITDA Margin 7.0% 17.1% b.p Depreciation and Amortization 959, ,824 16%

20 Cash Flow - Consolidated IFRS R$ thousand 3Q15 2Q15 Operating Activities Cash Flow Net Income (Loss) in the Period (1,042,156) (780,798) Financial Expenses and Monetary Var. / Net Exchge Var. 760,074 36,209 Interest Expenses 120,588 50,631 Depreciation and Amortization 348, ,342 Losses/(gains) on Sale of Property, Plant and Equipment 8,575 (4,184) Equity in the Results of Subsidiaries/Associated Companies 4,260 (33,991) Impairment of Assets (1,182) 985,046 Difered Income Tax and Social Contribution (225,093) (325,803) Constitution (reversal) of Provisions (5,927) 2,169 Actuarial Gains and losses 4,123 4,204 Stock Option Plan 1,939 3,367 Total (26,072) 241,192 (Increase)/Decrease of Assets Accounts Receivables Customer (22,085) 21,227 Inventories 510, ,632 Recovery of Taxes 27,298 42,730 Judicial Deposits 34,172 (14,967) Accounts Receiv. Affiliated Companies Others (1,347) (137,493) Total 548, ,221 Increase /(Decrease) of Liabilities Suppliers, Contractors and Freights (350,147) (165,493) Amounts Owed to Affiliated Companies 50,681 (53,504) Customers Advances (15,244) (31,790) Tax Payable 13,581 (35,412) Actuarial Liability Payments (48,414) (48,605) Others 38,662 (11,959) Total (310,881) (346,763) Cash Generated from Operating Activities 211, ,650 Interest Paid (183,698) (152,658) Income Tax and Social Contribution (2,308) (31,508) Net Cash Generated from Operating Activities 25,761 (41,516) Investments activities cash flow Marketable Securities 671,779 57,280 Amount Received on Disposal of Investments 0 0 Amount Paid on the Acquisition of Investments 0 0 Fixed Asset Acquisition (127,808) (214,174) Fixed Asset Sale Receipt 844 4,749 Additions to / Payments of Intangible Assets 0 0 Dividends Received ,840 Purchase of Software (6,342) (11,968) Net Cash Employed on Investments Activities 538,964 (127,273) Financial Activities Cash Flow Inflow of Loans, Financing and Debentures (20,396) 1,342,106 Payment of Loans, Financ. & Debent. (421,284) (788,548) Payment of Taxes Installments (297) (291) Swap Operations Liquidations (4,495) (17,412) Dividends and Interest on Capital 2 (38,227) Net Cash Generated from (Employed on) Financial Activities (446,470) 497,628 Exchange Variation on Cash and Cash Equivalents 61,060 (3,522) Net Increase (Decrease) of Cash and Cash Equivalents 179, ,317 Cash and Cash Equivalents at the Beginning of the Period 1,996,659 1,671,342 Cash and Cash Equivalents at the End of The Period 2,175,974 1,996,659 RECONCILIATION WITH BALANCE SHEET Cash and Cash Equivalents at the Beginning of the Period 1,996,659 1,671,342 Marketable Securities at the Beginning of the Period 892, ,701 Cash and Cash Equivalents at the Beginning of the Period 2,889,080 2,621,043 Net Increase (Decrease) of Cash and Cash Equivalentes 179, ,317 Net Increase (Decrease) of Marketable Securities (671,779) (57,280) Cash and Cash Equivalents at the End of the Period 2,175,974 1,996,659 Marketable Securities at the End of the Period 220, ,421 Cash and Cash Equivalents at the End of the Period 2,396,616 2,889,080 3Q15 Results 20