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Brazil-based integrated electric utility Companhia Energetica de Minas Gerais (CIG - Analyst Report), popularly known as CEMIG, recently posted a 15% year-over-year increase in net income, to R$604.2 million (US$308.3 million) in the second quarter 2012.

Revenue: 
 
Net revenue in the second quarter stood at R$4,413.9 million (US$2,251.9 million), up 16.0% year over year, despite a 0.17% dip in electricity sold to 16,907 GWh at the end of the quarter.
 
Expenses/Income: 
 
Operational costs and expenses in the quarter totaled R$3,225.9 million (US$1,645.8 million), up 15.7% year over year. This was primarily due to higher costs on employee profit shares, electricity bought for resale, operational reversals, charges for use of the national transmission grid and gas bought for resale.
 
EBITDA in the quarter improved 14% year over year to R$1,433 million (US$731.1 million) primarily on the back of operational efficiency.  EBITDA margin stood at 32.5% versus 32.9% in the year-ago quarter. Operating margin in the quarter came in at 26.9% compared with 26.7% in the year-ago quarter. 
 
Balance Sheet/Cash Flow:
 
Exiting the second quarter, the company’s cash and cash equivalents were R$2,335 million (US$1,122.5 million) compared with R$2,235 million (US$1,423.6 million) in the previous quarter. Loans, financing and debentures came in at R$16.0 million ($7.69 million).
 
Cash generated by operations declined 20.6% year over year to R$807 million (US$411.7 million), while the company also raised its capital spending by 6.0% to R$479 million (US$244.4 million).
 
CEMIG is one of the largest integrated electric utilities in Brazil with approximately 97% of the company’s installed generation capacity being hydroelectric power. The company primarily competes with Companhia Paranaense de Energia (ELP - Analyst Report).
 
In the long run, we have an Outperform recommendation on CEMIG. However, the stock currently carries a Zacks #3 Rank, which translates into a short-term (1-3 months) Hold rating.

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