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Brazil-based integrated electric utility, Companhia Energetica de Minas Gerais (CIG - Analyst Report), also known as CEMIG reported its financial results for the first quarter 2013 on May 17, 2013. Net earnings in the quarter were R$865 million (US$432.5 million), up 37% year over year.

Earnings per share were R$1.01 or US$0.51 per ADR. This was way above the Zacks Consensus Estimate of US$0.24 per ADR.

Revenue

CEMIG in the first quarter 2013 generated net revenue of R$3,677.6 million (US$1,838.8 million), up 15.2% compared with the year-ago revenues. Despite a fall in a few categories, including a 9.4% decline in revenues from sales to end customers, more than a double increase in revenue from Supply +Transactions in the CCEE category drove the results. 

Electricity sold in the quarter was down 1.8% year over year to 10,796 GWh.

Expenses/Income

Operational costs and expenses in the quarter totaled R$2,456 million (US$1,228 million), up 7% year over year. The expenses soared because of higher personnel costs, post-retirement benefits, cost of materials and purchased energy costs among others, although there was fall in a few other expenses, including contracted services, royalties, operating provisions among others on a year-over-year basis.

EBITDA was R$1,590 million (US$795 million) in the quarter, reflecting a year-over-year growth of 28%. EBITDA margin was 43.2% versus 38.9% in the year-ago quarter. Operating margin in the quarter came in at 33.2% compared with 28.0% in the year-ago quarter.

Balance Sheet/Cash Flow

Exiting the first quarter 2013, CEMIG had cash and cash equivalents of approximately R$2,041 million (US$1,020.5 million) versus R$2,485.8 million (US$1,212.6 million) in the previous quarter. Talking of long-term debts, a drastic decline was witnessed in loans, financing and debentures that came in at R$2,644 million (US$1,322 million).

CEMIG generated approximately R$374 million (US$187 million) in cash from operating activities, registering a year-over-year decline of 11%. Capital spending on addition of fixed and intangible assets plummeted 70% to R$219 million (US$109.5 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 stock currently has a Zacks Rank #4 (Sell).

Other stocks to watch out for in the industry are CPFL Energia S.A. (CPL - Snapshot Report) and Empresa Nacional de Electricidad S.A. (EOC - Snapshot Report) with a Zacks Rank #1 (Strong Buy) while ALLETE, Inc. (ALE - Snapshot Report) with a Zacks Rank #2 (Buy).

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