Companhia Energética de Minas Gerais SA :CIG.C-US: Earnings Analysis: Q1, 2016 By the Numbers : June 6, 2016

Companhia Energética de Minas Gerais SA reports financial results for the quarter ended March 31, 2016.

We analyze the earnings along side the following peers of Companhia Energética de Minas Gerais SA – FirstEnergy Corp., Consolidated Edison, Inc., Centrais Eletricas Brasileiras S.A. – Eletrobras Sponsored ADR Pfd Class B, Companhia Paranaense de Energia Sponsored ADR, SSE plc Sponsored ADR, EDP – Energias de Portugal SA Sponsored ADR, CPFL Energia S.A. Sponsored ADR and Enersis Americas S.A. (FE-US, ED-US, EBRBY-US, ELPVY-US, SSEZY-US, EDPFY-US, CPL-US and ENERSIS.AM-CL) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 1,160.77 million, Net Earnings of USD 1.33 million.
  • Gross margins narrowed from 32.15% to 22.69% compared to the same period last year, operating (EBITDA) margins now 16.70% from 30.30%.
  • Year-on-year change in operating cash flow of 38.81% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 2018.29 1741.02 1305.76 1348.45 1160.77
Revenue Growth (%YOY) -0.96 -18.15 -21.15 -44.41 -42.49
Earnings (mil) 512.22 172.45 45.55 78.32 1.33
Earnings Growth (%YOY) -4.28 -48.16 262.71 -82.05 -99.74
Net Margin (%) 25.38 9.91 3.49 5.81 0.11
EPS 0.41 0.14 0.04 0.06 0
Return on Equity (%) 58.83 18.73 5.15 10.54 0.18
Return on Assets (%) 16.69 5.91 1.68 3.13 0.05

Access our Ratings and Scores for Companhia Energética de Minas Gerais SA

Market Share Versus Profits

Revenues History
Earnings History

CIG.C-US‘s change in revenue this period compared to the same period last year of -42.49% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that CIG.C-US is holding onto its market share. Also, for comparison purposes, revenues changed by -13.92% and earnings by -98.30% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 32.15% to 22.69%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 30.30% to 16.70% in this time frame. For comparison, gross margins were 26.89% and EBITDA margins were -6.46% in the previous period.

Gross Margin Versus EBITDA Margin

Cash Versus Earnings – Sustainable Performance?

CIG.C-US‘s change in operating cash flow of 38.81% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 26.08% to 12.23% and (2) one-time items that contributed to a decrease in pretax margins from 33.65% to 2.01%

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Companhia Energética de Minas Gerais SA

Company Profile

Companhia Energética de Minas Gerais SA engages in the generation, transmission, distribution and sale of electricity, gas distribution, telecommunications and the provision of energy solutions. It operates through the following segments: Generation, Transmission, Distribution, and Other Businesses. The Generation segment engages in the generation of electricity through hydroelectric plants, thermoelectric plants and wind farms. The Transmission segment engages in the electric power transmission business, which consists of transporting electric power from the facilities where it broadcasted to the distribution networks for delivery to final users. The Distribution segment engages in the supply electricity to consumers in the state of Minas Gerais. The Other Businesses segment engages in the telecommunications, national and international energy solutions, and exploitation of natural gas. The company was founded by Juscelino Kubitschek de Oliveira on May 22, 1952 and is headquartered in Belo Horizonte, Brazil.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of CIG.C-US.

Leave a Comment