Companhia Energética de Minas Gerais SA :CIG-US: Earnings Analysis: Q4, 2016 By the Numbers : April 19, 2017

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

Highlights

  • Summary numbers: Revenues of USD 1,430.97 million, Net Earnings of USD -93.78 million.
  • Gross margins narrowed from 26.89% to 19.95% compared to the same period last year, operating (EBITDA) margins now 25.40% from 25.14%.
  • Change in operating cash flow of -352.51% compared to same period last year is about the same as 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:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 1430.97 1511.36 1393.82 1160.77 1348.45
Revenue Growth (%YOY) 6.12 15.75 -19.94 -42.49 -44.41
Earnings (mil) -93.78 133.83 59.24 1.33 78.32
Earnings Growth (%YOY) -219.74 193.85 -65.65 -99.74 -82.05
Net Margin (%) -6.55 8.86 4.25 0.11 5.81
EPS -0.07 0.11 0.05 0 0.06
Return on Equity (%) -10.39 14.18 6.9 0.18 10.54
Return on Assets (%) -2.86 4.02 1.89 0.05 3.13

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

Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, CIG-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if CIG-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -5.32% and earnings by -170.07% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 26.89% to 19.95%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 25.14% to 25.40%. For comparison purposes, gross margins were 25.45% and EBITDA margins were 27.48% in the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CIG-US‘s year-on-year change in operating cash flow of -352.51% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 21.23% to 20.41% and (2) one-time items that contributed to a decrease in pretax margins from 3.89% to -3.17%

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-US.