Energy of Minas Gerais posts earnings miss, revenue below forecasts

Energy of Minas Gerais SA (CEMIG), the Brazilian state-controlled utility, reported quarterly earnings that fell short of market forecasts on Tuesday, with revenue also declining year-over-year.

The company posted a net profit of 1.2 billion reais ($235 million) for the three months ended March 31, missing the median estimate of 1.5 billion reais from analysts surveyed by Refinitiv. Revenue totaled 8.7 billion reais, down 5.2% from the same period last year and below the 9.1 billion reais expected by analysts.

CEMIG attributed the revenue shortfall to lower electricity sales volumes and reduced tariff adjustments, which offset gains from cost controls. The company’s operational expenses rose 3.1% year-over-year, primarily due to higher fuel costs for thermal generation.

Chief Executive Officer Djalma Bastos highlighted that the weaker performance reflected softer industrial demand in Brazil’s southeast, a key market for CEMIG. The company maintained its full-year guidance for net profit between 5.5 billion and 6.5 billion reais, citing expectations for gradual economic recovery and stable regulatory conditions.

Shares of CEMIG fell 2.1% in early trading on the B3 exchange in São Paulo, underperforming the broader Ibovespa index. The decline extended losses from the previous session, where the stock had dropped 1.8% amid broader market weakness.

Analysts at XP Investimentos downgraded the stock to "neutral" from "buy," citing the earnings miss and near-term headwinds in pricing and demand. The brokerage maintained a price target of 15.50 reais but reduced its earnings estimates for 2024 and 2025 by 8% and 5%, respectively.

CEMIG, which operates hydroelectric, thermal, and transmission assets, remains exposed to regulatory risks and volatile energy prices in Brazil. The company’s exposure to industrial clients, which account for roughly 40% of its revenue, continues to weigh on its financial performance amid sluggish economic activity.