March 26, 2020 / 1:32 PM / 5 days ago

Brazil's Votorantim Peru, Argentina ops hit by coronavirus

SAO PAULO, March 25 (Reuters) - Votorantim SA, one of Brazil’s biggest diversified holding companies, said on Thursday it is seeking to preserve cash after coronavirus-related lockdowns partially halted operations in Peru and Argentina and as cement sales have slowed.

“Everyone’s compass is disoriented right now because of the pandemic,” Chief Financial Officer Sergio Malacrida said in an interview. “So liquidity is a priority.”

Still, he said the group has decided not to yet draw down $1 billion from three revolving credit lines because he considers its 10 billion-real ($1.99 billion) cash position - equivalent to one third of the group’s 2019 revenue - to be appropriate so far.

Depending on how long coronavirus-related lockdowns last in countries where it operates, Votorantim may end up using the credit lines, he added. Currently, the Peruvian operations of its listed mining arm Nexa Resources and Votorantim’s steel unit in Argentina are partially halted because of shelter-in-place orders.

In Brazil, Malacrida said all its businesses, which includes cement, orange juice, power generation and a bank, are still operating, but the coronavirus outbreak has already wiped out previous expectations of sales growth this year at Votorantim Cimentos.

Votorantim may also implement a cost reduction to keep its cash position high, he added. Earlier this week, the company said it may claim force majeure in energy contracts, seek a reduction in the energy it is required to buy.

Malacrida refrained from providing an outlook for 2020, saying any recovery would depend on the duration of lockdowns.

Votorantim’s net income last year more than doubled to 4.9 billion reais, mainly helped by the sale of its stake in Fibria Celulose SA to Suzano Papel e Celulose SA.

Revenues remained stable at 30.9 billion reais last year, as higher sales in cement were offset by lower metal prices.

Earnings before interest, taxes, depreciation and amortization - a gauge of operational profit known as EBITDA - fell 26% to 5.1 billion reais.

Votorantim ended December with net debt of 1.95 times its EBITDA, roughly in line with the end of 2018.

$1 = 5.0354 reais Reporting by Carolina Mandl; Editing by David Gregorio

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