Alberto Ono, Finance, Investor Relations and Corporate Planning Vice President Officer. Américo Ferreira, Industrial Vice President Officer. Kohei Kimura, Technology and Quality Vice President Officer. Miguel Holmes, Commercial Vice President Officer. Carlos Rezzonico, Managing Director of Mineração Usiminas. Ascânio Merrighi de Figueiredo Silva , Managing Director of Soluções Usiminas. Heitor Takaki, Managing Director, Usiminas Mecânica. Bruno Paulino, Head of Legal Department. Julio Arroyo, Controller, and Leonardo Karam, Head of IR. At first, Sérgio Leite de Andrade will make some initial considerations. Alberto Ono will present the results for the second quarter 2020. The officers will be available to answer the questions asked. I turn the call over to Sérgio Leite de Andrade .
Thank you very much. Good morning, everyone. Thank you very much for attending our conference to discuss the results of our company.
We are addressing you at a scenario which is very different from what we saw in May, when we announced the results of the first quarter at the peak of the pandemic. Today at Usiminas, we are confident that what's about to come, the pandemic continues. However, we have a perspective of growth recovery. Market indicators, all the positioning of several economic players have been very positive, so that we can move towards a positive scenario. We are confident that the scenario will continue, and we would like to communicate to you, and we do this with a lot of pleasure, that we are returning our blast furnace of Ipatinga. We are reforming the operations at Cubatão, and we are also increasing our guidance for investment considering the healthier situation of the company.
All in all, we are starting the third quarter in a very different scenario that we saw in the second quarter. In the second quarter, pandemic was a moment for reflection and action. We worked intensively during this period to minimize the effects that we had, the serious ones that we had in relation to the pandemic, affecting the economic situation of the country and preparing our country for the moment of recovery. This is the time we are going through right now. As you all know, we restructured Usiminas Mecânica. We concentrated the businesses of this company in order to provide services. Also in the other four companies of the company. The board approved unanimously some actions, and Usiminas Mecânica will be a company that will add positive EBITDA.
We also restructured our activities in Cubatão, where we are now adopting a new configuration in this month of August, and we'll make it ever more competitive. We have made, and we are going to continue working on increasing the competitiveness of our operations in Ipatinga. Soluções Usiminas also goes through a moment of increasing its complexity and changing its structure. This has been propelled by the pandemic that led us to profound reflections. We made immediate actions related to resilience and adaptations. It was a period that will remain in our memories, of a time of a lot of suffering, a lot of fight, a lot of struggle. In March, when the pandemic was installed in Brazil, on 26th of February, when the first case was recorded, we adopted deep and immediate measures.
We formed a coronavirus crisis committee. We worked seven days a week in the beginning, and they did a great job. We have a social part, which is very important, which is Fundação São Francisco Xavier , the foundation that allowed us to follow this path in a scientific and professional way. We have competent professionals working at this foundation. This will be our greatest priority, to preserve safety, health, and the life of everyone. This is work that we have been doing, not only involving our operations and employees, but also the trade partners, the third parties that work with us, and also the communities. We invested more than BRL 27 million providing support to the communities, all the operations of our hospitals.
Important to mention that we have four hospitals located in the steel area in Itabira that has a very large influence in the region where Vale, our partner, also works, and also in Baixada Santista. It is important to mention that our hospitals provided services to 90% of our communities. All those people who needed support, we were there. We did a very important job. In March, our second priority at that time was to do a proper management. We had to manage our cash as our second priority. We worked hard on this, and we are very happy to mention that we have had good results with our cash management results. The controller cash ended the quarter as the third highest cash level of the previous years, and the result is very important and brings us a very healthy situation in terms of finances.
If we look at the consolidated cash since the second quarter 2019, every quarter we have presented consistently an increased cash. Today, the consolidated level, more than BRL 2.5 billion. The cash management work that included all the team of Usiminas when we looked at the working capital, doing an excellent job. We are going to see in details during the presentation. The good news is that we will have an inflow of BRL 300 million that Eletrobras has already deposited, and we are just in the management of how to do the transfer. We have this additional amount in our cash. We are going to add BRL 311 million to the positive results that we have already achieved. The third focus that we had, and we are going to work on this in the next quarters, are the results generation.
In the second quarter, we had an excellent performance of our operations in Mineração Usiminas. We generated EBITDA, which was a record of all quarters of the company that has been in operation for 10 years. It was the best quarter. In the second quarter, we also were granted the installation permit of the dry stacking for the mining. We are working hard on this investment already, and this is going to go live in the first quarter 2021. We eliminated the operation of our last dam, which is a downstream dam, and we are going to work with dry stacking. We have been working on mining, and the result has been very positive. All in all, we have been working hard on this restructuring, preparing our company to the new periods to come.
We are increasing our investment guidance by 33% from BRL 600 million to BRL 800 million, which is also a very important aspect to consider. Today, we are bringing to you, together with the results of the second quarter, that we are going to present in a short while. It is a perspective and a work that has been done in order to prepare our company for the new challenges, the new scenarios in Brazil, and I believe the rest of the world, so that we can build together the present and the future of our companies. Thank you very much for your attention. I turn the floor over to our Investor Relations Corporate Planning Vice President Officer, Mr. Alberto Ono.
Good morning, everyone. Again, I would like to thank you for attending this earnings call. Let us move on to slide number two of our presentation.
These are the main figures of the company. First, steel unit sales. We can see here that the largest impact of all the coronavirus pandemic effect can be seen here. We had a significant reduction by 42%. As we have said before in the last call, we said that the Brazilian company had its industries nearly come to a stop in April. This impacted the sales quite significantly. In relation to iron ore sales, we can see there has been a small reduction in our sales. This is a result of a planned stoppage for maintenance activities. This is not likely to repeat in the quarters to come. We are likely to recover the volumes that have been lost in this period up to the end of the year.
In terms of the EBITDA margin, we can see the results of the impact, especially in the steel unit, but also other businesses were affected. We had a drop of 66% with 8% of margin. It is important to mention here, as we will show in more details during the presentation, we had no recovery factor that affected the results of the second quarter. In relation to the net profit, again, we reported the loss, a bit smaller, BRL 395 million. Here we can see the next net exchange variation was smaller. In the previous quarter, we had tax FX change of BRL 174 million, 5%. It is a result of the operating results that impacted this loss. Next slide, we can see a sequence of EBITDA of the latest five quarters. We would like to draw your attention on the slide that there is this information of non-recurring effects.
If we do not consider those effects our EBITDA would have been BRL 281 million. Out of those non-recurring effects, we have the provisions associated with the COVID-19 impact that affects the production perspectives, because those are provisions associated to what is likely to be observed in future quarters, more specifically in the third quarter. Then we have the impact of doubtful accounts and the associated provisions. This is considered non-recurring because the sale was related to an energy sale in 2019, and the client who purchased that energy had problems to pay. We were negotiating the payment, but unfortunately, in this quarter, this client went bankrupt. We had to recognize this provision of loss, which was related to an energy sale related to 2019. Lastly, the restructuration cost of Usiminas Mecânica, which will be reflected in the other quarters.
It is non-recurring that was done now, but the effect will be felt in the future quarters. Without those effects that amounted to BRL 89 million, our EBITDA would have been BRL 281 million. In relation to steel unit, as can be seen on slide four, we can see the non-recurring effect that has its operational aspect that was impacted by the expressive drop in volume. We can show the number of BRL 102 million, but the impact is more than double of what would have been the negative operational EBITDA. On next slide, Mineração Usiminas, as mentioned by Sérgio , in spite of volume, which was a little lower than the previous quarter, we reached BRL 380 million, which is the highest result of the quarter with 50% of margin. This is very favorable to us. This was an action that was well-used by our company.
On next slide, we can see the steel transformation, Soluções Usiminas, and we can see there has been a reduction in sales affecting the EBITDA, so we had a negative EBITDA of BRL 11 million. Moving on to the next slide. Lastly, Usiminas Mecânica. In addition to the provision for the restructuring of Usiminas Mecânica, we also had, for this specific company, COVID impact in the quarter. They were recognized in the quarter, and they were associated to a lot of stoppages of some construction works that were being carried out at clients, and they stopped, and they had to follow the guidelines established by their own companies related to COVID-19 crisis. We had these costs that were recognized in the quarter. Now talking about other financial indicators on the other slides, as has been mentioned by Sérgio in this presentation.
As for working capital, we had 5% reduction, and we went back to a level of BRL 4.1 billion. As we have already mentioned, and also contained in the release, we had a judiciary deposit in relation to the deposit received by Eletrobras. If we do not consider this aspect, we would have reached a level of working capital at BRL 3.8 billion. It is the lowest working capital level in the past quarters. In relation to steel inventories, as we can see on the next slide, during this quarter, we had a 4% reduction. We can see that we have been managing this drop in the volume of inventories so that we can have a more stringent control of our inventories. This shows that the measures adopted led to good results, and this can be seen in the results of our working capital.
But in function of this drop, the working capital has been increased, but the physical volume has been reduced. On next slide, we talk about cash position and indebtedness. As Sérgio mentioned, we have been going in this continuous trend. If we look at the cash position today in a consolidated manner, we can see that as of the second quarter of 2019, we have our cash doubled. Now we reached BRL 2.5 billion, and FX variation affected the debt, as I mentioned, and this makes our gross debt increases. About BRL 300 million. The cash was balanced partially, but it was impacted by a lower EBITDA and the increase of gross debt, which was not totally offset by the increase of cash. We have an increase of our leverage.
But we believe that even though we have seen this increase, the level is still quite reasonable considering everything that is happening now. The focus now, as Sérgio mentioned, is to preserve liquidity, and you can see this very clearly, and that we have reached this objective. On next slide, we will discuss our CapEx. In this quarter, we reached BRL 193 million of realized CapEx, BRL 11 million more than the previous quarter, but practically at the same level. As mentioned before by Sérgio, we have extended our guidance to BRL 800 million, and this is basically due to the projects. The main one is the dry stacking, but there are other projects as well connected to the mining activities. They all make a lot of sense considering everything that we have been observing along the previous quarters.
So we are going to concentrate this increase allocated in the mining activities. This is the presentation, and we will now open the Q&A session. Thank you.
Ladies and gentlemen, we are now going to start the Q&A session. To ask a question, please press star one. To remove your question from the list, type star two. We would like to remind you that this conference is for analysts and market analysts. We request that any questions from the journalists are referred to the present media relations, Usiminas, by the telephone 3134-998919 or using the following emails, press@usiminas.com. Our first question comes from Mr. Gabriel Galvão with Credit Suisse.
Good morning, everyone. Thank you very much for taking my question. My first question is related to how you see this recovery of steel demand this month.
Could you provide more details on the comparison on a monthly basis and as to last year? Could you give more details on how the assemblers are doing? So you said you expect those levels to normalize. What about the price increase in the domestic market? You announced an increase of price in July. I would like to understand if this increase has been approved and there has been a movement to increase prices. Do you intend to accompany this price increase? How big would this increase be? How you see parity today? What would that mean after the increases? Thank you.
Good morning. This is Miguel Holmes speaking. It's a very complete question, right? So you're talking about demand and price. It's important for us to understand how the recovery is happening, the demand recovery.
It's important to understand what happened in the previous quarter. The result of the sector was announced together with the forecast for the apparent consumption of steel for 2020. When Instituto Aço Brasil announced this, it said that the sector had a drop in its plant of 17% in relation to the year-on-year. So there was a drop in the apparent consumption for the whole quarter of 13.5%. When we consider the whole year, Instituto Aço Brasil estimates there will be an apparent total consumption, but it gives no details of which is long and which is short. We should expect a drop in apparent consumption higher than 14.5%. As for Usiminas follows those indicators because it's an active part of Instituto Aço Brasil. In relation to Usiminas for the second quarter, as you know, Usiminas, we have a very important presence in the automotive sector.
The drop of production was very high and the recovery has been important considering the demand. There was a drop in production, but in May, there was a drop of 105%. In June, there has been a recovery in the production of vehicles, reaching a level of 100,000 units, which is a drop, compared to the previous year, of 60%. This drop in the vehicle production is 31%. It is a very strong impact on Usiminas. When we consider this important drop, together with a strong drop in the household appliances, this can account for 40% of impact. But we can see that along the quarter, the sales have been evolving, but it is a drop of 44%. This is how the sales evolved accompanying the sectors where we operate.
ANFAVEA has estimated that production will be kept at 45% with a sales drop in exports of 50% in the automotive sector. We are looking at the future with good expectations. We can see that the level of cars put in the market is higher than the previous periods. This would lead to the increase in production because the inventory levels are very low in the automotive sector. We have to watch closely because when consumption recovers, the inventory, which is very low in all industrial chain. We are, in other words, prepared for this consumption recovery, both in our inventory levels and as well as our production levels. In relation to the price, it is also important to say that we are showing an average price of 1% in comparison to the previous quarter. In May, we mentioned that we are facing a scenario of negative parity.
At this time, what happened? As you said, we had an increase in price in July, yes. As you mentioned, about 10% for the sector. Also there was a drop in the value of the dollar. If we consider the parity of 10%, and also the evaluation of 5% of our currency, and we consider all this, we would have a positive parity of 5%. But what happened in the international prices is that there was an adjustment of nearly 50%. This leads to a negative parity. As we said in different opportunities, we cannot have a negative parity. It is not very good to the health of the company. We are going to return to a healthy parity in a short time.
Okay, thank you. What about the increase that you are planning for September?
We do not talk about future events. Maybe you could come to a conclusion after all we said today and what we would do to return to a healthy parity.
Very clear. Thank you.
Our next question comes from Mr. Thiago Ojea with Goldman Sachs.
Hello. Good morning, everyone. Thank you very much for taking my question. My first question is in relation to the restart of the blast furnace, especially in Cubatão. How do you see the price dynamics of plates? What would be a healthy price for the production of plates after you start the operation at Cubatão and with the improvement in the cash position? You mentioned the increase in CapEx, but do you see any possibility of adopting a different policy for dividend payout and/or allocation of capital?
Thank you. Thiago, this is Alberto speaking. I am going to talk about allocation of capital first.
We do not have any estimate to make any changes. We are still very focused on preserving the liquidity of the company. As for CapEx, as we have said before, it is more focused on improving our efficiency and also on sustaining the mining. This is the main point for us. Obviously, we are watching closely the result. For the time being, we still do not have any estimate of making any changes to the liquidity preservation. In relation to plate balance and the blast furnaces. What I have to say is that first, the restart the blast furnace, makes all sense to start resuming production. We can see that there is a positive scenario to recover or resume our activities with our clients. This is in line with our decision to restart the blast furnaces.
As for Cubatão, what we have to say is that we consider the market price. We see what the supply and demand of the market is. The prices are regulated at the international level. There is nothing different. Those prices make sense for us to do businesses, and this is what we have been observing in the domestic market. Basically, a big part of the volume that we have been observing will be supported by the domestic market, and this is what we can say. Of course, it makes sense to start producing. The plate price is different because the one who purchases will have to add its own margin. This decision makes sense considering the projections for the domestic market.
Thank you, Alberto.
Our next question comes from Daniel Sasson with Itaú BBA.
Hello. Thank you very much for the opportunity. I have two questions. We have follow-ups on the previous questions. As for production costs per ton, help us understand the evolution for the third quarter or in the future so that we can balance the restart of Blast Furnace No. 1 , maybe the cost will be higher. We also have to consider the fixed costs, which will improve sequentially. This can help us understand the modeling of costs. In relation to prices, you talked a little bit about the scenario and the prospects for the third quarter, but if you could make some comments on what you managed to do for the prices in the second quarter, so that the domestic market prices should be stable in relation to the first quarter. How we saw those differences in results.
Daniel, in relation to production cost, I could say the following.
During the second quarter, we had a high cost that was allocated to the production costs and also to the COGS, which was related to the high idleness of the product. We had some stoppages or the shutdowns of our blast furnaces in April, and also Cubatão, that also had some shutdowns. This is likely to be reduced in the third quarter, associated with the restart. As for blast furnaces, I believe Ipatinga Blast Furnace No. 1 has ramp up, which will not affect the production considering its ramp up. In August, you are likely to have efficient cost at reasonable level of production. It will help us decrease the idleness of clean furnaces. The fixed cost that you mentioned as to idleness, that you mentioned in your question, it will be reduced quite significantly, and this will make the cost per ton to be improved.
The level of improvement, we cannot tell for sure. It will depend on how things play out. In relation to prices, I will turn the call to Miguel.
Good morning. In relation to prices, yes, you are right. When we look at the average price for the second quarter with a drop of only 1%, considering the situation of the worst mix, considering the automotive sector, if we look at the results in more details, what we can say is the following. When we consider each family of the product, EG, HDG. Each of the product family will present an average price which is higher than the average price of the first quarter of comparing the same family of product.
If you consider the mix of products of the first quarter and consider the average price of each product in the second quarter, if we remove the mix product effect, but still maintaining the impact of the whole mix, we will have average price higher than 2% in relation to the first quarter 2020. How is that possible? We had businesses, projects that were negotiated when the sales price were better. As we mentioned in the previous call, they allowed us to increase the prices along the quarter. We have to remember that we mentioned adjustment to the sector and all the projects that needed to be implemented. We also had some contract that are adjusted on a quarterly basis or on a semester basis. This period, we could mention that some of those agreements that had adjustment on a semester basis, they had positive adjustments.
Our next question in English comes from Carlos de Alba with Morgan Stanley.
Thank you very much. Good morning, everyone. My question is on your product mix. Considering that the auto sector to which you have a lot of exposure is struggling a little bit more in coming back, and it may remain subdued while construction is doing better, is it possible, do you have any flexibility to maybe switch some of your coated products, galvanized products into the construction sector? Would you do that and would that require any, is it possible and would that require any CapEx or investments in order to do that? I just wanted to understand a little bit more about the restructuring of Usiminas Mecânica. I was under the impression that it was going to basically cease to provide third-party services or services to third parties, and it would really focus only to service other internal units of Usiminas.
But you just mentioned that the EBITDA should be positive after the restructuring. So I may be a little bit confused. Could you explain a little bit more what exactly are you planning on doing in Usiminas Mecânica? What will be the focus of the unit after the restructuring? If you can comment on what are some of the initiatives that would allow the company to post positive EBITDA in the future. Thank you very much.
Carlos, thank you very much for your question. Thank you very much for your question. I will start with your question related to the restructuring of Usiminas Mecânica and the question related to changes of mix of sector, then I'll turn to Miguel for him to answer. In relation to Usiminas Mecânica, as Sérgio mentioned in his initial consideration, services that are provided by Usiminas Mecânica to the companies of the group is a competitive service in terms of costs and results. This business segment, so as to say, is the only one where we observe that Usiminas Mecânica's results are generated. Therefore, we are going to preserve this business segment because it brings positive results. The result is to preserve this business, okay? The other businesses, they are not profitable. So these are the ones we are discontinuing.
The part which will remain, which is related to services provided to the group. It's profitable already for Usiminas Mecânica because its competitiveness level shows to be better than the competitors, because in the relationship between Usiminas and the companies of the group and Usiminas Mecânica, it's also market conditions. We have no preference in this regard. So its competitiveness is intrinsic, and it shows results in this segment. So the restructuring is being done so that we can optimize all the overhead structure so that we can meet the needs of this business segment alone. With positive results being generated. We believe that we are going to present a positive EBITDA. Yes, we believe that, but for sure, it's not going to be the EBITDA that we used to have in the past when volumes were more significant.
Because it's a segment, but still it's a smaller business, considering the company as a whole. If you compare this from a historical viewpoint, this is our basis. It's going to be a smaller business. The results are going to be positive, but smaller. So this is the idea we have, okay? So I'll turn the call to Miguel.
Thank you, Carlos. I thought your question is exactly related to what we did along the quarter. Considering the critical sector of the sector. We have an important participation here. We developed the product, then we increased our portfolio of products so that we can have a higher share and be more resilient considering the COVID pandemic.
With this objective, we were successful when we developed products for construction sector without the need for CapEx, as you mentioned, only by making adjustments to the processes and by using our research and development center. Usiminas has its quality recognized along the years, especially focused on the automotive sector. This has made us possible to add and implement new products to our portfolio to participate not only in the construction sector, but also in other products, and offer more products in sectors where we are still not participating. Concrete results are that we can produce products for construction sector and also galvanized products for storage in silos. These have been all favorable to our sectors.
The answer is yes, we have the capacity, and this is what we have done, and Usiminas is much better prepared to meet the demands of any sector that presents any demand for steel in Brazil.
All right. Thank you very much. Good luck.
Excuse me. If there are no further questions, we close the Q&A session. If you have any questions, the IR team is available to take your questions. We would like to thank you for your participation, and have a good day you all.