In a significant move, the Companhia Energética de Minas Gerais (Cemig) is set to pay R$ 541 million (approximately $100 million) in interest on equity (JCP) to its shareholders. The payment, approved by the company's board of directors on March 20, 2025, comes as quite a surprise amidst the backdrop of a sharp decline in their profits over the last quarter of 2024.
Shareholders holding both ordinary (ON) and preferred (PN) shares as of March 25, 2025, will be entitled to this payment, which equates to R$ 0.1891 per share. Following this date, starting March 26, Cemig shares will trade ‘ex-rights,’ meaning that new investors purchasing shares will not qualify for the impending payment.
The hefty payout will be disbursed in two installments; the first will be made by June 30, 2026, and the second by December 30, 2026, giving investors a significant forecast for future returns, despite recent financial challenges.
Despite the favorable shareholder return, Cemig recently faced financial losses, including a staggering 47% drop in net profit for the fourth quarter of 2024, down to R$ 998 million from the previous year. Likewise, the company's recurring net profit fell by 30.7%, totaling R$ 1.166 billion. These decreases have raised questions among market analysts, especially given the robust operational revenue that rose by 12.3% in comparison to the same period last year, reaching R$ 11.1 billion.
Analysts pointed out that the reduction in profits may stem from lower outcomes in the energy commercialization sector. Additionally, the company reported a consolidated EBITDA of R$ 1.914 billion, reflecting a decline of 21.9%. Nevertheless, Cemig managed to establish a profitable year overall, with a record total net profit of R$ 7.1 billion for 2024 and an EBITDA of R$ 11.3 billion.
Market experts have raised concerns regarding Cemig's financial outlook. For instance, analysts at JPMorgan indicated potential declines in future returns, estimating that they might drop from 10% in 2025 to 6.5%. This prediction comes in light of the declining profitability trends and the anticipated earnings drop following last year’s significant dividends that reached R$ 1.92 per share—a whopping 113% increase over the previous distribution.
According to the investment banking firm, the energy company appears to have boasted significant dividends in the past, but the new projected reductions could hinder their attractiveness as an investment opportunity. They also suggested that political factors in Minas Gerais could affect potential strategies, particularly regarding privatization efforts, which are seen as critical to enhancing the company's market appeal.
In the wake of this complex financial landscape, shareholders are left weighing the benefits of a substantial JCP payment against the backdrop of declining profits and uncertain market conditions. The uncertainty surrounding future dividends has caused many to reconsider their positions in Cemig, especially as the market processes these changes.
In summary, although Cemig is poised to make a notable JCP payment, the company is grappling with significant financial challenges that have raised eyebrows among investors. The situation has prompted both concern and hope within the financial community as they navigate the implications of these developments on the broader investment landscape.
