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Energy Company of Minas Gerais (NYSE:CIG)
Operating Income
$1,926 Mil (TTM As of Dec. 2014)

Energy Company of Minas Gerais's operating income for the six months ended in Dec. 2014 was $1,926 Mil. Its operating income for the trailing twelve months (TTM) ended in Dec. 2014 was $1,926 Mil.

Operating margin is calculated as operating income divided by its revenue. Energy Company of Minas Gerais's operating income for the six months ended in Dec. 2014 was $1,926 Mil. Energy Company of Minas Gerais's revenue for the six months ended in Dec. 2014 was $7,396 Mil. Therefore, Energy Company of Minas Gerais's operating margin for the quarter that ended in Dec. 2014 was 26.04%.

Warning Sign:

Energy Company of Minas Gerais operating margin has been in 5-year decline. The average rate of decline per year is -4.1%.

Energy Company of Minas Gerais's 3-Year average Growth Rate for operating margin was -4.10% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. Energy Company of Minas Gerais's annualized return on capital for the quarter that ended in Dec. 2014 was 16.43%. Energy Company of Minas Gerais's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Dec. 2014 was 89.48%.


Definition

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Energy Company of Minas Gerais's Operating Income for the fiscal year that ended in Dec. 2014 is calculated as

Operating Income(A: Dec. 2014 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=7396.19213445-4845.75494909-295.999091563
-Research & Development-Depreciation, Depletion & Amortization-Others
-0-303.190885348-24.9820205155
=1,926

Energy Company of Minas Gerais's Operating Income for the quarter that ended in Dec. 2014 is calculated as

Operating Income(Q: Dec. 2014 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=7396.19213445-4845.75494909-295.999091563
-Research & Development-Depreciation, Depletion & Amortization-Others (1)
-0-303.190885348-24.9820205155
=1,926

Operating Income(Q: Dec. 2014 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=2350.9595367-303.190885348-121.503463416
=1,926

For company reported semi-annually, GuruFocus uses latest annual data as the TTM data. Energy Company of Minas Gerais Operating Income for the trailing twelve months (TTM) ended in Dec. 2014 was $1,926 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition.

Energy Company of Minas Gerais's annualized Return on Capital (ROC) for the quarter that ended in Dec. 2014 is calculated as:

Return on Capital (ROC)(Q: Dec. 2014 )
=NOPAT/Average Invested Capital
=Oper. Inc.*(1-Tax Rate)/( (Invested Capital (Q: Dec. 2013 ) + Invested Capital (Q: Dec. 2014 ))/2)
=1926.26518793 * ( 1 - 29.96% )/( (8077.54580315 + 8350.42961505)/2)
=1349.15613763/8213.9877091
=16.43 %

where

Invested Capital(Q: Dec. 2013 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=3075.84149979 + 953.557733277 + 5384.74648487 - 1336.59991478
=8077.54580315

Invested Capital(Q: Dec. 2014 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=3110.64006965 + 2002.72531133 + 4270.03293085 - 1032.96869677
=8350.42961505

Note: The Operating Income data used here is one times the annual (Dec. 2014) operating income data.

2. Joel Greenblatt’s definition of Return on Capital:

Energy Company of Minas Gerais's annualized Return on Capital (Joel Greenblatt’s) for the quarter that ended in Dec. 2014 is calculated as:

ROC (Joel Greenblatt’s)(Q: Dec. 2014 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Net PPE+Net Working Capital)
     Q: Dec. 2013  Q: Dec. 2014
=EBIT/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=2047.76865135/( ( (2478.48317 + max(-64.763527908, 0)) + (2098.48972331 + max(-381.165070593, 0)) )/2 )
=2047.76865135/( ( 2478.48317 + 2098.48972331 )/2 )
=2047.76865135/2288.48644665
=89.48 %

where Working Capital is:

Working Capital(Q: Dec. 2013 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(814.657008948 + 16.190881977 + 674.051981253) - (1353.64294844 + 0 + 216.02045164)
=-64.763527908

Working Capital(Q: Dec. 2014 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(810.780120368 + 15.1406184943 + 621.900904652) - (1639.35046747 + 0 + 189.636246641)
=-381.165070593

When net working capital is negative, 0 is used.

Note: The Earnings Before Interest and Taxes (EBIT) data used here is one times the annual (Dec. 2014) EBIT data.

3. Operating Income is also linked to Operating Margin:

Energy Company of Minas Gerais's Operating Margin for the quarter that ended in Dec. 2014 is calculated as:

Operating Margin=Operating Income (Q: Dec. 2014 )/Total Revenue (Q: Dec. 2014 )
=1926.26518793/7396.19213445
=26.04 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Be Aware

Compared with a company’s EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company’s revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)’s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia’s Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus’s Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


Related Terms

Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense, Research & Development, Gross Profit, EBITDA, Depreciation, Depletion and Amortization, Return on Capital, Return on Capital (Joel Greenblatt’s), Earnings Yield, Operating Margin, EBIT


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Energy Company of Minas Gerais Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Operating Income 5803601,1659552,1092,0982,3401,2561,4471,926

Energy Company of Minas Gerais Semi-Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Operating Income 5803601,1659552,1092,0982,3401,2561,4471,926
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