We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Companhia Siderurgica's Future Dim on Micro & Macro Woes
Read MoreHide Full Article
We issued an updated research report on one of the leading steel producers in Brazil, Companhia Siderurgica Nacional (SID - Free Report) or CSN on Jun 17, 2016. Despite solid long-term growth potential backed by exposure in steel, iron ore mining, logistics, cement and energy industries, the company faces risks from certain near-term headwinds. Below we discuss the adversities faced by the company.
Headwinds Impacting Growth Potential
Highly Leveraged: Companhia Siderurgica Nacional is a highly leveraged company with a long-term debt balance of approximately $30.6 billion at the end of first-quarter 2016. Its net debt/EBITDA ratio was 8.7x versus 8.2x in the previous quarter. If unchecked, higher debt levels might increase the company’s financial obligations and prove detrimental to its profitability.
Forex Losses: International businesses have exposed Companhia Siderurgica Nacional to risks arising from unfavorable foreign currency movements. Depreciation of the Real against the U.S. dollar can create inflationary pressures in Brazil, negatively impacting its economy as a whole.
Dicey Future Prospects: According to the World Steel Association’s report (Apr 2016), the global steel consumption will decrease by 0.8% in 2016. We expect uncertain global economic conditions to adversely impact Companhia Siderurgica Nacional’s businesses in the quarters ahead. Difficult operating conditions adversely impacted the company’s first-quarter results as well. Crude steel production declined 21% sequentially, while production of rolled steel decreased 22%.
Other Headwinds: Companhia Siderurgica Nacional is also exposed to stiff competition and high start-up costs in the industry. Also, downward pressure on steel prices by competitors may adversely affect the company’s profitability.
Conclusion
Companhia Siderurgica Nacional currently carries a Zacks Rank #4 (Sell). We believe the above-mentioned risks/headwinds clearly reflect the company’s investment value.
However, there are certain stocks in the steel industry that have been performing better than Companhia Siderurgica Nacional and have gained high investment value. They include POSCO (PKX - Free Report) , Ryerson Holding Corporation (RYI - Free Report) and Olympic Steel Inc. (ZEUS - Free Report) . While POSCO and Ryerson Holding sport a Zacks Rank #1 (Strong Buy), Olympic Steel carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Companhia Siderurgica's Future Dim on Micro & Macro Woes
We issued an updated research report on one of the leading steel producers in Brazil, Companhia Siderurgica Nacional (SID - Free Report) or CSN on Jun 17, 2016. Despite solid long-term growth potential backed by exposure in steel, iron ore mining, logistics, cement and energy industries, the company faces risks from certain near-term headwinds. Below we discuss the adversities faced by the company.
Headwinds Impacting Growth Potential
Highly Leveraged: Companhia Siderurgica Nacional is a highly leveraged company with a long-term debt balance of approximately $30.6 billion at the end of first-quarter 2016. Its net debt/EBITDA ratio was 8.7x versus 8.2x in the previous quarter. If unchecked, higher debt levels might increase the company’s financial obligations and prove detrimental to its profitability.
Forex Losses: International businesses have exposed Companhia Siderurgica Nacional to risks arising from unfavorable foreign currency movements. Depreciation of the Real against the U.S. dollar can create inflationary pressures in Brazil, negatively impacting its economy as a whole.
Dicey Future Prospects: According to the World Steel Association’s report (Apr 2016), the global steel consumption will decrease by 0.8% in 2016. We expect uncertain global economic conditions to adversely impact Companhia Siderurgica Nacional’s businesses in the quarters ahead. Difficult operating conditions adversely impacted the company’s first-quarter results as well. Crude steel production declined 21% sequentially, while production of rolled steel decreased 22%.
Other Headwinds: Companhia Siderurgica Nacional is also exposed to stiff competition and high start-up costs in the industry. Also, downward pressure on steel prices by competitors may adversely affect the company’s profitability.
Conclusion
Companhia Siderurgica Nacional currently carries a Zacks Rank #4 (Sell). We believe the above-mentioned risks/headwinds clearly reflect the company’s investment value.
However, there are certain stocks in the steel industry that have been performing better than Companhia Siderurgica Nacional and have gained high investment value. They include POSCO (PKX - Free Report) , Ryerson Holding Corporation (RYI - Free Report) and Olympic Steel Inc. (ZEUS - Free Report) . While POSCO and Ryerson Holding sport a Zacks Rank #1 (Strong Buy), Olympic Steel carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>