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CSN Lags Estimates, Costs Rise


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Companhia Siderurgica Nacional (SID - Analyst Report), or CSN’s net income in the first quarter 2012 was R$92.6 million (US$52.3 million) versus R$615.7 million (US$370.9 million) in the year-ago quarter. Earnings per share came in at R$0.06, or US$0.04 per ADR as compared with the Zacks Consensus Estimate of US$0.25 per ADR.

Fall in net income was attributable to lower gross profits due to rise in cost of goods sold.


The company generated net revenues of R$3,896 million (US$2,201 million) in the first quarter 2012, registering a growth of 3% year over year and sequential decline of 7% due to fall in iron ore sales volume and prices.   

Crude steel production in the quarter was 1.20 million tons and rolled steel was 1.11 million tons, up 6% and 8% year over year, respectively. Steel sales volume inched up 9% sequentially to 1.3 million tons, of which domestic sales accounted for 79.0%, overseas subsidiaries 19% and direct exports around 2%.

Iron ore sales were down 17% sequentially to 6.7 million tons. Of total sales, domestic market accounted for 3.0% and exports about 97.0%.


During the first quarter 2012, cost of goods sold went up 23.3% year over year to R$2,752.6 million (US$1,555.1 million), leading to a fall in gross margin to 29% from 41% in the year-ago quarter.

As a percentage of net revenue, selling expenses increased by roughly 150 basis points (bps) year over year, while general and administrative expenses increased by 30 bps year over year.

Adjusted EBITDA in the quarter dipped 27% to R$1,113 million (US$628.8 million) with a margin of 29% compared with 40% in the year-ago quarter. Net financial results increased 21.2% year over year to an expense of R$628.2 million (US$354.9 million).

Balance Sheet

Exiting the first quarter, Companhia Siderurgica had cash and cash equivalents of roughly R$14,144.0 million (US$7,771.4 million) compared with R$15,417.4 million (US$8,288.9 million) in the previous quarter. Loans, financing and debentures, net of current portion increased to R$25,783.6 million (US$14,166.8 million) versus R$25,186.5 million (US$13,541.1 million) in the previous quarter.

Cash Flow

Net cash flow from operating activities plummeted 62.2% to R$346.7 million (US$195.9 million) while capital spending totaled R$885.3 million (US$500.2 million), up 7.6% year over year.

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