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Companhia Siderurgica Nacional (SID - Analyst Report), or CSN reported weak financial results for the fourth quarter and full year 2012 on Mar 28, 2013. Net earnings for the fourth quarter fell 61.3% year over year to R$316.1 million (US$153.4 million). Earnings per share were R$0.22, or 11 cents per ADR in the quarter.

For 2012, CSN reported a net loss of R$480.6 million (US$246.5 million), below net earnings of R$3.7 billion posted in 2011. Loss per share came in at R$0.33 or 17 cents per ADR.


CSN generated net revenues of R$4,596.5 million (US$2,231.3 million) in the fourth quarter, reflecting an increase of 10.3% year over year.  

The company’s crude steel production in the quarter was 1.1 million tons and rolled steel produced was roughly 1.3 million tons. Steel sales volume were down 5% sequentially to 1.5 million tons, of which domestic sales accounted for 77.0%, overseas subsidiaries about 20% and direct exports around 3%. Iron ore sales were down 2% sequentially to 6.4 million tons.
In 2012, net revenues came in at R$16,896.3 million (US$8,664.8 million), up 2.3% year over year.


Cost of goods sold in the quarter rose 46.5% year over year to R$3,235.2 million (US$1,570.5 million), leading to a fall in gross margin to 30% from 39% in the year-ago quarter. Rise in cost of goods sold was due to higher steel sales volume and higher production in steel and mining segments of CSN.
As a percentage of net revenue, selling expenses increased by roughly 200 basis points (bps) year over year, while general and administrative expenses plummeted 120 bps year over year.

Adjusted EBITDA in the quarter dipped 16.4% to R$1,222.4 million (US$593.4 million) with a margin of 27% compared with 35% in the year-ago quarter. Net financial results increased 10.5% year over year to an expense of R$549.6 million (US$266.8 million).

Balance Sheet

Exiting the fourth quarter, CSN had cash and cash equivalents of R$14,444.9 million (US$7,046.3 million), down 0.7% from R$14,553.7 million (US$7,276.9 million) in the previous quarter. Loans, financing and debentures, net of current portion decreased 1.2% to R$27,856.4 million (US$13,588.5 million) from R$28,208.4 million (US$14,104.2 million) in the previous quarter.

Cash Flow

In 2012, net cash flow generated from operating activities were R$3,487.5 million (US$1,701.2 million), down 17% year over year. Capital spending plummeted 28.6% to R$3,144.2 million (US$1,533.8 million).

CSN is a $6.5 billion steelmaker and is considered to be one of the best in Brazil. Other stocks to watch out for are Gibraltar Industries, Inc. (ROCK - Analyst Report) and Shiloh Industries Inc. , each with a Zacks Rank #1 (Strong Buy) and Kobe Steel Ltd. , with a Zacks Rank #2 (Buy).

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