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Brazilian steel maker, Companhia Siderurgica Nacional (SID - Analyst Report), or CSN reported disappointing financial results for the first quarter 2013 on May 15. The company’s net income fell 82.4% year over year and settled at R$16.3 million (US$8.2 million). Earnings were R$0.01 per share or 0.5 cent per ADR.


CSN generated net revenue of R$3,642.0 million (US$1,821 million), up 6.0% over the year-ago quarter.

The company’s crude steel production in the quarter was roughly 1.2 million tons and rolled steel produced was about 1.1 million tons. Steel sales volume increased 3% sequentially to roughly 1.6 million tons, of which domestic sales accounted for 77.0%, overseas subsidiaries about 21% and direct exports around 2%. Iron ore sales were down 35% sequentially to 4.1 million tons.
Talking of segments of CSN, Steel revenue accounted for 71.8% of total revenue and increased 22.8% year over year while revenue in the Mining segment fell roughly 34% and represented 18.2% of total revenue.

The Logistics segment contributed 6.5% of total revenue and was down 5.7% over the year-ago quarter. Cement revenues increased 12.6% and settled at 2.4% of the total. Energy at 1.1% of total revenue registered a 14.5% fall in revenue.


Cost of goods sold in the quarter rose 17.6% year over year to R$2,851.6 million (US$1,425.8 million), leading to a fall in gross margin to 22% from 29% in the year-ago quarter.

As a percentage of net revenue, selling expenses increased by roughly 170 basis points (bps) year over year, while general and administrative expenses plummeted 10 bps year over year.

Adjusted EBITDA of CSN in the quarter dipped 19.0% to R$902.0 million (US$452.0 million) with a margin of 24.8% compared with 32.4% in the year-ago quarter. Net financial results were reflected in an expense of R$527.3 million (US$263.7 million), down 17.4% year over year.

Balance Sheet

Exiting the first quarter, CSN had cash and cash equivalents of R$11,332.1 million (US$5,610 million), down 4.7% sequentially. Loans, financing and debentures, net of current portion decreased 1.3% to R$26,784.5 million (US$13,259.7 million).

Cash Flow

In the first quarter 2013, CSN used cash flow of approximately R$215.8 million (US$107.9 million) for operating activities. Capital spending in the quarter totaled R$440.5 million (US$220.3 million).

CSN currently has a market capitalization of roughly $5.0 billion and carries a Zacks Rank #3 (Hold). Other stocks to watch out for in the industry are Ternium S.A. (TX - Snapshot Report), LB Foster Co. (FSTR - Analyst Report) and Angang Steel Company Limited (ANGGY), each with a Zacks Rank #2 (Buy).

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