Companhia Siderurgica Nacional (SID) or CSN recently raised funds through the public issue of non-convertible unsecured debentures having a maturity life of 8 years. Funds raised through the issuance will be used to finance working capital and other activities of CSN.
After receiving its Board of Directors’ approval, the company issued 115 debentures each with a nominal value of R$10 million, totaling R$1,150 million. The issue was equipped with restricted placement offers. The company is intent on registering the debentures for distribution in the primary and trading in the secondary market.
Trailing four quarters, Siderurgica Nacional has been continuously raising funds via debt issuances. At the end of the second quarter of 2011, the company’s long-term debt balance was roughly R$11.3 billion, representing a sequential increase of 6%. Besides, the company’s cash balances were strong in the second quarter with cash and cash equivalents of roughly R$11.8 billion.
Companhia Siderurgica Nacional produces hot- and cold-rolled flat steel, galvanized sheets, and tin plates for the packaging, automotive, and construction industries. Over the long term, the growth prospects of CSN appear to be encouraging, considering the various projects that are being carried out by the company and the escalating trends of the global steel demand.
According to the World Steel Association, steel demand will rise by 6% worldwide both in 2011 and 2012. Further, the Brazilian steel industry looks promising with continuous growth in manufacturing and construction industries. Moreover, the country is also gearing up to host the forthcoming 2014 Soccer World Cup and 2016 Olympic games.
The current Zacks Consensus Estimate for earnings per share for the third quarter of 2011 is 23 cents, representing a year-over-year decline of 17.86%. The estimates for the fiscal years 2011 and 2012 are $1.30 and $1.24 per share, reflecting a 27.45% annual growth and 4.81% year-over -year decline, respectively.
However, growing competition from its peers like Ternium SA-ADR (TX) and Usiminas SA-ADR (USNZY), among others as well as cyclicality in the industry pose threat to the company’s growth.
We currently maintain an Underperform recommendation on the stock.
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