Brazilian steel maker, Companhia Siderurgica Nacional (SID), or CSN reported an impressive financial results for the second quarter 2013 on Aug 6. The company’s net income came in at R$501.9 million (US$243.6 million) as compared with net loss of R$1,048.4 million (US$534.9 million) in the year-ago quarter. Earnings per share were R$0.34 or US$0.17 per ADR.
The result was above the Zacks Consensus Estimate of US$0.03 per ADR.
Revenue
CSN generated net revenues of R$4,060.2 million (US$1,971.0 million), up 13.8% over the year-ago quarter due primarily to solid performances from the mining and steel segments.
The company’s crude steel production in the quarter was roughly 1.3 million tons and rolled steel produced was about 1.2 million tons. Steel sales volume increased 2% sequentially to roughly 1.6 million tons, of which domestic sales accounted for 77.0%, overseas subsidiaries about 20% and direct exports around 3%. Iron ore sales were up 45% sequentially to 6.0 million tons.
Talking of CSN’s segments, Steel revenue accounted for 68.5% of total revenue and increased 18.7% year over year while revenue in the Mining segment fell roughly 11.9% and represented 21.4% of total revenue.
The Logistics segment contributed 6.7% of total revenue and was up 2.7% over the year-ago quarter. Cement revenue increased 11.7% and settled at 2.3% of the total. Energy at 1.1% of total revenue registered a 7.0% fall in revenue.
Margins
CSN's cost of goods sold in the quarter rose 12.4% year over year to R$3,020.2 million (US$1,466.1 million), leading to a gross margin of 26% versus 25% in the year-ago quarter.
As a percentage of net revenue, selling expenses increased by roughly 220 basis points (bps) year over year, while general and administrative expenses plummeted 50 bps year over year.
Adjusted EBITDA in the quarter dipped 2.0% to R$1,095.0 million (US$531.6 million) with a margin of 27.0% compared with 31.4% in the year-ago quarter. Net financial results were reflected in an expense of R$457.8 million (US$222.2 million), up 0.6% year over year.
Balance Sheet
Exiting the second quarter 2013, CSN had cash and cash equivalents of R$12,272.9 million (US$5,503.5 million), up 8.3% sequentially. Loans, financing and debentures, net of current portion increased 5.4% to R$28,241.1 million (US$12,664.2 million).
Cash Flow
In the second quarter 2013, CSN generated R$1,008.6 million (US$489.6 million) cash from operating activities, up 709.2% year over year. Capital spending in the quarter totaled R$522.8 million (US$253.8 million).
CSN currently has a market capitalization of roughly $4.2 billion and holds a Zacks Rank #3 (Hold). Other stocks to watch out for in the industry are Ternium S.A. (TX) and Nippon Steel & Sumitomo Metal Corporation (NSSMY), each with a Zacks Rank #1 (Strong Buy) while Angang Steel Company Limited (ANGGY) holds a Zacks Rank #2 (Buy).
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