Brazilian steel maker Companhia Siderurgica Nacional SID or CSN posted impressive results for fourth-quarter 2015, with net income surging to R$2,371.4 million (US$615.9 million) from R$67 million (US$26.4 million) in the year-ago quarter. Earnings came in at R$1.71 per share or 44 cents per American Depository Receipt (“ADR”).
In 2015, Companhia Siderurgica Nacional’s net income totaled R$1,616 million (US$485.3 million) as against a net loss of R$112.3 million (US$47.8 million) incurred in 2014. Earnings for the year were 1.16 per share or 35 cents per ADR while the Zacks Consensus Estimate was loss of 17 cents per ADR.
Revenues
In the quarter, Companhia Siderurgica Nacional generated net revenue of R$3,678.5 million (US$955.5 million), down 3.7% year over year and 7% sequentially. The year-over-year decline was primarily due to weak pricing mechanism in the mining industry.
Roughly 46.3% of net revenue was generated from domestic markets, while the rest was sourced from Companhia Siderurgica's international operations.
Crude steel production declined 2% sequentially to 0.998 million tons while production of rolled steel decreased 4% to 0.952 million tons. Steel sales volume declined 5% sequentially to roughly 1.1 million tons, of which domestic sales accounted for 57%, overseas subsidiaries about 37%, and direct exports around 6%. Iron ore sales were down 12% sequentially to approximately 6.7 million tons.
Steel revenues, comprising 68.2% of net revenue, declined 5.8% sequentially. Revenues from the Mining segment fell 3.7%, accounting for 19.4% of net revenue.
The Logistics segment contributed 8.3% to net revenue, up 10.7% year over year. Cement revenues decreased 10.5% and represented 2.6% of net revenue. Revenues from the Energy segment edged up 1.7% year over year, accounting for 1.5% of net revenue.
In 2015, Companhia Siderurgica Nacional’s net revenue was R$15,331.9 million (US$4,604.2 million), down 4.9% year over year.
Margins
Companhia Siderurgica Nacional’s margins weakened in the fourth quarter as rising costs further aggravated the top-line decline. Cost of sales grew 0.43% year over year, representing 79% of net revenue compared with 76% in the year-ago quarter. Gross margin fell 300 basis points (bps) to 21%.
As a percentage of net revenue, selling expenses increased 210 bps year over year while general and administrative expenses rose 90 bps over the same time frame.
Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) decreased 20% sequentially to R$686 million (US$178.2 million), with a margin of 18.7% compared with 21.6% in the previous quarter. Net financial results included expense of R$182.8 million (US$47.5 million), down 68.5% year over year.
Balance Sheet & Cash Flow
Exiting fourth-quarter 2015, Companhia Siderurgica Nacional had cash and cash equivalents of R$8,624.7 million (US$2,178 million), up from R$8,226.8 million (US$2,006.5 million) at the end of the previous quarter. Borrowings and financing (net of current portion) decreased 2.9% sequentially to R$32,407.8 million (US$8,183.8 million).
In the quarter, Companhia Siderurgica’s net cash generation from operating activities increased 1425.5% year over year to R$3,651.7 million (US$948.5 million).
With a market capitalization of $2.96 billion, Companhia Siderurgica Nacional presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the steel industry include AK Steel Holding Corporation AKS, Schnitzer Steel Industries, Inc. SCHN and Carpenter Technology Corp. CRS. All three stocks carry a Zacks Rank #2 (Buy).
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