Companhia Siderurgica Nacional (SID) or CSN’s financial results for the second quarter 2011 were encouraging as both its top-line and bottom-line results showed healthy growth year over year and sequentially.
Net income jumped 29% year over year and 85% sequentially to R$1,137 million (US$715.1 million), or R$0.77 per share (48 cents per ADR). Earnings results were above the Zacks Consensus Estimate of 40 cents per ADR.
The sequential improvement reflects higher revenue, which was offset partially by higher cost of sales.
Revenue
Considering the top line, net revenues of R$4,323 million (US$2,719 million) in the second quarter soared 12% year over year and 14% sequentially. The sequential growth may be ascribed to higher iron ore prices and sales volume along with steel sales volume.
Crude steel production in the quarter was up 4% on a year-over- year basis and 10% sequentially to 1.24 million tons, while rolled steel production totaled 1.21 million tons, down 4% year over year and up 17% sequentially.
Steel sales volume increased 7% sequentially to 1.30 million tons, of which domestic sales accounted for 86.0%, overseas subsidiaries 10% and direct exports around 4%. Sales volume, however, was flat on a year-over-year basis.
Iron ore sales improved 8% year over year and 2% sequentially to 6.7 million tons. Of total sales, domestic market accounted for 7% and exports about 93%.
Margins
During the second quarter, cost of goods sold went up 25.8% year over year to R$2,487.5 million (US$1,564.5 million), leading to a fall in gross margin to 42% from 49% in the year-ago quarter.
As a percentage of net revenue, selling expenses declined by 100 basis points year over year, while general and administrative expenses went up by 20 basis points year over year.
In the reported quarter, adjusted EBITDA totaled R$1,772.9 million (US$1,115.0 million) with a margin of 41% compared with 46% in the year-ago quarter. Net financial results grew 54.5% year over year to an expense of R$649.7 million (US$408.6 million).
Balance Sheet
Exiting the second quarter, Companhia Siderurgica had cash and cash equivalents of roughly R$11,685.0 million (US$7,442.7 million) compared with R$11,115.0 million (US$6,777.4 million) in the previous quarter. Loans, financing and debentures, net of current portion increased to R$20,788.6 million (US$13,241.1 million) compared with R$19,779.9 million (US$12,060.9 million) in the previous quarter.
Cash Flow
Net cash flow from operating activities in the second quarter plummeted 19.1% year over year to R$1,083.6 million (US$690.2 million). Capital spending totaled R$978.7 million (US$615.5 million), reflecting an increase of 18.9% year over year.
Companhia Siderurgica produces hot- and cold-rolled flat steel, galvanized sheets, and tin plates for the packaging, automotive, and construction industries.
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