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Companhia Siderurgica (SID) Slips into Q1 Loss, Sales Weak

Brazilian steel maker Companhia Siderurgica Nacional SID or CSN posted disappointing results for first-quarter 2016. The company recorded net loss of R$831.3 million (US$213.2 million) as against net earnings of R$391.8 million (US$137 million) in the year-ago quarter.

Loss per share in the quarter was R$0.60 or 15 cents per American Depository Receipt.


In the quarter, Companhia Siderurgica Nacional’s net revenue totaled R$3,843.8 million (US$985.6 million), down 4.2% year over year. The year-over-year decline was primarily due lower sales volume in the steel segment.

Roughly 44.5% of Companhia Siderurgica Nacional's net revenue was generated from domestic markets, while the rest was sourced from international operations.

Crude steel production declined 21% sequentially to 0.836 million tons while production of rolled steel decreased 22% to 0.746 million tons. Steel sales volume increased 10% sequentially to roughly 1.2 million tons, of which domestic sales accounted for 52%, overseas subsidiaries about 42%, and direct exports around 6%. Iron ore sales were up 25% sequentially to approximately 8.3 million tons.

Steel revenues, comprising 68.2% of net revenue, declined 10.1% year over year. Revenues from the Mining segment grew 18.1%, accounting for 18.8% of net revenue.

The Logistics segment contributed 8.6% to net revenue, up 18.5% year over year. Cement revenues increased 12.9% and represented 2.8% of net revenue. Revenues from the Energy segment grew 6.3% year over year, accounting for 1.6% of net revenue.


Companhia Siderurgica Nacional’s margins weakened in the first quarter. Cost of sales represented 75.9% of net sales versus 75.4% in the year-ago quarter. Gross margin in the quarter inched down 50 basis points (bps) to 24.1%.

As a percentage of net revenue, selling expenses increased 430 bps year over year while general and administrative expenses rose 140 bps over the same time frame.

Companhia Siderurgica Nacional's adjusted earnings before interest, taxes, depreciation and amortization decreased 20% sequentially to R$733 million (US$187.9 million), with a margin of 19.1% compared with 22.7% in the previous quarter. Net financial results included expense of R$943 million (US$241.8 million).

Balance Sheet & Cash Flow

Exiting first-quarter 2016, Companhia Siderurgica Nacional had cash and cash equivalents of R$6,305.1 million (US$1,756.3 million), down compared with R$8,624.7 million (US$2,178 million) at the end of the previous quarter. Borrowings and financing (net of current portion) decreased 5.7% sequentially to R$30,561.1 million (US$8,512.8 million).

In the quarter, Companhia Siderurgica Nacional used net cash of R$983.5 million (US$252.2 million) for its operating activities versus R$3,651.7 million (US$1,276.8 million) generated in the year-ago quarter.

With a market capitalization of $3.8 billion, Companhia Siderurgica Nacional presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the steel industry include Ryerson Holding Corporation RYI, ArcelorMittal MT and POSCO PKX. While Ryerson Holding sports a Zacks Rank #1 (Strong Buy), both ArcelorMittal and POSCO carry a Zacks Rank #2 (Buy).

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