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Companhia Siderurgica Nacional Q2 Earnings and Revenue Fall

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Brazilian steel maker, Companhia Siderurgica Nacional (SID), or CSN, reported net income of R$19.0 million (US$8.5 million) in second-quarter 2014, down significantly from R$501.9 million (US$243.6 million) earned in the year-ago quarter.

Companhia Siderurgica Nacional's earnings were R$0.01 per share or approximately $0.01 per American Depository Receipt (:ADR).   


Companhia Siderurgica Nacional’s revenues inched down 0.19% year over year to R$4,052.4 million (US$1,817.2 million). The top line was adversely impacted by lower revenues from steel and mining operations.

Of the total revenues, Companhia Siderurgica Nacional generated roughly 62.4% from the domestic markets while the rest were sourced from international operations.

Crude steel production was around 1.22 million tons, up 2% sequentially while rolled steel production climbed 4% to 1.1 million tons. Steel sales volume declined 20% year over year to roughly 1.3 million tons, of which domestic sales accounted for 73%, overseas subsidiaries about 25% and direct exports around 2%. Iron ore sales were up 20% year over year to 7.2 million tons.

Steel revenues, comprising 64.1% of total revenues, declined 9.7% year over year. Revenues from the Mining segment expanded 13.5% and accounted for 25.2% of total revenue.

The Logistics segment contributed 6.2% to total revenue, decreasing 10.8% year over year. Cement revenues rose 7.6% and represented 2.5% of the total revenue. Revenues from the Energy segment, soaring 64.2% year-over-year, accounted for 2% of total revenue.


Companhia Siderurgica Nacional recorded a 9.1% year over year decline in cost of sales, representing 67.8% of total revenue as against 74.4% in the year-ago quarter. Lower cost of sales more than offset the revenue fall, leading to an expansion of 660 basis points (bps) in gross margin to 32.2%.  

As a percentage of net revenue, selling expenses decreased 60 bps year over year, while general and administrative expenses increased 10 bps year over year.

Adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) improved 19% year over year to R$1,303.0 million (US$584.3 million) with a margin of 32.2% compared with 27% in the prior-year quarter. Net financial result reflected an expense of R$814.9 million (US$365.4 million), up 78% year over year.
Balance Sheet

Exiting second-quarter 2014, Companhia Siderurgica Nacional had cash and cash equivalents of R$9,020 million (US$4,100 million) versus R$10,000.4 million (US$4,425.0 million) in the preceding quarter. Loans, financing and debentures (net of current portion) contracted 0.6% sequentially to R$24,019.8 million (US$10,918.1 million).

Cash Flow

Companhia Siderurgica Nacional used cash of R$159.7 million (US$71.6 million) for its operating activities as against cash of R$576.2 million (US$279.7 million) generated in the previous quarter. Capital spending totaled R$483.5 million (US$216.8 million), up 61.8% sequentially.

With a market capitalization of $7.6 billion, Companhia Siderurgica Nacional presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the steel industry include Grupo Simec S.A.B. de C.V. (SIM), ThyssenKrupp AG (TYEKF) and Olympic Steel Inc. (ZEUS). While Grupo Simec sports a Zacks Rank #1 (Strong Buy), both ThyssenKrupp and Olympic Steel hold a Zacks Rank #2 (Buy).

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