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Companhia Siderurgica Posts Q4 Earnings as Expenses Fall - Analyst Blog

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Brazilian steel maker, Companhia Siderurgica Nacional SID or CSN reported net earnings of R$67 million (US$26.4 million) in fourth-quarter 2014, an improvement over loss of R$487.1 million (US$207.3 million) incurred in the year-ago quarter. Earnings per share came in at R$0.05 or approximately 2 cents per American Depository Receipt (“ADR”).   

For 2014, Companhia Siderurgica Nacional recorded loss of R$112.3 million (US$47.8 million) versus earnings of R$534 million (US$248.4 million) in 2013.


Companhia Siderurgica Nacional generated net revenue of R$3,820 million (US$1,503.9 million) in the quarter, down 23.3% over the year-ago tally and 2% sequentially. The sequential decline in the top line was led by lower revenues from mining operations.

Of the total revenue, roughly 58.8% were generated from the domestic markets, while the rest was sourced from international operations.

Crude steel production totaled around 1.16 million tons, down 11% sequentially, while rolled steel production decreased 4% to 1.1 million tons. Steel sales volume declined 2% sequentially to roughly 1.3 million tons, of which domestic sales accounted for 69%, overseas subsidiaries about 26% and direct exports around 5%. Iron ore sales were down 2% sequentially to 7.5 million tons.

Steel revenues, comprising 65% of net revenue, edged down 1.9% sequentially. Revenues from the Mining segment slipped 9.1%, accounting for 23.3% of net revenue.

The Logistics segment contributed 7.4% to net revenue, decreasing 13.6% sequentially. Cement revenues declined 9.2% and represented 2.5% of net revenue. Revenues from the Energy segment, down 21.6% sequentially, accounted for 1.8% of net revenue.

For 2014, Companhia Siderurgica Nacional’s net revenue was R$16,126.2 million (US$6,862.2 million), declining 6.9% year over year.


Companhia Siderurgica Nacional’s cost of goods sold decreased 11.9% year over year, representing 75.9% of net revenue versus 66.5% in the year-ago quarter. Lower revenues more than offset the decline in cost of goods sold, leading to a 44.4% fall in gross profit. Gross margin came in at 24% as against 33% in the year-ago quarter.

As a percentage of net revenue, selling expenses increased 490 bps year over year, while general and administrative expenses decreased 30 bps over the same time frame.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 3% sequentially to R$1,010 million (US$397.6 million) with a margin of 26.4% compared with 25.2% in the previous quarter. Net financial results reflected an expense of R$580.8 million (US$228.7 million), down 37.5% year over year.
Balance Sheet

Exiting fourth-quarter 2014, Companhia Siderurgica Nacional had cash and cash equivalents of R$8,686 million (US$3,241 million), down from R$8,971.4 million (US$3,691.9 million) in the preceding quarter. Loans, financing and debentures (net of current portion) grew 8.1% sequentially to R$27,092.9 million (US$10,109.3 million).

Cash Flow

In the fourth quarter, Companhia Siderurgica Nacional generated net cash of R$588 million (R$231.5 million) from its operating activities as against R$183.9 million (US$81 million) in the preceding quarter. Capital spending totaled R$556.4 million (US$219.1 million), up 9% sequentially.

With a market capitalization of $2.4 billion, Companhia Siderurgica Nacional presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the steel industry include ThyssenKrupp AG TYEKF, Kobe Steel Ltd. KBSTY and Ossen Innovation Co., Ltd. OSN. While ThyssenKrupp and Kobe Steel sport a Zacks Rank #1 (Strong Buy), Ossen Innovation holds a Zacks Rank #2 (Buy).

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