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Companhia Siderurgica (SID) Q1 Earnings Dips Y/Y, Sales Beat

Companhia Siderúrgica Nacional SID reported first-quarter 2019 net earnings from continuing operations of approximately R$86.8 million ($23 million), significantly lower than R$1,486.5 million ($458 million) recorded in the year-ago quarter.
Revenues Improve

In the reported quarter, the Brazilian steelmaker’s net revenues came in at R$6,005.4 million ($1,594 million), reflecting 19% year-over-year growth and beat the Zacks consensus estimate of $1,570 million. The top line recorded growth on improvement in the performance of mining operations and steel seasonality.

Domestic revenues increased 9.7% year over year to R$2,760 ($732.6 million), representing 46% of net revenues. The company’s International business flourished with foreign market revenues registering growth of 27.2% year over year to R$3,245.3 million ($861.4 million), accounting for 54% of net revenues.

National Steel Company Price, Consensus and EPS Surprise

National Steel Company Price, Consensus and EPS Surprise
National Steel Company Price, Consensus and EPS Surprise

National Steel Company price-consensus-eps-surprise-chart | National Steel Company Quote

The company operates through five business segments. The segments’ results for the first quarter are briefly mentioned below:

Steel: The segment’s revenues totaled R$3,605 million ($957 million), down 1.8% year over year.

Slab production dropped 21% year over year to 830,000 tons and manufacturing of flat-rolled products decreased 5.2% year over year to 927,000 tons. Manufacturing of long-rolled products went up 27.5% to 51,000 tons.

Steel sales volume dipped 8% year over year to 1,175,000 tons, of which, domestic sales accounted for 69%, overseas subsidiaries for about 29% and exports for roughly 2%.
Mining: The segment generated revenues of R$2,079 million ($551.8 million), reflecting an 80% surge year over year.

Iron-ore sales volume were up 19% year over year to 8,859,000 tons, of which, domestic sales accounted for 13.2% and international sales for roughly 86.8%. However, iron-ore sales decreased 10% year on year.

Logistics: Revenues came in at R$387 million ($102.7 million), down 2.5% year over year.

Cement: The segment’s revenues totaled R$120 million ($31.8 million), reflecting a year-over-year decline of 8.4%.

Energy: The segment’s revenues slipped 23% year over year to R$70 million ($18.6 million).

Margin & Costs

In the first quarter, CSN’s cost of sales flared up 9.1% year over year to R$4,021.5 million ($1,067.5 million). It represented 67% of net revenues compared with the year-ago quarter’s 72.7%. Gross margin came in at 33% compared with the prior-year quarter’s 27%.

Selling expenses came in at R$572.2 million ($151.9 million), reflecting year-over-year jump of 25.8%. General and administrative expenses rose 11.7% year over year to R$114 million ($30.3 million).
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 38.8% year over year to R$1,724 million ($457.6 million). EBITDA margin was 27.7% in the reported quarter compared with 23.5% in the prior-year quarter.

Balance Sheet & Cash Flow

Exiting the first quarter of 2019, CSN had cash and cash equivalents of R$2,702 million ($689 million), up from R$2,248 million ($680 million) recorded at the end of the previous quarter. Net debt to adjusted EBITDA ratio was 4.09, down from the year-ago quarter’s 5.82.

Zacks Rank & Other Stocks to Consider

CSN currently carries a Zacks Rank #2 (Buy).

Some other similarly-ranked stocks in the Basic Materials space are Israel Chemicals Ltd. ICL, Arconic Inc. ARNC and Arch Coal Inc. ARCH. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Israel Chemicals has an expected earnings growth rate of 13.51% for 2019. The company’s shares have gained 20.9% in the past year.

Arconic has an estimated earnings growth rate of 3.5% for the current year. The company’s shares have appreciated 22.7% in a year’s time.

Arch Coal has a projected earnings growth rate of 5.49% for 2019. Its shares have rallied 25.4% over the past year.

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