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Updated Research Report on CSN

Zacks Equity Research

On Mar 27, 2014, we issued an updated research report on Companhia Siderurgica Nacional (SID), or CSN, one of the leading steel producers in Brazil.

Companhia Siderurgica Nacional’s fourth-quarter 2013 results failed to impress its shareholders as its net result plunged into losses amounting to 15 cents per American Depositary Receipt (:ADR). The bottom-line declined despite an 11% increase in revenues. Steel sales volume declined 5% sequentially, while iron ore sales volume was up 2%. Net financial result reflects an expense of R$929 million (US$409.3 million).

Weak results coupled with near-term risks, including rising cost of sales, growing competition and exchange rate fluctuations, triggered downward revisions in earnings estimates. In the last 30 days, the Zacks Consensus Estimate decreased 12.5% to 35 cents for 2014.

However, over the long term, we believe Companhia Siderurgica Nacional is well positioned to reap benefits from the rising infrastructural demand worldwide. In Brazil, the steel industry is likely to get a boost as substantial investments in infrastructures are planned for the development of ports, railroads, airports, wind farms and roads, among others.

Apart from steel, Companhia Siderurgica Nacional’s exposure to iron ore mining, cement and infrastructure projects will work in its favor. In 2013, the company spent R$2.8 billion (US$1.3 billion) to improve its production capabilities and services. Of the total amount, roughly 22.8% was spent on the Casa de Pedra mine and Port of Itaguai, 12.6% on long steel, 8.5% on cement and 23.8% on Transnordestina.

We anticipate Companhia Siderurgica Nacional to perform in line with the broader market over the next 6–12 months.
Others Stocks to Consider

Companhia Siderurgica Nacional currently has a market capitalization of roughly $6.4 billion and holds a Zacks Rank #3 (Hold). Some other stocks worth considering in the industry include Methanex Corporation (MEOH), Gibraltar Industries, Inc. (ROCK) and Ossen Innovation Co., Ltd. (OSN). While Methanex Corporation and Gibraltar Industries carry a Zacks Rank #1 (Strong Buy), Ossen Innovation holds a Zacks Rank #2 (Buy).

Read the Full Research Report on SID
Read the Full Research Report on MEOH
Read the Full Research Report on ROCK
Read the Full Research Report on OSN

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