Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Companhia Siderurgica Nacional (NYSE:SID) reported growth in production and sales across all segments, highlighting operational excellence.
• The company achieved a significant reduction in production costs, particularly in mining, where costs dropped to $19.09 per ton.
• SID recorded strong sales dynamics in the domestic steel market, with a 9% increase in commercial activity.
• The cement segment achieved new sales records, with a 37% increase in EBITA compared to the previous year.
• The company successfully reduced net debt from 37 billion to 34.4 billion, demonstrating effective cash management and leverage reduction.

Negative Points

• International price pressures negatively impacted SID's financial performance, leading to a drop in EBITDA for the quarter.
• The iron ore segment experienced an 11% drop in net revenue due to falling ore prices, despite increased production volumes.
• The steel segment faced challenges with high import penetration, which remains a significant issue affecting domestic pricing dynamics.
• SID's leverage remains a concern, with a challenging target to reduce it to 2.5 times by year-end.
• The company continues to face operational challenges in the steel segment, with delays in equipment and parts delivery affecting production efficiency.

Q & A Highlights

• Warning! GuruFocus has detected 8 Warning Signs with SID.

Q: Could you provide more details on the cost improvements in the steel mill segment and the outlook for the next quarter? A: Marco Jello, CFO, explained that there was a 5% drop in slab production costs, which should lead to better margins in the upcoming quarters. The production volume of slabs increased significantly, which had not been seen for some time. The outlook for the fourth quarter is positive, with expectations of further cost reductions and improved margins.

Q: What are the steps to achieve the leverage goal of 2.5 times by the end of the year? A: Marco Jello, CFO, mentioned that the sale of a 10.7% stake in mining, which brought in over BRL4 billion, will impact the fourth quarter figures. Operational improvements in steel, mining, and cement segments are expected to continue, although seasonality might affect results. The exchange rate and iron ore prices will also play a role in achieving the leverage target.

Q: How is the company addressing the high level of steel imports and low margins in China? A: Marco Jello, CFO, stated that the government has implemented provisional anti-dumping measures for tinplate, which should protect the market against unfair imports. The company is working with the government to expedite anti-dumping measures for other products, aiming for full competitive isonomy by mid-2025.

Q: What is the outlook for the cement segment, and are there any significant investments planned? A: Martinez, Executive Officer, highlighted that the cement segment has shown strong performance with a 28% EBITA margin. The company is focusing on new products and expanding its customer base. Investments will continue to enhance operational efficiency, with a focus on new product lines and potential M&A opportunities.

Q: Can you explain the impact of prepayments on the company's financials and leverage? A: Marco Jello, CFO, clarified that prepayments are a liquidity tool used routinely by the company. They have a low net effect on the company's financials and are not included in the published leverage indicator. The company monitors the volume and capacity for prepayments to maintain a comfortable range.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.