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Companhia Siderurgica's Q3 Loss Widens on Higher Costs

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Brazilian steel maker Companhia Siderurgica NacionalSID or CSN yet again posted disappointing results, with net loss of R$532.7 million (US$151.3 million) for third-quarter 2015. This was wider than net loss of R$250.4 million (US$110.3 million) recorded in the year-ago quarter.

Companhia Siderurgica Nacional' loss per share in the quarter came in at R$0.38 or approximately 11 cents per American Depository Receipt ("ADR").

Revenues

Companhia Siderurgica Nacional's net revenue was R$3,956 million (US$1,123.9 million) in the quarter, up roughly 1.9% year over year. The year-over-year increase was driven by sales hike in mining operations as well as positive impact from depreciation of real against the U.S. dollar.

Roughly 46.3% of net revenue was generated from domestic markets, while the rest was sourced from Companhia Siderurgica Nacional's international operations.

Crude steel production declined 9% sequentially to 1.1 million tons; while production of rolled steel decreased 4% to approximately 1 million tons. Steel sales volume declined 7% year over year to roughly 1.2 million tons, of which domestic sales accounted for 58%, overseas subsidiaries about 39%, and direct exports around 3%. Iron ore sales were down 2% year over year to approximately 7.6 million tons.

Steel revenues, comprising 65% of net revenue, declined 1.8% year over year. Revenues from the Mining segment grew 3.1%, accounting for 22.4% of net revenue.

The Logistics segment contributed 8.4% to net revenue, down 5.1% year over year. Cement revenues decreased 5% and represented 2.7% of net revenue. Revenues from the Energy segment, down 38.1% year over year, accounted for 1.5% of net revenue.

Margins

Companhia Siderurgica Nacional's top-line performance was more than offset by a hike in costs, leading to a weak margin profile in the quarter. Cost of sales grew 3.6% year over year, representing 76% of net revenue versus 75% in the year-ago quarter. Gross margin fell 100 basis points (bps) to 24%.

As a percentage of net revenue, selling expenses increased 350 bps year over year; while general and administrative expenses edged up 10 bps over the same time frame.

Companhia Siderurgica Nacional's adjusted earnings before interest, taxes, depreciation and amortization decreased 13% year over year to R$853 million (US$242.3 million), with a margin of 21.6% compared with 25.2% in the prior-year quarter. Net financial results included expense of R$1,548.9 million (US$440 million), up 64% year over year.

Balance Sheet & Cash Flow

Exiting third-quarter 2015, Companhia Siderurgica Nacional's cash and cash equivalents of R$8,226.8 million (US$2,006.5 million) increased 4.9% from R$R$7,844.4 million recorded in the previous quarter. Borrowings, financing and debentures (net of current portion) increased 15.2% sequentially to R$33,366.6 million (US$8,138.2 million).

In addition, Companhia Siderurgica Nacional generated cash of R$179.7 million (US$51.1 million) from its operating activities compared with cash usage of R$640.7 million (US$208.7 million) in the prior quarter. Capital spending totaled R$803.4 million (US$228.2 million), up 42.8% sequentially.

With a market capitalization of $1.7 billion, Companhia Siderurgica Nacional presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Celanese Corporation CE , Rayonier Advanced Materials Inc. RYAM and Stepan Company SCL . While both Celanese Corporation and Rayonier Advanced Materials sport a Zacks Rank #1 (Strong Buy), Stepan Company carries a Zacks Rank #2 (Buy).

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CIA SIDERUR-ADR (SID): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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