Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Companhia Siderurgica Nacional (SID, Financial) reported a significant increase in EBITDA, reaching $2.6 billion in Q2 2024, a 35% rise from Q1 2024.
- The mining segment achieved its best performance since 2016, with a notable reduction in production costs from $25 per ton to $21.2 per ton.
- The steel segment saw a recovery with sales volume exceeding 1.1 million tons, the highest since Q2 2022, and a 40% increase in EBITDA.
- The cement segment reported record production and sales, with 3.6 million tons sold and a 28% EBITDA margin, the highest since acquiring LafargeHolcim.
- The logistics segment experienced strong growth, with a 9.2% increase in EBITDA compared to the previous quarter, benefiting from positive seasonality and product diversification.
Negative Points
- The energy segment underperformed due to extreme rainfall in Rio Grande do Sul, impacting overall results.
- The company experienced a one-time increase in leverage, rising from 3.3 times to 3.36 times, primarily due to exchange rate impacts and dividend payments.
- Working capital consumption and higher investment levels led to a negative adjusted cash flow of $1.2 million.
- The steel segment's margins remain compressed despite improvements, indicating ongoing challenges in achieving optimal profitability.
- Imports continue to pose a challenge, with import penetration reaching 22% in Q2 2024, affecting domestic market competitiveness.
Q & A Highlights
Q: Can you provide context on your steps and drivers to reduce leverage, especially considering ongoing negotiations and potential asset sales?
A: We are focused on reducing leverage through strong operational performance in iron ore and cement, and strategic actions like concluding transactions within 2024. We are cautious with acquisitions to avoid impacting consolidated leverage and are committed to deleveraging through cash generation and EBITDA improvements.
Q: Can you elaborate on the recovery in the steel segment and the impact of new quota systems and import levies?
A: We have seen a 9% growth in demand and a 7% increase in domestic sales. We are focusing on reducing discounts rather than increasing prices. The government measures are in the right direction but have limited impact. We expect a more significant impact in the third quarter.
Q: What is CSN's stance on the potential sale of shares in Usiminas?
A: We are within the period set by justice to sell these shares and are observing the ideal moment to monetize them. We are in compliance with the deadlines and continue internal discussions and with authorities.
Q: How do you foresee the cost and margin dynamics for steel in the coming quarters?
A: We are focusing on operational efficiency and reducing costs. We aim to reach a slab cost of 3,000-3,200 BRLs, though it may not be achievable this year. We are also working on improving our product mix and margins.
Q: What are your expectations for leverage reduction, considering the current EBITDA and market conditions?
A: We aim to reach a leverage of 2.5x by the end of the year. The timeline for achieving 1-2x leverage depends on the steel market and iron ore prices. We are focused on operational improvements and strategic actions to support deleveraging.
Q: Are there any plans for IPOs of specific divisions to aid in deleveraging?
A: Yes, we intend to list other companies, starting with the cement area. The timing depends on market conditions and ongoing M&A processes. Logistics and energy assets are also potential candidates for future IPOs.
Q: How do you plan to balance domestic and export sales in the steel segment, given the current market conditions?
A: Export opportunities are limited due to global market conditions. We are focusing on strengthening the domestic market and improving margins by reducing exports and increasing sales of higher value-added products domestically.
Q: Can you provide more details on the successful commercial strategy in the cement segment and the potential for further synergies?
A: We have achieved more than 100% of the synergies from the LafargeHolcim acquisition and continue to optimize logistics and operational efficiency. We aim to reach EBITDA margins above 30% by continuing to reduce costs and improve our commercial strategy.
Q: What is the status of your negotiations with InterCement, and are you still under an exclusivity agreement?
A: We no longer have exclusivity with InterCement but continue to engage in discussions. The lack of exclusivity does not hinder ongoing negotiations.
Q: How do you plan to reach your leverage target of 2.5x, considering the lower iron ore prices and the importance of the mining division?
A: We are focused on operational improvements in the steel segment and strategic actions like asset sales and capital recycling. Despite lower iron ore prices, we aim to achieve our deleveraging goals through enhanced operational performance and strategic initiatives.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
