Zacks_Analysts' Blog : CSN's 3Q Beats Estimate, Down Q/Q - Analyst Blog

Companhia Siderurgica Nacional (SID), or CSN reported its financial results for the third quarter 2011 on October 27, 2011. Net income jumped 49% year over year but plummeted 4% sequentially to R$1,097 million (US$673.0 million), or R$0.75 per share (46 cents per ADR). Earnings results were above the Zacks Consensus Estimate of 20 cents per ADR.

The sequential decline was due to lower operating income, offset partially by improved financial results.

Revenue

Considering the top line, net revenues of R$4,241 million (US$2,501.8 million) in the third quarter soared 7% year over year but declined 2% sequentially.  The sequential decline was due to lower steel product sales, offset partially by higher iron ore sales volume.

Crude steel production in the quarter was up 2% on a year-over- year basis and 1% sequentially to 1.26 million tons, while rolled steel production totaled 1.23 million tons, up 2% year over year and 1% sequentially.

Steel sales volume decreased 9% sequentially to 1.2 million tons, of which domestic sales accounted for 86.0%, overseas subsidiaries 10% and direct exports around 4%.

Iron ore sales improved 18% sequentially to 8.0 million tons. Of total sales, domestic market accounted for 5% and exports about 95%.

Margins

During the third quarter, cost of goods sold went up 25.6% year over year to R$2,309.1 million (US$1,416.6 million), leading to a fall in gross margin to 41% from 48% in the year-ago quarter.

As a percentage of net revenue, selling expenses declined by 50 basis points year over year, while general and administrative expenses declined by 80 basis points year over year.

In the reported quarter, adjusted EBITDA totaled R$1,703.2 million (US$1,044.9 million) with a margin of 40% compared with 47% in the year-ago quarter. Net financial results decreased 28.4% year over year to an expense of R$340.5 million (US$208.9 million).

Balance Sheet

Exiting the third quarter, Companhia Siderurgica had cash and cash equivalents of roughly R$15,635.2 million (US$8,543.8 million) compared with R$11,685.0 million (US$7,442.7 million) in the previous quarter. Loans, financing and debentures, net of current portion increased to R$25,355.0 million (US$13,855.2 million) compared with R$20,788.6 million (US$13,241.1 million) in the previous quarter.

Cash Flow

Net cash flow from operating activities in the third quarter increased 1% year over year to R$1,045.1 million (US$641.2 million). Capital spending totaled R$1,383 million (US$848.5 million), reflecting an increase of 60.2% year over year.