CSN Gains as Quarterly Profit Exceeds Estimates: Sao Paulo Mover

Cia. Siderurgica Nacional SA, Brazil’s second-biggest steelmaker by market value, rose to a two-week high after profit beat estimates and the the company denied making a binding offer for ThyssenKrupp’s CSA mill.

Shares of the company known as CSN jumped 5.1 percent to 9.60 reais at the close of trading in Sao Paulo, the highest since March 18. The benchmark Bovespa index dropped 0.8 percent.

Adjusted net income in the fourth quarter was 332 million reais ($164 million), compared with an average estimate of 183 million reais among seven analysts, according to data compiled by Bloomberg after the company released results on March 28. CSN executives in a conference call today forecast reductions in debt levels and further increases in Brazilian steel prices.

“The stock is reacting positively today because profit exceeded forecasts and the steelmaker denied an offer for CSA,” Pedro Galdi, the chief analyst at Sao Paulo-based brokerage SLW Corretora, said in a phone interview.

David Salama, CSN’s head of investor relations, said on today’s call that “up until now the company hasn’t made a binding offer” for ThyssenKrupp’s CSA. Investors were concerned that buying the asset would increase CSN’s debt levels, Galdi said.

CSN plans to reduce its debt this year to less than three times earnings excluding interest, taxes, depreciation and amortization, according to executives on the conference call. At the end of 2012, the company’s debt-to-Ebitda ratio was 3.47, according to information posted on its website.

Price Outlook

Luis Fernando Martinez, the executive commercial director at CSN, said during the call that the steelmaker is “optimistic” about the outlook for 2013 and expects steel prices to rise further after a 5 percent increase in the first quarter.

“Investors are not sure CSN will be able to raise prices again, given prospects for the Brazilian economy and the government’s decision last year to increase steel import tariffs,” Galdi said. “One of the conditions for that measure was that Brazilian steelmakers didn’t increase their prices.”

President Dilma Rousseff in September raised tariffs on some flat and long-steel products to boost the domestic industry.

Economists covering the Brazilian economy expect gross domestic product to grow 3.01 percent this year after expanding 0.9 percent in 2012, according to a Central Bank weekly survey released today.

CSN shares fell 23 percent in the first quarter, three times the Bovespa’s 7.6 percent decline.

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