CSN Looks to Profit From Steel Rally With Sales Beating Forecast

  • CFO says first-quarter sales exceeded company projections
  • Looking for more domestic steel price increases by July

Brazil’s biggest steelmaker by market value says that while first-quarter results were good, the coming months could be even better as steel and iron-ore prices rally.

Cia. Siderurgica Nacional SA sold more steel than it projected in the first three months and expects to keep growing in export markets, although probably not at the same rate as 2015, Chief Financial Officer Paulo Caffarelli said. CSN will report $1.1 billion in sales when it releases first-quarter results in early May, according to the average of five estimates tracked by Bloomberg.

With global prices rallying this year on signs of renewed Chinese demand, the Sao Paulo-based company is increasing its domestic steel prices while continuing to try to boost foreign sales in markets such as the U.S. 

“We managed to sell more than estimated,” in the first quarter, Caffarelli said in an interview Wednesday from Sao Paulo.

Asked about the outlook for the company’s mining unit, Caffarelli said CSN will be looking to lock in higher iron-ore prices for July and August sales, adding that the rebound in prices this year will be reflected in second-quarter results.

Each $5 change in the price of iron ore means $500 million in earnings before items for CSN. The raw material has surged 44 percent to $62.90 a metric ton this year, although Goldman Sachs Group Inc. sees prices falling back down to $35 by the end of the year.

While CSN’s iron-ore operations can survive even at those low levels, the company would need to see prices stabilize at $60 or more before it considered increasing production, Caffarelli said.

In steel, CSN has raised its domestic prices recently and says there could be more increases by July as demand recovers from the worst economic recession in a century.

The company has no plans to sell bonds.

Divestment Goal

Caffarelli said he’s confident of completing at least one asset sale this year even though prospective buyers are tending to offer low prices because of Brazil’s economic and political crises.

When asked to specify which asset, Caffarelli mentioned CSN’s Tecon port terminal, its excess shares in railway operator MRS or the company’s energy assets as examples.

CSN intends to reduce its annual capital expenditure to a maximum of 1.2 billion reais ($340 million), he said.

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