sidpr2q18_6k.htm - Generated by SEC Publisher for SEC Filing
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 
For the month of August, 2018
Commission File Number 1-14732
 
 
COMPANHIA SIDERÚRGICA NACIONAL
(Exact name of registrant as specified in its charter)
 
National Steel Company
(Translation of Registrant's name into English)
 
Av. Brigadeiro Faria Lima 3400, 19º e 20º andares
São Paulo, Estado de São Paulo
CEP 04538-132
(Address of principal executive office)
 
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.  Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____
 

São Paulo, August 7, 2018

 

2Q18 Earnings Release

 

Companhia Siderúrgica Nacional (CSN) (BM&FBOVESPA: CSNA3) (NYSE: SID) announces today its results for the second quarter of 2018 (1Q18) in Brazilian reais, and its consolidated financial statements, which are presented in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), and with the accounting practices adopted in Brazil, which are fully convergent with international accounting standards, issued by the Accounting Pronouncements Committee (CPC) and approved by the Brazilian Securities and Exchange Commission (CVM), pursuant to CVM Instruction 485 of September 1, 2010. The comments presented herein refer to the Company's second quarter of 2018 (2Q18) and comparisons refer to the first quarter of 2018 (1Q18) and second quarter of 2017 (2Q17). The Brazilian real/US dollar exchange rate was R$3.8558 as at June 30, 2018, R$3.3238 as at March 31, 2018 and R$3.3082 as at June 30, 2017.

 

2Q18 financial and operating highlights

 

·         Generation of adjusted EBITDA of R$1,420MM, an increase of 58% compared to the 2Q17 and 14% compared to the 1Q18, with EBITDA margin of 24%, due to better performance in all segments.

·         Increase in steel sales volume in the domestic market reached 798 thousand tons, an increase of 22% compared to the same period in 2017.

·         Mining adjusted EBITDA reached R$533MM, an increase of 21% compared to the 1Q18, with  iron ore sale volumes increase, foreign exchange gains and better realized price against the Platts index, reaching EBITDA margin of 40%.

·         Increase of 10% in cement sales compared to the 1Q18, totaling 890 thousand tons – EBITDA of R$42MM compared to R$12MM in the 1Q18.

·         Free cash flow, before financing activities, totaled R$1.598MM in the 2Q18, compared to R$521MM in the 1Q18.

·         Net profit of R$1,190MM in the 2Q18, due to the gain accrued from the sale of CSN LLC, totaling R$2,7 billion for the year.

 

Highlights

2Q17

1Q18

2Q18

  

Variation

 

2Q18

x

2Q17

2Q18

x

1Q18

Steel sales (thousand tons)

1,174

1,277

1,321

  

13%

3%

- Domestic market

652

782

798

  

22%

2%

- Subsidiaries abroad

457

436

449

  

(2%)

3%

- Export

64

60

74

  

15%

23%

Iron ore sales (thousand tons)

7,818

7,474

8,130

  

4%

9%

- Domestic market

1,307

1,309

1,376

  

5%

5%

- Foreign market

6,511

6,165

6,754

  

4%

10%

Consolidated result (R$ million)

                    

Net revenue

4,311

5,066

5,687

  

32%

12%

Gross profit

985

1,381

1,563

  

59%

13%

Adjusted EBITDA¹

896

1,242

1,420

  

58%

14%

Adjusted net debt²

26,754

26,508

27,125

  

1%

2%

Adjusted cash/cash equivalents

4,545

3,070

4,357

  

(4%)

42%

Adjusted net debt/adjusted EBITDA

5.67x

5.82x

5.34x

  

(0.33)x

(0.48)x

¹ Adjusted EBITDA is calculated based on net profit/loss, plus depreciation and amortization, income tax, net finance income (costs), share of profit (loss) of investees and other operating income (expenses), and includes the proportionate share of EBITDA of the jointly-owned subsidiaries MRS Logística and CBSI. Adjusted EBITDA includes 100% in CSN Mineração, 37.27% in MRS and 50% in CBSI.

² Adjusted net debt and adjusted cash account for 100% stake in CSN Mineração, 37.27% in MRS and 50% in CBSI.

 

For further information, please access: www.csn.com.br/ri

 

 
 

EARNINGS RELEASE

2Q18

 

CSN´s consolidated result

 

·         In the 2Q18, net revenue totaled R$5,687 million, an increase of 12% and 32% compared to the 1Q18 and 2Q17, respectively. The improvement in performance compared to the 1Q18 was due to the increase in steel product prices, increase in volumes and prices in the mining segment and expansion of the railway logistics, cement and energy segments.

 

·         In the 2Q18, cost of sales totaled R$4.124 million, an increase of 12% compared to the 1Q18, due to the larger volume of sales in the period and increase in raw material prices (coal and coke) as a result of the US dollar appreciation against Brazilian real, as well as increase in general manufacturing costs.

 

·         In the second quarter of 2018, gross profit totaled R$1,563 million, a significant increase of 59% compared to the 2Q17, and increase in gross margin by 4.7 p.p. against the same comparison basis, from 22.8% to 27.5%, due to the recovery of the steel and mining margin.

 

·         In the 2Q18, general and administrative expenses totaled R$113 million, a decrease from 2.5% (2Q17) to 2.0% (2Q18) of net revenue. Selling expenses totaled R$470 million, or 8.3% of net revenue, a reduction of 2.8 p.p. compared to the 2Q17 (11.1% of net revenue).

 

·         In the 2Q18, other net income totaled R$542 million arising mainly from the gain on the sale of CSN LLC (R$1,150 million), partially compensated for the depreciation of Usiminas’ shares in the period, representing a loss of R$516 million at fair value through profit or loss.

 

·         In the 2Q18, net financial result, totaled R$989 million. Financial expenses (ex-exchange variation) continue to decrease, by virtue of the decrease in Selic rate, generating a reduction of R$195MM compared to the 2Q17. Monetary and exchange variations were strongly impacted by exchange variation in the period, generating a negative amount of R$ 1,905 million, with the increase in hedge accounting positions softening the final result.

 

Financial Result (R$ million)

2Q17

1Q18

2Q18

Financial Result - IFRS

         (829)

           (594)

           (989)

Financial Revenues

             84

               43

               48

Financial Expenses

         (912)

           (637)

        (1,037)

Financial Expenses (ex-exchange rates variation)

         (683)

           (523)

           (489)

Result with Exchange Rate Variation

         (229)

           (113)

           (548)

Monetary and Exchange Rate Variation

         (461)

           (138)

        (1,905)

Hedge Accounting

           227

               24

          1,353

Derivatives Result

               5

                  1

                  3

                                    .

 

·         Share of profit of investees totaled R$27 million in the 2Q18, compared to R$25 million in the 1Q18, mainly due to the better results in MRS.

Share of profit of investees

(R$ million)

2Q17

1Q18

2Q18

Variation

2Q18

x

1Q18

2Q18

x

2Q17

MRS Logística

          54

          33

         46

39%

(15%)

CBSI

             1

            1

           1

-

-

TLSA

           (5)

           (3)

         (8)

167%

60%

Arvedi Metalfer BR

             1

            0

         (2)

-

-

Eliminations

         (11)

           (6)

       (10)

67%

(9%)

Share of profit of investees

          40

          25

         27

8%

(33%)

 

·          In the 2Q18, the Company recorded net profit of R$1,190 million, compared to the net profit of R$1,486 million in the 1Q18, due to the recognition of the sale of CSN LLC and partial reversal of the provision for recognition of deferred income tax gains.

 

 

For further information, please access: www.csn.com.br/ri

 

2

 
 

EARNINGS RELEASE

2Q18

 

 

 

 

Adjusted EBITDA (R$ million)

2Q17

1Q18

2Q18

Variation

2Q18

x

2Q17

2Q18

x

1Q18

Net profit (loss) for the period

(640)

1,486

1,190

-

(20%)

(-) Depreciation

356

305

312

(12%)

2%

(+) Income tax and social contribution

145

559

(635)

-

-

(+) Finance income (costs), net

829

594

989

19%

66%

EBITDA (ICVM 527)

689

2,944

1,855

169%

(37%)

(+) Other operating income (expenses)

99

(1,797)

(542)

-

(70%)

(+) Share of loss of investees

(39)

(25)

(27)

(31%)

8%

(-) Proportional EBITDA in jointly-owned subsidiaries

147

119

134

(9%)

13%

Adjusted EBITDA

896

1,242

1,420

58%

14%

¹The Company’s adjusted EBITDA excludes equity interest and other operating income (expenses) as these items should not be considered when calculating the cash flow generated from operating activities.

 

·         Adjusted EBITDA totaled R$1,420 million, compared to R$1,242 million in the 1Q18, an increase of 14% due to an improvement in all segments. Adjusted EBITDA margin reached 23.9%, an increase of 0.4 p.p. compared to the previous quarter.

 

 

 

Adjusted EBITDA margin is calculated based on Adjusted EBITDA divided by Adjusted net revenue, which includes 100% stake in CSN Mining, 37.27% in MRS and 50% in CBSI, beginning December/15.

 

Free Cash Flow

 

In 2Q18, generation of operating cash, measured by Free Cash Flow, was R$ 1,598 million, influenced by the sale of LLC. Considering only the recurring operation, R$ 73MM was generated in the period, due to the negative variation of working capital, impacted by higher inventories. In the last 12 months, recurring Free Cash Flow reached R$ 1,395 million.

 

Debt

 

 In June 30, 2018, adjusted net debt totaled R$27,125 million, while net debt/EBITDA ratio, calculated based on the adjusted EBITDA for the last twelve months, reached 5.34x. In the quarter, the deleveraging effects from the increased EBITDA LTM, in addition to the sale of LLC, reduced the net debt/EBITDA ratio by 0.8x. However, these effects were partially offset by the exchange rate changes on the debt, representing a final reduction of 0.48x.  

 

For further information, please access: www.csn.com.br/ri

3

 
 

EARNINGS RELEASE

2Q18

 

 

 

 

 

Foreign exchange exposure

 

The net foreign exchange exposure of the consolidated balance sheet was US$1,035 million as at June 30, 2018, as shown in the table below. It should be noted that within the net foreign exchange exposure, a liability of US$1.0 billion is included in line item “Borrowings and financing” related to the perpetual bond, which, due to its nature, will not require disbursement for settlement of the principal amount in the foreseeable future.

 

The hedge accounting adopted by CSN correlates the projected export inflow in US dollars with part of the scheduled debt payments in the same currency. As a result, the exchange rate changes in the US dollar-denominated debt is temporarily recorded in equity and subsequently recorded in profit or loss when revenues in US dollars from exports occur. In this quarter, the increased number of US debt instruments designated as hedge accounting, increased with additional export volumes, mitigated further volatility.

 

Foreign exchange exposure

03/31/2018

06/30/2018

(US$ thousand)

IFRS

Cash

                                        244

                                        593

Trade receivables

                                        322

                                        329

Other

                                             4

                                            9

Total assets

                                        571

                                        931

Borrowings and financing

                                   (4,236)

                                   (4,237)

Trade payables

                                       (175)

                                      (202)

Other payables

                                           (5)

                                           (4)

Total liabilities

                                   (4,417)

                                   (4,443)

 

 

 

Natural foreign exchange exposure (assets - liabilities)

                                   (3,846)

                                   (3,512)

Derivatives, net

                                            -  

                                           -  

Cash flow hedge accounting

                                     1,307

                                    2,477

Foreign exchange exposure, net

                                   (2,539)

                                   (1,035)

Perpetual bond

                                     1,000

                                    1,000

Foreign exchange exposure, net (ex-bond)

                                   (1,539)

                                        (35)

For further information, please access: www.csn.com.br/ri

4

 
 

EARNINGS RELEASE

2Q18

 

 

Investments

 

Investments totaled R$263 million in the 2Q18, an increase of 18% compared to the 1Q18, arising mainly due to the project seasonality. The increase in steel expenses refers to the investments for the improvement of coking and sintering performance.

 

Investments (R$ million)

1Q17

2Q17

3Q17

4Q17

2017

1Q18

2Q18

Steel

92

102

119

168

481

65

134

Mining

60

106

115

97

378

116

99

Cement

24

20

34

40

118

23

13

Logistics

13

11

19

33

76

18

15

Other

0

0

6

6

12

2

2

Total investments - IFRS

           190

           239

           293

           344

        1,065

           223

           263

 

Working capital

 

To calculate working capital, CSN adjusts its assets and liabilities as demonstrated below:

                                                                                                                                                                                               

·         Trade receivables: excludes dividends receivable, advances to employees and other receivables;

·         Inventories: excludes warehouse, which is not part of the cash conversion cycle, and will be subsequently recorded in property, plant and equipment when consumed;

·         Advanced taxes: solely composed of income tax and social contribution included in line item “Recoverable taxes”;

·         Taxes payable: composed of line item "Taxes payable”, in current liabilities, plus taxes in installments;

·         Advances from customers: recognized in line item “Other payables”, in current liabilities;

 

Accordingly, working capital invested in the Company’s business totaled R$2,959 million in the 2Q18, increasing the financial cycle in 5 days, compared to the 1Q18, mainly due to the trucker strike and high raw material prices, which  impacted the increase in inventories by R$394 million compared to the prior quarter.  

 

Working capital (R$ million)

2Q17

1Q18

2Q18

 

Variation

 

2Q18

x

1Q18

2Q18

x

2Q17

Assets

6,252

6,252

6,924

 

672

672

Trade receivables

2,300

2,146

2,269

 

123

(31)

Inventories

3,744

4,064

4,458

 

394

714

Prepaid taxes

207

42

197

 

155

(10)

Liabilities

2,655

3,869

3,965

 

96

1,310

Trade payables

2,078

3,253

3,226

 

(27)

1,148

Payroll and related taxes

294

233

265

 

31

(30)

Taxes payable

183

288

337

 

50

154

Advances from customers

100

95

137

 

42

37

Working capital

3,597

2,383

2,959

 

576

(638)

 

 

 

 

 

 

 

 

 

 

 

Average term (days)

2Q17

1Q18

2Q18

 

Variation

 

2Q18

x

1Q18

2Q18

x

2Q17

Receipt

41

33

31

 

(2)

(10)

Payment

59

79

70

 

(9)

11

Inventories

106

99

97

 

(2)

(9)

Financial cycle

88

53

58

 

5

(30)

For further information, please access: www.csn.com.br/ri

                                            

5

 
 

EARNINGS RELEASE

2Q18

 

 

Business segment reporting

 

The Company maintains integrated operations in five business segments: steel, mining, logistics, cement and energy. The main assets and/or companies comprising each segment are presented below:

 

 

 

Beginning 2013, the Company no longer proportionally consolidated its jointly-owned subsidiaries Namisa, MRS and CBSI. For purposes of preparation and presentation of the information by business segment, Management maintained the proportional consolidation of the jointly-owned subsidiaries, as historically presented. For purposes of reconciliation of the consolidated result, the amounts recorded by these companies are not included in “Corporate expenses/elimination”. After the closing of 2015, after the combination of the mining assets (Casa de Pedra, Namisa and Tecar), the consolidated result includes this new company´s information as a whole.

 

 

Net revenue by segment – 2Q18 (R$ million)

 

 

 

Adjusted EBITDA by segment – 2Q18 (R$ million)

 

 

For further information, please access: www.csn.com.br/ri

 

6

 
 

EARNINGS RELEASE

2Q18

 

 

 

Results – 2Q18

Steel

Mining

Logistics (Port)

Logistics (Railway)

Energy

Cement

Corporate expenses/
elimination

Consolidated

(R$ million)

                

Net revenue

4,093

1,331

64

370

113

152

(437)

5,687

Domestic market

2,421

225

64

370

113

152

(661)

2,684

Foreign market

1,672

1,106

-

-

-

-

225

3,003

CPV

(3,276)

(855)

(49)

(262)

(74)

(122)

513

(4,124)

Gross profit

817

477

15

108

39

30

77

1,563

SG&A

(264)

(45)

(9)

(25)

(7)

(21)

(218)

(589)

Depreciation

155

102

5

64

4

34

(52)

312

Proportional EBITDA - jointly-owned subsidiaries

-

-

-

-

-

-

134

134

Adjusted EBITDA

708

533

12

147

36

42

(59)

1,420

                 

Results – 1Q18

Steel

Mining

Logistics (Port)

Logistics (Railway)

Energy

Cement

Corporate expenses/
elimination

Consolidated

(R$ million)

                

Net revenue

3,674

1,152

66

331

91

131

(378)

5,066

Domestic market

2,291

219

66

331

91

131

(612)

2,515

Foreign market

1,384

933

-

-

-

-

234

2,551

CPV

(2,900)

(795)

(46)

(244)

(66)

(125)

493

(3,685)

Gross profit

774

356

20

87

24

5

115

1,381

SG&A

(234)

(21)

(10)

(23)

(7)

(20)

(249)

(564)

Depreciation

150

106

4

65

4

27

(51)

305

Proportional EBITDA - jointly-owned subsidiaries

-

-

-

-

-

-

119

119

Adjusted EBITDA

690

442

14

128

22

12

(66)

1,242

                 

Results – 2Q17

Steel

Mining

Logistics (Port)

Logistics (Railway)

Energy

Cement

Corporate expenses/
elimination

Consolidated

(R$ million)

                

Net revenue

3,055

1,067

52

364

111

114

(452)

4,311

Domestic market

1,749

246

52

364

111

114

(674)

1,963

Foreign market

1,305

821

-

-

-

-

222

2,348

CPV

(2,628)

(742)

(38)

(244)

(71)

(126)

523

(3,326)

Gross profit

426

325

15

121

40

(13)

71

985

SG&A

(271)

(42)

(7)

(23)

(7)

(20)

(222)

(592)

Depreciation

172

124

4

65

6

33

(48)

356

Proportional EBITDA - jointly-owned subsidiaries

-

-

-

-

-

-

147

147

Adjusted EBITDA

327

408

12

163

39

0

(53)

896

 

CSN’s Steel Results

 

According to the World Steel Association (WSA), the global crude steel production totaled 453.9 million tons (Mton) in the 2Q18, an increase of 5.4% compared to the 2Q17. Asia produced 319.6 Mton in the 2Q18, an increase of 6.3% compared to the same period in 2017, while the European Union and North America increased by 1.7% and 2.7%, respectively, on the same comparison basis.

 

·           In the 2Q18, CSN’s plate production totaled 996 thousand tons, a decrease of 5% compared to the 1Q18 due to corrective maintenance. In turn, the production of flat rolled products in the 2Q18 remained stable compared to the 1Q18 and 4% above compared to the 2Q17, totaling 981 thousand tons. According to the Brazilian Steel Institute (IABr), in the second quarter of 2018, the domestic sales totaled 6.4 million tons of steel, an increase of 5% compared to the prior year. The apparent consumption totaled 5.1 million tons, an increase of 9% compared to the same period of last year. Brazilian steel production totaled 8.5 million tons, an increase of 1%.  

 

For further information, please access: www.csn.com.br/ri

7

 
 

EARNINGS RELEASE

2Q18

 

 

Steel production

2Q17

1Q18

2Q18

Variation

(thousand tons)

2Q18

x

1Q18

2Q18

x

2Q17

Plate production

1,070

1,050

996

(5%)

(7%)

Third-party plates

38

0

0

-

(100%)

Total plates (UPV + third parties)

1,108

1,050

997

(5%)

(10%)

Total flat rolled products

943

978

981

0%

4%

Total long rolled products

56

40

53

31%

(5%)

 

·           CSN’s total sales reached 1,321 thousand tons of steel products in the 2Q18, an increase of 3% and 13% compared to the 1Q18 and 2Q17, respectively.

 

 

 

·          In the 2Q18 the steel volume sold by CSN in the domestic market totaled 798 thousand tons, an increase of 2% compared to the 1Q18 and 22% compared to the 2Q17. Out of this total, 748 thousand tons refers to flat steel products and 50 thousand tons to long steel products. The expansion of the automotive and OEM market significantly increased  hot rolled flat steel products (+29% YoY) and galvanized items (+38% YoY).

 

·         In the foreign market, CSN’s sales in the 2Q18 totaled 523 thousand tons, an increase of 5% compared to the immediately prior quarter. In this period, 74 thousand tons were directly exported and 449 thousand tons were sold by  foreign subsidiaries, out of which 142 thousand tons by LLC, 212 thousand tons by SWT and 95 thousand tons by Lusosider.

 

For further information, please access: www.csn.com.br/ri

 

8

 
 

EARNINGS RELEASE

2Q18

 

 

·           In the 2Q18, CSN maintained its high market share of coated products as a percentage of total sales volume (44% in the 2Q18), following the strategy of adding more value to its product mix. Sales of coated products such as galvanized items and metallic sheets accounted for 56% of flat steel sales, considering all markets in which the Company operates. In the foreign market, the market share of coated products increased from 81% in the 1Q18 to 84% of flat steel sales in the 2Q18.

 

According to ANFAVEA(National Association of Automobile Manufacturers), in the second quarter of 2018, the production of vehicles, light commercial vehicles, trucks and busestotaled 734,774 thousand units, an increase of 12.73%, compared to the same period of prior year. The exports, in turn, reduced the performance, totaling 198,816 thousand vehicles sold, a decrease of 2% compared to the same period of prior year. Anfavea estimates an increase of 11.9% in vehicles produced in 2018, for 3.02 million units.

 

According to ABRAMAT(Brazilian Association of Building Material Industry), the accumulated building material salesdecreased by 4,7% through June 2018, compared to the June 2017, however, the association estimates an increase of 1,5% in the industry revenues, despite a reduction of 0,4% in 1H18.

 

According to IBGE (Brazilian Institute of Geography and Statistics),  home appliance productionreferring to data accumulated from 12 months to May,  registered a 13.8% increase, compared to the same period accumulated in 2017.

 

According to INDA (National Institute of Steel Distributors) in the 2Q18, distribution purchases increased by 11.2% compared to the 2Q17. Accumulated imports in the 2Q18 increased by 16.9% compared to the same period in 2017, a total volume of 335.8 thousand tons.

 

·         Net steel revenue totaled R$4,093 million in the 2Q18, an increase of 11% and 34% compared to the 1Q18 and 2Q17, respectively, mainly due to an increase in sales in the domestic and foreign markets and higher average steel prices, both in the domestic market (+3% compared to the 1Q18) and foreign market (+17% compared to the 1Q18).

 

 

·         Cost of sales in the 2Q18increased by 13% compared to the 1Q18, totaling R$3,276 million, mainly due to the increase in raw material prices (coal HCC, coke and pellets) and corrective maintenance.

 

·         Plate production cost in the 2Q18 totaled R$1,635/t, an increase of 11% compared to the 1Q18. The increase in the prices of the main raw materials was also impacted by the exchange rate  variation in the period.

 

·         Adjusted EBITDA totaled R$708 million in the 2Q18, an increase of 2.6% compared to R$690 million in the 1Q18, due to the increase in sales volume, as well as the challenging scenario during the trucker strike. The adjusted EBITDA margin in the 2Q18 reached 17.3%, or a decrease of 1.5 p.p. compared to the immediately prior quarter.

 

 

For further information, please access: www.csn.com.br/ri

 

 

9

 
 

EARNINGS RELEASE

2Q18

 

 

 

CSN’s Mining Results

 

In the 2Q18,  the steel production in China was 238 Mt, reaching a record quarterly production and representing an increase of 13% compared to 1Q18.  However, the cut in production of sintering and trade tensions have negatively impacted prices. In this regard, iron ore price ratio in the 2Q18 reached US$65.35/dmt (Platts, Fe62%, N. China), on average, a decrease of 12% compared to the 1Q18. The US dollar variation between the periods was 11.1%, which offset, in domestic currency, the decrease in iron ore prices.

 

The drop in the overall supply of high silica ore resulted in a strong reduction of 50% in the market discount of this impurity in 2Q18, compared to the 1Q18.

 

In regards to maritime freight, the BCI-C3 (Tubarão-Qingdao) route reached an average of US$17.41/wmt in the 2Q18, an increase of 16%compared to the prior quarter driven by higher transoceanic volumes and superior oil prices.

 

·         In the 2Q18, iron ore production totaled 6.7 million tons, an increase of 10% compared to the 1Q18, mainly due to the mining plan, lower rainfall index of the period and efforts to mitigate the restrictions imposed by the truck drivers' strike. Iron ore purchases totaled 1,878 thousand tons in the 2Q18, an increase of 26% compared to the 1Q18.

 

·         Iron ore sales totaled 8.1 million tons in the 2Q18, an increase of 9% compared to the 1Q18, out of which 1.4 million tons were sold to Presidente Vargas Plant (+5%).

 

Mining production and sales volume

2Q17

1Q18

2Q18

Variation

(thousand tons)

2Q18

x

1Q18

 

2Q18

x

2Q17

Iron ore production

7,948

6,129

6,744

10%

  

(15%)

Ore purchased from third parties

167

1,487

1,878

26%

  

1.027%

Total production + purchases

8,114

7,616

8,621

13%

  

6%

Sales to UPV

1,307

1,309

1,376

5%

  

5%

Volume sold to third parties

6,511

6,165

6,754

10%

  

4%

Total sales

7,818

7,474

8,130

9%

  

4%

                     The production and sales volumes considered a 100% stake in CSN Mineração.

 

In the 2Q18, mining net revenue totaled R$1,331 million, an increase of 16% compared to the immediately prior quarter due to the decrease in sales volumes (+9%) and appreciation of the US dollar against Brazilian real. The CIF + FOB unit revenue in the 2Q18 totaled US$56.8/wmt, an increase of 2% compared to the prior quarter, due to improved quality and higher demand for low alumina products.

 

Realized iron ore price by CSN Mineração

 (CIF + FOB* - US$/wmt delivered in China)

 

 

·         Mining sales cost totaled R$855 million in the 2Q18, an increase of 7% compared to the 1Q18, due to the increase in the sales volume in the period (+9%).

 

For further information, please access: www.csn.com.br/ri

10

 
 

EARNINGS RELEASE

2Q18

 

 

·         Despite the decrease in the Platts index in the quarter compared to the prior quarter, adjusted EBITDA margin reached 40% in the 2Q18, or an increase of 1.7 p.p. compared to the 1Q18, and adjusted EBITDA reached R$533 million in the 2Q18, an increase of 21% compared to the 1Q18, due to the increased volume, lower unit cost of iron ore volume in vessels and better realized price, in addition to the US dollar appreciation of 11.1% against Brazilian real.

 

CSN’s Logistics Results

 

Railway logistics: In the 2Q18, net revenue totaled R$370 million, generating adjusted EBITDA of R$147 million and adjusted EBITDA margin of 40%.

 

Port logistics: In the 2Q18, Sepetiba Tecon shipped 114 thousand tons of steel products, in addition to 98 thousand tons of general cargo and approximately 56 thousand containers. In the 2Q18, net revenue totaled R$64 million, due to the significant increase in general cargo volume and balance against container and steel volumes, generating adjusted EBITDA of R$12 million and adjusted EBITDA margin of 18%.

 

Sepetiba TECON highlights

2Q17

1Q18

2Q18

Variation

2Q18

x

1Q18

2Q18

x

2Q17

Container volume (thousand units)

39

65

56

(13%)

45%

Steel volume (thousand ton)

212

219

114

(48%)

(46%)

General cargo volume (thousand ton)

1

31

98

215%

17.991%

 

 

CSN’s Energy Results

 

According to EPE (Energy Research Company), domestic electric consumption in Brazil decreased by 0.4% in June over the same period of the previous year. The industrial segment posted an increase in energy consumption of 1.9% in the first half of 2018 versus the same period last year. The residential and commercial sectors increased energy consumption by 1.5% and 0.4%, respectively, against the same period in 2017.

 

In the 2Q18, net energy revenue totaled R$113 million (+24% compared to the 1Q18) due to the increase in energy sales in the free market, with adjusted EBITDA of R$36 million and adjusted EBITDA margin of 32%.

 

CSN’s Cement Results

 

In the second quarter of 2018, cement sales in the domestic market totaled 12.9 million tons, according to the preliminary industry data, disclosed by the SNIC (National Cement Industry Union), an increase of solely 0.14% compared to the second quarter of 2017.

 

According to the SNIC data, sales volume in the second quarter was significantly impacted due to the trucker strike, representing a decrease of 20.3% in May compared to the same period in 2017.

 

In the 2Q18, CSN’s cement sales totaled 890 thousand tons, an increase of 10% compared to the 1Q18, representing net revenue of R$152 million, despite of the adverse strike scenario. Adjusted EBITDA reached R$42 million (+248%), with adjusted EBITDA margin of 28%, or an increase of 18.6 p.p. compared to the prior quarter, mainly due to the increased prices and volumes.

 

Cement highlights

2Q17

1Q18

2Q18

Variation

(thousand tons)

2Q18

x

1Q18

2Q18

x

2Q17

Total production

                   841

                   775

                   876

13%

4%

Total sales

                   831

                   806

                   890

10%

7%

 

 

For further information, please access: www.csn.com.br/ri

11

 
 

EARNINGS RELEASE

2Q18

 

 

Capital market

 

In the second quarter of 2018, the CSN’s shares depreciated by 1.8%, while the Ibovespa index depreciated by 14%. The daily traded volume (CSNA3) on B3, in turn, totaled R$81.2 million. On the New York Stock Exchange (NYSE), the Company’s American Depositary Receipts (ADRs) depreciated by 24%, while Dow Jones increased by 2.65%. The daily traded volume (SID) of the Company’s ADRs on NYSE totaled US$6.3 million.

 

2Q18

Number of shares (in thousands)

1,387,524

Market value

  

Closing price (R$/share)

                   7.86

Closing price (US$/ADR)

                     2.02

Market value (R$ million)

10,906

Market value (US$ million)

                   2,832

Total return including dividends and interest on capital

  

CSNA3

(1.8%)

SID

(24%)

Ibovespa

(14%)

Dow Jones

2.65%

Volume

 

Daily average (thousand shares)

9,422

Daily average (R$ thousand)

81,222

Daily average (thousand ADRs)

2,641

Daily average (US$ thousand)

6,310

Source: Bloomberg

  

 

     

Webcast - 2Q18 Earnings Presentation                               Investor Relations Team

Conference Call in Portuguese with Simultaneous Translation into English

 Executive Officer – Marcelo Cunha Ribeiro

 Leo Shinohara (leonardo.shinohara@csn.com.br)

 José Henrique Triques (jose.triques@csn.com.br)

 Carla Fernandes (carla.fernandes@csn.com.br)

 Bruno Souza (bruno.souza@csn.com.br)

 

 

August 08th, 2018

03:00 p.m. (US EDT)

04:00 p.m. (Brasília time)

Phone: +1 (929) 378-3440

Code: CSN

Replay phone: +55 (11) 3127-4999

Replay code: 32572758

Webcast: click here

 

 

Some of the statements contained herein are forward-looking statements that express or imply expected results, performance or events. These perspectives include future results that may be influenced by historical results and the statements under ´Outlook'. Actual results, performance or events may differ materially from those expressed or implied by the forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, protectionist measures in the USA, Brazil and other countries, changes in laws and regulations and general competitive factors (on a global, regional or national basis).

 

 

 

For further information, please access: www.csn.com.br/ri

12

 
 

EARNINGS RELEASE

2Q18

 

 

 

 

 

 

 

SALES VOLUME CONSOLIDATED (thousand tonnes)

                       

 

2Q17

1Q18

2Q18

 

Change

 

 

2Q18

x

1Q18

 

2Q18

x

2Q17

 Flat Steel

            592

            737

            748

 

11

  

156

Slabs

                -  

                -  

                -  

 

-

  

-

Hot Rolled

            216

            271

            278

 

7

  

62

Cold Rolled

            117

            157

            142

 

(15)

  

25

Galvanized

            191

            242

            263

 

21

  

72

Tin Plates

              68

              67

              66

 

(1)

  

(2)

 Long Steel UPV

              60

              45

              50

 

5

  

(10)

 DOMESTIC MARKET

            652

            782

            798

 

16

  

146

 

                    

 

 

2Q17

1Q18

2Q18

 

2Q18

x

1Q18

 

2Q18

x

2Q17

 Flat Steel

            316

            280

            310

 

30

  

(6)

Hot Rolled

              14

              35

              24

 

(11)

  

10

Cold Rolled

              24

              17

              26

 

9

  

2

Galvanized

            232

            191

            200

 

9

  

(32)

Tin Plates

              46

              37

              61

 

24

  

15

 Long Steel (profiles)

            205

            216

            212

 

(4)

  

7

 FOREIGN MARKET

            521

            496

            523

 

27

  

2

 

 

 

 

              

 

 

2Q17

1Q18

2Q18

 

2Q18

x

1Q18

 

2Q18

x

2Q17

 Flat Steel

            909

         1,017

         1,059

 

42

  

150

Slabs

                -  

                -  

                -  

 

-

  

-

Hot Rolled

            230

            306

            301

 

(5)

  

71

Cold Rolled

            141

            174

            168

 

(6)

  

27

Galvanized

            423

            433

            463

 

30

  

40

Tin Plates

            115

            104

            126

 

22

  

11

 Long Steel UPV

              60

              45

              50

 

5

  

(10)

 Long Steel (profiles)

            205

            216

            212

 

(4)

  

7

 TOTAL MARKET

         1,174

         1,277

         1,321

 

44

  

147

 

 

 

 

 

For further information, please access: www.csn.com.br/ri

13

 
 

EARNINGS RELEASE

2Q18

 

 

 

 

 

INCOME STATEMENT

CONSOLIDATED – Corporate Law (thousands of Brazilian reais)

 

2Q17

1Q18

2Q18

 Net Revenues

           4,310,609

           5,065,950

           5,687,014

 Domestic Market

           1,962,864

           2,515,270

           2,684,055

 Foreign Market

           2,347,745

           2,550,680

           3,002,959

 Cost of Goods Sold (COGS)

         (3,325,893)

         (3,684,743)

         (4,123,918)

 COGS, excluding depreciation

         (2,977,952)

         (3,386,399)

         (3,818,992)

 Depreciation allocated to COGS

             (347,941)

             (298,344)

             (304,926)

 Gross Profit

              984,716

           1,381,207

           1,563,096

 Gross Margin (%)

23%

27%

27%

 Selling expenses

             (477,063)

             (454,860)

             (469,896)

 General and administrative expenses

             (106,801)

             (102,385)

             (112,603)

 Depreciation allocated to SG&A

                 (7,829)

                 (6,831)

                 (6,685)

 Other operation income (expense), net

               (99,025)

           1,796,928

              542,104

    Share of profits (losses) of investees

                 39,393

                 24,851

                 27,313

 Operational Income before Financial Results

              333,391

           2,638,910

           1,543,329

    Net Financial Results

             (828,619)

             (593,704)

             (989,064)

 Income before social contribution and income taxes

             (495,228)

           2,045,206

              554,265

Income Tax and Social Contribution

             (144,728)

             (558,711)

              635,422

 Profit/(Loss) for the period

             (639,956)

           1,486,495

           1,189,687

 

 

 

 

For further information, please access: www.csn.com.br/ri

14

 
 

EARNINGS RELEASE

2Q18

 

 

 

 

 

BALANCE SHEET

Corporate Law (thousands of Brazilian reais)

 

Consolidated

 

12/31/2017

06/30/2018

Current assets

11,881,496

13,086,676

Cash and cash equivalents

3,411,572

3,511,332

Short-term investments

735,712

741,184

Trade receivables

2,276,215

2,388,157

Inventories

4,464,419

5,131,411

Other current assets

993,578

1,314,592

Non-current assets

33,328,474

33,117,864

Long-term receivables

2,591,594

2,671,027

Investments

5,499,995

5,340,373

Property, plant and equipment

17,964,839

17,807,367

Intangible assets

7,272,046

7,299,097

Total assets

45,209,970

46,204,540

Current liabilities

10,670,050

10,456,884

Payroll and related taxes

252,418

264,689

Suppliers

2,460,774

3,226,249

Taxes payable

264,097

316,129

Borrowings and financing

6,526,902

5,831,919

Other payables

1,059,901

732,693

Provision for tax, social security, labor and civil risks

105,958

85,205

Non-current liabilities

26,251,691

27,526,328

Borrowings and financing

22,983,942

24,594,168

Deferred Income Tax and Social Contribution

1,173,559

859,593

Other payables

129,323

135,346

Provision for tax, social security, labor and civil risks

719,133

749,757

Other provisions

1,245,734

1,187,464

Shareholders’ equity

8,288,229

8,221,328

Paid-in capital

4,540,000

4,540,000

Capital reserves

30

32,720

Acumulated (Losses) / Profits

(1,291,689)

1,340,624

Other comprehensive income

3,779,032

867,515

Non-controlling interests

1,260,856

1,259,757

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

45,209,970

46,204,540

For further information, please access: www.csn.com.br/ri

15

 
 

EARNINGS RELEASE

2Q18

 

 

 

 

 

 

CASH FLOW STATEMENT

CONSOLIDATED - Corporate Law (In Thousand of R$)

 

1Q18

 2Q18 

 Net cash generated by operating activities

                 459,217

                 337,847

 (Net Losses) / Net income attributable to controlling shareholders

             1,471,863

             1,160,450

 Loss for the period attributable to non-controlling interests

                   14,632

                   29,237

 Charges on borrowings and financing raised

                 462,685

                 481,652

 Charges on borrowings and financing granted

                 (11,175)

                 (11,951)

 Depreciation, depletion and amortization

                 315,872

                 325,565

 Share of profits (losses) of investees

                 (24,851)

                 (27,313)

 Deferred income tax and social contribution

                 438,797

               (829,022)

 Provision for risks

                     1,046

                     6,902

 Foreign exchange and monetary variations, net

                   51,488

                 755,033

 Write off fixed assets and intangible

                     1,780

                           84

 Adjusted shares - VJR

            (1,936,389)

                 518,845

 Environmental liabilities and Deactvation Provisions

                    (3,270)

                 (55,000)

 Net gain on sale of foreign subsidiary

 

            (1,149,892)

 Other provisions

                   39,857

                   35,997

 Working Capital

                 254,746

               (490,295)

 Accounts Receivable

                 112,946

               (172,328)

 Trade Receivables – Related Parties

                 (24,304)

                   10,621

 Inventory

               (420,862)

               (468,491)

 Interest receive - Related Parties

                 (10,408)

                   11,687

 Taxes to be offset

                    (1,156)

               (162,464)

 Judicial Deposits

                 (12,443)

                    (8,529)

 Suppliers

                 606,335

                 186,868

 Payroll and related taxes

                 (19,827)

                   35,133

 Taxes (Refis)

                     1,673

                   43,556

 Due to related parties

                     4,605

                     6,496

 Other

                   18,187

                   27,156

 Others Payments and Receipts

               (617,864)

               (412,445)

 Interest paid

               (617,864)

               (412,445)

 Cash Flow from Investment Activities

               (213,570)

             1,201,351

 Purchase of intangible assets

                                

                       (557)

 Purchase of property, plant and equipment

               (223,270)

               (261,948)

 Related parties loans

                 (36,362)

                 (41,105)

 Short-term investment, net of redeemed amount

                     6,685

                 (19,869)

 Net cash received from the sale of a foreign subsidiary

 

             1,524,830

 Cash from the sale of Usiminas’ shares

                   39,377

                            -  

 Cash Flow from Financing Companies

            (1,423,065)

               (242,626)

 Borrowings and financing raised

             1,320,776

                 197,832

 Borrowing amortizations - principal

            (2,190,683)

               (653,410)

 Borrowing costs

                 (51,156)

                       (450)

 Dividends to minority shareholders

               (502,002)

                            -  

 Disposal of shares in treasury

                                

                 213,402

 Foreign Exchange Variation on Cash and Cash Equivalents

                       

             (19,394)

 Free Cash Flow

        (1,177,418)

         1,277,178

For further information, please access: www.csn.com.br/ri

 

16

 
SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 8, 2018
 
COMPANHIA SIDERÚRGICA NACIONAL
By:
/S/ Benjamin Steinbruch
 
Benjamin Steinbruch
Chief Executive Officer

 
COMPANHIA SIDERÚRGICA NACIONAL
By:
/S/ Marcelo Cunha Ribeiro
 
Marcelo Cunha Ribeiro
IR Executive Officer

 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.