Companhia Siderúrgica Nacional (SID) Q2 2025 Earnings Call Transcript
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Overview
The earnings call highlights strong financial performance with a significant increase in EBITDA, reduced leverage, and strategic capex investments. The Q&A section reveals plans for asset sales and partnerships to further reduce leverage and improve cash flow. Despite concerns over import issues, management's focus on operational excellence and strategic market positioning is promising. The market cap suggests moderate volatility, supporting a positive outlook for stock price movement.
Key Financial Performance
EBITDA BRL 2.6 billion with a margin of 23.5%, an expansion of 5% and 1.4 percentage points compared to the first quarter of 2025. The increase was due to excellent cost and expense management, diversification of investments, and a strong commercial strategy. However, mining EBITDA dropped due to a decline in iron ore prices.
Gross Debt Reduction Reduced by BRL 5.7 billion in the quarter, bringing leverage below 7 points compared to last year. This was achieved through active cash management and incorporation of new assets like Tora.
Mining Segment EBITDA Dropped by 36% compared to the first quarter of 2025 due to a $10 per ton decrease in iron ore prices, driven by lower demand in China and tariff disputes in the U.S.
Steel Segment EBITDA Increased by 79% year-over-year, reaching a 10.8% margin for the quarter. This was due to a 4.5% increase in prices compared to Q2 2024 and strong cost control, despite intense competition and a flood of imported materials.
Cement Segment EBITDA Margin Increased by 2.3 percentage points to 24% for the quarter. This was driven by an 8% growth in sales volume and a 10% increase in net revenue compared to Q1 2025, offsetting raw material cost pressures.
Logistics Segment EBITDA Reached BRL 519 million with a margin of 44.1%, a new record. This was due to strong performance in the rail model and the incorporation of Tora's numbers.
Energy Segment EBITDA Increased fivefold compared to the same period in 2024, driven by higher prices during the period.
Adjusted Cash Flow Negative BRL 1.4 million, compared to BRL 1.73 million previously. This was due to increased investments in expansion projects, financial expenses, and higher working capital consumption.
Net Debt and Leverage Leverage reduced from 3.33x in Q1 2025 to 3.24x in Q2 2025. Gross debt reduced by BRL 2.1 billion in the quarter, totaling BRL 5.7 billion for the year, due to efficient cash management and cost control.
CapEx Increased by 18.2% compared to the previous quarter due to seasonality and mining infrastructure advancements. However, it remained stable year-over-year as mining investments offset lower steel industry investments.
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Operating Highlights
Steel production: Prioritized value over volume, resulting in a 79% year-on-year EBITDA increase and a 10.8% margin despite intense competition from imported materials.
Cement: Quarterly sales volume grew by 8%, with a 10% increase in net revenue and a 24% EBITDA margin due to favorable seasonality and new launches.
Logistics: Achieved a new EBITDA record of BRL 519 million with a 44.1% margin, supported by the incorporation of Tora and strong rail model performance.
Steel market: Faced intense competition from imported materials, leading to a loss of market share. The company avoided price wars and focused on higher-margin products.
Mining market: Achieved the second-highest sales volume in company history, but EBITDA dropped 36% due to lower iron ore prices and tariff disputes.
Cost management: Reduced gross debt by BRL 5.7 billion year-to-date and improved operational efficiency across segments, including mining and steel.
Cash flow: Negative cash flow of BRL 1.4 million due to increased investments in expansion projects and financial expenses.
Deleveraging strategy: Continued focus on reducing leverage, achieving a reduction from 3.33x to 3.24x in the quarter.
ESG initiatives: Reduced GHG emissions by 11% compared to 2020 baseline and increased female representation by 80% since 2020.
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Risk or Challenges
Iron Ore Price Volatility: The company's mining segment experienced a drop in EBITDA due to a correction in iron ore prices, driven by demand fluctuations in China and tariff disputes in the United States. This price volatility poses a risk to financial performance.
Flood of Imported Steel: The domestic steel market is facing intense competition due to a significant influx of imported steel products, which has disrupted the market and created a hostile environment for local producers. This has led to a loss of market share and pricing pressures.
Tariff and Trade Barriers: Protectionist measures in the U.S. and other countries, including a 50% tariff increase on exports to the U.S., have made exporting unfeasible and negatively impacted the company's ability to compete internationally.
Cash Flow and Working Capital Pressure: The company reported negative cash flow for the quarter, driven by higher financial expenses, increased working capital consumption, and investments in expansion projects. This could strain liquidity if not managed effectively.
Blast Furnace Maintenance: Maintenance shutdowns of blast furnaces have led to reduced steel production, impacting operational efficiency and increasing costs temporarily.
Economic and Regulatory Uncertainty: The company highlighted moments of uncertainty and lack of forecastability, particularly in relation to government actions on protectionist measures and regulatory changes, which could impact strategic planning.
Cement Sector Cost Pressures: Despite favorable seasonality and demand, the cement segment faces cost pressures from raw materials, which could impact profitability if not offset by price increases.
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Guidance & Outlook
Debt Reduction: The company will comply with its guidance projected for the end of the year, continuing to reduce its debt. The debt is expected to drop to 3.2x, representing a reduction of 29 basis points for the period.
Debt Management: The company is focusing on lengthening the debt amortization term, concentrating on long-term operations and the local capital market, with bilateral contracts primarily between 2027 and 2030.
Steel Segment: The company is prioritizing results and margins over volume in the steel segment, avoiding price wars and focusing on higher profitability products. Steel is expected to be an important vector of growth for 2025.
Mining Segment: The company expects the iron ore market to stabilize at $100-$110 per ton as part of a technical outlook for Platts pricing.
Cement Segment: The company anticipates continued growth in the cement segment, supported by robust launch activity and favorable market conditions.
Operational Efficiency: The company is focusing on improving industrial performance, reducing costs, and enhancing productivity across all segments.
Market Outlook: The company expects an improvement in market conditions and prices, which will positively impact its performance in the coming quarters.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you provide more details on your potential partner in infrastructure and the impact on leverage? Also, regarding the sale of your stake in Usiminas, will you reduce your stake to 0 or comply with the CADE antitrust requirement of 5%?
A:The company has 7 logistics assets, 2 under construction, and discussions with potential partners depend on their asset preferences. A stake of 20%-40% could be sold, potentially injecting BRL 8 billion in liquidity and reducing leverage. Regarding Usiminas, no decision has been made on the next steps for selling the stake or the amount to be sold.
Q:Has the recent decision on dumping in pipes allowed for new dumping coated products and hot-rolled products? What is the margin trend for the following quarters?
A:Brazil faces significant import issues, and the government has been slow to enforce antidumping measures. Margins vary from 25%-75%, and the company expects the government to act within two months. For margins, the company prioritizes value over volume, focusing on higher-value products and operational excellence. Margins are expected to remain stable or improve slightly in the third quarter.
Q:What measures are you adopting to manage cost efficiency in steel, and how will this evolve? Also, what is your visibility on CapEx flexibility and potential asset sales to relieve cash flow?
A:The company has implemented measures like shutting down a blast furnace, changing raw material loads, and improving sintering processes, leading to cost reductions. CapEx for the year is targeted at BRL 5 billion, focusing on productivity and expansion projects. Asset sales, including energy partnerships, are being discussed to improve cash flow.
Q:Can you provide insights into the long steel market, recent price increases, and discussions with the government on protective measures for the sector?
A:The long steel market saw a 12% sales drop due to low prices. Prices were increased by 8%-10% recently, but margins remain under pressure. Discussions with the government emphasize the need for immediate enforcement of antidumping measures to protect the industry from unfair competition, particularly from China.
Q:What is the status of the P15 mining project, and what are the main levers to add value to the cement business?
A:The P15 project is progressing rapidly, with core equipment already contracted and infrastructure work underway. Delivery is expected in Q4 2027. In cement, the company focuses on operational excellence, logistics, and market coverage, aiming for higher margins and leveraging synergies with Lafarge and Tora transportation.
Q:What is your view on China's policy to address oversupply in the steel sector and its impact on Brazil and iron ore?
A:China is coordinating production reductions, which could positively impact Brazilian steel and iron ore markets. The company expects a recovery in prices and profitability due to reduced Chinese exports and improved market conditions.
Q:What was the rationale behind the sale of your stake in Usiminas, and how do you plan to maintain steel margins in the long term?
A:The sale of Usiminas shares was partly to comply with CADE requirements and to find a buyer in a low-liquidity market. To maintain steel margins, the company focuses on cost optimization, product diversification, and targeting high-value markets while reducing reliance on exports.
Q:What is your strategy for deleveraging, and what are your medium-term leverage targets?
A:The company aims to deleverage through asset sales, operational improvements, and investments in high-margin projects like P15. The target is to reduce leverage to below 3.0x net debt/EBITDA by year-end and maintain it around that level in the medium term, aiming for investment-grade status.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about the specific timeline and details of the Usiminas stake sale, as well as the exact measures the government might take to address antidumping issues. Responses were often broad and lacked specific commitments or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BRL margin
Corretora Valores
Director
GHG emission
Inc Research
Life
Marco
Research Division
SA Research
Securities
competition
cost control
emission baseline
expansion
flooding material
incorporation
increase volume
launch activity
level efficiency
margin cement
mine chain
mining drop
mining segment
model course
month mine
percentage point
period advance
price cost
rail model
sale history
sic
tariff dispute
volume improvement
volume launch
volume sale
SID Transcript
Companhia Siderúrgica Nacional (SID) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call highlights strong financial performance in the cement and logistics segments, with record EBITDA figures. The company is actively managing debt and aiming for deleveraging, which is positively viewed. Despite negative adjusted cash flow, improvements are noted. The Q&A reveals optimism in steel market recovery and strategic initiatives to enhance competitiveness. However, the lack of specific guidance on liquidity and project timelines slightly tempers enthusiasm. Considering the market cap and overall sentiment, a positive stock price movement between 2% to 8% is expected.
Companhia Siderúrgica Nacional (SID) Q2 2025 Earnings Call Transcript
Positive8-1
The earnings call highlights strong financial performance with a significant increase in EBITDA, reduced leverage, and strategic capex investments. The Q&A section reveals plans for asset sales and partnerships to further reduce leverage and improve cash flow. Despite concerns over import issues, management's focus on operational excellence and strategic market positioning is promising. The market cap suggests moderate volatility, supporting a positive outlook for stock price movement.
Companhia Siderúrgica Nacional (SID) Q1 2025 Earnings Conference Call Transcript
Unknown5-9
While CSN reported strong financial metrics, including a 28% increase in EBITDA and reduced net debt, concerns remain over high interest rates, competitive market pressures, and lack of dividends or buybacks. The Q&A highlighted cautious guidance and market challenges. Despite positive operational improvements, the absence of a share buyback and dividend program, coupled with unclear responses on future leverage and market impacts, tempers optimism. Given the mid-sized market cap, the stock is likely to experience limited movement, resulting in a neutral prediction.
Companhia Siderúrgica Nacional (NYSE:SID) Q4 2024 Earnings Call Transcript
Unknown3-14
Despite strong financial performance, including record cash position and improved EBITDA margins, concerns about economic conditions, exchange rate impacts, and competitive pressures were highlighted. The decision not to distribute dividends and unclear management responses in the Q&A add uncertainty. The market cap suggests moderate volatility, leading to a neutral stock price prediction over the next two weeks.
SID Report
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