CSN(SID)2022-11-01 23:05Financial Data and Key Metrics - EBITDA dropped by 16% due to margin compression in the steel sector, driven by lower international steel prices and sequential price increases [8] - Net debt increased to BRL24 billion, with leverage rising to 1.7x, up from 1.0x last year, due to the LafargeHolcim acquisition and reimbursement of BRL4.8 billion [11] - Cash generation improved to BRL3.2 billion, offsetting investment period taxes, with a significant positive impact from working capital management [10][11] - CapEx guidance for 2022 was revised down from BRL34 billion to BRL3 billion due to delays in equipment delivery and a more cautious approach in a turbulent market [9][10] Business Line Performance Steel - Domestic steel volumes grew by 20%, driven by strong performance in construction, offsetting slower growth in automotive and white goods segments [14] - International steel prices dropped by 9%, leading to a compression in EBITDA margins to 16%, with EBITDA for the steel segment at BRL1.2 billion [15] - Production costs for slabs dropped by 8% in September compared to the quarterly average, signaling further cost reductions in Q4 [15] Mining - Mining production volumes increased, with a 20% growth in sales, offset by a significant drop in iron ore prices [16] - EBITDA margin remained stable at 20 per ton despite lower slab prices [18] Cement - Cement volumes grew by 50% following the consolidation of LafargeHolcim's 10 plants in Brazil, now called CSN Cement Brazil [19] - EBITDA for cement increased from BRL160 million to BRL260 million, with margins expected to improve further in Q4 [20] Energy - The acquisition of Quebra-Queixo and CEEE-G transformed the energy business, with expected synergies reducing energy costs by BRL300 million annually, benefiting steel, mining, and cement operations [21][47] Market Performance - Domestic steel market is expected to reach 14.4-14.6 million tons in 2022, with a slight drop compared to 2021 [30] - International markets, particularly Germany and the US, showed strong profitability due to favorable energy hedges and low raw material costs [14][33] Strategic Direction and Industry Competition - The company is focusing on vertical integration and diversification, particularly in energy and cement, to enhance competitiveness and reduce costs [21][39] - Synergies from the LafargeHolcim acquisition are expected to drive significant EBITDA improvements in the cement segment, with plans to expand capacity and explore greenfield projects [39][41] - The company is prioritizing low-cost production and operational efficiency to navigate a challenging market environment [77][78] Management Commentary on Operating Environment and Future Outlook - Management highlighted the turbulent market conditions, particularly the impact of falling commodity prices and the slowdown in China, but emphasized the company's resilience and operational improvements [6][8] - The outlook for 2023 includes lower commodity prices, which will help maintain strong cash generation and control leverage [12] - The company is preparing for a highly competitive market by focusing on low-cost production and aggressive commercial strategies [77][78] ESG Performance - The company improved its ESG rating to 55 points, well above the global average of 20 points, and is conducting climate change scenario analyses to inform future decisions [22] - Renewable energy projects and dam de-characterization works are progressing, with zero fatalities reported in Q3 [23][24] Q&A Session Summary CapEx and Volume Guidance - CapEx for 2023 is still under review, with a focus on productivity gains in steel and growth in mining, while respecting liquidity and leverage constraints [28][29] - Domestic steel volume guidance for 2022 is 3.3 million tons, with total group volumes expected to reach 4.7 million tons [31] Leverage and Profitability - The company aims to maintain leverage below 1.95x, with plans to reduce it further through operational improvements and potential financial restructuring [38][72] - Cement profitability is expected to improve significantly, with synergies from the LafargeHolcim acquisition driving higher EBITDA margins [39][40] Energy Hedges and Acquisitions - Energy hedges in Germany are expected to expire gradually, with 25-30% of volumes hedged at favorable rates for 2023 [46] - The acquisition of CEEE-G is expected to reduce energy costs by BRL300 million annually, with half of the benefits accruing to the steel segment [47] Expansion and Cost Reduction - The company is investing in a new painting line for automotive and white goods, expected to be operational by Q1 2024, with a capacity of 160,000 tons per year [51] - Cost reductions in raw materials and operational enhancements are expected to improve margins in Q4, particularly in the steel segment [56]