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Companhia Siderurgica (SID) Reports Wider-Than-Expected Q3 Loss

Zacks Equity Research

Companhia Siderurgica Nacional SID reported third-quarter 2019 net loss of approximately R$871 million ($482.8 million) as opposed to net profit of R$752 ($190.7 million) recorded in the prior quarter. The company reported a loss per share of 35 cents in the reported quarter, wider than the Zacks Consensus Estimate of a loss per share of 2 cents. The company had reported a profit per share of 13 cents in the prior year quarter.

Revenues

In the reported quarter, the Brazilian steelmaker’s net revenues came in at R$6,006 million ($1,514.7 million), marking a year-over-year decline of 2.6%. Also, the figure missed the Zacks Consensus Estimate of $1,552 million. The downside resulted from lower sales of steel in the foreign market and less favorable pricing in mining.

Domestic revenues decreased 16% year over year to R$2,677 ($675 million). The company’s international business flourished with foreign-market revenues registering growth of 11.7%, year over year, to R$3,330 million ($839.8 million), accounting for 55.4% of net revenues.

National Steel Company Price, Consensus and EPS Surprise

National Steel Company Price, Consensus and EPS Surprise

National Steel Company price-consensus-eps-surprise-chart | National Steel Company Quote

Segment Performance

Steel: The segment’s revenues totaled R$3,334 million ($840.8 million), down 18.7% year over year. Production of flat-rolled products decreased 15%, year on year, while manufacturing of long-rolled products went up 6%.

Mining: The segment generated revenues of R$2,336 million ($589.2 million), reflecting a jump of 41% year over year, on higher prices and sales volumes.

Logistics: Revenues came in at R$423 million ($106.7 million), down 10% year over year.

Cement: The segment’s revenues totaled R$161 million ($40.6 million) compared with the R$160 million ($40.5 million) reported in the year-ago quarter.

Energy: The segment’s revenues slipped 29% year over year to R$74 million ($18.7 million).

Margin & Costs

In the third quarter, National Steel’s cost of sales flared up 1.6% year over year to R$4,370 million ($1,102 million). Gross profit decreased 12.3% year on year to R$1,636 million ($412.6 million). Gross margin came in at 27.2% compared with the prior-year quarter’s 30.2%.
 
Selling, General and Administrative expenses came in at R$567 million ($143 million), reflecting a year-over-year decline of 16%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 3.7%, year over year, to R$1,567 million ($395.2 million). EBITDA margin was 25.4% in the reported quarter compared with the prior-year quarter’s 26.4%.

Balance Sheet & Cash Flow

Exiting the third quarter of 2019, the company had cash and cash equivalents of R$2,981 million ($716.3 million), down from the R$4,083 million ($1009 million) recorded at the end of the year-ago quarter. Net debt to adjusted EBITDA ratio was 4.93, up from the year-ago quarter’s 3.81.

Zacks Rank & Other Stocks to Consider

Companhia Siderurgica Nacional currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Franco-Nevada Corporation FNV and Kirkland Lake Gold Ltd. KL, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

Kinross has an impressive expected earnings growth rate of 190% for 2019. The company’s shares have surged 67% in the past year.

Franco-Nevada has a projected earnings growth rate of 49.3% for the ongoing year. The company’s shares have rallied 42.8% in a year’s time.

Kirkland Lake Gold has an estimated earnings growth rate of 71.3% for the current year. Its shares have soared 113.4% in the past year.

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