2Q23 FINANCIAL RESULTS

August 2nd, 2023

RESULT 2Q23

São Paulo, August 2nd, 2023 - - Companhia Siderúrgica Nacional ("CSN") (B3: CSNA3) (NYSE: SID) discloses its second quarter of 2023 (2Q23) financial results in Brazilian Reais, with all financial statements consolidated in accordance with accounting practices adopted in Brazil issued by the Accounting Pronouncements Committee ("CPC"), approved by the Brazilian Securities and Exchange Commission ("CVM") and the Federal Accounting Council ("CFC") and in accordance with international financial reporting standards ("IFRS"), issued by the International Accounting Standards Board ("IASB").

The comments address the Company's consolidated results for the second quarter of 2023 (2Q23) and the comparisons are in relation to the first quarter of 2023 (1Q23) and the second quarter of 2022 (2Q22). The dollar price was BRL 5.24 on 06/30/2022; BRL 4.74 on 03/31/2023 and BRL 4.82 on 06/30/2023.

2Q23 Operational and Financial Highlights

GROWTH IN VOLUMES ACROSS ALL SEGMENTS SIGNALS RESILIENCE, BUT LOWER PRICES IN MINING PRESSURED RESULTS

Lower prices observed in mining and cost pressures in steel more than offset a quarter with solid commercial activity, even in a still challenging economic environment.

As a result, Adjusted EBITDA in 2Q23 reached BRL 2.3 billion and with an EBITDA margin of 20%.

GRADUAL NORMALIZATION OF STEEL OPERATION, WITH CONSEQUENT INCREASE IN SALES AND PRICES

The quarter was marked by the normalization of UPV's production capacity and consequent increase in sales and prices in the domestic market. But weaker foreign markets and cost pressures ultimately reduced the profitability of the period.

As a consequence, the steel segment Adjusted EBITDA reached BRL 553 million in 2Q23, with an Adjusted EBITDA margin of 9.3%.

CEMENTS: ANOTHER QUARTER MARKED BY

STRONG COMMERCIAL DYNAMISM, HIGHLIGHTING THE CAPTURE OF SYNERGIES

CSN's cement segment has stood out by showing strong sales growth even in a market slowdown and under pressure from high interest rates. As a result, the Company managed to offset the weaker dynamics of prices and still elevated costs by achieving a slight EBITDA growth.

HIGHEST PRODUCTION AND SALES VOLUME EVER RECORDED IN THE HISTORY OF MINING

2Q23 was marked as the quarter with the highest production volume and iron ore sales ever recorded by CSN, putting the Company on track to achieve its production guidance for this year.

On the other hand, the combination of falling iron ore prices and negative pressure from provisional prices ultimately reduced mining Adjusted EBITDA to BRL 1.1 billion and Adjusted EBITDA margin of 31%.

PREPAYMENTS OF IRON ORE AND ENERGY REINFORCES THE CAPITAL STRUCTURE

Long-term operations accrued more than BRL 3.4 billion, contributing to reinforce liquidity and mitigate the increase in leverage, which reached the pro forma level of 2.57x and is expected to converge to the guidance by the end of the year.

For more information, please visit our website: https://ri.csn.com.br/

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RESULT 2Q23

Consolidated Table - Highlights

2Q23

1Q23

2Q23 x 1Q23

2Q22

2Q23 x 2Q22

Steel Sales (Thousand Tones)

1,051

1,033

2%

1,066

-1%

- Domestic Market

739

669

10%

724

2%

- External Market

312

364

-14%

342

-9%

Iron Ore Sales (Thousand Tones)

11,019

8,618

28%

7,574

45%

- Domestic Market

764

666

15%

867

-12%

- External Market

10,255

7,952

29%

6,707

53%

Consolidated Results (R$ million)

Net Revenue

10,989

11,319

-3%

10,566

4%

Gross Porfit

2,243

3,246

-31%

3,006

-25%

Adjusted EBITDA

(1)

2,263

3,203

-29%

3,262

-31%

EBITDA margin %

19.8%

27.5%

-7.6 p.p.

29.7%

-9.8 p.p.

Adjusted Net Debt

(2)

31,455

30,158

4%

21,034

50%

Adjusted Cash/Disponibilities

(2)

12,469

14,293

-13%

15,657

-20%

Net Debt / Adjusted EBITDA

2.78x

2.45x

14%

1.31x

112%

  • Adjusted EBITDA is calculated from net income (loss), plus depreciation and amortization, taxes on profit, net financial result, investment participation result, other operating income/expenses result and includes the proportional share of 37.27% of the EBITDA of the joint subsidiary MRS Logística.
    ² Adjusted EBITDA Margin is calculated from Adjusted EBITDA divided by Management Net Revenue.
    ³ Adjusted Net Debt and Adjusted Cash/Availability consider 37.27% of MRS, in addition to not considering Forfaiting and Drawn Risk operations.

Consolidated Results

  • Net revenue reached BRL 10,989 million in 2Q23, representing a decrease of 2.9% when compared to 1Q23. This performance reflects the lower prices in the mining sector, which ended up offsetting the record sales verified in the segment and the operational improvements observed in the steel and cement segments.
  • Cost of goods sold (COGS) totaled BRL 8,746 million in 2Q23, up 8.3% from the previous quarter, mainly as a result of higher volumes sold in all segments of the Company's operations, in addition to the increased cost pressure with raw materials for the production of steel and cement.
  • The combination of revenue reduction and cost pressure resulted in an 8.3p.p. reduction in gross margins in 2Q23, reaching 20.4%.
  • Selling, general and administrative expenses totaled BRL 1,082 million in 2Q23, 6.0% higher than in the previous quarter, as a consequence of the record traded volumes in mining, generating a higher freight expense.
  • The group of other operating revenues and expenses was negative by BRL 128 million in 2Q23, a decrease of 92.3% compared to 1Q23, mainly explained by the positive effect of iron ore hedging operations, which generated a balance of BRL 227 million in the quarter, in addition to the lower impact of hedge accounting on the operations.
  • In 2Q23, the financial result was negative by BRL 1,186 million, practically stable compared to the previous quarter, as a consequence of the maintenance of the cost of debt and lower impact of Usiminas shares.

For more information, please visit our website: https://ri.csn.com.br/

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RESULT 2Q23

2Q23

1Q23

2Q23 x 1Q23

2Q22

2Q23 x 2Q22

Financial Result - IFRS

(1,186)

(1,190)

0%

(890)

33%

Financial Revenue

493

345

43%

346

42%

Financial Expenses

(1,679)

(1,535)

9%

(1,236)

36%

Financial Expenses (ex-exchange rate variation)

(1,435)

(1,287)

11%

(1,819)

-21%

Result with exchange rate variation

(244)

(248)

-2%

583

n.a.

Monetary and Exchange Rate Variation

(241)

(270)

-11%

580

n.a.

Derivatives Result

(3)

22

n.a.

3

n.a.

  • The equity result was positive at BRL 107 million in 2Q23, an increase of 386% compared to the previous quarter, as a consequence of seasonality and recovery of MRS's result, after the strong rainfall recorded at the beginning of the year.

2Q23

1Q23

2Q23 x 1Q23

2Q22

2Q23 x 2Q22

MRS Logística

125

54

131%

77

62%

TLSA

(7)

(4)

75%

(9)

-22%

Arvedi Metalfer BR

1

-

0%

3

-67%

Equimaq S.A

2

-

0%

1

100%

Others

8

(14)

n.a.

-

n.a.

Eliminations

(22)

(14)

57%

(18)

22%

Equity Result with Affiliated Companies

107

22

386%

54

98%

  • CSN reported a net income of BRL 283 million in 2Q23, reversing the loss observed in the previous quarter, as a result of lower impacts on the line of other revenues and operating expenses, due to the positive effect of iron ore hedge, in addition to the tax (IR/CSLL) reversal provision verified in the period.

Adjusted EBITDA

2Q23

1Q23

2Q23 x 1Q23

2Q22

2Q23 x 2Q22

]

Profit (Loss) for the Period

283

(823)

n.a.

369

-23%

Depretiation

788

781

1%

643

23%

Income Tax and Social Contribution

(328)

213

n.a.

512

n.a.

Finance Income

1,186

1,190

0%

890

33%

EBITDA (ICVM 527)

1,929

1,361

42%

2,414

-20%

Other Operating Income (expenses)

128

1,665

-92%

638

-80%

Free Cash Flow Hedge Accounting - Exchange rate

11

362

-97%

342

-97%

Free Cash Flow Hedge Accounting - Platts Index

(227)

568

n.a.

(23)

887%

Other

344

735

-53%

319

8%

Equity Results of Affiliated Companies

(107)

(22)

386%

(54)

98%

Proportional EBITDA of Jointly Owned Subsidiaries

313

199

57%

264

19%

Adjusted EBITDA

2,263

3,203

-29%

3,262

-31%

*The Company discloses its Adjusted EBITDA excluding participation in investments and other operating income (expenses) because it understands that they should not be considered in the calculation of recurring operating cash generation.

  • In 2Q23, Adjusted EBITDA was BRL 2,263 million, with an Adjusted EBITDA margin of 19.8% or 7.6 p.p. lower than last quarter. The reduction in profitability is a direct consequence of the worsening prices of the mining segment, which, even with the record sales volume, ended up presenting a much lower EBITDA in the period. In addition, rising raw material costs in steel and cement production also contributed to the reduction in margins in the quarter.

For more information, please visit our website: https://ri.csn.com.br/

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RESULT 2Q23

Adjusted EBITDA (BRL MM) and Adjusted Margin¹ (%)

  • The Adjusted EBITDA Margin is calculated from the division between Adjusted EBITDA and Adjusted Net Revenue, which considers the interests of 100% in the consolidation of CSN Mineração and 37.27% in MRS.

Adjusted Cash Flow

Adjusted Cash Flow in 2Q23 was positive at BRL 745 million, as a result of the normalization of working capital, with a strong reduction in inventories, mainly in the mining segment.

Adjusted Cash Flow¹ in 2Q23 (BRL MM)

  • The concept of Adjusted cash flow is calculated from Adjusted EBITDA, subtracting Ebitda from Joint Subsidiaries, CAPEX, IR, Financial Result and changes in Assets and Liabilities², excluding the effect of the Glencore advance.
    ² The Adjusted Working Capital is composed of the variation of the Net Working Capital, plus the variation of accounts of long-term assets and liabilities and disregarding the net variation of IR and CS.

Indebtedness

On 06/30/2023, the consolidated net debt reached BRL 31,455 million, with the leverage indicator, measured by the LTM Net Debt/EBITDA ratio reaching 2.78x. This one-off increase in leverage is mainly the result of the payment of BRL 2.7 billion in dividends in the period. On the other hand, when considering the prepayment operations of iron ore and energy, in a total of BRL 3.4 billion, of which BRL 2.4 billion after the end of the quarter, the pro forma leverage would go to 2.57x. These and other initiatives that are currently being evaluated, reinforce the Company's commitment to reduce its indebtedness, bringing leverage to the expected guidance for the end of the year. In addition, CSN maintained its policy of carrying high levels of cash, which in this quarter reached the level of BRL 12.5 billion.

For more information, please visit our website: https://ri.csn.com.br/

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CSN - Companhia Siderúrgica Nacional published this content on 02 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 August 2023 00:06:03 UTC.