Brazil’s CSN net profit soars on mining performance

CSN reported late on Wednesday an 851 million reais ($172.11 million) net profit for the quarter ended in December, a 332% year-on-year increase although still below the 981.9 million expected by analysts polled by LSEG.

The company said its mining segment was again the main lever of its results, with “solid margin expansion”. Revenue for the business grew 42.5% from a year earlier to 5.03 billion reais.

Steelmaking revenue, on the other hand, fell 6.6% to 5.65 billion reais.

Shares of CSN fell 4% in afternoon trade, after rising as much as 3.5% earlier in the session, while its listed mining subsidiary CSN Mineracao was up 2%. Brazil’s Bovespa stock index traded 0.5% lower.

Analysts at Itau BBA highlighted the mining results, “as better price realization more than offset lower volumes.”

CSN’s CFO Marcelo Cunha Ribeiro told analysts on Thursday the firm is seeking for partners in its mining and energy businesses.

Brazilian steelmakers have complained about cheaper steel, particularly from Russia and China, “flooding” the South American country’s market, and have asked the government for a temporary tax on imports.

Despite a “sharper quarterly drop” in China’s steel production during the fourth quarter, CSN expects that Chinese steelmakers will maintain their strong level of activity this year, “with the Chinese government’s incentives boosting various strategic sectors.”

CSN, which also has a cement unit, said its quarterly revenue rose 7.9% to 12 billion reais.

Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 16% to 3.62 billion reais, raising its adjusted EBITDA margin to 29.08% from 27.06% a year earlier.

Cunha also said CSN’s bid to buy assets from InterCement would not change its target to reduce financial leverage to 2 times by the end of the year – it was at 2.58 times in the fourth quarter.