Bloomberg News

CSN Says Analyzing Acquisitions After Profit Beats Estimates

October 28, 2011

(Updates with closing share price in last paragraph.)

Oct. 28 (Bloomberg) -- Cia. Siderurgica Nacional SA, the third-largest Brazilian steelmaker by output, said the current decline in asset prices may trigger acquisition opportunities.

CSN, as the Sao Paulo-based company is known, is considering purchases in the steel, cement and mining industries, as well as a dividend payment, Investor Relations Executive Officer David Salama told analysts today on an earnings conference call. The company also has an “ambitious” plan to invest in its own assets, he said.

“In times like this when we can see a reduction in the value of several assets these opportunities may arise, so we need to be alert,” Salama said, without giving any names of possible targets.

CSN posted third-quarter profit that beat analysts’ estimates yesterday after record iron-ore sales offset a fall in steel revenue. Net income jumped 52 percent to 1.12 billion reais ($665 million), or 77 centavos per share, from 737.4 million reais, or 51 centavos per share, in the year-earlier period, the company said late yesterday in a regulatory filing. CSN was expected to post profit of 577.1 million reais on an adjusted basis, the average of 10 analysts’ estimates compiled by Bloomberg.

‘Challenging’ Steel Outlook

CSN has operated Brazil’s first integrated flat-steel plant, the Presidente Vargas mill, since 1946. The company is relying on its iron-ore unit to make up for lower margins in its steel business.

The outlook for Brazilian steelmakers may remain “challenging” over the next several months as declining global prices, a slowdown in domestic demand and currency fluctuations weigh on earnings, Barclays Plc. analysts led by Leonardo Correa in Sao Paulo, said in a note to clients Oct 26.

CSN held 15.6 billion reais in cash as of Sept. 30, 33 percent more than at the end of the previous quarter, the company said yesterday in its third-quarter filing.

“CSN continues to build an impressive cash pile, but we are not sure what the plans are for the cash, which makes us somewhat nervous,” Jonathan Brandt, an equity analyst at HSBC Holdings Plc in New York, said in note to customers yesterday. He has a “neutral” recommendation on the stock.

CSN has accumulated a 15.2 percent stake in the preferred shares of competitor Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker by output, as well as 11.3 percent of common stock. CSN has been buying shares since at least January, when the company said it may boost its stake to a level that could alter management or control structure.

The company is always analyzing its options for the Usiminas investment, which it considers “strategic,” Salama said on today’s conference call, declining to comment further.

CSN was little changed at 16.40 reais in Sao Paulo today. The stock dropped about 39 percent since the beginning of the year, more than double the 14 percent decline for Brazil’s benchmark Bovespa Index.

--Editor: Robin Saponar

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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