Companhia Siderúrgica Nacional Q2 FY2025 earnings call

• The company had EBITDA growth in all segments except mining, which was impacted by iron ore price drop.
• Significant cost and expense management, diversification of investments, and assertive commercial strategy.
• Deleveraging efforts with gross debt reduced by BRL 5.7 billion in the quarter.
• ESG progress in occupational health, environmental sustainability, social and DEI agenda.
• Challenges from intense competition with imported materials and tariffs in the U.S.

Mining: Volumes were the second highest sales in history, but EBITDA dropped due to iron ore price decline. Steel: Prioritized value over volume, prices up 4.5% y-o-y, EBITDA up 7.9% y-o-y, margin 10.8%. Cement: Sales volume grew 8% q-o-q, net revenue up 10% q-o-q, EBITDA margin 24%. Logistics: New EBITDA record, rail model strong, Tora acquisition included, EBITDA BRL 519 million, margin 44.1%. Energy: EBITDA fivefold higher than same period 2024 due to price increase.

• The company will comply with its guidance projected for the end of the year.
• Continues to focus on deleveraging and reducing gross debt.
• Anticipates improvement in coming quarters, with expectations of better performance ahead.

• Iron ore price drops impacting mining EBITDA.
• Intense competition from imported materials.
• Tariffs and trade disputes affecting export and domestic markets.
• Exchange rate and interest rate fluctuations.
• Regulatory changes and protectionist measures in various countries.

Q: If possible, I would like to have more details on your eventual partner in infrastructure. How much could you reduce your leverage because of this and your sale of stake in Usiminas, will you reduce your stake to 0? Or will you comply with the CADE antitrust company of 5?

A: Regarding the first question about infrastructure, the discussion with potential partner depends on their profile. Regarding Usiminas, so far, we have not defined the next step on selling our stake Q: We have 2 at our end. Well, in terms of competition, I would like to understand if that recent decision of dumping in pipes has allowed for new dumping coated products and hot-rolled products. Now I was expecting weaker results in terms of margin. So it would be interesting to hear about the trend for following quarters, perhaps a margin expansion.

A: In truth, Brazil is facing an issue of imports. We continue to work on antidumping processes. Regarding margins, we have sound results in the steel mill with value over volume strategy Q: Two questions at our end. First, a follow-up in terms of the steel. You spoke of a positive evolution in cost efficiency gains. Could you give us some details on the measures you are adopting to manage that enhancement and how this will evolve going forward? The second question, a provocation speaking about cash generation. Your cash flow is under pressure. Do you have any visibility or idea on the CapEx flexibility we could observe until the end of the year. And if you will have another sale of assets without it being part of the infrastructure, something more in the short term to gain relief in your cash flow.

A: Regarding the steel mill, we shut down blast furnace, changed loads, and have investments for own sintering. CapEx for this year is between BRL 0 and BRL 6 billion. We're working on monetizing assets besides infrastructure Q: A follow-up for steel. Martinez, you spoke at length about the market. If you could speak about long steel, there was a price recently, and I believe that the increase was aggressive without speaking of imports, the long steel and which have been your conversations with the government? Benjamin mentioned that at the beginning of the conversation that despite all of the efforts, all of the measures adopted have been insufficient. So thinking about the future with this discussion of tariffs and the coming closer of the government with China, which is your mindset to think of a more protective measure for the sector? My second point, and do forgive me for insisting on this. You spoke about the sale of a stake to Usiminas. Benjamin, I would like to understand if there will be a more aggressive movement towards the sale of assets. The surprise was not only because of the timing, but because of the price at which the shares were sold to what's the market. There wasn't much choice. Now simply to understand if there has been a change of mindset to do something more aggressive in the coming quarters and years to clean out your balance.

A: In long steel, we expect recovery in second quarter. Conversations with government focus on commercial defense. Sale of stake to Usiminas is due to CADE agreement and finding buyers. We're working on deleveraging and asset sales Q: My first question comes from that slowing down of CapEx in -- sorry, the increase of pace in investment because of P15 in mining. What is happening with the milestones that you presented on CSN days and your expectations in terms of expansion? If you could also speak, and I'm referring to Martinez about the cement business. Martinez vis-a-vis our numbers, I think it has become very clear that you have diversified your business. You have diversified the flexibility. Well, we are speaking of cement and logistics. The cement market in Brazil has it recovered from the lows a decade ago, but we're still falling short in terms of the use of capacity and the prices continue to be the lowest in Latin America. If you could discuss with us the main levers to add value to this business.

A: P15 infrastructure is proceeding, forecast delivery fourth quarter 2027. In cement, we focus on value and volume, leveraging operational excellence and logistics to increase prices and capture higher value Q: The question is about the policy that China is mentioning about resolving the oversupply problems and in some sectors. And of course, the steel sector is one of the goals. So which is your mindset on the impact on Brazilian steel industry and the iron ore market?

A: China's production reduction could positively impact Brazil's steel market. Iron ore price is strong, and we focus on low-grade iron ore production Q: I simply have some follow-ups on previous questions. I begin with the sale of stake at Usiminas, the sale of assets, the idea of carrying out partnerships in the segment. I think all of this has been made very clear. I'd like to understand more about your sale of stake. This is a moment in which the industry has suffered considerably. We see the industry. We see the shares dropping. I would like to understand if the rationale of that sale of stake was based on a decision of the antitrust agency, the CADE, which was the rationale? The second question, something that has already been discussed, refers to the steel segment. It was the positive highlight of the quarter. We have seen industries with lower margins, but you delivered a very sound margin. The question is that over volume. Now how do you look upon your strategy for the long term? Can you continue following this rationale for much longer? Can you maintain that strategy in the third quarter? What will you do in the long term, however?

A: Sale of stake to Usiminas is due to CADE agreement and low share liquidity. In steel, we'll continue value over volume strategy, focusing on operational excellence and product diversification in the long term Q: We have some follow-ups, and I will be quick. I'm sorry to be so insistent, but a very direct question to understand if the sale of stake is because of the antitrust agency, CADE, beyond what you have done, you have to continue doing something simply to have more clarity. Now in terms of antidumping, there is a discussion of the Brazilian industry. And of course, this is of the utmost importance. There has been a predatory situation. Now regarding antidumping, this week, there was a discussion of the government introducing a lower tariff that would have an impact on the automobile industry that represents an important part of the demand for Brazilian steel. I don't know if you can pressure the government if you're part of that discussion, if it's important for you, which is your vision in this antidumping situation, if there are other ways of going around this problem. And finally, you speak about deleveraging. You have spoken broadly about investments that trend of having a 3x net debt EBITDA until the end of the year. I would like to gain an understanding for the medium term. You have a disinvestment of focus on deleveraging. How could we imagine that deleveraging for the coming year, which will be the path that it will follow and where it should stand in mid-2026.

A: Sale of stake is part of CADE compliance. Antidumping efforts focus on government action. Deleveraging targets include 3x net debt EBITDA this year, aiming for lower leverage in 2026 around 3.0x