Companhia Siderúrgica Nacional Q1 FY2026 earnings call

Consolidated Financial Performance

• Consolidated EBITDA grew 5.5% year-over-year (5.6% annual comparison) with a 1.8 percentage point margin expansion, despite severe seasonal rainfall and intense import competition in the first two months of the quarter. Diversified operations allowed stronger performing segments (cement, logistics) to offset headwinds in other areas.
• Leverage reduced to 3.36x net debt/EBITDA, a 0.11x (3 percentage point) improvement from the prior quarter, driven by operational improvements, debt prepayment contracts, and scheduled debt payments. The company maintains 2.6 billion reais in cash, sufficient for short-term obligations.
• In April 2026, the company secured a $1.2 billion bridge loan (expandable to $1.4 billion) to pre-fund operations ahead of planned asset sales, demonstrating market confidence and eliminating immediate liquidity pressure.
• CAPEX fell 49% quarter-over-quarter, with stable full-year investment plans; higher disbursements were concentrated in mining for the P15 expansion project.
• Working capital increased 54.4% quarter-over-quarter due to higher March steel sales receivables and lower third-party iron ore purchases. A company-wide working capital and inventory liquidity program launched in April 2026 to release cash, focused on the steel segment.
• Free cash flow was negative 1.6 million reais for the quarter, driven by seasonal factors, working capital consumption, elevated financial expenses, and significant debt amortization.

Operational Highlights

• Mining achieved record production despite extreme rainfall (one-day rainfall totals exceeded 10-day average forecasts), demonstrating strong operational risk mitigation and excellence. TECAR port set a new shipment record and delivered significant cost reductions.
• Steel: The March implementation of Brazilian protective measures against dumped imports reversed weak early-quarter trends, with resumption of exports and improved domestic pricing. Price adjustments were implemented in April to offset BRL appreciation pressures.
• Cement delivered record profitability in a seasonally weak quarter, supported by strong demand from Brazil’s Minha Casa Minha Vida affordable housing program and a fully vertically integrated, cost-competitive operation. Labor market conditions remain strong supporting construction activity.

ESG Highlights

• MSCI ESG rating upgraded from BB to BBB, and CSN ranks in the 10th percentile of lowest ESG risk globally.
• Tailings dam certifications were renewed in March 2026, and the company’s rainfall response plan successfully prevented operational or safety incidents during the quarter’s extreme weather.
• The company achieved ISO 45001 occupational health and safety certification, though management noted a small number of serious accidents in the quarter and maintains full focus on improving safety performance.
• Greenhouse gas emissions reductions are on track vs baseline targets, improving competitiveness ahead of expected carbon regulations. Diversity metrics improved, with a 12% increase in female workforce representation and 7% increase in female leadership representation.

Divestiture Progress

• The cement divestiture process received more than 7 qualified non-binding proposals, exceeding management expectations. The binding offer phase begins next week, with transaction closing expected in the second half of 2026.
• The logistics infrastructure divestiture/partnership process is progressing on schedule, with expected updates in the next quarterly call.

• Mining: Achieved 6.4% year-over-year growth in own production to a new quarterly record despite severe rainfall and adjacent public calamity declarations. TECAR port set a new shipment record of 8.7 million tons. Revenue declined year-over-year due to seasonal volume shifts and negative exchange rate impacts, while iron ore price resilience offset higher freight and oil cost increases. Adjusted EBITDA was impacted by seasonality and rising freight costs. Revenue contribution makes up a core share of consolidated results alongside other segments.
• Steel: Quarterly sales grew 12% quarter-over-quarter, with 50% of sales generated in March 2026 after weak activity in January and February. Year-over-year revenue fell due to price declines and negative foreign exchange impacts. EBITDA remained stable adjusted for non-recurring idleness effects from the prior quarter, while margins were pressured by market and one-off factors. Post protective measures implemented in March, demand and pricing trends turned positive, with resumption of exports driving results.
• Cement: Sales volume was stable quarter-over-quarter with a small year-over-year drop, reflecting seasonal rainfall and the company’s strategy of prioritizing profitability over volume. Revenue grew 14% year-over-year and was stable quarter-over-quarter, driven by recent price adjustments and resilient Brazilian demand supported by government housing programs. It achieved a company all-time record adjusted EBITDA of almost 400 million reais, with an EBITDA margin of 31.2% (above 30%), positioning it as the most profitable cement operation in Brazil. This segment contributed heavily to overall quarterly EBITDA growth.
• Logistics: Revenue declined due to seasonal rainfall impacts on railroad cargo volumes. Despite this, EBITDA grew 26% year-over-year, and profitability remained above 40%, demonstrating strong operational resilience and the strength of CSN’s integrated business model.
• Energy: EBITDA grew more than 92% quarter-over-quarter, driven by improved energy availability and higher energy prices, marking another quarter of strong growth for the segment.

• Management expects materially improved steel performance in the second quarter 2026, with a return to double-digit EBITDA margins, driven by reduced import volumes, realized 5-8% price increases for coated products, and continued cost reduction targets that aim to cut per-ton production costs to 3,000 reais by the end of Q3 2026.
• Cement segment EBITDA for full-year 2026 has upside potential to reach $1.6 billion to more than $2 billion, though management notes this is not formal guidance, only an indication of segment potential, with second quarter 2026 cement EBITDA expected to exceed the first quarter’s record level.
• Deleveraging remains the company’s top capital allocation priority, with material net debt reduction expected in 2026 driven by asset sale proceeds, working capital releases, and maintained CAPEX discipline. The target is to extend debt maturities and reduce interest costs by refinancing higher-cost short and medium-term debt, including the 2028 $1.3 billion bond. The 2026 amortization schedule has no material quarterly concentration after the April 2026 2026 bond payment.
• Iron ore price trends are favorable year-to-date, which management expects to support mining segment performance for the remainder of 2026.
• Asset divestiture of cement is on track to close in the second half of 2026, with the logistics infrastructure divestiture process expected to accelerate in Q2 2026, with an update provided in the next quarterly call.

• Extreme rainfall and related flooding/energy disruption negatively impacted production and logistics across all segments in the first quarter 2026, highlighting ongoing exposure to weather-related operational disruption.
• Intense competition from dumped imported steel, primarily from China but increasingly from other markets including South Korea, India, Germany, the Netherlands, and Egypt, as well as import circumvention via third countries (Vietnam) and the Manaus Free Zone, pressured steel pricing and margins in early 2026.
• Global geopolitical conflict (Middle East) and related increases in freight, energy, and raw material costs (including pet coke for cement production) create ongoing margin pressure across segments.
• Foreign exchange appreciation of the BRL creates negative translation impacts on revenue from export-focused segments (mining, steel).
• Upcoming debt maturities require active refinancing and deleveraging, creating near-term capital structure pressure; market concerns over CSN’s liquidity were explicitly addressed by management, who noted the company has sufficient cash and access to market funding.
• Illegal import circumvention and misclassification of steel products continues to undermine trade protective measures, requiring ongoing engagement with Brazilian government authorities.

Q: What is current steel capacity utilization, the impact of anti-dumping measures on import volumes, and what is the outlook for steel price increases and margin recovery? / A: In Q1 2026, steel prioritized inventory reduction and profitability over volume, following a value-over-volume strategy. January and February were weak, but March saw strong volume and price growth, which will drive Q2 2026 improvements. Global steel prices have risen across China, Europe, and the US, creating upward pricing pressure in Brazil. Anti-dumping measures have already drastically reduced imports from China, with Korean imports also falling sharply; further measures targeting hot rolled steel and circumvention are expected by July. Q2 2026 will see total price increases of 5-8% for coated steel, and management expects a return to double-digit EBITDA margins in Q2.

Q: What is the latest update on the cement divestiture process, what is the expected net debt of the cement segment at closing, and what is the potential valuation range? / A: The divestiture process is on track, with more qualified non-binding proposals received than expected. The binding offer phase begins next week, with transaction signing expected in H2 2026, after due diligence. Management expects 2026 cement full-year EBITDA between $1.6 billion to over $2 billion, with expected net debt of 2.8 billion reais at closing. The company is selling control of the cement segment, with the final sale percentage (50-100%) to be determined by the buyer. All existing and planned greenfield/brownfield projects, mines, and energy assets are included in the transaction.

Q: Beyond the cement sale, what other initiatives is CSN pursuing to accelerate deleveraging? / A: The company launched a working capital and inventory reduction program in April 2026 targeting 12 billion reais in inventory, which will generate incremental cash in 2026. CAPEX is maintained at 2025 levels, with flexibility to reduce further if cash flow is lower than expected. The logistics infrastructure divestiture process is accelerating in Q2 2026, with updates expected in the next call. CSN also holds several billion reais in non-core non-operational assets (including real estate) that can be monetized in the short to medium term to further accelerate deleveraging.

Q: What are the terms and planned use of the $1.2 billion bridge loan, and what is the status of 2028 bond refunding? / A: The bridge loan is committed, and the company has drawn one third of the facility so far; it can be expanded to $1.4 billion if needed, but the company will only draw what is required to avoid unnecessary interest costs. Proceeds will be used to prepay the highest-cost, shortest-maturity debt, with the 2028 $1.3 billion bond a top priority for refinancing or repayment in 2026. No formal refunding proposal has been announced yet, but management intends to address this maturity in the next few months. The loan demonstrates market confidence in CSN and gives flexibility to wait for optimal divestiture pricing.