Companhia Siderurgica Nacional (SID), through its wholly-owned subsidiary, CSN Resources S.A., issues US$1 billion bonds priced at 99.096%. The bond carries an interest rate of 6.5% p.a. and matures in July 2020. Funds raised through the issuance will be used to improve CSN’s leverage position and for general corporate purposes.
Trailing four quarters, Siderúrgica Nacional has been continuously raising funds via debt issuances. At the end of the first quarter of 2010, the company’s long-term debt balance was roughly R$ 19,802.6 million (US$ 11,060 million), representing an increase of 7.4% over the prior quarter. Also, the company’s cash balances were strong in the last four quarter with cash and cash equivalents roughly at R$9,148.9 million (US$5,110 million) in the first quarter.
Siderúrgica Nacional produces hot- and cold-rolled flat steel, galvanized sheets, and tin plates for the packaging, automotive, and construction industries. In the fiscal year 2009, the company accounted for approximately 47% of the galvanized steel products and 98% of the tin mill products market share in Brazil .
The growth outlook of Siderúrgica Nacional is encouraging based on various projects being carried out by the company. Moreover, the company has entered the cement business, which will provide synergies. The World Steel Association has forecast a 10.7% increase in global steel demand in 2010 and a 5.3% rise in 2011 compared with 2010. The increase is based on the resilience of the emerging economies, especially China .
However, the company operates in a highly cyclical and competitive industry. Prime competitors of the company are privately held ArcelorMittal Brasil S.A. and Metalúrgica Gerdau S.A.
In the last 30 days, EPS estimates for Siderúrgica Nacional were stable for 2010 and 2011, implying that the analysts do not see any meaningful catalyst for the time being. The current Zacks Consensus Estimate is $1.32 for 2010 and $1.88 for 2011.
We currently maintain our Neutral recommendation, which is supported by Zacks Rank of # 3 (Hold).
Read the full analyst report on “SID”
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