Reuters: Market News: Brazil CSN Q4 profit jumps 81 pct on ore, steel sales

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Brazil CSN Q4 profit jumps 81 pct on ore, steel sales Mar 27th 2012, 03:59 Mon Mar 26, 2012 11:59pm EDT * Margins decline in key segments despite forecast-beating results * EBITDA rises 1 pct; jump in expenses pares increase SAO PAULO, March 26 (Reuters) - Brazilian steelmaker CSN reported an 81 percent annual jump in net profit for the fourth quarter, as stronger-than-expected sales of iron ore and flat steel products offset a surge in expenses. The Sao Paulo-based company posted a net profit of 817 million reais ($450 million) for the fourth quarter compared with 450 million reais in the same period of 2010. But that was a 26 percent drop from 1.097 billion reais in the third quarter. The company was expected to post net profit of 733 million reais in the fourth quarter, according to the average estimate of seven analysts in a Reuters poll. Despite the forecast-beating results, operating profit margins in key business segments narrowed, sales expenses soared and net debt climbed. Earnings at its mining unit, CSN's most profitable, came in at the lowest level for the year. Brazil's steel industry is passing through its worst crisis in years, hurt by rising costs of raw materials and soft demand in Latin America's largest economy. Net revenue rose 21 percent on an annual basis to 4.167 billion reais, also beating the 4.079 billion reais estimate in the poll, driven by higher iron ore and flat steel sales, CSN said. But it slid 2 percent from the prior quarter, reflecting lower iron ore prices and a poorer sales mix for steel products in the company's home market. Sales of iron ore surged 25 percent year-on-year to 1.196 million tonnes. Proceeds from steel operations accounted for 56 percent of total revenue, and mining revenue about 39 percent. Sales expenses surged 144 percent annually as production and output of iron ore and steel rose. They also more than doubled from the third quarter of 2011 as iron ore freight costs climbed. Earnings before interest, tax, depreciation and amortization (EBITDA), a gauge of cash generation, rose 1 percent to 1.463 billion reais from a year earlier but fell 14 percent from the third quarter and missed a forecast for 1.504 billion reais. CSN said that a poorer sales mix and rising expenses pushed EBITDA lower. The EBITDA margin, or relation between operating profit and total sales, fell to 35 percent of revenue in the fourth quarter from 42 percent a year earlier and 40 percent in the third quarter. Link this Share this Digg this Email Reprints

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