Steel Mining Cement Logistic Energy Earnings Presentation May, 15 th 2018
FINANCIAL AND OPERATING HIGHLIGHTS 1 Strong recovery of steel volumes in the domestic market (+27% vs ) 2 Consistent increase in steel prices due to robust demand 3 4 5 6 Better iron ore realized prices in ( x ), with quality improvement and lower discounts Strong increase in cash generation, supported by reduced financial expenses and efficient working capital management Assets sales from treasury generating more than R$250 million of cash between February and April Signing of CSN LLC sale agreement, transaction with estimated net debt reduction of R$1.8 billion
SALE OF CSN, LLC: TRANSACTION OVERVIEW 1. Main terms 100% Sale of Companhia Siderúrgica Nacional, LLC, a company located in the United States, with operations in pickling, cold rolling and galvanizing of flat steel, for Steel Dynamics, Inc. CSN will maintain its commercial import and distribution activities in the North American market, through another subsidiary, to be set up for this purpose. Price: USD 400 M (cash free & debt free) to be paid on transaction closing Completion date: within 90 days Price Adjustment: After closing, the purchase price will be adjusted according to the target working capital, defined in the Contract as US$ 60 M The Transaction is part of CSN's divestment and deleveraging plan and will generate a reduction in net debt of approximately R$ 1.8 billion¹ 2. Conditions The transaction is subject to the approval of United States regulators (Federal Trade Commission e US Department of Justice). ¹ considering na Exchange rate R$/US$ 3,60 / working capital updated numbers 3
Steel Mining Cement Logistic Energy Consolidated Financial And Operational Indicators
EVOLUTION OF OPERATING RESULTS BY BUSINESS Ebitda Margin 23% Adjusted Ebitda Evolution R$MM Ebitda Margin 23% 1,203 195 23 91 19 10 1,242 176 351 Better prices and volumes in domestic market, offset by increase in cost/ton. Better realized iron ore prices. Evolution of cement segment and seasonal effect on logistics operations. Reduction in expenses 442 713 690 56 66 Ebitda Steel Variation Others Mining Mining Steel Others Elim./Corp. Exp. Elimination/Corporate Expenses Ebitda
FINANCIAL INDICATORS Capex - R$MM Financial Cycle - days 190 344 223 81 67-14 days 53 1Q19 787 Financial Expenses (ex variation) R$MM 683-23% 523 Free Cash Flow R$MM +645% 544-126 73
LEVERAGE AND LIQUIDITY Continuous gross debt reduction and an increase in leverage Gross Debt, Net Debt and Cash (R$MM) 30,623 5,146 31,299 4,545 30,075 4,358 30,597 4,328 29,577 3,070 5.45 25,477 5.67 26,754 5.48 25,717 5.66 26,268 5.82 5.43 26,508 7,752 Leverage reduction with CSN LLC sale (-R$1,8M) 55% 2Q17 3Q17 Net Debt/Ebitda Net Debt/Ebitda estimate Cash equivalents Net Debt
DEBT AMORTIZATION 03/31/2018 Debt reprofiling expected to accelerate in 2Q as asset sales advance IFRS in R$ Bi Schedule Debt Amortization¹ 28.0 28.0 5.6 4.2 4.6 2.2 6.4 5.6 2.3 3.1 2.3 3.1 7.2 9.4 2018 2019 2020 2021 2022 after 2023 Total Schedule - Debt Amortization Schedule - Debt Amortization after renegotiation² ¹ Values referring to amortization schedule, not included in accrued interest. Amortization schedule data does not include FTL, ERSA, TLSA, LLC e SWT. ² The amortization schedule after renegotiation considers BB rescheduling, CEF proposal and Bond reprofiling, noting that Bonds due 2019 and 2020 include a repurchase completed in 2016.
Steel Mining Cement Logistic Energy Business Highlights
STEEL PERFORMANCE Strong revenue growth due to increased demand and prices in the domestic market Sales Volume (thousand tons) +7% 19.4% Net Revenue (R$MM) and Average Price (R$/ton) 1,194 573 (48%) 1,174 517 (44%) 1,301 494 (38%) 1,253 489 (39%) 1,277 496 (39%) 2,572 2,741 3,071 3,435 2,876 3,674 +20% Net Revenue Revenue/ton 621 (52%) 657 (56%) 807 (62%) 764 (61%) 781 (61%) Adjusted EBITDA (R$MM) e Adjusted EBITDA Mg. (%) 610 713 690 2Q17 3Q17 20% 21% 19% Foreign Market Domestic Market
STEEL OUTLOOK Economic recovery underpins demand growth Domestic sales of flat rolled products increased by 13%, compared to the same period in 2017 and are expected to close 2018 with a 7% advance. Resumption of the main consumer sectors in reinforces positive outlook for the year: FLAT STEEL PERFORMANCE - BRAZIL Poduction Demestic Sales 3,278 3,511 2,338 +13% 2,639 +7% +19% Sale of light vehicles registered growth of 19% in ; OUTLOOK 2018 +15% Exports 784 684-13% +51% 51% increase of Buses and Trucks sales in 2018; +17% Imports Apparent Consumption Source: Instituto Aço Brasil 341 353 +4% 2,679 2,992 +12% +14% Distribution sales advanced 14% in ; +11% Capital goods production with growth of 11% in the year; +8% +10%
STEEL PERFORMANCE EBITDA per ton reached R$540 in, 6% higher than, even with a on-off increase in unit costs Slab s Production Volume Presidente Vargas steel mil (thousand tons) 982 +7% 1,070 1,065 1,099 1,050 Performance per ton(r$/t) 1,474 1,367 1,295 511 569 540 EBITDA/ton Slab cost/ton 2Q17 3Q17
MINING PERFORMANCE Evolution of market prices and better quality of ore partially offset lower production volumes Mining Sales Volume (thousand tons) +3% 9,56 Net Revenue (R$MM) 1,174 1,175 1,152 7,24 7,82 7,95 7,47 Net Revenue Adjusted EBITDA (R$MM) and Adjusted EBITDA Mg. (%) 620 53% 351 30% +26% 442 38% 2Q17 3Q17
MINING QUALITY EVOLUTION AND IMPACT ON PROJECTS Operational efforts to improve product quality led to even better results with the reduction of silica market adjustments Mining projects reduce dependency on dams, adding quality and reducing costs 105 100 95 90 85 80 75 70 65 60 55 50 Sinter Feed China: Silica (Jan/17 = Base100) Silica Filtering Phases I e II Reduces dependence on dams, allowing greater production pace of the Central Plant Phase I has start-up scheduled for Jun/ 18; Physical progress is 72% Phase II begins its activities in 1Q19 Reduces dependence on dams, turning waste into product 8 6 4 Market Adjustment: Silica ($/dmt) Magnetic concentrator II Gains in scale and quality improvement Magnetic concentrator ll has startup scheduled for 4Q/18; Physical progress is 44% 2 Does not depend on dams 0 55% cost reduction in 8Mtpa SiO2 (4.5-6.5%) SiO2 (6.5-9%) Dry production Implementation authorized by the environmental agency
CEMENT PERFORMANCE With the best market share positioning, CSN has been seeking price recovery to improve business results Cement Sales Volume (Thousand tons) 998 153 Net Revenue (R$MM) and Average Price (R$/ton) 160 162 821 831 806 126 106 131 +24% 661 Net Revenue Average Price R$/ton Adjusted EBITDA (R$MM) and Adj. EBITDA Margin (%) 12 12 10% 3% 9% 3 2Q17 3Q17
Million tons CEMENT - OUTLOOK The downward trend in cement consumption slowed in 2017 but recovery is expected in 2018 Total Sales Domestic Market Brazil (preliminar sales by industry and market estimates) 70,9-9% 64,8-11% 57,4-6% 53,8 +2% 54,9 Southeast market already starting volume recovery in Production costs: Fixed costs reduction; Raw materials synergy; Process optimization. Additional ongoing initiatives such as waste coprocessing and optimization/new raw materials. 6,0 +1% 6,1 Production costs maintenance, even with a strong increase in fuel prices. -18% 100,0 +2% 82,2 84,0 2014 2015 2016 Source: SNIC 2017 2018E Southest 2016 Source: CSN 2017 Base 100 = 2016
Website: www.csn.com.br Investor Relations: Marcelo Ribeiro CFO and IR Director Time de Relações com Investidores: Leonardo Shinohara, Jose Henrique Triques, Carla Fernandes e Bruno Souza invrel@csn.com.br