CSN to Redeem 9.50% Perpetual Bonds - Analyst Blog

Companhia Siderurgica Nacional (SID), or CSN has chosen to fully redeem all its 9.50% Guaranteed Perpetual Bonds resulting in the payment of principal amount of US$750 million along with accrued and unpaid interest.

 

The Bonds were issued in 2005 through CSN's wholly owned subsidiary CSN Islands X Corp. and guaranteed by CSN. The redemption date is October 14, 2010.

 

Companhia Siderurgica Nacional produces hot- and cold-rolled flat steel, galvanized sheets, and tin plates for the packaging, automotive, and construction industries. The company's second quarter results were strong as net income surged 167% year over year with earnings per ADR of US$0.33 (R$0.59 per share) in line with the Zacks Consensus Estimate of $0.33 per ADR.

 

Top-line results were also very encouraging with net revenues of R$3,872.6 million (US$2,151.4 million), up 55% year over year due to higher prices and volumes sold.

 

Quarter ending, the company's loans, financing and debentures (net of current portion) were up 12.2% sequentially at R$16,472.4 million (US$9,151.3 million). Financial expenses declined by 21.1% year over year to R$474.7 million (US$263.7 million).

 

We find the growth outlook of Companhia Siderurgica to be very promising because of the various projects being carried out by the company. Moreover, its entrance into the cement business would be an expected synergy. According to the World Steel Association, global steel demand in 2010 is likely to hike by 10.7% and 5.3% in 2011.

 

However, results in the quarters ahead are expected to be depressed attributable to falling domestic sales and higher manufacturing costs. High inventory levels in the supply chain will force steelmakers to export more, leading to lower domestic sales (88.5% of sales). Also, CSN's debt levels are escalating owing primarily to the funding of the company's dividend payments and investments plans.

 

We currently maintain an Underperform recommendation on the company.