National Steel Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2025

Key Takeaways

  • Positive Sentiment: CSN reported a 5% sequential rise in consolidated EBITDA to BRL 2.6 billion, delivering a 23.5% margin through strong cost control and diversified operations.
  • Positive Sentiment: The company reduced gross debt by BRL 5.7 billion in Q2, lowering leverage to 3.24x and advancing its deleveraging goals.
  • Positive Sentiment: CSN Steel posted a 79% year-on-year surge in EBITDA with a 10.8% margin by focusing on higher-value products despite intense import competition.
  • Negative Sentiment: Mining volumes reached the second-highest sales in company history, but segment EBITDA fell 36% due to an iron ore price correction.
  • Positive Sentiment: Logistics achieved a record quarterly EBITDA of BRL 519 million and a 41.4% margin, driven by strong asset performance and the Tora acquisition.
AI Generated. May Contain Errors.
Earnings Conference Call
National Steel Q2 2025
00:00 / 00:00

There are 1 speakers on the call.

Operator

Good morning and thank you for holding. At this time, we would like to welcome everyone to CSN's Earnings Conference for the 2025. Today, we have with us the company's Executive Officers. We would like to inform you that this event is being recorded and all participants will be in listen only mode during the company's presentation. Ensuing this, we will go on to the question and answer session.

Operator

We have simultaneous webcasts that may be accessed at ri.csn.com.br, where the presentation is also available. The replay of the event will be available after closing. Before proceeding, we would like to state that some of the forward looking statements made herein are mere expectations or trends based on current assumptions and opinions of the company's management. Future results, performance and events may differ materially from those expressed herein, which do not constitute projections. In fact, actual results, performance or events may differ materially from those expressed or implied by forward looking statements due to several factors such as general and economic conditions in Brazil and other countries, interest rates and exchange rate levels or prepayment of debt pegged in foreign currencies, protectionist measures in The U.

Operator

S, Brazil and other countries, changes in laws and regulations and general competitive factors at a national and international level. We will now turn the conference over to Mr. Marco Hebello, who will begin the company presentation. You may proceed, Mr. Hebello.

Operator

Good morning, everybody. It is very satisfying to present the results of CSN for the second quarter twenty twenty four. We begin on Page two, where we show you the highlights for the quarter, showing our strong resiliency. The company had an EBITDA growth in all segments, except for mining, impacted exclusively by a drop in the iron ore prices. This performance shows the excellent management of cost and expenses and diversification of investments with synergy and a very assertive commercial strategy.

Operator

We have had significant increases in competition with imported material. Of course, we have the reflection of the tariffs increased by The United States. CSN reached an EBITDA of BRL 2,600,000.0 with a margin of 23.5%, an expansion of five percent and one point four percentage points vis a vis the first quarter twenty twenty five. Additionally, we're moving ahead in our deleveraging with a very active management of cash and reducing the gross debt. Only this quarter, the company reduced gross debt by 5,700,000,000.0 BRLs even with the incorporation of new assets like Toda taking leverage below, seven points vis a vis last year, making CSN ever closer to its goals for the year.

Operator

We go for the highlights of mining company had, volumes that were the second highest sales in history, which shows not only, that even in the dry period, we had enormous operational excellence throughout the last few months in the mine and throughout the logistic chain. Now this increase in production and the diversification of fixed costs had an impact on cash reaching less than $21 per ton this quarter, putting CSN in a very important position vis a vis world mining companies. Despite the improvement in volume, the EBITDA of mining dropped because of a correction of iron ore prices during the quarter. We go on to steel and we're very proud to show you the performance for this quarter. Perhaps this was one of the most difficult periods in terms of competition in the last few years with a flood of imported material coming into Brazil.

Operator

Despite this, we had a very conservative position prioritizing value over volume. We want to offer a higher return for the operation. This was a very assertive strategy contrary to the local producers that went into that war of prices and volumes. We were able to present a very strong performance, 4.5% higher prices vis a vis the second And a stronger cost control during the period allowed us to have a cost control result in a 79% increase year on year for EBITDA, and we reached 10.8% margin for the quarter.

Operator

If we look at cement, we can observe that the favorable seasonality in the period points to the incredible resiliency with growing volumes and new launches with a quarterly growth of 8% in our sales volume. If we follow this dynamic, we also had reaction in prices with an expansion of 10% net revenue vis a vis the first quarter twenty five. Now this situation offset the cost pressure in raw material, allowing us a 2.3 percentage point increase in profitability with an EBITDA margin for cement of 24% for the period. Finally, and not less important, at the bottom of the slide, we have two great achievements for our business in logistics, a new EBITDA record because of two factors, a very strong performance in the real model. And of course, we have incorporated the Torah numbers, a recent acquisition.

Operator

Now the EBITDA reached $519,000,000 in the first quarter with an EBITDA margin of 41.4%. In terms of energy, the results were extraordinary because of the increase of prices in the period with an EBITDA fivefold higher than in the same period 2024. Now let's go on to the next slide where we show you our EBITDA margins and EBITDA for the second quarter. There's a quarterly increase of 5% for the period and a drop of EBITDA in mining offset with a sound growth in all of the other segments of the group. Once again, it's important to have a diversified operation, granting us greater resiliency and withstanding the pressures in some markets.

Operator

As a result, the adjusted margin reached 23.5% for the second quarter, an increase of 1.4 percentage points for the quarter. On the next slide, we show you our investment activities for the period. You can see a growth of 18.2% in CapEx vis a vis the previous quarter because of the seasonality of the period and the advance of the P15 infrastructure period for the mining sector. Compared to the same period in 2024, CapEx remained stable with advances in mining offsetting the lower investment in the steel industry. This shows you a higher concentration since 2025 in expansion and productivity, offset with the reductions that we have in some areas.

Operator

Let's go on to Slide number five, where we show you our net working capital. There has been an increase of 25% in the quarter vis a vis the same quarter last year and we're trying to offset accounts receivable drop. On the following slide, we show you the adjusted cash flow that was negative by BRL1.4 million, million previously. Despite the growth during the period, this shows an increase in the volume of investments to accelerate expansion projects and the negative impact of financial expenses, especially the impact of the blast furnaces. Additionally, the higher consumption of working capital also had a pressure on the cash flow for the period.

Operator

In the next slide, we show you the net debt and leverage for the company and the debt during the quarter. In the graph to the left, the message is the new reduction of leverage that we have during the period going from 3.33x in the first quarter to 3.24x this quarter. The company has been able to ally an efficient cash management with sound results, maximizing volumes with a cost control and of course an increase in efficiency. This is a continuous effort of the management during this year, reducing its gross debt. Only in this quarter, we had the reduction of BRL 2,100,000,000.0 for the quarter.

Operator

For the year, it is BRL 5,700,000,000.0 less. Now the company will comply with its guidance projected for the end of the year. And of course, this despite the moments of uncertainty and the lack of forecastability, but we continue on reducing our debt. We're working with recycling capital in the group as an alternative to liquidity and for our cash. The main project presently is that of CSN infrastructure, which is in its concluding stages.

Operator

It will lead our negotiations until we have a more formal, response at the end of the year. When we consider the debt of CAAA, our debt will drop to 3.2 times and this will represent a reduction of 29 basis points for the period. We now go on to slide number eight with our indebtedness profile. You can see that we're still in a rather comfortable position with our short and medium term obligations. We have sufficient money to comply with our commitments for the next three years.

Operator

We also have a very active management in terms of lengthening the debt, extending the amortization term, focusing on long term operations and the local capital market. We have begun bilateral contracts primarily concentrating on amortization flows between 2027 and 02/1930. With this, we can go on to Slide number 10, where we show you the highlights of the steel segment. In this first slide, you see the results of our commercial activity with a reduction of 11.5% in the sales or 10% when compared to the 2025. This is because of the strategy adopted during the period of results and, margins over volume.

Operator

The market has intense competition and literally a flooding of imported material. We did not enter the price war. We have lost a bit of market share, but we see that the market is being highly pressured. And in a consistent way, there is no adequate protection to guarantee a good protection. In the foreign market, it was somewhat lower due to seasonality and the impact of tariff disputes on foreign trade and anti dumping measures throughout the world.

Operator

When we look at the following slide, steel production, we see that the drop in production is due to the maintenance shut down of Blast Furnace 2. It begins to show the positive results for the cost of slab and performance per ton. To the right, we can see that the cost of production dropped during the quarter while the reforms per ton create a performance which is almost double than what we saw in the last quarter. This efficiency can only be shown after we improve the operations of our steel product. Now let's go on to the financial performance of the steel mill.

Operator

And we see a different anatomy in our results because of the strategy. We have revenues dropping because of the lower volume sold, but offset with an improvement of prices during the period. We have a sound recovery of EBITDA 79% higher than the same period in 2024 and with an EBITDA margin of two digits reaching 10.08%. This increase in profitability is because of the strategy followed by the company, avoiding the prices and focusing on products with a higher profitability. All of this is even more impressive when we consider what is happening in the market, of flooding, of imported material and the measures implemented by other countries, especially The United States.

Operator

In this context, CSN has been able to deliver stronger EBITDAs in 2025, and steel is an important vector of growth for this year. We now go on to the mining segment on Slide 14. You see the results of production and sales for the last quarter. There are two extraordinary results here, a record of production, the highest volume produced in the history of the company, but we also have the operational efficiency that the company has been able to achieve in the last few months in the mine and in the chain of logistics. This is the second highest volume of sales in our history with 11,800,000 tons sold, reflecting the operations that are excellent and the level of efficiency reaching very close to its capacity limits.

Operator

Regarding the financial performance on slide 15, even with the operational efficiency that we previous side, we are charging $10 less than what we had in the previous quarter. Well, the price of iron ore has dropped during the quarter. In the case of EBITDA, the situation was not different. With a strong volume of sales, the EBITDA in mining had a drop of 36% vis a vis the '25. This related to a drop in the price of iron ore because of the demand in China and the strong impact of the tariff disputes in The United States.

Operator

In the following slide, we have the EBITDA reconciliation with the previous quarter. We can see that the decline in EBITDA occurred despite the increase in volume, improvement in mix and cost reduction due to a drop in prices. Let's go on to analyze cement on slide 18. We have the sales volume for the quarter. Once again, we see a very dynamic segment despite the interest rate with the program My House, My Life and because of the robust volume of launches, keeping up the consumption of cement.

Operator

We have been able to make the most of our logistics network to capture new markets. We had a growth of 8% in the sales. That is proof of this trend. When we compare this with the same period of last year, there's a minor drop of 4% on a very strong comparison base. On the following slide, we have the financial performance of the segment.

Operator

This year, we have a quarterly increase in net revenue and EBITDA. This result was thrust because of the positive seasonality in the period. We had drier weather and we also had a sound launch activity. EBITDA increased 21% showing that although the circumstances surrounding us are very difficult, especially because of the interest rates, the sector continues to show strong new launch activity and a robust profitability. Finally, we will go on to our logistics segment, and the main highlight is the incorporation of TORA.

Operator

We have done this to strengthen our logistics sector and to enhance the synergy with the other, businesses of the group. Nowadays, STORA has, 75 branch offices, seven enterprises, five multimodal terminals and three owned and third party vehicles and a dry port. The company invoiced BRL $319,000,000 with an EBITDA of 86,000,000 and a very interesting margin of 27%. We go on to Slide 22 with the financial performance of all of our logistic assets. During the quarter, we had an extraordinary performance with a record in results, attaining higher levels of efficiency in the cargo handling and shipments.

Operator

We had an evolution in net revenue and we attained million BRLs for EBITDA and an EBITDA margin of 44.1%. Well, the drop in EBITDA is due exclusively to the acquisition of Torah. This model, rail model, of course, has one that is somewhat lower than railroad in general. Now with this, I would like to end the presentation for the segment, and I give the floor to Elena Gaja to speak about ESG highlights. Good morning, everybody.

Operator

Well, the results of the last quarter continue to show the strides in our ESG journey. In terms of occupational health and safety, we have, consistency. They are 30% lower than the results we had a few years ago in 2020. We are now in another level. We continue to present a lower number of high potential severity events, which has been the focus of our actions in 2025.

Operator

In the environmental agenda, we have very positive indicators. We have a reduction in water intensity and steel production. And in our decarbonization journey, we had a slight increase in the emissions from the steel plant because of the increase in volume, but we reached a reduction of 11% in GAHG emissions compared to the baseline year 2020 and three percent of GHC emissions compared to the baseline year 2020. Now we want a cost efficient decarbonization with investments and projects that will increase our operational efficiency and, of course, reduce our CO2 emissions. All of our tailing dams are stable and decharacterization in line with the project we have set forth.

Operator

In the social and DEI agenda, we have made steps. We have more than five twenty women that have been added when compared to 2024. This is an increase of almost 80% of female representation since we began this goal in 2020. We also have a 5% increase in the number of women in leadership. We have received the Ugo Vernek Award for environmental and sustainability for and we're working with Garoto Sidadam project that for twenty five years has been changing the life of youngsters.

Operator

And finally, we have a protocol reinforcing the quality and transparency of our information. The permanence of the company and FTSE4Good. We're also part of FTSE Russell because we have consistent practices and a constant evolution when it comes to, social and governance indicators. Thank you, Elena. I will now give the floor to our chairman, Benjamin Steinbruck.

Operator

Good morning, everybody. Once again, the presentation of results of CNCen. I would like to mention some points specifically that were conveyed and presented by Marco. First of all, I would like to underscore the operational results that we have been able to achieve in all of our activities, the improvement of industrial performance, a reduction of costs, and an enhancement in productivity. This, of course, is our number one priority at present.

Operator

We had already presented good results in mining as well as in cement from the viewpoint of cost and productivity, and we have had significant evolution in steel in the steel mill as we have been mentioning through time. And we now see the results of this. We're working with less equipment. We're attempting to increase production and, of course, to improve our costs. This is our main priority at present, and we are undergoing evolution in terms of the steel mill, and the results have begun to appear.

Operator

From the viewpoint of all of our other activities, we have had very good performance. And, of course, we have had challenges because of the imported products. In the case of the steel mill, everything is coming in in a highly disorganized and exaggerated fashion. We are the only country that has allowed this literal flood of imported products, and this has a negative impact on the market, of course, as we're offering them our domestic demand domestic demand for imported products, and this has completely disorganized the sector. The import levels are much higher than the CSN production per se and brings about a hostile environment, a disorganized and aggressive environment, which hampers overly hampers everything that is produced in Brazil.

Operator

Now that issue of imported products, something we have been fighting against, We have been negotiating to the government with. And although our conversations are heard by the ministry of industry and development, we have not made any strides. We have been involved in this conversation for quite some time without any concrete measure being taken. Now we're waiting for the manifestation of the Brazilian government. All other countries have set forth protectionist measures.

Operator

Now without mentioning The US to export there, we would have a tariff increase of 50%, which makes any attempt or idea to export there unfeasible for the moment. I hope that at some point in time, these measures will come because this sector is suffering much too much because of imported products. Cement has had a good performance, good growth, and good demand. We have significant internal competitiveness among the producers of Brazil. The market is there.

Operator

Our price is half of the foreign price for local cement producers, but, this has been going on for some time and will undergo adjustment. In the case of mining, we had exceptional performance. We had a drop in the plots. Of course, we are competitive. We have a low cost, and we do believe that this market will, end up at a 100, a $110 as part of a technical outlook for the price of Platts.

Operator

But I do think better results will come. As for the rest, we have a very stringent strategy when it comes to our cash. We're adopting all possible measures to be able to work with a lower working capital. And we have obtained results in this field. Our deleveraging commitment is ongoing.

Operator

We're going to work very strongly to comply with our commitments, and we do expect an improvement in the market as everything has been set up. It's operational. The strategy is the right one, and we hope that with a price improvement in the market at some point in time, there will be a reaction, and we will see this in our numbers. The company as a whole is deploying enormous effort to produce well at a lower cost and to make the most of the strategy and the market potential. We're working in all segments.

Operator

We're working in niches and diversification of product. We're doing everything within our reach to get to the market with very good offers, with good products, with high quality. And within what is in our hands, we're doing everything. Now progressively, we have had an improvement quarter on quarter, and we continue to believe that the coming quarter will be even better than the second quarter of this year. I would like to thank all of you once again for your attendance in the earnings call.

Operator

Our team is at your entire disposal for questions and answers. Thank The first question is from Mr. Yuri Pereira from Santander Bank. Your, microphone has been activated. Thank you very much.

Operator

If possible, I would like to have more details, on your eventual partner in infrastructure. How much could you reduce your leverage because of this and your sale of stake in Usiminas? Will you reduce your stake to zero or will you comply with the CADE, the antitrust company of 5%? Yuri, thank you very much. Thank you for the question.

Operator

Regarding the first question about infrastructure. I am sorry. I was looking at the second question. We have two different compositions. We have seven logistics asset in logistics and infrastructure, two of which are in the final stage of construction, the Transnordestina.

Operator

And I take advantage to tell you that they are hiring the last two stretches of construction. They will be completely concluded in 2027. In seventy days, these pieces of construction will be concluded. The entire part is available to conclude construction. There are no problems with licensing, no bottlenecks.

Operator

So until 2027, they will begin commercial production. And in 2025, they will begin working with commissioning. So we have seven assets, two under construction, and the discussion with the potential partner will depend on the profile they want for their assets. Two under construction, three in the Southeast, three in the Northeast, and one with an expansion in a somewhat larger region that we have just communicated. Depending on the logistic combination, those that have greater adherence or greater appetite with well, the investment, both primary and secondary, and the company could vary.

Operator

We are hoping for a stake, we have a stake of 20 to 40% that could be sold in this operation. Now if we don't take into account the assets that are under construction or if we don't consider the Northeast Cluster, we could reach 8,000,000,000 BRLs in terms of liquidity injection and reduction of leverage in the group in this first phase with the assets of only the Southeast. Regarding the second question of Usiminas, so far, we have not defined the next step when it comes to selling off our stake of how much will be sold and in which fashion this stake will be sold. Marco, simply to complement this Regarding the infrastructure, as Marcos mentioned, we have two packages, two under construction, five assets under operation that are quite equivalent. As Marco said, they represent 8,000,000,000 BRLs.

Operator

This is what we have calculated theoretically based on a value of 25,000,000,000. These five assets represent this amount. We also have similar amounts when it comes to the Transnordeschina and Nelog at the Pesen Port. We have a thousand kilometers that have been concluded. They're open for traffic, and you can calculate per kilometer 20,000,000 very broadly, of course.

Operator

And, coincidentally, these packages are more or less equivalent. What we are discussing now is to see if we will offer simultaneous treatment to both of these or if we're going to prioritize the Southeast first and then the Northeast. Everything will depend on our conversations with interested parties. And for this, we are considering, the choice of who will be our advisers. We're in the final stages of this, and we will begin our negotiations immediately.

Operator

This simply to complement the, answer to your question of what we have in our infrastructure package for CSN. Thank you very much. Our next question comes from Ricardo Monegala from Sattra. Understand if that recent decision of dumping in pipe has allowed for new dumping, coated products and hot rolled products. Now I was, expecting weaker results in terms of margin.

Operator

So it'd be interesting to hear about the transfer following quarters, a margin expansion. Martinez, perhaps you could speak about volumes, prices and costs. Thank you very much. Ricardo, I will begin with the first question. In truth, as Benjamin mentioned, presently, Brazil is facing an issue of imports, something that is quite chaotic and that is leading to a market that is completely different from the one we had in previous years.

Operator

We have insistently discussed this with the market face to face meetings with the ministry of development and industry. What we clearly perceive is that if the technical issue would prevail, we would have already had to have applied all of the processes for a commercial defense. What we opted to do was to work on the anti dumping, as you mentioned yourself. Ricardo, in all of them, we saw dumping a causal nexus, and this has, of course, changed the nomenclature that is being used at the World Trade Association. Simply to give you an idea, metal sheet, we began the process in October 2023.

Operator

So far, there is no provisional right in force. Quite the contrary, they have postponed the decision month after month. And this is also the truth for cold rolling, for, coated products, and much more. We expect the government to become more serious, to be faster and to base itself on a technical response. There are margins varying from 25% to 75%.

Operator

From the commercial viewpoint, a technical viewpoint, it doesn't make sense for Brazil not to apply these antidumping rules. We continue to insist the process is much slower than we had expected, but there is time to recover all this and obtain an enforcement or implementation of rules. Another important point referring to commercial defense, the issue of quotas. One more time, the company worked with the first thing, but with a wrong intensity. So we are still on that track with the wrong dose.

Operator

Now, there was 75% from USA. We're working on 7.3. If we had applied 73%, we would have an import penetration that is not difficult to deal within the domestic market. We're now speaking of 28% of penetration of imported products as a whole. Now when we think about CSN, the situation is more dire.

Operator

We're speaking of penetration of 40 to 50% of, tinplate and prepainted 70% import penetration. So this is a scenario we are facing at present. The issue of antidumping, we continue to imagine that the government will approve a process for this in the coming two months. Antidumping and template, coated galvanized, and, coated products. Now we're also working with the, basically, a priority on these other products.

Operator

Now regarding the margins, we have sound results in the steel mill. What we have prioritized and this was mentioned here is value over volume. We have worked with product diversification with a focus on the higher added value products. We have prioritized all of the galvanized prepainted products in our product mix. And in terms of cost, of course, we had a positive evolution, allowing CSN to have margins of around 11%, for EBITDA margin despite the highly challenging scenario regarding imports and competitiveness with other competitors in the domestic market.

Operator

What is positive about Brazil, and I'm very optimistic with Brazil when it comes to demand, is that this year, we will probably reach a steel production for flat steel slab higher than in 02/2019. That was our record year for flat steel. Sorry, I'm referring to the year 2013. We should reach 16,000,000 tons approximately. So there is demand in Brazil.

Operator

The problem is that it is very difficult to capture margins. And the question of what we foresee for the third quarter, as Benjamin mentioned, we're going to continue to work on operational excellence costs. We're looking at each value chain separately, the imports will have to be combated combated in a timely fashion. We can't cut down prices and everything. And additionally to that, with a reduction in the cost of raw material, the cost of slab should have less than the $13,300 that were presented.

Operator

And in price, I see a situation If what is happening in China truly happens, the cost of PQ increased five percent with an improvement of production because of the premium that we have presently between 510%. Perhaps we could also have a price recovery in the third quarter. We have to be careful not to hand over the Brazilian market to foreigners. This is the concern of Brazil.

Operator

Brazil has demand. It has markets upstream, the white home products. We have a very good market, but we need to recover our profitability, recover margin, and not hand over our market to foreigners. This is what we have been doing in terms of slabs. That was very clear.

Operator

Thank you, Martinez. Our next question comes from Marcelo Arazi from BTG Pacto. Your microphone has been unmuted. Good morning. Two questions at our end.

Operator

First, a follow-up in terms of the steel. You spoke of a positive evolution in cost efficiency gains. Could you give us some details on the measures you are adopting to manage that enhancement and how this will evolve going forward? The second question, a provocation speaking about cash generation. Your cash flow is under pressure.

Operator

Do you have any visibility or idea on the CapEx flexibility we could observe until the end of the year? And if you will have another sale of assets without it being part of the infrastructure, something more in the short term to gain relief in your cash flow. Thank you for the questions, Marcelo. Well, regarding the steel mill, we have shut down the blast furnace on January 19. Now this made feasible one of the first actions to work with Coke and others in the Blast Furnace 3.

Operator

We have changed our load using a ritual iron ore for the blast Furnace 3. We also had significant evolution based on investments that were made last year for the production of our own sintering. And all of these enhancements on blast furnace three are leading to excellent performance in efficiency and also from the viewpoint of cost. We saw a cost evolution in our own brand in the last quarters. And the second quarter of this year will be the first quarter where we have the blast furnace three fully using these new loads that we refer to.

Operator

And with this, we will have a change in the iron ore. So the projection that we have of a reduction of cost in slab for the third and fourth quarters of this year are even more important than what we have seen so far without giving you the figures. So we have a very good expectation in the reduction of cost of our own slab going forward. Now this about the performance of the steel mill as a whole. We have several other projects that will be implemented leading the steel mill to profitability levels of other areas well above the two digits, much more than we reached in the 2025.

Operator

Now regarding CapEx flexibility, the CapEx for this year is between 6,000,000,000. The focus of the company is in the low range of the CapEx, closer to the 5,000,000,000 BRLs. Now to change that CapEx significantly will not be beneficial for the company. Most of it is, geared to expansion projects and an increase productivity. These projects were done in the steel mill and for some quarters, they're showing us the benefits of these projects.

Operator

We have to put them in place. And the p 15, once it will be ready in 2027, this will generate another BRL 4,400,000,000.0 in EBITDA. So this is a project we have to speed up. We cannot hold it back. Now with these 5,000,000,000 reais, it has undergone a very important exercise, a daily exercise in the company in terms of monetizing our assets.

Operator

Besides infrastructure, we're holding a discussion with the market. We're speaking about energy, bringing in a partner for that segment. It's not of the magnitude of infrastructure, but it will also help us. And we have additional initiative in a phase of approval, I hope that in the next earnings call or before, we will be able to mention them. But we are working on other initiatives.

Operator

We're waiting for internal approvals to inform the market regarding this. That was very clear. Thank you very much. Simply to add to this in the first question, you asked if there would be faster options, more expeditious options that we can propose in terms of deleveraging. All of the options mentioned by Marcos, all our alternatives for deleveraging, they're all for the short term, including that of infrastructure.

Operator

We're hiring our advisers at present, and our ideas to move forward at a fast pace. Of course, everything will depend on the market opportunities, but the interest in infrastructure, it's quite different from all of the rest. There is a demand for, investment in infrastructure projects in Brazil, especially in railroads and ports. And alongside this, we are also holding some conversations. This simply to point to the fact that all of this will be for the short term.

Operator

We have structured ourselves to work very expeditiously in this option as well as in other options mentioned by Marcos to attain the fastest results towards deleveraging. Thank you. Thank you very much. The next question is from Marcio Faridji from Goldman Sachs. Your microphone has been activated.

Operator

Hello, everybody. Thank you for taking my question. A follow-up for steel. Martinez, you spoke at length about the market. If you could speak about long steel, there was a price recently and I believe that the, increase was aggressive without speaking of imports.

Operator

The, long steel and which have been your conversations with the government. Benjamin mentioned that at the beginning of the conversation that despite all of the efforts, all of the measures adopted have been insufficient. So thinking about the future with this discussion of tariffs and the coming closer of the government with China, which is your mindset to think of a more protective measure for the sector? My second point, and do forgive me for insisting on this, you spoke about your the sale of a stake to Usiminas. Benjamin, I would like to understand if there will be a more aggressive movement towards the sale of assets.

Operator

The surprise was not only because of the timing, but because of the price at which these shares were sold to, it's the market. There wasn't much choice. And now simply to understand if there has been a change of mindset to do something more aggressive in the coming quarters and years to clean out your balance. That is it. Thank you very much.

Operator

Hello, Marcio. This is Martinez in Longsteel. Longsteel was better than slab. Lack of coordination of the Brazilian segment. Everything that was done so far hasn't brought about an inch more of a new market or growth in the Brazilian market.

Operator

So everything was unnecessary. To give you an idea, our sale of long steel in the second quarter fell 12% because the prices reached a level with a base price for long steel cash payment without taxes at $3,303 400. This is a extremely low cost, and we have preferred to remain outside of this market and work in other markets. In the long steel market, we're going to increase the price on the first, an increase between 810% in rebar and others. And this is insufficient, of course, to recover our margins in long steel.

Operator

But this is what's happening in the sector. We follow-up on what the market is doing as long as it is reasonable, and it was not reasonable in the first quarter. And we expect a recovery in long steel in the second quarter and a recovery in profitability. And because of the need to increase, the EBITDA margin of the steel mill as a whole, in the specific case of the conversations we are holding with the government, I participated in all of these conversations. What can I underscore?

Operator

We have a ministry of development industry and services that is highly technical. They carry out excellent work in the technical part. They come out with pieces of commercial defense. As I mentioned previously, all of these without exception, without speaking about damages and causal nexus. What's lacking courage on the part of the government to clearly enforce without thinking about anything connected to politics, the economy of competition.

Operator

What could be done immediately, nothing that is very different from the regulations of the World Trade Organization is a provisional cost for all products, tinplate and other galvanized products, something that should be enforced immediately because through time we see that China besides, well, it's also facing a commercial defense in other countries of Asia. It exports to Vietnam, to Korea, the European Union, and to Brazil, 1,200,000.0 in flat steel. So what what we're lacking is courage and that will to take the industry to another level in Brazil. What is more important, Marcio, is that we do have demand in Brazil. We have sectors that are making due regardless of what is happening in terms of politics with The USA and China.

Operator

And what we truly need is a quick implementation of measures. We don't want to hand over our market to foreigners, which is what we're doing now. A non hedge market being handed to players, the largest of these players, of course, is China. Now this is the scenario we will be facing in the coming months. Perhaps in the third quarter, we will have the enforcement of one or two, provisional antidumping, rules.

Operator

Thank you. Thank you very much. To complement what Marcos has said, despite all of the conversations held with the government warning them about the growing volume of imported products in the steel sector and despite the positive conversations we have had with the ministry, of development and industry and with vice president Alkeming, we have always been treated very courteously with high level technical discussions. But as we have mentioned in one of those meetings, what we are lacking is the will of the president of the country. This goes beyond the government.

Operator

We need to have a clear manifestation of the president, his concern about the industry, what we're doing in the industry, what we're doing for employments in the industry. We're literally being run over by the volume of imported products in a highly chaotic fashion, and we need the action of the president to decrease this imminent risk that we are running of losing employment and the industry itself in general, not only the steel industry, but the industry as a whole because of the strong attacks we are under. And some of the exporters have no cost. They try to make exports feasible. They're not concerned with cost or price.

Operator

I believe that we need a presidential action signaling how the industry will be treated going forward, what they're going to do with the employments of industry, and what they're going to do with investments because we find ourselves in a highly critical moment from the, viewpoint of our assets, our sale of assets. We're always going to proceed in a organized and structured fashion. The goal, of course, is the deleveraging, and it's not worthwhile having great figures. We have good EBITDAs. We have a margin.

Operator

Even though we have lost significant margin in the last few years, the margin continues to be reasonably good between 2530%. But we do have that commitment towards ourselves to deleverage, and we have several assets to work with. It's not only infrastructure as a whole. That's, of course, our largest package in the Southeast and the Northeast, as I mentioned previously. And Marcos gave you the idea of 8,000,000,000 for each package.

Operator

I am convinced that we have that will, we have the determination, and the need to carry out these sales of assets. Notwithstanding this, we have to wait for the right moment with the right partner. We're working strongly on this. This is our highest priority along with a reduction of cost and enhancement of productivity. Now the issue of deleveraging is our great priority, and we will work with it in an intelligent and rational way and in the shortest period possible.

Operator

Thank you very much, Benjamin. That was excellent. Our next question comes from Daniel Sasson from Itau BBA. Your microphone has been activated. Good morning.

Operator

Thank you for taking my questions. My first question comes from that slowing down of CapEx and sorry, the increase of pace in investment because of p15 in mining. What is happening with the milestones that you presented on CSN days and your expectations in terms of expansion? If you could also speak, and I'm referring to Martinez about the cement business. Martinez, vis a vis our numbers, I think it has become very clear that you have diversified your business.

Operator

You have diversified the flexibility. We are speaking of cement and logistics. The cement market in Brazil hasn't recovered from the lows a decade ago, but we're still falling short in terms of the use of capacity, and the prices continue to be the lowest in Latin America. If you could discuss with us the main levers to add value to this business. Thank you for doing that.

Operator

This is Marco to speak quickly about p fifteen. Now, what is still missing is the infrastructure that is proceeding at a very fast pace. We just closed a huge package of civil work that will begin subsequently. Everything referring the packages of equipment, the core equipment and main equipment of p fifteen have already been contracted, some of which are already at the site or at other sites awaiting for their setup. What we're missing are small assembly works, accessory works that will have to be mobilized the second semester of the coming year and therefore will be contracted in the future.

Operator

Now the forecast for delivery is the 2027. Hello, Danielle. Thank you for your question regarding cement. You're one of the few that cover this sector, and we love to speak about this new sector. I have Edivaldo beside me.

Operator

He's responsible for the operational part. I will respond for him because he's somewhat hoarse today. And, in the market, I spoke about steel where we have the priority value over volume. In cement, it's volume and volume based on our platform that is highly competitive because of our operational excellence, logistics, the commercial strategy, the distribution centers and much more, we have reached our maximum potential in the business. We grew 8% in the second quarter vis a vis the first quarter.

Operator

It could have been a better growth, but we had some operational problems in the Northeast. They have been fully, redressed, in price, a recovery of 2.5% for the second quarter. What you said is important. Brazil has an enormous opportunity to increase prices. To recover prices, it does not make sense in a market like Brazil to work with price levels that are lower than those of Latin American markets and China as well.

Operator

Our efforts in cement will be ever more geared to look for each ton with a higher value using our market coverage, the increase in number of customers, and based on the commercial strategy that so far has been quite successful in terms of operational excellence. We see that raw material for steel have a tendency to go through a drop in the second half of the year. We hope to be able to see a drop in costs as well, especially for raw material for pet coke. At the end of the third quarter and fourth quarters, we imagine we will have materials and an inventory with a somewhat higher cost. Now additionally to this, we are maximizing the production of all of our assets of our 13 operations.

Operator

We continue to increase the fragmentation by setting up new distribution points, distribution centers, reaching an ever more lower ticket. This is our strategy to look for this profitability of 25%. And the Brazilian market is doing well presently. For example, let's talk about the, Minascademia Vida, my home, my life sector. It's doing very well.

Operator

We have constructions for the higher bracket, the middle class doing very well, and there is some work in infrastructure in the Southeast East that are leveraging our volume. So once again, CSN has fantastic assets in cement. We imagine that we will reach a total potential with the synergy that we have in the coming six months in terms of operations and logistics as well. And Tora Transportation that we acquired recently will be an important lever to work on freights transfer and with the end markets for cement. As a whole, to speak about Brazil, What we foresee for the second half of the year is the continuity of this growth in the cement market.

Operator

And for the coming year, we're working with a very positive scenario, imagining the carryover of works we have in the real estate market as well as in infrastructure. The main challenge, as you mentioned, is to recover margin. CSN has done its part, but faced with very strong competition in the market. We're going to continue fighting, but working with the best margin in the sector, which is our goal. Thank you, Danielle.

Operator

Thank you. Thank you very much. Our next question comes from Caio Ribeiro from Bank of America. Your microphone has been activated. Good morning and thank you for taking my question.

Operator

My first question is on the evolution with China, which is the mindset of the company on the policy that will have an impact on Brazil and iron ore? Now the second question for mining, there are lower grades of iron ore. How has this impacted your commercial decision? How are you selling the product in the market? Some players are reducing the sale of this lower grade iron ore.

Operator

How have you adjusted to this present day market moment? That would be very helpful to us. Thank you. Caio, I'm not sure I understood your first question. If you could repeat it.

Operator

The question is about the policy that China is mentioning about resolving the oversupply problems in some sectors. Of course, the steel sector is one of the goals. So which is your mindset on the impact on Brazilian steel industry and the iron ore market. I'm going to speak very generally of what is happening in China at present. An important point, Caio, is that we already clearly perceive that the price has had a result.

Operator

We see the, BQ cost increased 5% the last week. Now another interesting piece of information, something that did not happen, the ASEASA, the Chinese Association of Steel, has been working on the coordination of those industries of all the steel plants in China. Nowadays, in terms of occupation, we have a use of blast furnaces of 87, 89, but only 55 to 60% of these plants have a positive margin. Now, obviously, in China, the greatest use of them is employability. And, well, when the problem hits, they try to occupy production further.

Operator

We're working with a scenario of reduction in production in China in the next three to four months. And this could have a positive impact for Brazil when it comes to the premium. In Brazil, the premium vis a vis Chinese PQ is between 510%. And we if there are 20 or $30 more, which is the price of the Chinese domestic market, the price of PQ in China is $500. Now, we can imagine neutrality in premium in Brazil or a price recovery in the country.

Operator

All of these reductions in production are being better coordinated by Association of Steel Producers. This is an important piece of information. Now despite this, the exports from China continue at a pace of 90,000,000 per year. The government has also acted, on the environmental issues. They're incentivating modern plants to use cleaner technologies at present, and they could increase the use of the assets that have higher productivity, closing down capacity that has a higher cost.

Operator

Now the impact for Brazil, in my opinion, speaking honestly, Callio will be very positive, and that is why I'm positive. This is what we were missing for the steel plants in Brazil. We have a market. We have demand. As Benjamin mentioned, perhaps the presidential decision will be to work with protection or isonomy that would be important for Brazil.

Operator

And finally, in this world scenario, China could help us in terms of profitability in the Brazilian market, exporting at different levels. For iron ore, I will give the question to Marco. But in iron ore, you have already observed that we're working at somewhat higher levels. This is an opportunity for the Brazilian market as we will be able to capture based on the price of PQ a higher profitability for the third quarter. Tayo, regarding the question on iron ore.

Operator

Now the price of China is strong. The volumes, have also hit several records. We have focused ever more on the low grade iron ore produced in China. They're working well, they're working with higher volumes of low grade iron ore. Now because of quality issues, last quarter, was at $14.

Operator

Presently, it is at $15 and should remain at that level until the coming into operation of p fifteen. This will change the quality of iron ore, and we will have a completely different impact due to loss of quality, of course. Our next question comes from Tatiana Canceini from JPMorgan. You can ask your question. Good morning, everybody.

Operator

Thank you for taking my question. I simply have some follow ups on previous questions. I begin with the sale of stake at Usiminas, the sale of assets, the idea of carrying out partnerships in the segment. I think all of this has been made very clear. I'd like to understand more about your sale of stake.

Operator

This is a moment in which the industry has suffered considerably. We see the industry. We see the shares dropping. I would like to understand if the rationale of that sale of stake was based on a decision of the antitrust agency, the CADI, which was the rationale. The second question, something that has already been discussed refers to the steel segment.

Operator

It was the positive highlight of the quarter. We have seen industries with lower margins, but you delivered a very sound margin. The question is that over volume. Now how do you look upon your strategy for the long term? Can you continue following this rationale for much longer?

Operator

Can you maintain that strategy in the third quarter? What will you do in the long term, however? Thank you. Thank you for the questions, Tatiani. First, the sale of stake to Usiminas.

Operator

It's not very frequently that we're able to find a buyer that wants a volume of shares from Usiminas as we transacted this week. The liquidity of shares, the common shares and preferred shares is very low. If we carry out a sale of all shares through the stock market, it will take us years to sell all of those shares to the market. To find an investor at present is not something that you will find very easily. And clearly, we're following the agreement that we have with the CADI, the antitrust agency.

Operator

Tatiani, once again, you for your question. It's what you said in the report. CSN among the Brazilian companies industries is the one that suffers the greater pressure because of the imports. This is doubtless because nowadays, practically 50% of what we do is linked to higher quality products. And, well, this is the one that has the highest import rate in Brazil.

Operator

And in this scenario, CSN, as you mentioned, in the second quarter was the only industry that hiked up its prices. If I take away the long steel for our from our balance where the drop of prices was greater, we increased the price 2% to 3% in the second quarter to 2.5%. Working with that over volume in the third and fourth quarter, what do I believe will happen and what will help us maintain our profitability with a two digit margin? First of all, the operational excellence, the issue of cost, the endless work in cost optimization of our assets. We're working with one blast furnace less.

Operator

Despite this, we have complemented production with a regular purchase of PQD and slab. This is helping us to maintain our costs. Now additionally to this, the cost level of slabs will go from $3,300 to 3,000 BRLs per ton, which offers us a comfortable position. Now still speaking about cost, we have worked broadly in terms of coke and sintering to attain the maximum output to buy as little as possible of pellets and coke. In the commercial pillar, and this means enormous movements.

Operator

We have never done anything this strong in the last few years. We have worked the most on our strategy of selling more for, for less, not putting all of our eggs in the same basket. We're selling in all sectors. We have increased the number of customers 50% in this first half of the year, and we're looking at added value, quality, and those who truly care about quality. This is something we do day after day.

Operator

Now in terms of prices specifically, I'm counting upon a recovery of prices in some markets because of that level of equivalent of premium compared to the imported nationalized product. Now to work with those prices in China, we could slowly recover slowly. It's not a strong movement, but we could recover in strategic sectors and we're going to work ever more on our portfolio. Work with prepainted zinc or galvanized material And we're also working with a tinplate market in Brazil where our margin is much better than in other products. Now the last point, I focus, a complete focus on the domestic market.

Operator

That drop that you see in the volume of total shipment is linked to the drop in exports that we had because of the galvanized material in The USA. Finally, I would like to underscore the good performance of our units in Portugal, Germany and The United States, where we have stocked up in material to be able to compete in the second half of the year. The results have been positive and will contribute so that in the third and fourth quarter, we can maintain our two digits or perhaps have a slight increase vis a vis the second quarter. This is our strategy so far. Now let's speak about the vertical integration we have with the strategic clients and users with our partnerships working hand in hand with distribution.

Operator

This maintains a healthy business vis a vis our competitors. Unfortunately, our competitors are working with a strong a wrong strategy taking away value from the market. Thank you very much. That was very clear. Our next question comes from Gabriel Baja from Citi.

Operator

You may proceed, Gabriel. Hello, Benjamin and everybody else. Thank you for taking my question. We have some follow ups, and I will be quick. I'm sorry to be so insistent, but a very direct question to understand if the sale of stake is because of the antitrust agency, Cadia, beyond what you have done, you have to continue doing something simply to have more clarity.

Operator

Now in terms of antidumping, there is a discussion of the Brazilian industry, and, of course, this is of the utmost importance. There has been a predatory situation. Now regarding anti dumping, this week, there was a discussion of the government introducing a lower tariff that would have an impact on the automobile industry, which represents an important part of the demand for Brazilian steel. I don't know if you can pressure the government if you're part of that discussion, if it's important for you. Which is your vision in this antidumping situation if there are other ways of going around this problem?

Operator

And finally, you speak about deleveraging. You have spoken broadly about investments, that trend of having a three times net debt EBITDA until the end of the year. Would like to gain an understanding for the medium term. You have a disinvestment of focus on deleveraging. How could we imagine that deleveraging for the coming year, which will be the path that it will follow and where it should stand, in mid, 2026?

Operator

These are my questions. Thank you very much. Gabriel, thank you for your comments and questions. I'm going to, refer to Usiminas. Of course, there's an agreement with CADI, the antitrust agency.

Operator

There's also a certain level of confidentiality at the level of justice. Now this sale that was done now is a very important, relevant, and material part of our compliance with the agreement with CADI, but it doesn't refer exclusively to them. It's an incredibly important step in our commitment with the antitrust agency now regarding deleveraging, besides the infrastructure and logistics that we spoke about at length, we have improvements in our operational results that will deleverage the company in all segments. Logistics is growing considerably with record results at present, not only because of the acquisition of Tora, but because of the result of its other assets. Well, cement, the steel plant with all of the investment, two digits with a EBITDA margin growing going forward and mining, which is also part of our projects at p 15, generating 4,400,000,000.0 in EBITDA and relevantly helping us to deleverage the group.

Operator

Besides this, we have the sale of assets. So besides the infrastructure in the coming months, we will have other novelties for the market. Now in the long term, the company always wants to work with a leverage of two times or below two times net debt EBITDA, we would like to go back to being investment grade, but this doesn't depend exclusively on the company. It depends on the market and the sovereign rating of Brazil. We've already given you guidance of this year being below three point o times.

Operator

And going forward, we want that guidance of the year to remain stable. The market should perceive that all of the enhancements and results that we will well, the projects we will deliver in 2027 depend on the investments we are making. We're going to balance out good investments and a reduction in leveraging. This is a daily exercise for the company. So in 2026, the year you mentioned, the leverage should be around three point o times.

Operator

This is a challenge for the company. Gabriel, this is Martinez. Once again, thank you for the question. I'm going to speak about another side of the commercial defense issue from the viewpoint of commercial defense. Practically everything that could be done in Brazil in terms of instruments have been done.

Operator

In the specific case of CSN, we focus a great deal on anti dumping. We have been working on this for a year and a half and the Ministry of Industry itself has received us very well. The Vice President Alkeming has lent ears to everything we say. He loves the process but we don't see any results. A year and a half to discuss this is much too long.

Operator

First of all, we need to have courage to make the decision to implement what the ministry should do, in technical terms to set forth margins. They have to have courage. As Benjamin mentioned, this is something connected to the president of the republic. And in terms of the third point, the government needs to focus more on the industry. This is a sector that has been left aside in Brazil in the last two years.

Operator

So there's an important focus for industry. We're not speaking of direct imports. There's also direct, imports coming to Brazil in terms of products, and this makes the production chain rather uncompetitive compared to other countries in the automobile industry. And interesting fact, they have no imports practically. The level of services, the quality we have delivered to assembly plants in Brazil so far has been sufficient to compete in the domestic market.

Operator

The problem is that the competition with the Chinese is unloyal competition, completely disorganized, and the government has to work towards a balance between imports and competitiveness of the automobile chains. This is the problem, not having protect protection, having and something more reasonable so that the Brazilian industry can enhance its competitivity vis a vis other industries in the world. As we have no further questions, I will return the floor to Mr. Marco Jabello for the closing remark. I would like to thank all of the members of the CSN group who have contributed to our deliveries.

Operator

I thank all of you for attending our earnings call. At this point, we would like to end the call wishing all of you a very good weekend. Thank you. The earnings call for CSN ends here. We would like to thank all of you for your attendance.

Operator

Have a very good afternoon.

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