Brazilian steel company Companhia Siderurgica Nacional (SID) tends to use the initials, CSN, on its literature and website, despite its different ticker. CSN is a vertically integrated iron ore mining and steel production company. The company even owns a railroad to get ore from the mines to mills or port, and it owns the port to load iron ore for shipment overseas. Companhia Siderurgica Nacional’s revenues break down to approximately 60 percent steel sales, 30 percent iron ore sales, 7 percent logistics (the railroad and port), and the few remaining percentage points are production and sales of cement and electrical power.
CSN generates almost 100 percent of its steel sales revenue inside Brazil and 90 percent of iron ore sales are out of the country, providing investors exposure to Brazilian economic growth and to the global commodity market.
The CSN business and share price are cyclical with both the global and Brazilian economies. That said, the company maintains an impressive level of profitability as revenues rise and fall. At the end of the 2008 commodity prices downturn, CSN's EBITDA profit margin was 28 percent of sales. By the fourth quarter of 2009, the margin was over 40 percent and remained above that level through the first quarter of 2011.
For 2010, CSN reported net income of $1.79 per share. Current Wall Street estimates have the company earning $2.29 in 2011 and $2.77 in 2012. In spite of this level of projected growth, the share price currently sits about 35 percent below its 52 week high.
The share price as a dollar-denominated ADR will tend to follow the broad Brazil stock market in dollar terms. The overall Brazilian stock market has been in a down trend so far this year.
The most recent analyst action on the company was a downgrade by Barclays Capital. The stock was reduced from portfolio overweight to equal weight.
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