CSN stocks and bonds sink as new CEO tackles leverage and weak quarter

Results under pressure

CSN swung to a quarterly loss, posting an adjusted net deficit of 1.25 billion reais ($222 million) versus a 76 million reais profit in the same period last year. Adjusted Ebitda landed at 1.88 billion reais, down 43% year over year and short of the 1.94 billion reais analyst average tracked by Bloomberg.

Costs climbed and iron ore realized prices fell, dragging results. Management also flagged seasonally softer steel sales abroad and rising cement production costs as additional headwinds.

Markets pushed back

In credit, CSN's dollar notes fell broadly, with the actively traded 2031s declining by 3.38 cents and trading at 48 cents on the dollar at 11:06 am in New York, per Trace data compiled by Bloomberg.

Leverage remains heavy. At quarter-end, CSN's net borrowings stood at 44.9 billion reais, and net debt to adjusted Ebitda rose to 4.23 times, underscoring the balance sheet constraint even after recent efforts to shrink obligations.

New chief's fix-it plan

Fabio Schvartsman, who took over in September, used his first earnings call to promise a full-court press on the finances. "We're at rock bottom, and from here there's only one possible way to go: up," he said, adding the reset will take time. The company has been selling assets to pare debt, and once the pending transactions are done he said he will seek lower borrowing rates and longer terms from banks.

One marquee sale is the cement business, agreed to be sold to China's Huaxin Building Materials Group for 12.7 billion reais. Schvartsman said CSN owns high-quality assets and is advancing additional sale talks, without detailing which ones.

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Mining squeeze and what to watch

The mining arm, CSN Mineração, cut its full-year iron ore output guidance in September, citing "a tight market" and "higher freight prices." The slump led to curbs at the Pires Complex dry-processing plant in Brazil. Looking forward, Schvartsman called completing the P15 iron ore expansion by 2028 a priority. While construction is lifting capex now, the initiative is expected to lift capacity by 16.5 million tons per year of high-grade output and to generate over 4 billion reais of recurring earnings before one-off items in the long run.

Before the results were published, analysts had flagged stretched finances. In October, S&P Global Ratings cut CSN's rating, pointing to a sharp deterioration in the mining business, with higher freight and fuel costs squeezing earnings and cash flow. Coupled with a hefty interest burden and elevated investment spending, S&P said that leaves less room to bring leverage down.

The bottom line: this is a deleveraging story tied to asset sales, refinancing, and the P15 build. If CSN hits those milestones and stabilizes mining cash flow, credit metrics can improve. If not, the stock and bonds will keep trading on balance sheet risk.

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