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Top Brazilian steel producers dealing with heavy debt burden

Bnamericas Published: Tuesday, May 21, 2019
Top Brazilian steel producers dealing with heavy debt burden

Brazil's top three steelmakers – Gerdau, Usiminas and CSN – are betting on the country's economic recovery to help them control their heavy debt loads.

The three companies' total gross debt stood at 49.9bn reais (US$12.4bn) at the end of March, down from 52.3bn reais a year earlier.

GERDAU (gross debt: 15bn reais)

Gerdau's debt compares with 16.7bn reais on March 31, 2018, according to the company.

As of March 31, 2019, Gerdau's gross debt was 19.6% short term and 80.4% long term, according to its latest earnings release.

Gross debt was 24.9% denominatedin Brazilian reais, 74.4% in US dollars and 0.7% in other currencies.

"Consolidated gross profit decreased in 1Q19 in relation to 1Q18, reflecting the asset divestments," the company said.

In addition, Gerdau added: "The sharp reduction in the net debt/Ebitda ratio from 2.7x on March 31, 2018 to 1.8x on March 31, 2019, was due to the funds generated by the successful divestments program in recent years, which reached the economic value of 7bn reais, with a focus on
deleveraging and optimizing the company's asset portfolio, besides the continued improvement in Ebitda."

CSN (29.4bn reais)

São Paulo-based steelmaker CSN reported gross debt of 29.4bn reais at the end of 1Q19.

The figure compares with 29.9bn reais and 29.6bn reais at end 4Q18 and end-1Q18, respectively, according to its latest earnings release.

As of March 31, 2019, CSN's consolidated net debt reached 25.8bn reais, "while net debt/Ebitda ratio, calculated based on adjusted Ebitda of the last 12 months [LTM], stood at 4.09x, 1.73x less than in 1Q18," the steel producer said.

On March 12, Pedro Galdi, an equity analyst at Mirae Asset Management, told BNamericas that CSN needs to normalize its heavily indebted capital structure and has outlined some measures to that end, including the sale of its stake in rival steelmaker Usiminas and a US$500mn iron ore streaming deal closed with Glencore.

"If CSN manages to really hit these goals, it will achieve a marked improvement in its net debt/Ebitda ratio, but the steelmaker needs to be successful in its actions," Galdi added.

USIMINAS (5.5bn reais)

Usiminas' consolidated gross debt as of March 31 was 5.5bn reais, down 6% compared with three months earlier and down 3% year-on-year, the steelmaker said in an earnings release.

The debt was 3% short term and 97% long term, the company said.

The company said its consolidated net debt reached 3.72bn reais as of March 31, down 11% compared to the previous quarter and down 10% year-on-year.

The net debt/Ebitda indicator closed the first quarter at 1.5x, compared to 1.6x at the end of the previous quarter, the company said.

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