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CSN to sell shares in competitor, but does not set deadline

Company seeks partner for energy business, plans to divest assets to reduce leverage ratio

08/14/2024

Benjamin Steinbruch — Foto: Rogerio Vieira/Valor

Benjamin Steinbruch — Foto: Rogerio Vieira/Valor

CSN, the Brazilian steelmaker that holds a 12.9% stake in Usiminas, reiterated on Tuesday (13) that it will comply with the determination of the Administrative Council for Economic Defense (CADE), and more recently from the courts, to reduce its position in the competitor. However, the company still does not indicate a timeline for this move, which is defined in a process that is under confidentiality.

“The sale of the shares is still within the deadline set by the courts. CSN is observing the ideal moment to make this monetization and discussing, internally and with the authorities, the best way to do this,” the company’s chief financial and investor relations officer, Marco Rabello, told analysts.

The CADE determined in 2014 that CSN reduce its stake in Usiminas to less than 5%. Since then, the deadline for the operation has been reviewed twice, the last time in 2022. Less than a month ago, the courts ordered the sale of the shares again, and Usiminas indicated that CSN had failed to meet the legal deadline.

The timing is not ideal for this type of operation, as Usiminas shares have dropped more than 30% this year. However, divestment would help CSN reduce financial leverage at a time of high investments. Interest in acquiring assets from InterCement has been hindered precisely by this point, while CSN seeks alternatives to reduce its indebtedness.

In negotiations to bring a partner into the energy segment, Benjamin Steinbruch’s company is also negotiating the sale of a minority stake in mining. The floods in Rio Grande do Sul—CSN owns power generation company CEEE-G in the state—and the volatility of iron ore prices have prolonged the discussions, but the ambition is to close the deal by 2024.

In addition to the commitment to deleverage, another major challenge is the internationalization of the business, according to Mr. Steinbruch. “Internationalization is our biggest challenge, buying assets outside of Brazil. We are working hard on this,” said the CEO and chairman. CSN is particularly interested in steel assets in the United States and Europe.

According to the businessman, specifically in the steel business, there will still be a few quarters of efforts to reduce costs and modernization, although results have already begun to appear. “This was the first quarter after many where we showed a reaction [in steelmaking],” said Mr. Steinbruch.

In mining, the advances are more noticeable. “We are working with good future prospects. We are on the rise and will continue this way,” he said. In cement, production has already approached nominal capacity, with cost reductions, and the challenge is to “produce at full capacity.” Mr. Steinbruch also highlighted the growing contribution that the logistics business has brought to the results. “We are certain that infrastructure and logistics will be very valuable in Brazil soon.”

CSN’s results in the second quarter came in above expectations, particularly in mining. Net revenue rose 12% compared to the first quarter, reaching R$10.9 billion, while adjusted EBITDA jumped 35% to R$2.6 billion. On the bottom line, the company incurred a loss of R$222.6 million, reflecting the negative impact of the weakened real on foreign currency debt.

*Por Stella Fontes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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CSN ordered to reduce stake in Usiminas

Antitrust watchdog’s decision forces company to sell securities, but did not set deadline

09/22/2022

Usiminas: CSN started building a position in the competitor in 2011 and now holds 15% of common shares — Foto: Divulgação

Usiminas: CSN started building a position in the competitor in 2011 and now holds 15% of common shares — Foto: Divulgação

CSN needs to reduce its stake in Usiminas to up to 5%, but has no deadline to conclude the sale. This was the decision of the Administrative Council for Economic Defense (CADE) on Wednesday. There was the possibility of a 17% stake being allowed.

The solution adopted follows a 2014 decision. At the time, CADE’s court vetoed CSN’s nearly 17% stake in Usiminas, acquired in 2010. The decision required CSN to sell part of the shares it held in the competitor, which Benjamin Steinbruch’s company was unable to do in five years.

Even after three extra years, the sale was not completed either, and now CADE’s General Superintendence no longer sees a problem in the percentage that had been vetoed by the court of the antitrust agency. So the case went back to the court and an intermediate solution was adopted.

The assessment of people close to the negotiation is that the decision was positive for Usiminas compared to the possibility of a total reversal of the 2014 decision. However, it is not ruled out the possibility of litigation, according to a source, to restrict the purchase of shares by CSN.

The possibility of reversing the 2014 decision emerged last week, when CADE’s General Superintendence issued an opinion changing the regulator’s previous decision and allowing CSN to acquire more than 5% of Usiminas shares, provided it does not exercise voting rights.

If this new decision was adopted, CSN could keep nearly 15% of the common shares, which would make it CSN’s largest single stockholder outside the controlling group.

Usiminas asked the regulator on Wednesday to comply with its 2014 decision that limits CSN’s stake in the company and define an independent third party to try and carry out the sale of the shares. The superintendence’s order ended up not prevailing in the session.

CADE’s head Alexandre Cordeiro said that this is not a deal review. His vote maintains the obligation to sell the shares, but changes the fixed term of the sale to an indefinite term. Usiminas declined to comment. CSN did not reply to a request for comment.

*By Beatriz Olivon

Source: Valor International

https://valorinternational.globo.com/
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CSN concludes purchase of cement company

Benjamin Steinbruch signed check for R$5.2bn to take over LafargeHolcim’s operations in Brazil

09/08/2022

Benjamin Steinbruch — Foto: Claudio Belli/Valor

Benjamin Steinbruch — Foto: Claudio Belli/Valor

By signing a check for R$5.2 billion, businessman Benjamin Steinbruch, the main shareholder of steelmaker Companhia Siderúrgica Nacional (CSN), concluded on Tuesday the purchase of the cement company LafargeHolcim Brasil, unveiled one year ago. The deal was approved by CADE, the country’s antitrust watchdog, in August and was not contested within the usual period of 15 days. In dollar terms, the acquisition was closed for $1.025 billion – at the exchange rate of R$5.7 to the dollar at the time, the value was equivalent to R$5.8 billion.

In a notice of material fact, CSN said its subsidiary CSN Cimentos S.A., which concentrates the group’s cement manufacturing and sales operations, takes over 100% of the shares of LafargeHolcim (Brasil) S.A. As a result, the company acquired from the French-Swiss group Holcim is now called CSN Cimentos Brasil S.A. and becomes a wholly owned subsidiary.

Last year, Mr. Steinbruch’s cement company also acquired Paraíba-based Cimento Elizabeth for R$1.1 billion.

The acquisitions of Elizabeth and LafargeHolcim elevated CSN to the rank of Brazil’s second-largest cement producer, behind only Votorantim Cimentos and just ahead of InterCement Brasil. Total annualized production and sales of the new CSN Cimentos are estimated at 12 million tonnes – a volume to be confirmed by the end of 2023.

Holcim representatives arrived in Brazil on Monday to define the last details of the deal – and receive the check from Mr. Steinbruch’s hands. They met with him and had dinner with CSN executives, the businessman said during an event held by Valor. CSN was awarded in the Metallurgy and Steelmaking category.

“I am paying this semester, until the end of the year, R$9 billion in acquisitions,” Mr. Steinbruch said, listing the purchases of the cement company, Rio Grande do Sul-based power generation company CEEE-G, and two other companies in the sector (Energética Chapecó and Santa Ana Energética).

According to the businessman, the group has a project to invest more in power generation, with emphasis on renewable energy, such as solar. The goal is to supply the group’s own demand. The manufacture of cement is electricity intensive.

CSN already owns a thermal plant (235 MW) in the steel plant of Volta Redonda (Rio de Janeiro) and stakes in the hydroelectric plants of Itá (in the South region) and Igarapava (between Minas Gerais and São Paulo).

LafargeHolcim brings a net revenue of R$2.15 billion obtained in 2021, with an EBITDA of 64.2%, to CSN Cimentos. Ten operational units (integrated plants, mills and blending) in the states of Paraíba, Bahia, Espírito Santo, Minas Gerais, Rio de Janeiro, Goiás and São Paulo will be integrated by the group, with a capacity of 10.3 million tonnes a year.

After the two deals, CSN Cimentos has 13 plants in Brazil.

*By Ivo Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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CSN prepares plan to buy Samarco Mineração

Idea is to meet interests of shareholders – Vale and BHP Billiton – and the company’s creditors, sources say

06/21/2022

Otávio Honorato/Divulgação Samarco — Foto: Samarco plant in Mariana, Minas Gerais

Otávio Honorato/Divulgação Samarco — Foto: Samarco plant in Mariana, Minas Gerais

The Steinbruch family’s CSN group, which aims to become a global iron mining giant, is preparing a plan that may solve the imbroglio that the judicial reorganization of Samarco Mineração has become. The iron ore pellet producer reported more than R$50 billion in debts when it filed for protection from creditors on April 9, 2021.

The idea is to meet the interests of shareholders – Vale and BHP Billiton – and the company’s creditors, sources say. The two sides failed to reach an agreement on the recovery plan drawn up by Samarco and its owners. As a result, it was rejected at the creditors’ meeting on April 18.

CSN hired Ricardo Knoepfelmacher’s consulting firm, which is specialized in corporate restructuring and complex cases involving corporate and creditor disputes like Samarco’s. Any deal between the parties is better than litigation – to where the case is heading if there is no agreement, according to a source.

Preliminary talks have already been made with Samarco’s shareholders and representatives of the financial creditors – 17 foreign distressed funds. Among these are Oaktree, Goldentree, Solus, Monarch and Silverpoint.

The group holds more than R$23 billion in bonds issued by the company. These bonds refer to loans made by Samarco before 2015. These creditors did not agree with the terms of the company’s plan and submitted to the judge an alternative plan, which is being analyzed.

The group’s plan includes, among several points, a capital injection of 38% of the debt in the form of bonds, which removes Vale and BHP from the group that controls the mining company. The plan is referred to as “Nova Samarco” and one goal is to seek, soon after, a strategic investor. In other words, a company that operates in the mining industry. This means an opportunity for CSN.

Vale and BHP supported a second, alternative plan – much less radical than the one from the financial creditors – from two workers’ unions from Minas Gerais and Espírito Santo. Basically, they made some improvements to the recovery plan made by Samarco.

Both plans were submitted on May 17 to the judge in Belo Horizonte in charge of the suit, but according to a source familiar with the case, any ruling could still take 45 to 60 days. A conciliation hearing for shareholders and creditors with the judge has been scheduled for this Tuesday. At the first moment, the meeting is aimed at defining whether there will be mediation, according to information provided to Valor.

CSN has a difficult task ahead – mainly to convince Vale to listen to its proposal. The mining company is unwilling to do so. The others seem more open to listening to what it has to offer. If the funds’ plan is accepted, the two shareholders will be trounced in the clash and will go to court, a source said.

If it succeeds with an attractive proposal, it will be a great opportunity for CSN to take control of Samarco. CSN’s owner, Benjamin Steinbruch, famously avoids entering a business if he will not be able to be the controlling shareholder.

Samarco is in the condition of being again the large producer of iron pellets it was before 2015, when it sank together with the tailings from the collapse of the Fundão dam. The company, which can handle 30 million tonnes a year, resumed operations at the end of 2020 with only 26% of its capacity.

Pellets, as they are known, are a premium product in the international iron ore market.

CSN Mineração, which went public in February 2021 and already produces around 33 million tonnes of fine ore per year, will start making a superfine material known as pellet-feed, which is used as a raw material in the manufacture of pellets. This way, it would integrate its production – as Vale, which has several pellet plants in the country, already does.

BHP and Vale prepared a joint note. “BHP Brasil and Vale inform that Samarco is not for sale and affirm their support for the restructuring plan filed by Samarco’s worker unions and other creditors on May 18. Both shareholders are focused on preparations for the conciliation hearing tomorrow [Tuesday] and on ensuring Samarco’s sustainability and its responsibility to the remediation efforts, which are not addressed by the creditors’ plan.”

Ricardo Knoepfelmacher, CSN and the creditors did not immediately reply to the requests for comment.

*By Ivo Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Acquisition of LafargeHolcim by CSN may face questions

The acquisition made by CSN Cimentos of the assets of LafargeHolcim in Brazil for more than $1 billion may face questioning in the analysis of the operation by the antitrust regulator CADE, not scheduled yet. It may be postponed to the second half, according to sources consulted by Valor, and may be subject to some remedies, such as giving up assets, to be approved by the watchdog.

The delay was not foreseen by CSN, which was expecting an outcome in April. Now, the company has already acknowledged that it may come out at the end of June.

Announced at the beginning of September, the approval of the operation — without any restriction by the antitrust body at the beginning of April — was questioned by competitor Cimento Tupi. The order favorable to the deal was issued by the acting superintendent, Diogo Thomson de Andrade, on March 31.

Tupi argued — in manifestations and appeals submitted to the CADE (seen by Valor) — that the deal generates high concentration power. The company points out up to 50% in some markets of the Southeast region, especially Minas Gerais and Rio de Janeiro.

This fact, it argues in the documents, was ignored by CADE’s acting general superintendent. The company’s appeal, dated April 19, was accepted by the rapporteur Luis Henrique Bertolini Braido on May 2. The case had already been analyzed by the member Lenisa Rodrigues Prado, also in April, who favored a deeper investigation by the antitrust body.

Tupi – which is under protection from creditors – operates in Minas Gerais, Rio de Janeiro and São Paulo, with production units in Carandaí (Minas Gerais) and Mogi das Cruzes (São Paulo). The installed capacity totaled 3.4 million tonnes per year. In 2015, it had to close its mill in Volta Redonda after the end of the supply of basic slag by CSN’s steel unit that is located in the city. The case generated a dispute between the companies that lasted several years and was even analyzed by the CADE. At the beginning of the battle, in 2004, CSN was not yet active in cement.

With the acquisition of LafargeHolcim’s assets, CSN jumps from three production units to nine units in the Southeast — four in Minas Gerais, three in Rio de Janeiro, one in São Paulo and one in Espírito Santo. The acquisition also adds to the cement company a plant in Paraíba and another one in Goiás.

A source who knows well the industry and the behavior of CADE in cases of market concentration told Valor that from the point of view of the volume involved in the merger of the operations in the Southeast region, the unrestricted approval of the acting superintendent-general goes against the decision of the body itself, in 2014, when it analyzed the merger of Lafarge and Holcim in the country. The source says that at the time, the operation involved 12.9 million tonnes of combined capacity. “Now it is 13.9 million tonnes. What has changed?”. At that time, the CADE forced the two companies to sell assets totaling 3.7 million tonnes.

Besides this issue, another point raised by Tupi is the transportation logistics, via MRS railroad, in which CSN is one of the controlling companies. Both Tupi (for transportation of inputs and final products) and LafargeHolcim are major users of the railroad.

Tupi also questions the supply of basic slag, a byproduct of steel production which is a relevant input in the manufacture of some types of cement, such as CP-III, added to the clinker in the grinding unit. It alleges that CSN would be left with more than 50% of this input available in the Southeast region. Tupi produces CP-II-E, which contains 34% slag.

The major suppliers of slag besides CSN are Ternium Brasil (formerly CSA), ArcelorMittal Tubarão, Usiminas, Aperam and Gerdau, but all already have long-term contracts committed to other cement companies, including Lafarge Holcim. CSN supplies its own grinding mill located in Volta Redonda, Rio de Janeiro.

Tupi’s lawyers also point to the coordinated power of the deal, saying it could prevent small producers from having access to raw materials and logistics infrastructure.

According to their information, in the markets served by the Barroso and Rio de Janeiro plants, the participation of CSN+Lafarge is between 40% and 50%. In the case of Pedro Leopoldo+Cantagalo the percentage ranges from 30% to 40% and this was not allowed.

By the CADE’s criteria, the market is analyzed within a radius of up to 300 km and between 300 and 500 km, counting from the plants’ units. Even admitting that there is concentration higher than 20% — a reason for deeper analysis — Mr. Andrade said in his order that “after an individual analysis of each cement market affected by the operation, it was found that the levels of rivalry existing in each one are sufficient to make unlikely the exercise of market power by the applicants (CSN and LafargeHolcim).”

According to Tupi, among such rivals mentioned by CSN in the case are not very significant companies, such as UAU (250,000 tonnes) and Hypermix.

Ms. Prado, in her order, pointed out several concerns in the operation, which “should be further investigated by the court.” She also said that the sheer existence of rivalry would not be enough to justify approval without restrictions.

Meetings may take place soon between Mr. Braido (rapporteur), the third interested party (Tupi) and CSN before the case is sent to the court for a final decision.

In a note, CSN said that it “continues to cooperate with the instruction made by the rapporteur in the process of acquisition of the assets of LafargeHolcim Brasil.” Tupi said its allegations are in the documents sent to the CADE.

(Beatriz Olivon contributed to this story from Brasília.)

Source: Valor International

https://valorinternational.globo.com

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CSN tests green hydrogen-based technology

Felipe Spiri — Foto: Divulgação
Felipe Spiri — Foto: Divulgação

The production of steel and cement is the largest emitter of CO2 among industrial companies around the world, with 15% of the total, and both sectors are racing to meet targets for reducing greenhouse gases. In this vein, Companhia Siderúrgica Nacional (CSN) starts a pilot project with technology from the Portuguese company UTIS, which will use green hydrogen in the production process of some areas of the plant, located in Volta Redonda, Rio de Janeiro. This is one of the technological solutions, among several in the world, that are being developed to cut carbon emissions from industrial processes.

The technology from UTIS has already shown results in cement plants, solid waste combustion and biomass, but this is the first time it will be used by a steel mill, said Felipe Spiri, the chief executive of CSN Inova Open and co-founder of CSN Inova, the company’s arm that invests in innovation and technology projects.

CSN’s management team ordered to lower the use of fossil fuels (petroleum coke and metallurgical coal) and natural gas, Mr. Spiri said. This is both to comply with environmental standards and achieve cost savings. Coke and coal are imported and traded in dollars.

According to the executive, who majored in economics at Unicamp, has a master’s degree from Insper, and has worked in several departments within CSN, the project with UTIS has great potential to help CSN, as well as other steel companies, to meet decarbonization goals using less of fossil fuels. He said that the company has acquired and deployed, since 2020, UTIS technology in cement production.

The use began in the integrated plant of Arcos, Minas Gerais, where it obtained a reduction of 12 kilograms of CO2 per tonne of cement produced. The process is coupled, in four containers, to one of the two kilns in Arcos, generating gains, besides the reduced use of coke, in the productivity of the clinker kiln and power consumption. CSN Cimentos is expected to also take the technology to the plant acquired in Paraíba, and in the future to others.

This week, technicians from UTIS are in Volta Redonda to define where to start using the technology. This stage will last three months, Mr. Spiri said, because all the production flows will be mapped to test the technical and economic viability of UC3 (Ultimate Cell Continuous Combustion). The targets are the blast furnace (which uses coal and coke), steelmaking gases and natural gas, sintering (which agglomerates fine ore) and the hot-rolling mill.

The electric furnace of the long steel mill, for example, is a potential production area to receive UC3 technology initially. It is smaller than the large-flat steel mill.

The goal is to start the injection of green hydrogen in a controlled manner in the second half of the year, in one or more defined areas. The system, in containers – where the electrolysis process occurs, which generates hydrogen –, according to CSN, is easy to install, using renewable power and water, including from the sewage system. The size of the equipment, which will be imported from Europe, will also be defined.

The systems, Mr. Spiri said, have a price range that goes from €100,000 to €1 million. It depends on the capacity of green hydrogen to be generated and injected. According to him, CSN obtained financing from Finep (federal agency that supports innovation in industries) for the cement plant project. But it could not repeat it for the steel project. In all, including other efforts, R$45 million were financed.

According to Mr. Spiri, CSN works to reach in 2030 the CO2 reduction target that the rest of the sector has set for 2050. A bold goal for the eight-year timeframe.

UTIS was founded in 2018 as a joint venture between Ultimate Cell and the Secil group (cement). At the end of 2021, the Semapa group joined the company. UC3 targets energy efficiency and continuous combustion processes in industries.

Source: Valor International

https://valorinternational.globo.com

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