National Steel Co Q3 FY2024 Earnings Call

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to CSN Conference Call to present Results for the Third Quarter 2024. 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 presentation. In perusing this, there will be a question and answer section when further instructions will be provided. Today's event can be accessed at the CSN investor relations website at ricsn.com.br. The replay of the event will be available soon after closing. Before proceeding, please bear in mind that some of the statements herein are mere expectations or trends and are based on the current assumptions and opinions of the company management and that future results, performance and events may differ materially from those expressed herein which do not constitute projection. In fact, actual results, performance or events might differ materially from those expressed or implied by the forward-looking statements as a result of several factors overall and economic conditions in Brazil and other countries, interest rate and exchange rate levels, future rescheduling or prepayment of debt denominated in foreign currencies, protectionist measures in the U.S., Brazil and other countries, dangers in laws and regulations and general competitive factors at a global, regional or national level. I'll now turn the conference over to Mr. Marco Rabello, CFO and Investor Relations Executive Officer, who will present the operating and financial highlights of CSN during the period. You may proceed.

Good morning, everyone. I'm glad to be here to present CSN's earnings call for the third quarter of 2024. We have seen growth in production and sales across all segments this quarter. Additionally, there has been a significant trend toward cost reduction, which underscores our operational excellence and our efforts to enhance performance. Each quarter, we are increasing our industrial capacity with a positive impact on costs. The main pressure for this period came from international prices, which are beyond our control. Nevertheless, we are actively managing the situation. Operationally, we are on track, and financially, we have implemented various initiatives this quarter to boost our cash flow, secure credit for exports, establish new prepayment contracts, and manage the collection of receivables. We added R$3.7 billion to our cash reserves, providing more comfort for our operations. However, this was tempered by weaker international prices, resulting in a slight decline in EBITDA and a modest reduction in the group's leverage. Let's look at the highlights for each segment, starting with mining, which delivered the strongest performance with record production levels. The production cost was around $19, down by $9 from the previous quarter, positively impacting our cash position. In steel, we observed a strong sales dynamic in the domestic market, with commercial activity growing by 9% this quarter. There was also a 5% decrease in slab production costs, contributing to a 20% increase in EBITDA for the period. In cement, we achieved new sales records, with sales volumes reaching 3,600 tons and EBITDA up 37% from last year, along with a profitability rate 28% above the industry average. In logistics, our results remained robust, benefiting from seasonal trends that positively impacted EBITDA by 4%, especially in energy. We also saw a recovery in Rio Grande do Sul, capitalizing on stronger market prices. Moving on to the next slide, I’ll highlight some important recent events that will positively influence the fourth quarter. To start, we successfully completed the sale of our stake in CMIN, which brought in over R$4.4 billion to our balance sheet, demonstrating our commitment to managing our leverage. It's worth noting that this occurred with a strategic partner who has been involved with us in developing CMIN. The Brazilian government is currently working on establishing provisional anti-dumping duties for exports from China, aimed at tin plated and chromium plated feeds. This measure will allow us to regain our competitive position in other products. We are also in the process of issuing new debentures worth R$500 million to fortify our cash for the upcoming quarter. Finally, we are making progress on our strategic projects essential for the growth and investment of CSN in the years ahead. Analyzing adjusted EBITDA and EBITDA margins, we reported R$2.3 billion in EBITDA for the third quarter, with a 20% margin. We observed a weaker trend in iron ore prices globally, which affected our consolidated results. The performance of CMIN was the only drawback during this period, despite our robust commercial activity. In the following slide, you will see that our investments for the period are consistent with what we reported previously. Investments in the steel mill are advancing to enhance overall efficiency. We made significant progress in mining with the initiation of the P15 project, employing 3,000 workers devoted to its development. Looking at working capital, the advances made during the period impacted cash production favorably, along with a reduction in inventories due to strong industrial performance. On the cash flow slide, we recorded R$986 million in free cash flow. While operational results were lower, cash flow faced additional pressures from increased CapEx, financial expenses, and higher tax disbursements compared to the previous quarter. In terms of net debt and leverage, we observed a significant reduction in net debt from R$37 billion in the second quarter to R$34 billion this quarter, leading to decreased leverage. This improvement is a result of our diligent efforts to boost cash reserves. Our cash management and the proceeds from the CMIN sale reflect our dedication to reducing leverage, recycling capital, and improving operational results. Next, on Slide 9, we can see our debt profile and amortization schedule. The cash boost of nearly R$20 billion provides the company with a secure position to meet short and midterm obligations while extending our amortization schedule to focus on long-term projects. The major movements this quarter involved financing for the years 2027 and 2029. Notably, 64% of our debt is dollar-denominated, which exposes us to currency fluctuations frequently observed in recent months. Now, on Slide 11, let's analyze the steel plant segment, where we once again saw sales volume exceeding 1,100,000 tons, demonstrating strong dynamism in the domestic market. Compared to previous quarters, we experienced a 4% growth in total sales relative to the second quarter, and rates of 25% and 15% compared to the same period last year. The domestic market led to a 9% increase and an annual growth of 16%, highlighting the effectiveness of our commercial strategy and increased steel consumption. On the net revenue and EBITDA slide, our results improved, with stronger sales and price adjustments leading to a 20% increase in EBITDA. The EBITDA margin rose from 5.8% to 6.4%, an increase of three percentage points compared to the same quarter last year. Though margins remain tight, profitability is improving, and we anticipate continued progress with more favorable volume and price outlooks. In Slide 13, we see significant growth in slab production as operations resume following prior interruptions. We achieved a 13% increase in production, which contributed to reduced fixed costs and a 5% drop in production costs. Performance per ton also showed positive growth, with a quarter-to-quarter rise of 15%, nearly doubling from the same period last year. As we move to mining in Slide 15, we had an exceptional quarter, maximizing production and sales during the dryer season in the Southwest, reaching 11.5 million tons. This achievement reflects our production efficiency. The reduction in production compared to last year can be attributed to a lower volume of purchases from third parties, as our own production levels have reached their peak. In the following slide, net revenue and EBITDA were impacted by an 11% drop in net revenue due to declining ore prices negating growth in volume, which also led to a lower quarterly EBITDA. Price decreases overcame a significant cost reduction in C1, which came to $19.2 per ton this quarter. Finally, on Slide 17, we break down the adjusted EBITDA results. This shows the decline attributable to segment performance while all other metrics pointed to a stronger showing. Transitioning to Slide 19, we note another segment with historical records in production, sales, invoicing, and EBITDA. CSN continues to leverage operational synergies while expanding commercial activity in a challenging pricing environment. Revenues grew by 3%, maintaining an EBITDA margin of 28%, significantly better than industry standards, which is a key competitive advantage for our business. On Slide 21, we present continued growth in the logistics segment, which is becoming increasingly significant in our overall results. The dryer season has led to an uptick in both EBITDA and billing, with 6% and 4% growth respectively. This concludes the segment presentation, and I’d like to invite Helena Guerra to discuss our ESG highlights.

Good morning, everybody. Now, regarding the highlights for the period, in the last quarter, we were trying to maximize the opportunities that we have linked to the company. We signed a contract with Petrobras to supply natural gas to Volta Redonda. We are back to the free gas market. This makes us the largest industrial consumer in Brazil and brings about the possibility of partnerships that could make feasible several projects using natural gas adhering to our decarbonization agenda. Still speaking about this topic, we're trying to comply with the goals in each of the segments where we act. The great highlight is the steel segment where we had a 10% reduction in CO2 emissions. Now, the emissions will have to be achieved by 2030. This is thanks to several investments geared towards operational efficiency and we're using disruptive technologies in a pioneer way at the Presidente Vargas plant that will support us on our path towards complying with the goals. In mining, we also had a positive reduction in emissions, a reduction in the intensity of CO2 and the production of iron ore. We are that company with the lowest emission of CO2 per ton of cement worldwide. And in Brazil, we have advances in the safety of our workers. We had a year without any fatalities, thanks to a program implemented this year. We have reduced the severity of accidents and the days of absence of employees, a 70% reduction in September, along with our schedule for dam management. We had the renewal of our declarations of stability at all of the company dams. And finally, something that is growing constantly in the search of our diversity goal, we are beyond having 7,000 women working in the company, 25% of our total workforce and an increase of women in leadership positions. Thank you very much for your attention.

Thank you, Helena. And we will now go on to the remarks by the Chairman. We reinforce our invitation for CSM Day that will be held on December 11th, where we will be able to update you on the main strategic projects for the group. I give the floor to Benjamin Steinbruch, the Chairman of the Group.

Good morning, everybody, and thank you for your attendance at the CSM call. I'm going to go through a very quick review based on what was said by Marco Rabello. Let's begin with mining where everything was positive in terms of the increase of production, a reduction of cost, increase of sales. Well, within what we can control cost and sales, we offered our very best. We saw a drop of prices in international commodities, and there's very little we can do to that respect. With the cost reduction, we are prepared for these fluctuations we observed in the price of iron ore commodities. We believe that it will remain at a level of 100 to 120 fluctuating in that range. And we're awaiting new measures that will come from China. We received good news with the increase of the purchase of homes, something that had not been happening. And because of the interest rate, I think they will come out with something stronger that should favor the use of iron ore and steel. It's difficult that they'll maintain their prices below 100 because of the stop of production of some of their mines. And while we don't know what the countries will be doing because of the election of Trump in terms of geopolitics, each country will have to defend themselves more. And I believe that China will have to respond to this as well, respond to the new model we will be living with beginning in January of 2025. We're optimistic with the investments, we're optimistic with P15, with our product in mining. Well, the issue is price. Whatever you produce can be sold. And if you have the appropriate product for the market, we can sell it more easily. And this is our future. So mining had very good results and we hope to maintain and enhance the performance of the coming quarter regarding cement. The same holds true. The production of cement was a production record. We have been able to work at full speed, at full production capacity practically. We're also working on added value products. We're focusing on new products, diversifying and attempting to grow in terms of added value product. We know that cement has the right future in Brazil and we will continue to need popular homes. That sector is doing very well, surprisingly well. We did not expect that sales would be so good in the popular segment, even among Class A and we're awaiting infrastructure work that certainly will come about. The country requires better infrastructure and of course, cement will be used in this case. So in cement, we have to produce to our utmost at the best price and work with diversification. It is a product that is missing. If we were able to produce more, we could sell more. So it's now an issue of production capacity. We're quite optimistic with the cement market going forward. Logistics went through a good period. The seasonality is positive and this is a segment with a future promise with a good logistics infrastructure. This will be part of our investment priorities in Brazil and we believe that it is a very promising sector in terms of energy. There has been a significant change in prices. We have already overcome the difficulties of the flooding in Rio Grande do Sul with the updated prices. We're going through an excellent moment for the energy segment. Finally, in terms of the steel segment, it has pointed towards an improvement or reduction of cost and an increase of production. This is a sector that we have great knowledge about. We suffered significantly during 2023 and 2024. As we mentioned in our previous conversations, we suffered because of maintenance. We had a significant number of problems that began in 2022, remained during 2023, 2024, as we had mentioned previously. And well, even if we want to do things, the timing to replace parts and equipment tends to be quite lengthy. And we sometimes have a delay of 12 to 18 months in the delivery of the necessary equipment and parts. However, we're committed with this, we're working intensely and we're on the right path. And I believe that at the end of the year, because of a better third quarter and better fourth quarter, we will begin 2025 in a better position than 2022, 2023 and 2024. Well, we're doing our very utmost. And if you look at everything we began to do in 2022, doubtlessly, the positive results will begin to appear. Everything is under the control of technology and it's simply a matter of time until we can implement what we already know and what we have brought down. Basically, these are my comments. We are on a positive path. We're doing whatever we can. We try to live with the market fluctuations, fluctuations of currency, of the market and price itself. But this holds true for everybody. So we're doing the best we can where we do have control so that we can better take up the market opportunities. We're quite confident with the year 2024. We will improve because of the enhancements we made. Thank you very much for your attendance. And I'm at your disposal. I return the floor to Marco.

Thank you, Benjamin. Let's go on to the question and answer section.

Thank you. We will now begin the question and answer session. The first question is from Barbara Soares from Itau BBA. Your microphone has been unmuted.

Good morning, everybody. Thank you for taking my questions. I have two doubts regarding the steel mill, first about costs. This quarter, we have seen a margin recovery. In the last quarter you mentioned that these margins could reach two digits. There is an improvement in the slab production costs. Could you give us more color in terms of what happened this quarter and what we can expect for the next quarter in terms of cost? The second question refers to price. In the domestic market, the price has been flat. By speaking to market customers, there is a problem. The entry of imported material is still very high. It stands at 24%. In flat steel, it is higher, 30%. Could you help us understand how you foresee this price dynamic for the coming quarter and for the coming year with all of the factors I have just mentioned?

Hello, Barbara, good morning. It's good that you know so much about the sector. We meet at events and you follow up on what is happening. You have helped us to answer some questions impacting the market in steel. I have read some reports that have mentioned that there are strong signs across the board. I prefer to focus on that. In 2024, the apparent consumption stood at 9% to 10%. CSN sales grew 11%. What we had to do was done our costs. Although we see that the cost increased 4%, more important than that is that the slab costs dropped 5%. So this enables us to look at the fourth quarter and other quarters with better margins. Regarding the production volume of slabs, another important data, we went from 880 to a million tons practically, which had not happened for some time. In terms of price, Barbara, we implemented an increase. What happened was that we captured the increase, but the mix was not favorable. If we eliminate mix, the increase would be 3.5% to 4% in the third quarter. Let's go back to the steel outlook and talk about the fourth quarter. The outlook is very positive. This year, we were close to historical records in the terms of flat steel in Brazil. In 2025, this scenario will also materialize our sales. Our firm going forward for the fourth quarter, we're negotiating contracts for the coming year. And generally in terms of operational excellence, the slab costs will drop and go to levels of R$3,000 per ton, which is our end goal. Now, if we mix that cost with the price and with the enhancement of our mix, I'm not speaking about price increases. To give you an idea, what we have pre-painted in Brazil are two CSNs and we have Arcelor and CSN also fighting against imports. Import penetration has grown. It should end the year at 3.5 million tons and will continue very strong at 23%. This is a variable we have to work with. We were successful in tin plates. We have a provisional anti-dumping policy. And when they check China, this will be made permanent. We have to work on other products. It's not a matter of protectionism. We have to have full isonomy. Now, in terms of operational excellence, this is positive consolidated with what we presented in the third quarter. We have no control of what happens with prices. And to corroborate what Benjamin said, we have a more positive vision of China. We speak about civil construction, but industry, the white line and automotive industry are doing better. Another important point, there's employability. Everything will be done to reach a reasonable level to resume their economy. The election of Trump in the United States will certainly change that price dynamic. Our outlook for the coming year is that the price curve of 430, 420 for China, perhaps this is the floor for the business is now at 490, 500 with a very low premium, 6% to 8%. Because of some sanctions that were put in place, now to give you more color of what we have ahead of us, the color is blue, positive. All of the pillars are working in favor of what we saw in 2023, 2024, maintenance, operational cost. We're beyond that phase and we can now capture more value and increase our EBITDA share for the company.

Thank you, that was very clear. Thank you, Marco.

Our next question is from Ricardo Monegaglia from Safra. Your microphone has been unmuted.

Good morning, everybody. Thanks for taking our questions. We have two. If we could go back to the issue of leverage, Marco spoke about 2.5 times until the end of the year for leverage. If you could put this in context, all of the parts that make up this account at the end of the year, are you acquiring to obtain more cement? Will you be receiving money? Perhaps you will find a partner for energy. This is another fact that could help to help you if there will be another relevant prepayment. So which are the steps to get to that leverage goal? And if this is still the case, of course, my second question here refers to investments. And there will be investments in steel for an increase of operational efficiency. The investments are higher than those in mining. Think about that investment going forward for steel specifically. And if there's a relevant delivery in the short term, we know that there's a long period for the delivery of equipment and parts. Is there an important delivery in the coming 12 months? Or do you expect that the return on investment will be distributed more gradually during the coming months? Thank you for taking my questions.

Hello, Ricardo, this is Marco. Thank you for your questions. Regarding leverage, yes, we have some options we are working with until the end of the year. As we have mentioned in previous calls, discussions with strategic or financial partners are still ongoing, and we have time to finalize that operation by year-end. An important factor that did not influence the third quarter but will affect the fourth quarter is subsequent events, specifically the sale of a 10.7% stake in mining, which has already been disclosed. This has brought more than BRL4 billion to the company and will be included in our figures and leverage for the fourth quarter of 2024. We are celebrating the operational progress we made in the second and third quarters across our three main segments: steel, mining, and cement, and we plan to continue this momentum into the fourth quarter to improve operational results and leverage. However, seasonal factors in the fourth quarter might hinder optimal operations for mining and cement. We anticipate average prices for iron ore to behave around $89, having risen to $110 and currently sitting at $100. The performance over the next month and a half until year-end, along with steel prices, will be crucial. Another factor affecting our leverage is the exchange rate; at the end of the first quarter, the dollar was at 4.99 and has now reached BRL6. We expect the rate to decrease by the end of the year, which would aid in defining our leverage. Our guidance remains at 2.5 times, as previously mentioned. This remains a challenge due to all the factors we've discussed regarding investments, particularly in our steel plant, which will continue this year and into next year to enhance the efficiency of our steel mill. Additional investments will be made when we activate the Coke battery, but specifics will be discussed at our CSN Day on December 11th.

Thank you, Marco.

Our next question comes from Gabriel Simões from Goldman Sachs. Your microphone has been unmuted.

Thank you for your time, for taking my questions. The first is a follow-up on the question of leverage. We see that different leverage you're working with to decrease the company leverage. There's a sale of CMIN and the prepayment at CMIN giving you some breathing space in your financial leverage. Are you monitoring the leverage number also taking into account the prepayments? And if there's a limit in the prepayments in the CMIN call, we spoke about this somewhat, but from the viewpoint of CSN, is there a limit for those prepayments because they could increase the leverage. The second question refers to the anti-dumping for tin plate. What is happening with all of those issues if you have other requests advancing in terms of anti-dumping? It's been some time since we hear something about this. And I think it's important to hear about it because of the relevance of this product in Brazil. What is it that impedes new requests considering the high level of imports that we see in the low margins in China?

Well, thank you for the question. For the questions to answer the first part regarding the prepayments, prepayments as other tools are used in the balance of several companies. They are tools for liquidity used by companies and they are used as a routine. They have a low net effect on the company and the liquidity happens initially when the prepayment volume is higher, it has not been taken into account in our leverage indicator, not in the covenant that we publish, but it is accompanied by rating agencies who work with reports for CSN periodically. I believe that was your question. We look at the volume and the capacity available in mining at each period to carry out the payment within a very responsible, comfortable range for mining. Now, Gabriel to answer about anti-dumping, I'll speak about the scenario of what is happening as Barbara mentioned and as I reinforce the measures that the government has put in place, the quotas for 10 or 11 and the ends are in the right direction with a very timid intensity nonetheless. With this measure, we practically accepted what was imported in 2023 and allowed for an increase in imports. The direction the government is following is correct, and the government is very sensitive, especially the Vice President and the Minister of Industry and Trade. We have spoken about the competitiveness agenda in the country and they're more attentive along with the advisors about this issue. Now the positive side and this was a victory for the sector, not a victory only for CSN. We were able to implement three items for tin plate. The anti-dumping is temporary or provisional. It varies from $250 to $320 per ton for China. Without a doubt, this amount would be sufficient today to protect. It's not the wall that we expect, but it already protects our market against unloyal import, the import of low-quality material. And it is a performance control. What we're doing with tin plate now is that there was an in local verification in Brazil. The government deferred this and has implemented it. Now technicians have to go to China to verify what is happening in Chinese plants. When this process is carried out in local, in the plant that is causing dumping in the country, these figures will increase. So the trend is that this anti-dumping will increase. It has an advantage. It follows the rules of the World Trade Organization. It has a political influence and it is a remedy. It can extend for five years. It's not a short-term effect. Now regarding the other products and making it very clear that there is a new line of approval on the part of the government. The government deals with 60 anti-dumping suits per year and they're able to resolve 15 or 20 at the most. Vice President, Alckmin has spoken about repatriating people for this process that is disseminated throughout Brazil. In pre-painted products, the government has already carried out the local verification at CSN in the coming two or three months. They will be assessing which will be the anti-dumping margin for that sector higher than for tin plate. What we have coming into Brazil are two entire lines of CSN pre-painted products are underway. We're speaking with government technicians at CSN this week for cold rolled products. In a few months, we will work with the galvanized product. Now, if the government speeds up, if they focus on this, Brazil will be more protected industrially until May, June of 2025. All of the anti-dumping policies should be in place. In the world of decarbonization, globalization, we don't have competitive isonomy. We're betting all of our chips on this technical part, the use of anti-dumping for products, for galvanized products for CSN. And because of this, I have to fight against all of these imports. I cannot allow them to increase the levels that we see today that are absurd. Do forgive me, I have extended myself a bit, but I gave you a notion of what is happening in all other products.

Thank you, thank you very much.

The next question is from Pamela Bordes from Bradesco BBI. Your microphone has been unmuted.

Good afternoon. We have two questions here. The first for cement, the segment has shown sound performance, volumes reeking margin records above 20% above the sector, which is the expectation for the segment and for '25 and 2026. If you could also speak about the maintenance CapEx for cement, the second quick follow up in terms of the steel plant, you said that the volume is doing well with an outlook for improvement. Do you believe that the margin in the fourth quarter could reach a double digit or will it increase more gradually? Thank you.

Barbara, this is Martinez. Cement is an important segment for CSN, representing 10% of our revenues and 15% of our EBITDA. A few years ago, it was hard to imagine that cement would become a point of pride for everyone in the group. Currently, CMIN boasts the highest EBITDA margin in the industry at 28%, sustaining this for two consecutive quarters and continuing efforts for improvement. We achieved record numbers this quarter and for the year. It’s crucial to note that we are in a strong partnership with Lafarge Holcim, leveraging their strengths while incorporating our management style and aggressively expanding our sales and customer base. This strategy has proven successful, as reflected in our figures. Our margin is the highest in the sector. Benjamin also highlighted our expansion into new products, such as our agricultural line and value-added products that will strengthen our foundation and enhance our outlook for Brazil. Despite challenges, the cement market is expected to grow by 4.3%, while CSN is projected to grow between 7% and 9%. Looking toward 2025, we have a very optimistic outlook, supported by facts and data. The civil construction sector is anticipated to grow by 3.5%, with new projects continuously being launched. Government infrastructure funding has increased significantly, with 1.7 trillion allocated for infrastructure and affordable housing. The outlook for 2025 suggests we will consolidate our strategy and capitalize on commercial growth opportunities. Eduardo will now discuss our operational aspects and the essential link we maintain with civil construction, as we aim to be a one-stop shop for our customers. In the last four months, we launched 27 stores in the Forzato network fully owned by CSN, with plans for an additional two or three stores by March. This is part of our commercial strategy. I will now hand it over to Eduardo to elaborate on our commercial initiatives and synergies between our plants and logistics.

Well, Martinez, I think has fully covered the strategy of cement to compliment this. I reinforce that for the year, we had a growth of 37% of EBITDA in an environment of more difficult prices. And all of this, thanks to the enhancement in the sales process, fragmentation of the sales, the synergies with Lafarge Holcim, and the synergies that have already been mentioned, they will be annualized through time and through the coming months. All of the synergies were above what we expected and we're now annualizing them. We do have a competitive differential, Benjamin mentioned this at the beginning, more streamlined plants that the rest of the industry, their capacity canyons intrude with a good production scale, low consumption of electric and thermal energy, which means that we have a differentiated cash cost compared to the industry. We don't stop working. Of course, this year, we have reduced the cost by almost 15% vis-à-vis 2023. Our homework is eternal, continuous. In the field of new products, at the beginning of the year, we entered a new segment, agricultural lime. We're already marketing this from the plant at Arcos. We have three additional projects in the pipeline that will be implemented as soon as possible. We're waiting for the maturity of these projects to become a relevant player in the lime segment. This is a complimentary business for cement with a good EBITDA margin. Martinez already spoke about the aggregates. We have a base of aggregates, small one, but highly competitive for the furnace in São Paulo. And we're working to eliminate the bottleneck of the plants, increase capacity, and we could have a growth through M&A as well, if it makes sense for the company. So the outlook is very positive in cement, and we have done our homework. And if the country continues to grow, this will reflect on a growth of demand for cement. Pamela, regarding your last question about margin, it is important to mention that our strategy is highly robust. We will continue to work on horizontal integration, vertical integration of our long-term projects with customers, with users, with partnerships on the pillar of operational excellence. I think the situation is that given we were consistently reducing the cost of slab, that will of course lead to more sustainable and higher EBITDA levels. Now the cost issue is very important. We can't imagine anything in the steel market if it doesn't have operational excellence. When it comes to production, finally, I will be able to work with my ideal mix. We should be able to enhance the mix of voted products. We had problems in the last two quarters. I did not add value because of our mix. This will change. The focus is in the domestic market. There is nowhere to export this. We're going to focus on value, added value fragmentation and something that I always remark, CSN will privilege not stop markets necessarily, but not putting all of our eggs in the same basket. We still work with three to six months contracts that give us flexibility in terms of negotiations. We're not tied to a possible increase in iron ore or other products. What is uncomfortable of course is the import issue, a variable that is not under control, but we have taken the right measures and the government is now awake and will help us in that sector. Finally, the price issue. If you look around and see what is happening in China in terms of price, the valuation of hot rolled real with the election of Trump in the USA, the market will be more of a buyer will increase price. In Brazil, perhaps in the third quarter of the coming year, we will be able to see a price recovery because the premiums are very low and with the government measures, low premium and high cost, we will go back to margins at historical levels of 15% to 25%.

That was wonderful. Thank you.

The next question is from Nicholas from Jeffries. Your microphone has been unmuted.

Yes, thank you for the call. Nicholas, thank you for the question. We're going to answer in Portuguese as you have translation into English. Yes, your account on the effect of the entrance of the sale of the stake into CSN is correct. Now, the EBITDA has to be compared for the last 12 months and the fourth quarter of 2024 compared with the fourth quarter of 2023. And it depends on the other variables. We mentioned the growth of iron ore and exchange rate until the end of the year. The goal of the sale of the stake was to focus on the leveraging and bring the EBITDA ratio closer to our guidance. Although it is challenging to get to 2.5 times, as I already mentioned, from the total volume of prepaids open, we have 10 million tons from a total of more than 40 million tons per year, which is the volume of sales of mining, a comfortable volume. As part of the company's strategy in the last quarter, we worked with $750 million of prepayments for exports. This is a decision of mining, when to do it, how to do it. It depends on market conditions. And the company offers that have worked with prepayment for some time with mining already.

Our next question is written from Joaquin Santa Maria from Picton, along with another question that's unclear. They say hello to everyone and thank you for the presentation. They want to know about Intercement's assets and whether the company is interested in acquiring those assets.

As we disclosed on a material fact, some weeks ago, nowadays, we do have an exclusivity contract signed with the company and with the intercement shareholder. It was extended with the last term extension that we also presented. And the term will end at the end of this week on November 16th. We continue to be engaged in the discussion with the stakeholders of this process because of a process of this dimension. And because of the characteristics of the company, the process is more complex. We have creditors, shareholders, the company itself involved. So the negotiations are taking significant time until we get to a satisfactory conclusion of this transaction for all parties involved.

The next question is regarding the percentage of steel volume sold in Brazil and whether it is covered by the approved anti-dumping measures.

No, we have a very low percentage that is covered by anti-dumping measures. The measures adopted by the government were insufficient. They legitimated what was imported in 2023. There were very steep volumes. The measure that CSN was able to approve for tin plate, a technical anti-dumping measure will be applied to other products. And this will depend on the speed of the team of the ministry. This is what we did. We convinced the industry, the stakeholder, the ministry of industry and trade, and we will push so that this happens quickly. We have the worst import penetration ever seen before in Brazil.

The next question is from Gabriel regarding the outlook for production costs in dollars per ton of iron ore.

As we saw this quarter, there was a very positive effect, $19.2 per ton. The long-term guidance fluctuates between $21 to $23 per ton because of the recent impacts cost control. Mining should be closer to $21 for the long-term, which is the lower part of the guidance.

As we have no further questions, we will return the floor to Mr. Marco Rabello, the CFO, for the closing remarks.

Thank you all for another earnings result call. This was a call with several historical records and several companies of the group. I would like to congratulate all of the CSN areas for their results in the third quarter 2024. Thus we conclude our earnings call and wish all of you a very good week. Thank you very much.

The earnings result for CSN ends here. Have a very good day.