Companhia Siderurgica Nacional S.A.

Good morning and thank you for waiting. Welcome to CSN's conference call to present the results for the second quarter of 2021. 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's presentation. After the company's remarks are over, there will be a question and answer session At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. We have simultaneous webcasts that may be accessed through CSN's Investor Relations website at ri.csn.com.br slash en slash, where the presentation is also available. The slide presentation may be downloaded from the same website. Please feel free to flip through the slides during the conference call. Before proceeding, we would like to declare that some of the statements herein are mere expectations or trends and are based on the current assumptions and opinions of the company's management team. and that future results, performance and events may differ materially from those expressed herein, which do not constitute projections. In fact, actual results, performance, or events may differ materially from those expressed or implied by forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rates and exchange rate levels, future rescheduling or prepayment of debt denominated in foreign currencies, protectionist measures in the U.S., Brazil and in other countries, changes in laws and regulations, and general competitive factors on a global, regional, or national level. Now I'll turn the conference over to Mr. Marcelo Cunha Ribeiro, Investor Relations Executive Officer, who will present the company's operating and financial highlights for the period. Please, Mr. Marcelo, you may begin your presentation. Good morning, everyone. Thank you for participating in this conference call. This is yet another call in a quarter of very good numbers, very good news. We will start this presentation on page number two with the highlights for the period, mentioning a record EBITDA. And practically all the financial metrics of the company reached record numbers, except for the net income. where the number of quarter one was even higher, but at that time it was impacted by the IPO of CSN Mineração. At this time, it was R$ 5 billion of net income and with excellent operational results. It's a historical number, however, it's a short history because with such positive trends in terms of prices and costs, we are expecting that the next coming quarters are even better. So this has allowed us to reach some leverage targets that were expected only for the end of the year, but we were able to bring our leverage to very low levels. We even reduced the net debt to less than 50 billion rials, and we inaugurated a new phase in the company's journey. We are now focusing more on capital reallocation. So the highlights of this quarter, marked the start of this phase with the purchase of a cement plant, inaugurating the investment strategy of CSN in this industry. On slide number three, we see the evolution of our EBITDA numbers, with the sixth consecutive quarter of record growth reaching 8.2 billion rials and a margin of 53%. And in less than one year, We had an 80% lower EBITDA. So this growth was achieved in record time and practically in all segments of the company, contributing to the positive results of this quarter in particular. And the greatest growth was seen in steel making due to some cost-related factors, price-related factors. And in nominal terms, mining grew more than $1.3 billion. And the cement business also reached record numbers in terms of volume, revenues, and profitability. So we grew 40% or 2.4 billion rials in one single quarter. Next page, we have our cash flow indicators with very good news about our CapEx advancement. And it's growing where it needs to grow, in mining. This was what was forecast for the year and in this quarter. We have already delivered the purchase of very important assets, such as the magnetic concentrator number three, a project that will allow for improvement in production quality. And we have a guidance for the year of three billion rials. Regarding our networking capital, it grows in a period. very much due to the very healthy evolution of prices and volumes. This led us to growth in our stock account, and this was partially compensated by the growth of our suppliers, and also one event, which was the dividend payout during this period. On page number five, We see how this is leading to cash generation in our adjusted record, adjusted cash flow of 5.4 billion rials. Also, the fifth consecutive quarter of growth. And in this quarter, it reached high levels despite the impact of the growing capex, according to the expectations and also the variation in the working capital. And the one-off financial expenses, for example, the ore hedge and other financial operations such as the bonus buyback. And on page number six, we see how this very pronounced cash generation resulted in a very fast drop in our net debt. In this quarter, also supported by the exchange rate, the devaluation of the dollar and valuation of the real against the dollar. which brought our debt down to lower levels. And the sales of Yuzi Mina's shares, the 1.3 billion rials coming from this operation, which compensated the dividend payout of 900 million rials. So our net debt dropped by 35% in one single quarter, reaching below the 15 billion, which was the target. And now we see it as a ceiling of our net debt. And the leverage was also 1.6, also below the new ceiling that we have. A topic that we still have to address is the gross debt, which was 35 billion reais in this quarter, positively impacted in this quarter by the loan with NEXE of $350 million to support the growth of the mining business. On page number seven, we see how the gross debt issue will be addressed in the very short term. Today, we are announcing the buyback of the perpetual bonuses, $1 billion or 5 billion reals, which added to the buyback of the bonus from 2023 in the prepayment of banking debts will allow us to decrease by more than 10 billion reals our gross debt in the next coming months, reinforcing the very responsible capital structure of the company which has contributed to a very fast increase in our credit ratings, which reached a double B-flat and are on the right track for improvement in the future. Now I will go over the financial indicators for each segment. On page number nine, we have steel. And we see that in terms of volume, we sold everything that we had. So the demand, both from the external and domestic markets, are still very strong. We saw an unexpected recovery, a non-localized recovery, reaching all segments from automotive, civil construction, everything related with agribusiness and packaging. Martinez will go into more details about the performance of the sector. But what really contributed to the profitability this quarter was the price evolution. Accompanying the international market and the cost evolution in this quarter, 26% up, which led the EBITDA to 2.7 billion and a margin of 33%. Regarding our operational performance, on page 10, we see that slab production in this quarter was focally impacted by the anticipation of 60-hour maintenance. That's why we had a slightly lower slab production. And of course, this has an impact on the dilution of fixed costs. But this is a one-off event that we had this quarter, together with increasing price of raw materials such as gold and ore. We had an increase of 25% of the cost in reals. This was more than offset by the increase in sales and the increase in the average price. So the EBITDA per ton reached 2.107 reals, which is a historical record for the company. Now for mining, on page 12, We also have a record-breaking quarter supported by good sales volumes, which could even have been better considering that production exceeded the sales and we accumulated stocks due to problems of port efficiency that we had this quarter partially impacted by maintenance and rainfall. So we had the stock to make the most of this good price moment and we were very positively impacted by an excellent price realisation. there was a 26% increase in our price and the market indicators point to only 20%, which shows the quality of the ore that we sell. That's why our net revenue increased by 34%. The EBITDA increased by 36%, reaching record-breaking margins close to 70%. For the cement business, we are also going through a very unique moment. And not just CSN, but the market as a whole, is going through a renaissance period with increases year after year in the national volumes recent data show that the trend will continue and csn has reached its maximum production so we have capacity of about 4.6 4.7 million tons and we are expecting to reach these volumes in the next few quarters And making the most of the good price increase, the revenues also have reached record numbers with good operational performance and dilution of fixed costs. We've reached record margins of 43%, reaching an EBITDA of R$147 million for the period.

So these were the operational indicators for each business.

And on page 15... We will give you an update about our strategic priorities. In the past three or four years, we communicated to the market based on priorities related with an operational turnaround, which we have reached, and also reduction of our debt which we also were able to achieve. And now we're turning the page and now we will start talking much more about efficient and disciplined capital allocation. So the cash generation has to be well delivered to generate returns to our shareholders, but also conservatively. So we will always maintain this low leverage below the one-time level and high liquidity, which has always been a characteristic of CSN. The second pillar is innovation. And we're going to show you the progresses that we have been achieving through CSN Innova. And in third, our ESG agenda, the new pillar, the new ESG pillar, which is gaining traction in our company at very impressive speeds. So just a brief update on each of these pillars. On page 16, I'll start with our capital allocation. Capital allocation will mean growth. with opportunities. Organic growth in the case of mining. In the case of cement, we will grow through new plants and also sector consolidation. So in the case of the Elizabeth Cementos plant, this shows us that we are actually implementing this capital allocation strategy. It's a modern and integrated plant in the northeast of the country, a region where we have better prices than in the southeast, which diversifies our presence and brings us potential synergies, very strong potential synergies related with our strategy, our commercial activities, our differentiators, our capacity to gain scale and reduce costs through working with suppliers. So this demonstrates that we are really willing to grow fast in the cement business. This is still under analysis by the CAGI, but we expect to have this approval in the next few weeks. Regarding the CSN Innova pillar, one innovation that we have for this quarter is that first, we have the demonstration of CSN's commitment to innovation by increasing the resources available to this pillar. So CSN Innova had a fund of 30 million rials, and now it has 100 million rials available, considering the very good results of the first initiatives that we have implemented, analyzing startups that could add value to CSN. And the first venture is 2D Materials, a company from Singapore, one of the pioneer companies in developing graphene, a material that can be used for several applications, which has a lot of synergy with our steel and cement businesses. So the founder of the company got a Nobel Prize, was one of the people responsible for developing Raffine, and they are bringing diversified knowledge and expertise. They learn a lot about how to improve their own products, and it will allow us to enter new verticals. And as for ESG, I will ask our ESG director, Lena Guerra, to talk about the updates in this area. Good morning, everyone. First of all, we would like to announce the publication of our integrated report for 2020 with a little bit of CSN's history. CSN just celebrated its 80th anniversary, so this was our first integrated annual report It brings the largest number of indicators ever reported by CSN and the main events and results of the past year in terms of financial management, economic aspects, environmental aspects of our five segments, mining, logistics, energy, cement. This was outsourced to an independent company. according to CVM's instruction 14 of 2020. So I invite you all to read the report, which is already available on our platforms on CSN's website. And in this quarter, we also concluded our TCFD, and this is all available in the global emission records. And this was all prepared according to the GHD methodology. And for the seventh consecutive year, we got the golden stamp. Also, we concluded our disclosure inside action about our environmental and climate-related performance, water capture, supply chain. All this information is also available to all investors through this very important platform, CDP. In this quarter, we also had the start of the training of our executive officers and other members of the staff, the construction of a risk matrix and climate opportunities matrix, which allows us to venture and incorporate the impact of our climate-related initiatives in our financial reports. We also have Grupo Clima Forum with many executives in different areas that will allow us to discuss and supervise implementation of initiatives related with our decarbonization roadmap. And we're also using an AI tool that creates an imaginary curve showing the results projected for all projects. So it allows us to calculate the impact of the emissions that will be avoided. And in the end of this year, we will have new targets, even more ambitious and aggressive targets than what we presented in our initial plan. And also in addition to what we already said today regarding innovation, we also CSN and CSN Mineration signed an MOU with Itoshu Corporation for a decarbonization agenda and digital transformation of CSN Mineração to study and develop new technologies for low carbon steel production through the use of hydrogen and other technologies. So this has been a very productive quarter. very important quarter for our ESG agenda. In the safety pillar, I always say that we can't have a good operational result if we don't have a good safety result. That's why we always talk, insisting and talking about safety. And this has been the best year historically in terms of operational safety. We closed the quarter with very good rates. In the first quarter, we also had the best historical level of our reportable accident rate. We had a slight increase in quarter two, but we are accumulating a reduction of nearly 9% year over year. And 2020 had already been the best year of the last years for the company. And we had a significant reduction in the severity rate of these incidents. And despite having a slightly higher number of incidents, they were less severe. So we closed with a 21.3% reduction in the severity rate of quarter over quarter. For dams and water, you know that we are working on this area. And in the first half of the year, we started the works of the Vigia dams belt channel and the contracting of the works for the B4 belt channel. And this is also a milestone for the start of the characterization of these two dams. And we have a great indicator. We closed the first half of the year with a reduction of 8% in water capture, specifically for steel production. So with a higher production, but without increasing the use of water. And this is a very important indicator, considering that CSNT, has reduced by 70% the water consumption for steel production in the past few years. Social and diversity, we also want to double the number of women in our payroll. We've had a more than 11% increase in female participation in the company. We adhere to Mover. Mover is a movement for racial equity, an important initiative. 45 companies from different industries working in favor of racial equity. This should create 10,000 positions for Blacks and train thousands of people by 2030. So we are advancing fast in our ESG agenda with a lot of initiatives and reaping the souls of all these initiatives, as we can see in this slide. Thank you, Milena. And before we open for questions, I'd like to hand the conference over to our chairman and president, Benjamin Pinbrook, for his considerations.