Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

CSN POSTS NET REVENUE OF R$4.4 BILLION AND ADJUSTED EBITDA MARGIN OF 30% IN 1Q14.

São Paulo, May 7, 2014

Companhia Siderúrgica Nacional (CSN) (BM&FBOVESPA: CSNA3) (NYSE: SID) announces today its consolidated results for the first quarter of 2014 (1Q14), which are presented in Brazilian Reais and in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and with Brazilian accounting practices, which are fully convergent with international accounting norms, issued by the Accounting Pronouncements Committee (CPC) and approved by the Brazilian Securities and Exchange Commission (CVM), pursuant to CVM Instruction 485 of September 1, 2010. The comments herein refer to the Company’s consolidated results and comparisons refer to the fourth quarter of 2013 (4Q13) and first quarter of 2013 (1Q13), unless otherwise stated. On March 31, 2014, the Real/US Dollar exchange rate was R$2.263.

·         Net revenue totaled R$4.4 billion in 1Q14, 20% up on 1Q13;

·         Gross profit came to R$1.3 billion, 69% more than in 1Q13;

·         Adjusted EBITDA amounted to R$1.4 billion, a 60% improvement over the R$0.9 billion recorded in 1Q13, with an adjusted EBITDA margin of 30%, up by 8 p.p. in the same period;

·         Adjusted EBITDA from the steel segment totaled R$761 million in 1Q14, 44% higher than in the same quarter last year.

·         CSN closed 1Q14 with cash and cash equivalents of R$12.9 billion.

·         The Net Debt/EBITDA ratio ended the quarter at 2.66x, 0.25x less than at the end of 2013.

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Global growth has been consolidating, fueled by the recovery of the developed economies, while growth in the emerging nations is expected to be moderate. The global Purchasing Managers Index (PMI) closed March at 53.5 points, giving 18 consecutive months of expansion. In this scenario, the IMF expects global GDP growth of 3.6% this year and 3.9% in 2015, versus 3.0% in 2013.

USA

In the United States, even though the economic performance of the first two months of the year was jeopardized by the exceptionally rigorous winter, the fundamentals are still favoring a recovery in activity. March’s manufacturing PMI recorded 53.7 points, while the service sector PMI reached 55.3 points, up by 0.5 and 2.0 points, respectively, on February.

Industrial production moved up by 0.7% in March, giving 12-month growth of 3.8%, while capacity use came to 79.2%, higher than the 78.4% recorded in December 2013.

Unemployment reached 6.7% in March, flat over December 2013 and 0.8 p.p. down in the last 12 months.

The FED maintained its US$10 billion reduction in the asset purchase program at each meeting and will continue to do so, unless there is a significant change in the economic fundamentals. At the same time, it signaled that the current interest rates would remain in place for a longer period, even after the winding up of the asset purchase program, expected at the end of 2014, thereby alleviating market concerns. The FED expects U.S. GDP growth of between 2.8% and 3.0% in 2014.  

Europe

Despite the 0.4% economic shrinkage in the Eurozone in 2013, the European Central Bank (ECB) expects growth of 1.2% in 2014 and 1.5% in 2015, albeit not uniformly among the various countries.

The Eurozone’s compound PMI reached 53.1 points in March, 1.0 point up on December 2013 and the ninth consecutive monthly upturn. Unemployment, stable since October, fell slightly in March, reaching 11.8%, while industrial production increased by 1.7% in February over the month before. 

Twelve-month inflation closed March at 1.1%, below the 2% target established by the ECB. As a result, at its last meeting in April, the institution maintained interest rates at 0.25% p.a., their lowest ever level.

In the UK, first-quarter GDP edged up by 0.8%, fueled by the service sector. Industrial output grew by 0.9% in February over January, while compound PMI reached 58.1 points in the same month, slightly down on the 59.5 points recorded in December, but still high. According to the British Treasury, the consensus of estimates points to GDP growth of 2.8% in 2014.

Asia

In China, the beginning-of-year activity indicators pointed to deceleration, once again raising worries of a possible economic slowdown.

Preliminary 1Q14 figures indicate year-on-year Chinese GDP growth of 7.4%. Industrial production moved up by 8.7% in the first quarter, below the average of 10% recorded in the second half of 2013. Manufacturing PMI, disclosed by HSBC, which expanded by 50.5 points in December 2013, has been on the decline since the beginning of this year, reaching 48.0 points in March, while investments in fixed assets fell from 20.9% in 1Q13 to 17.6% in 1Q14.

According to the Chinese National Bureau of Statistics, total investments in the construction sector came to 1.5 billion yuan in 1Q14, 16.8% up in the quarter, versus 20.2% in 1Q13, signifying a decline of 3.4 p.p.

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Given this scenario, in April the Chinese government announced a series of measures to stimulate the economy, including tax breaks for small and mid-sized businesses, accelerated railway construction and improvements to the housing financing system. The government maintained its 2014 GDP growth target at 7.5%, with industrial output growth of 9.5%.

Japan continued to stage a modest recovery, with the local central bank maintaining its economic stimuli. Manufacturing PMI reached 53.9 points in March, the tenth consecutive monthly expansion, versus 55.2 points in December 2013. The institution expects 2014 GDP growth of between 0.9% and 1.5%, with inflation of 1.5%.

Brazil

On the home front, February’s seasonally-adjusted Central Bank Economic Activity Index (IBC-Br), used as a reference for GDP, increased by 0.24% over January, giving a 12-month variation of 2.41%. The Central Bank’s FOCUS report expects GDP growth of 1.63% in 2014 and 1.91% in 2015.

Industrial production in February edged up by 0.4% over the previous month and by 5.0% year-on-year. Retail sales increased by 0.2% in February over January and by 5.0% in the previous 12 months.

On the other hand, the Industrial Confidence Index (ICI) measured by the Getulio Vargas Foundation fell by 2.3% between February and March 2014, from 98.5 to 96.2 points, the lowest level since June 2009.The trade balance closed 1Q14 with a deficit of US$6.1 billion, the worst figure since the series began in 1994.

Inflation measured by the IPCA consumer price index increased by 0.92% in March over February and by 6.15% in 12 months, above the mid-point of the inflationary target defined by the Monetary Policy Committee (COPOM). As a result, the COPOM maintained its restrictive monetary policy, raising the Selic benchmark interest rate for the ninth consecutive time, this time to 11.25% p.a. The FOCUS report expects 2014 inflation of 6.5%, with a Selic of 11.25% at year-end.

On the foreign exchange front, the real appreciated by 3.4% against the dollar in 1Q14, closing March at R$2.263, reflecting the current yields of U.S. government bonds and the increase in Brazilian interest rates.

Macroeconomic Projections  

                                   Source: FOCUS BACEN                   Base: May 5, 2014

CSN recorded consolidated net revenue of R$4,371 million in 1Q14, 20% up on the R$3,642 million reported in 1Q13, chiefly due to increased revenue from steel and mining operations.

In relation to the R$4,949 million recorded in 4Q13, 1Q14 net revenue fell by 12%, primarily due to reduced revenue from the mining segment.

In 1Q14, consolidated COGS came to R$3,035 million, 6% more than the R$2,852 million posted in the same period last year, basically due to higher iron ore sales volume.

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In comparison to the R$3,292 million recorded in 4Q13, 1Q14 COGS declined by 8%, mainly due to lower iron ore sales volume.

SG&A expenses totaled R$294 million in 1Q14, 5% down on the R$311 million posted in 1Q13, chiefly due to the lower distribution cost, and 17% down on the R$355 million reported in 4Q13, mainly as a result of the reduction in administrative expenses.  

In 1Q14, Other Operating Revenue/Expenses amounted to R$177 million, 86% up on the R$95 million recorded in 1Q13, due to provisions for contingencies, and 10% down on the R$196 million reported in 4Q13, essentially basically due to the non-recurring impact of the Company’s adherence to the Tax Settlement Program (REFIS) in the latter quarter.

The Company uses Adjusted EBITDA to measure the segments' performance and operating cash flow capacity. It comprises net income, less net financial result, income and social contribution taxes, depreciation and amortization, results from investees and other operating revenue (expenses), plus the proportional EBITDA of the jointly-owned subsidiaries, Namisa, MRS Logística and CBSI. Adjusted EBITDA totaled R$1,440 million in 1Q14, 60% up on the R$902 million recorded in 1Q13, essentially due to the contributions of the steel and mining segments, while the EBITDA margin came to 30%.   In relation to 4Q13, adjusted EBITDA fell by 18%, chiefly due to the mining segment, partially offset by steel EBITDA, while the adjusted EBITDA margin narrowed by 2 p.p.

The 1Q14 net financial result was negative by R$741 million, primarily due to the following factors:

·         Interest on loans and financing totaling R$659 million;  

·         Expenses of R$41 million with the monetary restatement of tax payment installments;

·         Other financial expenses totaling R$24 million;

·         Monetary and foreign exchange variations amounting to R$55 million;

These negative effects were partially offset by consolidated financial revenue of R$38 million.

Gross debt, net debt and the net debt/EBITDA ratio presented below reflect the Company’s proportional interest in Namisa, MRS Logística and CBSI, as well as the impact from the partial spin-off of Transnordestina Logística S/A.

On March 31, 2014, consolidated net debt totaled R$15.8 billion, very close to the R$15.7 million recorded on December 31, 2013, impacted by:

·         Payment of dividends and interest on equity totaling R$0.4 billion;

·         Investments of R$0.3 billion in fixed assets;

·         A R$0.7 billion effect related to the cost of debt;

·         Other effects totaling R$0.1 billion;

These negative impacts were offset by 1Q14 EBITDA of R$1.4 billion.

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The net debt/EBITDA ratio based on LTM adjusted EBITDA closed the first quarter at 2.66x, 0.25x down on the ratio recorded at the end of 4Q13.

The consolidated equity result was negative by R$46 million in 1Q14, essentially due to the results of the jointly-owned subsidiaries Namisa and MRS.

CSN posted consolidated net income of R$52 million in 1Q14, R$36 million more than in 1Q13, chiefly due to the upturn in gross profit.

In comparison with the previous quarter, net income increased by R$539 million, given the 4Q13 net loss of R$487 million, primarily due to the Company’s adherence to the Tax Settlement Program (REFIS). 

Investments reflect the Company’s proportional interest in Namisa, MRS Logística and CBSI. The Company has ceased consolidating its interest in Transnordestina Logística S/A, due to the latter’s partial spin-off on December 27, 2013 and the consequent entry into effect of the new shareholders’ agreement.

CSN invested R$355 million in 1Q14, R$236 million in the parent company. Of this total, R$114 million went to the Casa de Pedra mine and the Port of Itaguaí and R$108 million to the steel segment, mainly due to improvements to the hot strip mill (LTQ) and the coke batteries.

The remaining R$119 million went to subsidiaries or joint subsidiaries, mostly as follows:

ü  Namisa: R$33 million;

ü  Sepetiba Tecon: R$28 million;

ü  MRS: R$23 million.

Working capital allocated to the Company’s businesses closed 1Q14 at R$2,510 million, R$25 million less than at the end of 4Q13, chiefly due to the increase in the suppliers line and the reduction in accounts receivable, partially offset by the upturn in inventories. The average supplier payment period widened by nine days, the average receivables period narrowed by two days and the average inventory turnover period increased by twelve days.

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The Company maintains integrated operations in five business segments: steel, mining, logistics, cement and energy. The main assets and/or companies comprising each segment are presented below:

The information on CSN’s five business segments is derived from the accounting data, together with allocations and the apportionment of costs among the segments. Results by segment reflect the Company’s proportional interest in Namisa, MRS Logística and CBSI, as well as the full consolidation of FTL.

Net Revenue per Segment (R$ million)  

Adjusted EBITDA by segment (R$million)

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Scenario

According to the World Steel Association (WSA) global crude steel production totaled 406 million tonnes in 1Q14, 2.5% higher than in 1Q13, with China, responsible for 203 million tonnes, recording growth of 2.4%. Global capacity use reached 79% in March, 6.2 p.p. up on December 2013. The WSA expects global apparent steel consumption to grow by 3.1% in 2014, with apparent consumption in China moving up by 3%.

According to the Brazilian Steel Institute (IABr), domestic crude steel production came to 8.3 million tonnes in 1Q14, 1.5% more than in 1Q13, while rolled flat output totaled 6.3 million tonnes, up by 1.9%. 

Apparent domestic flat steel consumption amounted to 6.4 million tonnes in the first quarter, 2.1% more than in 1Q13, while domestic sales moved up by 1.7% to 5.4 million tonnes. On the other hand, imports climbed by 3.8% to 0.9 million tonnes, while exports fell by 19% to 1.9 million tonnes.

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The IABr estimates domestic sales of 23.7 million tonnes in 2014, with apparent consumption of 27.2 million tonnes.

Automotive

According to ANFAVEA (the Auto Manufacturers’ Association), light vehicle production totaled 790,000 units in 1Q14, 8.4% down on 1Q13, with sales of 813,000 units, down by 2.1%.

ANFAVEA estimates light vehicle production and sales growth of 1.4% and 1.1%, respectively, in 2014, while FENABRAVE (the Vehicle Distributors’ Association) expects sales to remain flat over last year.

Construction  

According to ABRAMAT (the Construction Material Manufacturers’ Association), sales of building materials increased by 0.9% year-on-year in 1Q14.

ABRAMAT estimates sales growth of 4.5% in 2014 as a whole, sustained by the resumption of investments in infrastructure and the works for the upcoming sporting events.

Home Appliances

According to the IBGE (Brazilian Institute of Geography and Statistics), home appliance production fell by 2.4% year-on-year in January and February.

Distribution  

According to INDA (the Brazilian Steel Distributors’ Association), domestic flat steel sales by distributors totaled 1.17 million tonnes in 1Q14, 12% up on 4Q13. For 2014 as a whole, the association expects growth of 4% in flat steel sales by its affiliates.

Purchases by the associated network came to 1.09 million tonnes in 1Q14, 0.9% down on the previous three months. On the other hand, inventories closed March at 968,000 tonnes, 0.8% less than in 4Q13, representing 2.6 months of sales.

Sales Volume

CSN sold 1.39 million tonnes of steel in 1Q14, 4% down on 4Q13. Of this total, 73% went to the domestic market, 25% were sold by overseas subsidiaries and 2% went to direct exports.

Domestic Sales Volume

Domestic steel sales totaled 1.01 million tonnes in 1Q14, 5% less than in 4Q13, due to the seasonality of steel sales.

Foreign Sales Volume         

Foreign steel sales amounted to 377,000 tonnes in 1Q14, in line with the previous quarter. Of this total, the overseas subsidiaries sold 351,000 tonnes, 209,000 of which by SWT. Direct exports came to 26,000 tonnes.

Prices

Net revenue per tonne averaged R$2,216 in 1Q14, 6% higher than the 4Q13 average.

Net Revenue

Net revenue from steel operations totaled R$3,127 million, 1% up on 4Q13, chiefly due to higher prices, partially offset by the decline in sales volume.

Cost of Goods Sold (COGS)

Steel segment COGS came to R$2,395 million, 2% less than in 1Q13 and 4Q13, basically due to lower sales volume.

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Adjusted EBITDA

Adjusted steel segment EBITDA totaled R$761 million in 1Q14, 20% up on the quarter before, basically due to higher steel prices and the largest quarterly figure since 3Q10. The adjusted EBITDA margin came to 24%, 3 p.p. up on 4Q13, and the highest since 3Q11. These results signify a steel segment margin recovery.

Production

The Presidente Vargas Steelworks (UPV) produced 1.1 million tonnes of crude steel in 1Q14, in line with the 4Q13 figure, while consumption of slabs purchased from third parties totaled 102,000 tonnes. Production  of rolled steel came to 1.1 million tonnes, 8% down on the previous quarter due to the hot strip mill maintenance program.

Production Costs (Parent Company)

In 1Q14, the Presidente Vargas Steelworks’ total production costs came to R$1,656 million, 7% down on 4Q13, chiefly due to the reduced consumption of slabs acquired from third parties.

Scenario

In 1Q14, the seaborne iron ore market was negatively impacted by the slowdown in industrial output, the reduction in investments in fixed assets and lower real estate sales in China, which led to a deceleration in steel production. In addition, iron ore stocks in the main Chinese ports reached record levels, putting downward pressure on prices.

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In this scenario, the Platts Fe62% CFR China index averaged US$120.38/dmt in 1Q14, 10.6% down on the 4Q13 average. The iron ore quality premium varied between US$2.00 and US$2.30/dmt per 1% of Fe content, while freight costs on the Tubarão/Qingdao route averaged US$22.33/wmt, 10.7% less than the previous quarter’s average, with the seasonal reduction in exports from Brazil and Australia.

Brazil exported 77 million tonnes of iron ore in the first quarter, 19% down on 4Q13.

Iron Ore Sales

In 1Q14, sales of finished iron ore products totaled 6.4 million tonnes, 54% up on the 4.1 million tonnes sold in 1Q13 and 18% less than the 7.8 million tonnes recorded in the previous quarter, due to maintenance at the Tecar terminal in the Port of Itaguaí. Of this total, 2.2 million tonnes were sold by Namisa¹. Virtually all iron ore sold in 1Q14 was exported.

Iron ore volume for own consumption reached 1.5 million tonnes in 1Q14.

¹ Sales volumes include 100% of the stake in NAMISA.

Net Revenue

Net revenue from mining operations came to R$1,247 million in 1Q14, 67% up on 1Q13, primarily due to the upturn in sales volume.

In relation to the R$1,920 million reported in the previous quarter, however, 1Q14 net revenue fell by 35%, due to lower sales volume and prices and the 4Q13 reception of R$323 million in indemnification for lost earnings in 2007 due to a claim related to Tecar’s iron ore separator and belt transportation system.

Cost of Goods Sold (COGS)

COGS totaled R$716 million in 1Q14, 58% up on 1Q13, chiefly due to higher sales volume.

In relation to the R$946 million recorded in 4Q13, 1Q14 COGS fell by 24%, essentially due to lower sales volume.

Adjusted EBITDA

Adjusted EBITDA from mining operations totaled R$585 million in 1Q14, 79% up on the R$326 million reported in 1Q13, for the reasons mentioned above, with an adjusted EBITDA margin of 47%, and 43% down on the R$1,022 million recorded in 4Q13.

Scenario

Railway Logistics

According to the ANTT (National Ground Transport Association), the Brazilian railways transported 463 million tonnes in 2013, 0.7% up on 2012.  

Port Logistics

According to ANTAQ (National Waterway Transport Agency), Brazil’s port installations handled around 931 million tonnes in 2013, 3% more than the year before. Bulk solids totaled 569 million tonnes, 2% up on 2012, while container handling came to 8.9 million TEUs1, up by 9%. 

¹ TEU (Twenty‐Foot Equivalent Unit) – transportation unit equivalent to a standard 20-feet intermodal container

Analysis of Results

Railway Logistics

Net revenue from railway logistics totaled R$277 million in 1Q14, COGS came to R$205 million and adjusted EBITDA amounted to R$83 million, with an adjusted EBITDA margin of 30%.

Port Logistics

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In 1Q14, net revenue from port logistics amounted to R$60 million, COGS totaled R$34 million and adjusted EBITDA came to R$27 million, with an adjusted EBITDA margin of 46%.

Scenario

Preliminary figures from SNIC (the Cement Industry Association) indicate domestic cement sales of 17.1 million tonnes in 1Q14, 6% up on the previous quarter.

Analysis of Results

Cement sales totaled 488,000 tonnes in 1Q14, generating net revenue of R$98 million. COGS amounted to R$65 million, while adjusted EBITDA reached R$27 million, with an adjusted EBITDA margin of 27%.

Scenario

According to the Energy Research Company (EPE), Brazilian electricity consumption increased by 6.0% year-on-year in the first quarter of 2014, led by the commercial and residential segments, with respective growth of 10.8% and 10.0%.

Analysis of Results

In the first quarter, net revenue came to R$65 million, COGS totaled R$42 million and adjusted EBITDA amounted to R$23 million, with a margin of 35%.

CSN’s shares depreciated by 30% in 1Q14, while the Company’s ADRs fell by 27% on the NYSE.

Daily traded volume in CSN’s shares averaged R$73 million in 1Q14, from 6.4 million shares traded. On the NYSE, daily traded volume in CSN’s ADRs averaged US$29 million, from 6.0 million ADRs traded.

Shareholder Payments

The Annual Shareholders’ Meeting of April 25, 2013 ratified the distribution of dividends and interest on equity (IOE) as follows: (i) dividends of R$210 million and IOE of R$90 million paid on August 15, 2013; and (ii) dividends of R$400 million and IOE of R$100 million, paid on November 28, 2013, approved by the Board of Directors at meetings held on August 6, 2013 and November 13, 2013, respectively.

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