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Q3 2008 Companhia Siderurgica Nacional Earnings Conference Call (English) - Final.

Article Excerpt
OPERATOR: Good morning, ladies and gentlemen. At this time we would like to welcome everyone to the CSN third quarter 2008 earnings conference call. Today we have with us the Company's executive officers.

(Operator Instructions). We have simultaneous webcasts that may be accessed through CSN's Investor Relations website at www.csn.com.br/ir. The slide presentation may be downloaded from the website. Please feel free to flip through the slides during the conference call. There will be a replay service for this call on the website.

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform As compared to of 1996. Forward-looking statements are based on the beliefs and assumptions of CSN management and on the information currently available to the Company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of CSN and could cause the results to differ materially from those expressed in such forward-looking statements.

Now I'll turn the conference over to Mr. Otavio de Garcia Lazcano who will present CSN's operating and financial highlights of the quarter. Mr. Lazcano, you may begin your conference.

OTAVIO DE GARCIA LAZCANO, CFO, COMPANHIA SIDERURGICA NACIONAL: Good morning, everybody, thank you all for joining us for the third quarter earnings announcement and conference call. Let's start with the main highlights of the third quarter.

The Company reported net revenues from sales of R$4 billion. It is a record for the Company, 13% above the number reported during the second quarter '08 and 36% above the number reported during the third quarter '07. Net revenues from sales accumulated over the first nine months of 2008 of R$10.6 billion is also a new record for the Company, 26% above number accumulated over the first nine months of 2007.

Gross income of R$2.1 billion during the third quarter and R$5 billion during the first nine months of '08 are also records for the Company. The EBITDA of R$2.1 billion reported for the third quarter '08 was also a record and it is 22% above EBITDA reported during the second quarter '08 and 60% above the third quarter '07.

During the first nine months the EBITDA accumulated was R$5.1 billion, another record for the Company. The EBITDA margin of the Company was 52% during the third quarter. The Company has been reporting EBITDA margin above 40% for more than seven years in a row.

As to the net income accumulated over the first nine months of '08, it was R$1.8 billion. As to the net income reported for the third quarter '08, it was R$40 million, reflecting higher financial expenses related to Total Return Swap that we did on our own ADRs. This transaction was first executed back in 2003. It was then renewed several times.

By the end of '07 the accumulated gains net of taxes was R$2.2 billion. We accumulated additional gains of R$800 million during the first half of '08 and then we had losses of R$1.3 billion during the third quarter of '08. The accumulated gains net of taxes, once again, by September 30, 2008 was still R$1.8 billion.

Sales of new products in the local market, I mean, in the Brazilian economy during the third quarter accounted for 88% of the total sales volume of the Company. As to the net revenues for average net revenues per ton, it was R$2,448 per ton, significantly higher than the R$2,000 per ton during the second quarter '08, not to mention R$1,900 per ton one year ago. During the last 12 months the return on equity and the return on capital employed by the Company was 57% and 31% respectively.

Now moving to the next slide where we present net revenues from sales and sales volume by market, beginning with the chart on your left hand side, there's no change at all as to the sales volume of the Company, roughly speaking 1.3 million tons each and every quarter. There was a significant change in the sales allocation of the Company towards the domestic economy where the Company can generate higher margins historically. Domestic sales accounted for 88% of the total sales volume.

Now moving to the chart on your right hand side, net revenues from sales of R$4 billion is a record for the Company, [14]% above the previous quarter and 36% above one year ago, reflecting the cumulative price increase announced and then implemented by the Company on steel products back in March, May and June 2008. And also, the sales volume of iron ore, iron ore business is becoming more relevant within the Company.

Moving to the next slide where we present sales volume by product and market segment. Beginning with the chart on your left hand slide at the top of the slide, you can see that there is no change at all in the total sold by the Company. Total products still accounts for approximately 50% of the total sales volume, so no change at all.

Moving clock wise to the right, you can see that iron ore is becoming more relevant, as you see in our portfolio of assets. Total production of iron ore during the third quarter was equivalent to 4.5 million tons at Casa de Pedra, 1.3 million from NAMISA, our subsidiary. And we also acquired 1.6 million tons from others to develop our business to trade iron ore for others. So the total within CSN system was 7.4 million tons of iron ore.

During the first nine months of 2008 Casa de Pedra produced 13.5 million tons of iron ore products, NAMISA produced an additional 3.9 million tons and we acquired 3.9 million tons as well from others, a total of 21.3 million tons available for sale within CSN system.

As to the sales volume, during the third quarter of '08 we sold to final customers 5.4 million tons on top of 1.8 million tons used to support...

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