Brazilian Steel Faces Costs, Inflation Woes
By PATRICK CAIN, INVESTOR'S BUSINESS DAILY
Posted 06/17/2010 05:36 PM ET
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* Top-Rated Company Steel makers were one of the best industries when the market followed through this week, and that's a group where Companhia Siderurgica Nacional (SID) is found.
The Brazilian company, the largest Latin American steel maker, is a major supplier to the booming automobile industry in that fast-growing country.
It also owns the mines from which it gets iron ore, limestone and dolomite.
The stock's dividend has a 3.7% annualized yield.
The company is undergoing a bit of a transformation. In a bid to increase assets, CSN will start to gradually spin off parts of its business. The main business division, its iron ore unit, will have an initial public offering.
It is believed that the company could also sell stakes in its cement, steel making, energy and logistics units. If all goes well, the moves could help CSN fetch a better value for its business, in turn fueling possible acquisitions.
Brazil is facing some inflation issues, partly due to a run-up in prices on iron ore and wholesale goods. As a result, the country may cut the import duty on steel.
This is partly a response to CSN and other Brazilian steel makers raising prices by more than 10% a month due to higher iron-ore costs.
Brazilian steel can sell for more than 40% above international levels, according to industry analysts. That already has pushed buyers to look elsewhere despite trade tariffs. Steel imports rose 156% from January through April, vs. the level during the period last year.
The stock appears to be basing. Shares are 27% off their 52-week high. |
