6-K 1 siditr3q20_6k.htm FORM 6-K

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

For the month of October, 2020

Commission File Number 1-14732

 


 

COMPANHIA SIDERÚRGICA NACIONAL

(Exact name of registrant as specified in its charter)

 

National Steel Company

(Translation of Registrant's name into English)

 

Av. Brigadeiro Faria Lima 3400, 20º andar
São Paulo, SP, Brazil
04538-132

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.  

 

Form 20-F ___X___ Form 40-F _______

 

 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.  

Yes _______ No ___X____

 

 

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Table of Contents

 

Company Information  
Capital Breakdown 1
Parent Company Financial Statements  
Balance Sheet – Assets 2
Balance Sheet – Liabilities 3
Statement of Income 4
Statement of Comprehensive Income 5
Statement of Cash Flows 6
Statement of Changes in Shareholders’ Equity  
01/01/2020 to 09/30/2020 8
01/01/2019 to 09/30/2020 9
Statement of Value Added 10
Consolidated Financial Statements  
Balance Sheet – Assets 11
Balance Sheet - Liabilities 12
Statement of Income 14
Statement of Comprehensive Income 16
Statement of Cash Flows 17
Statement of Changes in Shareholders’ Equity  
01/01/2020 to 09/30/2020 19
01/01/2019 to 09/30/2020 20
Statement of Value Added 21
Comments on the Company’s Consolidated Performance 22
Notes to the quarterly financial information 40
Comments on the Performance of Business Projections 94
Reports and Statements  
Unqualified Independent Auditors’ Review Report 98
Officers Statement on the Financial Statements 100
Officers Statement on Auditor’s Report 101

 

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Company Information / Capital Breakdown

 

Number of Shares

(Units)

Current Quarter

09/30/2020

 
Paid-in Capital    
Common 1,387,524,047  
Preferred 0  
Total 1,387,524,047  
Treasury Shares    
Common 7,409,500  
Preferred 0  
Total 7,409,500  

 

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Parent Company Financial Statements / Balance Sheet - Assets
(R$ thousand)  

 

         
Code Description  Current Quarter 09/30/2020  Previous Year 12/31/2019
1 Total Assets          49,196,211        44,814,611
1.01 Current assets          12,163,202         9,719,866
1.01.01 Cash and cash equivalents            2,370,726            392,107
1.01.02 Financial investments            2,778,724         2,596,424
1.01.02.01 Financial investments measured a fair value through profit or loss            2,212,063         2,114,620
1.01.02.01.03 Financial investments measured a fair value through profit or loss – Usiminas’ shares            2,212,063         2,114,620
1.01.02.03 Financial investments at amortized cost               566,661            481,804
1.01.03 Trade receivables            1,750,211         1,691,643
1.01.04 Inventory            3,110,722         3,736,716
1.01.08 Other current assets            2,152,819         1,302,976
1.01.08.03 Others            2,152,819         1,302,976
1.01.08.03.01 Recoverable taxes            1,761,045         1,129,584
1.01.08.03.02 Prepaid expenses               110,472              82,664
1.01.08.03.03 Dividends receivable               229,379              33,447
1.01.08.03.04 Others                 51,923              57,281
1.02 Non-current assets          37,033,009        35,094,745
1.02.01 Long-term assets            6,957,978         7,374,332
1.02.01.03 Financial investments at amortized cost               131,317              95,719
1.02.01.07 Deferred taxes assets            2,434,954         2,435,551
1.02.01.10 Other non-current assets            4,391,707         4,843,062
1.02.01.10.03 Recoverable taxes               685,987         1,907,420
1.02.01.10.04 Judicial deposits               250,818            224,300
1.02.01.10.05 Prepaid expenses                 98,165            110,099
1.02.01.10.06 Receivable from related parties            1,853,911         1,558,194
1.02.01.10.07 Others            1,502,826         1,043,049
1.02.02 Investments          19,842,618        17,402,191
1.02.02.01 Equity interest          19,696,884        17,316,463
1.02.02.02 Investment Property               145,734              85,728
1.02.03 Property, plant and equipment          10,186,126        10,266,084
1.02.03.01 Property, plant and equipment in operation            8,444,525         8,685,331
1.02.03.02 Right of use in leases                 35,494              44,172
1.02.03.03 Property, plant and equipment in progress            1,706,107         1,536,581
1.02.04 Intangible assets                 46,287              52,138
               

 

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Parent Company Financial Statements / Balance Sheet – Liabilities
(R$ thousand)
Code Description  Current Quarter 09/30/2020  Previous Year 12/31/2019
2 Total Liabilities 49,196,211 44,814,611
2.01 Current liabilities 8,713,752 9,224,591
2.01.01 Payroll and related taxes 211,293 170,792
2.01.02 Trade payables 3,927,712 2,506,244
2.01.03 Tax payables 175,705 78,911
2.01.04 Borrowings and financing 3,013,864 4,396,840
2.01.05 Other payables 1,351,708 2,019,788
2.01.05.02 Others 1,351,708 2,019,788
2.01.05.02.01 Dividends and interests on shareholder´s equity 13,075 13,252
2.01.05.02.05 Advances from clients 149,328 72,404
2.01.05.02.06 Trade payables – Drawee risk 573,153 1,121,312
2.01.05.02.07 Lease liabilities 14,230 17,269
2.01.05.02.08 Other payables 601,922 795,551
2.01.06 Provisions 33,470 52,016
2.01.06.01 Provision for tax, social security, labor and civil risks 33,470 52,016
2.02 Non-current liabilities 35,485,732 25,415,476
2.02.01 Borrowings and financing 27,386,519 19,702,620
2.02.02 Other payables 430,602 356,942
2.02.02.02 Others 430,602 356,942
2.02.02.02.03 Lease liabilities 21,105 28,671
2.02.02.02.04 Other payables 284,446 328,271
2.02.02.02.06 Derivative financial instruments 125,051 -
2.02.04 Provisions 7,668,611 5,355,914
2.02.04.01 Provision for tax, social security, labor and civil risks 379,743 370,703
2.02.04.02 Other provisions 7,288,868 4,985,211
2.02.04.02.03 Provision for environmental liabilities and decommissioning of assets 185,651 164,464
2.02.04.02.04 Pension and healthcare plan 912,184 912,184
2.02.04.02.05 Provision for losses on investments 6,191,033 3,908,563
2.03 Shareholders’ equity 4,996,727 10,174,544
2.03.01 Paid-up capital 4,540,000 4,540,000
2.03.02 Capital reserves 32,720 32,720
2.03.04 Earnings reserves 4,431,200 4,431,200
2.03.04.01 Legal reserve 278,576 278,576
2.03.04.02 Statutory reserve 4,210,888 4,210,888
2.03.04.09 Treasury shares (58,264) (58,264)
2.03.05 Accumulated earnings (losses) 65,113 -
2.03.08 Other comprehensive income (4,072,306) 1,170,624
       

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Parent Company Financial Statements / Statement of Income    
(R$ thousand)
 

 

Code Description Current Quarter 07/01/2020 to 09/30/2020 Year to date 01/01/2020 to 09/30/2020 Same quarter previous year 07/01/2019 to 09/30/2019 YTD previous year  01/01/2019 to 09/30/2019
3.01 Revenues from sale of goods and rendering of services 3,998,497 9,879,817 2,675,199 8,679,231
3.02 Costs from sale of goods and rendering of services (3,387,750) (8,689,585) (2,765,033) (8,473,275)
3.03 Gross profit 610,747 1,190,232 (89,834) 205,956
3.04 Operating (expenses)/income 218,586 (1,679,782) (338,290) 37,233
3.04.01 Selling expenses (175,430) (501,592) (129,121) (388,268)
3.04.02 General and administrative expenses (52,898) (164,022) (70,568) (189,504)
3.04.04 Other operating income 13,950 378,777 (231,182) (226,952)
3.04.05 Other operating expenses (497,458) (1,985,401) (572,772) (1,346,041)
3.04.06 Equity in results of affiliated companies 930,422 592,456 665,353 2,187,998
3.05 Profit before financial income (expenses) and taxes 829,333 (489,550) (428,124) 243,189
3.06 Financial income (expenses) 256,298 677,011 (563,786) (1,204,629)
3.06.01 Financial income 129,950 635,636 52,385 203,210
3.06.02 Financial expenses 126,348 41,375 (616,171) (1,407,839)
3.06.02.01 Net exchange differences over financial instruments 11,037 1,094,345 (189,477) (100,432)
3.06.02.02 Financial expenses 115,311 (1,052,970) (426,694) (1,307,407)
3.07 Profit (loss) before taxes 1,085,631 187,461 (991,910) (961,440)
3.08 Income tax and social contribution (4,845) (122,348) (1,048) 1,705,993
3.09 Profit (loss) from continued operations 1,080,786 65,113 (992,958) 744,553
3.11 Profit (loss) for the year 1,080,786 65,113 (992,958) 744,553
3.99.01 Basic earnings per share - - - -
3.99.01.01 Common shares 0.78311 0.04718 (0.71948) 0.53949
3.99.02 Diluted earnings per share - - - -
3.99.02.01 Common shares 0.78311 0.04718 (0.71948) 0.53949

  

 

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Parent Company Financial Statements / Statement of Comprehensive Income
(R$ thousand)
 
 

 

Code Description Current Quarter 07/01/2020 to 09/30/2020 Year to date 01/01/2020 to 09/30/2020 Same quarter previous year 07/01/2019 to 09/30/2019 YTD previous year  01/01/2019 to 09/30/2019
4.01 (Loss) profit for the year 1,080,786 65,113 (992,958) 744,553
4.02 Other comprehensive income (237,274) (5,242,930) (791,915) (196,236)
4.02.01 Actuarial gains over pension plan of subsidiaries, net of taxes 28 89 30 89
4.02.02 (Loss) /Gain over pension plan - - - 93,894
4.02.04 Cumulative translation adjustments for the year 135,882 649,335 64,636 36,700
4.02.10 (Loss)/gain on the percentage change in investments 1,631 6,243 - (1,995)
4.02.11 Losses in cash flow hedge (651,581) (7,316,513) (1,038,192) (959,789)
4.02.13 Cash flow hedge reclassified to income upon realization 341,991 1,481,672 186,022 632,681
4.02.14 Gain (Loss) on net investment hedge from investments in subsidiaries - 1,469 (4,411) 2,184
4.02.16 (Loss)/ gain in cash flow hedge from investments in subsidiaries (65,225) (65,225) - -
4.03 Comprehensive income for the year 843,512 (5,177,817) (1,784,873) 548,317

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Parent Company Financial Statements / Statements of Cash Flows – Indirect Method (R$ thousand)
Code Description Year to date 01/01/2020 to 09/30/2020 YTD previous year  01/01/2019 to 09/30/2019
6.01 Net cash from operating activities 2,779,274 1,902,461
6.01.01 Cash from operations 723,000 (613,530)
6.01.01.01 Profit (loss) for the period 65,113 744,553
6.01.01.02 Financial charges in borrowing and financing raised 771,804 1,054,136
6.01.01.03 Financial charges in borrowing and financing granted (34,204) (42,331)
6.01.01.04 Charges on lease liabilities 2,667 2,029
6.01.01.05 Depreciation, amortization and depletion 650,438 481,891
6.01.01.06 Equity in results of affiliated companies (592,456) (2,187,998)
6.01.01.07 Deferred taxes assets 597 (1,705,982)
6.01.01.08 Provision for tax, social security, labor, civil and environmental risks (9,506) (141,615)
6.01.01.09 Monetary and exchange variations, net 436,078 716,220
6.01.01.10 Result of derivative operations - 7,664
6.01.01.11 Updated shares – Fair value through profit or loss (100,314) 365,305
6.01.01.12 Write-off of property, plant and equipment and Intangible assets (2,283) 18,324
6.01.01.13 Provision for environmental liabilities and decommissioning of assets 21,187 (15,876)
6.01.01.14 Accrued/(reversal) for consumption and services 3,749 68,132
6.01.01.16 Others 22,884 22,018
6.01.01.17 Receivables by indemnity (512,754) -
6.01.02 Changes in assets and liabilities 2,056,274 2,515,991
6.01.02.01 Trade receivables - third parties 60,297 61,528
6.01.02.02 Trade receivables - related party (153,234) (112,331)
6.01.02.03 Inventory 625,994 (587,053)
6.01.02.04 Receivables - related parties/dividends 946,259 3,644,534
6.01.02.05 Recoverable taxes 589,972 (60,522)
6.01.02.06 Judicial deposits 20,256 9,178
6.01.02.09 Trade payables 1,326,253 (173,196)
6.01.02.10 Trade payables – Drawee risk (548,159) 862,412
6.01.02.11 Payroll and related taxes 40,501 71,196
6.01.02.12 Tax payables 110,562 (54,424)
6.01.02.13 Payables to related parties (217,251) 33,526
6.01.02.15 Interest paid (766,529) (1,067,847)
6.01.02.17 Interest received 1,202 -
6.01.02.18 Others 20,151 (111,010)
6.02 Net cash investment activities (852,338) (781,052)

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6.02.01 Investments / AFAC / Acquisitions of Shares (76,133) (70,623)
6.02.02 Purchase of property, plant and equipment and intangible assets (568,613) (759,368)
6.02.07 Intercompany loans granted (2,365,393) (170,182)
6.02.09 Intercompany loans received 2,241,226 -
6.02.11 Financial Investments, net of redemption (83,425) 219,121
6.03 Net cash used in financing activities 51,683 (914,916)
6.03.01 Borrowings and financing raised 80,744 3,377,697
6.03.02 Transactions cost - Borrowings and financing (18,478) (35,262)
6.03.03 Borrowings and financing – related parties 2,421,713 3,274,891
6.03.05 Amortization of borrowings and financing (1,570,158) (5,028,445)
6.03.06 Amortization of borrowings and financing - related parties (843,642) (1,181,350)
6.03.07 Amortization of leases (18,319) (11,768)
6.03.08 Dividends and interest on shareholder’s equity (177) (1,310,679)
6.05 Increase (decrease) in cash and cash equivalents 1,978,619 206,493
6.05.01 Cash and equivalents at the beginning of the year 392,107 539,853
6.05.02 Cash and equivalents at the end of the year 2,370,726 746,346

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Parent Company Financial Statements / Statement of Changes in Equity - 01/01/2020 to 09/30/2020
(R$ thousand)
Code Description Paid-up capital Capital reserve, granted options and treasury shares Earnings reserve Retained earnings (accumulated losses) Other comprehensive income Shareholders’ equity
5.01 Opening balances 4,540,000 32,720 4,431,200 1,170,624 10,174,544
5.03 Adjusted opening balances 4,540,000 32,720 4,431,200 1,170,624 10,174,544
5.05 Total comprehensive income  -   -  65,113  (5,242,930)  (5,177,817)
5.05.01 Profit (loss) for the period  -   -  65,113  -  65,113
5.05.02 Other comprehensive income  -   -   (5,242,930)  (5,242,930)
5.05.02.04 Translation adjustments for the year  -   -  649,335 649,335
5.05.02.07 Actuarial gains/(losses) on pension plan, net of taxes  -   -  89 89
5.05.02.12 (Loss) / gain on the percentage change in investments  -   -  6,243 6,243
5.05.02.13 (Loss) / gain on cash flow hedge accounting, net of taxes  -   -   (5,900,066)  (5,900,066)
5.05.02.14 (Loss) / gain on hedge of net investment in foreign operations  -   -  1,469 1,469
5.07 Closing balance 4,540,000 32,720 4,431,200 65,113  (4,072,306) 4,996,727
               

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Parent Company Financial Statements / Statement of Changes in Equity - 01/01/2019 to 09/30/2019
(R$ thousand)    
Code Description Paid-up capital Capital reserve, granted options and treasury shares Earnings reserve Retained earnings (accumulated losses) Other comprehensive income Shareholders’ equity
5.01 Opening balances  4,540,000  32,720  3,064,827  -   1,065,188  8,702,735
5.03 Adjusted opening balances  4,540,000  32,720  3,064,827  -   1,065,188  8,702,735
5.04 Capital transaction with shareholders  -  (412,659) (412,659)
5.04.06 Dividends  -  (412,659) (412,659)
5.05 Total comprehensive income  -  744,553 (196,236) 548,317
5.05.01 Profit (loss) for the period  -  744,553 744,553
5.05.02 Other comprehensive income  -   -  (196,236) (196,236)
5.05.02.04 Translation adjustments for the year  -   -  36,700 36,700
5.05.02.08 Actuarial gains/(losses) on pension plan, net of taxes  -   -  93,983 93,983
5.05.02.10 (Loss) / gain on the percentage change in investments  -   -  (1,995) (1,995)
5.05.02.11 (Loss) / gain on cash flow hedge accounting, net of taxes  -   -  (327,108) (327,108)
5.05.02.13 (Loss) / gain on hedge of net investment in foreign operations  -   -   2,184  2,184
5.07 Closing balance  4,540,000  32,720  3,064,827 331,894 868,952  8,838,393
               

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Parent Company Financial Statements / Statement of Value Added
(R$ thousand)
 
Code Description Year to date 01/01/2020 to 09/30/2020 YTD previous year  01/01/2019 to 09/30/2019
7.01 Revenues 12,412,192 10,572,016
7.01.01 Sales of products and rendering of services 12,218,076 10,856,499
7.01.02 Other revenues 191,532 (306,910)
7.01.04 Allowance for (reversal of) doubtful debts 2,584 22,427
7.02 Raw materials acquired from third parties (11,099,220) (10,471,007)
7.02.01 Cost of sales and services (8,885,496) (8,801,675)
7.02.02 Materials, electric power, outsourcing and other (2,233,368) (1,646,063)
7.02.03 Impairment/recovery of assets 19,644 (23,269)
7.03 Gross value added 1,312,972 101,009
7.04 Retentions (648,994) (481,891)
7.04.01 Depreciation, amortization and depletion (648,994) (481,891)
7.05 Value added created 663,978 (380,882)
7.06 Value added received 1,591,170 2,450,407
7.06.01 Equity in results of affiliates companies 592,456 2,187,998
7.06.02 Financial income 635,636 203,210
7.06.03 Others 363,078 59,199
7.06.03.01 Others and exchange gains 363,078 59,199
7.07 Value added for distribution 2,255,148 2,069,525
7.08 Value added distributed 2,255,148 2,069,525
7.08.01 Personnel 962,149 1,007,083
7.08.01.01 Salaries and wages 727,468 749,657
7.08.01.02 Benefits 185,240 203,434
7.08.01.03 Severance payment (FGTS) 49,441 53,992
7.08.02 Taxes, fees and contributions 904,198 (1,154,328)
7.08.02.01 Federal 758,549 (1,326,467)
7.08.02.02 State 145,649 172,139
7.08.03 Remuneration on third-party capital 323,688 1,472,217
7.08.03.01 Interest 1,052,970 1,307,407
7.08.03.02 Rental 1,983 5,179
7.08.03.03 Others (731,265) 159,631
7.08.03.03.01 Others and exchange losses (731,265) 159,631
7.08.04 Remuneration on Shareholders' capital 65,113 744,553
7.08.04.02 Dividends - 412,659
7.08.04.03 Retained earnings (accumulated losses) 65,113 331,894

 

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Consolidated Financial Statements / Balance Sheet - Assets
(R$ thousand)
Code Description Current Quarter 09/30/2020 Previous Year 12/31/2019
1 Total assets         57,022,091         50,869,276
1.01 Current assets         18,541,939         12,725,805
1.01.01 Cash and cash equivalents          5,724,428          1,088,955
1.01.02 Financial investments          2,805,381          2,633,173
1.01.02.01 Financial investments measured a fair value through profit or loss          2,212,063          2,114,620
1.01.02.01.03 Financial investments measured a fair value through profit or loss – Usiminas’ shares          2,212,063          2,114,620
1.01.02.03 Financial investments at amortized cost             593,318             518,553
1.01.03 Trade receivables          2,668,369          2,047,931
1.01.04 Inventory          5,035,288          5,282,750
1.01.08 Other current assets          2,308,473          1,672,996
1.01.08.03 Others          2,308,473          1,672,996
1.01.08.03.01 Recoverable taxes          1,953,337          1,282,415
1.01.08.03.02 Prepaid expenses             164,588             107,428
1.01.08.03.03 Dividends receivable               45,153               44,554
1.01.08.03.04 Derivative financial instruments                 1,010                 1,364
1.01.08.03.05 Others             144,385             237,235
1.02 Non-current assets         38,480,152         38,143,471
1.02.01 Long-term assets          7,401,053          7,626,577
1.02.01.03 Financial investments at amortized cost             131,317               95,719
1.02.01.07 Deferred taxes assets          2,501,398          2,473,304
1.02.01.10 Other non-current assets          4,768,338          5,057,554
1.02.01.10.03 Recoverable taxes             893,568          2,119,940
1.02.01.10.04 Judicial deposits             372,526             328,371
1.02.01.10.05 Prepaid expenses             130,797             126,213
1.02.01.10.06 Receivable from related parties          1,554,207          1,274,972
1.02.01.10.07 Others          1,817,240          1,208,058
1.02.02 Investments          3,691,195          3,584,169
1.02.02.01 Equity interest          3,530,479          3,482,974
1.02.02.02 Investment Property             160,716             101,195
1.02.03 Property, plant and equipment         20,033,718         19,700,944
1.02.03.01 Property, plant and equipment in operation         15,901,359         16,011,547
1.02.03.02 Right of use in leases             498,805             472,345
1.02.03.03 Property, plant and equipment in progress          3,633,554          3,217,052
1.02.04 Intangible assets          7,354,186          7,231,781
       

 

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Consolidated Financial Statements / Balance Sheet – Liabilities
(R$ thousand)
Code Description Current Quarter 09/30/2020 Previous Year 12/31/2019
2 Total Liabilities 57,022,091 50,869,276
2.01 Current liabilities 12,861,250 11,619,957
2.01.01 Payroll and related taxes 404,057 317,510
2.01.02 Trade payables 4,560,230 3,012,654
2.01.03 Tax payables 1,664,726 541,027
2.01.04 Borrowings and financing 3,598,537 5,125,843
2.01.05 Other payables 2,553,077 2,526,444
2.01.05.02 Others 2,553,077 2,526,444
2.01.05.02.01 Dividends and interests on shareholder´s equity 40,977 13,252
2.01.05.02.05 Advances from clients 962,789 787,604
2.01.05.02.06 Trade payables – Drawee risk 605,385 1,121,312
2.01.05.02.07 Lease liabilities 84,675 35,040
2.01.05.02.08 Derivative financial instruments 263,283 -
2.01.05.02.09 Other payables 595,968 569,236
2.01.06 Provisions 80,623 96,479
2.01.06.01 Provision for tax, social security, labor and civil risks 80,623 96,479
2.02 Non-current liabilities 37,817,990 27,887,387
2.02.01 Borrowings and financing 32,559,616 22,841,193
2.02.02 Other payables 2,704,234 2,493,702
2.02.02.02 Others 2,704,234 2,493,702
2.02.02.02.03 Advances from clients 1,937,420 1,845,248
2.02.02.02.04 Lease liabilities 420,014 439,350
2.02.02.02.05 Other payables 221,749 209,104
2.02.02.02.06 Derivative financial instruments 125,051 -
2.02.03 Deferred taxes assets 564,043 589,539
2.02.04 Provisions 1,990,097 1,962,953
2.02.04.01 Provision for tax, social security, labor and civil risks 529,176 526,768
2.02.04.02 Other provisions 1,460,921 1,436,185
2.02.04.02.03 Provision for environmental liabilities and decommissioning of assets 548,737 524,001
2.02.04.02.04 Pension and healthcare plan 912,184 912,184
2.03 Shareholders’ equity 6,342,851 11,361,932
2.03.01 Paid-up capital 4,540,000 4,540,000
2.03.02 Capital reserves 32,720 32,720
2.03.04 Earnings reserves 4,431,200 4,431,200
2.03.04.01 Legal reserve 278,576 278,576
2.03.04.02 Statutory reserve 4,210,888 4,210,888
2.03.04.09 Treasury shares (58,264) (58,264)
       

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2.03.05 Accumulated earnings (losses) 65,113 -
2.03.08 Other comprehensive income (4,072,306) 1,170,624
2.03.09 Profit attributable to the non-controlling interests 1,346,124 1,187,388

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Consolidated Financial Statements / Statements of Income
(R$ thousand)
Code Description Current Quarter 07/01/2020 to 09/30/2020 Year to date 01/01/2020 to 09/30/2020 Same quarter previous year 07/01/2019 to 09/30/2019 YTD previous year01/01/2019 to 09/30/2019
3.01 Revenues from sale of goods and rendering of services  8,714,583  20,269,919  6,006,393  18,912,601
3.02 Costs from sale of goods and rendering of services  (5,133,126)  (13,528,898) (4,370,357)  (12,834,121)
3.03 Gross profit  3,581,457  6,741,021  1,636,036  6,078,480
3.04 Operating (expenses)/income  (1,422,016) (3,932,678)  (1,365,864)  (3,494,511)
3.04.01 Selling expenses  (606,938) (1,398,316)  (429,836)  (1,429,593)
3.04.02 General and administrative expenses  (124,180)  (369,681) (137,497) (383,379)
3.04.04 Other operating income 25,549  432,506  (183,090) (163,924)
3.04.05 Other operating expenses (742,417) (2,606,403) (679,510) (1,636,583)
3.04.06 Equity in results of affiliated companies 25,970  9,216 64,069 118,968
3.05 Profit before financial income (expenses) and taxes 2,159,441  2,808,343 270,172  2,583,969
3.06 Financial income (expenses)  (156,049) (1,072,330) (840,074)  (1,832,849)
3.06.01 Financial income 134,489  656,290 114,213 310,994
3.06.02 Financial expenses  (290,538)  (1,728,620) (954,287)  (2,143,843)
3.06.02.01 Net exchange differences over financial instruments (69,751)  277,491  (282,224) (197,581)
3.06.02.02 Financial expenses (220,787)  (2,006,111) (672,063)  (1,946,262)
3.07 Profit (loss) before taxes 2,003,392 1,736,013 (569,902) 751,120
3.08 Income tax and social contribution (741,797) (1,340,227) (300,754) 359,449
3.09 Profit (loss) from continued operations 1,261,595 395,786 (870,656)  1,110,569
3.11 Consolidated Profit (loss) for the year  1,261,595 395,786 (870,656)  1,110,569
3.11.01 Profit attributable to the controlling interests 1,080,786 65,113 (992,958) 744,553
3.11.02 Profit attributable to the non-controlling interests  180,809 330,673 122,302 366,016
3.99.01 Basic earnings per share - - - -

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3.99.01.01 Common shares 0.78311 0.04718 -0.71948 0.53949
3.99.02 Diluted earnings per share 0.00000 0.00000 0.00000 0.00000
3.99.02.01 Common shares 0.78311 0.04718 -0.71948 0.53949

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Consolidated Financial Statements / Statement of Comprehensive Income
(R$ thousand)
 
 

 

Code Description Current Quarter 07/01/2020 to 09/30/2020 Year to date 01/01/2020 to 09/30/2020 Same quarter previous year 07/01/2019 to 09/30/2019 YTD previous year  01/01/2019 to 09/30/2019
4.01 Consolidated profit (loss) for the year 1,261,595 395,786 (870,656) 1,110,569
4.02 Other comprehensive income (246,566) (5,252,220) (791,913) (196,230)
4.02.01 Actuarial gains over pension plan of subsidiaries, net of taxes 34 97 32 95
4.02.02 (Loss) /Gain over pension plan   - - - 93,894
4.02.04 Cumulative translation adjustments for the year 135,882 649,335 64,636 36,700
4.02.09 (Loss)/gain on the percentage change in investments 1,631 6,243 - (1,995)
4.02.10 Losses in cash flow hedge, net of taxes (834,789) (7,499,721) (1,038,192) (959,789)
4.02.12 (Loss)/gain on hedge of net investment in foreign operations. - 1,469 (4,411) 2,184
4.02.13 Cash flow hedge reclassified to income upon realization, net of taxes 450,676 1,590,357 186,022 632,681
4.03 Consolidated comprehensive income for the year 1,015,029 (4,856,434) (1,662,569) 914,339
4.03.01 Profit attributable to the controlling interests 843,512 (5,177,817) (1,784,873) 548,317
4.03.02 Profit attributable to the non-controlling interests 171,517 321,383 122,304 366,022

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Consolidated Financial Statements / Statements of Cash Flows – Indirect Method
(R$ thousand)    
       
Code Description Year to date 01/01/2020 to 09/30/2020 YTD previous year  01/01/2019 to 09/30/2019
6.01 Net cash from operating activities 5,586,004 3,760,369
6.01.01 Cash from operations 4,504,812 3,239,338
6.01.01.01 Profit (loss) attributable to the controlling interests 65,113 744,553
6.01.01.02 Results of non-controlling shareholders 330,673 366,016
6.01.01.03 Financial charges in borrowing and financing raised 1,449,560 1,468,587
6.01.01.04 Financial charges in borrowing and financing granted (26,846) (45,219)
6.01.01.05 Charges on lease liabilities 39,814 36,430
6.01.01.06 Depreciation, amortization and depletion 1,376,433 1,065,256
6.01.01.07 Equity in results of affiliated companies (9,216) (118,968)
6.01.01.08 Deferred taxes assets (77,474) (1,620,646)
6.01.01.09 Provision for tax, social security, labor, civil and environmental risks (22,258) (132,585)
6.01.01.10 Monetary, exchange and derivative financial instruments, net 1,990,497 918,838
6.01.01.12 Updated shares – Fair value through profit or loss (100,314) 365,305
6.01.01.13 Write-off of property, plant and equipment and Intangible assets 4,716 39,806
6.01.01.14 Accrued/(reversal) for consumption and services 20,147 51,248
6.01.01.16 Provision for environmental liabilities and decommissioning of assets 24,736 7,877
6.01.01.17 Others (48,015) 92,840
6.01.01.19 Receivables by indemnity (512,754) -
6.01.02 Changes in assets and liabilities 1,081,192 521,031
6.01.02.01 Trade receivables - third parties (406,493) (162,632)
6.01.02.02 Trade receivables - related party 13,391 (90,822)
6.01.02.03 Inventory 548,764 (866,466)
6.01.02.04 Receivables - related parties/dividends - 5,320
6.01.02.05 Recoverable taxes 555,450 (196,688)
6.01.02.06 Judicial deposits 2,619 (3,434)
6.01.02.08 Trade payables 1,252,949 (151,385)
6.01.02.09 Trade payables – Drawee risk (515,927) 862,412
6.01.02.10 Payroll and related taxes 76,802 101,327
6.01.02.11 Tax payables 1,124,159 229,376
6.01.02.12 Payables to related parties (22,214) (23,538)
6.01.02.13 Advances from clients 110,482 2,645,962
6.01.02.14 Interest paid (1,577,315) (1,619,552)
6.01.02.17 Others (49,661) (208,849)
6.01.02.18 Cash flow hedge accounting (31,814)  
6.02 Net cash investment activities (1,348,220) (1,316,527)
6.02.02 Investments / AFAC / Acquisitions of Shares (69,686) (56,226)
6.02.03 Purchase of property, plant and equipment and intangible assets (1,118,154) (1,377,339)

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6.02.05 Receipt/(payment) in derivative transactions - (372)
6.02.08 Intercompany loans granted (101,631) (101,913)
6.02.09 Intercompany loans received 14,584 20,386
6.02.10 Financial Investments, net of redemption (73,333) 198,937
6.03 Net cash used in financing activities 442,190 (2,789,789)
6.03.01 Borrowings and financing raised 6,008,548 9,575,838
6.03.02 Transactions cost - Borrowings and financing (35,923) (52,073)
6.03.04 Amortization of borrowings and financing (5,320,116) (10,434,891)
6.03.06 Amortization of leases (75,398) (57,469)
6.03.07 Dividends and interest on shareholder’s equity (134,921) (1,821,194)
6.04 Exchange rate on translating cash and cash equivalents (44,501) (6,194)
6.05 Increase (decrease) in cash and cash equivalents 4,635,473 (352,141)
6.05.01 Cash and equivalents at the beginning of the year 1,088,955 2,248,004
6.05.02 Cash and equivalents at the end of the year 5.724.428 1.895.863

 

 

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Consolidated Financial Statements / Statements of Changes in Equity - 01/01/2020 to 09/30/2020
(R$ thousand)
                   
Code Description Paid-up capital Capital reserve, granted options and treasury shares Earnings reserve Retained earnings (accumulated losses) Other comprehensive income Shareholders’ equity Non-controlling interests Shareholders’ equity
5.01 Opening balances 4,540,000 32,720 4,431,200 - 1,170,624 10,174,544 1,187,388 11,361,932
5.03 Adjusted opening balances 4,540,000 32,720 4,431,200 - 1,170,624 10,174,544 1,187,388 11,361,932
5.04 Capital transaction with shareholders - - - - - - (162,647) (162,647)
5.04.06 Dividends - - - - - - (134,745) (134,745)
5.04.07 Interest on equity - - - - - - (27,902) (27,902)
5.05 Total comprehensive income - - - 65,113 (5,242,930) (5,177,817) 321,383 (4,856,434)
5.05.01 (Loss) profit for the year - - - 65,113 - 65,113 330,673 395,786
5.05.02 Other comprehensive income - - - - (5,242,930) (5,242,930) (9,290) (5,252,220)
5.05.02.04 Translation adjustments for the year - - - - 649,335 649,335 - 649,335
5.05.02.07 Actuarial gains/(losses) on pension plan, net of taxes - - - - 89 89 8 97
5.05.02.12 (Loss)/gain on the percentage change in investments - - - - 6,243 6,243 - 6,243
5.05.02.13 (Loss) / gain on cash flow hedge accounting, net of taxes - - - - (5,900,066) (5,900,066) (9,298) (5,909,364)
5.05.02.14 (Loss) / gain on hedge of net investment in foreign operations - - - - 1,469 1,469 - 1,469
5.07 Closing balance 4,540,000 32,720 4,431,200 65,113 (4,072,306) 4,996,727 1,346,124 6,342,851
                   

 

 

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Consolidated Financial Statements / Statements of Changes in Equity - 01/01/2019 to 09/30/2019
(R$ thousand)
Code Description Paid-up capital Capital reserve, granted options and treasury shares Earnings reserve Retained earnings (accumulated losses) Other comprehensive income Shareholders’ equity Non-controlling interests Shareholders’ equity
5.01 Opening balances 4,540,000 32,720 3,064,827 - 1,065,188 8,702,735 1,310,705 10,013,440
5.03 Adjusted opening balances 4,540,000 32,720 3,064,827 - 1,065,188 8,702,735 1,310,705 10,013,440
5.04 Capital transaction with shareholders - - - (412,659) - (412,659) (479,051) (891,710)
5.04.06 Dividends - - - (412,659) - (412,659) (430,638) (843,297)
5.04.07 Interest on equity - - - - - - (48,413) (48,413)
5.05 Total comprehensive income - - - 744,553 (196,236) 548,317 366,022 914,339
5.05.01 (Loss) profit for the year - - - 744,553 - 744,553 366,016 1,110,569
5.05.02 Other comprehensive income - - - - (196,236) (196,236) 6 (196,230)
5.05.02.04 Translation adjustments for the year - - - - 36,700 36,700 - 36,700
5.05.02.08 Actuarial gains/(losses) on pension plan, net of taxes - - - - 93,983 93,983 6 93,989
5.05.02.10 (Loss)/gain on the percentage change in investments - - - - (1,995) (1,995) - (1,995)
5.05.02.11 (Loss) / gain on cash flow hedge accounting - - - - (327,108) (327,108) - (327,108)
5.05.02.13 (Loss) / gain on hedge of net investment in foreign operations - - - - 2,184 2,184 - 2,184
5.07 Closing balance 4,540,000 32,720 3,064,827 331,894 868,952 8,838,393 1,197,676 10,036,069
                   

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Consolidated Financial Statements / Statements of Value Added
(R$ thousand)
Code Description Year to date 01/01/2020 to 09/30/2020 YTD previous year  01/01/2019 to 09/30/2019
7.01 Revenues                    23,028,028                    21,037,359
7.01.01 Sales of products and rendering of services                    22,818,215                    21,265,727
7.01.02 Other revenues                        205,079                       (253,242)
7.01.04 Allowance for (reversal of) doubtful debts                            4,734                          24,874
7.02 Raw materials acquired from third parties                   (16,005,568)                   (15,060,282)
7.02.01 Cost of sales and services                   (12,276,717)                   (11,684,401)
7.02.02 Materials, electric power, outsourcing and other                    (3,658,054)                    (3,288,431)
7.02.03 Impairment/recovery of assets                         (70,797)                         (87,450)
7.03 Gross value added                     7,022,460                     5,977,077
7.04 Retentions                    (1,372,557)                    (1,065,256)
7.04.01 Depreciation, amortization and depletion                    (1,372,557)                    (1,065,256)
7.05 Value added created                     5,649,903                     4,911,821
7.06 Value added received                     1,636,493                        610,074
7.06.01 Equity in results of affiliated companies                            9,216                        118,968
7.06.02 Financial income                        656,290                        310,994
7.06.03 Others                        970,987                        180,112
7.06.03.01 Others and exchange gains                        970,987                        180,112
7.07 Value added for distribution                     7,286,396                     5,521,895
7.08 Value added distributed                     7,286,396                     5,521,895
7.08.01 Personnel                     1,652,791                     1,715,683
7.08.01.01 Salaries and wages                     1,284,313                     1,323,162
7.08.01.02 Benefits                        291,973                        312,758
7.08.01.03 Severance payment (FGTS)                          76,505                          79,763
7.08.02 Taxes, fees and contributions                     2,532,531                        356,167
7.08.02.01 Federal                     2,246,836                        132,068
7.08.02.02 State                        259,321                        206,813
7.08.02.03 Municipal                          26,374                          17,286
7.08.03 Remuneration on third-party capital                     2,705,288                     2,339,476
7.08.03.01 Interest                     2,006,111                     1,946,262
7.08.03.02 Rental                            5,681                          15,521
7.08.03.03 Others                        693,496                        377,693
7.08.03.03.01 Others and exchange losses                        693,496                        377,693
7.08.04 Remuneration on Shareholders' capital                        395,786                     1,110,569
7.08.04.02 Dividends                                 -                           412,659
7.08.04.03 Retained earnings (accumulated losses)                          65,113                        331,894
7.08.04.04 Non-controlling interests in retained earnings                        330,673                        366,016
       

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São Paulo, October 15, 2020

 

Results for the Third Quarter of 2020

 

Companhia Siderúrgica Nacional (“CSN”) (B3 S.A. – Brasil, Bolsa e Balcão: CSNA3) (NYSE: SID) announces its results for the third quarter of 2020 (3Q20) in Brazilian Reais, in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), which are fully convergent with international accounting standards and with Brazilian accounting practices.

 

All comments presented herein refer to the Company’s consolidated results for the third quarter of 2020 (3Q20) and comparisons refer to the third quarter of 2019 (3Q19) and second quarter of 2020 (2Q20).The Brazilian Real/U.S. Dollar exchange rate was R$4.1644 on September 30, 2019, R$5.4416 on June 30, 2020, and R$5.6407 on September 30, 2020 (+3.7% appreciation of the U.S Dollar against the Brazilian Real in the quarter).

 

Operating and Financial Highlights in 3Q20

 

 

 

 

 

 

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¹ Adjusted EBITDA is calculated based on net profit (loss), plus depreciation and amortization, income tax, net financial result, share of profit (loss) of investees and other operating income/expenses, and includes the proportional share of EBITDA of jointly owned subsidiaries MRS Logística (37.27%) and CBSI (50% 3Q19, 100% 3Q20).

² Adjusted Net Debt and Adjusted Cash and Cash Equivalents include the stakes of 100% in CSN Mineração, 37.27% in MRS and CBSI (50% in 3Q19, 100% 3Q20), our stake in this company until 3Q19, excluding Forfaiting and Drawee Risk operations.

 

CSN’s Consolidated Result

 

·Net Revenue in 3Q20 totaled R$8,715 million, up by 40% over 2Q20 and by 45% over 3Q19. The increase was mainly due to the normalization of the volume of iron ore production, combined with higher prices for iron ore, cement and steel when compared to 2Q20.

 

·In 3Q20, the Cost of Goods Sold totaled R$5,133 million, up by 17% over 2Q20. Gross Margin increased by 11.5 p.p. over 2Q20, reaching 41.1% in 3Q20, due to the positive performance, mainly in cement, steel and mining.

 

·In 3Q20, Selling, General and Administrative Expenses totaled R$731 million, up by 39% over 2Q20, while the Net Revenue reached 40% year-on-year. Selling Expenses increased 52% in 3Q20, mainly due to a higher volume of freight, while General and Administrative Expenses decreased by 2% YoY.

 

·In 3Q20, the group of Other Operating Revenues and Expenses reached a negative value of R$717 million, mainly due to hedge accounting.

 

·The financial result reached a negative value of R$156 million, with cost of debt partially offset by the appreciation of Usiminas shares, generating a gain of R$537 million without cash effect.

 

 

 

  

 

 

 

 

 

 

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·Equity Pick-up was positive by R$26 million in 3Q20, compared to R$29 million in 2Q20, due to higher eliminations in the period.

 

 

 

 

 

·In 3Q20, the Company recorded a net income of R$1,262 million, compared to net income of R$446 million in 2Q20.

 

Adjusted EBITDA

 

 

 

 

*The Company discloses adjusted EBITDA excluding interests in investments and other operating income (expenses) understanding that these items should not be considered when calculating the recurring operating cash flow.

 

·Adjusted EBITDA reached a record of R$3,506 million in 3Q20, compared to R$1,925 million in the second quarter, due to an increase in sales volume, mainly in the volume of steel sold in the domestic market and iron ore in the foreign market. Adjusted EBITDA margin reached 39% or up by 9.2 p.p. YoY.

 

 

 

 

 

 

 

¹ Adjusted EBITDA margin is calculated as the ratio between Adjusted EBITDA and Adjusted Net Revenue, which considers stakes of 100% in CSN Mineração and 37.27% in MRS and 50% in CBSI (50% 3Q19, 100% 3Q20).

 

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Adjusted Free Cash Flow¹

 

Adjusted Cash Flow in 3Q20 reached R$2,837MM, positively affected mainly by the higher Ebitda and by the positive variation in working capital due to the sharp decrease in inventory. 

 

 

  

 

¹Adjusted Free Cash Flow is calculated from Adjusted EBITDA less EBITDA of Joint Subsidiaries, Capex, Income Tax, Financial Income (Expenses), and variation of Assets and Liabilities², excluding the impact of Glencore’s advance.

²Adjusted Working Capital² includes the variation in Net Working Capital (+R$264MM), plus the variation in long-term assets and liabilities accounts (R$701MM) and disregards the net variation of Income Tax and Social Contribution Tax for consumption (+R$3MM), dividends payable (-R$16MM) and non-cash CAPEX (-R$42MM) and AFAC TLSA non-cash (-R$95MM).

 

Indebtedness

 

On September 30, 2020, the consolidated net debt reached R$30,603 million, with the exchange rate change offset by the strong cash generation in the period and the inflow of funds from iron ore prepayment. The net debt/EBITDA ratio reached 3.67x, a considerable decrease due to the strong cash flow.

 

 

 

 

  

 

 

In 3Q20 and at the beginning of 4Q20, the Company continued to extend its liabilities, obtaining approvals for an extension of R$600 million with private banks.

 

 

 

 

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Foreign Exchange Exposure

 

Net exchange exposure of the consolidated balance sheet on September 30, 2020 was US$88 million, as shown in the table below, in line with the company's policy of minimizing the impacts of exchange rate volatility on results.

 

Hedge Accounting adopted by CSN correlates projected export in dollar with scheduled debt payments in the same currency. Therefore, the exchange rate variation of the dollar-denominated debt is temporarily accounted for under shareholders’ equity and recorded in the income statement when dollar revenues from exports are received.

 

 

 

 

 

Investments

 

The Company invested R$459 million in 3Q20, prioritizing reliability and safety projects in Steel and Mining.

 

 

 

 

 

 

 

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Net Working Capital

 

Net Working Capital invested in the business totaled R$3,317 million in 3Q20, down by R$264 million due to the decrease in inventories of finished goods due to the more robust demand in the period. The decrease was also possible due to the maintenance of the payment terms, besides the payment extension in the context of COVID-19.

 

Net Working Capital applied to the business disregards Glencore’s advance, as shown in the table below:

 

 

 

 

 

 

 

 

¹Other Assets NWC: Considers: Advances Employees and Other Accounts Receivable

²Other Liabilities NWC: Considers: Other accounts payable, dividends payable, installment taxes and other provisions

³Inventories: Does not consider the effect of the provision for losses on inventories. To calculate the PME, the balances of warehouse inventories are not considered.

 

 

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3Q20 Results (R$ Million) Steel Mining Port Logistics Railway Logistics Energy Cement Corporate Expenses/
Eliminations
Consolidated
                 
Net Revenue  4,570  3,861  58  418  40  259  (491)  8,715
Domestic Market  3,299  429  58  418  40  259  (878)  3,625
Foreign Market  1,271  3,432  -     -     -     -     387  5,089
COGS  (4,022)  (1,291)  (38)  (273)  (34)  (170)  694  (5,133)
Gross Profit  548  2,570  20  144  6  89  203  3,581
SG&A  (231)  (44)  (9)  (29)  (8)  (21)  (390)  (731)
Depreciation  234  167  8  104  4  32  (88)  461
Proportional EBITDA of Jointly Owned Subsidiaries  -           -     -     -     -     195  195
Adjusted EBITDA  551  2,694  19  219  3  100  (80)  3,506
                 
2Q20 Results (R$ Million) Steel Mining Port Logistics Railway Logistics Energy Cement Corporate Expenses/
Eliminations
Consolidated
                 
Net Revenue 3,440 2,688 75 382 38 172 (574) 6,221
Domestic Market 2,124 345 75 382 38 172 (778) 2,358
Foreign Market 1,316 2,343 - - - - 204 3,863
COGS (3,109) (1,367) (51) (260) (33) (161) 604 (4,378)
Gross Profit 330 1,321 23 122 5 11 30 1,843
SG&A (228) (44) (9) (28) (7) (21) (190) (527)
Depreciation 222 141 8 105 4 37 (90) 428
Proportional EBITDA of Jointly Owned Subsidiaries -   - - - - 182 182
Adjusted EBITDA 324 1,418 22 200 2 27 (68) 1,925
                 
3Q19 Results (R$ Million) Steel Mining Port Logistics Railway Logistics Energy Cement Corporate Expenses/
Eliminations
Consolidated
                 
Net Revenue  3,334  2,336  69  354  74  161  (322)  6,006
Domestic Market  2,417  142  69  354  74  161  (540)  2,677
Foreign Market  917  2,194  -     -     -     -     218  3,330
COGS  (3,190)  (1,071)  (43)  (258)  (56)  (180)  427  (4,370)
Gross Profit  144  1,265  26  96  19  (19)  106  1,636
SG&A  (198)  (51)  (9)  (26)  (8)  (25)  (251)  (567)
Depreciation  159  138  2  97  4  33  (83)  352
Proportional EBITDA of Jointly Owned Subsidiaries  -     -     -     -     -     -     146  146
Adjusted EBITDA  105  1,352  19  166  16  (11)  (81)  1,567

 

 

CSN’s Steel Results

 

According to the World Steel Association (WSA), global crude steel production totaled 311.1 million tonnes (Mton) in the YTD for July and August 2020, down by 0.3% YoY. China alone produced 188.2 Mton, up by 8.7%, while in the European Union and North America there was a decrease year-on-year.

 

In 3Q20, CSN’s slab production totaled 781,000 tons, down by 15% over 2Q20 due to the strategic shutdown of BF#2 at the end of May, which shows a substantial evolution in performance of BF#3 after 2019’s general renovation.

 

In 3Q20, total sales reached 1,278,000 tons, up by 27.4% over 2Q20, mainly due to the recovery in the domestic market after the peak of the pandemic, as well as the good use of galvanized products in the foreign market.

     
     
     

In 3Q20, the volume of steel sold on the domestic market totaled 923,000 tons, up by 50% over 2Q20 due to the strong recovery after the peak of the pandemic. Of this total, 869,000 tons refer to flat rolled steel and 54,000 tons to long rolled steel. According to the Brazilian Steel Institute (IABr), apparent consumption based on the monthly average (July and August 2020), increased by 29% over 2Q20.

 

In the Foreign Market, sales in 3Q20 totaled 355,000 tons, down by 9% compared to the previous quarter, due to the seasonality in Germany and the return of the use of quotas in the U.S. market. During this period, 26,000 tons were exported directly and 329,000 tons were sold by subsidiaries abroad, with 63,000 tons sold by LLC, 171,000 tons by SWT and 94,000 tons by Lusosider.

  

 

 

 

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·In 3Q20, regarding total sales volume, the share of products coated with flat steel remained stable at 53% QoQ and YoY. Sales volumes for the automotive (+165%), white goods (108%) and distribution (+52%) segments were the period’s positive highlights, with a strong recovery after the impact of the pandemic in 2Q20.

 

 

 

According to ANFAVEA (National Association of Automotive Vehicle Manufacturers), in the monthly average of the third quarter of 2020 for the production of cars, light commercial vehicles, trucks and buses reached 190,700 units, up by 300% QoQ, however still below the monthly average of 245,000 in 2019.

   
   
   

According to IBGE, production of household appliances fell by 5% YTD on a YoY basis.

 
 
   

 

 

·Steel’s Net Revenue reached R$4,570 million in 3Q20, up by 33% over 2Q20. The domestic recovery, the devalued exchange rate and the improvement in international prices led to adjustments in the main product lines over the period. The average price evolved in both markets (+4.6% in the Domestic Mkt and +5.3% in exports) QoQ.

 

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·Slab Production Cost in 3Q20 reached R$2,116/t, an increase of only 1.6% QoQ, offsetting a higher increase of costs with operational efficiency despite an increase in iron ore and the devalued exchange rate in the quarter.

 

 

     
     
     

 

 

·Adjusted EBITDA reached R$551 million in 3Q20, up by 70% over 2Q20, with an EBITDA margin at 12.1%, up by 2.6 p.p. in the period. The profitability significantly improved, from R$324/ton in 2Q20 to R$431/ton in 3Q20.

 

CSN’s Mining Results

 

In 3Q20, stimuli in China led to a strong recovery in steel margins and, despite the pandemic, demand for iron ore increased, leading to higher reference prices. Ore inventories at ports and mills remained at low levels due to the tight supply, which ensured high prices in the period. In this context, iron ore closed 3Q20 with an average of US$118.2/dmt (Platts, Fe62%, N. China), up by 27% over 2Q20 (US$93.3/dmt).

 

 

     
     
     

 

 

 

Regarding sea freight, Route BCI-C3 (Tubarão-Qingdao) reached an average of US$17.9/wmt in 3Q20, up by 51% QoQ due to the growing demand and seasonality.

 

 

·In 3Q20, CSN’s Iron Ore Production reached 9.4 million tons, up by 27% QoQ, due to the expected growth of the new mining fronts, leading to a return of the normal production.

 

·In 3Q20, sales volume reached 9.2 million tons, up by 18% QoQ due to the higher availability of iron ore.

 

 

     
     
     

 

 

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  ·  In 3Q20, Mining Net Revenue totaled R$3,861 million, up by 44% QoQ, due to the higher sales volume (+18%) together with the devalued exchange rate and strong realization price. Net Unit Revenue reached US$78.3 per wet ton, up by 21% QoQ.

 

·Cost of Goods Sold from mining totaled R$1,291 million in 3Q20, down by 6% due to the better production performance. FOB Cash Cost totaled USD15.4/t in 3Q20, down by 9% due to the higher volume produced in the period and the devalued exchange rate.

 

·EBITDA reached R$2,694 million in 3Q20, a record margin of 70%, reflecting the recovery in sales volume, cost control and Platts appreciation.

 

Cement Results

 

In 3Q20, Cement’s Net Revenue reached R$259 million, up by 50% QoQ due to the higher sales volume (+16%) over 2Q20, in addition to price increases, which contributed to the change in the EBITDA level of R$100 million and a record EBITDA margin of 39%.

 

CSN’s Logistics Results

 

Railway Logistics: In 3Q20, Net Revenue reached R$418 million, with an EBITDA of R$219 million and an EBITDA margin of 52.4%.

 

Port Logistics: In 3Q20, 156,000 tons of steel products were shipped by Sepetiba Tecon, in addition to 4,000 tons of general cargo, about 44,000 containers and 181,000 tons of bulk goods. Net Revenue reached R$58 million, generating an EBITDA of R$19 million, with an EBITDA Margin of 33.0%.

 

Energy Results

 

In 3Q20, the volume of energy traded totaled a net revenue of R$40 million, with an EBITDA of R$3 million and an EBITDA margin of 7.1%.

ESG – Environmental, Social & Governance

 

Sustainability

 

The last quarter also had major advances in the Company’s ESG agenda. CSN was recognized, once again, with the gold seal of the “GHG Protocol” Program, which certifies the disclosure of inventories of greenhouse gas (GHG) emissions.

 

Currently, about 140 organizations present their data, making their Public Emissions Record the largest base of corporate inventories available in Latin America, with CSN participating in the program from the beginning and having a gold seal since 2014.

 

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Also, in the last quarter, for the tenth consecutive year, we concluded the report to the “Carbon Disclosure Project (CDP)”. The purpose of this initiative is to disseminate information on companies’ policies and results on the following subjects: Climate Change, Supply Chain and Water Resources.

 

This year, for the first time, the Company will have its information available to all audiences, as soon as the information is published on this platform.

 

Safety and Health:

 

Safety is our main priority and the result of our efforts towards the zero-accident target has been successively reflected in our indicators.

Actions focused on risk management have been key to prevent accidents.

 

Throughout CSN group, we recorded a 20% drop YoY in accident rates with and without leave (CAF+SAF), in occurrences with own and outsourced employees.

 

Environmental Licenses and Management of Dams

 

Completely independent of the use of dams for its production process, CSN Mineração obtained important environmental licenses in the last quarter, including: Fraile II Tailings Pile Operating License and Authorization for Environmental Intervention to Build B4 Dam’s Waist Channel - to drain any water that enters the dam - formalizing the start of its de-characterization process, which should be concluded in 2023.

 

Considering the last 6 months, we obtained three other important environmental licenses:

 

- Installation of Itabiritos processing plant, with capacity for 10 Mtpy;

- Implementation and operation of a waste pile called Batateiro IIIA;

- Operation for mining expansion in Mascate body;

 

All within the expected schedule to meet our expansion projects.

 

Also regarding the management of dams, in the last quarter we concluded the works to de-characterize B5 Casa de Pedra and Vigia Auxiliar dam, which has already been inspected by ANM (National Mining Agency) and FEAM (State Foundation for the Environment-MG). The only thing missing is the expert opinion with the final approval issued by these bodies.

 

In this quarter, the implementation of the Municipal Plan for Dam Safety also started, a joint initiative between the City Hall and the mining companies in the municipality of Congonhas, with an investment of over R$6 million from CSN Mineração. The plan’s purposes are, among others: building a modern headquarters for civil defense, acquiring vehicles and equipment, preparing the Integrated Contingency Plan considering all mining companies, signaling and advertisement campaign, as well as training the municipal brigade.

 

Biodiversity and Social Responsibility

 

In its relationship with the community, CSN Mineração kept the schedule of bimonthly routine meetings with several representatives of the public/private sector and communities, with the purpose of discussing demands, criticisms and suggestions to minimize or mitigate the social and environmental impacts inherent to its enterprises.

In this sense, “Casa de Apoio CSN”, located in the neighborhood Residencial, in Congonhas-MG, is an important communication channel with the community. Besides, we have expanded the scope of our Environmental Education Program (PEA), working monthly with the internal and external public on key environmental aspects, promoting the development of a collective awareness, and, therefore, contributing to environmental conservation in the company’s operating area.

 

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In the last quarter, CSN Mineração carried out important actions to protect the Biodiversity. Among them, regularizing lands and donating areas to ICMBIO located in the Sempre Vivas National Parks and Cavernas do Peruaçu National Park. All of them included in the São Francisco River basin, contributing to the preservation of biodiversity and water recharge in that region.

 

 

Coping with COVID-19

 

The company has been constantly raising the awareness of employees, maintaining the measures to fight COVID19. Our efforts include, but are not limited to, the measures listed below:

 

  • Reinforcing internal notices with information on how to avoid Covid-19;
  • Reinforcing the cleaning process of the rooms, making hand sanitizers available in all plants;
  • Distributing protection masks for each employee;
  • Medical protocols such as: measuring the body temperature of all employees before their access to plants and offices, RT-PCR testing in symptomatic cases and in possible contacts;
  • Maintaining social distance;
  • Keeping employees belonging to Risk Groups on leave of absence or working from home;
  • Canceling in-person meetings, in the units or outside, as well as internal and external training, using electronic means to make work contacts.

 

These measures, among others, kept infection rates low, preserving the health and lives of our employees and ensuring that there is no impact on our operational performance.

 

  

 

Capital Markets

 

In the third quarter of 2020, CSN's shares appreciated 55.81%, while the Ibovespa decreased 1.66%. The average daily value (CSNA3) traded at B3, in turn, was R$ 191 million. On the New York Stock Exchange (NYSE), the Company's American Depositary Receipts (ADRs) appreciated by 50.00%, while the Dow Jones rose 7.95%. The daily average trading (SID) with ADRs on the NYSE was US$ 4.6 million.

 

2Q20 3Q20
Number of shares (in thousands) 1,387,524 1,387,524
Market Cap    
Closing price (R$/share) 10.68 16.50 
Closing price (US$/ADR) 1.96 2.94 
Market cap (R$ million) 14,819 23,435 
Market cap (US$ million) 2,720 4,174 
Total return including Dividends and Interest on Equity    
CSNA3 56.31%  55.81%
SID 56.97% 50.00%
Ibovespa 33.94% 1.66% 

 

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Dow Jones 23.25% 7.95% 
Volume    
Daily average (thousand shares) 14,657 13,578 
Daily average (R$ thousand) 132,694 190,637 
Daily average (thousand ADRs) 2,109 1,753 
Daily average (US$ thousand) 3,538 4,613 
Source: Bloomberg    

 

Webcast – 3Q20 Earnings Presentation                                                        Investor Relations Team
Conference Call in Portuguese with Simultaneous Translation   CFO and IRO Marcelo Cunha Ribeiro
into English   Leo Shinohara (leonardo.shinohara@csn.com.br
    José Henrique Triques (jose.triques@csn.com.br
October 16th, 2020   Guilherme Vinco (guilherme.vinco@csn.com.br)
11:00 a.m. (Brasília Time)    
10:00 a.m. (US EDT)    
Phone: +1 929 378-3440 / +1 516 300-1066    
Code: CSN    
Replay phone: +55 11 3127-4999    
Replay Code: 35890687    
Webcast: click here    

 

Some of the statements contained herein are forward-looking statements that express or imply expected results, performance or events. These include future results that may be implied by historical results and the statements under ‘Outlook’. Actual results, performance or events may differ materially from those expressed or implied by the forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, protectionist measures in the USA, Brazil and other countries, changes in laws and regulations and general competitive factors (on a global, regional or national basis).

 

 

 

 

  INCOME STATEMENT            
  CONSOLIDATED - Brazilian Corporate Law (in thousand of Reais)            
                 
        3Q20   2Q20   3Q19
                 
  Net Sales Revenue   8,714,583   6,220,683   6,006,393
                 
     Domestic Market   3,625,325   2,358,059   2,676,655
     Foreing Market   5,089,258   3,862,624   3,329,738
                 
   Costs of Goods Sold (COGS)   (5,133,126)   (4,378,065)   (4,370,357)
                 
     COGS, excluding Depreciation and Depletion   (4,685,167)   (3,962,839)   (4,026,696)
     Depreciation/Depletion allocated to COGS   (447,959)   (415,226)   (343,661)
                 
   Gross Profit   3,581,457   1,842,618   1,636,036
     Gross Margin (%)   41%   30%   27%
                 
     Selling Expenses   (603,629)   (396,847)   (427,703)
         General and Administrative Expenses   (114,822)   (117,706)   (131,171)

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             Depreciation and Amortization in Expenses   (12,667)   (12,356)   (8,459)
     Other Income (Expenses), net   (716,868)   (790,794)   (862,600)
     Equity in Results of Affiliated Companies   25,970   28,354   64,069
                 
   Operating Income Before the Financial Result   2,159,441   553,269   270,172
                 
     Net Financial Result   (156,049)   284,857   (840,074)
                 
   Income before Income Tax and Social Contribution   2,003,392   838,126   (569,902)
                 
     Income Tax and Social Contribution   (741,797)   (392,226)   (300,754)
                 
   Profit for the Period   1,261,595   445,900   (870,656)

 

  

 

 

BALANCE SHEET        
Brazilian Corporate Law (in thousand of reais)        
             
        09/30/2020   12/31/2020
             
   Current Assets   18,541,939   12,725,805
             
    Cash and Cash Equivalents   5,724,428   1,088,955
    Financial Investments   2,805,381   2,633,173
    Accounts Receivable   2,668,369   2,047,931
    Inventory   5,035,288   5,282,750
    Other Current Assets   2,308,473   1,672,996
         Taxes to Recover   1,953,337   1,282,415
         Prepaid Expenses   164,588   203,733
         Dividends Receivable   45,153   44,554
         Derivative Financial Instruments   1,010   1,364
         Others   144,385   140,930
             
   Non-current Assets   38,480,152   38,143,471
             
    Long-term Assets   7,401,053   7,626,577
    Financial Investments Valued at Amortized Cost   131,317   95,719
    Deferred Taxes   2,501,398   2,473,304
    Other non-current Assets   4,768,338   5,057,554
    Tax to Recover   893,568   2,119,940
    Judicial Deposits   372,526   328,371
    Prepaid Expenses   130,797   139,927
    Credts Related Parties   1,554,207   1,274,972
    Others   1,817,240   1,194,344
    Investments   3,691,195   3,584,169
    Shareholdings   3,530,479   3,482,974
    Investments Properties   160,716   101,195
    Property, Plant and Equipment   20,033,718   19,700,944
    Fixed Assets in Operation   19,534,913   19,228,599
    Lease   498,805   472,345
    Intangible Assets   7,354,186   7,231,781
             

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   TOTAL ASSETS   57,022,091   50,869,276
             
  Current Liabilities   12,861,250   11,619,957
             
    Payroll and Related Taxes   404,057   317,510
    Trade Payables   4,560,230   3,012,654
    Taxes Payable   1,664,726   541,027
    Loans and Financing   3,598,537   5,125,843
    Other Payables   2,553,077   2,526,444
    Dividends and JCP Payable   40,977   13,252
    Customer Advances   962,789   787,604
    Payables - Drawee Risk   605,385   1,121,312
    Lease Liabilities   84,675   35,040
    Other Payables   595,968   569,236
    Provision for Tax, Social Security, Labor and Civil Risks   80,623   96,479
             
   Non-current Liabilities   37,817,990   27,887,387
             
    Loans, Financing and Debentures   32,559,616   22,841,193
    Other Payables   2,704,234   2,493,702
    Customer Advances   1,937,420   1,845,248
    Lease Liabilities   420,014   439,350
    Derivative Financial Instruments   125,051    
    Other Payables   221,749   209,104
    Deferred Taxes   564,043   589,539
    Provisions for Tax, Social Security, Labor and Civil Risks   529,176   526,768
    Other Provisions   1,460,921   1,436,185
    Deactivation   548,737   524,001
    Pension and Health Plan   912,184   912,184
             
   Equity   6,342,851   11,361,932
             
    Social Capital Paid   4,540,000   4,540,000
    Capital Reserve   32,720   32,720
    Profit Reserve   4,431,200   4,431,200
    Accumulated Loss   65,113    
    Other Comprehensive Income   (4,072,306)   1,170,624
    Non-controlling Interest   1,346,124   1,187,388
             
   TOTAL LIABILITIES AND EQUITY   57,022,091   50,869,276

 

 

 

 

 

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CASH FLOW        
CONSOLIDATED - Brazilian Corporate Law - in thousand of Reais        
             
        3Q20   2Q20
             
  Net Cash generated by Operating Activities   3,618,761   1,500,310
             
     Net income (loss) for the period attributable to controlling shareholders      1,080,786   345,178
     Net income attributable to non-controlling shareholders     180,809   100,722
     Charges on loans and financing raised     466,546   512,024
     Charges on loans and financing granted     (6,351)   (9,014)
     Charges on lease liabilities     13,688   13,070
     Depreciation, depletion and amortization     486,612   452,314
     Equity in results of affiliated companies     (25,970)   (28,354)
     Deferred taxes     37,058   (103,181)
     Provisions for tax, social security, labor, civil and environmental risk     (25,168)   11,595
     Monetary and exchange rate variation, net   601,370   866,556
     Write-off of fixed and intangible assets      2,387   929
     Adjusted shares – VJR   (535,678)   (527,197)
     Accounts receivable – restitution   (4,428)   (508,326)
     Provisions for decommissioning and environmental liabilities      10,324   (6,228)
     Provisions (reversal) for consumption and services      (15,802)   (1,209)
     Other provisions      (49,625)   3,189
             
  Working Capital Variation     2,089,056   789,276
     Accounts receivable – third parties      (693,056)   376,412
     Accounts receivable – related parties      (20,182)   65,145
     Inventories      990,260   (427,984)
     Taxes to be compensated   529,739   (31,516)
     Judicial Deposits   16,121   (8,753)
     Trade Payables   437,752   473,630
     Trade Payables - Drawee Risk   4,565   (336,756)
     Payroll and Related Taxes   (7,628)   98,850
     Taxex/Refis   581,802   603,969
     Trade Payables - Related Parties   2,686   (4,328)
     Customer Advances - Glencore   464,222   (223,172)
     Others   (217,225)   203,779
             
Other Payments and Receipts   (686,853)   (411,034)
    Interests Paid   (655,039)   (411,034)

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    Payment of cash flow hedge operations   (31,814)    
             
  Cash Flow from Financing Activities   (523,756)   (419,613)
             
     Investments/Future Advance for capital increase   (33,148)   (36,538)
     Acquisition of intangible assets      (397,590)   (366,866)
     Loans granted - related parties      -   (19,542)
     Loans received - related parties     2,031   9,531
     Financial application, net of redemption      (95,049)   (6,198)
             
  Cash Flow from Financing Activities   (1,578,915)   (136,022)
             
     Loans and financing raised   943,860   510,718
     Loan amortizations – principal     (2,346,349)   (610,101)
     Borrowing costs      (16,751)   (10,041)
     Lease amortizations   (24,924)   (26,564)
     Dividends Paid   (134,751)   (34)
             
  Exchange Rate Variation on Cash and Cash Equivalents   (5,214)   (12,261)
             
  Increase (Decrease) of Cash and Cash Equivalents   1,510,876   932,414
  Cash and cash equivalents at the beginning of the period   4,213,552   3,281,138
  Cash and cash equivalents at the ending of the period   5,724,428   4,213,552

 

 

 

 

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(Expressed in thousands of reais – R$, unless otherwise stated)

 

1.DESCRIPTION OF BUSINESS

 

Companhia Siderúrgica Nacional “CSN”, also referred to as “the Company” or “Parent Company”, is a publicly-held company incorporated on April 9, 1941, under the laws of the Federative Republic of Brazil (Companhia Siderúrgica Nacional, its subsidiaries, associates and joint ventures are collectively referred to herein as the "Group”). The Company’s registered office is located in São Paulo, SP, Brazil.

 

CSN is listed on the São Paulo Stock Exchange (B3 S.A.- Brasil, Bolsa, Balcão) and on the New York Stock Exchange (NYSE). Accordingly, the Company reports its information to the Brazilian Securities and Exchange Commission (CVM) and the U.S. Securities and Exchange Commission (SEC).

 

The Group's main operating activities are divided into five segments as follows:

 

·Steel:

 

The Company’s main industrial facility is the Presidente Vargas steelworks (“UPV”), located in the city of Volta Redonda, state of Rio de Janeiro. This segment consolidates all operations related to the production, distribution and sale of flat steel, long steel, metallic containers and galvanized steel. In addition to the facilities in Brazil, CSN has commercial operations in the United States and operations in Portugal and Germany aimed at gaining markets and providing excellent services to end consumers. Its steel is used in home appliances, civil construction and automobile industries.

 

·Mining:

 

The production of iron ore is developed in the cities of Congonhas, Ouro Preto and Belo Vale, in the state of Minas Gerais, by the subsidiary CSN Mineração.

 

Iron ore is sold basically in the international market, especially in Europe and Asia. The prices charged in these markets are historically cyclical and subject to significant fluctuations over short periods of time, driven by several factors related to global demand, strategies adopted by the major steel producers, and the foreign exchange rate. All these factors are beyond the Company’s control. The ore transportation is carried out through Terminal de Carvão e Minérios do Porto de Itaguaí – (“TECAR”), a solid bulk terminal, one of the four terminals that comprise the Itaguaí Port, in State of Rio de Janeiro. Imports of coal and coke are also carried out through this terminal by providing services by CSN Mineração to CSN. The Company´s mining activities also comprise exploitation of tin in the State of Rondônia, to supply the needs of the UPV. The surplus of these raw materials is sold to subsidiaries and third parties.

 

The Company's mining activities utilize tailings filtering and dams are maintained for contingent situations (power supply shortfalls, sudden interruptions in the beneficiation plant, etc.) for tailing discharges. The Company has invested around R$250 million in two filtering plants. The filtered tailings are placed in piles geotechnically controlled which represents a new trend in iron ore mining without the use of tailing dams. As a result of those measures, decommissioning of dams is the natural path of processing dry tailings.

 

All of our dams, both mining and hydroelectric dams, are positively certified and comply with the environmental legislation in force.

 

·Cement:

 

CSN entered the cement market boosted by the synergy between this activity and its existing businesses. Next to the Presidente Vargas Steelworks (UPV) in Volta Redonda (RJ), the Company installed a new business unit that produces CP-III type cement using slag produced by the UPV’s blast furnaces. It also exploits limestone and dolomite at the Arcos unit in the State of Minas Gerais, to meet the needs of the UPV and of the cement plant. Additionally, the operation clinker production line is located in Arcos/MG. As a result, the Company is self-sufficient in the production of cement, with an installed capacity of 4.7 million tons per year.

 

·Logistics

 

Railroads:

 

CSN has interests in three railroad companies: MRS Logística S.A., which manages the Southeast Railway System of the former Rede Ferroviária Federal S.A. (“RFFSA”), Transnordestina Logística S.A. (“TLSA”) and FTL - Ferrovia

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Transnordestina Logística S.A. (“FTL”), the last two having the concession to operate the former Northeast Railway System of RFFSA, in the States of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco, Alagoas and Sergipe, with TLSA being responsible for the rail links of Eliseu Martins-Trindade, Trindade-Salgueiro, Salgueiro-Porto Suape, Salgueiro - Missão Velha and Missão Velha – Pecém (Railway System II),and construction phase, and FTL responsible for the rail links of São Luís - Altos, Altos - Fortaleza, Fortaleza - Sousa, Sousa - Recife/Jorge Lins, Recife/Jorge Lins - Salgueiro, Jorge Lins - Propriá, Paula Cavalcante - Cabedelo, Itabaiana - Macau (Railway System I).

 

Ports:

 

The Company operates in the State of Rio de Janeiro, through its subsidiary Sepetiba Tecon S.A., the Container Terminal ("TECON”) and through its subsidiary CSN Mineração S.A., TECAR, both at the Itaguaí Port. Locate in the Bay of Sepetiba, they have privileged highway, railroad and maritime access.

 

TECON handles and stores containers, vehicles, steel products, general cargo, among other products, and TECAR performs the operational activities of loading and unloading of solid bulk ships, storage and distribution (road and rail) of coal, coke, petroleum coke, clinker, zinc concentrate, sulfur, iron ore and other bulk intended for the seaborne market, for own consumption or for different customers.

 

·Energy:

 

As energy is fundamental to its production process, the Company has electric energy generation assets to mitigate its costs aiming more competitiveness.

 

Note 23 - “Segment Information” details the financial information per CSN´s business segment.

 

·Going Concern

 

The interim financial information was prepared based on the normal continuity of its business.

 

The negotiations for reprofiling part of the debts remain in constant progress and do not jeopardize the Company's operating continuity. The management does not have any other relevant operational restructuring plan that implies a change to the conclusion of the operational continuity. Except for the statement in the following paragraphs, the assumptions adopted on the disclosures on the bases for evaluating the operational continuity included in the financial statements of December 31, 2019 remain unchanged in their majority, being those financial statements approved by Management on March 4, 2020.

 

The COVID-19 pandemic was a new and important factor that emerged globally, reaching great relevance at the end of the first quarter 2020 causing impacts to the global economy. Our operations experienced some impacts in the first half of 2020, especially in the steel operations. Although the pandemic is still active, many restrictive measures imposed by the Brazilian authorities have been attenuated and we consider the effects of the pandemic in the global economy continue the process of dissipation, as well as in our activities. We haven’t identified any evidences of continuity risks and substantially maintained our primary operating assumptions unchanged.

 

Additionally, as published on the Relevant Act of August 25, 2020, the Company studies to realize a public offering of shares of its subsidiary CSN Mineração S.A. (“CMIN”). On September 18, 2020, the Board of Directors approved the new business plan of the subsidiary driven by expansion projects for reaching the full potential of its reserves and natural resources. In this context, the Company has taken all the measures to realize the initial public offering of shares issued by CMIN, with the purpose of partially financing the mining activities besides adding value to its shareholders.

 

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

2.a) Basis of preparation and declaration of conformity

 

The consolidated and parent company condensed interim financial information (“condensed quarterly information”) have been prepared and are being presented in accordance with accounting practices adopted in Brazil based on the

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provisions of the Brazilian Corporate Law, pronouncements, guidelines and interpretations issued (CPC), approved by CVM, besides the own standards issued by the Brazilian Securities and Exchange Commission (“CVM”) and International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standard Board (IASB) and highlight all the relevant information of the interim financial statements, and only this information, is being disclosed and corresponds to the information used by the Company's management in its activities

 

The interim financial information has been prepared and is being presented in accordance with CPC 21 (R1) - “Interim Financial Reporting” and IAS 34 - “Interim Financial Reporting”, consistently with the standards issued by the CVM.

 

The significant accounting policies applied in this interim financial information are consistent with the policies described in Note 02 to the Company’s financial statements for the year ended December 31, 2019, filed with CVM.

 

This interim financial information does not include all requirements of annual or full financial statements and, accordingly, should be read in conjunction with the Company’s financial statements for the year ended December 31, 2019.

 

Therefore, in this interim financial information the following notes are not repeated, either due to redundancy or to the materiality in relation to those already presented in the annual financial statements:

 

Note 02 – Summary of significant accounting policies

Note 08 - Investments

Note 15 - Taxes in installments

Note 16 - Provision for tax, social security, labor, civil and environmental risks and judicial deposits

Note 26 – Employee benefits

Note 27 – Commitments

 

The parent company and consolidated interim financial information were approved by Management on October 15, 2020.

 

2.b) Basis of presentation

 

The interim financial information is presented in thousand of Brazilian reais (R$), which is the Company’s principal functional currency and the Group’s presentation currency.

 

Transactions in foreign currencies are translated into the functional currency using the exchange rates in effect at the dates of the transactions or valuations when items are remeasured. The asset and liability balances are translated at the exchange rates prevailing at the end of the reporting period. As of September 30, 2020, US$1 is equivalent to R$5.6407 (R$4.0307 as of December 31, 2019) and €1 is equivalent to R$6.6132 (R$4.5305 as of December 31, 2019), according to the rates obtained from the Central Bank of Brazil website.

 

 

2.c) Basis of consolidation

 

The accounting policies have been consistently applied to all consolidated companies. The consolidated financial statements for the period ended September 30, 2020 and year ended December 31, 2019 include the following direct and indirect subsidiaries and joint ventures, as well as the exclusive funds, as described below:

 

·Companies

 

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  Number of shares held by CSN in units Equity interests (%)  
Companies 09/30/2020   12/31/2019   Core business
             
Direct interest in subsidiaries: full consolidation            
CSN Islands VII Corp.  20,001,000  100.00    100.00   Financial transactions
CSN Inova Ventures (1) 50,000  100.00    100.00   Financial transactions
CSN Islands XII Corp. 1,540  100.00    100.00   Financial transactions
CSN Steel S.L.U.  22,042,688  100.00    100.00   Equity interests and Financial transactions 
TdBB S.A (*)  100.00    100.00   Equity interests
Sepetiba Tecon S.A.  254,015,052  99.99    99.99   Port services
Minérios NacionalS.A.  141,719,295  99.99    99.99   Mining and Equity interests
Companhia Florestal do Brasil  66,354,391  99.99    99.99   Reforestation
Estanho de Rondônia S.A.  195,454,162  99.99    99.99   Tin Mining 
Companhia Metalúrgica Prada  555,142,354  99.99    99.99   Manufacture of containers and distribution of steel products
CSN Mineração S.A.   158,419,480  87.52    87.52   Mining and Equity interests
CSN Energia S.A.  43,149  99.99    99.99   Sale of electric power
FTL - Ferrovia Transnordestina Logística S.A.   486,592,830  92.38    92.38   Railroad logistics
Nordeste Logística S.A. 99,999  99.99    99.99   Port services
CSN Inova Ltd.   100.00    100.00   Advisory and implementation of new development projec
CSN Equipamentos S.A (2)      99.99   Rental of commercial and industrial machinery and equipment
CBSI - Companhia Brasileira de Serviços de Infraestrutura  3,752,291  99.99    100.00   Equity interests and product sales and iron ore
             
Indirect interest in subsidiaries: full consolidation            
Lusosider Projectos Siderúrgicos S.A.  100.00    100.00   Equity interests and product sales
Lusosider Aços Planos, S. A.  99.99    99.99   Steel and Equity interests
CSN Resources S.A.  100.00    100.00   Financial transactions and Equity interests
Companhia Brasileira de Latas   99.99    99.99   Sale of cans and containers in general and Equity interests
Companhia de Embalagens Metálicas MMSA   99.67    99.67   Production and sale of cans and related activities
Companhia de Embalagens Metálicas - MTM   99.67    99.67   Production and sale of cans and related activities
CSN Steel Holdings 1, S.L.U.   100.00    100.00   Financial transactions, product sales and Equity interests
CSN Productos Siderúrgicos S.L.   100.00    100.00   Financial transactions, product sales and Equity interests
Stalhwerk Thüringen GmbH   100.00    100.00   Production and sale of long steel and related activities
CSN Steel Sections UK Limited (3)      100.00   Sale of long steel
CSN Steel Sections Polska Sp.Z.o.o   100.00    100.00   Financial transactions, product sales and Equity interests
CSN Mining Holding, S.L  87.52    87.52   Financial transactions, product sales and Equity interests
CSN Mining GmbH   87.52    87.52   Financial transactions, product sales and Equity interests
CSN Mining Asia Limited   87.52    87.52   Commercial representation
Lusosider Ibérica S.A.   100.00    100.00   Steel, commercial and industrial activities and equity interests
CSN Mining Portugal, Unipessoal Lda.   87.52    87.52   Commercial and representation of products
Companhia Siderúrgica Nacional, LLC  100.00    100.00   Import and distribution/resale of products
Direct interest in joint operations: proportionate consolidation            
Itá Energética S.A.  253,606,846  48.75    48.75    Electric power generation 
Consórcio da Usina Hidrelétrica de Igarapava  17.92    17.92    Electric power consortium 
             
Direct interest in joint ventures: equity method            
MRS Logística S.A. (4)  63,377,198  18.64    18.64    Railroad transportation 
Aceros Del Orinoco S.A.   31.82    31.82    Dormant company 
Transnordestina Logística S.A. (5)  24,670,093  47.26    47.26    Railroad logistics 
Equimac S.A (2) 1,117  50.00        Rental of commercial and industrial machinery and equipment 
             
Indirect interest in joint ventures: equity method            
MRS Logística S.A. (4)  16.30    16.30    Railroad transportation 
             
Direct interest in associates: equity method            
Arvedi Metalfer do Brasil S.A.   46,994,971  20.00    20.00    Metallurgy and Equity interests 

 

(*) Dormant companies, therefore, they are presented in note 8.a., where information on companies accounted for under the equity method and fair value through profit or loss and comprehensive income are disclosed;

 

1.       On June 29, 2020, CSN Islands XI Corp. was renamed as CSN Inova Ventures.

 

2.       On June 26, 2020, CSN Equipamentos S.A. was renamed as Equimac S.A and its paid-up capital was increased by a new shareholder called Unidas Guindastes Eireli. Accordingly, CSN was diluted and its share in Equimac’s capital was decreased to 50%.

 

3.The company was liquidated on March 11, 2020;

 

4.As of September 30, 2020 and December 31, 2019, the Company directly owned 63,377,198 common shares, 26.611,282 preferred shares class A and 36,765,916 preferred shares class B and indirectly owned 63,338,872 common shares, 25.802,872 preferred shares class A and 37,536,000 preferred shares class B of MRS Logistica S.A.

 

5.As of September 30, 2020, the Company held 24,168,304 common shares and 501,789 preferred shares Class B.

 

 

 

·Exclusive funds

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    Equity interests (%)  
Exclusive funds   09/30/2020   12/31/2019   Core business
Direct interest: full consolidation            
Diplic II- Fundo de investimento multimercado crédito privado    100.00    100.00   Investment fund
Caixa Vértice - Fundo de investimento multimercado crédito privado  100.00    100.00   Investment fund
VR1 - Fundo de investimento multimercado crédito privado    100.00    100.00   Investment fund

 

2.d) COVID-19 effects

 

As of December 31, 2019, the first cases of Covid-19 arose in many countries and in March 2020 the WHO (World Health Organization) declared the pandemic of the virus. From the beginning of the pandemic, the Company has adopted several precautionary measures to reduce exposure of its employees and assure the continuity of its businesses. All employees in conditions of vulnerability (group of risk) have been identified and set on vacations together with many others with the purpose of reducing around 50% of the corporate staff in the Company’s premises. Additionally, we provided masks to our employees, placed hand sanitizers in all our premises and, also, circulate internal communications with preventive measures with the purpose of reinforcing the hygiene protocols recommended by the authorities.

 

Also, the Company continues assessing in details the effects caused by the Covid-19 pandemic in its businesses due to the sharp decrease in the economic activities in Brazil since the end of March 2020, which imposed restrictions and measures of social distancing with the purpose of reducing the virus circulation. Many of those restrictive measures have been already attenuated by the competent authorities and the Company expects no significant impacts in its businesses.

 

The Company’s economic activity is directly linked to the steel products demand in the automotive, domestic and civil construction segments, as well as in the iron ore’s in the domestic and international markets. Any reduction in the activities of those segments could affect the demand and the prices of our products and bring relevant impacts in our financial position and results.

 

The potential economic effects of Covid-19 in the Company are presented below:

 

a) Operating effects

 

The 2020 budget of investments has been revised considering the adverse effects of a global economic deacceleration and, consequently, the amount of investments has been reduced since priority is given to primary sustaining investments to maintain our current conditions in the operating capacity, environmental and security.

 

In the beginning of June 2020, the Company turned off the blast furnace No.2 in the Presidente Vargas steelplant (UPV), in the city of Volta Redonda – RJ. The decision was based on the weak global economic scenario since CSN is a major supplier of raw material to the automotive, appliances and civil construction industries. However, blast furnace No.3 has been recently refurbished and has supplied the current demand that continues expanding. Additionally, the Company is preparing to turn on the blast furnace No.2 by the end of November 2020.

 

The pandemic effects were most perceived in the second quarter of 2020, when caused some impacts in our activities, more precisely in the steel revenues. Other segments have not experienced any significant impacts.

 

The Company’s rail and seaborne logistics also did not experience any impacts as well as the Company’s supply chain that could have caused interruptions in its operating activities.

 

b) Assets recovery and financial and non-financial liabilities

 

The pandemic has not caused any significant impacts in the fair value of our assets and liabilities, except for a temporary adverse negative impact in the market value of our Usiminas’ shares that, as of March 31, 2020, had accumulated losses of R$962 million in that quarter, which were fully recovered and accumulated a gain of R$97 million as of September 30, 2020. It is not possible to predict the actual impact of the pandemic in the Company’s businesses. In limit situations, certain covenants or special obligations applicable to our debt instruments may be achieved. The Company closely monitors the indicators to avoid the risks to its financial position.

 

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There are no relevant impacts in the Company’s financial assets. A portion of the receivables that had been postponed was fully received until the end of the second quarter of 2020. The default rate of the Company’s receivables has not changed significantly and is not expected to change in the future.

 

Our portfolio of investments and the nature of our industrial plants have long-term characteristics. The long-term operating and economic context in which the Company is inserted gives us more flexibility in the strategies and plans to mitigate the risks and effects of the pandemic and, accordingly, ensure the maintenance of recoverability expected from our non-financial assets, such as equity instruments, property, plant and equipment and tax credits. In the beginning of the pandemic we realized stressing tests playing with many assumptions of our business projections, especially for the years 2020 and 2021. Those stressed assumptions were revalidated and remained unchanged during the second and third quarters and, accordingly, we did not identify any impairment losses that should be recognized in our financial information as of September 30, 2020.

 

According to orientations given by the Brazilian Securities and Exchange Commission (CVM), the Company assessed effects that eventually could have a relationship with its business continuity and accounting estimates. Despite we have perceived some adverse effects in the beginning of the pandemic, they did not put risks of continuity nor of changes to our accounting estimates that could produce significant effects in the Company’s businesses and, consequently, in the financial position.

 

The Company maintains in its entirety the production and sales projections for the medium and long term.

 

 

3.CASH AND CASH EQUIVALENTS
      Consolidated       Parent Company
  09/30/2020   12/31/2019   09/30/2020   12/31/2019
Current              
Cash and cash equivalents              
Cash and banks  4,737,275   496,769    2,088,814   99,835
               
Short-term investments              
In Brazil:              
Government securities  341   69,093    60    735
Private securities 986,440   462,831   281,479   291,537
  986,781   531,924   281,539   292,272
Abroad:              
Private securities 372   60,262   373    
Total short-term investments 987,153   592,186   281,912   292,272
Cash and cash equivalents 5,724,428   1,088,955   2,370,726   392,107
               

 

The funds available established in Brazil, are basically invested in private securities and yield interest based on the floating of Certificates of Interbank Deposits (“CDI”) and government securities are basically repurchase agreements backed by National Treasury Notes. The Company invests part of the funds through exclusive fund investments, and their financial statements were consolidated into the Company’s statements. The funds are managed by BNY Mellon Serviços Financeiros DTVM S.A. and Caixa Econômica Federal (CEF).

 

A significant part of the funds is invested abroad in Time Deposits in banks considered by management as top rated banks and the returns are based on fixed interest rates.

 

4.FINANCIAL INVESTMENTS

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                Consolidated               Parent Company
    Current   Non Current   Current   Non Current
    09/30/2020   12/31/2019   09/30/2020   12/31/2019   09/30/2020   12/31/2019   09/30/2020   12/31/2019
Private securities (1)   587,439   481,409           565,595   481,409        
Government securities (2) 5,879   37,144           1,066   395        
Usiminas shares (3)   2,212,063   2,114,620           2,212,063   2,114,620        
Bonds (4)           131,317   95,719           131,317   95,719
    2,805,381   2,633,173   131,317   95,719   2,778,724   2,596,424   131,317   95,719
                                 

 

1.Restricted financial investments linked to Bank Certificate of Deposit to secure a letter of guarantee of certain loans.
2.Investments in National Treasury Bills (LFT) managed by its exclusive funds.
3.A portion of Usiminas’ shares is given as guarantee to a portion of the Company’s debt.
4.Bonds issued by Fibra with maturity in February 2028.

 

5.TRADE RECEIVABLES

 

      Consolidated       Parent Company
  09/30/2020   12/31/2019   09/30/2020   12/31/2019
Trade receivables              
Third parties              
Domestic market 1,055,999   1,118,632   762,172   852,434
Foreign market 1,723,894   1,003,905   110,095   62,833
  2,779,893   2,122,537   872,267   915,267
Allowance for doubtful debts (268,721)       (245,194)       (164,663)       (167,247)
  2,511,172   1,877,343   707,604   748,020
Related parties (note 17 a) 157,197   170,588   1,042,607   943,623
  2,668,369   2,047,931   1,750,211   1,691,643
               

 

In accordance with the sales policy the Group carries out transactions of assignment of receivables without co-obligation in which, after assigning the customer’s trade notes/bills and receiving the amounts from each transaction closed, CSN settles the receivables and becomes entirely free from the credit risk of the transaction. This transaction in the consolidated totals R$51,930 as of September 30, 2020 (R$51,161 as of December 31, 2019) and in the Parent Company R$43,219 (R$47,994 as of December 31,2019).

 

The gross balance of receivables from third parties is comprised as follows:

 

 

 

        Consolidated       Parent Company
    09/30/2020   12/31/2019   09/30/2020   12/31/2019
Current    2,506,615    1,739,746   700,762   731,377
Past-due up to 30 days   53,246   132,845   13,871   9,089
Past-due up to 180 days   24,801   23,877   19,251   6,684
Past-due over 180 days   195,231   226,069   138,383   168,117
     2,779,893    2,122,537   872,267   915,267
                 

 

The changes in the Company’s allowance for doubtful accounts are as follows:

        Consolidated       Parent Company
    09/30/2020   12/31/2019   09/30/2020   12/31/2019
Opening balance   (245,194)   (237,352)   (167,247)   (176,855)
Estimated (losses)   (40,003)   (43,313)   (9,165)   (18,540)
Recovery of receivables   16,476   35,471   11,749   28,148
Closing balance   (268,721)   (245,194)   (164,663)   (167,247)
                 

 

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6.INVENTORIES

 

 

 

 

Consolidated

 

 

 

Parent Company

  09/30/2020   12/31/2019   09/30/2020   12/31/2019
Finished goods 1,731,362   1,691,842   829,488   1,141,385
Work in progress 1,030,400   1,294,369   804,636   1,081,050
Raw materials 1,372,857   1,493,129   924,847   1,021,350
Storeroom supplies 932,731   902,135   514,021   502,591
Advances to suppliers 79,682   35,828   73,904   31,541
Provision for losses (111,744)   (134,553)   (36,174)   (41,201)
  5,035,288   5,282,750   3,110,722   3,736,716
               

 

The changes in the provision for inventory losses are as follows:

    Consolidated   Parent Company
    09/30/2020   12/31/2019   09/30/2020   12/31/2019
Opening balance       (134,553)       (157,754)         (41,201)         (45,076)
Reversal / (losses) for slow-moving and obsolescence           22,809           23,201             5,027             3,875
Closing balance       (111,744)       (134,553)         (36,174)         (41,201)
                 

 

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7.OTHER CURRENT AND NONCURRENT ASSETS

 

The group of other current and noncurrent assets is comprised as follows:

              Consolidated               Parent Company
  Current Non-current Current Non-current
  09/30/2020   12/31/2019   09/30/2020   12/31/2019   09/30/2020   12/31/2019   09/30/2020   12/31/2019
Judicial deposits (note 15)         372,526   328,371           250,818   224,300
Credits with the PGFN (1)             46,774               46,774
Recoverable taxes (2) 1,953,337   1,282,415   893,568   2,119,940   1,761,045   1,129,584   685,987   1,907,420
Prepaid expenses 164,588   107,428   117,083   126,213   110,472   82,664   98,165   110,099
Prepaid expenses with sea freight (3)     96,305                        
Actuarial asset - related party (note 17 a)         13,714   13,714                
Derivative financial instruments (note 12 I) 1,010   1,364       4,203