Companhia Siderurgica Nacional SA
BOVESPA:CSNA3
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Companhia Siderurgica Nacional SA
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Good morning, ladies and gentleman. At this time we would like to welcome everyone to CSN's conference call to present results for the third quarter '22. Today we have with us the company's executive officers. We would like to inform you that this event is being recorded. [Operator Instructions]
We have a simultaneous webcast that may be accessed through CSN's Investor Relations website at ri.csn.com.br/english where the presentation is also available. The replay service will be available on the website for a week. You can flip through the slides at your own convenience.
Before proceeding, we would like to clarify that some of the statements herein are mere expectations or trends and are based on the current assumptions and opinions of the company management. Future results, performance and events may differ materially from those expressed herein as they do not constitute projections. In fact, actual results, performances or events may differ materially from those expressed or implied by forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rates and exchange rate levels, future rescheduling or prepayment of debt denominated in foreign currencies, protectionist measures in the U.S., Brazil and other countries, changes in laws and regulations and general competitive factors at a global, regional or national basis.
I will now turn the conference over to Mr. Marcelo Cunha Ribeiro, CFO and Investor Relations Executive Officer who will present the company's operating and financial highlights for the period.
Mr. Ribeiro, you may proceed.
Good morning, and thank you all for participating in our results call for the third quarter, our quarter highlights.
First of all, I would like to mention that this was a pretty turbulent period due to the change of prices in commodities, especially in the international market, iron ore, the impacts of the Chinese economy that is going into a slowdown, impacted by the global market factors and the prices of steel and mining at domestic level.
We did our part in this very complicated period. We obtained a good operational result, a growth in volumes and a reduction in the cost of production of our main business. It shows that we are quite resilient in our figures.
Secondly, we were able to conclude our strategy that transforms the cement business integrating the plants and assets of LafargeHolcim, now called CSN Cimentos Brazil. It has been consolidated in our figures during September. The good news is that we have a company with ever stronger results and more promising synergies in the third place and as a subsequent event.
We were able to conclude 2 acquisitions that will also transform CSN in terms of energy. We concluded the acquisition of Quebra-Queixo and ensuing this, the inclusion of control of CEEE-G. And this is a step of the group to world's renewable and competitive self-energy, but also poses a low risk and is an excellent segment. These are the highlights for the period.
We go on to page 3 with our consolidated operating and financial indicators. A normalization of our profitability based on a change of all of that exuberance that you observed in prices and commodities at the beginning of the pandemic. This allows us to have representative margins in all segments.
This quarter we had an evolution with a drop of EBITDA of 16% because of the steel sector where there was a compression of margins in the quarter and the prices in the international market dropped and sequential increase of prices. The good news is now the prices and the raw material costs are going down.
But we do have a negative variation in the period. In mining stability, marked with a growth in production volumes, lower costs offset with a lower price for iron ore and cement, a strong performance and the consolidation of the CSN Brazil for the first month.
We have 24% margin for the quarter. We continue on. We see the cash generation. We begin with investments that showed a stable performance at BRL 839 million. We have already communicated to the market this. We're being very careful with our reimbursements because of a more term loan market and because of the increase in prices and cash generation.
We took the decision to prioritize our initiatives. And this is being reflected in our expectations for investment in the year 2022. Initially it was to be BRL 4 billion. We are now at BRL 3 billion, which is in accordance with the moment that we live in. And because of the delay in our main expansion project we pick in due to a delay in the manufacture of equipment, which is somewhat complex in terms of the delivery.
The outlook for the CapEx for the fourth quarter will drop following that guidance of BRL 3 billion in working capital, a significant evolution. This is one of our essential leverages in our search for cash generation. We have had good news in several fronts, stocks that are dropping, drop in the price of raw material and the length in the term we have suppliers boosting and aiding our networking capital with an impact of almost BRL 3 billion.
On the following page you see the adjusted cash flow where we show you a favorable comparison vis-a-vis previous quarters. In previous quarters we were impacted by the working capital because of the high costs and raw material with a negative impact in cash generation. And presently you'll see a strong cash flow, a very timely one, offsetting the investment in the period, taxes with a cash generation of BRL 3.2 million.
What is essential when we look at the next page is to look at our leverage under control. Of course the leverage has increased as we have a normalization of EBITDA. And it goes from the last year to values of 1x, now getting to 1.7x. But of course this is the result of a very strong movement that we had this quarter, the confusion of the LafargeHolcim operation that should have reduced our indebtedness as we had a reimbursement of BRL 4.8 million, net debt increases BRL 3 million, goes up to BRL 24 million and leverage stands at 1.7x.
What is relevant is that we're changing our leverage guidance for the medium term. Medium term means the end of the year 2022 and the beginning of 2023 to a level between 1.75x and 1.95x net debt above the levels that we desire, which are 1x. But we recognize an increase in the price of commodities and capital allocation made recently.
The outlook is to have a lower price of commodities in 2023. And with this adjustment, we will maintain a sufficiently strong cash generation, avoiding the leverage to go above these levels.
On page #7, our liquidity, which is based on our policy, of course BRL 15 billion in cash this quarter. And this is the amount we reached this with a series of initiatives and the management of our liabilities, BRL 1.4 billion for mining, of infrastructure, debenture and the institutional CSN debenture carried out in the month of October.
With this we were not only able to obtain this amount, but lengthen our liabilities with a short-term debt coverage of more than 6 years and a very strong balance to face up to this moment of uncertainty and the investments foreseen for the coming year.
This is a very strong metric that deserve the continuity of our upgrades in terms of credit ratings. We have a BB at present. We expect a BB+ very soon. And of course this is a structural search, this investment grade for us.
I will speak about the performance of each separate business beginning with steel. We had a strong performance in terms of volumes in the domestic market. We had stability, CSN was able to grow almost 20% using the distribution channels and its strength in segments and continues to grow in civil construction which has been quite resilient.
This offset other segments where the growth is lower, for example, the automotive segment and the white line. We have the typical seasonality of the summer in Europe, but we're on a very strong path of profitability, especially in terms of profitability in Germany, where we have excellent prices and favorable costs because of energy hedges and low raw material costs. This has given us stability during the period.
In terms of revenue, despite the growth of volumes, we had international prices that were adjusted dropping approximately 9%. In the case of EBITDA that compression of margin caused by the prices and also because of very expensive raw material in purchases during the second semester coke and coal reducing the margin in the period to BRL 1.21 billion, BRL 3 billion with an EBITDA margin of 16%.
In the next page, we see that this cross increase was a timely thing. In production, we have good news. There has been a drop of 6%, BRL 4,100 slab. And when we compare the cost of September with the average of the period, there is a subsequent drop. The cost in September was 8% lower than the average for the quarter, showing us a clear direction through the fourth quarter.
Costs will continue to be reduced significantly because of the raw material and because of the operational enhancement. This quarter we had more than 1 million tonnes of slab and this helps us to reduce our fixed costs. We had BRL 1,100, $105 of EBITDA per tonne between the peaks of course, that we saw in the pandemic, but with interesting profitability above our historic average, and this is how we will continue in the coming quarters.
Speaking about mining, as in steel, we had an important moment in terms of production volumes and scales vis-a-vis the weaker quarters in the past, impacted by operational restrictions because of the heavy rainfall and the intention of the use of water at the plant. These problems were reduced during the third quarter gradually.
We're still at the maximum limited production that we will reach in the fourth quarter with all of the projects coming into operation. We still have some enhancements to do. This is the good news, but we did achieve this important evolution, but we had a significant drop in prices.
Stability in the revenues is positive evolution of 20% in sales, offset by greater drop in prices and offset by good news in quality and the cost of freight, and that is why there is a drop of only 3% in EBITDA, the margin without a significant drop because the costs were very good. We had an important evolution, an increase in production volumes and better costs in the movement of our freight. So we are at the best level of the year of $19 with a neutral EBITDA vis-a-vis the second quarter.
On Page 13, a perhaps better comparison, eliminating the effects of that reversion of provisions of cargoes sold at provisional prices. Orange and Orange, this quarter our EBITDA grows because of enhancements in all of the lines, better volume, a better quality mix, better purchases, reduced freight and lower costs, offset by the negative evolution of the Platts index with a drop of 15%. We get to an EBITDA of BRL 960 million.
Our breakeven of iron ore delivered in China is competitive. And despite the lower slab prices, that will not persist below $80. We're making margins that are higher than $20 per tonne. We have interesting margins presently.
Regarding the next segment, which is cement, we had a very special quarter with a change in level in terms of volumes because of the consolidation of the 10 plants of LafargeHolcim in Brazil, now called CSN Cimentos Brazil.
Compared to our historic average, we have grown 650,000 tonnes a month and a growth of 50% that we had between 1 quarter and the other. Now because of this consolidation, the business did very well. Prices were recovering their increases based on inflation, volumes, quite strong, reflecting a very resilient construction segment.
And without the consolidation of LafargeHolcim, our results were increasing. We also have the consolidation of our PCHs that were acquired to offer us sufficiency and to work with the cement business. With this our margin was increasing.
We had the consolidation of this additional production. And with this, our EBITDA went from BRL 160 million to BRL 260 million. What the levels are still not what we expect this will become formalized in the fourth quarter, but it shows us the potential that the cement business has.
In the past, it was 1% to 2%. It will have a more relevant share in the fourth quarter and with the acquisition of LafargeHolcim Brazil.
Now to conclude, our energy business, at the end of the third quarter, we had the closing of the acquisitions that will transform our energy business. Quebra-Queixo, BRL 427 million, funded by anticipation, a very efficient way of funding energy assets. And it will bring about a competitiveness and production of iron ore will benefit production and will transform us into a player in the energy sector, not only in our search for self-sufficiency, but will also enable us to sell some of this energy. We have already begun to operate this business, and we're quite enthusiastic with the opportunities that we're finding.
With this, I would like to give the floor to Helena Guerra, who will speak about our ESG performance for the quarter.
Good morning, everybody. Here we are again to present results for the third quarter. The full material is being presented and it's geared towards offering you a very transparent vision of ESG in the company.
In the last quarter for the 8 consecutive year, we received an award because this is the highest level of qualification of our inventory. During this period because of a better understanding of our actions, we were able to improve our performance and the rating went up to 55 points where the average of the world is 20 points.
And we also began our study on climate changes. We're analyzing our processes to detect some opportunities. Now this construction of scenario is based on the best market practices and they will enable us to make more assertive decision when it comes to climate changes.
To continue speaking about climate and our emissions for the quarter, the accrued results for the 9 months of the year, point to adherence to the plan set for each segment, improvements in the production of steel and a slight increase in the level of emissions in the production of iron ore. And of course, we do have great expectations in terms of our performance and the implementation of projects that have been set forth.
We spoke about renewable energy, of course, when it comes to speaking about climate changes. And this is so important for the company. It is through the company's strategy that we will be able to stand out and also work with new innovation projects. We will have clean energy that can be scaled up in several of our new developments.
Now speaking about our dam management, we're continuing the de-characterization works on the Vigia dam. We have completed the structural building. And officially, it is being acknowledged as being de-characterized, and then there is nothing reported in terms of our licenses.
We have had a significant evolution in operational terms. Quarter-on-quarter, we speak about our security, which is also under evolution. We have reduced the number of accidents, the problem of the third party. All these presenting the best result in our historical series.
This quarter, we reached the best figure, and we ended the quarter with 0 fatalities. And in terms of social and diversity, of course, we're under constant evolution. We have increased the representation of women in leadership positions. In 9 months, we had significant advances compared to 2021.
[Operator Instructions] Our first question is from Daniel Sasson from Itau BBA.
Marcelo, if you could remark on CapEx, the reduction in your guidance, if this is coming from something that will continue on the next year, which is your expectation of CapEx for 2023. At this moment of greater uncertainty it seems that you're revising the execution of some contracts? When it comes to steel, if you could speak about your expectations for volume and the guidance for 2022 was given 1,60,000 tonnes, if you could remark on this, and perhaps Martinez could do this, if you're comfortable with these levels and give us more color in terms of volumes and prices for the short term?
Thank you for the question. I will begin to answer the question on CapEx and then give the floor to Martinez for his outlook on volume.
Well, regarding CapEx in the medium term, we still don't have anything. We're carrying out this exercise. Now we're going to share this during CSN Investor Day in the middle of December. But of course, we're working with priorities as we have during 2022. This gave us a savings of BRL 1 million because of the moment of uncertainty, and we're trying to increase the cadence of projects that will be delivered but will be delivered in a different time frame.
We're thinking of productivity gains and steel growth in mining, but we do have to respect the environment and liquidity and leverage issues. This doesn't mean that we're changing our direction in steel. We're going to work with changes in sintering, have some shutdowns. And in terms of mining, the great projects is the expansion of P15 and PK expansion.
In the other projects, we do have a master plan. And part of our trajectory is to de-characterize the dams and of course, work with the tailings. This is a subsequent enrichment. And their time frame might become somewhat more flexible.
We're going to maintain the annual CapEx, but far from the levels of BRL 10 million that we had in 2022. Of course, we will have significant expenses in these projects. But so far, we do not have a precise figure for the medium term. Very soon, we will be sharing this with you in the following 30 days.
I give the floor to Martinez. Should you have any more doubts, we can continue speaking.
Daniel, good morning and thank you for the questions. I will begin speaking about the market. The Brazilian market for flat steel this year will end at 4.4 -- I'm sorry, 14.4 million, 14.6 million tonne vis-a-vis other years. And in 2021, there will be a small drop.
And from the viewpoint of volumes, we should reach a very interesting figure. Of course, because of the market conditions that we have had this year, still speaking about the fourth quarter and the outlook for the sectors, some sectors continue to be very positive.
Agri business for example, stable construction, agricultural implements, machines, equipment, packaging, trucks. All of these sectors are operating very well in terms of steel in Brazil. We have trucks with 8%, machines with 12%. Some sectors that lead a bit to be desired that should improve are the automotive sector, although it did improve in the third quarter, the outlook is more positive for the fourth quarter. And the white line also, it suffered significant seasonality in the third quarter, but they're getting ready for Black Friday and other end of the year activities.
From the viewpoint of guidance in the domestic market, the fixture is 3,300,000 tonnes for the year and totaling for the group a figure of 4,700,000 tonnes. Considering Lusosider with 300,000 WT, 60 long in Brazil, 240,000 in the U.S., approximately 230,000. Approximately, this would be the guidance of volumes that we have for the year.
A very positive piece of information, strong penetration this year will drop to levels of 14% to 15%. This is good news. It will return significant volumes to the domestic market. And when it comes to prices, we have focused on, I mentioned this in the previous call that we were focused on recovering market share and we did. We had a growth of 20% in the domestic market. There will be a minor seasonality at the end of the year. It happens every New Year, especially in September.
And in terms of prices, what I can say is that the premium, although we have altered the price has still been able to compete. The premium is 18% to 20% vis-a-vis the nationalized imported product. As Marcelo mentioned, our strategy is to remain operational and to compete.
Our slab, I don't know if you will recall this to BRL 4,200 per tonne at the worst moment, should end the year at lower levels of BRL 3,100, BRL 3,600, which makes us very competitive currently.
What I can say regarding the market strategy is that we're going to continue to diversify the production. We're going to work towards added value, quality, action in all markets. The geographic issue is very important. We're well positioned in Germany, Portugal. There is a trend for recovery until the end of the year, beginning of 2023. And in the U.S.A., good news, we have a sense with you for cold and hot lamination.
So the U.S. opens another door for the CSN. Besides the amounts that we export every year, we will have the opportunity of exporting 50,000 more cold lamination and 150,000 of hot lamination. Brazil [ 132 ] and the other countries that were able to eliminate the anti-dumping lost by 720, which shows that we have a good outlook for Brazil.
Now still speaking about strategy, we're ever more horizontally integrated. We're seeking vertical integrations in long-term processes with strategic intentions, of course, and the market of zinc material, we're still struggling for prices. We have to fight against the imports in Brazil.
The imports, 95% come from China. They arrived in Brazil with prices that are much lower than those of the domestic market. We're going to continue to fight to maintain our margins and a better cost.
Now an important piece of information so that we can add value ever more. We announced an investment in the new painting line. We're still seeking a location. It will be 160,000 tonnes per year for automotive and for the white line, which means that we will gain some more diversity.
In the metal line, we're working very strongly with the American market to increase our quota in the U.S. market. The quota is very small for Brazil. If we can get to 80,000 or 100,000 tonnes a year, this would be highly desirable.
This is all, and thank you for the question.
Our next question is from Rafael Barcellos from Santander Bank.
I have a question about the leverage that you have spoken about. Will you speak about the price of iron ore or the same prices you spoke about steel. Now regarding cement, with the consolidation of Lafarge, what is your outlook for profitability? And if you could detail the growth that you're going to have an investment?
Well, thank you for the questions. Regarding the leverage, we do have that range, but it's more focused on a goal. We're aware of the challenges that are necessary to broaden that leverage and work with the drop of prices of commodities, which is important for CSN.
In this forecast, we have already included and iron ore at a different level that we saw this quarter between $80 and $90. And if the iron ore continues to drop in terms of price, the intention of CSN is to maintain indebtedness below that level of 1.95. We're going to seek out other initiatives to make this a ceiling, a limit.
In terms of management, whenever we see the leverage increasing, we seek alternatives to reduce the leverage to get back to the levels that we deem acceptable.
Now I will give the floor for a fuller response.
I'm sorry, I'm a bit hoarse. In terms of the evolution of profitability of cement, nowadays, CSN is the most competitive platform in Brazil. We work with margins of 130%. Lafarge operates with lower levels. Marcelo has already mentioned that we found a very well-structured company with excellent assets and that we're seeking out opportunities and synergies that are greater than we had imagined initially.
We're quite convinced that in the short or medium term, we will bring Lafarge into operation with these very high levels of EBITDA. We're working on this now. And for this, of course, we have several synergies that go from A to Z in the commercial area, the logistic area, operationally and in the commercial area. We're going to replicate the model of success that we have at CSN.
Our pricing strategy in logistics, we work with optimization in our services to the market, focusing on regions municipalities or markets. And in terms of operations, we have several synergies, beginning with electrical energy. In the second semester of the coming year, we will have high production of energy, which will be important because of the acquisition of the plants that have been mentioned and synergies that we're seeking in terms of efficiency, cargo and energy matrix, a new avenue of things that we are capturing in the short term, getting ready for the year 2023. We're quite optimistic in terms of this.
Regarding the growth plan, we have 16,000 tonnes of capacity. We're selling 12 million to BRL 13 million. There is still room for growth, of course, for the present day assets, and we have 2 important points: one, to be attentive to market opportunities. We believe that consolidation will continue in Brazil. CSN is a major player in this process. We're going to look at the opportunities with a great deal of discipline, of course, and an organic growth plan where we have the opportunity of building grid fields.
And we have 3 projects in our pipeline that will be initiated if there is the need for this or if we have a better visibility of the growth of the market in the coming years. There's a project in [ Para ] and other in Parana.
Now well, we don't begin these projects immediately. We're working with the maturity of these products, working with the licensing, the protocol of intentions with the government and definition of all of the equipment so that these projects will be highly competitive in their respective regions. I hope that this has responded to your question.
And Rafael, to complement the information that Edvaldo has just conveyed. We're going to follow the strategy of diversification in cement. Today, we have the best of both worlds. At CSN, we were highly focused on the retail segment. 90% we sold to the end users and customers. We have 20,000 clients. We used to sell to only 8,000. That was our goal initially to sell to less clients. And now we have an operation that is very focused on bulk cement, technical cement that will sustain the growth of infrastructure in Brazil.
And when we speak about geographies and going beyond the projects mentioned by Edvaldo, we're very well positioned in some regions of Brazil in the Northeast, in the Southeast and the region of Rio de Janeiro and Minas Gerais or in Sao Paulo, we have a market share of 20% for Brazil.
In some regions, we predominate in the region, and this allows us to also work on sales channels, distribution. This is a strategy that we're going to work with diversifying the geography, the customers and, of course, focusing on the value of the company, whether it is in batch or bulk.
Our next question will be in English from Mr. Carlos De Alba from Morgan Stanley.
Just a couple of questions. One is, when do you expect or when do the hedges that you had in place in Germany for energy cost or energy inputs will expire? And if you could give us a sense of how much below current spot prices where you're purchasing energy at in Germany, that will be useful?
And then the other question is on the benefit of the energy acquisitions that you recently did on the steel sector, in particular. Have you quantified how much dollars per tonne of slab production in respect to reduce or COGS per tonne? However, you have quantified that would also help us.
Thank you for the questions, Carlos. Speaking about Germany, we have had that hedging policy for 10 years. There hasn't been any alteration and the policy is to hedge 100% during the short-term period. And then quarter-on-quarter, we work with a scale with the percentage drop.
This year, we had more than 80% locked at 74 hours per megawatt hour. And the coming year, 25% to 30% of our volume will stand at that same price. We would be working with the spot market where the prices are much higher, 300, for example. But even with these lower hedge levels for the coming year, we are looking at a result that will be double our historical results, EUR 50,000, EUR 60,000 for the unit, and we will pay double of that because gas and energy will be more expensive.
This is the combination of limited supply. There are production problems there. And gas perhaps will go down. We will work according to the policies with lower prices. And we hope to have a very strong market for the coming year.
Regarding CEE it brings us BRL 300 million in terms of benefits, a reduction in the cost of energy for steel, mining and cement. And approximately half of this refers to steel. We're speaking of BRL 650 million or $30 million, $10 per tonne. This is what improves in terms of our margin because of the synergy.
Our next question is from Caio Ribeiro, Bank of America.
My first question is about the expansions in the steel sector. If you could speak about the growth that you're contemplating here and perhaps convey some details in terms of volume and CapEx? Secondly, you spoke about the results that you think there will be a drop in the price of some inputs during the fourth quarter and a drop in the price of slab. Could you give us an outlook of which will be the margin that you expect in the steel sector for the fourth quarter?
Well, regarding the expansion, it would be interesting for Martinez to mention what we announced recently. Martinez?
This new painting line is another step that we're taking in our strategy towards a value chain. To give you an idea, we have a line in Parana that produces 120,000 tonne a year. This new line was acquired. It's a line that was in operation in Korea. Japanese lines, start of the art, also producing 160,000 tonnes. And we're now disassembling and working with engineering.
I think that in the first quarter of 2024, this line will be operational in Brazil. Obviously, this is another step. We're going to work with more zinc material and work more with painting. And the focus is exports. The market here is given. What comes in here in terms of pre-painting represents capacity of our line. We're very comfortable that this line will arrive full. It is for civil construction and the white line, the chosen markets.
When it comes to the expansion of CSN, what is more important is consolation. We're working on steel sheets in domestic market with 350,000 tonnes a year. We have capacity with a low CapEx of reaching 600,000 tonnes. But we do count on the eventual opening of the North American market to export this. So we're focusing more on this market, and it will depend on what we're doing with the American market.
In terms of other types of growth, we're working with an exercise at present. We're making investments upstream, and we have an engineering production and commercial team jointly deciding what we're going to do upstream. Of course, we have analyzed the possibility of increasing capacity and volume in Brazil. There is another line that comes in of imports, and we think that we could also increase the capacity of zinc products.
This is still under study, and we're working with this in-house. We're going to keep away from the hot rolled products. We're going to work more with coated products, products with added value to be closer to the end consumer and sending steel per kilo instead of selling it per tonne. This is the goal of CSN.
Marcelo, I don't know if you're going to add whatever it is that we're serving outside of Brazil.
Well, I'm sure Benjamin will also make remarks on the company's strategy. It is important to internationalize in the more developed markets, especially North America. But we're now reviewing the timing to put in place these projects. We do have -- we have made strides in terms of long steel because of this internationalization. We truly do like this project, but it will be put in place at the right moment. It will all depend on the context.
I will give the floor to Benjamin to remark on this.
Regarding Caio's second question, cost. Simply to clarify what was said during the presentation, we had the cost of slabs of 4,100 in the third quarter. In the fourth quarter, the cost is 8% below that average. This points to the trend. There will be a greater drop in the fourth quarter, which means that as part of price expectations, our margin per tonne may increase marginally.
There are too many variables involved. There's a seasonality of the quarter. But our margin increases marginally because of this drop in prices.
Our next question is from Isabella Vasconcelos from Bradesco BBI.
We have 2 questions. The first referring to cost, you're going to enhance productivity and several comments have already been made of this. But if you could give us more color in terms of other initiatives that you're surveying in the value chain for the company?
The second question, simply to confirm this with Martinez, the strategy and the strategies that you have worked on more if that has changed if most of your volumes will continue to do what they were doing in the past. This is our question.
Isabella, if I can begin answering the second question, this is Martinez. Regarding the contracts, nothing has changed. Quite the contrary, in the United States, we have seen that the negotiations continue to close annual volumes without any problem and revising the price every quarter or every 6 months according to the market.
Our strategy is the same in Brazil, in civil construction, in industry and some sectors. And in the white line and automotive sectors, we do this quarter-on-quarter. Basically, this is what we're thinking of.
Regarding the negotiations with these sectors there beginning once again now in a month or 1.5 months, we'll have an idea of which will be the negotiations for 2023. In the case of coated material where I have 51% of my portfolio, we're going to continue to fight against imported products. We want to grow more and sell to more customers. There is no other way out.
And commercially, we're working on all fronts, trying to go from the sunset review from hot to cold, the metal heater, metal foil because we do find a great deal of Chinese coated material in Brazil. It's very difficult to compete with this. And the supervisors tend to prefer the import of materials in this area.
So we're going to focus on pricing in the fourth quarter. As Marcelo mentioned, we're imagining that we will maintain our margins through a cost reduction. Marcelo mentioned the word marginally, but we're going to work on cost so that we're able to marginally maintain our margins.
To speak about cost, our main costs are raw material, energy and services, maintenance contracts, strong logistic support. Now in logistics, we do have a strategy and the strategy is verticalization and working with premiums, and this has given us good results.
We have some subsidiaries that are no longer suppliers of CSN. They're working with competitive product for the entire segment, [indiscernible], which is a company as well, where we work with very tight costs. And in energy, we're doing what we can. We're reaching indices of high production. To work with natural gas is also something that we could do. We have projects for the longer term.
So it's a combination of things and partnership with Casa de Pedra looking for a greater yield for the blast furnace, working less with pellets. We're seeking activities to increase our fill rate, and we're working statistically in the slab market where we still have a great deal of opportunities. In all of these, we're able to have a very competitive cost.
Our next question is from Leonardo Correa from BTG Pactual.
I have a single question to clarify some points in the same question, leveraging, capital, strategy. If we look at the evolution, many things have been done. Lafarge, CEE, well, these are large acquisitions. And now there is a period where you have to absorb capital synergies. And of course, this has to be well done.
Additionally to this, in all of the IPO process of the CEE, there were also several projects and a great deal of things on the table of the company, things to be delivered and that were under evolution. The question, therefore, that we have is that, of course, this is having an impact on the leverage of the company. For many years, CSN has been deploying a great deal of efforts in terms of reducing the leverage. And I think the market as a whole has been very appreciative when we look at the leverage that is almost 2x. This is a level that you had in the past.
It puts the company into a different situation when it comes to global industries. In Latin America, United States, Europe and Asia leverage is 1.5x above the average. Because of that ceiling and your leverage and your objective, the impression that we're under is that you don't have much room for maneuvering here. I know that you have spoken about your desire to make a company international, but all of your movements have been done domestically.
If we think about all of this, if we think about your strategy, the leverage, the risks of the scenario, the price of commodities, dropping things are still rather hazy. Isn't this a time perhaps to stop to integrate everything to continue on with what you have been doing? I would simply like to hear from you because this is very important to the market, and the market is very focused on this. This would be my question.
Leo, this is Benjamin. I'm going to respond to some of these questions at the end. But as this question involves strategy, I would like to respond to it. And the other questions will be answered by others.
First of all, good day to all of you. Thank you for participating in our results call. We truly have prepared the company for a deleveraging that was done very successfully. And because of this, we have prepared the company for organic growth and for acquisitions.
You truly never know what will come first. We were ready to participate in mergers and acquisitions. And of course, we're continuing on with our investment plan. Our priority, our strategic priority is to invest outside of Brazil. You are correct. We continue on with that strategy.
The conclusion that we have come to is that despite having very good margins in our businesses in Brazil, we are penalized by the multiples, which are much lower than those of our peers abroad or even among our Brazilian peers and because of an issue of reliability regarding our assets. Now this effort towards internalization in each of the businesses continues to be a priority for us.
At the same time, we're making organic investments and investments for growth. And what came up was LafargeHolcim. And because there were no internal buyers and because there was a need to sell off the company in the short term because of the leveraging, because of an acquisition they had done it was -- well, this opportunity was left for us.
We analyzed it. We analyzed it very speedily because it was not part of our strategy. And because of what was presented to us in terms of the quality of the asset, the geographical diversification, the potential for synergy, this operation would complement us. We decided to anticipate everything, makes the most of the opportunity and acquire the assets of LafargeHolcim and somewhat postponed that organic growth that we have in Brazil.
You said that we have 2 projects at the port of Sepetiba, for example, are all packaged up. So we decided to make the most of that opportunity, and it truly was a very positive one. The synergies are much greater than we had imagined.
Besides the logistic issue that requires good management for the 2 companies the complementarity and the possibility of marketing, the production of each company and a more smart way has increased the synergies beyond what we had imagined. And although the cost was higher than ours because our assets are newer because of the synergy in logistics and supply, it's going to reduce our costs and give us better margins than we had expected.
I would say that this was a good opportunity that we made the most of. And of course, we do not repent this. As you can see from the results that we have presented beginning the coming year, we will have a significant EBITDA for the entire group.
Now when it comes to investments in the field of energy, we're being carried by the EDP or EDF, he says, because of the possibility of acquiring CEEE, the day before because of the analysis may dropdown, we decided to continue on a loan, and because of the amount told of 66%, as 33% belong to Eletrobras, we decided to continue on a loan, and we got ready for an auction.
And if we speak comparatively of the assets that we had acquired previously, in terms of margin, we were prepared to go way beyond what we went for. And we thought it was a good business compared to the previous acquisitions that we had done of Quebra-Queixo and [indiscernible] and [ Santana ]. So we were prepared to pay what we had paid for the Quebra-Queixo and other hydroelectric plants.
And we were surprised with that margin of 10%, which made the business look extremely interesting. And it enabled us to create our energy business, we were self-producers. We had shares in hydroelectric and thermal electric plants. But with the acquisition of CEEE that has 3 [indiscernible], we have the business of clean generation, which is very important for us.
We grasp this advantage. And with an acquisition cost that was surprisingly very low, and very soon, this will have a repercussion, will have an impact on our EBITDA results, and we will become very efficient producers of energy. And we do have a very significant potential for growth greater than we have in mining or cement.
I would say that these were opportunities that we took contrary to the strategic priority that we had set forth. But with very good results, and we're quite calm in terms of what was done. Now the leverage did increase and we're offering this guidance.
But I would like to say to you that we are ready for new opportunities to carry out some structured financial movements in the field of cement as well as in energy as well as in the steel sector. So that assumption that we had adopted previously of maintaining the leverage below 1x, that was our priority and our commitment, and we're going to maintain it, of course.
Notwithstanding this, because of the opportunities that have come up in a very conservative fashion, we will not set aside working with opportunity businesses. If you look at the price of operational assets compared with assets that have to be created, whether brownfield or greenfield, you will pay 1/3 or 1/4 of the value.
So that topic of investment, organic investment, organic growth when it comes to opportunities when you see a ready-made an operational asset, well, you have to think judiciously, of course, you are not going to enter into a business where you won't make money.
Our greater commitment is what I mentioned previously. Now we're going to continue to deleverage ESP technology and we will mandate thoroughly maintain our focus. Every once in a while, we may slip in terms of the leverage. This is a timely thing, a onetime thing, but whenever there is an opportunity, a window for a financial operation that will allow us to deleverage, we're going to adopt this quickly and go back to the greater commitment, our original commitment of deleveraging.
Basically, this is what is happening. We have to be sufficiently smart, so as not to allow ourselves to miss investment opportunities. Overall, so going to maintain our commitments and our conservative stance when it comes to deleveraging. But of course, we're going to come up with some assets. We are prepared to produce at a low cost. And with this, we will be quite aggressive in the market where we sell our products with representative margins.
[Operator Instructions] As we have no further questions, we will return the floor to Mr. Marcelo Ribeiro, the CFO and Executive Investor Relations Officer.
I would like to thank you for your attendance, and I would like to give the floor to Benjamin Steinbruch for the closing remarks.
Thank you, for participating in our call. Very few words in terms of our strategy and the priorities of the company and our business, and share some information in terms of what we're thinking about and doing.
We think that this moment is very similar with 2020 when the pandemic came about. We have very aggressive measures preparing the company for this and for a significant change in production and consumption. We're presently doing the same. The company is being prepared for a highly competitive market, something that is different from what we had anticipated in.
As all of you know, the price of raw materials and prices in general and the level of economy as a whole are dropping, and we have to be prepared for a new type of market. And what we have to do is to work with a lower competitive price to make the most of the market in which we operate. We cannot create the market, but yes, we can participate actively working with a low cost, and this is what we're doing.
The company is ready to produce at a low cost and to continue to truly participate in the consumer market. We are going to have this drop of cost that began in the second quarter already. As you know, the prices drop before the cost. And when you see everything package, the raw material and the services and the payroll, you have that effect of inertia, the prices drop, the cost because you have already bought raw material. The products are being manufactured and when you have an inventory, it leads to a margin decrease initially, but it didn't have a benefit, the benefit of the drop of cost in raw materials and services.
We did have an impact in the second quarter. The third quarter was the worst. The fourth quarter will begin to improve and beginning with the first quarter in 2023 the company as a whole will be very prepared to work with low cost and participate in all sorts of markets. Commercially, we will be very aggressive and being commercially aggressive, does not mean to lower our prices. We want to set ourselves aside.
We're seeking partnerships, shares. We want to maintain our philosophy of work. And of course, we want to be commercially well placed to be able to enhance the domestic market and also supply to the foreign market.
Regarding the investment, I have already mentioned this. There are many opportunities. We think that there will be ever more opportunities because of what is happening worldwide, opportunities to consolidate segments. And we have to be ready to participate in this and do whatever we think will be smarter for the company in the short term.
Always keeping in mind the leverage lengthening the company that were already quite lengthened in terms of debt, we're going to pay the maturities in the coming 6 years. We are concerned with working capital. We have our effort in this, minimize inventories, maximize the payout of dividends to work appropriately with inventories to have at least BRL 15 billion in cash, which is what we deem to be necessary to give us that freedom of action because of the size of the company and to also have that freedom for some choices that may appear in the horizon.
I spoke about the synergies that we have among our assets. And the focus of the strategy is low cost, quality and the products. We continue on with that idea of quality and there are variable that plays in our CAGR the quality of the products and added value to produce with a low cost and to have added value and quality in our products gives us a differentiated market vis-a-vis the market.
A low leverage within our commitment, aggressiveness in the domestic market, the payment of dividends is something that we think the market values and respects and, of course, the issue of investments abroad. So we're working within all of these variables.
We're always seeking quality, as you know. Our structure is a very lean structure. It used to be much larger than our structure than our fixed costs. We're attempting to work with a highly efficient management and very good quality.
I think that, as of this moment, we will have better margins in all of the products. The market is there, and we're ready for it. We're enthusiastic with this market when it comes to China, which is an important topic for us. We see that China is progressively returning or improving its economic activity, perhaps not as aggressive as it was formally but progressively offering well-being and development to its population.
And iron ore will be an important product when it comes to social issues and infrastructure for China. When it comes to ESG, we're highly committed as always. And when it comes to security and governance, this is a flag that we work with and technology and leverage.
I would like to thank all of you for participating in the call. Once again, we're highly enthusiastic. We're being conservative in terms of our forecast, highly satisfied with the investments that have been made and then aware that new opportunities will come about in the short term in terms of mergers and acquisitions, both in the domestic and international market.
We do want to be a very active participant of the market without getting our greatest commitment, which is maintaining the company deleveraged. That, of course, has perhaps had a minor slip because of the opportunities. But once again, returning as soon as possible to this commitment.
Thank you very much to all. I hope to see you in person at our next meeting. Thank you for your participation.
Thank you. The CSN results call ends here. You can now disconnect, and have a very good afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]