Grupo BTG Pactual analysts led by Edmo Chagas recommended investors take profits on shares in Cia Siderúrgica Nacional SA as risks persist from logistics and mining projects at Brazil’s No. 2 flat steel producer. The company, which posted stronger-than-expected third-quarter earnings on Thursday, continued to burn cash, and its debt rose on a sequential basis, Chagas said on a client note distributed late on Sunday. He estimated that CSN, as the company is known, burned 900 million reais ($383 million) of cash in the quarter and added that the robust results were the outcome of lower-than-expected costs and expenses, rather than better top-line trends. In addition, CSN’s steel business improved much less than that of its peers, the note said.
CSN’s stock is up more than 100 percent since this year’s low in July, due to expectations of strong quarterly results and the lower probability that the company may buy the Brazilian assets of ThyssenKrupp AG. Optimism that iron ore venture Namisa would merge into CSN’s Casa de Pedra ore unit is already priced in, “leaving room for profit-taking after third-quarter results,” Chagas said in the note, adding that he recommends investors add exposure to Brazil steel stocks via Usinas Siderúrgicas de Minas Gerais SA.