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25 SEGMENT INFORMATION
 12 Months Ended
Dec. 31, 2019
Segment Information [Abstract]  
SEGMENT INFORMATION

25    SEGMENT INFORMATION

 

According to the Group´s structure, the businesses are distributed and managed in five operating segments as follows:

 

·           Steel

 

The Steel Segment consolidates all the operations related to the production, distribution and sale of flat steel, long steel, metallic containers and galvanized steel, with operations in Brazil, United States, Portugal and Germany. The Segment supplies the following markets: construction, steel containers for the Brazilian chemical and food industries, home appliances, automobile and OEM (motors and compressors). The Company’s steel units produce hot and cold rolled steel, galvanized and pre-painted steel of great durability. They also produce tinplate, a raw material used to produce metallic containers.

 

Overseas, Lusosider, which is based in Portugal, produces cold rolled steel and galvanized steel. CSN LLC in the U.S.A. meets local market needs, import and export of steel products.  In January 2012, CSN acquired Stahlwerk Thüringen (SWT), a manufacturer of long steel located in Unterwellenborn, Germany. SWT is specialized in the production of shapes used for construction.

 

In January 2014 the production of long steel products started in Brazil and consolidates the company as a source of complete construction solutions, complementing its portfolio of products with high value added in the steel chain.

 

·          Mining

 

This segment encompasses the activities of iron ore and tin mining.

 

 The high-quality iron ore operations are located in the Iron Quadrilateral in Minas Gerais, which has its own mines and sells third party iron ore.

 

At the end of 2015, CSN and the Asian Consortium formalized a shareholders' agreement for the combination of assets linked to iron ore operations and the related logistics structure, forming a new company that has focused in mining of the Group activities from December 2015. In this context, the new company, currently named CSN Mineração S.A., holds the TECAR arraignment, the Casa de Pedra mine and all the shares of Namisa, which was incorporated on December 31, 2015. CSN still owns 100% of Minérios Nacional which includes the mines of Fernandinho (operational), Cayman and Pedras Pretas (mineral resources), all located in Minas Gerais.

 

Moreover, CSN controls the Estanho de Rondônia S.A., company with mining units and tin casting, in the state of Rondonia.

 

·          Logistics

 

i. Railroad

 

CSN has equity interests in three railroad companies: MRS Logística, which manages the former Southeast Network of Rede Ferroviária Federal S.A. (RFFSA), Transnordestina Logística S.A. and FTL - Ferrovia Transnordestina Logística S.A., which has the concession to operate the former Northeast Network of the RFFSA in the states of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

 

a) MRS

 

The railroad transportation services provided by MRS are fundamental to the supply of raw materials and the shipment of final products. The total amount of iron ore, coal and coke consumed by the Presidente Vargas Mill as well as part of the steel produced by CSN for the domestic market and for export are carried by MRS.

 

The Southeast Brazilian railroad system, encompassing 1,674 kilometers of tracks, serves the tri-state industrial area of São Paulo-Rio de Janeiro-Minas Gerais, in the southeast region, linking the mines located in Minas Gerais to the ports located in São Paulo and Rio de Janeiro, and the steel mills of CSN, Companhia Siderúrgica Paulista, or Cosipa, and Gerdau Açominas.  Besides serving other customers, the railroad system carries iron ore from the Company’s mines in Casa de Pedra, Minas Gerais, and coke and coal from the Itaguaí Port, in Rio de Janeiro, to Volta Redonda, and carries CSN’s export products to the ports of Itaguaí and Rio de Janeiro.

 

b) TLSA and FTL

 

TLSA and FTL hold the concession of the former RFFSA’s Northeast Network. The Northeast Network totals 4,238 km, divided into two sections: i) Network I, which comprises the São Luiz–Mucuripe, Arrojado–Recife, Itabaiana–Cabedelo, Paula Cavalcante–Macau and Propriá–Jorge Lins (Network I); and ii) Network II, which comprises the sections of Missão Velha–Salgueiro, Salgueiro, Salgueiro –Trindade, Trindade– Eliseu Martins, Salgueiro–Porto de Suape and Missão Velha–Porto de Pecém.

 

In addition, it connects to the main ports in the region, thereby offering an important competitive advantage through opportunities for combined transport solutions and logistics projects tailored to customer needs.

 

II. Port Logistics

 

The Port Logistics Segment consolidates the operation of the terminal built in the privatization period after the law of modernization of the ports (law 8.630/1993) that permits to transfer the port logistics activities to the private sector. The Sepetiba terminal features complete infrastructure to meet all the needs of exporters, importers and ship owners. Its installed capacity exceeds that of most other Brazilian terminals. It has mooring berths and a huge storage area, as well as the most modern and appropriate equipment, systems and intermodal connections.

 

The Company’s constant investment in projects in the terminals consolidates the Itaguaí Port Complex as one of the most modern in Brazil.

 

·       Energy

 

CSN is one of the largest industrial consumers of electric power in Brazil. As energy is fundamental in its production process, the Company invests in assets for generation of electric power to guarantee its self-sufficiency. These assets are as follows: Itá hydroelectric power plant, in the State of Santa Catarina, with rated capacity of 1,450 MW, where CSN has a share of 29.5%; Igarapava hydroelectric power plant, Minas Gerais, with rated capacity of 210 MW, in which CSN holds 17.9% of the capital; and a thermoelectric co-generation Central unit with rated capacity of 238 MW, which has been operating at the UPV since 1999, that uses the residual gases produced by the steel mill itself.

 

·       Cement

 

The cement division consolidates the cement production, distribution and sale operations, which use the slag produced by the Volta Redonda plant’s blast furnaces.

 

The Company produces clinker in Arcos/MG, using limestone from own mine and also two cement mills in additions to the mills that already operate in Volta Redonda/RJ.

 

The information presented to Management regarding the performance of each business segment is generally derived directly from the accounting records, combined with some intercompany allocations.

 

·       Sales by geographic area

 

Sales by geographic area are determined based on the customers’ location. On a consolidated basis, domestic sales are represented by revenues from customers located in Brazil and export sales are represented by revenues from customers located abroad.

 

·       Result by segment

 

Beginning 2013, the Company no longer proportionately consolidates joint ventures MRS and CBSI. For segment information preparation and presentation purposes, Management decided to maintain the proportionate consolidation of the joint ventures, as historically presented. For consolidated profit reconciliation purposes, the amounts of these companies were eliminated in the column “Corporate expenses/elimination”.

 

                                12/31/2019
P&L   Steel   Mining    Logistics       Energy   Cement   Corporate expenses/elimination   Consolidated
      Port   Railroads        
Metric tons (thou.) (*)     4,524,805   38,545,067                   (3,258,923)    
Net revenues                                
Domestic market   10,027,999   926,836   240,451     1,321,355     325,343     570,805   (2,462,088)   10,950,701
Foreign market     3,921,033    9,100,813                   1,463,870   14,485,716
Total net revenue (note 21)   13,949,032   10,027,649   240,451     1,321,355     325,343     570,805     (998,218)   25,436,417
Cost of sales and services     (12,962,861)     (4,396,247)   (173,344)     (1,030,210)     (266,754)     (607,719)   2,173,871   (17,263,264)
Gross profit   986,171     5,631,402   67,107   291,145     58,589   (36,914)   1,175,653   8,173,153
General and administrative expenses   (834,977)   (186,189)     (34,560)   (109,770)   (29,034)   (91,466)   (1,567,874)     (2,853,870)
Depreciation (note 22)   700,074   476,374   30,568   387,565     17,471     139,667     (330,015)   1,421,704
Proportionate EBITDA of joint ventures                             510,072   510,072
Adjusted EBITDA   851,268     5,921,587   63,115   568,940     47,026     11,287     (212,164)   7,251,059
                                 
Sales by geographic area                                
Asia     2,980     6,742,946                   1,463,870   8,209,796
North America   767,977                           767,977
Latin America   169,036                           169,036
Europe     2,978,994     2,357,867                       5,336,861
Others     2,046                           2,046
Foreign market     3,921,033     9,100,813                   1,463,870   14,485,716
Domestic market   10,027,999   926,836   240,451     1,321,355     325,343     570,805   (2,462,088)   10,950,701
Total   13,949,032   10,027,649   240,451     1,321,355    325,343     570,805     (998,218)   25,436,417

 

                                12/31/2018
P&L   Steel   Mining    Logistics       Energy   Cement   Corporate expenses/elimination   Consolidated
      Port   Railroads        
Metric tons (thou.) (*)     5,068,758   34,780,756                   (4,961,345)    
Net revenues                                
Domestic market   10,328,372   972,360   266,378     1,506,114     410,606     588,230   (2,718,623)   11,353,437
Foreign market     5,305,771     5,012,421                   1,297,256   11,615,448
Total net revenue (note 21)   15,634,143     5,984,781   266,378     1,506,114     410,606     588,230   (1,421,367)   22,968,885
Cost of sales and services     (12,613,216)     (3,585,691)   (189,999)     (1,049,071)     (286,734)     (544,266)   2,163,320   (16,105,657)
Gross profit     3,020,927     2,399,090   76,379   457,043     123,872     43,964     741,953   6,863,228
General and administrative expenses   (984,980)   (144,754)     (35,423)   (106,412)   (27,948)   (95,893)   (1,362,301)     (2,757,711)
Depreciation (note 22)   609,274   366,547   20,368   258,985     17,285     115,411     (212,763)   1,175,107
Proportionate EBITDA of joint ventures                             568,045   568,045
Adjusted EBITDA     2,645,221     2,620,883   61,324   609,616     113,209     63,482     (265,066)   5,848,669
                                 
Sales by geographic area                                
Asia   40,681    4,422,377                   1,297,256   5,760,314
North America     1,506,041                           1,506,041
Latin America   369,830                           369,830
Europe     3,330,991   590,044                       3,921,035
Others   58,228                           58,228
Foreign market     5,305,771     5,012,421                   1,297,256   11,615,448
Domestic market   10,328,372   972,360   266,378     1,506,114     410,606     588,230   (2,718,623)   11,353,437
Total   15,634,143     5,984,781   266,378     1,506,114    410,606     588,230   (1,421,367)   22,968,885

 

                                12/31/2017
    Steel   Mining    Logistics       Energy   Cement   Corporate expenses/elimination   Consolidated
        Port   Railroads        
Metric tons (thou.) (*)     4,921,719   32,576,843                   (5,359,571)    
Net revenues                                
Domestic market     7,818,552   829,268   238,240     1,416,612     407,671     487,129   (2,491,006)   8,706,466
Foreign market     5,140,471     3,791,703                     885,961   9,818,135
Total net revenue (note 21)   12,959,023     4,620,971   238,240     1,416,612     407,671     487,129   (1,605,045)   18,524,601
Cost of sales and services     (10,537,547)     (3,005,840)   (156,997)     (1,024,696)     (285,085)     (512,762)   1,926,786   (13,596,141)
Gross profit     2,421,476     1,615,131   81,243   391,916     122,586   (25,633)     321,741   4,928,460
General and administrative expenses   (963,822)   (158,958)     (27,943)     (94,921)   (27,098)   (80,823)     (877,383)     (2,230,948)
Depreciation (note 22)   658,587   490,805   15,752   294,571     17,265     121,801     (190,016)   1,408,765
Proportionate EBITDA of joint ventures                             538,170   538,170
Adjusted EBITDA     2,116,241     1,946,978   69,052   591,566     112,753     15,345     (207,488)   4,644,447
                                 
Sales by geographic area                                
Asia   23,364    3,592,226                     885,961   4,501,551
North America     2,009,337                           2,009,337
Latin America   506,951                           506,951
Europe     2,564,823   197,701                       2,762,524
Others   35,996     1,776                       37,772
Foreign market     5,140,471     3,791,703                     885,961   9,818,135
Domestic market     7,818,552   829,268   238,240     1,416,612     407,671     487,129   (2,491,006)   8,706,466
Total   12,959,023     4,620,971   238,240     1,416,612     407,671     487,129   (1,605,045)   18,524,601

 

(*) The ore sales volumes presented in this note take into consideration Company sales and the interest in its subsidiaries and joint ventures.

 

·         Adjusted EBITDA

 

Adjusted EBITDA is the main measurement based on which the chief operating decision maker assesses the segment performance and the capacity to generate recurring operating cash, consisting of profit for the year less net financial income (expenses), income tax and social contribution, depreciation and amortization, equity in results of affiliated companies, results of discontinued operations and other operating income (expenses), plus the proportionate EBITDA of joint ventures.

 

Even though it is an indicator used in segment performance measurement, EBITDA is not a measurement recognized by accounting practices adopted in Brazil or IFRS, it does not have a standard definition, and may not be comparable with measurements using similar names provided by other entities.

 

As required by IFRS 8, the table below shows the reconciliation of the measurement used by the chief operating decision maker with the results determined using the accounting practices:

 

    12/31/2019   12/31/2018   12/31/2017
             
Net income / (loss) for the year   2,244,511   5,200,583   111,229
Depreciation / amortization / depletion (note 22)   1,421,704   1,175,107   1,408,765
Income tax and social contribution (note 14)   (833,778)   250,334   409,109
Financial income / (expenses) (note 24)   2,131,184   1,495,643   2,463,627
EBITDA   4,963,621   8,121,667   4,392,730
Other operating (income) / expenses (note 23)   1,903,081   (2,705,337)   (177,342)
Equity in results of affiliated companies (note 8b)   (125,715)   (135,706)   (109,111)
Proportionate EBITDA of joint ventures   510,072   568,045   538,170
Adjusted EBITDA (*)   7,251,059   5,848,669   4,644,447

 

(*) The Company discloses its adjusted EBITDA net of its share of investments and other operating income (expenses) because it understands that these should not be included in the calculation of recurring operating cash generation.