Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to CSN Mineração's conference call to present results, third quarter 2024. Today, we have with us the company's executive officers. We would like to inform you that this event is being recorded, and all participants will be in listen-only mode during the company presentation. Ensuing this, we will begin the question and answer section when further instructions will be given. Today's event can be accessed at the CSN Investor Relations website at ri.cmin.com.br, where the presentation is also available. The replay will be available soon after the call is over.
Before proceeding, please bear in mind that some of the statements herein are mere expectations or trends and are based on the current assumptions and opinions of the company management, and that future results, performance, and events may differ materially from those expressed herein, which do not constitute projections. In fact, actual results, performance, or events may differ materially from those expressed or implied by forward-looking statements as a result of several factors, such as general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, future rescheduling and prepayment of debt, 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. We would like to turn the conference over to Mr. Oliva, CFO and Investor Relations Executive Officer. He will present the company's operating and financial highlights for the period.
You may proceed, Mr. Oliva.
A good day to all of you. I would like to thank you for your attendance at the earnings call for CSN Mineração. Let's begin with the highlights. We had the highest quarterly sales volume in the company's history. We had the highest operational efficiency, allowing us a cost reduction of $19.2 per ton, a reduction of $2 vis-à-vis the previous quarter. There was the approval for distribution of BRL 3 billion in dividends and interest on capital payment. Now, this approval was supported by a net cash position of BRL 5.3 billion at the end of the quarter. In the next slide, we present the production and inventory data. We reached 11.437 tons, a growth of 9.8% vis-à-vis the previous quarter. This shows a seasonality of a drier period and the efficiency of the operation. Our own production is the highest for the company.
In the annual comparison, the drop of volume is due to a lower volume of iron ore purchases from third parties. We have communicated this strategy since the investor day last year of prioritizing margin. We had a reduction of inventory from 3.5 million to 3.1 million, directly linked to the sales in the period. In the next slide, we see sales. They reach 11.8 million tons, a growth of 10% vis-à-vis the previous quarter. This represents a new record for CMIN. The lower revenues, BRL 2.9 billion, are the result of a drop of price in iron ore impacting net revenue in the third quarter. On the following slide, we see the detail of our price realization. I highlight revenues of $45.90, unitary price, a drop of $2.
Last time, it was $56.2. Those $2.7 can be explained by a drop of flat to $99.7 and an adjustment of $12.1, along with the impact of the drop of QPs in previous periods with a negative amount of $2. We ended the quarter with 5 million tons exposed for future periods at a flat of $93.33 per ton, which was the average price for September. In the following slide, we see our COGS that grew 7.4% to BRL 1.77 billion. Now, this growth is attributable to a rise in the sales volume and the purchases of iron ore quarter -on -quarter.
The decline in EBITDA of BRL 1.1 billion can be attributed exclusively to the reduction in realized prices since the quarter was marked by extraordinary results with records in our own production and the cost of $19.2 per ton, the lowest cost since December of 2021, despite the inflation, and also exported for a depreciated price. Here we have the breakdown of EBITDA on the next slide with a very clear impact. We began with an EBITDA of BRL 1.6 billion. We're down to BRL 1.1 billion this quarter.
There was the impact of the iron ore price of BRL 742 million during the quarter, along with the price provisions of BRL 130 million from the previous quarter. This negative impact on price was partially offset with an increase of volume of BRL 71 million and a positive impact on EBITDA, thanks to the cost reduction with an improvement in cost.
We had a positive impact of BRL 113 million during the quarter. In the next slide, we show you our information on investments. It is important to underscore the growth as expected, 70% of the CapEx, with a highlight, of course, for the P15 project. In October, we had the beginning of the heavier works in infrastructure for the construction of the plant, and the pace of advance of the project will change levels, of course, and we will have a significant level of activity going forward at the P15 worksite. The total volume of CapEx was BRL 475 million compared to BRL 407 million the previous quarter.
Regarding our net working capital, the net working capital was negative by 566 to 892 negative due to an increase in supplier lines, an increase in the volume of purchases, and a reduction in accounts receivable impacted by the drop of prices in the quarter. Now, our indebtedness profile for the company. We have an amortization schedule that is quite lengthened with a sound position of liquidity of BRL 14.5 billion, representing an advance vis-à-vis the previous period. We have two new prepayments signed during the third quarter, reinforcing the net revenue by BRL 5.3 billion, and we will end the quarter with a negative leverage of 0.8 x. That situation is what has allowed the board to comfortably approve the payout of BRL 3 billion of shareholders' equity and payout this year. Regarding the free cash flow, we began with EBITDA of BRL 1 billion.
We ended up BRL -276 million, impacted by the growth in CapEx, the growth of the exchange rate in the company cash. We have cash in strong currency and the result of June, the strong result of June, with a payment in the following quarter. So this is what has impacted the free cash flow in the third quarter. In the ESG front, we can highlight, of course, several of the indicators. The company has made significant strides, but I would like to underscore the dams. Of course, this is fundamental in our sector. We had declarations of stability renewed in September 2024 for all dams that are deemed to be stable, and we have an indicator which is a reduction of 8.5% in the CO2 emissions from January to September, compared with a base year 2020, 14% drop vis-à-vis 2023.
This, of course, is due to the efficiency of our operations and what we do in the company with electrical equipment and tests in the operation. Before we go on to the Q&A session, I would like to inform you on the CSN CMIN Day. It's an important day to share our strategic plan, our market vision. This will be held on December 11th at the headquarters of the group on Faria Lima Avenue, and will also be broadcast online to all of our investors. I have here Carlos Mello, the Superintendent Director of CMIN, who will be at your disposal for question and answer. Before we proceed to the question and answer session, I will give the floor to Mr. Benjamin Steinbruch, the Chairman of the Board.
Thank you, Pedro, and a good day to all of you.
It is a pleasure to have you present with us once again for the earnings call of CMIN. I would like to emphasize some points that were mentioned by Pedro Oliva and that show the concern and the determination that we have in terms of what we can do regarding the increase of our own production. It was a record production, which, of course, is very significant because that issue of purchase and sale of iron ore is a one-time event in the market. It may be favorable or not, but our own production, which is our greatest challenge and which is something that we seek is important. And, of course, the part of sales where we had record sales during this quarter with a cost reduction as well of $2 in C1.
And in truth, this is what we can do, what is in our hands to produce more at a lower cost. We were very successful with that strategy and the sales, of course, that were also a record, allowing us to have a robust operational performance as part of what we had set forth to do. We also had a decisive investment level, our commitment with the P15, and the schedule that we have for the operation of this plant that will represent our future. So we're advancing at a good pace and going forward. The situation is a given, and we will deal with it in the best way possible and in the shortest term possible. We had, during this period, the closing with our Japanese partners of a part of a stake at CMIN. They showed their desire to invest additionally. We thought this was the right time.
We carried out the operation, and it has been positive for both parties, and we are quite satisfied with the conclusion of that operation. Alongside that, we also had the approval of the payout of dividends of shareholders' equity, which will allow CMIN to continue being a very good dividend payer, maintaining the leverage within what we had set forth to do, a low leverage, and this will enable us to continue on with the investments that are necessary for the expansion of Casa de Pedra. I believe, therefore, this was a good quarter, an aggressive quarter in terms of production, aggressive as well in terms of cost. We are on the right path. It's more of the same, of course. Now, we do have the price issue with significant variations.
It is very important for us, and it's not in our hands, so we have to do our part, which is to produce at the lowest cost possible and, well, to work with price fluctuations. I believe the price has hit a minimum level of negotiation of $100. It decreased a bit. It increased once again, and the lower cost will stimulate the production of other plants that are not very competitive. We have to be ready for that, and we are. Now, if the market improves and if the measures adopted by China for their internal improvement in the market and the use of steel will allow the situation to get better, that a range of $100-$120 is where the iron ore should stand. So what we had to do, we did. We will continue to do this in the fourth quarter.
We are on the right path. We're with the right production. Our product is adequate, and this is what we wanted to add to the presentation made by Pedro Oliva. We're deeply satisfied with the operational results. Pedro, I will turn the floor over to you again.
Thank you, Mr. Chairman, and we can now go on to the questions of investors and analysts.
Thank you. We will now begin the question and answer session for investors and analysts. Should you have a question, please click on the raise hand icon or send your question through the Q&A icon. The first question is from Edgar d de Souza from Itaú BBA. Your microphone has been unmuted. You may proceed.
Good morning, everybody. Thank you for taking our questions. Congratulations for your operational results.
If we discard the price impact, it has been a sound quarter with a significant reduction in cost and increase in your own production as well as in sales. My first question to Benjamin in the sale of that minority stake to the Japanese, this shows that trajectory to deleverage the holding CSN, and I would like to understand two points in this event. First, if that stake that remains at CSN of 69% at CMIN is a stake that you deem to be adequate, or if you still foresee an additional sale of minority stake here, and regarding that partnership with the Japanese, if it is your understanding that there will be another benefit, uptake, prepayment, which would be the benefits that this partnership will grant you. My second question, we looked at the prepayment agreements that were signed, very close to BRL 3.5 billion.
Pedro, if you could give us greater details on these agreements, the volumes, the terms, and if we could work with a check here, which are the volumes that have been open for 2025 and the average price as well. Thank you very much.
Edgar, what I would like to say is that the sale of that stake had been debated for some time because of the interest that the partners, the Japanese, had regarding the increase of their stake. We know them well in terms of accounting, their finances, the partnership. We had already negotiated this, and to strengthen this relationship, we decided to take this opportunity as we considered that the price was a fair price and that, in truth, we would have that availability of remaining with at least 70% as our long-term stake within CMIN.
The sale of the stake per se is a result of what we are undergoing with our Japanese partners. We have had a long-term partnership, and this partnership is for our business. It involves the shipping part, trading, the financial part, and we believe there is significant synergy that we can explore through CSN for other businesses, and we will consolidate that entrepreneurial long-term strategy. You are aware of our desire to internationalize the business and everything we can do with strong and strategic partners from abroad. While we're interested in moving ahead with this, the movement was good. It is in accordance to our interests, to the interests of the Japanese partner. We're thinking in the long term for this partnership, and we will hold on to 70%. We have always indicated to the market that we were looking for opportunities to deleverage the company, the CSN company.
This desire that we had manifested in the market was materialized, and this complies with the interests of all CSN, CMIN, the Japanese company. We're highly satisfied with this opportunity and with this consolidation of our relationship with the Japanese.
Edgar, referring to the prepayment agreement in the third quarter, we carried out an operation of $450 million with Cargill, another of $300 million. Important operations for CMIN at present, and this means that for 2025, the volume of prepayment that will be amortized is 10.2 million tons in 2026, 10.9 million tons in 2029, and in 2028, this will drop to only 3 million tons. Simply to confirm, these volumes are for the new contracts. This is the total figure that I have mentioned. Thank you.
Thank you very much, Benjamin and Pedro.
Thank you, Edgar, for the question.
The next question is from Guilherme Nippes from XP. Your microphone has been unmuted.
Good morning, Benjamin , Pedro , and team. Thank you for taking our questions. We have two questions at our end. If you could remark on the beginning of the works of P15 that began in October, and if you could share details of what you expect, speak about the timeline of the works, and perhaps payback. My second question refers to the purchase from third parties. If you could remark on volumes from purchase of third parties this quarter. Thank you.
Thank you for the question, Guilherme. I will give the floor to Carlos about the works of P15 and then answer the question.
This is Carlos, Guilherme. Regarding the P15, this is good news. We began the land leveling work, and of course, we have a picture in the presentation, as you saw. It's relevant earth movement.
We're working with earth leveling to create the plateau for the new plant, and then we will ramp up the number of equipment and people at the site. This is what is happening. Most of the equipment, material parts, were purchased beforehand by CMIN, so we are ready to continue on with the work. In the coming works, you will see earth movement for the land leveling, and in the first or second quarter, we will close the civil work and then the assembly part. Significant earth movement in coming months.
Regarding the purchases, Guilherme, in the third quarter, we had 2.47 million tons of purchases, representing 21% of total sales during the period. There was a slight increase in share vis-à-vis the 18% for the second quarter, who sustained the record sales that we had. Thank you.
Thank you very much.
The next question is from Camilla Barter from Bradesco BBI. Your microphone has been unmuted.
Good morning, everybody. Simply a follow-up regarding the purchase from third parties. You mentioned that for coming quarters, the outlook is to continue to reduce this, which will be the mix from purchases from third parties going forward regarding the cash flow. This quarter was negative, impacted by a lower generation of EBITDA because of the low iron ore price. What can we expect in terms of cash flow? If you could speak about working capital and paybacks for the coming three years, that would be appreciated.
Thank you for the questions, Camilla. Well, the purchases from third parties, my question refers to year-on-year purchases. In 2023, we had a strong purchase volume, 14 million tons, and this year we stand below 10 million. Therefore, the priority is our own production.
On CSN Day last year, the expectation was to grow our own production by 2.5 million tons a year to date. From January to September, we had a growth of 3.8 million tons in terms of our own production, more than 50% of growth based on what we had forecast last year. This is what has allowed us to reduce the volume of purchases. In the fourth quarter, it was a seasonal issue, the increase of rainfall, and perhaps we will buy more from third parties once again because of the rainfall. Now, regarding cash flow, and I'll take advantage of this to highlight our accounting methodology of marking the volumes set aside for future sale.
We have the quote from September, from the last quarter, and for a specific reason in this quarter, the price was materially lower, $93.93 average month, compared with a close of the month that was $108.3. There's a difference of $14 per ton for 5.9 million tons. Had we used the close of the month as the sales were flat, the impact on our EBITDA would have been positive by BRL 464 million. EBITDA would have been flat quarter -on -quarter. Regarding the other variables, we expect a stronger cash generation for the coming quarter. We're not expecting to have that impact of middle of the month and a different price at the closing, not only for the average of the month, but the price on September 30th. CapEx, the expectation is for growth because of the new stage of works at P15. We will work with significantly higher disbursement.
Regarding the working capital, once again, this is very sensitive to the closing price of the quarter. We have to see what will happen with December to have a clear vision, but we do expect a positive cash generation and not have the one-off effects we had in the third quarter.
Thank you. That was very clear.
Our next question comes from Ricardo Monegaglia from Safra. Your microphone has been unmuted.
Good morning, everybody. Thank you for taking my questions. We have three quick questions here. The first, I would like to understand how we can think about the buyback going forward. They were higher. They have gone to a different level. Which will be your buyback level going forward? My second question is about prepayments.
How does the process to define how much exposure you want to have in future sales to understand if these new prepayment contracts will be announced in the coming quarters, if there's a demand from the trading companies? And the third question, very simple one. The cost of quality is somewhat steep this quarter. What can we expect for the next 12 months in terms of the iron ore quality for CMIN? And if you could share this information, please.
Thank you for the questions, Ricardo, regarding the buyback. What we have executed up to now is 50% of the volume approved by the board. There is room to work with this further. We don't have a definition for this, but that is our mandate, that possibility given by the board regarding the prepayment from the commercial viewpoint.
This is an attractive transaction if the traders can guarantee the supply of volumes for their operations. At our end, in this negotiation process, we can have quality premiums regarding the formula index and discounts in freight. Commercially, this is attractive, and it's possible and probable that we will do something else until the end of the year because of the benefits that this brings to the company, probably with lower volumes than those of the previous quarter. Regarding quality discounts, we had already spoken about this outlook for the third quarter, opening the window for negative margins of Chinese products. Today, they stand at $18 for the fourth quarter, Ricardo. We expect a somewhat lower discount regarding the iron ore content. In the third quarter, it was 59.1% compared with 51.4% in the previous quarter.
And we expect to have a better quality in the fourth quarter compared to the second and third quarter because of our operational planning. So the operational discount will allow us to have the second best quarter in the year. Regarding 2025, I will share that information during CSN CMIN Day. Thank you.
Thank you, Pedro.
Our next question comes from Gabriel Simões from Goldman Sachs. Your microphone has been unmuted.
Good morning, everybody. Thank you for the presentation and for taking our questions. We have two follow-up questions. That question of Ricardo on prepayment, you made it clear that this is a strategy going forward and that it makes sense for you. Which will be the limit for this if you foresee a limit vis-à-vis the production that you expect for these prepayments for future production? You mentioned that the P15 works are speeding up their pace.
Of course, there will be an acceleration in the use of CapEx. CapEx in the third quarter is somewhat below what we expected compared to the first half of the year. Which is the risk of timing that you see for new projects? Given this lower CapEx we have seen in the last quarter, will this speed up in the works be sufficient to deliver the P15 when you had planned for it or not? Thank you.
Gabriel, thank you for the questions. Regarding the prepayment, it's very difficult to speak about a limit. We don't have a firm limit. We understand that we would be close to a situation that is attractive commercially, but of course, this is dynamic and it will depend on the terms of market negotiations.
What I can say today is that we have planned to work with another volume until the end of the year without an outlook after that. Of course, we can update you if this strategy comes to be altered regarding the P15 and CapEx in general. In the fourth quarter, we will have a representative acceleration with the expansion CapEx increasing twofold compared to the third quarter, and the timing of the projects, Gabriel, the outlook at present is that the startup of P15 will be in 2027. There will be an update of schedule that is being refined. We can present this at CSN CMIN month. It's a matter of some months, and we will take that moment to update the timing for other minor projects. The great company focus at present is the P15.
It will be transformative in terms of volume as well as in terms of production. P15 will offer a premium per ton vis-à-vis the [flat 62%]. And given the mix of 50% of direct reduction and 50% of blast furnace, which would be the best estimate of P15 compared with [for 62%] , they said it would be $28 per ton, a significant premium that will contribute towards improving the unit margin for the company once the plant comes into operation.
Thank you.
Thank you very much, Pedro.
The next question is from Henrique Braga from Morgan Stanley. Your microphone has been unmuted.
Good morning, everybody. Thank you for taking my question. Simply one question regarding the second phase, which is lower this quarter in terms of how do you foresee the C1 in the coming quarter?
Thank you for the question.
The coming quarter, we will have an inverse effect of the third quarter, a reduction of volume because of our outlook for rainfall. This weekend, we had a rainfall of more than 90 mm. We're now entering the rainfall period. This will impact volume. There is a reduction in fixed costs, and of course, C1 will increase. Now, having said this, the trend, well, we do have a guidance for C1 of 21-23, and with the performance up to date for the fourth quarter, is to be aligned with the lower part of the guidance until the end of the year. A positive result, doubtlessly. Regarding 2025, we have some challenges, as usual. This year, we also did, although the challenges were lesser than what we had last year. But I prefer to give you details regarding 2025 at the CSN CMIN Day.
The next question comes from Alejandre Andrade from JP Morgan. Your microphone has been unmuted.
Simply a follow-up question. You spoke about the C1 guidance. I would like to understand how you track this, the purchase from third parties, your own production, and the guidance on volume. Should we expect an acceleration, and how expressive will this be? Will we reach that initial guidance, or should we understand that this will not happen because of your purchases from third parties? Thank you.
Tatiana, thank you for the question. Now, for the time being, the guidance is maintained. Production, well, we have a challenge on the fourth quarter. Year to date, we had 31 million tons in the fourth quarter. We had 10.9 million in the fourth quarter of 2023. We understand it is possible. It is challenging. More than challenging, there is a strategic issue.
We had an inventory reduction, a better working capital. So there is a trade-off between production purchases and destocking part of the volume we have. If you look at our sales volume up to present, it was 31.8 million tons to reach 42 million in sales. We need a comfortable volume, and we're quite calm that we will deliver beyond that until the end of the year.
Very clear. Thank you very much.
The next question is in writing from Mr. Reinaldo Francisco, Investor.
Congratulations for your results. Have you been able to identify the growth of other Asian countries like India after the drop of reservoirs and rivers? Is CSN thinking of purchasing a wind plant?
Thank you for the question regarding orders from other countries. Yes, we have received a significant number, or we have seen interest from other countries.
With the outlook of our production in pellet feed, we have been approached by players from around the world. Many of these steel plants understand that trend to seek decarbonization, and steel mills play an important role globally. So the route will be a direct reduction to produce green steel, which has become consolidated. So we see interest from Europe, India, and other players in Southeast Asia, players that are developing new plants that have sought us out to work for the long term. This is an outlook that is given, and we have been quite cautious in terms of our engagement because it's associated to the advance of the project. But there is strong interest regarding wind energy. This is an interesting source, quite competitive in Brazil. CMIN presently is self-sufficient because of the assets that it has, the hydroelectric plant, the CEEE.
So we work with self-sufficiency that makes us quite competitive. We don't have the outlook of developing greenfield energy projects at CMIN. I know that CSN has an energy vertical and plants that will be presented by CSN itself. But CMIN is well positioned. It is self-sufficient, uses competitive and renewable energy.
As we have no further questions, I will return the floor to Mr. Pedro Oliva, the CFO and the Executive IRO.
I would like to conclude by thanking all of you once again at our earnings call. And we celebrate the record of volume, our own production during the quarter, and the cost control with C1 of $19.2 per ton, the lowest C1 since 2021. This is the merit of the entire team at the company. I would like to thank them and celebrate these indicators. Have a good day.
The earnings call for CMIN ends here.
Have a very good day.