[Foreign language]
Good morning and thank you for waiting. Welcome to CSN Mineração's conference call to present results for the first quarter of 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's presentation. Afterwards, we will start the Q&A session when further instructions will be given. Today's event can be accessed on CSN Mineração's investor relations website at ri.csnmineracao.com.br, where the presentation is also available. The slides presentation may be downloaded from this website and there will be a replay service for this call.
Before proceeding, we would like to clarify that some of the statements herein are mere expectations and trends that are based on current assumptions and opinions of the company's management, and future results, performance, and events may differ materially from those expressed herein, which do not constitute projections. In fact, actual results, performances, events may differ materially from those expressed or implied by forward-looking statements as a result of several factors such as the general economic conditions in Brazil and other countries, interest rate 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 on a global, regional, or national basis. Now, we would like to turn the floor over to Mr. Pedro Oliva, CFO and Investor Relations Officer, who will make the presentation of the financial highlights of CSN Mineração over the period. Please, Mr. Oliva, you may proceed.
[Foreign language]
Good morning. I'd like to thank you all for your presence. We're going to start talking about the highlights of the period this quarter. What drew most attention was the combination of record sales for the period, combined with a strong drop in the price of iron ore, resulting in just a bit of BRL 1.1 billion and a margin of 40.1%. Despite the drop in iron ore drop, we had sound cash generation reinforcing the company's resilience. This increase in the net cash position highlights the solid capital structure, with the leverage indicators remaining debt-on-EBITDA negative 0.24x in terms of ESG.
In the highlights, we have a drop of 13% in the CO2 emission volume per ton of ore produced compared to the previous year, renewal of maximum stability certificates for all the company's dams, maximum level of stability, and the publication of the 2023 integrated report available to all on the company's website. On our next slide, we see production data, including purchase. They reached 9,150 tons in the first quarter of 2024, with a drop of 16% considering previous quarter because of seasonality and a growth of 2% regarding the same period previous year. What I'd like to highlight here is that there has been a great growth of our own production. We had a significant drop in purchase, as we mentioned, prioritizing unit margin. With the increase of our own production, that reached 28% collective increase regarding the same period last year.
Sales were relatively in line with the volume and the stock of 4 million tons. On the next slide, we have sales volume 9.145 million tons, a drop of 18% expected because of seasonality. We had strong rainfall in the port, with a total of over 900 mm of rainfall. We rained more in the port this year than previous year. Even so, we had a growth of 6% in sales regarding the same period last year. As to net revenue, the unit net revenue, we had the sales record, and unit net revenue was 32% below four-quarter 2023, reaching $61.8/ton because of the downward trajectory of the Platts price and the negative effects of provisional prices. Regarding price realization, we had $61.8. We had a drop from the $91.4 of the previous quarter, explained by the drop in the price of iron ore.
If you look at the variation of average price, a Platts quarter-over-quarter is not so much, only $4.7. Over the quarter in December last year, we had a price of $136, and in March it was $109. It was a drop of $26.8 over the quarter. This impacts both the QP basket that in the previous quarter was positive $4.6, to now it was - $8.8, as the impact of the cargo that had exposure in the quotation periods of the future. On the next slide, we have actually Capex variation. The drop in 27% considering previous period is a result of smaller volume and lower spending in acquisitions, and we had a price drop verified over the period. In the first quarter, adjusted EBITDA had a drop of 58% regarding previous period, reaching BRL 1.1 billion, with an EBITDA margin of 40%.
This performance reflects the seasonality of the period and the lower prices realized over the quarter. On the next slide, we have a bit of variation compared to previous quarters. Here we have the impact of the volume. There was 11.1 million tons, a 9.1% drop in 2 million tons, and above all, impact in the drop of price over the period. We had strong adjustment in the iron ore price and an impact on provisional prices. On the next slide, we have the CAPEX variation of the company. We had CAPEX of BRL 253 million in the first quarter. Here we have a reduction of spending with maintenance, reflecting efforts made last year to seek maximization of the use of our assets, seeking excellent performance. And in the case of P15, some of the backlogs are still being designed for suppliers, engineering design, has no great disbursement this quarter.
Our expectation is that we should have a growth of almost exponential over the year, a second semester with CAPEX of expansion 5.2 times above CAPEX that we had forecast for the first quarter. As to net working capital, we concluded the quarter with -BRL 536 million, result of a strong reduction in accounts receivable, impacted here by a drop in volume and price over the period. This negative result in net working capital is despite the reduction in supply line, basically explained by the drop in volumes and also price for the purchasing of iron ore of our suppliers. On the next slide, we have the amortization schedule of the CSN Mineração debt, and we also present the cash position with BRL 10.4 billion availability, the company continuing and reinforcing its positioning of net cash.
As to free cash flow, on the next slide, we had a result in line with the previous quarter, positive BRL 1 billion, supported by the capital or net working capital that has been presented in previous slides here. This quarter, strong quarter. We had the increase in resilience of the company, delivering sound cash generation, even in a period with great pressure in terms of results because of the drop in iron ore prices. On the last slide, we have the highlights in ESG. Here, I would stress the statements of renewed stability of the dams. All the dams considered stable at the highest level of the category of ANM. The publication of integrated report available to all on our website presents the development of the ESG indicators and how we're moving forward to attain the goals.
Here, I stress the advance in this front of diversity, with an 88% growth in representation of women in the staff of the company compared to the base year, which was 2019. We've also grown 30% in employment training compared to the same period last year. In terms of health and safety, we had a drop of 33% in accident frequency rate, which represents the lowest level historically in the company, a drop of 50% reduction in the number of days of absenteeism of our own employees in environmental management, a drop in 13% in CO2 emissions per ton of iron ore compared to the first quarter 2023, and growth in volumes, and also the approval we had of Agência Nacional de Mineração of 98 m³ in water intake of Brumado River.
That would be enough to give you an idea of magnitude of this volume to develop a new P15. With regards to the great highlights, I would conclude the presentation so that we can open for Q&A, talking again about the growth of 28% of our own production compared to Q1 2023 and the dividends and JCP that were announced last night to be paid out by 28th of May, BRL 1.48 million. That accounts for 5.2% of the market cap of the company on yesterday's date. Before we move on to Q&A, I will turn over to our chair of the board, Mr. Benjamin Steinbruch.
[Foreign language]
Good morning, everyone. Thank you for your participation in this earnings results call of CSN Mineração. I would like to go over our mining business. As Pedro has already mentioned, we had record production offset by a great drop in price of $25 in the quarter, approximately. So this has impacted on a positive side, a better production of ours, but with a price drop. Ahead, the production will continue to be doing well. We have been showing constant improvements in production, reducing the amount purchased. Controlled cost. Our costs are under control on the palm of our hands, and we have an improvement in prices expected for the second quarter. So we believe that once these conditions are maintained, we will have a recovery because of the price improvement practiced in the second quarter. Our price level is between $115-$120. We are betting on this range.
I'd like to mention that P15, all the equipment has been hired despite the fact that Pedro mentioned, although there has not been disbursement because of the engineering that is going on, all the project has been contracted. So now we're going to catch up and start operations of this main project that we have, as you all are aware of. With regards to port, we had a good port performance. I believe we are presenting this constant improvement on the port. It's important to say that the mining business is under control, with eventual changes in price variation in the market, but within this range that we have forecast, we believe now there will be a significant results improvement. Once conditions are maintained, the price will be quite favorable. Basically, this is what I wanted to share with you. Let's open up for questions, and we're all available to you.
[Foreign language]
We will now start the Q&A session for investors and market analysts. If you have any question, please press the raise hand button or submit your question in writing through the Q&A button. Our first question is from Barbara Soares from Itaú BBA. Your microphone is open.
[Foreign language]
Hi everyone. Good morning. Can you hear me all right?
[Foreign language]
Yes, Barbara.
[Foreign language]
Thank you for taking my questions. I have two questions. One that is more macro and the other one micro. How do you see supply and demand of steel from now on? In April, we saw iron ore prices getting to $98, then quickly recovered. With improvement in macro news, we saw some improvements in margins of steel mills. We see better sequential. It was better before the holiday. How do you see things ahead? Question more micro regarding purchases for third parties. You said there was a growth of 28% in your own production. Can you give some color as to the proportion in terms of volume? How much do we have in terms of proportion of your own and purchase of third parties? And if we can think about this proportion for the forthcoming quarters. Thank you.
[Foreign language]
Hi Barbara. Thank you for the questions. Starting with our market vision on the side of supply, first quarter, we had a growth of Transocean of 7.5 million tons. This is explained by Brazil that grew 12 million tons and we had a better performance. It was the case of some of our peers here too. Australia at a high level, but compared to the same period last year, a drop of 1.2 million tons and a drop in Sweden 4 million and remains of the remaining part of the world's 3. Ukraine recovering in the growth 3.6 million tons. So we have an offer that has grown a bit. The production of Chinese concentrate is stronger. We had 16 million tons a day compared to 408. Same period last year. They're producing more, but they have weakened that is high. They can only sustain the production at this level of price that we see now. As to stocks of iron ore imports, they are relatively high, about 147 million tons compared to an average of 2021-2024, 133.
But the stocks in the mills are low, 93.8 million tons compared to an average of the same period of 2021-2024, 101 million, below average. So this is also explained for an effort of working capital management, considering recent history of negative margins. But now, as you've touched, fortunately, are back to positive level. It's the first month that was positive since July 2023 of the Chinese steel mills. Last data of $3.6 per ton. The use of blast furnaces occurred there at a recovery. We're talking about 86% of use of those plants and very close to where we were a year ago in 89%. The steel stock was dropped, but this is very much in line with the historical average. It's 5.1 million tons. And with the traders, there's a difference of -2 million tons above compared to the average.
Overall, the stocks in line with the average. The Chinese economy, in which there was a meeting of the Politburo that pointed to a speeding up of emission and spending resources with long-term bonds, that local government we see as an important element to support spending in infrastructure in the Chinese economy. On the side of consumption, they have announced and reinforced the measure of renewing consumer goods. They're talking about the white line, encouraging purchase of automobiles. This should be an irrelevant element to offset this sector in China that has a correction downwards compared to previous industries. They're exporting a lot of steel. China, in 2022, exported 67 million tons. Last year, it grew to 91. First quarter this year, they exported 25.9 million tons.
That's a growth that, if you analyze the 103 million tons, a growth of over 10% regarding last year that was quite strong. Within this context, we have this vision of prices at this level that is now $16.6. It should be $115 and $125, as the chairman of the board has put it. With regards to purchase volume, in the first quarter this year, we had a purchase take on the total of sales of 23%. You see relevant drop regarding Q4. The same percentage was 30%. For the next quarters, I believe it should fluctuate within this level that is lower. That would be this new reference, a bit below, around 25% rather than level 30 that we ran previous quarter. And the average last year was 34%. So actually, we are running at a level that is lower. This is only possible because of these excellent operations in our own assets that result in a production volume that is higher.
[Foreign language]
Very clear. Thank you.
[Foreign language]
Our next question is from Camilla Barter from Bradesco BBI.
[Foreign language]
Good morning, everyone. Thanks for taking my question. My first question is related to volume. This quarter, as you've mentioned, has been a strong quarter, growing on a strong basis. Perhaps it's a bit early to say, but should we expect production more geared to the guidance this year? If you can give more details on performance over the year, it will help. The second question would be regarding the hedge position. Do you still have an open position? Can you comment on it, please? Thank you.
[Foreign language]
Thank you for the question, Camilla. Regarding volumes, I think it's early to discuss the guidance. Guidance is maintained. I think the stretch for the top of guidance is very much related to the volume of purchase that we will decide to carry out over this year. We are now working on a margin target that is higher so that the result of purchases over the year should be better than previous year, but with the volume, even if the volume is lower, I think this is the variable. From our own production standpoint, we are very confident we will have a growth that is relevant regarding previous year. We're projecting a growth of over 2 million tons. And here, the great question will be our tactical view on volume of purchases from third parties trying to maximize absolute results, not necessarily volume. Today, we're very comfortable in delivering the guidance of the company that was presented to the market last year.
Regarding hedge, we do have an open hedge volume. This volume over the second quarter has a total of 4.8 million tons at an average price of $129.1. The result of the hedge, I checked this two days ago, was positive BRL 384 million reais. And this is added to the positive result that we had in March, which is a cash settlement that only happened early April that was positive BRL 256 million reais. So we are actually with a hedge position that is very relevant that should help to the company's results next quarter.
[Foreign language] .
Perfect. Thank you very much.
[Foreign language]
Our next question is from Carlos De Alba from Morgan Stanley. The microphone is open.
Great. Good morning, everyone. Thank you very much. So just a few questions. One is on CapEx. Pedro, just wanted to clarify if you can maybe give us a little bit more precise information on the level of CapEx. You said that it's going to increase exponentially going forward, but if you can give us maybe a range of how you see the second quarter and maybe the full year. And then on cash costs, good performance in the quarter. Could you maybe tell us how do you see that progressing in the coming months, in the coming quarters? And finally, a clarification on the interest on equity that was declared or announced in December, late December. But am I correct that that interest on equity announced in December is only being paid now in the second quarter of 2024? Thank you very much.
[Foreign language]
Carlos, thank you for your questions. Starting with CapEx, we believe that this year, around BRL 2 billion, half of it sustaining and half of expansion, possibly a bit above that. Actually, this is a growth that is relevant. The second semester, we should have 5x more CapEx of the first semesters. It has to do with the significant advance of the development of P15. As the chairman of the board mentioned, we have moved forward quite well with the contracts, and we have a cash impact as mobilizations, deliveries of equipment take place, and the work advances. As to cash cost, I think this relevant drop has been a result of the smaller volume of purchase, Carlos, that we should keep at the lower level. From the seasonal standpoint, second quarter, our own costs should also drop.
Our C1 resulted in a greater reduction of fixed costs that is expected with the entry of the dry period. We should sustain this level below of cash cost, obviously subject to Platts with impact in purchases price grows a lot. We will have an impact on our costs, and our expectation is downwards in the second quarter. As to JCP, you're correct. It's been declared last year and should be paid along with the dividends announced yesterday by the 28th of May this year.
Thank you very much.
[Foreign language] .
Our next question is from Guilherme Rosito, from Bank of America. Your microphone is open.
[Foreign language]
Good morning. Can you hear me?
[Foreign language] .
We can hear you well. I have a brief question. I just wanted to ask you to comment on the quality of this quarter as you increase your own production in the mix. How do you see this evolving over the year? Do you still see that this is a market that favors higher silica, better quality? How do you see the market?
[Foreign language]
Guilherme, thank you for the question. As to quality, this was relatively flat, 6.3% of iron ore, alumina a bit lower, 5.0% compared to 1.68% of the previous quarter. Overall, we should be very close to this figure. We see a window of low-grade still existing. Actually, this applies to all. So today, we have some peers that are offering more low-grade to the market. On the negative side in this viewpoint, we have the improvement in the margins of the Chinese steel mills since we have the use of blast furnaces that is relatively low. This rationale of prioritizing unit cost is true in the current context of the Chinese economy. So we believe this window continues for some more time, and we will try to tap into this window whilst it's open. We should [Foreign language] Have a more aggressive attitude favoring things over the second and third quarters.
[Foreign language]
Thank you very much. Just a follow-up. How much this low-grade product favoring increases you acquiring products from third parties or having your own production? Just looking ahead.
[Foreign language]
Guilherme, this is a good question because in the spectrum of suppliers of iron ore in Minas Gerais, you have from producers of low-grade with very low content to players that have volumes of 65% iron ore content. I'd say we have a view of seeking improvement of unit margin over this year. This quality mix will depend a bit on the negotiations with each one of those suppliers. It is hard for me to position ourselves to you how we'll end up in terms of quality over this year because of our vision that is more tactical. How we select our iron ore suppliers over the year will seek over this time to prioritize quality. I believe with the development of our own project announced, we will have a material change of quality to stop having a discounted day of about $10, a bit above that in the past quarter to $12.9 to have a premium of around $15 over the next five years. We will go over a transformational change because of the development of our own project. Above all, P15, this year, the dynamic quality and purchase will depend very much on this tactical negotiation on a supplier-by-supplier basis.
[Foreign language]
Thank you very much. Very clear.
[Foreign language]
We would like to remind you that if you wish to ask a question, push the button, raise hand, or submit it in writing through the Q&A button. Please wait while we collect questions.
[Foreign language]
Since there are no more questions, I would like to turn over to Mr. Pedro Oliva, CFO and Investor Relations Officer, for his final remarks.
[Foreign language]
I would like to once again thank you all for your attendance to our conference call. I'd like to thank analysts for the question. I'd like to conclude by emphasizing this improvement in operations of our assets with growth of our own production of 28% compared to the same period last year and the maintenance of our distribution policy of dividends with this announcement of BRL 1.4 billion to be paid by the end of May, by the 28th of May, accounting for 5.2% market cap. This shows that we'll move on enabling this strong dividend distribution just as we move forward with growth projects highlighting P15. I thank you once again and wish you all a good day.
[Foreign language]
The CSN Mineração's earnings conference call is concluded. We thank you for your participation and wish you all a very good day.