David Salama - IR Daniel dos Santos - Mining Director.

Marcos Assumpcao - Itau Alan Glezer - Bradesco Ivano Westin - Credit Suisse.

Good morning, ladies and gentlemen. Welcome to CSN Conference Call regarding the First Quarter 2015 Results. 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 a listen-only mode during the company's presentation.

After the company's remarks are over, there will be a Q&A session. [Operator Instructions] Today's event is always being simultaneous broadcast via interest and it can be accessed at www.csn.com.pr/ir. There u will also find the presentation. You can flip through the slides. There will be a replay service for this call on the website.

Before proceeding, let me mention that forward-looking statements that are being made here are under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of CSN management and on information currently available to the company.

They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of CSN and could cause results to differ materially from those expressed in such forward-looking statements. Now let me turn the conference over to Mr.

David Salama, CSN's Executive Investor Relations Officer, who will present the company's operating and financial highlights for the period. Please Mr. Salama, you may begin your conference..

Good morning everybody, thank you for attending CSN's teleconference. Together with me I have other executive officers. Without further I do like to go straight to slide number 3 where I would like to make some remarks. Actually prior to talking about the figures regarding the first quarter 2015.

I would like to future resilience vis-à-vis the challenging economic scenario we have today. Our business model highly integrated once again makes the difference. Our business strategy with two industry is focused on increasing the customer base, speaking to customers domestic sales with sales abroad, mainly by CSN LLC in Indiana in the U.S.

There we play as a local player thus - our results. Due to segment on the other hand, we seek a substantial reduction in production cost including extraction processes or freight and other port expenses. And thus [ph] among most consecutive mining companies in the world.

Additionally we try to adapt our product mix to the new market reality through more aggregate value products. I would also like to point out that several measures are underway to gain productivity and operational excellence. Let's now go to the next slide, where we are going to see the results for the first quarter of 2015.

In the first quarter, net revenue will be in reais represent 5% more than that of the fourth quarter of 2014, due to revenues in the steel industry, the growth profit of $985 million in the first quarter was 7% above the fourth quarter of 2014.

Adjusted EBITDA in the first quarter reached $911 million, 10% about the previous quarter, basically due to steel and mining. The EBITDA margin reached 22% and expresses margin if you consider the current scenario. On slide number 5, you see investments during the quarter.

Tax will as compared to the previous quarter and we focused for on the most efficient businesses and more profitable in the first quarter spending 407 million euro and that 123 million in line, especially dedicated to the extension of Casa de Pedra, 121 million in steel industry, especially in the banking of the coke battery and operating excellence 90 million in capacity for cement, 73 million for logistic.

Slide number 6 shows results for segment. Let's start by the upper - where you have the net revenue totaling 4 billion, in the 24% comes from steel, 16% from mining, 7% from logistics, 2% cement and 1% energy.

In the next part of the slide we see that the adjusted EBITDA in the first quarter reached 911 million, 69% of which is from steel, 6% through mining, 11% logistics, 3% from cement and 1% energy. During the first quarter the EBITDA reached 683 million with a margin of 22%.

Margin was 156 million, 4%, and logistics 106 million, 36% margin, cement 24 million, 28% margin and energy 15 million, a 24% margin. On slide number 7 we have the results for steel, in the first quarter - the total volume reached 1.4 million tonne, a very important increase in the last quarter.

With an increase in sales and this also has to do with our strategy of focusing in the domestic market, it's a strategy which at the end of last year. We're trying to increase our sales abroad. 63% of sales were in the domestic market, 34% in subsidiaries abroad, and 2% exported directly.

On the - see that the net revenue increased 4% vis-à-vis the fourth quarter of 2014, this is strictly due to increase in the volume sold. The important point to highlight that our net revenue was 1% above that of the previous quarter 2,162 reais per tonne.

I would also like to highlight the work we've been conducting in terms of production cost since - as you can see by the development, the production from the first quarter of 2014 until now we reached a 17% reduction in our production which is very important, vis-à-vis the economic scenario that we have - EBITDA reached $163 million, 22% margin.

In the next slide we have the same analysis for mining. Since I have to said, we need to have taken a lot of measures to improve the results in mining.

In view of the current class levels, our Executive Board has created a group to work - a multi-disciplinary group aiming to reduce production cost including extraction, freight and board expenses, and very important results coming from these efforts.

On the right hand side you see that starting from base event at the end of 2014 we manage to reduce production cost by 21%, positioning the index has dropped 62% during the period while our average price has remained at 16% below in the same period. Our freight strategy is to account for that. Our average price was $41 per tonne.

Our sales in total 7.5 million tonnes. Our part of the strategy thankfully we started a term in the fourth quarter and we reached 7.4 in the first quarter of 2015. This is also due to the quality of the product, as you can see our iron grade has increased to 64 in the fourth quarter.

So this is a variation between the last quarter to our current quarter and the syndicate concerns also which is something that penalizes our sales price. It has gone from 5.9% to 5.2% binding a detail reached 156 million in the first quarter of 2015 maintaining EBITDA margin at 24%.

That was now for the next slide where we are going to analyses the results. On the upper left, we see the sales volumes of 525,000 tonnes in the first quarter of 2015, 4% below what we saw in the fourth quarter of 2014. This is due to sales seasonality, something to be expected for this time of the year.

Net revenue 101 million with 7% below the fourth quarter of 2014. In spite of the slowdown into the construction market, we generated EBITDA of 28 million in the first quarter of 2015 with an EBITDA margin of 28%. Let's now move onto slide number 10 where you see a chart with the EBITDA evolution.

The event show an EBITDA that is consistent, especially we take into consideration current economic scenario, our EBITDA of R$911 million for the first quarter - total reduction of 10% vis-à-vis the fourth quarter of 2014.

The factors which contributed to reducing EBITDA were increases in steel processing cost which is basically impacted by exchange rates because the price of raw material subject to exchange rate duration, an increase of use of coke by third parties due to the renovations that you are currently engaged, additionally we had dropped in volumes of iron ore, considering the commercial strategy of focusing on product sold.

On the other hand we had an offset - more prices for few products and reduction of cost deployed in earnings. EBITDA margin of 22% in the first quarter was three percentage points below the margin for the fourth quarter. Slide number 11, you see the development of our net debt.

Our net debt which was R$20 billion at end of the first quarter represented a R$1.1 billion increase vis-à-vis the R$18.5 billion at the fourth quarter of 2014. The net debt ratio calculated according to the last 12 months reached 4.85X vis-à-vis 4X at the end of the fourth quarter of 2014.

We had an impact in the net debt - the distribution of dividend, the R$400 million investment with fixed assets, to the order of R$700 million with debt charges, and also the exchange rates fluctuations which represented R$400 million.

Our R$0.9 billion EBITDA in the first quarter of 2015 partially offset debt from the total debt, 53% was the reais denominated for the 7% was in foreign currency, 94% of this debt in the long term and only 6% in short term. Basically at closure to my presentation and now let's open for questions..

[Operator Instructions] Our first question comes from Karan [ph] from Merrill Lynch..

Good morning. Thank you very much for the presentation.

My first question, what is the level of premium at the domestic market that has the demand environment? Second question has to do with mining, could you cater the approximate breakeven considering the cost structure and what kind of evolution do you expect for this year?.

Thank you very much for your questions. I'll go towards the first one, and Daniel dos Santos, our Mining Director is going to answer the second one. Good morning.

We are heartfelt the MDA domestic market considering $380 that will be, this premium would be between 8% to 11% in case of [ph], imagine something to start at $450, $460, it would be between 5% and 8%. Then in terms of galvanized, say between $560 to $570, the premium would be between 3% and 5%. Here I'm calculating exchange rate at 3.05.

It's important to say that the premium will have to be for our products, our coated products have never been that low.

So in lieu of our product mix we can have a mix with more added value, more coated products, we can make the most of this situation because in spite of the slow market, we can take up some stage or gain some market share in terms of export.

The import of galvanized product in the last quarter of 2014 was the only product that reached this level to 130,000 tonnes. In the first quarter of 2015 we at low see quarter at 150,000. So part of this product will be captured by sales in the domestic market which helps us in loss in terms of premium.

Work flow premium is still relatively high as far they see. And if this inhibits import due to exchange rate volatility.

And the main perspective, at the domestic market, in spite of the weak demand in all areas in the first quarter we try to maintain our market share in all our segment keeping our coated products at 48% or less, we have a very important impact from [ph] a drop of 12% that will recover now during the first half of the year but we are going to see some problems in the other market.

We have just commented that the strategy that we chose last August - in the last call, remember I said that we were going to operate in the American market as a local player, well this strategy is working out because in addition to increase our revenue by 12%, our margin is $220 per tonne.

So what I sensed to be was, it do not leave in the markets, would so depend more valued products, and this just seems in the results posted for the first quarter. So this is a scenario we see. So we are going to be more concentrated in the domestic market but we are going to export cheaply to the United States as a player in their local market.

For Latin America we have very bold plan to export thin plate, this is in the area where we have a very good market share and we have room for growth. So these are basically the two areas where we are focusing on exports. So now since August last year we've been trying to reduce cost in mining more than we have done before due to drop in prices.

And this has covered all our front from the iron ore extraction to processing, to railing, and forth, American freight, and also product quality at the end which starts to have an impact on pricing. This led to an improvement in our mix.

We have a breakeven of $43 per tonne in China, and our objective is by the end of the second quarter to reach $41 per tonne.

In case of mining, our focus is cost reduction, product improvement, and productivity increase today when we compare the cost curve, for the industry, we see ourselves among the five most noted [ph] companies in the world in this area. Thank you very much..

Our next question comes from Alan Glezer from Bradesco..

Good morning, thank you very much for the opportunity. My first question regards to mining. We see that last drop $12 per tonne is by - see the prices for [ph] I get a drop of $4 per tonne. I think part of this has to do with the rebalancing of the strategic - and the need of really greater share for Casa [ph].

But I wonder if you could give me some color on what is behind this better performance regarding this. My second question has to do with leveraging.

The ratio, net debt, EBITDA is close to 5X, was there any action by the company to increase the brokerage - was there anything planned in terms of selling that or something along these lines? These are my questions, thank you very much..

Thank you very much for your questions. The first question is going to be answer Gerard [ph], Commercial Director and Daniel. Then I will talk about leveraging..

Good morning, Alan. In terms of price, our contract some are for future sales, some are for the current quarter, some are for other sales already calibrated before.

Also we have some sales at fixed price which we closed them as soon as possible, we did not wait for the prices to drop, also at the end of the quarter we managed to close some freight - American freight at prices which are closer to the stock prices. So this led to our FOD prices dropping less than what the market did.

Daniel is going to talk about our product mix which accounts for - also accounts for some of the better prices than wide mix..

So since last year, the second half of last year, or simply since September last year we started deploying actions because we looked at our operating model and the market scenario and the deposit to take these measures. So the changes in our operating models had a great impact on prices, so we managed to reach higher prices in the market.

In simple terms, we improved the middle products quality, producing concentrated products with 64% of our 3.5 of silica. Before we had a 62% which was something that the market was accepting with high margins of texture [ph]. In Casa de Pedra, we have been having very high quality product for a long time.

So what we did was to increase Casa de Pedra's production, just compare the fourth quarter last year and the first quarter this year, and you see an increase of 20% in Casa de Pedra. And this increase in production was based on high quality products.

So I repeat in super feet as well as our flagship is improved and so we have some advantages due to that. There is another initiative which also has this a lot, it doesn't impact the prices but it has impact margins that we are here focusing on our competitiveness, our breakeven. And this is the renegotiation of freight.

We've been working very hard on that since the end of last year, and we manage to reduce these prices substantially. So we were at $22 and now we're reaching $10 to $12 which is what the soft market is also practicing. In terms of leveraging, I must say that this is call for concern for us for all company management.

We're very much concerned with this aspect. And we are working to reduce leveraging gradually. So there is some different measures that are being taken. All I could say that this is a complex process of liability management.

As an example, I can tell you that we have reviewed our CapEx, the Board has approved a CapEx of R$1.6 billion, it's well below the R$2.2 billion that we have for last year. And we are also analyzing other alternative to reduce this leverage, only do not rely on one single business actually, so there are different measures being taken.

In order to diversify our business, in view of the current economic scenario, we are reducing cost, we are adjusting our impacts, and we're also looking into other alternatives. In addition to renegotiating debt, so making for longer debt, increasing the concerns of debt, and also looking for cheaper loans.

So with all these things together, we also have an objective, I don't want to give you any deadline for that but we want to reach a ratio of three times.

I cannot give you a firm date we got to occur because it all depends on the number of processes which are going on, but I can assure you that at some point we are going to post the decrease in our leveraging reaching 3X EBITDA..

Next question comes from Ivano Westin from Credit Suisse..

Thank you for the presentation. I would like to ask about Casa de Pedra. Could you tell us how the issue let go [ph] and about immediate cash, is there any definition in terms of a possible distribution that the take would be? And we also talked about the reduction of CapEx in 2015, what's the breakdown, what expansion, what maintenance per unit.

Could you give us content?.

Let's start talking about - this process will go on during this year, actually during the first month.

We have introduced our new master plan - our master plan includes a production plan for the next five years, we brought it, projected about it - the organization structure and also discussions on funding for the project, the master plan was presented to CSN Board, and to the consortia board as well, our partners there forth.

It was approved beginning of May, right now we are reaching some requirements in terms of authorization regulation which is authorization from city, from all these agent needs. And we see as a software guidelines at the end of this year, this is when we would dropdown fits and the new mining company would then start operating.

This is more or less the schedule we have projected for this year. We also asked about this year's key route, R$1.2 billion. So basically we're talking about what R$820 million extension which R$530 million in current investments, in fact R$327 million are for steel, R$587 million for mining, around R$113 million and cement R$200 million.

And the remainder is small project, always trying to improve performance, and reach operating payments. What good maintenance CapEx for mining. This year we expect something around R$150 million..

Next question comes from Marcos Assumpcao from Itau..

My first question addresses your debt. Could you tell us what's due in the next two years, and if you need to refinance, what's the estimated cost from refinancing this debt? And regarding iron ore, what was the impeded freight for iron ore.

And the $2 rejection in terms of breakeven, where does it come from, is it a result of cost reduction of exchange rate fluctuation or what, where does it come from?.

Well the $2 reduction comes from the different sources that I mentioned. So there are some actions regarding iron ore quality which is part of the reason, a reduction in the American freight, reduction in production cost, also the way AMRS and our port also is partly accounted there [ph] but the bulk of it is production cost and freight reduction.

I'll let [indiscernible] our Executive Director who is in charge of controller. He is going to give you the direct breakdown..

Our growth debt around R$30 billion for 2015, we have R$674 million, and for 2016 and 2017 R$2.5 billion, and R$4.3 billion respectively. As we have ready asses we're taking a lot of measures for financial efficiency, so we're working very strongly to reduce the debt level. Also talking to the banks for rolling to death.

So far our proposals have been meet and are with a good mood and so we think it's manageable. When we think about the rolling cost, cost for credit in facility, cost there to every large company has. So any large company that goes to the market will invest something close to CDI, R$108 million to R$115 million.

And if you're talking about performed markets, right now for Brazilian emissions, we're not in a very favorable moment but we are checking what our employment rates are. So in addition to that, local market and foreign market, we have other alternatives.

We can have better rate efficiency, they pull your securitization structure, they fill you credit grand's of our customers, customers where we have long term contracts. So we are making an effort to reach a better financial efficiency and in the next quarter it's time for sure that we're going to visit it better figured.

And the first quarter you had a rare engage in a strong rolling effort and they have had an impact on the results. It is the day you have around R$3 billion for the next two years between 2015 and 2016.

Then in the previous quarter I think that figure was a little higher, so just to confirm - yes, we have some a mortgage durations in the first quarter, R$1.6 billion and funding R$400 million. Then our goal is to roll as much as possible in the best terms possible. Analyzing all the possibilities that we have commentated on.

Our objective is to level the curve, to flatten the curve that we seeing it..

Just a follow-up regarding iron ore, is there any counterpart, any offset in terms of these measures prove iron ore quality.

So if you reduce silica and do you have any decrease in production? Is there any downside to it?.

This is Daniel speaking. If you remember what we were trying to do until the second half of last year, we were buying iron ore in south region. So this offer - appeared because for players as a region were no longer competitive and there also were simply set which was standard.

On average 61% to 62% are in, the class [indiscernible] better quality than that. So this is why we could afford to buy this order, mix about - and debt to volume which was above market averages and this is what we were doing up to the moment when had a drop in the stock market and billed last year.

In spite of he reached you, our operating model, and so we stopped buying ore and this is what lead to the current situation that we're at. Improving and making an effort to improve our Namisa product which is close to what we have.

So in a new job, we do see a reduction in volume but the most important aspect is the iron deplete, if you compare from the first quarter last year to first quarter this year, you see an increase in product of 20%. So our objective is to keep up increasing production where the best margins are.

So when you reduce processing from third parties, what's the guidance for sales or exports for 2015? Our guidance is R$22 million and total toll free for any unit. Thank you..

Next question comes from [indiscernible]..

My first question to Daniel. We have been to expanding its mining business for a while, we see that all the players are changing their profile growth a little bit. In other words, they are reviewing some of the projection. I mean - wanted to understand what you want to do.

Are you pure trying to reach the R$ 40 million tonnes from Casa de Pedra, it's in this possible. Or do you see things differently now. In order words, have you changed in terms of what you see for growth profile, CapEx expenditures? Second question, this is more strategic.

As for the sales, one of the pillar which is for year perhaps this is a great cost of concern, something the market has been focusing on. You have the higher of liquidity in spite of the your debt. And you have a possibility of selling - very relevant period. So if you mean us, comes from a quicker market but I'd like to talk about Casa opportunities.

There are business possibilities which perhaps would be lower priority for years. And funding, I'd like to cash flow. I know that this is sometimes considered a minor detail but when I look at your cash flow, I see R$400 million in terms of reducing the capital of your controlled - but you don't give us some color on this account..

Thank you for your questions. We probably closed going to talk about the financial aspect and Daniel is going to talk about the mining business. So it shouldn't with cash flow, your last question..

According to IFRS this cash flow is coming from ninth down, neither doing PSN, so in December 214 we've started to accounting the date for the larger one at the point was the dividend disruption. Let me talk to its conversates. So if you were friend, in the consortium.

$300 million, so R$118 million from further to the exchange rate, where the decision was made the first quarter of December which will - yield will give you before R$ 100 million.

Is that okay? Can I move in? Regarding the leveraging issue, the assets, the sales, this is the month during - and let me try and give you a wrap up of everything the you talked about.

So we have a challenge which is to increase the data in other areas, this is our greeted efforts, more obsessively focusing on that, improved quality to get better prices. So the first part is operations.

When we are truly sure this is in our hands, and we are delivering on this promise, it's the first aspect, it's something we can do, it's something that's in our hand.

The second aspect, we didn't look at leveraging, we go back to the previous question, so we're working in terms of rolling the debt so that we have time to make any necessary moves that we need to make.

I don't want to tell you right here what is the ideal assets but first of all our homework in terms of operation has been made, we are not under pressure because of our debt, the first thing that we are going to do is to roll our debt.

We operated in five different segments, we have very high quality assets and we're going to see what our benefit partners will be - the best conditions for sales, we're not going to act under pressure, we're not going to sell under pressure.

The report that we made clear it's important to show the market that we have results, we're going to analyze this debt within this long term strategy. Now going back to the mining asset, and the strategic points that you mentioned. We have to see the very two different groups that operate in the market.

We have traditional producers, long term, and we have seen this period as a window of opportunity - they did what they had to do and now they are removing themselves from the market.

Let me take additional producer, however, it stands out the Australian producers in our most competitor in Brazil, we try to be more agile, we are able to capture the market very fast. And still has a strategy whereby maintains the company competitive for any price scenario whatsoever.

So in general terms, we are not going to make any changes to our strategy, we believe in a growth strategy for Casa de Pedra and for our mining business as a whole, we believe in that and we manage to bring to our business large partners. Our partners at Namisa who are now working with us to create this new mining company.

Now this aspect of traditional manufacturer had us operate in the transoceanic market, and we have to offer good quality product always.

Due to the fact that we have very good quality products, we are going to maintain the program for Casa de Pedra, of course we are going to adapt our Phase 2 the moment but we are going to seek as much as possible proactive return regarding Casa de Pedra. Thank you.

Now thinking in terms of the assets, let me put there Casa de Pedra, of course, there is a great difference vis-à-vis it's a new - which is now Namisa which would be a lower quality asset, less competitive than Casa de Pedra.

So this said, if it's too operating it's 5 million or 6 million tonnes in the scenario or it's huge this production including the current scenario [ph]. Could you please ask your question again because we did not understand it..

Regarding your mining asset, so you've had - prepare run which is the best quality, we are flagship, competitive in any scenarios but you also have a part of the mix which is Namisa, and the old production - old CSN production which we believe has different cost levels.

So are you judging the production capacity vis-à-vis on new price scenario?.

We are always working to maximize the profitability of its assets, this is our aim. What we do is to try to synergically integrate our assets.

So Namisa is still operated - of course you got to adjust here there in terms of the mine but we are totally integrated a Casa de Pedra, and due to this fact we keep our package [ph] and both company has the they were a single company which actually they are - this now we see our business.

Some of so that you can see our cost curve, we are perhaps look forward the most competitive - in a way we were among the five best company. This is after we had the posting of the Australian competitor. So we're perhaps look forward to the most efficient. And this include - so we're trying to operate with synergy seeking the best value possible.

So we are going to extract as much value as we can from all mines, all businesses, also businesses that we have not announced yet because there are some which are under exploratory terms and then we'll be able to replenish our reserves..

Thank you very much. If there are no more questions, let me give the floor to David Salama, Executive Investor Relations Officer for his closing remarks..

Let me highlight the fact that we are doing our homework, we have already delivered a very good cost reduction. We'll keep on reducing cost among this year, we are focusing on the increase of our operating EBITDA, in other words, the company is very sound in spite of the challenging economic scenario that we have ahead of us.

Our investments are focused on higher results by assets. We are very disciplined regarding investment. And let me repeat that we are very concerned with our leveraging levels. But this is how we see things. We're doing our homework as we've said in terms of trying to roll the deck.

We're also looking at other alternatives, we're analyzing all the possibilities we have, and we expect to keep on delivering subsequent results in the next quarters. Let me thank everybody for again, being called. Our team is totally available for any questions you may have. Thank you very much and good afternoon..

Thank you. CSN audio conference call has come to an end. Please disconnect your lines and have a nice day..