Benjamin Steinbruch - Chairman, Chief Executive Officer Luis Martinez - Commercial Director Marcelo Cunha Ribeiro - Investor Relations

Good afternoon, and thank you for holding. At this time we would like to welcome everyone to CSN's conference call to present results for the Fourth Quarter 2021. 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, there will be a question-and-answer session at which time further instructions will be given. . We have simultaneous webcast that may be accessed through CSN's Investor Relations website, ri.csn.com.br where the presentation is also available. The replay of this event will be available soon after closing for one week. You may flip over the slides at your own convenience. Please bear in mind that some of the forward-looking statements made herein are mere expectations or trends and are based on the current assumptions and opinions of the company's management. They may differ materially from those expressed herein, as they do not constitute projections. In fact, actual results, performance or events may differ materially from those expressed or implied by the forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rates and exchange rate levels, future rescheduling or prepayment denominated in foreign currencies, protectionist measures in the U.S., Brazil and other countries, changes in laws and regulations and general competitive factors at global, regional or national basis. We will now turn the conference over to Mr. Marcelo Cunha Ribeiro, Investor Relations Executive Officer. He will present the operating and financial highlights for the periods. You may proceed sir.

A good day to all of you! Thank you very much for joining in this earnings conference call for 2021. I have Luis Martinez, the Commercial Director and the Chairman, Benjamin Steinbruch who will make his considerations before the Q&A. I begin with a presentation, speaking about the period highlights. Of course we have operational and financial records that are exceptional records. We doubled the results, attaining BRL22 billion in EBITDA, almost BRL50 billion of net revenue and we are going to surpass this goal without a doubt in 2022, making the most of the excellent moment of international commodities, but also due to operational efficiency and stringency with costs. We go on to highlight two where we were able to resolve a problem in our balance excessive leverage. We have now tuned the page. We are below our goal of 1x EBITDA; we are 0.76x with a solid cash generation and a commitment to maintain this, transforming the ability of companies of being a large capital allocating company. Now we have already begun this journey, and we have made the most of this good moment to make transformation or moments we had the IPO of cement, important for the growth of the business and of course through the acquisitions of Cement, we will become the second Cement player in Brazil. We go on to the next page, to speak about the details of the quarter; a very clear change between the first semester of the year and the second semester. We begin to see gradual readjustment in the price of commodities. In the third and fourth quarter this was also continued and CSN continued a very correct strategy of margin over volume, maintaining our percentage margins very high and moving away from the records in the second semester. In…

Thank you, Marcelo. Good day to all of you. I would like to thank all of you for your participation in the call, and express my satisfaction for being able to witness this moment where CSN has delivered, better - the best results in its 80 years. CSN celebrates 80 years this year, and all of you know how difficult it is to work with a company in Brazil and to keep it alive and active after 80 years. And we are now celebrating these 80 years, at the very best moment, and to be alive to witness this is something that is a balm for my soul. During the last few years for all of you who have kept up with us, that was our commitment, a commitment to deleverage the company, to maintain growth, and of course to maintain margins. This has always been our branch, and our differentiated levels of EBITDA that throughout the year allowed us to become a benchmark. So the fact that I am here today, in which we announce the results for the last quarter and the full year 2021, is something that fills me with pride and motivation. Pride, because we did what most people did not believe in. They did not believe that this could be done, especially the way it was done, which means that we maintain the assets, the company businesses, we left from almost nothing. We enhance the indicators in terms of margin, cash generation. We allow the company to grow in an extraordinary fashion, not only in terms of net revenue, but also as regards EBITDA and we have deleveraged the company radically, which means that we began with 3.2 net debt EBITDA ratio in 2020 to 0.76 or 0.78 at the end of 2021, and this…

Thank you. Our first question is from Thiago Lofiego from Bradesco BBI. You may proceed Thiago.

Thank you, and a good afternoon to all of you. Congratulations Benjamin for the company journey trajectory. I have two questions for Martinez if you could speak about still here. First, the cost of iron ore, all that are increasing for the plans, the slab increasing as well. What is your outlook for the price of steel in the global context? Do you think that at the end of the day, at the end of all of this confusion that we observed in the market world, still will maintain its margin or lose its margin? The second question, also in the steel context. In Brazil, what is a demand now at the beginning of the year? If you could speak about your plan for long steel, that would be excellent to understand the market dynamic in these two statements. Thank you.

It seems that Martinez may have a problem in returning to the call. Luis Fernando Martinez, you may proceed sir. It truly seems that Martinez’s connection has dropped. He will be back soon. I suggest Thiago, if it’s not too uncomfortable, we’ll hold onto your questions and for Martinez to answer them, and then we can go on to the next question.

Of course, no problem. Let's go on to the next question.

Next question, and as soon as Martinez is back, we will continue again. We do apologize for this inconvenience. Operator, next question please.

Our next question is from Daniel Sasson for Itau BBA. You may proceed.

Good afternoon to all of you. Thank you for taking my questions. I reinforce the congratulations offered by Thiago to Benjamin. My question already referred to what you said at the end, reflections on the coming years of CSN, you spoke about doubling the size of the company in the coming years. If you could remark on your plans perhaps, not only for mining, but for international expense and where we could have better upsides if you’re considering when you analyze investment opportunities to expand outside of Brazil, once again if you could refer to this angle. I have another question for Martinez as well, but we'll leave it for later. Also along the lines of the question asked formerly, I wanted to understand the competitive environment in Brazil and how successful the latest announcements of price increases have been or not. Thank you.

Very well. Regarding the first question, I would like to make it very clear and decisive for you that we're going to grow the company based on the assumptions that we have mentioned, the deleveraging, that is to say to maintain 1x net debt as a reference and the main priority for all of our efforts, we're going to work with an enhancement of quality of all of our products; work with more added value as much as possible. We want to work in a different fashion, which means to say coming or bringing the product ever closer to the consumer and perhaps by adding more services to the product and making the most of the opportunities for expansion that we observed in each of the sectors in which we work. I don't see great novelties for new types of products for the company. We're going to continue working strongly with the steel mill, with mining, with infrastructure and logistics and of course with energy. Now energy is one of the things we're going to invest in rapidly and invest in correctly, so that we will not only become self-sustainable in terms of generation, but will make of energy important, a large business for CSN. Basically we're going to be working on the segments that you are all aware of. Our commitment is to increase the size of the company two-fold in the coming three years based on that assumption of deleveraging, the search for technology. We're going to become an important player in technology enhancement in our continuous search for abatement. We're already implementing this; we’re committed with it. Always complying with what we mentioned formerly, the four pillars, basically technology and ESG. The new CSN Inova that has been working in the field of technology and ESG is…

Can you hear me?

Yes, we do. Please join us. I'm concluding my remarks.

Very well.

And to conclude, we have the deleveraging as our main premise technology; as the second assumption, ESG. Our sort of main assumption margin contributions for assumption and the fifth would be diversification of assets, 30% in mature and developed countries. This is our plan for the coming three years and this will enable us to increase the size of the company two-fold based on these assumptions. This is what I offer to all of our work associates and our shareholders and we're going to work earnestly to be able to deliver this I hope in three years, to be able to speak to you with these challenges already surpassed. Martinez, we have two questions for you. I don't know if you heard some.

I will first of all answer the question made by Thiago, and the second, if you would be kind enough to repeat it. I do apologize. Once again a technological glitch, but everything is working. Can you hear me?

Yes, we do. Please continue.

Thiago, to go back to your question and to speak about the global steels situation, the cost of slabs and our outlook for the future, if we put aside all of the movements that we see in the world scenario. There is a very clear scenario of decarbonization, de-globalization as mentioned by Benjamin. Regarding the de-globalization, we perceive more and more that the strong economies are closing up and they are producing their own steel. This is something that we have observed in Europe and the United States and generally – and the situation will not be different in Brazil. United States is a very strong country and at present they are going through an onshoring phase, bringing several products to be produced again in the US. There is a new industrialization, the issue of ports in the U.S., all of this has contributed so that economies can become ever more de-globalized. Now, in the world at present, to give you an idea of what is happening, we have a situation impacted by this crisis between Russia and Ukraine. Now, in terms of prices, we have some consultations for slabs that are around $900 in the spot market, but the world will – and to increase these values because of the scarcity of products in some regions, today for example the BQ from China, the prices are $870 to $895 and the Turkish rods have increased to $900 today because of these world movements. Now, besides these world movements, we have a very clear view of cost. The cost of coal was approximately $15; the Australian coal, which is the one that we use; and coke, $865, $800; iron ore at $270. So the world scenario of steel I think will be quite favorable, although we are undergoing conflicts in…

I have already had my question answered. Perhaps you could open the floor for Mr. Daniel Sasson.

Sasson had asked about competition in the Brazilian market.

Competition in the Brazilian market, precisely. We're going to allow him to come back. If you could already begin to answer while he's coming back.

Very well. Daniel, thank you once again for the question. Obviously Brazil at present has very important information. In the case of CSN, we have 40% to 45% of our products that are coded products and the graders competition in the Brazilian market in coated products AHDT, the pre-painted material was very stronger then the imported material, so this scenario is quite positive. Because of issues of an increase in world prices and the difficulties of imports, we should have in their domestic market a return of almost 700,000 tons of coated material, which means that CSN will benefit from better imports and capture the value of this material. This also applies to template. There is very little imports and our vertical integration will improve, so that we can increase the size of the market vis-a-vis competition in packaging. Now, regarding the competition and other products, competition is stronger in terms of hot rolls, but there is no import of these hot rolls or hot rolled coils or reels. So the market doesn't have excess capacity. It has a very tight supply demand equation, even in hot rolling, we have a very clear strategy for working with civil construction, we are more focused on added value quality and fragmentation, and we have 75% to 80% in spot prices, so we're well positioned in different markets, different sectors, with the possibility of exporting BQ to Portugal. Nowadays if you imagine CSN in terms of guidance for 2022, as I had mentioned, we're going to look in the domestic market for longs, 1.5 million in the foreign market, exports of 120,000 tons as a minimum that we supply with hot roll 350,000 to 400,000 SWT that is operating at full speed with very good margins, 800,000 tons in 2022 and our company and the U.S., nowadays we market our entire production, 300,000 tons. So all of this is important, so that the plans that we have to resume an industrial address in the United States and double the production in Portugal, so that all of this can become reality. We are going to focus on the markets where we decided to participate and where we have local services. Basically this is a competition dynamic. I don't know if there is something I did not answer.

Thank you, Martinez. That was very clear.

Our next question is in English, and comes from Carlos de Alba from Morgan Stanley. You may proceed. Mr. Alba.

Yeah, thank you very much. Good morning everybody or afternoon everyone. Congratulations on the 80 years of CSN. Just a couple of questions. First maybe for Martinez. With the acquisition of the Real that we have seen, what makes you believe that we are going to see these drop in imports into the domestic market that will be able to be captured by local producers. Maybe I’m missing something, but if you could maybe elaborate on that, given again the strong currency that would be great Martinez. And then maybe Mr. Steinbruch, clearly very few companies in the world – let alone in our coverage would be able to double the size or per size in the next three years. But when can have more concrete details about the CapEx and the pace of this expansion and maybe more concrete plants in terms of what project specifically would take you there.

Carlos, good day! And thank you once again for your question. I would once again explain to you why we believe we can recompose prices, comparing the domestic prices with international prices. If we go back to supply and demand, that demand in Brazil at present went through a trough because of the seasonality. The demand is back in the first quarter, several sectors have experienced growth, a growth of 5% as a minimum; the agricultural, railway, the truck market, the market of civil construction itself. We have several buildings that have been launched, that are presently being built and we're also capturing value there and we have the beginning of the infrastructure work. So in terms of supply and demand, there won't be great problems, because at CSN we are also able to export spot to make the most of the world situation in terms of prices or the market share of CSN and the markets where we already exists Germany, United States, and Portugal. Now the issue of cost, there is nothing that we can do. Our cost of slabs which presently is BRL3600 will jump to BRL4200. We have to recover this cost. The price of coal has increased 500 coke, 750 in iron ore, that will remain at $170, another important point that could be better than I imagined, because of the world trade problems in general. The trend is for imports to be reduced constantly. So local production will be in a privileged position and nowadays if you imagine the prices in the market with the trend for rising BQ at $895 exchange at 5.05 and a BQ in the domestic market of BRL5800 the premium is on note, slightly negative. So this will support that possibility of increasing prices by 8% to 10% in the hot rolled, cold rolled zinc projects and coated products and template. This is the logic that we are basing ourselves on to recover prices in the domestic market.

To add to what Martinez has just answered for Carlos, our strategy for growth and our market vision, as I mentioned formerly, will contemplate the purchase of suppliers and clients in the market, which means that besides servicing the traditional market that we already had, we will have a growth that will go beyond the normal growth, because we want to add value to our products. We also want to add services, so all of this, represents a different attack in the traditional market because we are offering services and we are willing to acquire some suppliers and clients to have a more diversified market with a greater potential. So, all of this will contribute towards this growth in the domestic market. We're not considering a normal market growth, we are r projecting an additional growth, through this process of virtualization of suppliers and clients, so that we can expand this market outside of the normal growth and with this idea of being closer to the end consumer, offerings services as well, based on mutual agreements of course. So this for the domestic steel market in terms of mining, our approach will be different as well. Besides the projects that we already have, and besides the purchase of iron and ore we are going to offer, smaller companies the opportunity of working on our reserves in a partnership. Whatever is not our priority in terms of exploitation of mineral reserves, we're going to offer to third parties that are more aggressive, have greater flexibility and are willing to work there. We're going to invite them to participate in the exploitation of these reserves in short periods of time, to complement our efforts in production, with the purchase of products and the production of third parties as well. So, this market…

Thank you very much.

. Thank you. As we have no further questions, I would like to turn the floor over to Mr. Marcelo Cunha Ribeiro, Executive IR Officer. Mr. Cunha, you can continue with your closing remarks.

I would like to close by sharing our enthusiasm with the year 2022. It will be better than our record year 2021. We thank all of your for your participation. We wish you a very good day and we hope to see you in our next earnings call. Thank you very much.

The earnings results call for CSN ends here. You can now disconnect and have a good day!