Pimco is investing in this company

Pimco is investing in this company June 18, 2009 I have a friend who likes to invest in stocks, but does so in a very particular way: my friend copy the strategy of portfolio investment funds have achieved improved profitability in recent times . The argument of my friend is simple: "If the investment funds, which generally have a highly qualified team of specialists and probably handle quasi-privileged information, invest in certain companies, it is likely that they have a high potential profitability?. For those who act like my friend probably would not be a bad strategy is to pay attention to those papers in which the investment fund potential growth observed in the medium to long term. Thus, investing in papers with higher growth potential term, the investor may acquire before the best of its growth has passed. There are two very interesting companies to invest now. Click here to find out which ones. What I mentioned above arises from a note that read in Latin Economics where he met Michael Gomez executive of Pimco bond fund who acknowledged that they are investing in Brazil's sovereign debt because the bonds "are of the highest in the world and this is a country that is well managed, does not have an inflation problem, has a relatively stable currency between strong?.

But Pimco has not only set in the Brazilian sovereign bonds, but has also targeted in three companies in the country, among which is the Companhia Nacional-CSN Steel-(BVSP: CSNA3; NYSE: SID). CSN is Brazil's second largest steelmaker and the largest producer of flat steel, which has an annual production capacity of 5.6 million tons per year and generates 16,000 jobs directly. The company has international operations, beginning the process of internationalization in 2001 through the purchase of Heartland U.S. Steel. Taking advantage of its benefits, the firm currently operates in different market segments such as automotive, construction, packaging, appliances, among others.

After seeing this note, I searched the graph of its ADRs to see its evolution, and found that it is seeing an upward trend since early February this year. Shares of the company did not have a good day in the day yesterday and closed at U.S. $ 22.34, far from the $ 51, May 2008. However, the current value of ADR is further growth potential that can reach the company. The economic depression, has been affected by the strong impact that the crisis has been particularly in the area, but recent signs of increasing global economic recovery hopes. Depression on the international stage is reflected in the results of the company during the first quarter. The gross operating profit (EBITDA) for the first quarter of 2009 was R $ 681 million (U.S. $ 323.3 million), representing a fall of 47% over figures for the first quarter of 2008. This sharp fall is another mitigating factor is that CSN is recording a record in 2008 net profit R $ 5,800 million (about U.S. $ 2,529 million), double the 2007 figures.

On the results of the first quarter of 2009, Brascan brokerage said in BNamericas: "Since 2006 we have not observed an Ebitda margin of less than 30%?. The reason for this result to Brascan is: "This weakening in operations is a direct reflection of the low demand for steel products?. For the consultant, that result from improvements will gradually and continuously from month to month in the lawsuit that recompose the results of the firm. The expected recovery in demand for steel is good news for the prospects of profitability for the company to which is added the decision to impose tariff measures by the Brazilian government and end a dispute that was maintained by Vale (SAO: VALE3, NYSE: VALE). Brazil recently decided tariff measures on steel imports that have a positive effect on domestic firms, as CSN. Lula's government decided to yield to pressure from local industry, re-establishing tariffs ranging from 12% to 14% on imported steel products. They were eliminated in 2005. Last May, CSN managed to end a dispute that started in 2000 by Vale, the exploitation of the mine House, in a deal that benefits both, according to which Vale is at the discretion suspend or permanently cancel a contract until end of this year to buy mineral produced by Casa da Pedra.

The agreement also provides for delivery by Vale of up to 3 million metric tons of iron pellets to CSN between 2009 and 2014. In regard to the strategy of the company in these times of crisis, it has given priority to stay liquid at least until the uncertainty in the markets. In this sense, CSN made a strategic sale of 40% of the shares of ore SA National -Namisa-(Brazilian company producing iron ore, a subsidiary of steelmaker CSN), a consortium of companies from Japan and South Korea. In the same vein to maintain the financial strength this year, and considering the weakness in demand will see a slow and gradual recovery and limit the amount of income, CSN has limited their investment projects to the continuity of those already up. At the moment, CSN has postponed the project to enter the market long steel (CSN are the specialty of flat steel), scheduled for 2010. It also postponed construction of two new steel, one in Itaguai (Rio de Janeiro) and in Mina Gerais. If confirmed the continuity of investments for the construction of a cement factory.

Perhaps one might think that the decision to postpone investments in the steel sector represents a setback for the company. But this is not true because global demand is very depressed and time-consuming to resume normal, so it is not advisable on expanding production capacity to an excessive current supply situation. Evidence of excess production capacity exists worldwide, a friend of mine who works in a leading steel in Argentina, China told me that about 90% of the mills are "stops?, Given the weak demand. So in the short term, this steel Argentina benefits from China's steel demand to exceed production by plants that active, but this situation is not sustainable in the medium term as the global economic recovery will be reactivated many plants are dormant how are you in China. To summarize, CSN Pimco sees a company that is well positioned in a market that is depressed though, is in its phase of gradual recovery. Moreover, the business strategy of the company will help speed the recovery of profitability compared to other companies.