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PERFORMANCE INDICATORS
OPERATIONAL Unit 2001 2002 2003 2004 2005
Crude steel production t thousand 4,048 5,107 5,318 5,518 5,201
Sales volume t thousand 4,0451 4,970 5,000 4,744 4,864
Number of employees1 9,179 8,470 8,501 8,175 8,542
Molten steel production t thousand 4,134 5,227 5,461 5,672 5,318
Rolled products1 t thousand 4,141 4,625 4,810 4,991 4,848
Operational productivity1 t/man/year 646 879 946 1,012 995
FINANCIAL Unit 2001 2002 2003 2004 2005
Gross revenues R$ mm 4,832 6,108 8,292 12,251 12,283
Net revenues R$ mm 3,982 5,165 6,977 9,800 10,038
EBITDA R$ mm 1,699 2,276 3,002 4,789 4,594
EBITDA Margin % 43 44 43 49 46
Gross profi t R$ mm 1,702 2,417 3,140 4,802 4,569
Gross margin % 43 47 45 49 46
Net profi t (loss) R$ mm 300 (195) 1,031 1,982 2,005
Net margin % 8 (4) 15 20 20
Net profi t (loss) R$/thousand shares2 4 (3) 14 8 7
Div. & Interest on own Capital1 R$ mm 2,754 140 800 752 2,268
ROE % 6 (4) 14 30 31
Net debt / EBITDA 2.9 2.1 1.6 1.0 1.0
Net debt / shareholders’ equity % 95.9 99.5 66.2 70.7 71.0
Added value1 R$ mm 2,467 4,890 2,346 5,892 4,925
1 Data from the Parent company.2 Adjusted for dividends and groupings.
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CSN
Average maturity 13.16 years
Average cost 8.93% p.a.
DEBT PROFILE
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CSN AROUND THE WORLD
ears
p.a.
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CSN FACILITIES IN BRAZIL
1 Fortaleza CE CFN
2 Maracanaú CE Metalic
3 Arcos MG Arcos mine
4 Congonhas MG Casa de Pedra mine
5 Ariquemes RO ERSA
6 Porto Real RJ GalvaSud
7 Volta Redonda RJ Presidente Vargas Steelworks
8 Rio de Janeiro RJ CSN Head Offi ce
9 Itaguaí RJ Sepetiba Port (Tecon and Tecar)
10 Mogi das Cruzes SP INAL
11 São Paulo SP CSN Sales Offi ce
12 Araucária PR CSN Paraná
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www.csn.com.br
ADDRESSES
HEAD OFFICE
Rua São José 20, grupo 1.602
Centro, Rio de Janeiro RJ, 20010-020
Phone (55 21) 2215 4901 Fax (55 21) 2215 4901 ext.26
SALES OFFICE
Av. Brigadeiro Faria Lima 3.400, 20o andar
Itaim Bibi, São Paulo SP, 04538-132
Phone (55 11) 3049 7100 Fax (55 11) 3049 7150
PRESIDENTE VARGAS CENTRAL OFFICE
BR 393 (Lúcio Meira) s/no, km 5,001
Vila Santa Cecília, Volta Redonda RJ, 27260-390
Phone (55 24) 3344 6000 Fax (55 24) 3344 5131
PRESIDENTE VARGAS STEELWORKS
Auto Estrada s/no
Vila Santa Cecília, Volta Redonda RJ, 27269-900
CSN PARANÁ
Rodovia PR 423, 5.500
Araucária PR, 83705-300
Phone (55 41) 641 8000 Fax (55 41) 641 8009
GALVASUD
Av. Renato Monteiro 7.777
Porto Real RJ, 27570-000
Phone (55 24) 3358 2900 Fax (55 24) 3358 2901
CSN LLC
455 West Industrial Drive
Terre Haute, IN 47802, USA
Phone (1 812) 299 4157
LUSOSIDER
2840-075 Aldeia de Paio Pires
Portugal
Phone (351 21) 227 8307
CASA DE PEDRA MINE
Congonhas MG, 36415-000
Caixa Postal 101
Phone (55 31) 3749 1212 Fax (55 31) 3749 1161
ARCOS MINE
Arcos MG, 35588-000
Caixa Postal 24
Phone (55 37) 3359 7700 Fax (55 37) 3359 7777
ERSA
Rua do Estanho 123
Ariquemes RO, 78930-000
Phone (55 69) 3535 2160
INAL
Av. Cavalheiro Nami Jafet s/no
Vila Industrial, Mogi das Cruzes SP, 08700-040
Phone (55 11) 4791 7800 Fax (55 11) 4790 7091
METALIC
Rua Parque Sul 1.441
Maracanaú CE, 61910-000
Phone (55 85) 299 7309 Fax (55 85) 299 7335
SEPETIBA PORT (TECON and TECAR)
Estrada da Ilha da Madeira s/no
Itaguaí RJ, 23825-410
Phone (55 21) 2688 9201 Fax (55 21) 2688 9235
CFN
Av. Francisco Sá 4.829
Fortaleza CE, 60310-002
Phone (55 85) 4008 2500 Fax (55 85) 4008 2507
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CS
N
www.csn.com.br
AN
NU
AL R
EP
OR
T 2005C
ompanhia S
iderúrgica Nacional
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CS
N
ANNUAL REPORT
2005
AN
NU
AL R
EP
OR
T 2005C
ompanhia S
iderúrgica Nacional
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Companhia Siderúrgica Nacional (CSN) is one of the largest
and most competitive integrated steel complexes in Latin
America. The Company has the lowest production cost
and one of the highest EBITDA margins in the global steel
industry, a unique competitive advantage that makes it
one of the sector’s ten most valuable companies, in terms
of market capitalization. CSN focuses on the client and
offers complete solutions, possessing the fullest portfolio
of fl at steels on the continent. Self-suffi cient in iron ore
and electric power, the Company’s operations are truly
integrated and cover the entire steel production chain.
Its vertical structure allows it to capture the synergies
between its mining, steelmaking and logistical operations,
maximizing the returns for its shareholders. The Company’s
shares enjoy the highest level of liquidity of any steelmaker
in the São Paulo Stock Market and are also traded on the
New York Stock Exchange.
CSN’s Presidente Vargas Steelworks, in Volta Redonda,
Rio de Janeiro, has a production capacity of 5.6 million tons
of crude steel per year. The Company also has a cold-rolling
mill and galvanizing facility in the United States, CSN LLC,
and a 50% stake in the Lusosider steel mill, in Portugal.
In Brazil, it has two modern galvanizing plants – GalvaSud
and CSN Paraná – and a further three such lines within
the industrial complex at Volta Redonda. CSN is the only
producer of Galvalume and tin-plate in Brazil, and also
produces pre-painted steel – high value-added coated
products in growing demand by industry. Furthermore,
CSN’s subsidiary, Metalic, is the country’s sole producer
of steel cans for carbonated beverages.
CSN’s mining activities are geared towards inputs for
the steel business, producing iron ore, limestone,
dolomite and tin. The company undertakes all stages of
the steelmaking process: primary metallurgy, refi ning,
rolling and coating. It also handles distribution, through its
subsidiary INAL, one of the 500 largest companies in the
country and Brazil’s leading fl at steels distributor, with
service centers strategically located to effi ciently cover the
entire length and breadth of the country.
In terms of logistics, CSN has its own infrastructure and
therefore does not depend on third parties to move its raw
materials and products. It retains stakes in two rail compa-
nies, Companhia Ferroviária do Nordeste (CFN) and MRS
Logística, which connects the Presidente Vargas Steelworks
to Sepetiba Port – where CSN holds the concessions to run
two terminals, one for bulk solids and the other for contai-
ners. It is also a partner in two hydroelectric plants – those
of Itá and Igarapava – and runs a thermoelectric plant at the
Presidente Vargas Steelworks, thereby ensuring that it has
the power to feed its industrial facilities.
CSN strives to identify the needs of its clients in order
to add value to the products and services provided. These
clients come from a wide range of segments, including the
automotive, civil construction, packaging, home appliance and
OEM industries, both in Brazil and abroad. To this end, CSN
relies on a highly professional workforce, with the fl exibility and
dedication to adapt to constant changes and focus on results.
Founded in 1941, CSN is a landmark in Brazil’s
industrialization process. In its 65 years of operations, the
company has always stood out on account of its ethical
posture and the quality of its products and services.
Following a series of expansion drives that ended in the
1980s, it was privatized in 1993. Since then, the company
has undergone a new and intensive cycle of investments
geared towards modernizing its production processes and
its organizational structure.
CSN
MISSION
To increase value for our shareholders
To maintain our position as the steelmaker with the world’s lowest production costs and highest EBITDA margin
To become a global player, optimizing our infrastructure assets (mines, ports and railways) and their
competitive cost advantages, allowing CSN to grow even further
To focus on the client and offer complete steel solutions, supported by products and services of the highest quality,
in Brazil and abroad
To provide our employees with a safe and healthy working environment
To respect the environment and the communities in which we are present
NUAL REPORT
005
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MESSAGE FROM THE BOARD OF DIRECTORS
SECTOR ANALYSIS
STRATEGY AND OUTLOOK
THE BUSINESSES
OPERATING AND FINANCIAL PERFORMANCE
CAPITAL MARKETS
CORPORATE GOVERNANCE
HUMAN RESOURCES
SOCIAL RESPONSIBILITY
ENVIRONMENTAL RESPONSIBILITY
RISK MANAGEMENT
CONTENTS
2
4
10
18
28
40
48
56
64
76
92
The results achieved in 2005 were very positive,
both in operational and in financial terms. Crude
steel production reached 5.2 million tons and
the consolidated sales of higher value-added
products accounted, for the first time, for more
than half of the total volume sold. The net income
amounted to R$ 2 billion and the cash generation,
using the EBITDA concept, to R$ 4.6 billion. We
distributed dividends of more than R$ 2 billion
and repurchased R$ 864 million worth of shares,
with no increase in our debt levels. In fact, we
extended the maturity of our debts from 8.2 to
13.16 years and anticipated the payment of future
contracts, such as loans taken out with the
BNDES, which were to fall due in 2011.
In 2005, CSN achieved an EBITDA margin
of 46%, consolidating its position as one of the
world’s leading integrated steel companies in
terms of profitability. The company’s unique
competitive edge, together with our strong
financial position, enabled us to close the year
as the eighth largest steel producer in the
world, in terms of market capitalization. It also
helped us raise more than US$ 1.2 billion in
the capital markets, including the issuance of
perpetual bonds amounting to US$ 750 million
– a demonstration of the confidence that foreign
investors have in the company’s capacity to
generate free cash flow.
Message from the Board of Directors
Our aim now is to triple in size over the
next four years. This growth strategy includes
investments in mining, with the expansion of the
Casa de Pedra mine, which will start exporting iron
ore in the second half of 2006; the construction
of steelmakers in Brazil, to increase production
capacity by 6 million tons; and the acquisition of
rolling assets in the US and European markets, to
add value to our operations in Brazil, which enjoy
the lowest costs in the sector.
One of our goals is to strengthen our mining
operations and become a competitive player
on the world stage in terms of both quality
and price, conquering an expected 5% of the
intercontinental seaborne iron ore trade as from
the start of 2008.
Although there is no question that our future
is promising, it is on the present that we must
focus. After all, our expansion plans would not be
feasible if CSN did not provide its shareholders
with high returns. From January 2003 to December
2005, our shares appreciated 492% in value. We
anticipate that our free cash flow generation in
2006 will enable us to continue rewarding our
shareholders in a similarly attractive fashion.
Benjamin Steinbruch
Chairman of the Board of Directors
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In 2005, the Port of Sepetiba (TECON) handled more than 138 thousand containers, 43% more than in 2004. Below, the Casa de Pedra mine, where iron ore production capacity is expected to reach 53 million tons by 2010
Sector Analysis
POSITIVE OUTLOOK With the likelihood of a cut in interest rates and government incentives for the sector, investments in Civil Construction should grow in 2006, leading to a healthy recovery during the year.
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In 2005, shipments to Steel Distributors fell by 20%.
This drop in distributor consumption was led by the
Agricultural and Cold Profiles micro-sectors.
There was also a 16% retraction in the Home
Appliance market over the year. With the ex-
Sector Analysis
change rate discouraging exports and trade bar-
riers placed on Brazilian products (as occurred
in Argentina), steel consumption by the Home
Appliance industries slipped 23% in 2005, a sub-
stantial reduction.
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Packaged coils: steel consumption is expected to resume expansion at twice the GDP rate, which is projected at 3.5%, reaching 7%
Furthermore, by the year end, consumption by
the Civil Construction Sector had fallen 9%. The
biggest decline in consumption occurred in the
Agricultural/Road transport micro-sector, with a
drop of 71% in 2005. Nevertheless, with the likeli-
hood of a lowering, albeit moderate, in the Basic
Interest Rate for the economy (the Selic rate),
and with the new package of measures adopted
by the government for the sector, Civil Construc-
tion is expected to attract investment in 2006 and
should stage a healthy recovery.
In 2005, the Auto Sector enjoyed sustainable
growth over the course of the year, driven by in-
creased production and particularly the upturn in
exports. Vehicle production increased 9% in the
year and sales rose 4%. Consequently, shipments
for the sector grew 3% against 2004.
In the meantime, CSN established itself as
the leading supplier to the Bus Market, providing
almost all the steel needs of this micro-sector.
As part of its strategy, the company also
expanded its portfolio of clients in the Automotive
segment, making significant gains in the Auto
parts and Road accessory sub-sectors.
In 2005, the volumes of tin-plate sold rose 1%
in comparison to 2004, the good performance
due primarily to the healthy Milk and Derivatives,
and Tomato-based product markets.
The can gained market share in the Milk
and Derivatives, Edible Oil and Paint categories,
due to CSN’s constant marketing efforts, such
as publicity campaigns on the benefits of the
steel packaging and the development of designs
with the clients and packagers. The closer
relationship to the retail trade has helped
improve the success of the can.
To control the drop in price, the steel compa-
nies adjusted their production capacity, reducing
the output from their plants. However, the balance
between supply and demand was then upset by
the increase in Chinese steel production, which
occurred when stock levels in the market were
already relatively high and demand was down.
At the end of the third quarter, the USA,
struck by natural disasters such as Hurricane
Katrina reduced a significant proportion of its
inventories and local market prices began to
recovery, rising again to the highest in the world.
Since this time, global consumption has picked
up, albeit timidly, leading to announcements of
price adjustments. In light of all this, the average
value of steel in 2005 rose in comparison to 2004
– a good result, in historical terms.
While, at world level, the market fluctuated
between highs and lows, in Brazil it experienced
a sharp drop. In 2005, affected by the macro-
economic situation, the domestic consumption
of flat steel fell 9%, with a 21% fall in the last
quarter alone, as compared to the same period
the previous year.
The combination of an economic slowdown,
high interest rates and the appreciation of the
Brazilian real led not only to a slump in domestic
demand, but also affected the competitiveness
of Brazilian exports, particularly in segments
such as that of electrical home appliances, which
purchased 16% less steel than in 2004. The
distribution sector also suffered a significant
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5loss, with a 20% drop over the year, and a 36%
decline just in the last quarter, when compared to
the same period in 2004.
In contrast, the Brazilian automotive steel
market enjoyed a period of sustainable growth
throughout the year, driven by a 9.11% rise in pro-
duction and, above all, by the upturn in exports.
Shipments in this sector actually increased 3%
over 2004, despite the 11% retraction in con-
sumption during the last quarter, as expected.
In 2006 the domestic flat steels market is
expected to pick up again. With the country’s
risk rating at its lowest historical level, a
falling interest rate, increasing amounts of
foreign investment, new government incentives
expected for the Civil Construction industry
and the sustainable growth of exports in the
Automotive sector, the outlook for the steel
industry is promising. Steel consumption is
expected to resume expansion at twice the GDP
rate, reaching 7%. In the international market,
the future also looks bright. Prices in Asia and
Europe show signs of recovery, approaching the
levels practiced in the USA.
In a globalized and fiercely competitive mar-
ket such as that of steel, in which the pressure
to cut costs is constant, CSN believes in the
resumption of growth in the sector, driven by the
company’s continual marketing efforts.
Strategy and Outlook
FUTURE GROWTH The company has plans to expand its businesses in the steel, mining, cement and logistical segments.
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STRATEGY
CSN’s financial solidity, its fully integrated struc-
ture, the self-sufficiency it enjoys in almost all the
main inputs and its production costs, which are
rated among the lowest in the global steel indus-
try, combine to give the company its unique com-
petitive advantage. These factors also sustain its
strategy for growth in the four segments in which
it operates, or in which it plans to soon start oper-
ating – mining, steel, logistics and cement.
To consolidate its position as a major global
player, the company will seek to expand its pres-
ence both within Brazil and overseas. The focus
of its growth strategy will remain on the steel
segment. It intends to increase its capacity for
steel production in Brazil and boost its participa-
tion in regions where it already operates overseas
(the United States and Europe); to conquer market
share in all its steel products, particularly the
higher value-added coated steel items; and to ex-
pand horizontally, in activities that offer synergies
with its main business, steel, such as in the case
of cement and mining, in which it plans to grow by
exporting iron ore.
MINING:
US$ 1 BILLION IN NEW REVENUES
In recent years, China’s significant economic
development has driven up demand for iron ore,
the main input employed in the production of
steel. As demand has increased, the price of iron
ore has soared, rising each year between 2003
and 2005 by 9%, 18.6% and 71.5%. Analysts
believe this upward trend will continue until 2010,
Strategy and Outlook
when the average price should stabilize at a level
approximately 40% above that recorded in 2004.
CSN is self-sufficient in iron ore and has,
historically, sold its surplus production
exclusively on the domestic market. With the
increase in international demand, however, the
company realized it could earn significant profits
though ore exports. Consequently, it decided to
invest US$ 1.5 billion in increasing its capacity
for iron ore production (from 16 to 53 million
tons), beneficiation and shipping.
The investments are to be used to expand the
Casa de Pedra mine, located in the town of
Congonhas (Minas Gerais), which contains 4,487
million tons of excellent quality iron ore, as audited
in December 2003; construction of two pelletizing
plants, with capacity to produce 6 million tons/
year; and adaptation and expansion of the Sepetiba
Port Tecar bulk terminal, to prepare it for the
export of up to 30 million tons of ore per year. The
ore will be sent by rail from the mine to the port,
carried by MRS Logística S.A., which will also
invest to expand its capacity to handle the ore. CSN
holds a 32.2% stake in the share capital of MRS.
Iron ore shipments are due to start in the
second half of 2006, when Tecar will be capable of
exporting 7 million tons/year. Once the system is
running at full capacity, CSN will account for 5%
of the intercontinental seaborne iron ore trade,
with a projected annual gross revenue of more
than US$ 1 billion. The short distance between
the mine and port, besides its own excellent
operations, will provide the company with a
considerable competitive advantage, allowing it to
benefit from lower than average market costs.
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Casa de Pedra Mine: 4,487 million tons of audited high grade iron ore reserves and a production capacity of 16 million tons/year
The company’s commercial strategy will
focus on long term supply agreements,
particularly with clients in Europe. As part of
this strategy, CSN negotiated its first long term
iron ore export contract in March 2005, which
provides for annual shipments of 5.5 million
tons of ore over a period of 10 years, at prices
reigning in the international market. Although
most of the production will be earmarked for
export, some of the ore will continue to be sold
on the domestic market.
The Casa de Pedra mine expansion project
is now fully under way, with CSN having
obtained all the environmental licenses
required for its go-ahead (see the chapter on
Environmental Responsibility).
STEEL:
EXPANSION WITHIN BRAZIL AND OVERSEAS
Over the next few years merger and acquisition
Strategy and Outlook
activity within the steel industry is likely to
intensify. Competing within an increasingly glo-
balized market, CSN intends to use its cheap
production costs – amongst the lowest in the
world – to expand its steel business both within
Brazil and abroad.
The idea is to increase slab production
in Brazil and purchase rolling and finishing
facilities in Europe and the United States. To
increase its production capacity in Brazil, the
company will invest in new facilities in the
south-east. These will help supply the rolling
mills overseas (both existing and future).
CSN plans to build two slab plants. The first
is to be set up in Itaguaí, in the State of Rio de
Janeiro, and will have a production capacity
of 3 million tons. The two units investments
are budgeted at US$ 3.6 billion, raising CSN’s
crude steel production from its current level of
5.6 million tons to around 11.6 million tons.
BASE CASE 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
Investment 21 Mtpa MAR 07
Investment 53 Mtpa
Expansion to 40 Mtpa* MAR 08
Expansion to 42 Mtpa* DEC 08
Expansion to 45 Mtpa* JUL 09
Expansion to 53 Mtpa* JUL 10
PELLETISATION 6 MTPA
Itaguaí 3 Mtpa JUL 09
Casa de Pedra 3 Mtpa JUL 10
PORT
1st phase 7 Mtpa OCT 06
2nd phase 30 Mtpa JUL 07
3rd phase JUL 09
* (million tons per annum)
LOGISTICS:
AUTONOMY IN MANAGING THE BUSINESS
In industries such as steel and mining, logisti-
cal efficiency is crucial to achieving a good eco-
nomic and financial performance. CSN operates
two terminals at the Port of Sepetiba in Rio de
Janeiro and holds stakes in two rail companies,
MRS Logística and Companhia Ferroviária do
Nordeste (CFN), which cover the South-east-
ern and North-eastern regions, respectively.
Controlling the logistical operations not only
generates efficiency in costs, it is also impor-
tant strategically, since it gives the company
autonomy in two vital stages of its business: the
receipt of raw materials and the distribution of
the final products.
To make its expansion overseas possible,
CSN is investing in transforming the Tecar
terminal – which until 2005 only handled im-
ports of coal, coke and sulfur, amongst other
bulk products - in order to prepare the port to
handle exports, particularly iron ore. The first
stage of the project will be completed in the
second half of 2006, when iron ore shipments
overseas are due to start.
In addition to its own needs, CSN’s logisti-
cal assets also generate returns by providing
services to third companies. MRS Logística is a
prime example, earning around R$ 2 billion in
2005, 23.3% more than in 2004. In 2005, MRS
made investments of R$ 398 million, including
the acquisition of 20 new locomotives, 29 heavy
locomotives from the US second-hand market,
716 wagons and 18,000 tons of state of the art rail
track, as well as the reactivation / transformation 14 | 15C
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Presidente Vargas Steelworks: the cost of production of steel slabs is 50% lower than in European and North American steelworks
Strategy and Outlook
rates, the new mills will enable the company to
produce high quality cement at a low produc-
tion cost and in an environmentally responsible
manner.
Given the investments in infrastructure re-
quired to foster the economic and social growth
of Brazil, the as yet low cement consumption
levels in the national market and the high levels
of synergy with CSN’s existing operations, the
cement segment represents an opportunity for
the company to compete in a market with a lot of
potential, combining profitability and growth.
of 132 formerly idle wagons and the expansion of
its rail yards.
Reaffirming its belief in Brazil, CSN, to-
gether with the Federal Government, is to invest
around R$ 4 billion to transform the Companhia
Ferroviária do Nordeste (CFN) into the ‘Ferrovia
Transnordestina’ (Trans-northeastern Railway).
The first phase of the work, which will generate
approximately 600 thousand direct and indirect
jobs, is due to be concluded at the start of 2008.
The project aims to encourage the economic
integration of the North-eastern region, in-
creasing the railway’s current transportation
capacity by a factor of 20, from 1.5 to 30 million
tons a year. Greater operational efficiency will
allow cost reductions of up to 75%, boosting the
region’s economy, largely by stimulating agro-
business exports.
CEMENT: PROFITABILITY
AND HIGH GROWTH POTENTIAL
Located within the complex at Volta Redonda,
with the gains in scale and logistics that this will
bring, the market driven by the high levels of
synergy between this activity and the company’s
existing operations. Every year the Presidente
Vargas Steelworks generates, as part of its pro-
duction process, around 1.4 million tons of blast
furnace slag, which alone accounts for up to 70%
of the raw material used in the production of ce-
ment. new cement factory will also use the most
modern cement production technology avail-
able in Brazil - vertical cement mills. Capable
of controlling the product’s quality in real time,
and with relatively low electricity consumption
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The Businesses
MINE IN EXPANSIONLocated in Congonhas, in Minas Gerais, the Casa de Pedra mine has audited resources of more than 4.4 billion tons of excellent quality iron ore. Its production capacity, which currently stands at 16 million tons, is expected to grow to 53 million tons by 2010.
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CSN’s integrated operations cover the entire
steel production process, from ore extraction
to delivery of the end product to the client. The
synergies captured between its mining, steel
production and logistical activities, together with
its self-sufficiency in almost all the main inputs,
enable the company to minimize costs and, con-
sequently, to maximize returns in the production
and commercialization of its flat steels.
MINING
CSN’s mining activities focus on inputs used
in the production of steel. The company mines
iron ore, limestone, dolomite and tin. In 2005,
CSN supplied all the iron ore required by its
own steel production lines and then sold the
surplus to other Brazilian plants. As from
2006, with completion of the first phase of
expansion of the Sepetiba Port bulk terminal,
this ore will also be exported. The limestone,
dolomite and tin, on the other hand, are
produced solely for CSN’s own consumption.
Once CSN starts to produce cement, the
limestone not absorbed in steel production will
also be used to produce clinker.
CASA DE PEDRA
Located in the municipality of Congonhas, in the
State of Minas Gerais, the Casa de Pedra mine
has audited resources of more than 4.4 billion
tons of excellent quality iron ore and a current
production capacity of 16 million tons of the end
product. In 2005, production reached 13.7 million
tons, of which 54% was consumed by CSN and
43% was sold on the market.
With the Casa de Pedra expansion project,
CSN intends to improve the usage and prolong
the service life of the field. The company aims
to increase its iron ore production capacity to
53 million tons/year. It should reach this target by
the end of the decade.
The first shipments of iron ore abroad are
expected to take place in the second half of 2006.
The Businesses
RESOURCES1
Proven 502
Indicated 1,551
Inferred 2,433
Total 4,487
1 in million tons. Source: Amec - Survey in December 2003
Current Production Production Sales Internal PRODUCTS Capacity1 20052 20052 Consumption 20052
Iron ore 16.00 13.70 5.90 7.40
Limestone 2.45 1.42 0.00 1.30
Dolomite 1.10 0.64 0.00 0.55
1 In million tons. Refers to the capacity for production of finished products. 2 In million tons.
CASA DE PEDRA MINE (million tons)
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With an efficient integrated logistical system at its
disposal that includes a railway (operated by MRS)
and bulk terminal (at the Port of Sepetiba), CSN is
well-positioned to become a competitive player in
the international iron ore market.
BOCAINA
Situated in the municipality of Arcos in Minas
Gerais, the Bocaina mine produces limestone
and dolomite, inputs used as flux materials in
the iron ore blast furnace reduction process.
The mine will also supply the limestone not
absorbed in steel production used to produce
clinker, a raw material of the cement output.
ERSA
Acquired in 2005, for R$ 100 million, Estanho
de Rondônia S.A. (ERSA) comprises the
Santa Bárbara tin mine, in Itapuã do Oeste,
and a smelting facility at Ariquemes, both
in the State of Rondônia. The deposit holds
proven reserves of 25,898 tons and potential
resources of 54,066 tons of tin. The smelting
facility has the capacity to process 3,600 tons
of tin metal per year.
The acquisition of ERSA was a strategic
move on the part of CSN. Tin is used in the
production of tin-plate, a high value-added
coated product used in packaging that is
produced in Brazil exclusively by CSN. The
latter is also one of the five largest tin-
plate producers, worldwide. CSN’s goal is to
increase ERSA’s annual production from the
current 3,600 tons (the volume consumed by
CSN) to 4,800 tons until 2009.
STEELMAKING
CSN’s operations cover the entire steel chain, from
the production of slabs to distribution of the finished
products. At the Presidente Vargas Steelworks, in
Volta Redonda, the Company produces the widest
array of flat steels offered in Latin America. It also
has two galvanizing plants in Brazil, GalvaSud
and CSN Paraná, located near the towns of Porto
Real (in Rio de Janeiro) and Araucária (in Paraná),
respectively. On top of this, CSN also has two plants
overseas. In the United States, it owns CSN LLC,
which boasts pickling, cold-rolling and galvanizing
lines, while in Portugal, it retains a 50% stake in the
steelmaker, Lusosider, which produces galvanized
and tin-plate products.
CSN is Brazil’s only producer of tin-plate – a
steel used in the packaging industry – and Galva-
lume, a steel coated with zinc and aluminum that
is both resistant and visually attractive and which
is used in civil construction. It also produces pre-
painted steel, a high value-added coated product
used in the home appliance and civil construction
industries. In 2005, 51 thousand tons of pre-painted
steel were produced.
METALLURGY
This is the first stage of steelmaking, in which the
ores, flux materials and coals are transformed
into pig iron and, subsequently, into molten steel.
The liquid metal is then cast into slabs.
ROLLING
In the hot-rolling mill, steel slabs are converted
into sheets of various thicknesses. The sheets
The Businesses
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INAL
Largest flat steel distributor in Brazil
333 thousand tons of sales in 2005
Gross revenues: R$ 980 million
12.9% share in the steel distribution market
are then rolled into coils, which can be used in
the manufacture of a variety of products, includ-
ing wheels, pipes and gas cylinders.
In the cold-rolling process, which takes place
after the hot-rolling, the thickness of the sheets
is reduced even further. The resulting products
can then be used in the civil construction and
packaging industries, among others.
COATING
After cold-rolling, the sheets are sent to the
zinc-, chrome- and tin-electrolytic facilities,
where they are transformed into galvanized steel
(used in the civil construction and home appli-
ance industries), or chrome- or tin-plate, both of
which are employed in the packaging industry.
CSN is the only Brazilian company autho-
rized to produce Galvalume, a steel coated with
20% zinc and 80% aluminum. Three times more
resistant than traditional galvanized rolled steel,
Galvalume is used in civil construction, particu-
larly roofing, and side panels.
PACKAGING
Metalic Nordeste S.A., a CSN subsidiary, is
the only producer of two-part steel cans for
carbonated beverages in Latin America. Metalic
has two plants, one producing steel cans and
the other, aluminum can lids.
In 2005, CSN made a positive impression on
the packaging segment with its expanded steel,
a versatile material that allows for creative pack-
aging designs, featuring customized angles and
curves, used in the food industry.
DISTRIBUTION
CSN operates in the distribution market and
provides services through Indústria Nacional
de Aços Laminados (INAL S.A.), which is active
in six Brazilian states. INAL processes and
distributes flat steels, catering to a number
of segments, including the automotive, auto
parts, home appliance, civil construction,
electrical-mechanical equipment, packaging
and furniture industries.
As Brazil’s leading distributor of flat
steels, INAL maintains substantial stock
levels and has the technical capacity to
provide steel-processing services. Moreover,
the flexibility of its structure also allows INAL
to offer its clients special services such as
just-in-time delivery.
LOGISTICS
PORTS
CSN manages two terminals in Rio de Janeiro:
a Bulk Solids Terminal (Tecar) and a Container
Terminal (Sepetiba Tecon), both at the Port of
Sepetiba. A project is currently under way to
adapt and expand Tecar. The plan is to prepare
the terminal, which currently receives imported
coal and coke, to also export iron ore. The
partial inauguration of the iron ore terminal
is due to take place in the second half of 2006,
with an initial shipping capacity of 7 million
tons/year.
Once fully concluded, in July 2007, the iron
ore terminal will have an annual capacity of 30
million tons, which will help establish the
Sepetiba port complex as one of the leading
facilities in the country.
In 2005, Tecar handled 4.7 million tons of
products. The terminal handles coal, petroleum
coke, sulfur, zinc concentrate, pellets, pig-iron,
ferroalloys, soybean and other bulk solids for a
variety of clients, as well as coal and coke for CSN.
The Sepetiba Tecon facility, meanwhile,
handled more than 138 thousand containers in
2005, 43% more than in 2004. With the strong
demand from the container market, which
grows substantially with each passing year, the
The Businesses
TECON
CONTAINERS HANDLED
2003 18,947
2004 96,089
2005 138,036Sepetiba Port: strong demand from the container market has helped make the Terminal one of the largest in Brazil.
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CSN is to invest R$ 4 billion in transforming CFN into ‘Transnordestina’. The works are due to be completed in 2008
Terminal has become one of the largest of its
type in Brazil.
RAILWAYS
CSN holds stakes in two railway companies.
The first, MRS Logística, now runs what was
the South-eastern network of the old federal
rail company (Rede Ferroviária Federal S.A.),
connecting Rio de Janeiro, São Paulo and Belo
Horizonte. The second, Companhia Ferroviária
do Nordeste (CFN), operates the former
North-eastern network, serving the States of
Maranhão, Piauí, Ceará, Rio Grande do Norte,
Paraíba, Pernambuco and Alagoas.
CSN and the Federal Government are to
invest R$ 4 billion in transforming CFN – which
currently uses 2,600 kilometers of rail track
– into ‘Transnordestina’, a new railway with 20
times the current transportation capacity. The
new, expanded system will play an important
role in the development of the North-eastern
region. The works are expected to be concluded
in 2008.
MRS Logística, which concluded nine years
of operations, continues to grow. In 2005, MRS
transported 108.3 million tons of products, a
10.4% increase in volume over the previous year.
In 2005, it focused on serving clients in the heavy
haul segment (carrying ore, bauxite, coal and
coke) and on winning new markets.
MRS’s rail transport services play a vital
role in bringing in raw materials and outflow
of end products. All the iron ore, coal and coke
consumed by the Presidente Vargas Steelworks
The Businesses
are carried by MRS, as is some of the steel
produced by CSN, both for the domestic market
and for export.
In 2005, MRS’s gross revenues reached R$ 2
billion, up 23.3% on 2004. The railway closed the
year with a net profit of R$ 410.3 million. Other
indicators also reflect the results of its efforts:
during the year, MRS reached 120.3 thousand TEU
(20 foot containers) – a 30.9% increase compared
to the 91.9 thousand TEU registered in 2004.
This performance reinforces MRS’s position
as the largest container carrier in the national
rail sector. In 2005, the company achieved 44.4
billion useful ton-kilometers (TKU), surpassing
the 33.1 billion TKU target set by Brazil’s Na-
tional Land Transport Agency.
ENERGY
CSN is one of the biggest industrial consumers
of electricity in Brazil, its consumption being
equivalent to that of the entire Federal District.
Since power is so crucial to its production
process, the company has invested heavily in
electrical generation plants assets in order to
ensure its own self-sufficiency. These assets
are: the Itá Hydroelectric plant in the State of
Santa Catarina, which has a capacity of 1,450
MW and in which CSN retains a 29.5% stake;
the Igarapava Hydroelectric plant in Minas
Gerais, which has a capacity of 210 MW and in
which CSN holds a 17.9% stake; and, finally, the
238 MW thermal power plant that operates at
the Presidente Vargas Steelworks, which CSN
opened in 1999. This plant is fuelled by the waste
gases from the steel production process. The
three plants combined provide CSN with 430 MW
of electric power.
MRS
Gross revenues: R$ 2 billion (23.3% growth in relation to 2004)
Operating Cash Generation (Ebitda): R$ 887.9 million (15.3% more than in 2004)
Net Profit: R$ 410.3 million
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238 MW Thermoelectric plant, operating at the Presidente Vargas Steelworks since 1999
Operating and Financial Performance
RECORD PRODUCTIONLocated in Porto Real, in the State of Rio de Janeiro, GalvaSud specializes in galvanized products catering for the demanding automotive industry. The company, in which CSN retains 100% of the share capital, has a production capacity of 350 thousand tons/year and, in 2005, set a new record: 297 thousand tons.
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PRODUCTION
In 2006, the Presidente Vargas Steelworks will
celebrate 65 years of uninterrupted activity. Over
the past six decades, the business has grown
substantially, particularly in terms of production
volume, product line expansion, environmental
control and productivity. In the 1940s, coal con-
sumption stood at 1,100 kg/t of pig iron; it now
stands at around 600 kg/t. In the 1940s, 125 tons
of crude steel were required to obtain 100 tons of
products; nowadays, just 108 tons are required.
When CSN started operations it had a pro-
duction capacity of 500 thousand tons per year.
Forty years on, while occupying the same land,
the company can produce almost 11 times as
much. One interesting point: only one original
item of equipment is still used in the plant’s op-
Continuous casting system at the Presidente Vargas Steelworks: cutting the steel sheets for production of the coils
Operating and Financial Performance
2000 2001 2002 2003 2004
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PRODUCÃO E CAPACIDADE PRODUTIVA
PRODUCTIVE CAPACITY / OUTPUT
CAPACITY OUTPUT 2005 CAPACITY
UNIT (thousand tons) (thousand tons) UTILIZATION (%)
Coke plant 1,680 1,666 99.2
Blast Furnaces 5,380 4,994 92.8
Steel works 5,750 5,318 92.5
Casting 5,600 5,201 92.9
Hot-rolling 5,100 4,847 95.0
Cold-rolling 4,210 3,470 82.4
Galvanizing 1,525 1,022 67.0
Tinning 1,030 985 95.6
Painting line 100 51 51.0
erations – the temper mill (LE-1), which, having
undergone a number of refits over the years, is
now used just 12 shifts a week.
The Volta Redonda Plant has the capacity to
produce 5.6 million tons a year of crude steel.
In 2005, CSN produced 5.2 million tons – 92.9%
of the installed capacity. Although less than the
95.1% recorded in 2004, this is the second high-
est rate ever achieved in the company’s history.
Production in 2005 was adversely affected by the
breakdown in the Furnas Power System, in Janu-
ary, which caused the temporary shutdown of
blast furnace 3, also causing a partial stoppage
of production in the hot strip mill.
SALES
The Brazilian steel market shrank 7.8% in 2005.
The retraction can largely be explained by two
factors: the lower than expected growth in the
country’s GDP and the relatively high stocks
held by clients in the first half of the year, in the
expectation of future price increases and fear of
a shortage in supply.
In 2005, CSN sold 4.9 million tons, 2.6% more
than in the previous year. Of the total volumes
sold, 59% went to domestic clients, as against
70% in 2004, reflecting the weak performance
of the Brazilian market. CSN LLC and Lusosider,
together, consumed approximately 500 thousand
tons, around 25% of the 1.989 million tons that
were exported.
In Brazil, to minimize the impact of the drop
in domestic steel consumption on the company’s
turnover, the sales department strove to expand
CSN’s client base and strengthen ties with ex-
isting clients, in order to boost its sales of the
higher value-added coated products.
In 2005, CSN consolidated the use of ex-
panded steel in the packaging industry, adding
value to the product through designs for the food
industry that won international awards. To pro-
duce differentiated packaging, CSN worked with
design studios, can manufacturers and the food
industry itself, causing a major impact in the
market.
By focusing on its clients and the market
rather than on the product, the company pushed
up the sales of coated products, which already
account for 50% of the total volumes sold. One of
the highlights was the advance in sales of pre-
painted steel: in 2005, in just its second full year
of production, this line of products from CSN
Paraná reached 50% of its total capacity.
CONSOLIDATED FINANCIAL PERFORMANCE
REVENUES AND COSTS
In 2005, net revenues reached the R$ 10 billion
mark , 2.4% higher when compared to 2004. The
growth in revenues is explained by the increase
in the volume of products sold, which more than
made up for the fall in average prices in the in-
ternational market during 2005.
The rise in the cost of goods sold (COGS),
to R$ 5.5 billion, reflected not only the greater
volume of sales, but also the use of high-priced
coke during the year. Although the price of coke
in the international market declined significantly
during the second half, CSN still held stocks of
the product at 2004 prices. Consequently, the
company anticipates an extraordinary reduction
in the cost of this raw material in 2006.
Operating and Financial Performance
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INAL is the largest individual client for the steel produced by CSN and Brazil’s leading distributor of flat steels
EBITDA AND NET INCOME
The company’s EBITDA in 2005 amounted to
R$ 4.6 billion, with an EBITDA margin of 45.8%,
one of the highest in the world steel industry.
This was the second best performance by the
company in its history, having posted cash gen-
eration – using the EBITDA concept – of R$ 4.8
billion and a margin of 48.9% in 2004. CSN’s net
income amounted to R$ 2 billion, up 1.1% on the
previous year.
FINANCIAL RESULTS
The net financial result in 2005 amounted to an
expense of R$ 761 million, a R$ 48 million (equiv-
alent to 6%) reduction compared to the expense
registered in 2004. As regards the losses aris-
ing from the devaluation of the Brazilian Real in
2001, pursuant to Resolution nos. 404 and 409/01
of the CVM (the Brazilian Securities Commis-
sion), CSN amortized the remaining balance of
R$ 113 million in 2004, which generates a favor-
able effect in the comparison with 2005.
NET INDEBTEDNESS
The net indebtedness at the year end was equiv-
alent to 1x (one time) the EBITDA, holding at
practically the same level as at the close of 2004
(0.98x). Variations in both gross debt and cash
between December 2004 and December 2005
were insignificant.
Adopted since 2003, the strategy of extend-
ing the maturity of the debt proved successful
in 2005: the average maturity increased from
8.2 years to 13.2 years. This achievement was
only possible as a result of the funds raised in
the capital markets during the period. These
amounted to more than US$ 1.2 billion, includ-
ing the issuance of US$ 750 million in perpetual
bonds, in July, which were largely acquired by
Asian investors.
Furthermore, in 2005, CSN anticipated the
payment of contracts with the BNDES, which
related to financing obtained for a number of
investment projects implemented between 1996
and 2002.
Operating and Financial Performance
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EQUITY RESULTS
As in the case of the indebtedness, there was
little variation in the consolidated equity holding
results: in 2005 these amounted to a negative
R$ 55 million against a negative R$ 46 million
in 2004, relating to the amortization of goodwill
from investments.
Income tax / social contributions on profit
In 2005, income tax and social contributions on
profit charges amounted to R$ 869 million, 5.6%
higher than in 2004, due, basically, to the Com-
pany’s higher taxable base. It should be noted
that the 30% effective tax rate stayed in line with
that for the previous year.
INVESTMENTS
In 2005, the annual consolidated capex amounted
to R$ 1 billion, climbing 14% against the R$ 891
million booked in 2004. Of this total CSN invested
R$ 700 million, while MRS and CFN invested
R$ 130 million* and R$ 48 million*, respectively,
in their expansion projects. CSN’s Coal Terminal
adaptation and expansion project alone absorbed
R$ 210 million, equivalent to 30% of the total
amount invested by CSN.
SHAREHOLDER RETURNS
The dividend distribution policy adopted by CSN
in recent years has prioritized shareholder re-
turns, a strategy that has been vindicated given
the growth in free cash flow generated by the
company. The year 2005 proved no exception.
During the period, R$ 2.3 billion were distributed
in dividends, which related to the 2004 financial
year. It is proposed that dividends amounting to
R$ 1.3 billion be distributed for the financial year
ending on the 31st December 2005, of which
R$ 937 million have already been distributed as
advance dividend payments, in February 2006.
PERFORMANCE OF THE STEEL
SECTOR SUBSIDIARIES
CSN PARANÁ
CSN Paraná is a steel rolling and coating plant
located in Araucária, within the metropolitan
area of Curitiba. The plant produces three high
value-added coated products – Galvalume (steel
galvanized with a zinc and aluminum alloy), pre-
painted steel and steel galvanized with a pure
zinc coating – that are increasingly sought by the
civil construction and home appliance industries.
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Average maturity 13.16 years
Average cost 8.93% p.a.
DEBT PROFILE
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* reflects the proportion of CSN’s holding in
these companies.
Production starts with the pickling and
cold-rolling of steel coils, to attain the precise
thickness required by each client. The process
is concluded in the Service Center, which cuts
the steel into sheets, blanks, strips and profiles.
Operational synergies with the nearby INAL unit
have enabled the subsidiary to increase business
with clients from the Southern region of Brazil,
offering a just-in-time supply service.
In 2005, CSN Paraná produced 51 thousand
tons of pre-painted steel, 27.6% more than had
been produced since its inauguration, in Sep-
tember 2003. The company expects to improve
further on this performance in 2006. The plant
has a production capacity for 100 thousand tons
of pre-painted steel per year.
GALVASUD
Located in Porto Real, in the south of the State
of Rio de Janeiro, GalvaSud specializes in
Operating and Financial Performance
galvanized coated products. Its product mix
includes Galvanneal (galvanized steel with
an iron and zinc alloy) and galvanized steel
coated with pure zinc, used for internal and
exposed parts. Both are used in the automo-
tive industry.
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In 2005, CSN expanded its client base and also increased its sales of higher value-added coated products
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5 The company has a hot dip galvanizing line,
with a production capacity of 350 thousand
tons/year; a Cut Service Center, for the benefi-
ciation of flat steels, with a production capacity
of 160 thousand tons/year; and a Laser Welding
Center, with a production capacity of 8 thousand
tons/year.
Galvasud serves clients in both the domes-
tic and foreign markets, offering products such
as galvanized coils; and rectangular, trapezoi-
dal and special shaped blanks, as well as laser
welded blanks – all of which are high value-
added products. It also offers a number of
special services, such as just-in-time delivery
and pre- and post-sales technical assistance.
The company, in which CSN has held 100% of the
share capital since June 2004, set a new record
for production in 2005, of 297 thousand tons.
METALIC
Located in Maracanaú, in Ceará, Metalic is the
only company in Brazil to produce steel beverage
cans. The main material used is tin-plate with a
special DWI (Draw Wall Ironing) steel, a technol-
ogy that in Brazil is exclusive to CSN.
Metalic has two plants. One produces cans,
having the capacity to produce 900 million such
items per year, or around 2 thousand a minute.
The other produces aluminum can lids, having a
production capacity of 1.8 billion units per year.
In 2005, the company sold 645 million complete
cans and a little over 480 million lids, including
sales to clients in Latin America. Its perfor-
mance was improved by 15% in comparison to
2004. Metalic holds 53% of the market share in
canned beverages in the North-east of Brazil,
but just 5% in the South-eastern region.
In its pursuit of growth, part of the challenge
faced by Metalic is cultural. Despite the fact that
steel can is cheaper, more resistant and less
harmful to the environment than its aluminum
counterpart – it takes around five years for a
steel can to decompose, as compared to 110
years for one made of aluminum – steel can
still only accounts for 6.7% of the market share
in Brazil. In Asia, by contrast, 54% of the cans
sold are made of steel, while in some Western
European countries up to 90% of the carbonated
beverage cans are steel.
INAL
Inal is Brazil’s leading distributor of flat steels.
It has four Service Centers fitted with state of the
art equipment and four strategically located Dis-
tribution Centers efficiently covering the entire
country.
The company is the largest individual client
for the steel produced by CSN – in 2005, it pur-
chased more than 330 thousand tons – and has
a portfolio of over 3 thousand clients, to whom it
sells monthly volumes of up to 300 tons.
The company’s strategy of pursuing a high
number of sale orders but with smaller volumes
per sale, together with its value-adding steel
processing services, allows it to obtain an up to
50% higher average selling price per ton than
that practiced directly by CSN, who directly
serves clients that make purchases of at least 10
thousand tons/month.
INAL supply an extensive array of products,
such as coils, rolls, sheets, blanks, metal-
plates, profiles, pipes and tiles, amongst others.
Its clients are from a wide variety of segments in
industry, ranging from the automotive sector to
civil construction.
LUSOSIDER
Situated in the town of Paio Pires, in Portugal,
Lusosider is jointly controlled, on an equal basis,
by CSN and the Anglo-Dutch steel company,
Corus. In 2005, Lusosider achieved a gross rev-
enue of US$ 217 million, producing 85 thousand
tons of tin-plate and 240 thousand tons of galva-
nized products. With the start-up of a new pick-
ling line, production capacity at the plant rose
from 360 thousand to 550 thousand tons a year.
Lusosider is not only a major consumer of the
hot coils produced by CSN – 173 thousand tons in
2005 – it is also an important strategic asset. Al-
though it cannot sell CSN products, since it has
a European partner, the subsidiary provides CSN
with a better understanding of what is happening
in the local markets, particularly in the Iberian
Peninsula.
CSN LLC
This is a plant of cold-rolling and galvanizing
situated in the U.S. State of Indiana. CSN LLC
imports slabs and hot coils produced in Brazil,
which are then processed locally. In 2005, it im-
ported a record volume of 298 thousand tons.
As a wholly-owned subsidiary of CSN, LLC
can also sell the full range of products made by
the company in Brazil. In 2005, LLC underwent
a thorough commercial restructuring process,
building up a sales team of professionals with a
profound knowledge of the local market.
Despite its relatively small size, LLC is an
important strategic asset, providing CSN with a
gateway into the US market, one of the largest
steel consuming markets in the world.
Operating and Financial Performance
Located in the U.S. State of Indiana, CSN LLC underwent a thorough commercial restructuring process in 2005
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5PERFORMANCE INDICATORS
OPERATIONAL Unit 2001 2002 2003 2004 2005
Crude steel production t thousand 4,048 5,107 5,318 5,518 5,201
Sales volume t thousand 4,0451 4,970 5,000 4,744 4,864
Number of employees1 9,179 8,470 8,501 8,175 8,542
Molten steel production t thousand 4,134 5,227 5,461 5,672 5,318
Rolled products production1 t thousand 4,141 4,625 4,810 4,991 4,848
Operational productivity1 t/man/year 646 879 946 1,012 995
FINANCIAL Unit 2001 2002 2003 2004 2005
Gross revenues R$ mm 4,832 6,108 8,292 12,251 12,283
Net revenues R$ mm 3,982 5,165 6,977 9,800 10,038
EBITDA R$ mm 1,699 2,276 3,002 4,789 4,594
EBITDA Margin % 43 44 43 49 46
Gross profit R$ mm 1,702 2,417 3,140 4,802 4,569
Gross margin % 43 47 45 49 46
Net profit (loss) R$ mm 300 (195) 1,031 1,982 2,005
Net margin % 8 (4) 15 20 20
Net profit (loss) R$/thousand shares2 4 (3) 14 8 7
Div. & Interest on own Capital 1 R$ mm 2,754 140 800 752 2,268
Return on Equity (ROE) % 6 (4) 14 30 31
Net debt / EBITDA 2.9 2.1 1.6 1.0 1.0
Net debt / shareholders’ equity % 95.9 99.5 66.2 70.7 71.0
Added value1 R$ mm 2,467 4,890 2,346 5,892 4,925
1 Data from the Parent company.2 Adjusted for dividends and groupings.
Capital Markets
ATTRACTIVE STOCKIn recent years CSN shares have appreciated at higher than market rates, paid substantial dividends and enjoyed healthy liquidity - everything investors like.
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Capital Markets
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Companhia Siderúrgica Nacional stock is
traded on the São Paulo (Bovespa - CSNA3)
and New York (NYSE -SID) stock exchanges.
In 2005, daily trading in CSN shares amounted
to around US$ 20 million on the Bovespa and
US$ 17 million on the NYSE, consolidating its
position as one of the most liquid companies
in the steel industry on both exchanges, a fact
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corroborated by the increase in the shares’
weight in the Ibovespa Index: from 3.7% to 3.9%.
The high liquidity of the stock is a
consequence of the continuing and growing
interest of investors in steel companies shares,
particularly those displaying a sustainable
competitive position, with high profitability and
healthy growth outlook, as in the case of CSN.
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The appreciation of CSN’s stock underscores the competitiveness of the company, which enjoys one of the highest EBITDA margins in the world steel industry
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Capital Markets
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44 | 45
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In Brazil, the steel industry obtained excellent results in the first half of 2005, a fact reflected in the performance of CSN’s shares, which appreciated 18%
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Capital Markets
The company’s shares appreciated in value for
the third consecutive year, having climbed 492%
between January 2003 and December 2005.
CSN closed the year as the eighth highest-
valued steel company in the world, with a
market capitalization of US$ 5.8 billion, almost
double its market value at the end of 2003.
Notwithstanding the real rise in share price
by the year end, the behavior of CSN shares was
relatively cyclical throughout 2005. In the first
quarter, these appreciated 24.6%, with the steel
market starting 2005 at the same accelerated
pace as it ended 2004, and with the prices of
steel and its main inputs remaining at record
levels. In the second quarter, the shares slid
29.6%, reflecting investor fears that the period
of high steel prices was in the end, after seeing
steel price drops of up to 30% on the interna-
tional stage. In the third quarter, the recovery
of the steel price in the international market as
a consequence of demand heated up in some
countries, drove the company’s share prices
back up 36.6% in the period. In the last quarter
these fell again slightly (2.8%) due to profit tak-
ing by investors.
The shares have not only appreciated in
value, but have also provided substantial
returns to their holders by way of dividend
Control room at the Presidente Vargas Steelworks: a member of staff oversees production
46 | 47
RANKING COMPANY MARKET CAPITALIZATION INSTALLED PRODUCTION CAPACITY (US$ Million) (million tons)1
1st Nippon Steel 24,280 32.4
2nd JFE 19,749 31.6
3rd Mittal 18,905 42.8
4th POSCO 17,266 30.2
5th ARCELOR 15,882 46.9
6th ThyssenKrup 10,741 17.6
7th NUCOR 10,383 17.9
8th CSN 5,847 5.5
9th US Steel 5,450 20.8
1 Source: IISI (INTERNATIONAL IRON AND STEEL INSTITUTE) data for 2004. CSN now has a production capacity of 5.6 million tons.
TOP 10 RANKING
payments. Over the past three years, the
company paid around R$ 3.8 billion in dividends,
of which R$ 2.3 billion were paid in 2005,
relating to the fiscal year 2004.
This performance has attracted the
attention of foreign investors, who now hold
between 30% and 35% of the total share capital
in the company.
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48 | 49
Corporate Governance
MORE TRANSPARENCYIn 2005, CSN set up the Audit Committee and formally laid out the responsibilities of its members, who are authorized to take decisions regarding the provisions of the Sarbanes-Oxley Law, such as recommending the contracting of an external auditor and supervising the in-house and external audits.
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Corporate Governance
CSN’s corporate governance efforts are guided
by four concepts:
• Fairness – people are treated fairly.
• Accountability – management must be aware
of their responsibilities and account for their acts.
• Compliance – there must be strict and full
compliance with the legislation in effect.
• Disclosure – the information provided to the
market must be transparent and of a high quality.
INVESTOR RELATIONS
The company’s relations with shareholders
and investors are built upon its commitment to
transparency. In 2005, the Investor Relations
sector improved its mechanisms for communi-
cating with the markets in an effort to broaden
and enhance the transparency of the information
provided about the company. The IR team also
hosted and took part in an intense schedule of
events in order to strengthen relations with mar-
ket analysts and shareholders.
One of the initiatives taken during 2005 to
improve communication was to redesign the
website for investors. The site is now both easier
to use and faster, in terms of navigation and ac-
cess to content. New areas have been created, to
satisfy the demand for given types of informa-
tion. This was made possible by using a system
that monitors the visits to the various different
pages of the site, allowing the company to identify
what types of information are most sought after
by investors. Improvements were also made to
the quarterly earnings releases – another tool
for communication with the market. New types
of information and analysis are now provided,
with more detailed explanations as to accounting
procedures and operations that occur during the
quarter, as well as the inclusion of a section for
guidance. In addition, teleconferences are now
set up to follow the disclosure of the results, in
which the company’s leading executives discuss
the results and the future outlook for CSN, as
well as for the steel industry as a whole.
Indeed, the company’s earnings releases and
information disclosure procedures were rated
amongst the top five in Latin America, according
to the criteria used in the eighth edition of the In-
Meetings with Investors at the Company 56
Lunch with Investors 8
Conferences /Roadshows Brazil 6 São Paulo, Rio de Janeiro, Salvador
Teleconferences with banks 4
Visits to the industrial facilities 3
Conferences /Roadshows Abroad 4 USA, Europe and Asia
EVENTS WITH INVESTORS
vestor Relations Global Ranking. The award dem-
onstrates that the efforts the company is making
to provide the information sought by its investors
are leading in the right direction.
The IR team set up no less than 81 meetings
with investors, in Brazil and abroad, in 2005, in
an effort to forge closer ties to its target public,
always striving to provide the highest quality
service possible. The team endeavors on a daily
basis to clarify doubts and provide information
on the telephone, as well as welcoming visits to
the company by both existing and prospective
shareholders, either at its offices or at its indus-
trial facilities.
SARBANES-OXLEY LAW
In 2005, CSN identified the company’s internal
exposures and controls, so as to improve its
in-house controls in relation to the disclosure
of Financial Information, and furthermore, to
adopt practices in full and strict compliance with
the Sarbanes-Oxley Law. The main measures
adopted were:
• The amendment of the Corporate By-laws,
updating these to provide for the Audit Commit-
tee and establishing the responsibilities of the
members;
• The annual assessment and testing of the in-
house controls, to comply with the requirements
of Section 302;
• The updating of the Code of Ethics (Section 406);
• The setting up of the Audit Committee and
formal statement of the responsibilities of its
members (Section 301);
• The setting up of a channel of communication
through which to receive complaints from staff and
suppliers (Sections 302 and 806), with the creation
of an e-mail address for external use, and a dedi-
cated mail box for in-house use. In 2006, a toll-free
line will also be set up for these purposes.
• The scanning and testing of the in-house
processes and controls for compliance with Sec-
tion 404, to ensure there is an Internal Controls
structure as regards the Financial Statements,
and guarantee its effectiveness and adherence to
the Laws, as well as the reliability of the Finan-
cial Information.
• Preparation of the Manual for the Disclosure
and Use of Information concerning Material Acts
or Facts and the Trading of Securities (currently
in the process of being checked and approved).
US GAAP
The US GAAP Financial Statements are based on
the Securities Exchange Act of 1934, which, pur-
suant to an internal regulation, complies with all
the requirements of the Securities and Exchange
Commission (SEC).
DISCLOSURE OF MATERIAL ACTS OR FACTS
The company has an internal guideline which de-
termines that all disclosures must contain infor-
mation that is trustworthy – correct, proper and
transparent – within the appropriate deadlines,
as set out in CVM 358, of the 3rd January 2002.
All material acts and facts are disclosed to
the markets in which the company’s shares are 50 | 51C
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listed on the Stock Exchanges, first in Brazil,
then in the USA – there being a time lag of ap-
proximately one hour between the releases.
CSN issues quarterly performance reports,
containing approximately 20 pages of informa-
tion. These are released in conference calls with
both Brazilian and foreign investors, which take
place at different times and at which the execu-
tive officers of the company are present. The an-
nual performance report is submitted at an event
in which the leading executives are present.
In 2005, the company undertook the task of
drawing up a manual for the disclosure and use of
information concerning material acts or facts and
the trading of securities, in compliance with the
US Sarbanes-Oxley Law. The manual is currently
in the process of being checked and approved.
CODE OF ETHICS
Although it was not mandatory at the time, hav-
ing only become a legal requirement in 2005, the
CSN companies have had a formal Code of Ethics
since 1998. All staff receive a copy of the Code,
which sets out not only the standards of personal
and professional conduct they are expected to
adhere to in relations with their various publics,
but also a declaration of our conduct and com-
mitments as a company. This Code applies to all
staff of the various CSN companies, and covers
all relations with shareholders, clients, suppli-
ers, unions, communities, government, society
and the communication media.
Information regarding possible ethical viola-
tions or illegal activities are received and dealt
with in the strictest confidence, with no retalia-
tion of any kind being countenanced.
The items that make up the Code of Ethics
are updated periodically, and are regulated ac-
cording to guidelines divulged through the com-
pany’s intranet system. At the last review, which
took place in 2005 and included the participation
of representatives from all the CSN companies,
it was proposed to link the Ethics Committee to
the Board of Directors. The Committee com-
prises the executive officers in charge of Internal
Audits, Human Resources and Legal Affairs.
The Ethics Committee holds ordinary meet-
ings every six months and, when necessary, can
be summoned for extraordinary meetings should
material issues arise that require an urgent deci-
sion. The Committee may also, at their discretion,
invite officers from other sectors of the company
to take part in the meetings.
ADMINISTRATION
Companhia Siderúrgica Nacional is controlled by
Vicunha Siderurgia S.A., which holds 43% of the
shares in circulation. It is managed by the Board
of Directors and the Board of Executive Officers.
The General Meeting of Shareholders – the
sovereign body – meets ordinarily once a year
and, extraordinarily, whenever necessary – in
compliance with the appropriate legislation. It
is responsible for approving any amendments
to the Corporate By-laws and for electing the
members of the Board of Directors.
The role of the Board of Directors is to ana-
lyze and approve the policies and strategies,
and oversee the acts of the Board of Execu-
Corporate Governance
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5
tive Officers. It elects the Executive Officers
and the statutory committees. According to the
Corporate By-laws of CSN, in addition to the
responsibilities attributable to it under law, the
Board of Directors is responsible for, amongst
other tasks:
• Approving the general management direc-
tives, as well as deciding on the general direc-
tion of the company’s business, laying down the
basic guidelines for executive action, includ-
ing as regards production, commercialization,
technology transfers, the use of brands and
patents, investment and financial manage-
ment, as well as ensuring these guidelines are
strictly complied with;
• Examining the company’s books and records,
requesting information concerning specific
documents, business or projects, whether under
way or already concluded;
• Electing or dismissing the members of the
Audit Committee, setting their remuneration,
determining the responsibilities of the Com-
mittee and approving the operational rules
that the latter establishes in order to function
appropriately.
BOARD OF DIRECTORS
The Board of Directors comprises eight mem-
bers, five of whom are independent. Ordinary
Meetings are held on the dates set out in the
yearly schedule approved by the Board. Since the
29th April 2005, the Board has been made up as
follows:
Benjamin Steinbruch – Chairman of the Board of
CSN since the 28th April, 1995 and CEO since the
30th April 2002. He is also Managing Director of
Vicunha Siderurgia.
Jacks Rabinovich – Vice-Chairman of the Board
of CSN since the 24th April, 2001 and a member
of the Board since the 23rd April, 1993.
Antonio Francisco dos Santos – A CSN Board
member since the 25th November, 1997. He
is Chairman of the Board and CEO of the CSN
Investment Club and a member of the Decision-
making Board of the CSN Employees’ Pension
Fund (CBS).
Darc Antonio da Luz Costa – A CSN Board
member since the 29th April, 2004. Mr. Costa
is a corporate planning consultant and guest
Transportation of iron ore at Casa de Pedra
professor for the COPPE postgraduate pro-
gram at the Federal University of Rio de Janei-
ro (UFRJ). Previously he was Vice-President of
the BNDES (National Bank for Economic and
Social Development).
Dionísio Dias Carneiro Netto – A CSN Board
member since the 30th April, 2002. He has been
a professor in the Economics Department at the
Pontifícia Universidade Católica (PUC) of Rio de
Janeiro since 1985 and Director of Galanto Pes-
quisas Econômicas since 1993.
Fernando Perrone – A CSN Board member
since the 26th September, 2002. He has been the
Executive Officer for Infrastructure and Energy
at CSN, CEO of the Empresa Brasileira de Infra-
Estrutura Aeroportuária (Infraero) and Director
of Infrastructure at the BNDES.
Mauro Molchansky – A CSN Board member
since the 24th April, 2001. He was CEO of Globo
Comunicações e Participações S.A. (Globopar)
and, before that, Director of Finance and Investor
Relations for Aracruz Celulose S.A..
Yoshiaki Nakano – A CSN Board member since
the 29th April, 2004. Head of the Economics De-
partment at the Getúlio Vargas Foundation (FGV)
in São Paulo, he was a consultant to the World
Bank and Finance Secretary for the São Paulo
State Government from 1995 to 2001.
AUDIT COMMITTEE
The Audit Committee has the autonomy to
take decisions relating to the provisions of the
Sarbanes-Oxley Law – Sections 301 and 407.
Its main responsibilities include reviewing,
considering and recommending to the Board
of Directors the appointment, remuneration
and contracting of external auditors, as well as
overseeing the performance of the internal and
external audits.
The Audit Committee consists of three in-
dependent members, elected by the Board of
Directors. Members have a one year mandate
and can be re-elected. The Committee meets at
least once every three months and its decisions
must be unanimous. It is currently made up of
Fernando Perrone, Dionísio Dias Carneiro Netto
and Yoshiaki Nakano.
BOARD OF EXECUTIVE OFFICERS
The Board of Executive Officers has four mem-
bers, including the CEO, Benjamin Steinbruch.
The other three members are:
Eneas Garcia Diniz – Executive Officer for Pro-
duction since the 21st June, 2005. Mr. Diniz has
worked at CSN since 1985, and has previously
been General Manager for Hot-Rolling, General
Manager for Maintenance, Director of Metallurgy
and General Director of the Presidente Vargas
Steelworks.
Marcos Marinho Lutz – Executive Officer for
Infrastructure and Energy since the 24th June,
2003. Before joining CSN, he was Managing
Director of Ultracargo S.A. (Grupo Ultra).
Pedro Felipe Borges Neto – Institutional Execu-
tive Officer since the 20th September, 2005. Prior
to joining CSN, he held the posts of Managing
Director, Vice-Chairman and CEO of the Vicunha
Group.
Corporate Governance
Coal at the Sepetiba Port Solid Bulk Terminal (TECAR)
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Coal at the Sepetiba Port Solid Bulk Terminal (TECAR)
Human Resources
TRAINING IN THE WORKPLACEIn 2005, CSN intensified its efforts to standardize the Human Resources management policies in the various units of the company so as to establish common criteria for the activities and appraisal of personnel and results.
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Human Resources
During 2005, CSN adopted a series of measures
that included the mapping out and redefining of
job and salary structures, linking these to the re-
sults each function generates for the company.
CSN recognizes that to achieve its goal of
tripling in size over the next four years, it must be
pro-active in attracting, developing and retaining
the best talent in the market. The main attributes
sought by the company in its staff are professional
competence, the flexibility to deal with constant
change and an ability to focus on results. Fur-
thermore, staff are expected, at all times, to act in
a strictly ethical and professional manner.
INTERNAL COMMUNICATION
CSN understands the importance of good corpo-
rate communication within the company. It there-
fore employs a variety of channels to communi-
cate with its staff. These include: memos, both
printed and electronic, to transmit news quickly
and efficiently; a printed bimonthly magazine; an
intranet system, to provide information and tools
to the different areas; an e-mail system, with
specific addresses for press relations, internal au-
diting and the ethics committee, amongst others;
notice boards, banners and billboard posters.
INVOLVEMENT OF STAFF IN MANAGEMENT
CSN’s organizational structure is constantly
evolving to make its operations as efficient as
possible and to respond more quickly to our
clients and the market, offering a high quality,
competitive service.
Most of the changes aim to bring manage-
ment closer to the factory floor, providing for and
requiring a more open form of administration
that is accessible to the staff.
In 2005, two initiatives designed to involve
staff in management stood out - the Quality
Cycle and the Technological Seminar. The lat-
ter allows staff to participate and contribute
with technical work, geared towards improving
systems and the growth of the company. The two
projects award prizes to the best pieces of work,
based on criteria such as profitability, increases
in productivity and the reduction of costs.
PROFIT SHARING SCHEME
The Profit Sharing Scheme is company-wide and
pegged to the corporate earnings. All company
areas have targets that must be met during the
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Staff at the Port of Sepetiba:
training, health and safety
year. The amount payable is calculated based on
the average target fulfillment over all areas, tak-
ing the company as a whole.
WORK SAFETY
CSN strives to promote safety in the workplace.
The company runs progressive accident pre-
vention programs that focus on establishing a
safety-driven attitude amongst staff and include
subcontracted personnel. There are weekly
meetings to analyze and improve the corrective
and preventative measures in place.
SKILLS AND PERFORMANCE EVALUATION
Executives are assessed on a 360 degree basis,
using a model that considers their performance
and competence in nine skills, divided into three
categories: business, personal qualities and lead-
ership. This tool is one of the means used to iden-
tify talent and potential staff, to select personnel
for key positions, to pinpoint areas that require de-
velopment, and to prepare staff retention and suc-
cession programs. The 360 degree model was first
introduced five years ago and provides guidelines
for executive development, as well as impacting on
the profit and earnings sharing scheme.
BENEFITS
The company offers a range of benefits to its
staff, including medical care, life insurance, day
nursery allowance, maternity and child support,
funeral allowance, and special agreements with
pharmacies, amongst others.
At the Presidente Vargas Steelworks, for
example, a Social Security office has been set
up to help with social security benefit applica-
tions, such as for sick leave and pensions. A
request for sickness support, for example, which
would normally take up to 90 days for the INSS
(the Brazilian national social security service) to
process, if handled through the ‘Prisma’ office, is
cleared in around 30 days.
TRAINING AND DEVELOPMENT
CSN offers a number of opportunities for staff
training and development. More than 2,000 staff
have completed their primary and secondary
education through the company’s Programa
Educar (Educate Program), which was set up at
the Presidente Vargas Steelworks in 1998. The
program is fully funded by the company, which
provides the classrooms and organizes classes
and teachers, setting up agreements with educa-
tional establishments.
The program also includes technical training
courses sponsored in conjunction with Fundação
CSN’s Pandiá Calógeras Technical School. New
courses in Electrical mechanics and Metallurgy
are now being run every year for CSN staff, who
invariably then go through internal recruitment
processes and rise to technical posts.
All operational staff undergo workplace
training in company practices and processes,
safety awareness and environment-related is-
sues when they join the firm, before they take
part in any operational / production activities on
their own. The knowledge required for each posi-
Human Resources
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tion is defined and observed to ensure that every
professional has the knowledge and skills nec-
essary to carry out their respective functions.
The company offers a number of partial schol-
arships to staff to study at university in order to
further their personal and professional develop-
ment. CSN staff can apply to be selected for these
benefits at the start of each academic year.
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5 December 2005 saw the introduction of the
Equipe de Valor (Valuable Team) Program, ini-
tially involving 240 staff from the Presidente Var-
gas Steelworks. This program aims to develop
potential company leaders and is geared to all
those responsible for managing other employ-
ees, from supervisors to managers. All such
personnel from all CSN companies will eventu-
CSN offers staff a series of benefits, such as medical care, life insurance, nursery day-care allowance, maternity and child support
Human Resources
ally be included. The two-year program will al-
low CSN to standardize its managerial practices
and ensure the participants’ commitment to its
corporate strategies. In 2006, the program is to
be extended to a further 180 members of staff
from other CSN business units.
HEALTH AND QUALITY OF LIFE
CSN promotes a better quality of life at the work-
place through various projects geared to health-
care. The company runs programs to combat drug
addiction and smoking, as well as for the preven-
tion of cancer, stress and Aids, amongst others.
In September 2005, after observing that
orthopedic problems were the leading cause of
sick leave and disability retirements, the com-
pany set up a Physiotherapy Center at the Presi-
dente Vargas Steelworks, which provided 255
consultations for 21 members of staff. Besides
its healing treatments, the Center also plays a
preventative role, promoting better ergonometric
practices in the workplace and physical exercise
in the day-to-day routines of the staff. Another
initiative worthy of mention is the Semana de
Conservação Auditiva (Hearing Preservation
Week) which, in 2005, examined and provided
guidance to 4,707 personnel.
RETIREMENT PREPARATION PROGRAM
CSN offers a Retirement Preparation Program
aimed at providing advice to personnel and their
spouses for this new phase in their lives. The
couples are invited to spend time at company, at-
tend talks and discuss any doubts they might have
on the subject. In 2005, 104 personnel took part in
this program, which covered themes such as the
rights of workers, of pensioners and the family,
health, and the social integration of pensioners.
RETIREMENT
In 2005, 87 staff applied for retirement (212 ap-
plied in 2004). In each case there is a process
that needs to be followed, namely: the calcula-
tion of the period of service (prior calculation);
the filing of a formal request through a system
linked to the National Institute of Social Security
(INSS); consultations in person and by tele-
phone to obtain information on the status of the
request; and the contacting of the employee as
soon as the process is completed.
CBS
CSN offers its personnel a private pension
scheme, managed and administered by CBS
Previdência, formerly the ‘Caixa Beneficente dos
Empregados da CSN’. The scheme is open to all
personnel, who can join or leave it at any given
moment. The CBS Previdência scheme admin-
isters a fund of approximately R$ 1.5 billion. In
2005, the fund achieved a profitability of 11.51%
in the year, enjoying a R$ 139.6 million surplus.
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CBS
Retirees 10,940
Beneficiaries 5,391 (dependents who receive pensions following
the death of the participating member)
Dependants of retirees and beneficiaries 26,169 dependents
Funds injected every month in Volta Redonda R$13,850,000.00/month (average for 2005)
Share of the city’s gross product 33%
MILLENIUM PLAN RETURN X ACTUARIAL TARGET (INPC + 6% P.A) X SAVINGS
YEAR Millenium Plan Return Actuarial Target (INPC + 6% p.a) Savings
2001 25.35 16.00 8.59
2002 15.36 21.61 9.14
2003 41.06 17.01 11.10
2004 16.49 12.51 8.10
2005 17.63 11.37 9.18
Social Responsibility
AN EXERCISE IN CITIZENSHIPIn 2005, Fundação CSN invested R$ 20 million in socially responsible projects geared towards education, culture, community development, sports and oral health, serving more than 200 thousand people in 12 municipalities across five Brazilian states.
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Social Responsibility
SOCIAL RESPONSIBILITY
CSN believes firmly that in order to achieve its
goals it must be transparent and ethical in its
relations with its stakeholders – the staff, share-
holders, clients, investors, suppliers, service pro-
viders, government and society as a whole – and
fulfill its role in society in a responsible manner.
The company understands that the quality of
life enjoyed by its personnel and the surrounding
communities is just as important as the busi-
ness itself. CSN’s activities in the field of social
responsibility are channeled through Fundação
CSN (the CSN Foundation).
FUNDAÇÃO CSN
The work of Fundação CSN is guided by a com-
mitment to improving the quality of life and the
social development of the communities in which
the company is present.
In 2005, Fundação CSN invested R$ 20 million
in education, cultural, sporting and health –
related projects serving more than 200
thousand people, in 12 municipalities across
five Brazilian states.
The Foundation’s efforts focus on projects run
in partnership with carefully chosen institutions
that display the capacity to generate results,
transform people’s lives and be self-supporting.
The underlying philosophy is that the part-
nering institutions must be able to generate
income to reinvest in the projects and thus en-
sure their long-term sustainability. This is the
only way to promote effective and lasting social
change in the communities.
Fundação CSN maintains two schools that
offer high quality technical training for young-
sters: the Escola Técnica Pandiá Calógeras, in
Volta Redonda, Rio de Janeiro, and the Centro de
Educação Tecnológica General Edmundo Macedo
Soares e Silva, in Congonhas, Minas Gerais.
In addition to its partnerships with private in-
stitutions, Fundação CSN forges agreements with
the local authorities in the areas in which it oper-
ates, seeking to set up projects that provide work
In 2005, Fundação CSN invested R$ 20 million in educational, cultural, social, sporting and health-related projects
training, generate jobs and income, and encourage
the digital and social inclusion of the population.
In 2005, the Garoto Cidadão (Child Citizen)
project, which caters to underprivileged chil-
dren and teenagers, received the LIF award for
Freedom, Equality and Fraternity, granted by the
France-Brazil Chamber of Commerce, in recogni-
tion of its immense contribution to the country.
The award highlighted the project’s efforts to
develop responsible citizens, fostering talents and
stimulating self-esteem, and to thereby lay the
foundations for a better future. In 2006 the project
is to be introduced in other towns in which Funda-
ção CSN is active, starting with Congonhas.
FUNDAÇÃO CSN PARTNERSHIPS IN 2005
The Projeto Informática e Cidadania
(Information Technology and
Citizenship Project)
This is a digital and social inclusion initiative
developed in partnership with the Committee for
the Democratization of Information Technology
(CDI) that aims to train underprivileged young
people and adults in order to help them enter the
job market.
The hallmark of the project is the attention
given to personal growth and the building of
self-esteem, using computers and IT as tools to
develop genuine citizenship.
In addition to its work with young people and
adults, the project also caters to children and
teenagers from underprivileged backgrounds,
providing them with an outlet to occupy their free
time. To take part the youngsters have to be en-
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5 The program provides for Information Tech-
nology and Citizenship Schools to be set up in all
the cities and towns where CSN is present, al-
ways in partnership with the CDI. There are cur-
rently ten schools up and running – in the mu-
nicipalities of Itaguaí, Volta Redonda and Barra
Mansa (Rio de Janeiro), Araucária (Paraná) and
Arcos and Congonhas (Minas Gerais). Three new
schools were opened in 2005, in Barra Mansa,
Arcos and Volta Redonda.
The Fundação CSN e Você contra a fome
(Fundação CSN and You against hunger)
Campaign
This campaign is run every year at Christmas
time. In 2005, Fundação CSN raised 64.5 tons of
foodstuffs, donated to around 120 entities that pro-
vide social assistance. The campaign covered all
the areas in which CSN operates: in Volta Redon-
da, the surrounding region and Itaguaí (RJ); Arcos
and Congonhas (MG); Araucária (PR); Fortaleza
and Maracanaú (Ceará); Arquimedes (Rondônia);
and Mogi das Cruzes and São Paulo (SP).
The Garoto Cidadão (Child Citizen) project
Set up in 1999, the project aims to promote
the social, educational and emotional develop-
ment of children and teenagers between the
ages of 8 and 18, helping to create citizens with a
capacity to think critically, through their partici-
pation in musical and artistic activities. To take
part the students must be enrolled in the Public
Education System.
The choice of which activity the children and
teenagers will take part in – whether music,
drama, ballet or art – depends on their skills, a
judgment based on the experience gained after
six years observing the artistic talents of each
one, and on their own preferences.
Cultural activities are backed up by recreational
pastimes that encourage integration and interac-
tion. The project also offers food – with supple-
mentary meals for the children and a basic food
basket for their families, dental treatment, trans-
port and uniforms for all participants, as well as
support work by psychologists and social workers.
The activities offered by the Garoto Cidadão
project are intended to help improve the quality
of life and interpersonal relationships not just
of the children and teenagers who take part, but
also, indirectly, those of their families.
The workshops that involve the families en-
courage greater integration, which generates ad-
ditional benefits for the children and teenagers,
such as better performance in their activities
both in and out of school. Family participation is
essential, particularly to avoid the exploitation of
child labor, a practice that, unfortunately, is still
relatively common amongst low income families.
The Garoto Cidadão methodology is based on
the four pillars set out by UNESCO in its educa-
tional policy for the 21st Century: learn to know,
learn to do, learn to live together and learn to be.
These concepts include cognitive and techni-
cal aspects (to know and to do) and human and
relationship skills (to be and to live together),
emphasizing that educational development
should not focus only on knowledge – it must
also encourage creativity, the control of emo-
tions and feelings, the establishment of ethical
values and the capacity to relate to other people.
The specific aims of the project are to raise
and/or develop the self-esteem of children and
teenagers when in social risk; to provide for the
inclusion and, particularly, the social transfor-
mation of all participants; to stimulate inte-
gration between children, teenagers and their
families; and to contribute to the development of
social technology.
• Music
The project includes classical, contemporary
and popular music, with particular emphasis on
renowned Brazilian composers. The youngsters
are taught to play instruments (strings, wind,
brass and percussion) and to sing. There are
also theoretical lessons such as on the history
and understanding of music.
The idea is to develop the students’ instru-
ment-playing skills and critical capabilities, in-
cluding their musical taste, ear, sensitivity, tone
and rhythm.
Group performances are put on throughout
the year, and feature experimental band, cham-
ber and symphonic orchestra music, with stu-
dents working together on stage, thus encourag-
ing both discipline and cooperation.
• Ballet
Ballet encourages students to explore the
potential of their body, developing their mo-
tor skills and musical coordination, as well as
corporal and facial expressions. For children
and teenagers to be able to move with ease and
precision, and thus express their own individual
Social Responsibility
The Garoto Cidadão Project contributes to the development of children and teenagers through musical and artistic activities
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The Garoto Cidadão Project contributes to the development of children and teenagers through musical and artistic activities
personalities, it is essential that they acquire and
master such skills.
The purpose of ballet is to develop, through
movement, a consciousness of the complete
individual (body, mind and emotion) and corpo-
ral self-awareness, through social interaction.
These skills are clearly evident at the end of year
show in which all the dancers take part.
• Art
The art activities include painting, drawing,
sculpture, clay-modeling and graffiti, amongst
others. The aim is for students to learn and
make connections between the different forms
of expression, transforming and expanding their
understanding and sensibility, knowledge, imagi-
nation and capacity to produce art. Using the
different forms, the students are encouraged to
think about art individually or in groups.
• Drama
The theater workshops aim to develop the
ability of the students to interact, and to express
themselves through movement and speech, as
well as their corporal, visual and hearing senses.
In this way, they stimulate creativity, the imagi-
nation and memory.
The methodology followed involves interac-
tive games, play activities, the study of texts,
physical body training and vocal exercises. At
the end of each year, a Theater Festival is put on
featuring plays by a variety of authors, largely
Brazilian, who write for younger audiences. In
2005, the Festival featured works by the author,
Maria Clara Machado.
Social Responsibility
• The “SER e CONVIVER”
(To Be and Live Together) Workshop
The Garoto Cidadão Project uses cultural
development as a way to reveal a social cultural
identity. At the same time, it emphasizes that
one’s personal development should also be
steadily encouraged. In this way the discovery of
the social cultural identity occurs together with
that of the individual, leading to both individual
and collective growth.
The program is split into modules and covers
topics such as the Statute for children and teen-
agers, Personal identity, Ethics and citizenship,
Personal attitudes, the Importance of the group,
Interpersonal communication, Sexuality and Life
planning.
• The “ACONTECER” (To Happen) Workshop
The Garoto Cidadão Project also offers work-
shops to strengthen family integration, following
a specific methodology. The workshops work
with the families in connection with the personal
development of the child, interlinking the devel-
opment of the individual and the group.
The program is split into modules and cov-
ers topics such as the Statute for children and
teenagers, Personal hygiene, Ethics and citizen-
ship, Domestic violence, the Importance of the
group, Notions of law, nutrition and education,
amongst others.
• Social and Cultural Workshops
The main target of these workshops is chil-
dren and teenagers attended by social insti-
tutions that have agreements with Fundação
CSN. The aim is to accentuate the charm and
playfulness of the artistic activities of the Garoto
Cidadão project, encouraging more access to art
and culture in the communities.
• Technological Education Center
The Centro de Educação Tecnológica Gen-
eral Edmundo Macedo Soares e Silva (CET) first
opened more than 40 years ago and provides
young people with professional training and
qualifications. It also offers companies in the
Alto Paraopeba (MG) region a source of high
quality personnel.
The Center offers seven courses: Industrial
apprenticeship, Secondary schooling, Adminis-
tration, Mining, Work safety, and Electrical-tech-
nical and Electrical-mechanical training.
Through its Oral Hygiene Center, Fundação CSN attends around 500 people, from babies to adults
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5 In 2005, there were 498 students enrolled, 97
with full and 18 with partial scholarships. There
were also 79 students with internships at various
firms in the region.
• The Pandiá Calógeras Technical College (ETPC)
The ETPC, which is located in Volta Redonda
(RJ), prepares teenagers for the job market and
university. The quality of the teaching, the equip-
ment and facilities at the college have made it a
benchmark for technical/professional training
and secondary education. The ETPC offers six
courses: Metal-mechanics, Electrical-mechan-
ics, Electronics, Information Technology, Tele-
communication and Telematics.
In 2005, the college had 1,282 students en-
rolled, of whom 410 enjoyed full or partial schol-
arships. Furthermore, 84 students had profes-
sional training internships offered in a scheme
set up by the local government of Porto Real, in
conjunction with Fundação CSN and GalvaSud:
21 in Electrical Maintenance, 20 in Mechanical
Maintenance and 43 in Oxy-acetylene Cutting/
Welding. All student interns also had refresh-
ments and transport provided.
In 2005, 939 young people from the public
and private education systems of Volta Redonda
attended the Professional Guidance and Lec-
tures Circuit, a scheme run by the ETPC.
During the year, the ETPC, through its stu-
dents, continued to run Social Responsibility
projects, providing assistance to underprivileged
communities and to homes for senior citizens.
The students organized campaigns for the dona-
tion of food, clothing and toys for underprivileged
children, as well as personal hygiene items for the
residents of the Dom Bosco Home for the Elderly.
Sport and Citizenship
The Recreio sport and leisure center of Funda-
ção CSN occupies an area of 47 thousand square
meters. The facility boasts a multi-sport gym hall,
an aquatic park with three pools, sports grounds
with both an artificial and natural grass field, a
sand court, two tennis courts, an athletics track
and kiosk, as well as an exercise gym and car park.
Two sports-based social projects are run at
the center, based around volleyball (Viva Vôlei)
and badminton (Núcleo de Badminton), the lat-
ter being run in partnership with the Brazilian
Badminton Confederation. Each one caters to 80
children and youngsters from public schools in
the Médio Paraíba region of Rio de Janeiro.
The Recreio also offers leisure activities for
the community in general, including internal,
regional and state Sporting Tournaments; recre-
ational events like on Children’s Day; Environ-
ment Week; Open days showing the sports
courses offered; the Dance Festival; and the
Swimming Festival, amongst others.
Besides the Social Sporting projects, the
Recreio runs 17 courses and leisure activities for
its own members. These cater for both begin-
ners and the more advanced, and cover a variety
of field, court, pool and gym activities.
Moreover, the center promotes leisure events
geared to all age groups. In 2005, these included
the Summer project, featuring live music at the
pool; the Holiday Camp; Happy Hour; the Dance
Festival; the Children’s Day celebrations; an Eco-
Social Responsibility
logical Walk; Sports Tournaments; Sports Festi-
vals and the Cycling Tour, to name but a few.
The Fundação CSN Cultural Center
Located in the city of Volta Redonda, in Rio de
Janeiro, the Center has established a reputation
for artistic information, development and advance-
ment. Renowned professionals help discover,
train, and develop artists, musicians, producers
and cultural agents from the city and the entire
southern region of the State of Rio de Janeiro. The
Center’s prime objective is to foster and dissemi-
nate culture, and to stimulate its widespread ap-
preciation, through seminars, workshops, lectures,
exhibitions, recitals and concerts.
The Cultural Center features an art gallery, cul-
tural garden, multi-cultural room, cultural corridor
and rooms for courses and workshops, as well as a
hall for lectures and performances. Its challenge is
to become an instrument for social change through
Culture, by discovering and developing talent, by
disseminating and broadening the access of the
community at large to cultural values and by en-
couraging the development of those values.
During 2005, the Cultural Center directly
served more than one thousand people, com-
prising teachers, students, and other profession-
al workers involved with the events and activi-
ties. A further 25 thousand visitors also benefited
from the various cultural activities on offer.
The Fundação CSN Experimental Band
and Orchestra
These groups are formed by children and teen-
agers from underprivileged communities in the
Children and teenagers who participate in the Fundação CSN Orchestra learn to play string, wind and percussion instruments
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Children and teenagers who participate in the Fundação CSN Orchestra learn to play string, wind and percussion instruments
south of Rio de Janeiro who are registered with
support institutions accredited by Fundação CSN.
The program offers practical orchestra
classes, featuring string (violin, viola and cello),
wind or brass (recorder, fife, flute, clarinet,
saxophone, trumpet, trombone and tuba) and
percussion (snare, cymbals, timpani, drums,
symphonic drum, full drum set, vibraphone and
bells) instruments. The musical lessons are
rounded off with workshops on choir-singing, vo-
cal techniques, and musical theory, history and
perception. The students also take part in or-
chestral rehearsals and concerts and chamber
music activities, which are conducted every day
at the Fundação CSN Cultural Center.
In December 2005, the Orchestra put on a
“Brazilian Classics” Concert, in which the Brazil-
ian Youth Symphony Orchestra took part. The
event, which was held in the Recreio Gym Hall,
in Volta Redonda (RJ), attracted an audience of
around 5 thousand people.
Community Workshops
The Trupe do Aço (Steel Troupe) sets up social
cultural workshop schemes in underprivileged
communities, giving children and teenagers ac-
cess to cultural events and training in music,
theater and the visual arts. The project involves
producers, actors, musicians, artists and dancers.
The schemes have a number of aims, namely:
to stimulate family well-being and integration
through meetings, performances and workshops;
to help create audiences to revive interest in Cul-
ture; to encourage youngsters to form cultural
groups in their communities; and to encourage
the inclusion and, above all, the social transfor-
mation of all participants. In 2005, the Community
Workshops directly and systematically involved
more than 1,500 children and teenagers.
Caravana Cultural (Cultural Caravan) –
A Tale of Steel and Daring
In 2005, Fundação CSN toured the country
with the Caravana Cultural - Uma História de Aço
e Ousadia project, in which researchers, poets,
musicians and actors took part, and which in-
volved youngsters assisted by the Garoto Cidadão
Project, as well as members of the Fundação
CSN Symphonic Orchestra.
More than 32 thousand spectators enjoyed the
onstage musical, which tells the story of the min-
ers who migrated to the southern part of the State
of Rio de Janeiro in search of a new life and helped
build the largest steelworks in Latin America – the
Presidente Vargas plant, CSN’s industrial heart.
Fundação CSN raised and purchased more
than 30 tons of food for donation to institutions
that provide social assistance in the towns and
cities in which the shows were put on.
The Itaguaí Community Library
As part of its efforts to promote the social
development of the communities in which it is
present, CSN and Fundação CSN, together with
the Instituto Ecofuturo and Itaguaí Education
Department, developed a project in 2005 to set
up a Community Library in the municipality of
Itaguaí (RJ), where the Port of Itaguaí is located.
This was the first step in a program to encour-
age reading amongst children and teenagers in
the town. It is hoped the library will benefit more
than 1,500 youngsters from the region.
Oral Hygiene Center
Through its Oral Hygiene Center (CSO),
Fundação CSN, in partnership with local authori-
ties and NGOs, runs community projects geared
towards oral health. All the projects run by the
Center, which include the Sorriso Amigo (Friend-
ly Smile) and Educar para Prevenir (Educate
to Prevent) initiatives, form part of the Sorriso
Novo (Fresh Smile) scheme. The Center attends
around 500 people, including babies, children,
teenagers, young people and adults.
The Rindo à Toa (Laughing Openly) Project
Run by Fundação CSN, in partnership with
the local authorities of the towns where the
company is present, this project focuses on oral
health, with an emphasis on education and pre-
vention. The scheme caters to students from the
state school educational system, up to 4th grade
(primary).
The students are given fluoride treatment and
oral physiotherapy. They also attend talks, watch
films and even take part in short plays that un-
derscore the importance of oral hygiene. One of
the hallmarks of the scheme is precisely this use
of drama as a tool to motivate the children.
In 2005 the project benefited 12 thousand
children from the municipality of Itaguaí, who
each won a dental kit (toothpaste, dental floss
and toothbrush). In 2006, the project is to be
introduced in other towns and cities covered by
Fundação CSN, starting in the municipality of
Quatis, in the State of Rio Janeiro.
Social Responsibility
2005 ANNUAL SOCIAL BALANCE SHEET – IBASE
COMPANY
1 - Basis of Calculation 2005 Amount (R$ thousand) 2004 Amount (R$ thousand)
Net Revenues (NR) 8,173,977 8,134,492
Operating Result (OR) 2,578,033 2,993,096
Gross payroll (GP) 373,826 317,520
2 - Internal Social Indicators Amount (thousand) % of GP % of NR Amount (thousand) % of GP % of NR
Food 17,406 4.66% 0.21% 7,902 2.49% 0.10%
Mandatory payroll taxes 107,448 28.74% 1.31% 108,810 34.27% 1.34%
Private pension plan 68,908 18.43% 0.84% 66,050 20.80% 0.81%
Health 48,573 12.99% 0.59% 43,303 13.64% 0.53%
Work Health and Safety 30,263 8.10% 0.37% 35,778 11.27% 0.44%
Education 625 0.17% 0.01% 822 0.26% 0.01%
Culture 0 0.00% 0.00% 0 0.00% 0.00%
Training and development 1,066 0.29% 0.01% 1,322 0.42% 0.02%
Day-care/day-care allowance 85 0.02% 0.00% 92 0.03% 0.00%
Profit/income sharing scheme 51,866 13.87% 0.63% 51,462 16.21% 0.63%
Other 11,876 3.18% 0.15% 1,583 0.50% 0.02%
Total - Internal social indicators 273,223 73.09% 3.34% 262,665 82.72% 3.23%
3 - External Social Indicators Amount (thousand) % of OR % of NR Amount (thousand) % of OR % of NR
Education 8,093 0.31% 0.10% 7,700 0.26% 0.09%
Culture 1,066 0.04% 0.01% 563 0.02% 0.01%
Health and sanitation 382 0.01% 0.00% 412 0.01% 0.01%
Sports 2,084 0.08% 0.03% 2,160 0.07% 0.03%
Nutritional support /allowance 0 0.00% 0.00% 0 0.00% 0.00%
Other 1,897 0.07% 0.02% 1,170 0.04% 0.01%
Total contributions to society 0 0.00% 0.00% 0 0.00% 0.00%
Taxes (excluding payroll taxes) 2,244,075 87.05% 27.45% 2,379,450 79.50% 29.25%
Total - External social Indicators 0 0.00% 0.00% 0 0.00% 0.00%
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4 - Environmental Indicators Amount (thousand) % of OR % of NR Amount (thousand) % of OR % of NR
Investments related to company production/ operations 229,243 8.89% 2.80% 159,436 5.33% 1.96%
Investments in external projects and/or programs 0 0.00% 0.00% 0 0.00% 0.00%
Total environmental investment 229,243 8.89% 2.80% 159,436 5.33% 1.96%
With regard to the setting of ‘annual targets’ for minimizing ( ) has no targets ( ) achieves to 51 a 75% ( ) has no targets ( ) achieves to 51 a 75% waste, general consumption in its production / operations, ( ) achieves 0 to 50% (X) achieves to 76 a 100% ( ) achieves 0 to 50% (X) achieves to 76 a 100% and increasing its efficiency in the use of natural resources, the company
5 - Staff Indicators 2005 2004
No. of employees at the year end 8,542 8,175
No. of employees hired during the year 1,076 498
No. of outsourced personnel 11,606 10,465
No. of interns 102 92
No. of employees above 45 years of age 1,985 1,740
No. of women working at the company 621 570
% of management positions occupied by women 9.60% 9.30%
No. of Afro-Brazilians working at the company 2,091 1,904
% of management positions occupied by Afro-Brazilians 3.40% 4.00%
No. of employees with disabilities or special needs 41 32
6 – Material Information relating to corporate responsibility 2005 2006 Targets
Ratio between the highest and lowest remuneration package at the company 0 0
Total number of work-related accidents 48 0
The social and environmental projects developed ( ) top executives (x) top executives ( )all employees ( ) top executives (x) top executives ( )all employees by the company were selected by: and middle management and middle management
Health and safety standards ( ) top executives (x) top executives ( )all employees ( ) top executives (x) top executives ( )all employees at the workplace were set by: and middle management and middle management
As to worker union freedom, ( ) does not ( ) follows (x) encourages ( ) does not ( ) follows (x) encourages right to collective negotiation get involved ILO rules and follows get involved ILO rules and follows and internal representation, the company: ILO rules ILO rules
Company pension plan covers: ( ) top executives ( ) top executives (X)all employees ( ) top executives ( ) top executives (X)all employees and middle management and middle management
Profit-sharing scheme covers: ( ) top executives ( ) top executives (X)all employees ( ) top executives ( ) top executives (X)all employees and middle management and middle management
In selecting suppliers, the same ethical and social environmental ( ) are not (x) are ( ) are ( ) are not (x) are ( ) are responsibility standards as adopted by the company: considered suggested required considered suggested required
In relation to volunteer work by employees, the company: ( ) does not ( ) supports (x) organizes ( ) does not ( ) supports (x) organizes get involved and encourages get involved and encourages
Total number of consumer claims and complaints: at the company at Procon in Court at the company at Procon in Court __________ __________ __________ __________ __________ __________
% of claims and complaints solved: at the company at Procon in Court at the company at Procon in Court _________% _________% _________% _________% _________% _________%
Total added value to distribute (R$ thousand): In 2005: 4,925 In 2004: 5,892
Added value allocation: 54.6% government 9.8% staff 48.7% government 7.5% staff 24.3% shareholders (2.6)% third parties 39.1% shareholders 3.3% third parties 13.9% retained 1.5% retained
7 - Other information
2005 ANNUAL SOCIAL BALANCE SHEET – IBASE (continued)
Day of the Smile
On this day a number of activities are run
to encourage the practice of oral hygiene
amongst children from the state school sys-
tem between the ages of 3 and 14. Trained
dental hygiene staff target the different age
groups using various kinds of light-hearted
educational, recreational and preventative
activities organized for both the students and
their parents.
In 2005, ‘Day of the Smile’ events took
place in towns in the southern region of the
State of Rio de Janeiro and in Congonhas,
Minas Gerais.
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5
Environmental Responsibility
GREEN LIGHTIn 2005, CSN invested more than R$ 200 million in environmental studies, measurements and works. The year saw intense environmental licensing activity in relation to the company’s new mining, logistical and cement projects.
THE ENVIRONMENT
CSN’s environmental management efforts are
geared towards prevention. The company uses
equipment featuring state of the art control
technology to constantly monitor and manage its
environmental risks.
Its Internal Environmental Management
Committee, in which staff from all areas of the
company participate, meets every week to dis-
cuss any problems that have arisen and to identi-
fy any preventative action that can be taken in the
different areas of production so as to minimize
future environmental risks. At CSN, environmen-
tal concerns are a major factor in guiding the
way production is managed, together with safety
and quality.
The year 2005 saw intense environmental
licensing activity undertaken in relation to the
company’s new mining, logistical and cement
production projects.
Of the new investments, the most substan-
tial related to the works undertaken at the Port
of Itaguaí’s Solid Bulk Terminal (TECAR), where
the company intensified efforts to implement
the environmental control systems and equip-
ment provided for under the Environmental
Commitment Agreement (TCA) signed with the
Rio de Janeiro State Government on the 30th
November, 2001 and then revised on the 24th
May, 2004.
Several projects were completed at TECAR,
including the system for drainage and treatment
of the effluents arising from pier washing opera-
tions and the installation of collector channels
Environmental Responsibility
and humectant systems for the ship unloaders,
which prevent the spillage of waste into the sea
and the dispersion of dust into the atmosphere
during the unloading of bulk materials.
A number of other projects are in the final
stage of completion, such as the modern system
for the collection and treatment of effluents from
the solid bulk stockyards and the water sprin-
kling systems that cover two lines of bulk mate-
rials, the car dumpers and the transfer points.
Geotechnical work is also under way to recover
two lines of the bulk stockyard.
By the end of 2006, as a result of all these
investments and works, the Ituaguaí Port Termi-
nals run by CSN will be the most modern in Bra-
zil in terms of pollution prevention and control.
INVESTMENTS
Between 2000 and 2003, CSN invested R$ 300
million in environmental projects - of which
more than R$ 250 million were absorbed in
works relating to the Presidente Vargas Steel-
works Environmental Commitment Agreement
(TCA) - raising its environmental performance to
new heights.
The need for ‘investments’ in this area is now
relatively low, and is concentrated on two types
of initiatives: those geared towards improvement
and those geared towards growth. In contrast,
the expenses incurred with defrayal is increas-
ing with every passing year, particularly as items
relating to the operation and maintenance of
the new environmental control equipment are
booked as defrayal.
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5 In 2005, environmental management
spending amounted to R$ 229.2 million, and
mainly went towards studies that needed to be
conducted in order to obtain and renew envi-
ronmental licensing; towards studies, mea-
surements and works carried out to remedy
environmental liabilities arising from past
operations, particularly that arising from the
pre-privatization period (both in Volta Redonda
and in Criciúma, Siderópolis, Treviso and Capiva-
ri de Baixo - deactivated coal-mining areas lo-
cated in Santa Catarina); and towards continu-
ing the works and actions provided for under
the Environmental Commitment Agreement
(TCA) of the Solid Bulk Terminal at the Port of
Sepetiba (TECAR).
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Environmental Responsibility
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The following graphs detail the Company’s
expenditure on the environment in 2005, broken
down into investments and costs, per applica-
tion. The substantial increase in total invest-
ments - from R$ 11.7 million to R$ 66.3 million
– relates to the TCA of the TECAR terminal and
to the control equipment provided for under the
plans to export iron ore, both at the Casa de Pe-
dra unit and at the TECAR.
ENVIRONMENTAL MANAGEMENT SYSTEM
Based on ISO Norm 14001, the Environmental
Management System (SGA) employed at CSN’s
units has allowed the company to continually im-
prove its environmental performance. The SGA is
a decentralized system featuring a set of general
rules and norms that are applied in, and impact
on, the company’s different units.
In 2005, the system was once again audited
by ABS - Quality Evaluations. The Casa de Pedra
mine and Presidente Vargas Steelworks, as
well as the other operations in Volta Redonda
obtained re-certification under the most recent
international standards criteria for environmen-
tal management systems, ISO 14001:2004. Gal-
vaSud maintained its certification, having con-
cluded the training of its entire workforce (both
direct employees and subcontracted personnel)
in relation to the SGA.
The SGA reflects the company’s environmen-
tal policy. This policy is built upon six pillars,
which, in Portuguese, are encapsulated in the
acronym S.E.M.P.R.E. (or “always”), namely:
• Support for the business
• Corporate Transparency
• Continual improvement
• Prevention of pollution
• Respect for the environmental legislation
• Correction of any cases of noncompliance
These six principles provide the basis for the
objectives and goals of all the company units; for
its preventive and corrective action plans and
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5programs; and for the monitoring and verifi-
cation procedures and audits that ensure the
system’s efficiency and constant improvement.
AIR QUALITY
All CSN operations that may have an impact on
the atmosphere have pollution control systems
in place, either in the form of dust abatement and
gas washing systems or complex filtration sys-
tems (sleeve filters and electrostatic precipita-
tors, among others).
In Volta Redonda, the company maintains a
sophisticated air quality monitoring system, made
up of nine monitoring stations:
• 3 automatic telemetric stations, which reg-
ister the total concentrations of particles in
suspension and transmit this information, on
an hourly basis, on-line, to the company and to
FEEMA, the Environmental Agency for the State
of Rio de Janeiro. The data transmitted includes
the total concentrations of particles and concen-
trations of inhalable particles, those of nitrogen
oxides, sulfur oxides, ozone, benzene, toluene,
xylene, methane and total hydrocarbons in the
atmosphere, as well as meteorological wind data.
• 5 semi-automatic stations, fitted with equip-
ment to measure total concentrations of par-
ticles in suspension and inhalable particles (one
of these semi-automatic stations was set up in
2005, in the Sidervile neighborhood, at Feema’s
request).
• 1 complete meteorological station that also
transmits on-line to the company and to Feema.
The results of the monitoring performed by
the automatic stations are expressed through
the Air Quality Index (IQA), measured by Feema
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and are updated daily on its website (www.
feema.rj.gov.br).
The samples show that the quality of the air in
Volta Redonda is good. Throughout 2005, the IQA
fluctuated between “average” and “good”, signify-
ing that it remained within the legal standards.
On just one day in November, the automatic
station located at Recreio do Trabalhador, in the
Vila Santa Cecília neighborhood, gave a reading
indicating inappropriate levels of ozone.
Ozone is a secondary pollutant formed in the
atmosphere when two gases, which are mainly
generated by vehicles and traffic, come into con-
tact with light. Exposure to ozone levels above
those considered appropriate for one day will not
have any effect on human health.
In the municipality of Araucária, where CSN
Paraná is located, the company maintains an
automatic air quality monitoring station linked to
the Paraná Environmental Institute (IAP). In the
mines and the port terminals the particulate mat-
Environmental Responsibility
ter is measured by networks of semi-automatic
stations, which generate results every six days.
WATER RESOURCES
The Presidente Vargas Steelworks, in Volta Re-
donda, is one of the largest individual consum-
ers of water in the State of Rio de Janeiro, with a
catchment rate of more than six thousand liters
per second, the equivalent to around 1/6 of the
total catchment for the city of Rio de Janeiro. In
2005, for each ton of steel produced, CSN con-
sumed 42.8 m3 of water.
CSN sees the rational use of water in its pro-
duction processes as a priority, from the point
of view of both costs and the environment. The
company operates, maintains and is developing a
series of projects and initiatives geared towards
increasing the volumes of water that are re-cir-
culated. The steelwork processes use around 42
thousand liters of water per second, of which 36
thousand liters will have been recycled.
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CSN sees the rational use of water in its produc-tion process as a priority. Of the approximately 42 thousand liters of water used per second, 36 thousand liters have been re-cycled
Through a modern and complete water
catchment and treatment system, the company
can even, in the event of an emergency, serve
part of the population of Volta Redonda. The net-
work extends over several kilometers, supply-
ing water and providing effluent controls for all
areas of the Presidente Vargas Steelworks.
The Presidente Vargas Steelworks has a total
of nine pump-houses for re-circulating the water;
13 effluent treatment stations, with seven operating
in a closed circuit, returning all the treated water to
be used again in the industrial processes, while the
remaining six subsequently release the waters into
the Paraíba do Sul river, once these are within the
standards required by the legislation.
The initiatives taken to rationalize the use of
water have allowed the company to reduce its
catchment volumes, in three years, from 8.7 thou-
sand liters per second to the current 6.15 thou-
sand liters (the consumption of “new water”, ten
years ago, amounted to around 15 thousand liters
per second). The volume of cooling water and ef-
fluents released back into the Paraíba do Sul river
has also been substantially reduced over the past
three years, from 7.5 m3/s to 5.2 m3/s.
To help it make further improvements in the
future, CSN commissioned a study from the Inter-
national Water Recycling Reference Center (Cir-
ra), linked to the University of São Paulo (USP),
to assess possible new initiatives to increase the
proportion of water that is re-used at the Presi-
dente Vargas Steelworks (currently at 84%, one of
the highest rates in the Brazilian steel industry).
When it receives the study in mid-2006, CSN
will undertake a technical and economic ap-
CSN sees the rational use of water in its produc-tion process as a priority. Of the approximately 42 thousand liters of water used per second, 36 thousand liters have been re-cycled
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5
Environmental Responsibility
praisal of the proposals submitted in order to
implement those that are economically sustain-
able and that will allow it to reduce further the
levels of water it collects and the volumes of ef-
fluents it releases into the Paraíba do Sul river.
This same policy of maximizing the efficiency
of the use of water is also followed in CSN’s other
productive units. In 2005, the Casa de Pedra mine
received substantial funds to expand its projects
to monitor and control the potential impacts aris-
ing from the lowering of the underground water
table, caused by the pumping out of the water
from the mines, and to monitor the river sources
of the hydrographical micro-basins that run into
the mines. It was observed that the lowering of
the water table, which is necessary to allow the
ore to be extracted, has not caused a reduction in
the flows of these natural river sources.
A number of measures were adopted in
relation to water resources in 2005, including:
improvements made to the effluent treatment
systems of CSN Paraná, in Araucária; improve-
ments made to the drainage systems of the
Companhia Ferroviária do Nordeste’s central
workshop, in Fortaleza, with the installation of
a Water/Oil Separating Station; and, at Metalic,
also in the State of Ceará, the introduction of a
system to re-use the liquid effluents from the
cans washer to irrigate the garden.
PARAÍBA DO SUL RIVER: THE FISH ARE BACK
The Presidente Vargas Steelworks benefited
from significant environmental investments be-
tween 2000 and 2003. Under an Environmental
Commitment Agreement (TCA) signed with the
Government of the State of Rio de Janeiro on the
27th January, 2000, more than R$ 250 million
were invested in pollution prevention and con-
trol equipment, systems and initiatives. Of this
amount, around 42% was allocated to prevent
the pollution of the Paraíba do Sul River.
In 2002, through the National Museum and
the Federal University of Rio de Janeiro, CSN
hired a team of renowned fish researchers and
biologists to monitor the fauna in the Paraíba do
Sul river, in order to compare the state of health
of the river following a series of investments
made to clean it up with that indicated in stud-
ies and reports prepared prior to the company’s
privatization.
The report on the more than three years of
research concludes that CSN has fulfilled its
role in reducing the level of pollutants in its ef-
fluents – and recommends that the company’s
environmental control program be permanently
maintained. While the full results from these
three years of studies can be accessed at our
site (www.csn.com.br), some of the main points
were as follows:
• The ictiological diversity (number of differ-
ent species) and relative abundance (quantity
of individuals captured per specie) downstream
of Volta Redonda increased over the last three
years, a fact observed not only by the project
team, but also by local small-scale and amateur
fishermen;
• There is now no difference between the
diversity and equitability of samples from
stretches of the river upstream and downstream
of Volta Redonda;
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5• There has been a significant reduction in the
proportion of fish displaying anomalies in the
two areas over the past three years, compared to
previous data (Feema, 1983);
• There was no significant difference (just 1%)
in the proportion of fish displaying anomalies
between the samples from Floriano (upstream of
Volta Redonda) and Pinheiral (downstream);
• The environmental quality of the main channel
of the Paraíba do Sul river downstream of Volta
Redonda improved significantly as a result of the
treatment of liquid effluents from the Presidente
Vargas Steelworks/ CSN, as confirmed by the re-
sults of research carried out and information gath-
ered from inhabitants of riverside communities.
INDUSTRIAL WASTE
Most of the waste that is generated is re-used.
Some is re-used as a raw material in the steel-
works production process, while some is trans-
formed into co-products used by other industries
or in construction.
In 2005, the Presidente Vargas Steelworks gen-
erated 3.4 million tons of waste, or 670 kg per ton
of steel produced. Of this total, 67.8% were sold,
31.3% were recycled internally, 0.1% were recycled
externally, 0.1% were co-processed in cement
kilns and 0.7% were incinerated or disposed of in
landfills specifically licensed to receive waste.
Waste recycling at the Presidente Vargas
Steelworks – which largely consists in the con-
sumption of acquired scrap, of scrap generated
from the industrial processes at the Presidente
Vargas Steelworks, CSN Paraná, GalvaSud
and Inal, in the use of powders and muds in the
sintering processes and in the steelworks, and
in the consumption of carbon wastes and waste
gases as energy-generating substitutes in vari-
ous stages of the production process - has led
to a considerable reduction in production costs
(of around R$ 160 million per year), while also
reducing the pressure generated by the facility
on natural resources.
Indeed, CSN has been transforming its
industrial waste into a lucrative business, gen-
erating gross revenues of R$ 196 million in 2005.
One of the main sources of revenue is ‘steel ag-
gregate’, a co-product formed from the granula-
tion of the facility’s main waste product - blast
furnace slag - which is ground and used in the
production of cement, increasing its resistance.
As from 2007, this blast furnace slag will be used
by CSN to produce its own cement.
WASTE REDUCTION AT SOURCE
In 2005, CSN expanded its efforts to reduce the
generation of waste at source. At the Casa de
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Environmental Responsibility
Pedra and Arcos mines, a series of initiatives
were introduced to reduce the generation of
hazardous wastes, including used oils and poly-
urethane wastes.
At Casa de Pedra, particular mention should
be made of the initiatives to reduce the genera-
tion of solid mining effluents, such as the proj-
ects to prevent erosive processes and to control
the generation of solids that are subsequently
disposed of in the tailings dams. At Arcos, plans
were implemented to reduce the generation of
ultra-fine wastes, envisaging their re-use in the
sintering processes at the Presidente Vargas
Steelworks.
At both mining facilities and also at the Presi-
dente Vargas Steelworks, the transformers and
capacitors containing dielectric askarel oil (poly-
chlorinated biphenyl) are being replaced by new
equipment, reducing the risks of contamination.
The three units also continued with initiatives to
eliminate equipment containing CFC12.
In 2005, the CSN companies also adjusted
their disposal procedures for non recyclable
wastes. Hazardous and oily wastes from the
Presidente Vargas Steelworks, CSN Paraná and
GalvaSud were sent for thermal destruction, be-
ing co-processed in cement kilns or burnt in in-
dustrial incinerators. A smaller proportion were
disposed of in class 1 landfills run by outside
companies. At Metalic, a review was undertaken
of all solid industrial waste applications, particu-
larly in relation to the paints and varnishes used
in the production process.
RECYCLING SCRAP PRODUCTS
The Projeto RECICLAÇO is a recycling project
run by Metalic, the only manufacturer of steel
cans for carbonated beverages in Brazil. The
initiative seeks to encourage the recycling of the
cans so that these may be re-used in the produc-
tion process as scrap. The success of the project
is measured not only through the considerable
increase in the recycling rate (from 27% in 2000
to a current rate of 88%), but also by the fact that
it offers an alternative source of income for the
scrap collectors.
To increase the steel can recycling capacity in
the country’s North-eastern Region, RECICLAÇO
maintains a register of scrap collectors; orga-
nizes promotions during events; installs its own
collection points in beach stands, bars, hotels and
restaurants; and forges promotional partnerships
with soft-drinks and beer producers.
ENVIRONMENTAL OBLIGATIONS
In 2005, CSN continued to investigate, analyze,
treat and remedy environmental damage at its
units. The mandatory operational environmental
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audits were undertaken and submitted to the Rio
de Janeiro and Paraná State environmental au-
thorities in compliance with the respective state
laws. The following list sets out the main envi-
ronmental licenses requested and granted in the
period, as required in order to set up and engage
in the company’s current and future activities:
Environmental licenses requested in 2005
• Rio de Janeiro (Volta Redonda)
• 500 KV transmission line (Preliminary Li-
cense) – Feema Process E07-200.064/05 – Re-
quested on the 07/01/05.
• Rio de Janeiro (Itaguaí)
• Itaguaí Pelletizing Plant (Preliminary Licen-
se) – Feema Process E07-200.065/05 – Reques-
ted on the 07/01/05.
• Sepetiba TECON – Mooring Berth 304
(Preliminary License) – Feema Process E-
07/202968/05 – Requested on the 09/09/2005.
• Sepetiba TECON – Containers Area 3
(Preliminary License) – Feema Process E-
07/202893/05 – Requested on the 09/09/2005.
• TECAR – Mooring Berths 103 and 203
(Preliminary License) – Feema Process E-
07/203305/05 – Requested on the 01/12/2005.
• Sepetiba TECON – Container Washer
(Installation License) – Feema Process E-
07200143/05 – Requested on the 18/01/2005.
• Sepetiba TECON – Container Washer
(Operational License) – Feema Process E-
07/203.813/05 – Requested on the 30/11/2005.
• Rio de Janeiro (Porto Real)
• GalvaSud artesian well (SERLA request for
grant) – SERLA Process E-07/101548/05.
• Minas Gerais (Congonhas)
• Expansion of the Casa de Pedra Mine: mining
Environmental Responsibility
at Corpo Norte (the Northern Body) and Mascate,
Expansion of Corpo Oeste (the Western Body)
and Corpo Principal (the Main Body), the Casa
de Pedra Dam and the Batateiro Dam (Installa-
tion License FEAM/COPAM) – Requested on the
13/01/2005.
• Deforestation: water recirculation supply
network and electrical network of the dam, min-
ing at Entre-corpos (area between the Bodies)
and Entorno (the immediate surroundings) and
sinter heap COBRAPI (IEF Authorization) – Re-
quested on the 25/01/2005.
• Deforestation (452.76 ha): Corpo Norte/Mas-
cate mining areas, Dam at Casa de Pedra and
Batateiro. (Ibama authorization) – Requested on
the 28/01/2005.
• Water course walkways/channels for instal-
lation along the Access Road to Corpo Norte
(IGAM Authorizations) – Requested on the
05/04/2005.
• Diversion of the Casa de Pedra stream to
develop a products heap (IGAM Authorization)
– Requested on the 28/04/2005.
• Santa Catarina
(Criciúma /Siderópolis/Içara/Treviso)
• Lot 42 – Rehabilitation of degraded area
(renewal of Environmental Operational License)
– Fatma Process RSI 032/CRS.
• Lot 44 - Rehabilitation of degraded area
(renewal of Environmental Operational License)
Fatma Process RSI 034/CRS.
• Operation of clay deposit (renewal of Envi-
ronmental Operational License) - Fatma Process
MIN 336/CRS.
• Gleba Malha II Oeste - Rehabilitation of de-
graded area (renewal of Environmental Installa-
tion License) – Fatma Process DIV 200/CRS.
• Gleba Morozini - Rehabilitation of degraded
area (Environmental Installation License and
Environmental Operational License) – Fatma
Process RSI 036/CRS.
• Ceará
• Companhia Ferroviária do Nordeste (CFN/
Ceará) – Environmental Authorization for the
transportation of Class l Waste – Semace Pro-
cess 05471447-8.
• Piauí
• CFN/Piauí – Renewal of the Installation Li-
cense – Semar Protocol 2.410/05 – Requested on
the 21/11/2005.
• CFN/Piauí – Renewal of the Operational Li-
cense – Semar Protocol 2.445/05 - Requested on
the 16/11/2005.
• Rondônia (Itapuã do Oeste)
• Authorization for deforestation (96 ha), at
ERSA, Estanho de Rondônia SA – Ibama/Gerex/
MMA/Gerex-RO Process 02024.000012.2005/12.
Environmental Licenses granted in 2005
• Rio de Janeiro (Volta Redonda)
• Cement Grinding (Preliminary License)
– Feema Process LP FE010138 – Granted on the
27/12/2005.
• INAL Cutting Lines Unit within the Presidente
Vargas Steelworks (Installation License) – Feema
Process LI FE00931 – Granted on the 27/09/2005.
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A Region of Atlantic Rainforest close to the Casa de Pedra mine, in Congonhas, Minas Gerais
Environmental Responsibility
• Rio de Janeiro (Barra Mansa)
• INAL Floriano (Water Catchment Authori-
zation) - Serla Ordinance 376 – Granted on the
22/02/2005.
• Rio de Janeiro (Itaguaí)
• TECAR Expansion (Preliminary License)
– Feema Process LP FE009311 – Granted on the
22/12/2005.
• TECON Container washer – (Installation Li-
cense) – Feema Process LI 007941 – Granted on
the 28/06/2005.
• Minas Gerais (Congonhas)
• Deforestation: water recirculation sup-
ply network and electrical network of the dam,
mining at Entre-corpos and Entorno and sinter
heap COBRAPI (32.30 ha). Ibama Authorization
047/2005, granted on the 04/07/2005. Authoriza-
tion IEF 003972, granted on the 12/09/05.
• Deforestation (452.76 ha): Corpo Norte/Mas-
cate mining areas, Dam at Casa de Pedra and
Batateiro. Ibama Authorization 056/2005, grant-
ed on the 19/07/2005.
• New Loading area and Rail Maneuvering
Yard A70 (Preliminary License) – Feam/Co-
pam Process LP 060/2005 – Granted on the
26/08/2005.
• Rectification of the Maria José Stream to
implement a Loading area and Rail Maneuvering
Yard – Igam Authorization: Ordinance 623/2005,
granted on the 09/05/2005.
• Expansion of the Casa de Pedra Mine: Mining
area at Corpo Norte and Mascate, Expansion of
Corpo Oeste and Corpo Principal, the Casa de
Pedra Dam and the Batateiro Dam (Installation
License) – Feam/Copam Process LI 210/2005
– Granted on the 15/12/2005.
• Water course walkways / channels for instal-
lation along Access Road to Corpo Norte – Igam
Authorizations: ordinances 624/05, 806/05,
807/05, granted respectively in May, June and
July, 2005.
• Implementation of the Batateiro Dam – Igam
Authorization: ordinance 812/2005, granted on
the 20/07/2005.
• Water catchment on the Maranhão river
– Igam Authorization: ordinance 1154/2005,
granted on the 23/09/2005.
• Implementation of the Casa de Pedra Dam
and recirculation of the water from the bar-
rier – Igam Authorization: ordinance 1155/2005,
granted on the 23/09/2005.
• Minas Gerais (Arcos)
• Authorization for Deforestation – Ibama,
granted on the 30/09/2005.
• Santa Catarina (Treviso/Capivari de Baixo)
• Gleba Morozini – Recovery of the Area De-
graded by Coal Mining – Fatma Process RSI 036/
CRS, LAP 123/2005.
• Ceará
• Metalic (Operational License) – Semace Pro-
cess 1009/2005. Granted on the 07/07/2005.
• CFN Ceará (Operational License) – Semace
Process 1269/2005.
• CFN Ceará (Installation License) – Semace
Process 134/2005.
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5• Pernambuco
• INAL Recife (Operational License) – CPRH
Process 01242/2005 – Granted on the 15/06/2005.
• CFN/Pernambuco (Renewal of Operational
License) – CPRH Process 01450/2005.
• Piauí
• CFN/Piauí (Installation License) – Semar
Process 2005D063.
• Maranhão
• CFN/Maranhão (Operational License) – Gema
Process 301/2004.
• Paraíba
• CFN/Paraíba (Operational License) – Sudema
Process 821/2005.
• CFN/Paraíba: installation and operation of
the iron ore loading and unloading unit, in the
yard at Juazerinho-PB (Environmental Authori-
zation) – Sudema Process 1316/20058.
ENVIRONMENTAL COMMITMENT
AGREEMENTS (TCAS)
In 2005, CSN signed two Environmental Com-
mitment Agreements (TCA), both related to the
Casa de Pedra mine. TCA number 0905036/2005
provides for the introduction and implementation
of environmental protection measures by virtue of
the deforestation authorization granted by the IEF
(Authorization 003972/2005) for intervention in an
area of 79.19 hectares in order to set up the water
catchment supply line at the Casa de Pedra Tailings
Dam; implementation of the Electrical Power Dis-
tribution Network, the Ore Mining operations in the
Southern and Entorno parts of the Corpo Principal
and Corpo Oeste areas. TCA number 105052/2005
provides for environmental compensation in rela-
tion to the Casa de Pedra Mine Expansion Project,
pursuant to the SNUC Law (Law 9985/2000).
Furthermore, the company also has obliga-
tions remaining from a TCA relating to environ-
mental liability in the coal-producing region
in the south of the State of Santa Catarina,
resulting from CSN’s coal production activities
from 1940 through to 1989 - prior, therefore,
to the company’s privatization. In 2005, around
R$ 4.7 million went towards recovery work and
the fixed costs of the operations.
In addition, the company has obligations it still
has to fulfill with respect to the TCA for the Itaguaí
Port Solid Bulk Terminal (TECAR), signed on the
30th November 2001 with Feema and the Depart-
ment for the Environment and Urban Development
of the State of Rio de Janeiro, and revised on the
28th May 2004, through the 1st Addendum to the
Commitment Agreement. The revision included
a series of obligations to carry out environmental
control work identified as being necessary during
the studies and monitoring processes conducted in
the first stage of the TCA. In 2005, R$ 47.46 million
were spent on works relating to the TECAR Envi-
ronmental Commitment Agreement.
FOR FURTHER INFORMATION
www.csn.com.br
Linha Verde CSN (toll-free): 0800 2824440
E-mail: [email protected]
Risk Management
UNDER DIRECT CONTROLCSN strives to minimize the impact of economic, financial, fiscal, political and regulatory factors upon its business.
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5
Risk Management
ports its coal and coke from overseas suppliers.
In order to negotiate better prices, the company
seeks to vary the source, quality and quantity of
these imports.
CSN is the only Brazilian producer of tin-
plate, a high value-added product, and one of
the five largest producers in the world, with an
output of more than 1 million tons/year. In 2005,
with the acquisition of Estanho de Rondônia S.A.
(ERSA), for R$ 100 million, CSN became self-
sufficient in tin, the main raw material used in
tin-plate production, thus eliminating its expo-
sure to swings in the material’s price.
COMPETITION
In recent years, the world steel industry has
undergone some moments of intense change,
marked by mergers and acquisitions envisaging
gains in competitiveness through the reduction of
costs. Brazil has not been immune to such chang-
es. In 2005, a number of new global players en-
tered the market, causing a substantial impact on
industry, particularly in the automotive segment.
CSN aims to forge closer relationships with
its clients, offering them higher value-added
products that are more suited to their needs, in
terms of quality, service, and delivery peri-
ods. Seeking to offer a more efficient service to
the domestic and international markets, CSN
acquired stakes in two rolling mill companies -
CSN LLC, in the USA, and Lusosider, in Portugal.
This presence in North America and Europe will,
in the longer term, enable the company to ex-
pand its client base and strengthen its ties with
foreign customers.
RISK MANAGEMENT
CSN operates in a globalized and increasingly
complex market. It is therefore permanently
exposed to various risks that can affect its perfor-
mance. These risk factors are closely followed by
specialized professionals, who monitor them on
a daily basis. Although risk management, in the
strictest sense, only encompasses factors that
can be controlled by routine actions, CSN also
strives to minimize the impact of economic, finan-
cial, fiscal, political and regulatory factors on its
business, both within Brazil and around the world.
CYCLICAL AND MARKET-RELATED FACTORS
The steel industry is highly cyclical in nature,
thanks to swings in supply and demand caused
by global macroeconomic fluctuations. Substan-
tial downturns in the demand for steel from the
markets served by CSN in Brazil and abroad can
cause an impact on its operations. It is, therefore,
sensitive to trends in the automotive, civil con-
struction, home appliance and packaging sectors.
After record growth in 2004, in terms of both
volume and price, the steel industry suffered a
series of adjustments in 2005. However, CSN tends
to enjoy relative stability during such cycles, since
a high proportion of the products it sells are coated
steel (galvanized and tin-plate), which have a wide
range of applications in the consumer-goods indus-
try and whose prices are less susceptible to swings.
RAW MATERIAL SUPPLY AND COSTS
Brazil suffers from a shortage in coals suitable
for use in steel production. CSN therefore im-
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5FOREIGN EXCHANGE EXPOSURE
Since CSN operates and earns income abroad,
some of its revenue (from exports) and costs (from
imported raw materials and equipment, as well
as debt servicing items) are in foreign currency. To
protect itself against any sudden variations in the
exchange rate, CSN resorts to derivative financial
instruments, particularly futures contracts and
swaps, as well as investing a large portion of its
cash resources in the foreign markets.
ANTIDUMPING MEASURES
AND GOVERNMENT PROTECTIONISM
Antidumping measures and international trade
inquiries are common in the world steel industry
and are often used to make it more difficult for the
companies under investigation to gain access to
the leading markets. In 2005, CSN won an anti-
dumping suit in the USA that overtaxed Brazilian
hot-rolled coil exports. This result will help CSN
expand its activities in the North American market.
One of the strategies used to offset such
restrictions is to maintain a diversified and well-
spread portfolio of clients. CSN currently has
clients in around 60 countries. In 2005, 26% of its
exports went to North America, 28% to Europe,
8% to Latin America and 33% to Asia, with the
remainder going to Africa, the Middle East and
Oceania. However, the tendency is that, in the
future, exports will focus more on Latin America,
Europe and North America.
ENVIRONMENTAL REGULATIONS
Steelworks generate jobs and products that
help drive the Brazilian economy, but they also
produce wastes and effluents that can harm the
environment. Consequently, they are obliged
to comply with a series of requirements under
Brazil’s strict environmental legislation. These
seek to control emissions into the atmosphere,
the release of effluents into the waterways and
the handling and disposal of solid waste, so as to
safeguard human health and that of the environ-
ment. CSN’s efforts go beyond compliance with
the requirements of the legislation. The company
has adopted a proactive and preventative stance
on environmental issues, striving to anticipate
potential risks and/or problems. Details on the
company’s environmental management system
and major accomplishments and initiatives in
2005 are highlighted in the Environmental Re-
sponsibility section of this report.
FISCAL AND ENVIRONMENTAL
CONTINGENCIES
CSN is involved in a number of lawsuits concern-
ing civil, labor and environment-related claims,
as well as federal, state and municipal tax
charges and contributions. At the close of 2005,
the company had set aside provisions of
R$ 3.3 billion in relation to these suits, as well
as R$ 673 million in judicial deposits. There is,
however, no guarantee that the company will
obtain a favorable outcome in these proceedings,
which may, in the end, be dismissed.
EMPLOYEES’ PENSION FUND (CBS)
In August 2002, the State Supplementary Social
Security Department approved the plan drawn
up by CSN, together with CBS Previdência,
to tackle the insufficiency of the unamortized
mathematical reserves, for which the sponsors
are responsible. The plan proposes the payment
of 240 consecutive monthly installments in the
amounts of R$ 958 thousand (installments 1 to
12) and R$ 3.1 million (installments 13 to 240).
It also provides for the anticipation of install-
ments in the event the defined benefit plans re-
quire cash. The installments have been adjusted
for inflation in accordance with the INPC + 6%
p.a., since June 2002.
The agreement also envisages the transfer to
the updated debtor balance of any deficits/sur-
pluses for which the sponsors are liable, in order
to maintain the balance of the plans without
exceeding the maximum amortization period set
out in the contract.
The company decided to recognize actu-
arial liability adjustments in the results for
the five year period from the 1st January 2002,
as established in CVM Decision no. 371/00,
including R$23 million for 2005, which, added
to disbursements, amounted to R$ 100 million.
The balance of the provision to cover actuarial
liabilities on the 31st December 2005 stood at
R$ 223 million.
In 2005, the Guaranteeing Assets increased
11.50% over 2004 – rising from R$ 1,341 mil-
lion to R$ 1,495 million – with 39.52% invested
in CSN shares and 51.27% in Fixed Income
investments.
INSURANCE COVERAGE
CSN carries insurance policies with a series of
specific coverages to cover a variety of risks.
A single policy with a maximum indemnity
limit, sub-limits and clauses tailored to the par-
ticular industrial operations in question insures
the industrial operations, assets and equipment
of the Presidente Vargas Steelworks, Galva-
Sud, Tecar and Tecon, in the city and towns of
Volta Redonda, Porto Real and Itaguaí, respec-
tively, within the State of Rio de Janeiro; of CSN
Paraná, in the town of Araucária, in the State of
Paraná; of the Casa de Pedra and Arcos mines,
in the towns of Congonhas do Campo and Arcos,
respectively, in the State of Minas Gerais; and,
lastly, of ERSA, in the towns of Ariquemes and
Itapoã do Oeste, in the State of Rondônia.
INAL, Metalic, the non industrial sites, the
central offices and the technological research
center are insured by individual property, busi-
ness interruption and fixed costs insurance
policies, with a maximum indemnity limit, sub-
limits and clauses tailored to the operations
carried out there.
Risk Management
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The Tecar and Tecon terminals have specific
port operator liability insurance policies to cover
their operations, with limits and clauses tailored
to their activities.
CSN also holds a general public liability
insurance policy to cover any lawsuits brought
by third parties as a result of losses caused by
the company’s activities, policies covering the
transportation of steel products, raw materials,
equipment and spare parts both within Brazil
and abroad, an export credit insurance policy
to ensure receipt of its export sales credits and
group life insurance for the directors and staff.
CREDIT RISKS
Credit risk exposure from financial instruments
is managed by only accepting as counterparts in
derivative instruments large financial institu-
tions with respectable credit quality. Manage-
ment believe the risk of default by the counter-
parts is thus insignificant.
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5 CSN neither maintains nor issues financial
instruments for commercial purposes. The com-
pany adopts a series of procedures to minimize
potential problems with its commercial partners,
namely: the careful selection of clients, the di-
versification of its portfolio of accounts receiv-
able and keeping strict control over the sales
financing terms for each business segment.
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BOARD OF DIRECTORS
CHAIRMAN Benjamin Steinbruch
VICE-CHAIRMAN Jacks Rabinovich
BOARD MEMBER Antonio Francisco Dos Santos
BOARD MEMBER Mauro Molchansky
BOARD MEMBER Fernando Perrone
BOARD MEMBER Yoshiaki Nakano
BOARD MEMBER Dionísio Dias Carneiro Netto
BOARD MEMBER Darc Antônio Da Luz Costa
BOARD OF EXECUTIVE OFFICERS
CEO Benjamin Steinbruch
EXECUTIVE OFFICER FOR PRODUCTION Eneas Garcia Diniz
EXECUTIVE OFFICER FOR INFRASTRUCTURE AND ENERGY Marcos Marinho Lutz
INSTITUTIONAL EXECUTIVE OFFICER Pedro Felipe Borges Neto
INVESTOR RELATIONS
INVESTOR RELATIONS MANAGER
Marcos Leite Ferreira E-Mail: [email protected]: (55 11) 3049-7588
INVESTOR RELATIONS ANALYST
Renata Isis KaterE-Mail: [email protected]: (55 11) 3049-7592
INVESTOR RELATIONS ANALYST
Geraldo ColonheziE-Mail: [email protected]: (55 11) 3049-7593
INVESTOR RELATIONS ANALYST
José Eduardo Szuster E-Mail:[email protected]: (55 11) 3049-7526
GENERAL E-Mail: [email protected]: (55 11) 3049-7150
CORPORATE COMMUNICATIONS
CORPORATE COMMUNICATIONS MANAGER
Marcos BarretoE-Mail: [email protected]: (55 11) 3049-7550
CORPORATE COMMUNICATIONS COORDINATOR
Adriana Bidoli Rezende S. ReccoE-Mail: [email protected]: (55 11) 3049-7222
Corporate Information
NEWSPAPERS USED FOR CORPORATE ANNOUNCEMENTS IN 2005
CSN publishes all its corporate
announcements in the following newspapers:
Jornal do Commercio; Gazeta Mercantil;
O Valor Econômico and Diário Oficial
do Estado do Rio De Janeiro
INDEPENDENT EXTERNAL AUDITORS
Deloitte Touche Tohmatsu
Auditores Independentes
ADR
Depositary bank: Banco Jp Morgan
Address: 4 New York Plaza, 13th Floor - New York - NY
SHAREHOLDER SERVICE
Shareholder services are provided by Banco Itaú,
custodian for CSN’s shares, at theShareholder
service desks, at its branches or by telephone:
(55 11) 5029-7780
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