Apr 1, 2013
Executives
David Salama – Investor Relations Luis Fernando Barbosa Martinez – Commercial Director
Analysts
Renato Antunes – Brasil Plural Leandro Cathy – Deutsche Bank Thiago Lofiego – Merrill Lynch Andres Pinheiro – Itau BBA Rodolfo De Angele – JP Morgan Marcelo Aguiar – Goldman Sachs Ivan Fernandes – Barclays Carlos de Alba – Morgan Stanley
Operator
Good morning ladies and gentlemen. At this time we would like to welcome everyone to CSN’s Fourth Quarter 2012 Earnings Conference Call.
Today, we have with us the Company’s Executive Officers. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the Company’s presentation.
After the Company’s remarks are over, there will be a question-and-answer section when further instructions will be given. (Operator Instructions) We have a simultaneous webcast that maybe accessed through CSN’s Investor Relations website at www.csn.com.br/ir.
The slide presentation maybe downloaded from this website. Please feel free to flip through the slides during the conference call.
There will be a replay service for this call on the website. We would like to inform that due to the number of participants, the Company will answer only up to two questions per participant, with no right to reply and therefore we kindly ask that all the questions are made at once as soon as the line is opened by the operator.
Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of CSN management and on information currently available to the Company.
They involve risks, uncertainties and assumptions because they relate to future events, and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of CSN and could cause results to differ materially from those expressed in such forward-looking statements.
Now, I will turn the conference over to Mr. David Salama, CSN’s Executive Investor Relations Officer, who will present the Company’s operating and financial highlights of the period.
You may begin your conference sir.
David Salama
[Interpreted] Thank you. Good morning to all.
Thank you for participating in this CSN conference call to discuss the 2012 results. Participating with me and we have some executive officers.
Let us start on Slide 3, where we give you our consolidated results for 2012. Net revenue for 2012, R$16.89 billion a record marking for the company, 2% up compared to that of 2011.
Highlights going to record steel sales of 5.8 million tons. Moving to the Company’s strategy to prioritize domestic market demand.
Highlighted acquisition – in Germany in February of last year. In the first quarter, the net revenue was R$4.6 billion record 8% up compared to the previous quarter.
Gross profit R$4.8 billion in 2012 and 1.4 in the first quarter of 2012 and this one was 17% above that of the third quarter of 2012. Adjusted EBITDA R$4.5 billion or 30% lower than that posted in 2011 of the mining and steel segments, in the first quarter EBITDA was R$1.2 billion, up 14% compared to the third quarter of 2012.
Adjusted EBITDA margin was 27%, same as posted in the last quarter of 2012. CapEx for 2012 was R$3.1 billion, highlight going into investments in steel R$724 million mining, R$463 million, logistics, R$1.3 billion and cement R$83 million.
In the first quarter of 2012, consolidated CapEx was R$788 million. Net income was 316 for the fourth quarter, the result for the year was negative R$481 million, impacted by the accounting reclassification of the losses from the company’s investments in new (indiscernible) which I should highlight did not impacted the company’s cash.
If we were to disregard this reclassification, the net income would be R$864 million in 2012. Moving on to slide four where we give you the EBITDA evolution in the last quarter of 2012.
EBITDA R$1.2 billion in the first quarter was 14% superior to that of the third quarter positively impacting the EBITDA with higher prices of steel, higher prices and volume of iron ore sold in consolidated sense. On the other hand, we have the negative effects of the increase in steel and mining prices in the quarter, and also the reduction of sales volume of steel.
It’s important to highlight that the previous quarter posted record sales of steel. Now we are moving to slide five.
In the slide, we give you the net revenue by segment and adjusted EBITDA by segment where CSN operates. Steel accounted for 63% of our net revenue and 43% of our EBITDA.
Mining accounted for 26% of the net revenue and 45% of the EBITDA. Moving to slide six.
We have details about the steel segment. We will start with the upper left hand corner.
In the first quarter, sales volume for steel was 1.5 million tons; it was the second best quarter of CSN in terms of sales of steel, only we had [1.6 tons] (ph) versus in the third quarter as mentioned previously. Of the total sales, 77% were sold in the domestic market 20% through our overseas subsidiaries, and 3% exports.
We are highlighting is that in 2012 CSN sold a record volume of 5.8 million tons, 19% up compared to 2011 because of the strong domestic demand where we had record sales of 4.5 million tons, which collaborated to the sales volume (indiscernible) was included as of February. On the right upper hand corner, we see net revenue of R$2.8 billion, 3% down compared to the third quarter, basically given the lowest volume sold.
Net revenue of 12% to R$38 billion is a record mark for the company and 14% up compared to that of 2011. Now in the bottom of the slide, we will look at the EBITDA.
EBITDA R$564 million for steel, 20% margin in the first quarter. They remained at the same level of those, same in the third quarter, while in 2012, the adjusted EBITDA totaled R$2.1 billion with a margin of 19%.
Moving on to slide seven, same analysis now for the mining segment. We will start again with the upper left hand corner.
In the first quarter, iron ore of CSN which is 6.4 million tons, 2% down compared to the third quarter of 2012 totaling in the year 26 million tons. It is important to highlight that in addition to sales pick up, CSN consumed additionally 6.1 million tons of iron ore last year.
Still in the upper part of the slide, but on the right hand corner now we see that the net revenue for the first quarter was R$1.3 billion, 39%up compared to the third quarter as a result of higher iron ore sales and consolidated churns and higher prices. And in the first quarter, we reached an average of $88 compared to $82 of the third quarter.
In the year, net revenue for mining reached R$4.5 billion. Now let’s look at the EBITDA for the mining segment in the bottom part of the slide.
In the first quarter, EBITDA totaled R$572 million, 44% up compared to the third quarter of 2012 with an EBITDA margin of 44%. For 2012, EBITDA was (indiscernible) with an EBITDA margin of 48%.
The net debt of the company, net debt amounted to R$15.7 billion, remained in line with the third quarter a growth of R$31 billion and cash balance of R$14.4 billion. On one hand, investment R$800 million on expenses the outlay of R$600 million with net charges are contributed to an increase in the net debt.
But that was basically offset by EBITDA R$1.2 billion and by an important reduction of R$300 million in the company’s working capital. At the end of the first quarter net debt over EBITDA which was 3.5 times.
EBITDA of R$4.5 billion over last year total of the growth led to 64%, and that was the negative 36% denominated in foreign currency, particularly in the US dollars and this position 92% of the debt was long-term and 8% of the debt term was short-term. That basically ends our presentation and we can move now to the Q&A.
Renato Antunes – Brasil Plural
[Interpreted] Thank you good morning. My first question is about mining.
If you could tell us about the beginning of the first quarter, qualitatively and quantitatively that will be great and if you could help us looking forward, what can we expect in terms of CSN’s own iron ore production and what volume the other company will contribute with? My second question, we had strong results from CSN better than what we expected and from your peers, if you could tell us a little bit about the market how it stands in the beginning of the year?
You could give us the detailed information about the prices that will be great. Thank you.
David Salama
[Interpreted] Antunes, I’ll answer your first question and Martinez is sitting next to me will answer your second question. Okay, on the (indiscernible) and CSN, we expect to have a volume very similar to that of 2011, in other words, exploiting R$29 million tons around that, and maintaining the usual transfers that normally (indiscernible).
and as for the first months of 2013, in the first quarter, shipments were a little bit lower than expected particularly because we had a problem in one of the machines that feeds the Casa de Pedra plant, and with that operating issue that we have there at Casa de Pedra mine, we will post a slightly lower figure in the first quarter. Then, mining is certain because we have adopted some mitigating measures to replace that capacity adding machines in the mine and having additional equipment to have further shipment, and as you know, most of the local demand for iron ore did not materialized and the supply on the other hand increased to quite a lot because the supply of [purchases] (ph) did not materialize.
In fact, it is now okay at CSN when we were able to include the second car dumper and we have therefore an additional capacity starting over the next week. We are in the phase of making some adjustments to reach full production in the car dumper and the port, which was an important bottleneck, recent use and now I guess is no longer a bottleneck, and at a good timing as well because our competitors were not able to have their additional capacity of purchases that they were expecting.
So that, the supply of ore locally has got favorable for us, and we are able to close good contracts with good trends, so that we can offset part of the losses that we were sustaining with that operating problem that we had in Casa de Pedra with (indiscernible) and the additional capacity that we were able to install at the port. So despite of beginning of the year a little bit difficult because that machine broke down and so this structural problem.
We were able to offset with some in-house mitigating factors adding to (indiscernible) in the mine and then feeding the plant, and then also with a higher supply that we have now given, but all competitors were not able to deliver because of port issues. We have supply with simulating demand and giving us good conditions for the acquisition overall, so we expect to close a figure most similar to what we had in 2011.
Luis Fernando Barbosa Martinez
[Interpreted] Renato, good morning this is Martinez. I will try to tell you a little bit about the five points that I always mention, I’ll talk a little bit about supply, demand, and first, which is also very important for 2013, costs which are a bit of a little less relevant at this point, exchange rate, and the competitiveness of the production chains where CSN operates very well.
Let’s talk about the economy, let me give you an interesting piece of data. Although the GDP was low 0.9%, this is all known, but still it’s worthwhile highlighting that the industry (indiscernible) negative 0.8%.
And in the transformation, the industry where CSN serves, the processing segment was obviously a bit higher. So 2012 was a year which was relatively difficult for the processing industry.
We expect a much better outlook for 2013. CSN is working with the GDP growth for the processing industry of 3.2% for 2013.
As for supply and demand, the apparent consumption of flat steel in 2012 was about 14 million tons a year and long steel about 11 million. But it’s really worth mentioning in terms of flat is that the 14 million tons of apparent consumption, basically 2.2 million, 2.4 million relative to imports, I am planning that in 2013, imports will not reach 1 million; I believe it will be around 800,000 which means that basically only that volume will go back supply local plants, local mills which is very healthy for our markets.
As for the industries, and its interesting information basically civil construction growth estimate would grow about 2% vis-à-vis 2011. Our outlook for 2013 is that this industry will continue to grow sustainably.
Again, the households are consuming more both for long steel and for construction. And we need to unlock some infrastructure projects that are in the pipeline.
With that, we are planning – we are expecting a 3.5% sustained growth in civil construction in terms of consumption of materials and (indiscernible) cement, something around 4% to 5% growth. And since I am talking about civil construction, cement in 2013 is expected to reach 74 million tons in the year in CSN.
We are investing more and more and I am going to tell you what we investing in the cement segment. That’s about pipeline, 2012 growth was around 15%, and at least in the first quarter, I don’t see anything different, we are working with the same prospects that we had in 2012 for the automotive industry there was some doubt which was solved basically this year.
ITI reduction continues for cars, number of cars licensed about 12 million cars a day – should remain at least at this level. I want to remind you that when the industry was at the rock bottom this was down to 8 million.
So in those two segments the consumers feel white line and automotive industry I don’t see major issues expected for 2013. So we should see a positive trend there and important also is that in the packaging industry where CSN supply played more and more was in this like that stuff and they end up buying can.
So cans should take more space in the packaging mix of our customers and we can see that improving. In distribution an important thing to state the channel is very competitive and inventories are quite controlled.
So the outlook for distribution is quite positive for 2013. As for costs, I don’t think there is anything relevant to mention.
I think the costs were relatively under control. So we are going to talk about the price of all in a little while and about the price of other raw materials.
As for the opinion of imported material nationalized compared to domestic markets, if we mention – with a starting point of $610 FOB per ton, the premium compared to the domestic market is 1% to 3% for cold rolled products, 2% to 6%, in galvanized about 5% and tin plates about 10% to 11%. So in terms of the implied equation, there is no reason to think that we should have a significant import during this year of 2013.
Basically, this is the outlook that we are making for 2013 it is quite positive. You then had a price recovery in the first quarter of about 5% and part of that price the alignment and discount reductions should probably be seen in the first quarter earnings results.
We are looking at the second quarter with a lot of optimism and along the year we mentioned that we might have some price recovery coming out there. Hence for the guidance, for 2013 which is – present we are working with 6.2 million tons for 2013, 4.9 of those for the domestic market and practically 200,000 going to exports of tin plates for Latin America, 800,000 for our unit in Germany and for LLC in the US 500,000.
That means vis-à-vis 2012, 6.2 down to 5.8. Sales basically is international markets remains with relatively from prices with little margin – a reduction.
Some mills are working very close to their cost line. What’s basically, that’s Renato, thank you.
Operator
(Operator Instructions) Leandro Cathy from Deutsche Bank would like to ask a question.
Leandro Cathy – Deutsche Bank
[Interpreted] Good morning everyone. Thank you for the opportunity.
First question. How much do you intend to invest in 2013?
What is the lifecycle and a little bit about iron ore pricing, what is the mix in the spot and contract price and the strong recovery in the fourth quarter were a surprise to the market. So I’d like to have a better understanding of these two points?
Thank you.
David Salama
[Interpreted] Let us start, well, Geraldo our Commercial Officer for Mining will be answering the second question first and then I’ll be answering your question about investments in steel.
Geraldo
[Interpreted] Good morning the price of ore since the second half of last year has been growing very dramatically. We had a peak of $160 in March this year.
Ever since then, the price is around $140 per ton. And the price level is way above the market expectation at the end of last year with already recovered prices between quarter three and four and in the first quarter of this year, we expect to have an additional increase in prices due to the follow-up of indexes.
Another important variable when it comes to price its freight. Freight has very low historic levels.
We have been performing many sales in this modality cost of freight and we can absorb part of our sales margins benefiting from higher prices. For 2013, we expect prices to be above 2012.
So, we believe we will be exceeding last year’s results. As a result, our inventories are very low.
We have been following this very closely and we believe that 2 million per ton in the beginning of this year, these levels will be back to the inventories and we need ore to maintain our operations. Answering your first question related to our CapEx for steel, just to give an idea, we expect for this year investments amounting to R$400 million in terms of current CapEx for steel and one of the projects we have in mind is to rebuild our coke factory.
You know that CSN today is self-sufficient about 65% in coke production from third-party purchase. And obviously we are going to maintain and over time we are also going to expand this number.
So this is in our agenda for 2013 and also for 2014.
Operator
Thiago Lofiego from Merrill Lynch would like to ask a question.
Thiago Lofiego – Merrill Lynch
Good morning everyone. I have two questions.
What is the average price for mining? You have the full quarter.
It seems to be slightly higher compared to the competition. Could you give us a breakdown of your realized price and also the other factors embedded in the revenue for mining or for ore more specifically?
You can have the full revenue embedded. So how can we calculate exactly what each factor was?
Second question, what about your third-party purchase slab? We didn’t see that happened in 2011.
So what should we expect for the future? Thank you.
David Salama
[Interpreted] Ore prices that quotation period that is behind, ore prices, in the fourth quarter, we had an average from October, November and December then as a result they were higher compared to previous quarters. Basically, we have three kinds of pricing systems.
We have those – lag behind three months backwards, three months that coincide but shipment day and also quotation period related to spot pay-off. In the fourth quarter, our volume was higher, our sales volume was higher.
Quotation period coincided with the quarter or with the fourth quarter and the average was higher compared with the third quarter. And we also have some spot pay-offs.
And we waited until the right time to sell them. It is the so-called time to market that product was available and we just waited that the timely moment to benefit from the market.
So basically that’s the profile of our sales, vis-à-vis our quotation period and the time to market related to the shipment in a more timely manner. Thiago, answering your question related to the flats.
Actually, we have preventive maintenance or scheduled maintenance in our steel mills. Thiago, coming back to your question, at the end of last year, we had scheduled maintenance in our steel mills and it eventually led to a reduction of about 150,000 tons of our own flat production.
And this shows why we have to resort to the market by approximately 140,000 tons to offset our volumes and as you know CSN is one of the few companies that works at full speed, full capacity and that happened in the second half of 2009 ever since then and we are very proud of it. So whenever the company requires scheduled maintenance, or any other kind of adjustment in production, it is under limit production wise and this happened in the last quarter of last year.
And whenever that happens, we will try to supply in order to maintain the company always at full capacity.
Operator
Andres Pinheiro from Itau BBA would like to ask a question.
Andres Pinheiro – Itau BBA
[Interpreted] Good morning everyone. I have two questions.
First question, what about leverage? You could say leverage is higher last year, almost 3.5 times the net debt over EBITDA ratio, how are you handling this?
What are the measures that you are considering to lower this average? And the second question, I wonder if you could give us an update as to long steel products, if the project is really expected to happen in the third quarter of this year and what is the volume expected for 2013 and 2014?
Thank you.
David Salama
[Interpreted] Martinez will answer the second question, vis-à-vis the long steel product plant and then I will answer about leverage. Andres, good morning.
The long steel plants or the start up is scheduled for August this year. It has already been confirmed this year.
Shipment will basically be used to qualify and also to rectify our products. And investments made up to now in this plants were just virtually concluded, it’s about R$1.2 billion.
That’s the total. For 2013, the volume is very small virtually related to approval and for 2014, we have a very strong curve, something around 500,000 tons per year since these are products that are – when it comes to technology and also when it comes to logistics and production of the year further controlled.
We understand it shouldn’t be a problem for CSN to be in the market. And the market is also growing.
Basically, it has 11 million tons per year and CSN accounts for 500,000 tons. So basically that’s our update for long steel products.
Now just to give you more details on the long steel product project, sometimes people are not that certain, the part of civil construction has 97% completed. Metal structures, 94%, electro-mechanic assemblies, which is the part that we are basically working now is 62% in line with the electric work at 68%, piping virtually completed around 88% and mechanics also aligned to electro-mechanics at 70%.
So for those of you who have following up the construction work, you can see a very good performance. And this year, we intend to invite you all to start-up for the plant start-up and visit our new facility.
Thank you. Answering your other question related to the leverage, you know this is one of the main issues that is being currently discussed at CSN.
What I can tell you right now is that the company will be maintaining a very stringent attitude when it comes to cash use or cash burn discipline. Our expectation is that this net debt-over-EBITDA ratio is below three times at the end of the year.
And basically that will happen due to an increase in EBITDA over the year. Our steel and mining personnel have already given their expectation vis-à-vis the volume.
Please bear in mind that now we are in a phase in which investments are very significant in these areas where the company operates in. Our expectation is that the ratio will be slightly below three times by year end and it’s expected to be maintained at the same level for a short time and once our projects already start generating results, we expect these ratios to go down.
Operator
Mr. Rodolfo from JP Morgan would like to ask a question.
Rodolfo De Angele – JP Morgan
[Interpreted] Good morning. I would like to focus my questions on mining.
First of all, I would like to understand more precisely, what is the operating problem that you are facing in the mine? And second and most important question, I wonder if you could – well, I saw the guidance that you just mentioned.
However what I’d like to have is an update, I would like to know something about your business plan or the case study for Casa de Pedra and for Namisa. When do you expect to see increased capacity?
What has already being done at Namisa more specifically? What are the commitments with partners, both ways?
Thank you.
David Salama
[Interpreted] As to the operating problem we had, it happened in the last weeks of January. Actually, that machine is one of the machines that feeds our processing plants.
In other words, it removes the ore from a yard in Casa de Pedra and sends the – to the process at a processing plant. And that’s where all the products come from.
This special equipment began to show structural problems. We had some issues and cracks in the equipment structure in the second or third week of January and then at the end of the month we had to shut down the equipment in order to have a technical evaluation, an in-depth evaluation and then take any routine measures necessary to the piece of equipment.
At the same time, we also began a plan to try to recover as much as possible the capacity we lose whenever we had to shutdown such a big piece of equipment. Just to give an idea, in our homogenization yard we have four IOs and also forklifts that can work on two IOs simultaneously and obviously two recovery machines.
We are taking up one of these recovery machines 52 meters wide and 700 tons. It does take a lot of caution and we really have to be very careful whenever we start any necessary repair.
As to mitigating actions that happen in the venture over the last weeks, where we had a real war operation. We allocated some additional equipment both in the mine anticipating parts of the mine purchases cater for this year.
So we anticipated part of the CapEx and also equipment for processing that are in the homogenization yard in order to replace the plant’s capacity, we have some hoppers in order to feed the conveyor equipment and they also receive the material the power shovels. So we did it out of emergency in order to have the right production levels.
And in the following weeks, we will be finding a final solution. Anyway, as I said in the beginning, this problem appeared at a time in which we had a very interesting ore supply in the region.
The iron quadrilateral region is going through a very interesting moment right now. There were a series of announcements about additional full capacity that would come from other ports, other competitors.
Many people got ready to produce, there are many people delivering, we have about 12 to 14 small producers in the region that have been investing through their operations up and running. And now we are just benefiting from the scenario offsetting part of the losses on top of our in-house solutions, offsetting them with the purchase in a timely manner of the supply that is coming right now particularly in the iron quadrilateral particularly MRS that includes Alto, Serra Azul.
So we are benefiting from the circumstance as best possible. So basically the operational problem lies in this machine and that is structural.
And with this kind of saying we cannot just relax out of safety reasons, occupational safety and also equipment integrity and facilities that they have in the yard. Therefore we are trying to provide the best repair possible.
The (inaudible) being investigated. We have some experts working on that problem but with this higher ore supply and our in-house solutions, at least we can deliver in a very timely manner and also reach the export levels we had in 2011, particularly because now we have additional ore capacity.
As to the business plan you ask, we maintain the big lines of our business plans. Today, at Casa de Pedra we have about 1500 staffs working in the extension for 40 million tons.
We have three companies of large size that are working with us, one is the Finnish engineering company providing the engineering work of the plan and many details with many local companies. And they have a lot of penetration in the mining market and have local resources very efficiently and we also have another company to conclude the civil works.
There are some details to be completed and Colin is a company from (inaudible). As to Namisa, we are about to conclude works at these terminals we also have a facility to treat ore and we have two concentration magnetic concentration lines that take part of the production, where they are important because they produce high grade ore 66% iron ore that helps in the mix of the purchase ore and also our own production.
Between June and July, we expect to open another two additional lines and by year end another two lines in series. In addition, one of the main projects, one of the key projects at Namisa is to reclaim some waste down.
As you know in the iron ore quadrilateral region we have some dams that are very old and they have high grade ore that can be sourced at very good price today. We conclude that the earthmoving works, installation of the operating system and we are about to start the feeding system in order to use for civil construction and electro-mechanic assembly in mid this year.
For the project to recover or steam the dams, so we are sticking to the plan. We are emphasizing the basics.
For instance, higher levels for dams which is critical for any mining company particularly in assets that have the same age as CSN’s access. We have thousands of people invoked working with – well, 500 or 600 pieces of equipment for Casa de Pedra.
Like I said, we are sticking to the basics when it comes to waste disposal with a very strong focus in order to unlock things that are basic to allow the company grow. So the plan is do the same, we maintain our focus on development, higher levels for the dams, recovery of high grade ore found in the dam, expanding Namisa’s activities and we are all working together with a lot of funds concentrated in Casa de Pedra.
Operator
(Inaudible) from HSBC would like to ask a question.
Unidentified Analyst
[Interpreted] Good morning. My question has to do with the interest in defense group in the American unit.
Could you give us an update regarding that process? My second question was to do would you take the interest in the Usiminas?
And what do you expect for the future regarding your interest in Usiminas?
David Salama
[Interpreted] The answer to your first question regarding CFH, as you mean we have a fiduciary obligation of following all of the movements happening in the industry where we operate. We will come to a conclusion that’s here when one has in its DNA working and following a conservative path in terms of acquisition, so what we can handle with?
Just as predicted in the past, if there is anything out there that is relevant, it will be immediately informed to the market and to the second question regarding investment in Usimina, this investment beginning financial investment we tried to somehow recover the cash that we invested and we are always looking for the best opportunities for this investment. It is important to point out that we had a division in mid last year there are regulation of authority of – not to make any additional acquisition in the respect of decision by the authorities and we want at the same time to preserve the investment that we made to-date.
Operator
Mr. Marcelo Aguiar from Goldman Sachs would like to ask a question.
Marcelo Aguiar – Goldman Sachs
[Interpreted] Thank you for the opportunity. Good morning.
I would like to go back to the mining issue. On the – explanation regarding the problem in the machine, but it’s not clear to me how much you expect to produce at Casa de Pedra, could you give us some figures?
Would that now include how much you produced in the past and the release, how much you expect to produce this year and when will be the start-up of the 40 million and what are the problem number that we claim, we all delayed the start-up of the 40 million. So could you elaborate more on that?
My second question is to do with your leverage. You have all the investment and need that to be made, so I would like to have accumulation of your CapEx, if you could breakdown your CapEx for this year total consolidated for the business for this year and for next year.
So that we can model the company a little bit better? Daniel will answer your first question and I will answer the second one regarding CapEx.
Daniel dos Santos
[Interpreted] Well, we have all the funded production in a consolidated way. On the first page of the release, we have information about iron ore deduction; it was at about 26 million tons last year.
The Presidente Vargas mill involved a build up about 7 million tons. This was the total in terms of Casa de Pedra and Namisa production and purchase of ore last year.
This year, the consolidated information will be around 36 million tons of which, we will be exporting 29 million tons. As far the impact of the climate on the project with the full capacity which was to the 40 million ton plant, so actually, this is a non-recurring problem.
It should default during the year. There will be no direct impact on expansion, expansion will continue in the plant.
Answering your second question about the CapEx for this year, we have in our budget worth of about R$3.1 billion to be invested, needs to involve the expansion CapEx and also the current maintenance CapEx. So I was trying to breakdown the figures for you.
When we talk about mining as a whole, we estimate R$660 million for cement, R$170 million from the long steel plant R$370 million, also for this year, we are expecting to invest R$1 billion in the Transnordestina Logística, specifically regarding Transnordestina. During the year a makeup in operation where we intend to give you more details regarding what we are doing back to new business for Transnordestina as of now.
We are putting together big package – packets are being discussed and we are discussing with the government and this is unfolding quite smoothly we expect to have it signed in the coming months and as soon as we have all of the documentation signed, we will disclose the plan to you. What I can tell you now is that overall, it tackles how the project is going to be financed to local and it’s more clear how are we going to have return on invested capital?
So going back to the CapEx because I was trying to break down the figures for you right? So overall, the expansion cut back total R$2.3 billion and in a consolidated term, including steel, mining, we have a current CapEx of another R$900 million.
Operator Ivan Fernandes from Barclays would like to ask a question.
Ivan Fernandes – Barclays
[Interpreted] Good morning. Just to add to what said before.
When it comes to the problem you had in the first quarter and also the change in the logistics or how you transport ore with this add more pressure on cost in the first quarter or why the problem persists or basically will be the same operating cost that you had before? Thank you.
David Salama
[Interpreted] Actually, there was no significant change in the way we transport ore. In reality, our operating model has three main pillars.
The first pillar is Casa de Pedra production followed by Namisa production and lastly ore purchases that we have in the logistics access of MRS. As to cost, we won’t have any significant change.
I don’t see any change that might be worth mentioning right now. Anyway what happened is that by and large, we end up by bringing a little bit more ore that is not in-house but like I said before the condition to buy ore abroad are far more favorable compared to previous years.
So that most local producers got themselves ready to afford capacity way above what they see today. So the only port that had additional capacity dollars and eventually we buy in a very accretive manner and to some extent, we have formal prices without significant changes.
Operator
We have a question in English. Carlos de Alba from Morgan Stanley would like to ask a question.
Carlos de Alba – Morgan Stanley
Yes, good morning. Thank you for taking the question.
Regarding the CSA assets and the US assets, do you present an offer, because we understand that the timing for present – already passed and we just want to know if CSN presented enough or and if you didn’t, is it because the negotiations with BNDS are delayed, any color on this will be appreciated? And then the other question is regarding your expectation for Transnordestina, just can you give us a little – an idea of when do you think you will be starting to generate revenue out of this project?
Thank you very much.
David Salama
[Interpreted] Carlos, I’ll be answering both questions. First question about CSA.
I would like to say that the company up to now and by the way, I stated that before in the document sent to them, we don’t have any binding offer yet when it comes to the acquisition of this asset. And I’d rather avoid making any further comments that my generation is speculation in the market.
I can tell you that if the company has any binding offer or any decision related to that we will be making use of legal instruments; we would be announcing that to you. Answering your second question, vis-à-vis Transnordestina, our expectation is that the project to some extent be completed by 2016.
By doing so we have a consolidated flow of revenues starting right now or then and not only that, we also have a clear picture of the return of this project. But like I said before, I’d rather wait and do we have the execution of the document, there is very good pathway and as soon as we have the execution of this document, we will prepare a presentation and you are all invited to attend this presentation in which we will be breaking down the whole project, as well as funds, returns, giving you very clear visibility for Transnordestina project.
Operator
Rodrigo Barros from – he would like to ask a question.
Unidentified Analyst
[Interpreted] Thank you all for the opportunity. I have two questions.
My first question has to do with the third-party ore purchase. You might be buying 14 million tons of iron ore from third-parties to have a 29 million goal for exports.
Does these figure makes sense? And the second question has to do with the coke plant.
You have approximately 1.7 tons of coke and you see coke is either using in its bank, then you would have R$2 million as investment. So how much would be recovered?
And do you have any anticipated CapEx for that?
David Salama
[Interpreted] Rodrigo, I think I answered the first question previously when I broke down the CapEx for maintenance this year. Actually what we have is a reform or revamp of this gold plant at first.
In order to maintain our efficiency around 65% or 70% in coke production. Daniel will be answering the second question about third-party ore
Daniel dos Santos
[Interpreted] Rodrigo, like I said in the beginning, we announced our amounts in a consolidated basis. So when we add Casa de Pedra, Namisa production and iron ore purchase, our expectation is 36 million tons and another piece of information is that, because we don’t operate by traders.
This kind of information what it gets to us it will create us, is not official information by the company be turned. The trader is in charge of that we buy directly.
But what I can tell you is this, consolidated production is 36 million tons and 29 will be submitted for exports.
Operator
There are no further questions. So we would like to turn the floor over to the company’s officers for the closing remarks.
David Salama
[Interpreted] Once again we would like to thank you all for being with us for this conference call. Our IR team is at your service for any other questions that remain unanswered.
Have a great day.
Operator
Thank you. This concludes today’s CSN’s earnings conference call.
You may disconnect your lines now at this time. Have a good day.