CSN 4Q25: Structural Risks and Execution Remain Central

Spread dislocation reflects subordination and asset sale uncertainty, while liquidity remains adequate but deteriorating

We maintain an Opportunistic Overweight recommendation on CSN, with a preference for the CSNBZ 4.625% 2031s and CSNBZ 5.875% 2032s, which in our view continue to offer the best combination of attractive carry, valuation, and upside potential along the curve. We use the Opportunistic Overweight label deliberately, as the thesis is driven by spread dislocation following rating actions and ongoing capital structure concerns rather than by an improving fundamental trajectory. 4Q25 results came in above expectations on both revenues and EBITDA, but they also confirmed ongoing credit pressure from negative free cash flow and rising leverage. While we think current spread levels already reflect the near-term pressure from cash burn, elevated capex, high financing costs, and still weak underlying steel profitability, persistent weak cash generation and softer credit metrics continue to reinforce the market’s cautious stance. Liquidity fully covers 2026 maturities and, assuming typical bank debt rollover, extends coverage into 2027. That said, cash declined meaningfully to R$16.0 billion, covering short term debt by 1.5x, and we no longer characterize the liquidity position as strong. We would view liquidity as becoming a more material concern if cash continues to decline without a corresponding improvement in operating cash flow or successful execution of liability management initiatives. Management reiterated that deleveraging remains a top priority, to be pursued through asset monetizations, liability management initiatives, and additional financing structures.