Good morning and thank you for standing by. Welcome to CSN Second Quarter of 2016 Earnings Conference Call. Today, we have with us the company’s executive officers. We would like to inform you that this is event is being recorded and all participants will be in listen only mode during the company’s presentation. After the company’s remarks, we will begin a question and answer session when you will receive further instructions. [Operator Instructions] Today’s event is being simultaneously aired by webcast and can be accessed through the CSN’s Investor Relation website at www.csn.com.br/ir where you will find the slide presentation as well. Please feel free to flip through the slides during the conference call. There will a replay service for this call right after the events close. Before proceeding, I would like to mention that forward-looking statements that are made during this conference are under the safe harbor and of the securities litigation reform acts 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 and they do not guarantee performance. Therefore, may depend on circumstances that may or may not occur. 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 Moise Salama, Corporate and Investor Relations Executive Officer who will present the company’s operating and financial highlights for the period. Please, Mr. Salama, you may proceed.

Good morning everyone. Thank you all for being here for CSN earnings conference call. I have here with me officers from the company as well. We will begin on slide 3. During the second quarter, we highlight EBITDA totaling R$855 million, a 17% increase over the first quarter of 2016 with an EBITDA margin of 19%. During June, EBITDA reached R$320 million, showing a recovery in the domestic steel market and also according to the good figures in the mining segment. In steel sales, we have reached 1,253kt, a slight expansion over the first quarter with an increased share of coated products, achieving 60% of the total sales for flat sales, a very expressive figure. In mining you have iron ore production totaling 8.5 million tons, with sales of 9.3 million tons in the same period. The delivered iron ore costs went from 31.20 in the first quarter of this year to 28.20, a reduction of $3 resulting from the efforts we have been made of reducing cost and projections. It is also worth noting that their working capital has been reduced and totaled $718 million during the second quarter and this is in line with our financial agenda that we have been disclosing to the market for a time of reduction, therefore in line with what we have said. Moving on we have the consolidated results in the fourth slide. In the second quarter, net revenues of R$4.3 billion had an increase of 13%, compared to the first quarter, mainly due to a higher volumes and sales in mining and higher prices in sales. Concerning the second quarter of last quarter, net revenues totaled 18% higher. Growth profit of 922 million in the second quarter is in line with the figure towards the first quarter and is interesting if…

Thank you. We will now begin the question-and-answer session for investors and analysts. [Operator Instructions] Our first question comes from Mr. Marcos Assumpcao from Itau BBA. You can start sir.

Thank you. This is Marcos Assumpcao. My first question is for the steel sector, we see an increase in the domestic market but also an improvement in coated products. Could you tell us a little bit more about the improvement in the mix that was actually done and if the increase in cost reflects it in terms of distribution and in line with this, how do you see the premium in terms of the current levels of exchange rate for imports? And concerning tax generation, do you have a lot of liberation of working capital because of lower inventory due to the stoppage that you mentioned? Do you expect this to be partially reverted during the next quarter, and you have already increasing inventories again? Or do you think that inventories is at a more normal level now? And another thing is concerning the cost of production, I would like to have more information, you commented that slab went back to 280 in June. Could you say a little bit more at this level? Has it stabilized in June and what will – is this the time for the third quarter or can really have some effects of the reduced fixed cost as well in the second quarter? That’s what I have to ask. Thank you.

Thank you for your questions. I’ll ask Martinez to answer all your questions.

Daniel, good morning. I’ll start answering what you asked on cost. Going back, we have that maintenance of the blast furnace #3 which was planned. It was expected to last 10 days. It was started on April 13 and finished on the 24, but went on to May 06. It was 22 day long. It was expected but it lasted more than we expected. So what happened was that this currently took over inventory of finished products, it was 200 million tons more or less and we worked on inventory promoting a significant reduction of the company’s working capital. So today, blast furnace #3 is normal, it’s operating at four capacity. The furnace #2 is under maintenance and we’ll be back to on operations in October, so we will have a brand new blast furnace #3, it’s totally complete and full fledged although we were delayed. And then the blast furnace #2 will be back on October 01. So what today we said was that, we have a slab price that was normalized and it was normalized in the second quarter. Together with the increase in price, we are going to probably pick up margin in the next quarter. So the cost is totally under control and in addition to the slab cost which is the most important that we have that had a very extra leads, we still have a target to reduce cost in other lines of the company to reduce internal cost of the other cost reduction programs that we have. Concerning the price increase for the domestic market, going back we actually did three price increase in the domestic market in distribution, major networks and to the construction and oilfield industry excluding automakers. We had an increase in April, May and June. All these increases were…

Perfect. Thank you.

[Operator Instructions] Our next question comes from Leonardo Correa with BTG Pactual. Thank you sir, you may proceed.

Good morning everyone. Thank you for the call. My first question concerns the demand Martinez, we have seen that they are certainly leveling off not really significant, but the figures have not decreased anymore and maybe in the second half you will have more improvement. So, at first 2017, how can one justify or, is there anything in the outlook for 2017 in the steel industry that shows although there will be a higher demand. Because if we look in Brazil, the last 35 years the steel market products has dropped by 35%, what is the elasticity for the demand in steel? What should we expect? Should we expect a stronger demand for 27 and in terms of steel again if you can help us understand Martinez by giving your opinion because all of the protection is that we have in Brazil, the government now is analyzing an anti-dumping request of China and Russian clients, could you tell us the probability of this, especially given the global context, is there any sense what is the reason why Brazil should act in this way and another thing is the [indiscernible] diagram, what is the expectations for increase, is it around 5% and my last question is concerning the dam of the rejects products of the bioproducts. We have been reading that there may be new legislation on this due to some adequate incident, I would like to know what are the risk that you have in your dams? What measures have been taken in order to protect and to act according to the new regulations?

Leonardo, thank you for your questions. Before giving the floor to my colleagues I will like to announce that Benjamin Steinbruch, CEO and Chair of the Board is following our call and he is available to answer questions from the market as well. The first question will be answered by Martinez in the steel segment and the last question concerning the dams, I will give to [indiscernible] who is our Commercial Director for mining.

Leonardo, good morning again. You said something that was very important and I consider your opinion very clear and I have the rather same conclusion there is a potential in our country of an ample reform, therefore the demand potential would be more encouraging than the last years, the directions are positive than what we have noticed is that there are sectors that have recovered in the industry and this is clear to us. The apparent consumption has reached the level that can’t get really worse. If you think that we are closing the year with an apparent consumption of 10 million and last year was 12 million and in 2014, it was 14 million. So, I have a view for 2017, particularly which is very optimistic. I think that steel in 2017, first of all I think that next year’s GDP depending on the reforms that we have maybe much better than what is being expected and still may have an elasticity better than it has historically, more than 2.5% with additional figure and then the recovery of the factor may happen quickly than we think. And I’m not, I’m being excessively optimistic. We have witnessed these kinds of moments in Brazilian economy. We have gone beyond and come back from rock bottom. Another important issue is the level of imports that in Brazil we’ve had the import penetration that making it easier for the domestic market to adjust and to start to have the projection change, which are more aligned. So, today you see a certain integration of projection change and today for penetration we may close the year with less than 600,000 times in import against 2 million last year. So, this is a scenario that is also very positive, the import levels and it makes it…

Thank you. Our dams in [indiscernible] has a license, it is safe, it has recently undergone two environmental inspections and we went through them successfully. The way the dam was built was the most safe, was the safest and now the dam is considered a reference in the sector. The work schedule for the dam is correct. We are on schedule and there are two to three years that we have for the level of the dam that it is today. So that is the rate that we have. Now I would like to give the floor to Mr. Benjamin Steinbruch who would like to make some comments concerning the results for the second quarter of this year. Mr. Benjamin Steinbruch.

Good morning everyone. Good morning CSN personnel. I only managed to connect now. I like to participate briefly in this call to provide you with an overview of what we have been doing in the second quarter and the consequences that this may have for the effects concerning the results for the next quarter. I like to highlight that I was not able to listen to the previous questions, but giving you some of my view concerning the prices in mining, we have been penalized because we are conservative and have opted to sell at a close price and because of the high prices in the second quarter and thoroughly in the third quarter we do not enjoy this peak in prices, but we will capture it in the next quarter. So we will recover significantly in terms of margins and concerning the quantities we are optimistic, we are producing more than we forecast and I believe we are going to meet the [indiscernible] and would be over the [indiscernible] by 10% with quality price and margin and this we will be seeing in the third quarter concerning the steel price. I heard the penultimate question we have had three price increases that have been effected totaling 10% each. There will be mirage in the next quarter and in terms of quantity you see that the high furnace #2 is being maintained and will be back in October first week and we believe there is demand and there is space for this production. In the second quarter, we acquired IBQ [ph] plant to see the reduction and we are now back – we will be back with the second blast furnace in October. And we always look for added value, we prioritize the coated product and we believe that still…

Our next question comes from [indiscernible] Banco Credit Suisse. Sir, you may proceed.

Good morning, everyone. I’d like to make a question in terms of iron ore. What can we expect for this year and for next year? This cost of $28 per tonne in China, even though the exchange rate effect, how much – how long can you sustain this cost and can you keep it at this level if we look to the future? These are the questions. Thank you.

Thank you for the questions. Geraldo [ph] will answer both of them.

The volumes for this year will be 70 million tonnes and concerning the sustainability of the cost part, the reduction that we have seen is a result of this very, very hard that work that Mr. Benjamin trying to consult and it is grounded in structural action that was taking in the operations. We have [indiscernible] that we have captured synergy in that operation, we have gain in productivity, we were very positive. We also as you have mentioned and already Benjamin mentioned, we have already discussed all the contacts that we have with suppliers exhaustively because we all today is going through a moment of recovery and in order to cut down on costs, we sat down with the suppliers for services and products. Our inner planning medium and long term has been optimized. We have a very clear view of our results and we have optimized our planning for the mines and still with some – presenting some clients of ore that were being used as by-products, we have $70 products that should not have gone through the market – went through the market because we recovered products and we made this feasible. Finally, our rates according to the volume that we were able to produce additionally, we export almost everything to China because the level of the market is very competitive and we saw that despite the figures of last quarter our maritime price was reduced and also these actions goes structural and I’m here to say we don’t believe that freight in the next year will be changing much and therefore these actions at a competitive level at its same level of the major mining companies that work with lower crisis, lower cost.

Our next question comes from Mr. Carlos Alba from Morgan Stanley.

Yes. Good morning. Thank you very much. Just really the company has made great efforts.

[indiscernible]

Yes, to improve the performance but your leverage remains quite high around 8 times net debt to EBITDA. And so my question is, the asset sale or longer to be realized, you realized [indiscernible]. I know the shareholders ready to inject price equity into the company much faster, the balance sheet of CSN. And the second question has to do within the lever cash cost of iron ore at $28, how much do you freight? Thank you.

Carlos, thank you for your question. I’ll ask Zeraldo to start with the second question and then we’ll answer the first question concerning the ramp up of the company.

The $28.11 is freight. Carlos, concerning the first question that you said concerning the high leverage of your company, we have been conducting the work that has several strengths. We try to bring to a more convertible level. Many of these actions have reduced our working capital for example we are focusing on company business, increasing profitability in terms of operations, better cost, better results and at the same time we have a deliverance program which is ongoing. The programs as you know takes a while and we want to look for a fair price for our assets. You have excellent assets, so we cannot miss an opportunity to look for a reasonable price for these assets. This of course take some time but we are comfortable because we have already renegotiated the principal of our current debt for 2016 and 2017. So I believe we are on schedule. We are going to announce a first sale in the next 10 days, I can’t announce it yet and then we have another sale so it is a program that it is ongoing and it will have effects in the figures that we will have for the next quarters.

[Operator Instructions] Thank you. Since there are no more questions, I like to give the floor to Mr. Moise Salama, Investor Relations, for his final remarks.

I would like to reinforce our optimistic message for the second quarter of this year. We have seen a recovery in the domestic market that has begun. The company is focused on certain niches and this leads to higher profitability. The situation at China is better than what we could have imagined in the beginning of the year. We are working hard to reduce cost and expenses and you can now see this on the results. Our working capital has also showed the results in the work we’ve been doing and having an expressive decrease in this quarter. The commercial strategies are consistent and also we will be announcing the first sale of assets. We have very good assets and this will happen within schedule that the company thinks appropriate. Lastly, the scenario is positive and will be reflected in the figures and this will be a gradual process from now on. I’d now like to give the floor to Mr. Benjamin Steinbruch who will also provide final remarks.

I like to thank you all for being here for this earnings conference call and to express our belief that the scenario is improving, the company’s performance is improving of the entire segment in fact and think we are better and we’ll improve more than they have improved till now. We have the political scenario that will be solved in the short term and with this I believe that the market conditions will improve due to a return of credits and cutting down on interest which we know that is highly exaggerated and has been penalizing productions and consumption. We believe that what has to be done in terms of reducing cost and to work on production everything has been done, everything that was on – depended on us in terms of operation so the entire company has been done. We have started eating fruits of this in August and July, and we are certain that the task is the correct one and the EBITDA 25% rate for the third quarter is a reality. And the company has a feature that it reacts very quickly to face those scenarios that is when we were with the projection with low cost and the possible pick up in the market that we have discussed will lead to figures for a third quarter that are most better than these ones. As I have said, we will tackle the financial part now, the leveraging is what concerns us at this moment and it was now the increase of the debt that penalized us. The decrease in EBITDA from iron ore went from $150 to $37 and it’s now like $62, $63 but in concrete terms it was this drop in margin that penalized us in terms of the debt. And that was in terms of what we could do, operations wise, we will show an improvement in EBITDA with consequences that will lead to a better leveraging. And I like to stress again that we are concerned and we are acting, we will be announcing a sale of asset in the next 10 days and we would like to say that we are working even on what we think is core to sell part in order to reduce the debt of the company and those have been our focus. So everything we can view that is within our reach we have been doing and we are doing, and after this general operations improvement is what comes next, it’s the financial aspect. This is what we have to do to say to you, thank you very much for the questions, thank you for your participation and we will see each other in the next call which will probably bring everything that we have. Thank you.

Thank you. The earnings conference call for CSN is now closed. Please disconnect your lines and have a good day.