CSN Mineração (BVMF:CMIN3) Has A Pretty Healthy Balance Sheet

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that CSN Mineração S.A. (BVMF:CMIN3) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does CSN Mineração Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 CSN Mineração had R$9.82b of debt, an increase on R$8.32b, over one year. However, its balance sheet shows it holds R$14.3b in cash, so it actually has R$4.47b net cash.

How Strong Is CSN Mineração's Balance Sheet?

According to the last reported balance sheet, CSN Mineração had liabilities of R$7.44b due within 12 months, and liabilities of R$17.6b due beyond 12 months. On the other hand, it had cash of R$14.3b and R$1.32b worth of receivables due within a year. So its liabilities total R$9.47b more than the combination of its cash and short-term receivables.

CSN Mineração has a market capitalization of R$28.2b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. Despite its noteworthy liabilities, CSN Mineração boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for CSN Mineração

On the other hand, CSN Mineração saw its EBIT drop by 7.6% in the last twelve months. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if CSN Mineração can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. CSN Mineração may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, CSN Mineração actually produced more free cash flow than EBIT over the last three years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While CSN Mineração does have more liabilities than liquid assets, it also has net cash of R$4.47b. The cherry on top was that in converted 124% of that EBIT to free cash flow, bringing in R$8.2b. So we are not troubled with CSN Mineração's debt use. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 2 warning signs we've spotted with CSN Mineração (including 1 which doesn't sit too well with us) .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.