In 2003, CST’s net sales revenue grew 31% to R$ 3.729 billion compared to 2002. This performance was driven by the highest average slab price (US$237/ ton) since 1997 and the fourth highest in the Company’s history. Value-added hot coil sales growth was also significant. Favorable pricing in the domestic market together with financial advantages of domestic market sales from ICMS tax savings derived from tax credits generated on raw material purchases accumulated in a year in which the Company sold only slabs, mainly for export.
      The Asian (mainly Chinese) influence on market activity had an impact on the Company’s gross profit, effecting both revenues and costs. Greater demand for slabs was coupled with higher raw materials prices, mainly coal, iron ore and pig iron as well as higher freight

prices, resulting in higher operational costs.
      Cost of good sold was 25% higher in 2003 compared to 2002 due to a 5% higher average exchange rate, a greater portion of scrap used in production in order to optimize production, as well as greater production of value-added hot coils.
      While higher scrap usage raises production costs, it also contributes to greater productivity, which in turn improves profitability and the Company’s earnings.
      Despite this, CST remained one of the most competitive companies in the world in terms of production cost, with gross profit totaling R$ 1.282 billion, 46% higher than in 2002 and gross margin reaching 34%, an improvement of 3 percentage points.