Fri Feb 28, 2014 12:17pm EST

Feb 28 (Reuters) – Brazilian steelmaker Companhia Siderç…¤rgica Nacional SA expects profit margins to rise in 2014 as a result of cost-cutting measures and sees iron ore sales increasing from the prior year, executives said on Friday.

Known as CSN, Brazil’s second-largest producer of flat steel products posted an unexpected 487.1 million reais ($210 million) loss in the fourth quarter after settling a tax bill on foreign earnings.

Adjusted earnings before interest, tax, depreciation and amortization, a measure of profitability known as EBITDA, rose to 32 percent of net revenue at the end of December. The so-called EBITDA margin was 31 percent in the previous three months.

Margins should continue to improve due to “a significant reduction in costs,” commercial director Luis Fernando Martinez said on a conference call to discuss quarterly earnings.

Sales, general, and administrative expenses jumped 13 percent from the previous quarter to 355 million reais, with the company citing administrative provisions.

The company, whose steel mill is running at nearly full capacity, sees steel sales stable this year at 6.1 million tonnes, while iron ore sales from its mining operations is expected to rise to 44 million tonnes from 25.67 million tonnes in 2013, executives said on the call.

The company expects investments to total 2.8 billion reais in 2014, investor relations officer David Salama said. While the number is little changed from the previous year, the firm sees more of its investment focused toward the mining sector.

A major overhang on CSN shares has been the company’s conflict with a group of Asian steelmakers that own a share in CSN’s Namisa ore unit. The companies want to exit the partnership by exercising a put option, which would force CSN to pay them compensation.

Salama said the company is looking to conclude an agreement with the steelmakers “at the beginning of this year.”

“Short-term risks remain due to the impasse related to the Namisa partners, whose exit remains undefined,” BB Investimentos analyst Victor Penna wrote in an investor note on Friday.

Shares of CSN fell 4.91 percent to 10.45 reais in afternoon trading in Sao Paulo, their biggest one-day decline in over a week.

Fourth-quarter income was heavily affected by CSN’s agreement in November to pay Brazil 566 million reais in back taxes related to profit at overseas operations. The company said net income would have reached 450 million reais in the quarter without the tax charges.

Steel sales fell 5 percent from the previous quarter. The Brazilian market accounted for 74 percent of sales, down from 77 percent in the previous quarter, reflecting a weaker local currency and a sluggish manufacturing sector in Latin America’s largest economy.

Net revenue rose 6 percent in the quarter to 4.949 billion reais, compared with a 4.441 billion reais estimate. Cost of goods sold came to 3.292 billion reais, little changed from the previous quarter.