.jpg?lang=en-US&ext=.jpg)
Gerdau Reports First Quarter Results
05/12/2009 - Gerdau reports first quarter net income of R$ 35 million on revenues of R$ 7.7 billion, reflecting the significant impact of the ongoing contraction in world steel demand.
Gerdau reported consolidated sales volume of 3.1 million tonnes for the first quarter of 2009, a 12.7% drop as compared to the fourth quarter of 2008. Steel production decreased by 22.2% over the same period, reaching 2.5 million tonnes in the first quarter. First quarter net income was R$ 35 million on revenues of R$ 7.7 billion.
The company said that while first-quarter results reflect the significant impact of the contraction in world steel demand, in March it had observed signs of improvement in the market, with its sales volume in that month 20.7% higher than in December 2008.
“We managed to adjust quickly to the new market reality, drawing on our flexible operations and the concerted efforts and expertise of our teams in all countries where we have operations,” said André B. Gerdau Johannpeter, Gerdau’s CEO. “We increased our cash position, which stood at R$ 5.8 billion at the end of March, and improved liquidity by lowering our working capital requirements. In addition, total production costs decreased by R$ 1.8 billion, or 28%, in relation to the previous quarter. These efforts by our management teams should have positive repercussions on costs in the coming quarters, which are no longer suffering impacts from the high inventories formed to meet the growing consumption observed in October 2008,” added Johannpeter.
“We managed to adjust quickly to the new market reality, drawing on our flexible operations and the concerted efforts and expertise of our teams in all countries where we have operations,” said André B. Gerdau Johannpeter, Gerdau’s CEO. “We increased our cash position, which stood at R$ 5.8 billion at the end of March, and improved liquidity by lowering our working capital requirements. In addition, total production costs decreased by R$ 1.8 billion, or 28%, in relation to the previous quarter. These efforts by our management teams should have positive repercussions on costs in the coming quarters, which are no longer suffering impacts from the high inventories formed to meet the growing consumption observed in October 2008,” added Johannpeter.
In Canada and the United States (except for units producing specialty steels), Gerdau Ameristeel registered 1 million tons growth in steel production volume, 11.4% higher than in the fourth quarter of last year. Sales volume was 1.1 million tons, down 11.5% vs. the previous quarter. Despite lower demand in the first quarter, North American sales in March were 10.1% higher than in December 2008.
In Latin America (excluding Brazil), Gerdau’s units produced 316,000 tonnes of steel in the first three months of the year, up 41.1% vs. the previous quarter. Sales volume was 487,000 tonnes, also expanding against the previous quarter, by 9.7%.
In Brazil (excluding the units producing specialty steel), steel production volume in the first quarter declined by 41.3% against the prior quarter to 879,000 tonnes. The company said the volume contraction was mainly due to anticipation of the scheduled maintenance stoppage of the No. 1 Blast Furnace at Gerdau Açominas in Minas Gerais. Sales volume in the domestic market in the quarter fell by 26.8% to 721,000 tonnes. The company noted, however, that domestic sales volume was 12.2% higher in March than in December 2008.
To partially offset the slowdown in the domestic economy during the first quarter, Gerdau increased its exports from Brazil (despite the lower profitability of export sales). Export shipments totaled 374,700 tons (a 38.4% increase) while revenue from export sales totaled R$ 397.4 million.
Gerdau’s specialty steel segment (which includes units in Brazil, United States and Spain) produced 300,000 tonnes in the first quarter, down 50.5% vs. the prior quarter, while sales volume contracted by 32% to 398,000 tons. The company noted that specialty steel sales volume had expanded by 9.6% in March vs. December 2008.
From January to March, Gerdau’s investments in fixed assets totaled US$ 242 million, which was used for projects already initiated in 2008. Of this amount, 57.9% was allocated to Brazil (excluding units producing specialty steel) while the remaining 42.1% was allocated to the other operations.
Regarding prepayment of dividends, the company noted that Metalúrgica Gerdau SA and Gerdau SA have dividend payment policies that are aligned with market practices and provide for the distribution of at least 30% of adjusted net income each fiscal year, above the 25% minimum required by Brazilian law. In view of the current economic environment and the company’s objective of preserving cash, the dividend payment for the first quarter of 2009 will not be anticipated. The company said it would review its position for the coming quarters, always in compliance with the minimum mandatory dividend stipulated in the company’s bylaws.
Gerdau, the largest producer of long steels in the Americas, is also one of the world’s major suppliers of specialty long steel. It has industrial plants in 14 countries, with operations in the Americas, Europe and Asia, which total an installed capacity of more than 20 million tonnes of steel. It is the largest recycler in Latin America, and reclaims over 16 million tonnes of scrap worldwide every year.
.png?lang=en-US&ext=.png)