Exchange Rates Lift Gerdau Earnings Even As Shipments Decline
08/14/2015 - Brazilian steelmaker Gerdau SA recorded a 3-percent increase in net sales, even as shipments fell during the second quarter, the company said in its quarterly earnings statement.
On the quarter, the company shipped about 4.3 million tons, which was down 5.6 percent on a year-over-year basis. Gerdau said the decline was due in part to weaker demand from Brazil's construction and manufacturing industries, reflecting the economic uncertainties in company's home country.
Net sales rose to R$10.8 billion, up from $10.4 billion in the previous year, due to favorable currency exchange variations. Despite the increase, Gerdau's net income slid 32.6 percent to R$265 million. The company blamed the decline on lower operating income and higher financial expenses.
In a statement, Gerdau said that it is restructuring some of its divisions "to capture greater strategic and operational synergies." Through the restructuring, units in Mexico, along with its joint ventures there and in the Dominican Republic and Guatemala, will become part of the North America division, which currently consists of long steel facilities in Canada and the U.S.
Gerdau also is creating a South America division, which will include the long products plants in Argentina, Chile, Colombia, Peru, Venezuela and Uruguay.
Also, the company's iron ore operation will become part of the Brazil division, given that it primarily serves the Ouro Branco mill in Minas Gerais, Gerdau said. The Brazil division consists of long- and flat-products facilities in Brazil and the metallurgical coal mines and coke ovens in Colombia.
During a conference call with analysts, Gerdau CEO Andre Gerdau Johannpeter said that the company is open to asset sales, given the challenging global market conditions, and therefore is re-evaluating the profitability of each of its operations, according to AMM.
"We don't have anything to announce at the moment, but the decisions will be made based on the return on invested capital in each business," Johannpeter said, according to AMM.
As for the remainder of the year, Gerdau said it expects to see slow growth in steel demand into 2016, owing to China's economic slowdown and structural adjustments to the world's economies. It said the world industry has 720 million tonnes of excess capacity, which will continue to pressure industry margins.
It also said it expects its home market, as well as those in North American and Latin America, to be disrupted by steel exports from China.
Net sales rose to R$10.8 billion, up from $10.4 billion in the previous year, due to favorable currency exchange variations. Despite the increase, Gerdau's net income slid 32.6 percent to R$265 million. The company blamed the decline on lower operating income and higher financial expenses.
In a statement, Gerdau said that it is restructuring some of its divisions "to capture greater strategic and operational synergies." Through the restructuring, units in Mexico, along with its joint ventures there and in the Dominican Republic and Guatemala, will become part of the North America division, which currently consists of long steel facilities in Canada and the U.S.
Gerdau also is creating a South America division, which will include the long products plants in Argentina, Chile, Colombia, Peru, Venezuela and Uruguay.
Also, the company's iron ore operation will become part of the Brazil division, given that it primarily serves the Ouro Branco mill in Minas Gerais, Gerdau said. The Brazil division consists of long- and flat-products facilities in Brazil and the metallurgical coal mines and coke ovens in Colombia.
During a conference call with analysts, Gerdau CEO Andre Gerdau Johannpeter said that the company is open to asset sales, given the challenging global market conditions, and therefore is re-evaluating the profitability of each of its operations, according to AMM.
"We don't have anything to announce at the moment, but the decisions will be made based on the return on invested capital in each business," Johannpeter said, according to AMM.
As for the remainder of the year, Gerdau said it expects to see slow growth in steel demand into 2016, owing to China's economic slowdown and structural adjustments to the world's economies. It said the world industry has 720 million tonnes of excess capacity, which will continue to pressure industry margins.
It also said it expects its home market, as well as those in North American and Latin America, to be disrupted by steel exports from China.
