Gerdau Ameristeel Reports 2009 4th Quarter, Year-End Results
02/26/2010 - Gerdau Ameristeel reported a net loss of $46.1 million on net sales of $1.0 billion for the fourth quarter and a net loss of $161.7 million on net sales of $4.2 billion for the year ended December 31, 2009.
Gerdau Ameristeel Corp. reported a net loss of $46.1 million on net sales of $1.0 billion for the fourth quarter and a net loss of $161.7 million on net sales of $4.2 billion for the year ended December 31, 2009.
Fourth Quarter Results — The $46.1 million ($0.11 per share) net loss compares to a net loss of $25.4 million ($0.06 per share) for the previous quarter (3Q09) and a net loss of $1.3 billion ($3.08 per share) for the year-ago fourth quarter. Results included a $12.2-million pre-tax charge related to the write-off of deferred financing costs and a $3.2-million pre-tax gain on sale of investments. Excluding these adjustments, Non-GAAP Adjusted Net Loss was $40.3 million ($0.09 per share) for the three months ended December 31, 2009.
Net sales of $1.0 billion reflect a 9% decrease from $1.1 billion for the previous quarter (3Q09) and a 29% decrease from $1.4 billion for the year-ago fourth quarter. Weighted average mill selling price decreased 2% or $13 per ton in comparison to the previous quarter (3Q09) and decreased 33% or $296 per ton in comparison to year-ago fourth quarter. Finished steel shipments were 1.3 million tons, a decrease of 14% or 210,000 tons from the previous quarter and a decrease of 4% or 55,000 tons from the year-ago fourth quarter.
EBITDA was $43.8 million compared to EBITDA of $163.0 million for the previous quarter and $19.4 million for the year-ago fourth quarter.
During the fourth quarter, the company incurred a foreign exchange loss of $7.4 million as the Canadian dollar strengthened approximately 4% in comparison to the US dollar. This charge arose from the revaluation of US dollar investments held by the company's Canadian entities.
Full-Year Results — The $161.7 million ($0.37 per share) net loss compare to a net loss of $587.4 million ($1.36 per share) for 2008. Results included a $115.0-million pre-tax charge related to actions to stop production at some of the company's steel mills, a $12.2-million pre-tax charge related to the write-down of deferred financing costs, an $11.9-million pre-tax charge of related to early extinguishment of certain debt obligations, and a $3.2-million pre-tax gain on the sale of investments. Excluding these adjustments, the Non-GAAP Adjusted Net Loss was $73.3 million ($0.17 per share) for the year ended December 31, 2009, which compares to Non-GAAP Adjusted Net Income of $718.0 million ($1.67 per share fully diluted) for 2008.
Net sales of $4.2 billion compare to net sales of $8.5 billion for 2008. Weighted average mill selling price decreased 28% or $247 per ton compared to 2008, while finished steel shipments decreased 36% to 5.3 million tons for 2009 compared to 8.3 million tons for 2008.
EBITDA was $320.3 million compared to EBITDA of $1.5 billion for 2008.
During the year, the company incurred a foreign exchange loss of $37.9 million as the Canadian dollar strengthened approximately 16% in comparison to the US dollar.
Financial and Liquidity — During December 2009, the company entered into a new $650-million senior secured asset-based revolving credit facility. The facility replaced the company's $950-million asset-based credit facility that would have matured in October 2010. The new facility is scheduled to mature in December 2012. The company also entered into a $610-million loan agreement with Gerdau Holdings Inc., a subsidiary of Gerdau S.A. The loan bears interest at 7.95%, is payable semi-annually, has no scheduled principal payment prior to maturity, and will mature in January 2020. Net proceeds of the Gerdau Holdings, Inc. loan plus an additional $300 million of cash were used to prepay $910 million of the Term Loan Facility.
At December 31, 2009, the company had $656.3 million of cash and short-term investments, a decrease of $32.1 million from the levels at December 31, 2008. Excluding both the cash paid by the company to redeem its $405-million 10 3/8% Senior Notes in August 2009 and the above-mentioned $300-million debt prepayment, the company generated $680.2 million in cash and short-term investments in 2009. In addition to its cash and short-term investments, the company had approximately $420.2 million available under secured credit facilities, which resulted in a total liquidity position of approximately $1.1 billion at December 31, 2009.
CEO Comments -- "While 2009 was certainly a challenging year for the steel industry, we took a number of actions to better position us for the future,” commented Mario Longhi, President and CEO of Gerdau Ameristeel. “In regard to our operations, we reduced our cost structure and implemented processes to better maximize productivity across our network of facilities and we worked very closely with our customer base during these difficult times to enhance our long-term relationships. From a financial standpoint, using our significant cash generation, we improved the strength of our balance sheet by reducing our debt by $709 million and extending maturities.
“Some of the benefits of these actions were evidenced in the fourth quarter 2009 results,” continued Longhi. “By focusing on what we control, when comparing the fourth quarter of 2009 to the same period of 2008, we improved EBITDA by $24 million despite facing a decline in selling prices and shipment volumes of 33% and 4%, respectively. I am proud to say that these successes were achieved as a result of the dedication of our teams delivering exceptional performance during these difficult times.
“While minimal stimulus dollars were spent during 2009, we believe that more infrastructure projects will be undertaken during 2010. In addition, there are certain segments such as the nuclear power industry which we believe will begin committing significant investments to modernize the aging infrastructure in North America,” added Longhi.
“We believe that these factors, along with low customer inventory levels and increases in shipments and selling prices that have occurred since the end of 2009, give us reason to enter 2010 with optimism for a better year."
IFRS Conversion — The Canadian Accounting Standards Board is requiring Canadian publicly accountable enterprises to adopt International Financial Reporting Standards (IFRS) for interim and annual financial statements related to fiscal years beginning on or after January 1, 2011. The company expects to adopt IFRS in 2010.
Gerdau Ameristeel is the second-largest mini-mill steel producer in North America, with annual manufacturing capacity of approximately 12 million tons of mill- finished steel products. Through its vertically integrated network of minimills, scrap recycling facilities and downstream operations, Gerdau Ameristeel serves customers throughout the United States and Canada. The company's products are generally sold to steel service centers, steel fabricators, or directly to original equipment manufacturers for use in a variety of industries. Gerdau Ameristeel's majority shareholder is the Gerdau Group, a 100+ year old steel company, a leading producer of long steel in the Americas and one of the major specialty long steel suppliers in the world.