Gerdau Ameristeel Reports Profit for 2nd Consecutive Quarter
08/06/2010 - Gerdau Ameristeel reported net income of $46.7 million on net sales of $1.3 billion for the second quarter, and net income of $71.9 million on net sales of $2.5 billion for the six months ended June 30, 2010.
Gerdau Ameristeel Corp. reported net income of $46.7 million on net sales of $1.3 billion for the three months, and net income of $71.9 million and net sales of $2.5 billion for the six months ended June 30, 2010.
Second Quarter Results — The $46.7 million ($0.11 per share diluted) second quarter net income compares to net income of $25.2 million ($0.06 per share diluted) for the previous quarter (Q1-2010) and a net loss of $52.4 million ($0.12 per share) for the year-ago second quarter. The company noted that it has adopted International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, as of January 1, 2010, so the comparative periods for fiscal year 2009 have been restated under IFRS.
Net sales of $1.3 billion reflect an 18% increase from $1.1 billion for the previous quarter (Q1-2010) and a 30% increase from $1.0 billion reported for the year-ago second quarter.
Weighted average mill selling price increased by $59 per ton (9%) in comparison to the previous quarter (Q1-2010) and by $89 per ton (15%) in comparison to the year-ago second quarter. Finished steel shipments were 1.5 million tons, an increase of 4% compared to the previous quarter (Q1-2010) and a 15% increase compared to the year-ago second quarter.
Metal spread — the difference between mill selling prices and scrap raw material costs — was $409 per ton, a decrease of $31 per ton from the same period in 2009. The company said the decrease was primarily due to an increase in scrap raw material costs, which at $292 per ton represented an increase of $120 per ton compared to the year-ago quarter.
EBITDA, as adjusted, was $136.4 million, which compares to EBITDA of $116.7 million for the previous quarter and EBITDA of $66.0 million for the year-ago second quarter.
Six Month Results— The $71.9 million ($0.17 per share diluted) net income for the first six months of 2010 compares to a net loss of $83.9 million ($0.19 per share) for the comparable year-ago period.
Net sales of $2.5 billion reflect a 19% increase from $2.1 billion reported for the six months ended June 30, 2009.
Weighted average mill selling price was $672 per ton, which was relatively flat vs. $666 for the comparable year-ago period. Finished steel shipments were 3.0 million tons, an increase of 20% in comparison to the six months ended June 30, 2009.
Metal spread was $392 per ton, a decrease of $89 per ton from the same period in 2009. Scrap raw material cost used in production for the first half was $280 per ton, an increase of $95 per ton compared to the comparable year-ago period.
EBITDA was $253.1 million compared to EBITDA of $107.8 million for the six months ended June 30, 2009. The company noted that EBITDA was favorably impacted primarily by shipment volume but also by increased earnings from joint ventures for the three- and six-month periods as compared to comparable prior-year periods. Income from joint ventures was $18.1 million for the second quarter, an increase of $10.4 million from the previous quarter and an increase of $23.3 million vs. the year-ago quarter. Income from joint ventures increased $41.3 million for the first half of 2010 as compared to the first half of 2009. Additionally, as a result of the significant increase in the company's stock price during the second quarter of 2010, EBITDA includes an unfavorable non-cash stock compensation charge of $9.3 million and $10.2 million for the three and six months ended June 30, 2010, respectively, which represents an increase of $8.4 million when comparing the first and second quarter of 2010.
Financial Position— At June 30, 2010, the company had $540.3 million of cash and short-term investments, a decrease of $116.0 million from December 31, 2009. This decline was primarily the result of the company's pension contributions, interest payments and increased investment in working capital. In addition to its cash and short-term investments, the company had approximately $498.4 million available under secured credit facilities, which resulted in a total liquidity position over $1.0 billion at June 30, 2010.
As of June 30, 2010, the Company had 433,745,489 common shares outstanding.
CEO Comments — "Our ability to manage costs and maximize efficiency throughout our operations, along with the gradual improvement in business fundamentals, was clearly reflected in our second quarter EBITDA results,” commented Mario Longhi, President and CEO of Gerdau Ameristeel.
“Looking toward the second half of 2010, we remain cautious as unemployment continues to be high and the overall economy remains fragile,” continued Longhi. “We will continue to work closely with our customers and monitor our end markets to ensure that we maximize the opportunities presented to us as well as leverage our business systems and network of mini-mills to optimize productivity and remain globally competitive."
Gerdau Ameristeel is the second-largest minimill steel producer in North America, with annual manufacturing capacity of approximately 10 million tonnes 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, including non-residential, infrastructure, commercial, industrial and residential construction, metal building, manufacturing, automotive, mining, cellular and electrical transmission and equipment manufacturing. Gerdau Ameristeel's majority shareholder is Gerdau SA.
