Gerdau Reports 2012 Results
02/25/2013 - Gerdau said its shipments declined 3% in 2012 due to the slowdown in China and other emerging countries, the European crisis, and uncertainty over the fiscal policy of the U.S. Despite lower economic activity in Brazil, the area was highlighted as an area of growth for the company.
Gerdau closed the year 2012 with consolidated net revenue of R$ 38 billion, which was 7% higher than the previous year. Nevertheless, the volume of shipments saw a 3% reduction compared to the previous year, reaching 18.6 million tonnes due to the slowdown in China and other emerging countries, the European crisis, and uncertainty over the fiscal policy of the U.S. Performance in the Brazilian domestic market (excluding the special steel segment) in 2012, despite a lower economic activity recorded in the country, was highlighted among the regions in which Gerdau operates with an expansion in its net revenue (+12%) and volume of shipments (+5%).
Gerdau's global steel production in the year was 18.9 million tonnes, 4% below 2011. Considering the economic context of 2012, cash from operations (EBITDA) amounted to R$ 4.2 billion, which was a 10% reduction compared to the previous year. Consolidated net profit, in turn, was R$ 1.5 billion in 2012, 29% lower than 2011.
In the fourth quarter, consolidated net revenue was R$ 9 billion, while shipments reached 4.3 million tonnes. Consolidated steel production was 4.2 million tonnes. In the same period, the consolidated operating cash flow totaled R$ 891 million and net profit R$ 143 million.
"The performance recorded in the fourth quarter of 2012 does not represent Gerdau's performance trend for 2013 as it was impacted by extraordinary operational and financial adjustments in North America and Latin America. Throughout 2012, beyond the effects of the global economic environment on the company's performance, we saw an increase in costs of important raw materials, notably scrap and freight, which impacted the sector's profitability as a whole. In this context, we sought to enhance our operational efficiency in all regions where we operate, driven by the strategy of striving for higher levels of profitability and sustainable development. Among the main initiatives is to increase investments in the mining area, which should add more profit to our business and generate significant results with the export of this raw material to the international market. We are also going to expand the product mix in Brazil with the start of production of flat steel products in the first quarter of 2013. In addition, we are strengthening our geographic diversification in markets with significant growth potential, such as India, where we began with the production of special steels, a high value-added segment," said Gerdau's CEO, André B. Gerdau Johannpeter.
Throughout the year, the effects of the global economic scenario were felt at different levels, depending on the business segment and geographic region of the operations. The operation in Brazil (not including special steel mills), for example, reported 7.3 million tonnes sold in 2012 with 5.3 million tonnes going to the domestic market (+5%) and 2 million tonnes going to exports (-23%).
At Gerdau’s operations in Canada and the U.S. (not including special steel mills), 6.5 million tonnes were sold in the year, which is a volume practically even compared to 2011. In other Latin American countries (excluding the operations in Brazil), sales increased 2% and reached 2.7 million tonnes. As for the special steel operation (includes special steel mills in Brazil, Spain, and the U.S.), sales reached 2.7 million tonnes, a 10% reduction in 2012, primarily due to the Brazilian and European markets.
From January to December, Gerdau invested R$ 3.1 billion in plants and equipment in its operations worldwide. One of its biggest investments was to start the production of flat steel in Brazil, and the rolling mill for hot rolled coils has already been in the testing phase since December 2012. This equipment, whose capacity is 800,000 tonnes per year, will start its operation in the first quarter of 2013.
In the area of mining, investments were continued in order to reach an annual installed capacity of 11.5 million tons in 2013. Moreover, Gerdau has already made the first shipments of iron ore to the international market, totaling 325,000 tonnes.
Gerdau has started the operation of a blast furnace in India, a large potential market, with an annual installed capacity of 350,000 tonnes, the power generation plant that will use blast furnace gas, sintering, the melt shop, and the new special steel rolling mill with an annual installed capacity of 300,000 tonnes. Two new inspection lines of bars will start operating in 2013. In 2014, the implementation of a coking plant is already in the plans with an annual capacity of 200,000 tonnes and integrated into it is a power generation plant.
The company is being more selective in the assessment of its future investment projects considering the large volume of investments made in 2012, which had been previously scheduled, and the uncertainties about the global economic market. Therefore, for the period 2013-2017, R$ 8.5 billion are scheduled in investments in its industrial units, considering both the steel and mining activities.
Gerdau is the leader in the segment of long steel in the Americas and one of the main suppliers of special long steel in the world. With over 45,000 employees, it has industrial operations in 14 countries—in the Americas, Europe, and Asia—which together represent an installed capacity of over 25 million tonnes of steel per year. It is the largest recycler in Latin America and in the world, and transforms each year millions of tons of scrap steel, reinforcing its commitment to sustainable development in the regions where it operates. Gerdau is listed on the stock exchanges of São Paulo, New York, and Madrid and has over 140,000 shareholders.
