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Gerdau Reports 2nd Quarter Results
08/05/2011 - Gerdau's consolidated sales volume reached 4.9 million tonnes in the second quarter of 2011, an increase of 12% vs. the 2Q 2010, expanding the company's total net income to R$9 billion, a 9% increase compared to a year ago.
Gerdau's consolidated sales volume reached 4.9 million tonnes in the second quarter of 2011, an increase of 12% vs. the 2Q 2010, expanding the company's total net income to R$9 billion, a 9% increase compared to a year ago. Consolidated steel output, in turn, reached 5.1 million tonnes, an increase of 9% over the same period last year.
The increased costs of inputs, especially iron ore, mineral coal, and ferrous scrap, impacted the operating cash flow (EBITDA), which was R$1.3 billion against R$1.7 billion in the second quarter of 2010, a reduction of 24%. Compared with the first quarter of 2011, the EBITDA presented a 19% growth. Net profit reached R$503 million, 41% less than the same period of 2010. Compared with the first three months of the year, net income showed an increase of 23%.
"Gerdau results were impacted by the unfavorable exchange rate in Brazil and by the high costs of inputs. We are still following the strategy to achieve self-sufficiency in iron ore, as well as to expand the supply of mineral coal from our operations in Colombia, which have a capacity to serve about 25% of Gerdau Brazil's current needs, and to expand the network of exclusive scrap suppliers,” said Gerdau CEO André B. Johannpeter.
“On the other hand, we continue to work on the project to monetize part of our mineral resources and will expand the product range with higher added value,” Johannpeter continued. “Particularly noteworthy in this context is the fact that Brazil will start production of flat steel in 2012. Additionally, we continue to maintain a good capital structure for the company, reinforced by the R$3.6 billion capital increase operation completed in the second quarter. Based on these initiatives, we will seek maximum efficiency for our operations, improving operating margins and long-term sustainable growth.”
In addition to the R$718 million investment announced last May for plants located in the state of São Paulo, the company will invest an additional R$183 million until the second quarter of 2012, in the Pindamonhangaba and Mogi das Cruzes mills to meet the growing demand for special steel in the Brazilian automotive market. A new continuous caster and a new reheating furnace will be installed in Pinda, increasing the plant's productivity and competitiveness.
Rolling capacity at Mogi will be expanded from 216 tonnes to 276,000 tonnes per year. At the end of both investments, 130 direct permanent jobs and 570 indirect jobs will have been created in the supply chain, according to Gerdau.
The company is also resuming technical studies for a new investment in Chile. The studies will analyze the feasibility of increasing annual installed capacity for the Colina mill, adding 280,000 tonnes of steel and 425,000 tonnes of rolled products. With that, Gerdau's installed capacity in Chile could reach 800,000 tonnes of steel and 900,000 tonnes of rolled products.
Regarding the monetization of part of the company's mineral resources, located in the state of Minas Gerais, Gerdau has disclosed that a company has already been hired to conduct in-depth studies on alternatives to market these assets efficiently, considering all aspects of the project in terms of mining, processing, transport logistics, storage, and marketing.
In the second quarter, investments in fixed assets (CAPEX) amounted to R$340 million, of which 71% were allocated to units in Brazil and 29% to operations overseas. In the full year, disbursements reached R$673 million.
Gerdau is a leader in long steel in the Americas and a leading supplier of special steel. With 45,000 employees, the company has plants in 14 countries—in the Americas, Europe, and Asia—with a total installed capacity of more than 25 million tonnes per year. The company is the largest recycler in Latin America.
