Open / Close Advertisement

Gerdau Sees Continued Demand Growth in North America

Consolidated physical sales in turn reached 4.5 million metric tons of steel, which is a volume 2.4% lower than the second quarter in 2013. This was due to reduced demand for steel in the Brazilian market caused by lower economic activity in the period, a decline in exports from Brazil, and lower sales in the other countries of Latin America. During the period, consolidated steel production was 4.7 million metric tons, keeping in line with the second quarter of last year. The operating cash flow (EBITDA) of R$ 1.2 billion was 2.2% lower compared to the second quarter of 2013, a percentage similar to the variation of the consolidated net income (-2%), which reached R$ 393 million.
 
"The scenario of a surplus of installed capacity of steel around the world and pressure on margins impacted the steel sector as a whole, which has experienced a moment of volatility in earnings. However, Gerdau's strategy of geographic diversification of its assets has contributed to a greater stability of its performance. In this quarter, the recovery of the U.S. market made it possible to dilute the impact of a lower demand in some markets where the Company operates. At the same time we will continue to work to increase the operational efficiency of the Company's business, optimize our working capital compared to the levels of demand, and review investments in fixed assets (CAPEX)," says Gerdau's chief executive officer (CEO) André B. Gerdau Johannpeter.
 
During the quarter, the markets supplied by Gerdau performed differently. Physical sales for the Brazilian market (excluding the units producing special steels) were 1.4 million metric tons, a decrease of 8.9% compared to the same period last year, while exports from the country went down 17.6%, reaching 216,000 metric tons. In the United States and Canada (excluding the units producing special steels), 1.7 million metric tons were sold, an increase of 6.9% over the second quarter last year driven by a growth in demand from non-residential construction.
 
In the other countries of Latin America (except Brazil), 631,000 metric tons were sold, which is 13.1% less compared to the same period last year. On the other hand, sales made by the Business Operation of Special Steels (including mills in Brazil, the United States, India, and Spain) totaled 749,000 metric tons, which is a volume 2.2% lower compared to the second quarter of 2013, mainly impacted by the reduction in the automotive industry's production in Brazil.
 
Sales of iron ore, in turn, reached 1.7 million metric tons, an increase of 94.1% over the same period the previous year. Of this total, 1 million metric tons was directed to Gerdau's mills and 715,000 metric tons to the market.
 
Gerdau's investments reach R$ 478.7 million in second quarter
Investments in fixed assets (CAPEX) amounted to R$ 478.7 million in the second quarter due to investments made that have already been announced, and the accumulated in the year is R$ 1.2 billion. In Brazil investments continue to be made to reduce costs and increase the productivity of the industrial plants.

In the United States, where there is renewed demand levels, investments are being made in the Saint Paul (Minnesota) mill, which will start operating a new continuous caster, increasing the installed capacity, product quality, and plant productivity. At the Beaumont (Texas) unit, the investments are dedicated to advancing the quality of products and in Midlothian (Texas) to increase the installed capacity. Also in the United States, in the special steel sector, investments are being made at the Monroe (Michigan) mill in order to increase its steel production, rolling, and finishing capacity. In Argentina the construction of a melt shop with an installed annual capacity of 650,000 metric tons is still in progress.
 
Considering the scenario of volatility of results experienced by the steel industry, Gerdau has revised its investment disbursement program (CAPEX) for 2014, going from R$ 2.9 billion to R$ 2.4 billion.


Gerdau is the leading manufacturer of long steel in the Americas and a major global supplier of special long steels. The company recently began operations in two new Brazilian markets, with the production of flat steel and the expansion of its iron mining activities, initiatives that are expanding its product mix and the competitiveness of its operations.  With more than 45,000 employees, Gerdau has industrial operations in 14 countries — the Americas, Europe and Asia — with a combined installed capacity of more than 25 million tons of steel a year. It is also Latin America’s biggest recycler and, worldwide, transforms millions of tons of scrap metal into steel every year, reinforcing its commitment to sustainable development in the regions where it operates.  With more than 120,000 shareholders, Gerdau’s shares are listed on the New York, São Paulo and Madrid stock exchanges.