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Gerdau announces new CEO<p><span style="text-align&#58;justify;"></span></p><p>- Gustavo Werneck, currently Executive Director of the Brazil Operation, will be the new Chief Executive Officer (CEO) of Gerdau starting from January 1, 2018, succeeding André Gerdau Johannpeter.</p><p>- The current CEO, André Gerdau Johannpeter, and Executive Vice Presidents Claudio Johannpeter and Guilherme Gerdau Johannpeter will concentrate their efforts in the Boards of Directors of Gerdau and Metalúrgica Gerdau, in which they already are members.</p><p><br></p><p>Gerdau S.A. and Metalúrgica Gerdau S.A announce today (August 24) an important step in the evolution of corporate governance at the Company in its 116-year history, which was being planned for more than 12 months.&#160; As part of the Company's transformation, starting January 1, 2018, the current members of the Gerdau Johannpeter family in the company's executive leadership (André Gerdau Johannpeter, CEO, and Executive Vice Presidents Claudio Johannpeter and Guilherme Gerdau Johannpeter) will dedicate themselves exclusively to the Boards of Directors of the respective companies in which they already are members.</p><p>To lead this new phase in the Company, the Board of Directors has chosen Gustavo Werneck, currently Executive Officer of the Brazil Operation, as the new CEO of Gerdau, effective January 1, 2018. Werneck, 44 years old, has been in the Company for 13 years. He has a bachelor's degree in Mechanical Engineering from the Federal University of Minas Gerais and MBAs from INSPER and Fundação Getulio Vargas. He also completed specialization courses at INSEAD, Harvard Business School, Kellogg School of Management and the London Business School. Prior to serving as Executive Director of the Brazil Operation, he served as Corporate Director of IT and as Industrial Director of Gerdau in India, among other positions.</p><p>&quot;We are confident in Gustavo Werneck's unique management capability and adherence to Gerdau's new business culture. In all the positions he has held, he always delivered strong results, overcome important challenges, and built high-performance teams using an innovative management profile and contagious energy. On the part of the Gerdau Johannpeter Family, we believe we built an important legacy in direct business management, having consolidated the company's position as the leading producer of long and special steel in the Americas and marking its entry into the flat steel segment. Over the last few years, amidst the global challenges facing the industry, we returned to delivering positive results, optimized assets, implemented a pioneering digital innovation in the steel industry and modernized the company's culture. Starting January 2018, we will draw on our executive experience to sharpen the focus on defining Gerdau's medium- and long-term strategies in order to create value for our stakeholders and aid our executives in rolling out the strategies,&quot; says the current CEO of Gerdau, André Gerdau Johannpeter.</p><p>Gustavo Werneck, the future CEO of Gerdau, believes &quot;it is a great honor to accept the challenge of leading a company with the history, size, quality of people and culture of Gerdau. In this new position, our focus will be on continuing and accelerating the transformations that the company has been going through in recent years in order to increase the profitability of our operations and create more value for shareholders.&quot;</p><p style="text-align&#58;justify;">The next four months will be dedicated to the transition of the new Governance in order to ensure a smooth process and, subsequently, to define the executive functions and processes across the company.</p><p style="text-align&#58;justify;"><strong>&#160;</strong></p><p style="text-align&#58;justify;"><strong>About Gerdau</strong></p><p style="text-align&#58;justify;">Gerdau is the leading producer of long steel in the Americas and one of the leading suppliers of special steel in the world. In Brazil, it also produces flat steel and iron ore, activities that expand its product mix and boost the competitive edge of its operations. It is also the largest recycler in Latin America and, around the world, annually transforms millions of tonnes of scrap into steel, underlining its commitment to the sustainable development of the regions where it operates. Gerdau's shares are listed on the São Paulo, New York and Madrid stock exchanges.<br></p>https://www.gerdau.com8/24/2017 1:48:21 PM8/24/2017 1:48:21 PM
Gerdau reports 2Q17 earnings<p>-&#160; Net sales reach R$9.2 billion in the quarter, with adjusted EBITDA of R$1.1 billion</p><p>-&#160; Adjusted net income of R$147 million, reversing the net loss in the first quarter</p><p>- &#160;Free cash flow reaches R$241 million in the second quarter</p><p>- Selling, general and administrative (SG&amp;A) expenses decrease 27% compared to the second quarter last year</p><p><span style="text-align&#58;justify;">In the second quarter of 2017, Gerdau posted net sales of R$9.2 billion, down 11% from the same period a year earlier. The result was mainly affected by the effects from exchange variation in the period on units located abroad and by the divestment of the special steel units in Spain. However, compared to the first quarter of 2017, net sales advanced 8%, supported by higher shipments at nearly all of the Company's business divisions.</span></p><p style="text-align&#58;justify;">Meanwhile, consolidated shipments fell by 13% compared to the second quarter last year, amounting to 3.7 million tonnes. Compared to the first quarter, shipments grew by 3%. Steel production, which amounted to 4.1 million tonnes, accompanied the behavior of shipments, decreasing 5% from the second quarter last year and increasing 2% form the first quarter this year.</p><p style="text-align&#58;justify;">Adjusted consolidated cash generation (EBITDA) amounted to R$1.1 billion in the second quarter, down 7% on the prior-year period, reflecting the lower gross profit, which was partially neutralized by the 27% reduction in selling, general and administrative expenses. Despite the lower EBITDA in the period, EBITDA margin expanded to 12.2%, from 11.7% in the second quarter of 2016. Compared to the first quarter of 2017, adjusted EBITDA advanced 31%, supported by improvements in all divisions. The highlights were the EBITDA growth of 54% in the Special Steel Division (includes the special steel mills in Brazil, United States and India), of 49% in the North America Division (increases the long steel plants in Canada, United States and Mexico) and of 22% in the Brazil Division (excludes the special steel plants).</p><p style="text-align&#58;justify;">In the second quarter, Gerdau also was able to reverse the adjusted net loss of R$34 million reported for the first quarter, with consolidated adjusted net income of R$147 million, supported by the higher EBITDA in the period. Net income in the quarter was adjusted by the deconsolidation of the operation in Colombia from the balance sheet, which has been treated as a jointly controlled entity since June, following the consummation of the sale of a 50% interest in Gerdau Diaco to Putney Capital Management.<br></p><p style="text-align&#58;justify;">&quot;The better performance compared to the first quarter reflects the recovery in our main markets and our ongoing management efforts at all divisions. During the second quarter, we were able to reverse the net loss, generate free cash flow, cut expenses and keep debt stable. Over the coming quarters, we will continue to work to further improve our performance, enhance our profitability and create value for our shareholders,&quot; said CEO André Gerdau Johannpeter.<br></p><p style="text-align&#58;justify;">In the second quarter, shipments to Brazil's domestic market (excludes the special steel mills), which were affected by the slowdown in the construction industry, came to 871 thousand tonnes, down 13% from the year-ago period and stable in relation to the first quarter. Exports from Brazil came to 510 thousand tonnes, 18% lower than in the second quarter of 2016 and 24% higher than in the first quarter this year.</p><p style="text-align&#58;justify;">The operations in Canada, United States and Mexico (excluding the special steel mills) shipped 1.6 million tonnes of steel goods in the second quarter of 2017, down 5% from the same period a year earlier and stable compared to the first quarter of 2017, due to strong pressure in the region from imported goods.</p><p style="text-align&#58;justify;">Meanwhile, the units in South America (excluding Brazil) shipped 441 thousand tonnes, or 17% less than in the second quarter of 2016, mainly due to lower shipments in the region and to the deconsolidation of the operation in Colombia, as mentioned above.</p><p style="text-align&#58;justify;">Shipments by the Special Steel Business Division (includes the mills in Brazil, United States and India) came to 512 thousand tonnes, declining 14% from the second quarter of 2016, basically due to the divestment of the units in Spain. Compared to the first quarter of 2017, shipments advanced 16%, supported by higher sales volumes in all markets, with the highlight the improvement in Brazil's automotive industry.</p><p style="text-align&#58;center;">&#160;<strong style="text-align&#58;center;">Investments came to R$195 million in the second quarter</strong></p><p style="text-align&#58;justify;">In the second quarter, capital expenditure (CAPEX) came to R$195 million. Of the total, 33% was allocated to the Brazilian Division, 34% to the units in North America, 19% to the units in other countries in South America and 14% to the Special Steel Division.</p><p style="text-align&#58;justify;">In June, Gerdau started up its new melt shop in Pérez, Argentina, which is located 6 km from the Company's rolling mill in the region. The investment of R$786 million (US$ 232 million) was begun in 2014 and concluded this year. The melt shop has annual installed capacity of 650 thousand tonnes and will focus on serving domestic demand in Argentina.<br></p><p style="text-align&#58;center;"><strong>Gerdau S.A. to pay dividends on September 1</strong></p><p style="text-align&#58;justify;">On September 1, Gerdau S.A., based on the results for the second quarter of 2017, will distribute dividends to be calculated towards the minimum mandatory dividends set forth in its Bylaws. A total of R$34.2 million will be distributed to the shareholders of Gerdau S.A. (earnings per share of R$0.02).<br></p>https://www.gerdau.com8/10/2017 1:42:04 PM8/10/2017 1:42:04 PM
Gerdau reports 1Q17 earnings<p></p><p style="text-align&#58;left;"></p><ul><li>Adjusted EBITDA of R$853 million in the first three months of 2017. </li></ul><p style="text-align&#58;justify;">&#160;</p><ul><li>Reductions in selling, general and administrative (SG&amp;A) expenses of 32% year-on-year and 18% sequentially.</li></ul><p style="text-align&#58;justify;">&#160;</p><ul><li>Gerdau announces a joint venture in Colombia and continues to execute its strategy to focus on its more profitable assets, which led to divestments of R$441 million in 2017.</li></ul><p style="text-align&#58;justify;">&#160;</p><p style="text-align&#58;justify;">In the first three months of 2017, Gerdau posted net sales of R$8.5 billion, down 16% from the same period last year, reflecting the effects from exchange variation on the performance of the overseas units and the divestment of the units in Spain. Shipments of steel goods amounted to 3.6 million tonnes, down 7%&#160;from the year-ago period. Meanwhile, steel production fell by 3% to 4 million tonnes.</p><p style="text-align&#58;justify;">Adjusted consolidated cash generation (EBITDA) came to R$853 million, 8% lower than in the first quarter last year, reflecting the reduction in gross profit, which was partially neutralized by the R$205 million reduction in selling, general and administrative expenses. However, compared to the fourth quarter of 2016, consolidated and adjusted EBITDA increased 19%, led by the 47% growth at the Brazil Business Division (excludes the special steel units), which is explained by the better product mix and other factors. In the period from January to March, consolidated net income amounted to R$824 million. However, excluding non-recurring events, the Company recorded a consolidated and adjusted net loss of R$34 million, given the lower EBITDA in the period.</p><p style="text-align&#58;justify;">Gerdau's net result in the first quarter of 2017 were influenced by the non-recurring reversal of a provision accrued between 2009 and 2016 for contingencies related to the exclusion of ICMS tax from the calculation base of PIS and COFINS contributions. This reversal was based on the conclusion of the trial by the Federal Supreme Court (STF) sitting the bank, which declared unconstitutional the inclusion of ICMS tax in said calculation base, and is supported by the position of the Company's legal counsel that the probability of loss in the pending lawsuits became remote after the decision by the STF. Therefore, the net effect from this reversal and from the other provisions on the Company's net result in the quarter was R$858 million.</p><p style="text-align&#58;justify;">Gerdau emphasizes, however, that there is a possibility the STF may understand that the application of the modulation mechanism necessarily applies to this decision, which is used to determine the time effects of a decision to declare unconstitutionality. If the STF applies the modulation mechanism, which would limit the effects of the decision in terms of time, the need may arise to reassess the risk of loss associated with said lawsuits, which consequently may require the accrual of new provisions related to this matter in the future.</p><p style="text-align&#58;justify;">&quot;Gerdau's performance in the first quarter, excluding non-recurring items, reflects the challenging moment the world steel industry has been facing, marked in particular by overcapacity and unfair trade practices in the global market. In Brazil, we expect steel demand to recover gradually, starting in the second half of 2017. In North America, the strong inflow of imported steel goods continues to weigh on industry profitability, but the prospects for market growth are good. Our priorities for 2017 remain generating free cash flow, greater selectivity in CAPEX investments, reducing our debt indicators and the strategy to focus on our more profitable assets. This year, we formed a joint venture in Colombia and divested assets worth R$441 million,&quot; said André Gerdau Johannpeter.</p><p style="text-align&#58;justify;">Over the course of the quarter, the markets served by Gerdau presented distinct performances. In Brazil, shipments to the domestic market (excludes the special steel units) decreased 4% from the same quarter last year to 863,000 tonnes, due to weaker activity in the construction industry. This reduction was partially offset by higher shipments of flat steel goods, which is consistent with the Company's strategy to diversify its product portfolio. Flat steel shipments in the first quarter of 2017 accounted for 28% of total shipments in the domestic market. During the period, the fewer opportunities in international markets led Gerdau's export volume to decrease by 22% to 412,000 tonnes.</p><p style="text-align&#58;justify;">The operations in Canada, the United States and Mexico (excluding the special steel mills) shipped 1.6 million tonnes in the first three months of 2017, or 3% more than in the same period last year, driven by improvement in the non-residential construction and manufacturing industries. Meanwhile, the units in South America (excluding Brazil) shipped 489,000 tonnes, 3% less than in the first three months of 2016. Shipments by the Special Steel Business Division (includes the mills in Brazil, the United States and India) came to 441,000 tonnes, down 30% on the first quarter of 2016, due to the divestment of the units in Spain.</p><p style="text-align&#58;center;">&#160;<strong>Announcement of joint venture in Colombia and divestments of R$441 million in 2017</strong></p><p style="text-align&#58;justify;">In 2017, Gerdau continued to execute the strategy to focus on its more profitable assets, which led to the divestment of assets worth R$441 million in the year to May. In March, Gerdau entered into an agreement to form a joint venture<em>, </em>based on the sale of its 50% interest in Gerdau Diaco in Colombia, with Putney Capital Management, which already is a partner in its operations in the Dominican Republic. The transaction attributed to the joint venture<em> </em>an economic value of R$523 million, which implies that the 50% interest held by Gerdau has an economic value of R$262 million. The transaction has yet to be consummated, therefore Gerdau Diaco continued to be reported as a subsidiary on the first-quarter financial statements. Moreover, five special steel production units and five plants manufacturing products for the construction industry in the United States were sold, whose economic value amounted to R$179 million.</p><p style="text-align&#58;center;"><strong>Gerdau invests R$237 million in the first quarter</strong></p><p style="text-align&#58;justify;">In the first quarter, Gerdau invested R$237 million in fixed assets (CAPEX). For 2017, CAPEX is projected at R$1.3 billion, which is in line with the amount invested in 2017. The investments will focus mainly on boosting productivity and sustaining the operations.</p><p style="text-align&#58;center;">&#160;<strong>Gerdau will not advance the payment of dividends this quarter</strong></p><p style="text-align&#58;justify;">In the period from January to March, consolidated net income amounted to R$824 million and was influenced by the non-recurring reversal of the provision for contingencies in the amount of R$858 million. However, considering the possibility that the Federal Supreme Court (STF) may apply the modulation mechanism prospectively to its decision to declare unconstitutionality, which could limit the production of its effects for taxpayers, the Company is not proposing at this time the distribution of early dividends to be calculated towards the minimum mandatory dividends, and will continue to monitor the matter until a decision is taken by the STF.</p><p style="text-align&#58;justify;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </p><p style="text-align&#58;justify;"><strong>About Gerdau</strong></p><p style="text-align&#58;justify;">Gerdau is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world. In Brazil, it also produces flat steel and iron ore, activities that are expanding its product mix and boosting its competitiveness. It is also the largest recycler in Latin America and around the world it transforms each year millions of tonnes of scrap into steel, reinforcing its commitment to sustainable development in the regions where it operates. Gerdau's shares are listed on the São Paulo, New York and Madrid stock exchanges.</p>https://www.gerdau.com5/4/2017 12:13:01 PM5/4/2017 12:13:01 PM
Gerdau reports 2016 net sales of R$ 38 billion<p></p><ul><li>Consolidated adjusted EBITDA came to R$ 4 billion, despite the challenging global scenario for the steel industry and the recession in Brazil, while consolidated adjusted net income amounted to R$91 million.</li></ul><p style="text-align&#58;justify;">&#160;</p><ul><li>Free cash generation, a financial priority of the Company, came to R$ 2.3 billion in the year, with a highlight free cash flow in the fourth quarter of R$1.2 billion. This marked the seventh straight quarter that Gerdau has delivered positive free cash flow.</li></ul><p style="text-align&#58;justify;">&#160;</p><ul><li>Gerdau's management efforts also were evident in the reductions achieved in capital expenditure, selling, general and administrative expenses and net debt.</li></ul><p style="text-align&#58;justify;">&#160;</p><ul><li>Divestments in the year came to R$1.2 billion, which is in line with the Company's strategy to focus on its more profitable assets. </li></ul><p style="text-align&#58;justify;">&#160;</p><p style="text-align&#58;justify;">Gerdau ended 2016 with consolidated net sales of R$37.7 billion, a reduction of 14% from 2015, which is mainly due to the lower steel shipments at all business divisions and the divestment of the special steel units in Spain. Shipments and production both amounted to 16 million tonnes, representing decreases of 8% and 7%, respectively, compared to the prior year.</p><p style="text-align&#58;justify;">Gerdau's results in 2016 were also influenced by nonrecurring items related to noncash accounting write-offs, particularly of fixed assets and goodwill, in the amount of R$2.9 billion. Therefore, the Company is reporting its EBITDA and net income on an adjusted basis to reflect better its performance and the respective internal management efforts at all of its divisions. On this basis, adjusted operating cash generation (EBITDA), i.e. excluding nonrecurring items, came to R$4 billion, down 10% from 2015, reflecting the decline in gross profit, which was partially offset by the R$343 million reduction in selling, general and administrative expenses. Consolidated adjusted net income amounted to R$91 million and, including the effects from nonrecurring items, the net result was a loss of R$2.9 billion.</p><p style="text-align&#58;justify;">&quot;Despite the challenges in the global steel industry and the recession in Brazil, we delivered positive results in 2016 and met our priorities for the year, thanks to the intensive management efforts made by our teams at all divisions. In 2016, we posted free cash generation of R$2.3 billion, reduced our investments by 43% on a year earlier and cut general and administrative expenses by 13%, which allowed us to reduce our net debt by 26% and to improve our leverage ratios. These achievements were complemented by the divestments of R$1.3 billion in 2016, which reflect the strategy to focus on our more profitable assets. All these efforts were recognized by the capital markets during the year, given the sharp appreciation in the stock prices of Gerdau S.A. and Metalúrgica Gerdau S.A.,&quot; said Gerdau CEO André B. Gerdau Johannpeter.</p><p style="text-align&#58;justify;">In the fourth quarter, Gerdau's net sales amounted to R$8.6 billion, decreasing 18% on the same period of 2015. Shipments came to 3.8 million tonnes, down 2% from the same period of 2015, while production decreased 14% to 3.3 million tonnes. In the period from October to December, adjusted operating cash generation (EBITDA) amounted to R$716 million, down 21% from the same period of 2015. In the fourth quarter, Gerdau posted an adjusted consolidated net loss of R$205 million; including nonrecurring items, the net loss in the quarter was R$3 billion.</p><p style="text-align&#58;justify;">In 2016, shipments declined in all markets served by Gerdau. Shipments to Brazil's domestic market came to 3.7 million tonnes in the year, decreasing 13% in relation to 2015, due to the slowdown in the construction and manufacturing sectors. Exports from Brazil, however, advanced 9% to 2.4 million tonnes, reflecting the commercial efforts made in the international market.</p><p style="text-align&#58;justify;">In 2016, the operations in Canada, United States and Mexico (excluding the mills producing special steels) shipped 6 million tonnes, down 4% from the prior year, due to the continued flow of imported goods into the region and to the uncertainty regarding the presidential elections in the United States, with these factors partially mitigated by the continued strong demand from the non-residential construction sector. In South America (excluding the Brazil division), shipments came to 2.1 million tonnes, 6% lower than in 2015.</p><p style="text-align&#58;justify;">&#160;The special steel division (includes mills in Brazil, United States and India) shipped 2.1 million tonnes in 2016, 20% less than in 2015, reflecting the divestment of the units in Spain and, to a lesser extent, the lower shipments by the units in Brazil.</p><p style="text-align&#58;center;"><strong>Divestments amounted to R$1.3 billion in 2016</strong></p><p style="text-align&#58;justify;">Gerdau continued to execute its strategy of focusing on its more profitable assets by divesting in the year assets worth R$1.3 billion based on their economic value. The divestments comprised the special steel units in Spain, a long steel mill in Colombia, Cleary Holdings Corp (producer of coke and holder of coking coal reserves in Colombia), a 30% interest in Corporación Centroamericana del Acero and manufacturing units and properties in the United States. Since 2014, divestments have amounted to R$2.4 billion. Over these three years, the Company has sold 13 assets in the United States, Europe and Latin America.</p><p style="text-align&#58;center;"><strong>Investments amount to R$1.3 billion in 2016</strong></p><p style="text-align&#58;justify;">In 2016, investments in fixed assets came to R$1.3 billion, 43% lower than in 2015, reflecting the more rigorous criteria adopted for approving new investments. The highlights in the year were the conclusion of the investments in flat steel, with the startup of the heavy plate rolling mill at the Ouro Branco Mill, and the completion of construction of the melt shop in Argentina, which is scheduled to start up in March 2017.</p><p style="text-align&#58;justify;">For fiscal year 2017, Gerdau will continue to limit its capital expenditure and expects to invest R$1.3 billion, prioritizing investments in capturing productivity gains and in maintaining its plants.</p><p style="text-align&#58;center;"><strong>​Gerdau S.A. distributes R$85.4 million in dividends in 2016</strong></p><p style="text-align&#58;justify;">In fiscal year 2016, Gerdau S.A. allocated R$85.4 million (R$0.05 per share) to the payment of dividends, which was distributed from the profit earned in the first nine months of 2016 and from the retained earnings reserve.</p><p style="text-align&#58;justify;">Metalúrgica Gerdau S.A., however, reported a net loss of R$1.4 billion in 2016. Even after adjusting the result by the proportionate interest in non-recurring events at Gerdau S.A. in the fiscal year, Metalúrgica Gerdau S.A. recorded a net loss of R$239 million. Given the net loss in the year and the financial obligations exceeding cash generation, the company did not distribute dividends in fiscal year 2016.</p><p style="text-align&#58;justify;"><strong>About Gerdau</strong></p><p style="text-align&#58;justify;">Gerdau is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world. In Brazil, it also produces flat steel and iron ore, activities that are expanding its product mix and boosting its competitiveness. It is also the largest recycler in Latin America and around the world it transforms each year millions of tons of scrap into steel, reinforcing its commitment to sustainable development in the regions where it operates. Gerdau's shares are listed on the São Paulo, New York and Madrid stock exchanges.&#160;</p>https://www.gerdau.com2/22/2017 2:16:20 PM2/22/2017 2:16:20 PM
Gerdau reports net sales of R$ 8.7 billion in the third quarter of 2016<p style="text-align&#58;left;"></p><p>- Adjusted EBITDA amounted to R$ 1.2 billion in the third quarter and R$ 3.3 billion in the first nine months of the year.</p><p>- Selling, general and administrative expenses decreased by 23% in the third quarter and by R$ 222 million in the nine-month period, underscoring the Company's management efforts.</p><p>- Free cash flow, a priority of the Company's financial management, came to R$ 1&#160;billion in the nine months.</p><p style="text-align&#58;justify;">&#160;</p><p style="text-align&#58;justify;">Gerdau ended the third quarter of 2016 with net sales of R$ 8.7 billion, down 27% from the same period last year, reflecting the lower shipments at all business divisions. Consolidated shipments fell 21% from the third quarter of last year, to 3.7 million tonnes, while steel production came to 3.9 million tonnes, down 7% from the year-ago period.</p><p style="text-align&#58;justify;">Operating cash generation, measured by adjusted consolidated EBITDA, which includes proportional EBITDA from the jointly controlled entities and associate companies, amounted to R$ 1.2 billion, decreasing 7% from the same period last year. This performance is explained by the weaker performance of the North America Division, which was partially neutralized by the better performance of the other divisions. Compared to the second quarter of 2016, EBITDA was stable, essentially due to the better performance of the Brazil Division (excludes special steel units).</p><p style="text-align&#58;justify;">In the third quarter, adjusted consolidated net income was R$ 95 million, 51% lower than in the same period last year, reflecting the lower EBITDA in the period. In the nine months, net income amounted to R$ 293 million. Selling, general and administrative expenses decreased by 23% in the third quarter and by R$&#160;222 million in the nine-month period.</p><p style="text-align&#58;justify;">&#160;&quot;This quarter, we were able to mitigate the effects from this challenging moment for the steel industry in the world and Brazil through the efforts of our management teams at all divisions. We managed to cut expenses, expand margins, generate substantial free cash flow while keeping the level of net debt unchanged. In Brazil, despite the margin improvement, we still foresee a challenging market scenario, with gradual and slow recovery in economic activity and weaker exports. The scenario also applies to our other operations in the Americas. On the other hand, we will continue to work intently on creating value for the company on various work fronts, which include modernizing our corporate culture, cutting costs and expenses, generating strong free cash flow, limiting CAPEX, continuing to reassess the potential of assets and implementing digital innovation initiatives,&quot; said Gerdau CEO André B. Gerdau Johannpeter.</p><p style="text-align&#58;justify;">In the area of digital innovation, Gerdau recently signed an unprecedented partnership with GE Digital. The Company became a pioneer in the world steel industry by implementing an Online Monitoring and Diagnostic System, which uses advanced tools to analyze data with a view to anticipating potential faults in equipment and conducting preventive maintenance. &quot;The implementation of unique new initiatives, such as the project with GE Digital, is already reflecting the digital evolution we are experiencing. The project is generating substantial gains for our mills in Brazil, such as capturing industrial efficiency gains and reducing costs,&quot; said Johannpeter.</p><p style="text-align&#58;justify;">Some 30,000 sensors are being installed on 1,000 pieces of equipment at 11 mills in Brazil to enable real-time monitoring of equipment performance. The monitoring center installed at the Ouro Branco Mill in Minas Gerais will initially monitor the performance of mills in the Brazil Division, but the Company plans to expand the system to its special steel mills and mining units in the country.</p><p style="text-align&#58;justify;">During the quarter, all markets served by Gerdau posted lower shipments. In Brazil, shipments to the domestic market (excludes the special steel units) decreased 18% from the same quarter last year to 928,000 tonnes in the third quarter this year, reflecting the slowdown in the construction and manufacturing industries. In the first nine months of the year, shipments in the domestic market came to 2.8 million tonnes. Steel exports amounted to 554,000 tonnes in the third quarter, down 32% from the same period of 2015, explained by the record-high exports in that period. However, in the first nine months of the year, exports increased 7% on the year-ago period, to 1.7 million tonnes, helping to neutralize the weaker performance in the domestic market.</p><p style="text-align&#58;justify;">The operations in Canada, United States and Mexico (excluding special steel units) shipped 1.4 million tonnes in the third quarter of 2016, down 18% from the same period last year, reflecting the strong flows of imports into the region, weaker industrial activity and the heightened caution ahead of the U.S. presidential elections. Meanwhile, the units in South America (excluding Brazil) shipped 516,000 tonnes, or 11% less than in the third quarter of 2015. Shipments by the Special Steel Business Division (formed by mills in Brazil, United States and India) came to 437,000 tonnes, declining 29% from the same period a year earlier, basically due to the divestment of the units in Spain.</p><p style="text-align&#58;justify;">&#160;</p><p style="text-align&#58;center;"><strong>Gerdau invests R$286 million in the quarter</strong></p><p style="text-align&#58;justify;">In the third quarter of the year, capital expenditure (CAPEX) amounted to R$286 million. Most of the expenditures were allocated to the Brazil Division (50% of CAPEX) to conclude the investments in the heavy plate rolling mill at the Ouro Branco Mill in Minas Gerais.</p><p style="text-align&#58;justify;">As previously announced, Gerdau expects to end fiscal year 2016 with CAPEX of around R$&#160;1.5 billion, down 35% from 2015. The CAPEX projected for 2017 is R$ 1.4 billion, which will be concentrated in productivity gains and maintenance.</p><p style="text-align&#58;justify;">&#160;</p><p style="text-align&#58;center;"><strong>Gerdau S.A. to pay dividends on December 1</strong><strong><sup>st</sup></strong></p><p style="text-align&#58;justify;">On December 1<sup>st</sup>, Gerdau S.A., based on the results for the third quarter, will distribute dividends to be calculated towards the minimum mandatory dividends set forth in its Bylaws. A total of R$34.2 million will be distributed to the shareholders of Gerdau S.A. (R$0.02 per share). In the first nine months of 2016, Gerdau S.A. allocated R$ 5.7 million (R$ 0.05 per share) to the distribution of dividends.</p><p style="text-align&#58;justify;">&#160;</p><p><strong>About Gerdau</strong></p><p style="text-align&#58;justify;">Gerdau is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world. In Brazil, it also produces flat steel and iron ore, activities that are expanding its product mix and boosting its competitiveness. It is also the largest recycler in Latin America and around the world it transforms each year millions of tons of scrap into steel, reinforcing its commitment to sustainable development in the regions where it operates. Gerdau's shares are listed on the São Paulo, New York and Madrid stock exchanges. ​​</p>https://www.gerdau.com11/9/2016 11:20:18 AM11/9/2016 11:20:18 AM

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