Acquisitions and increased Brazilian demand boost Gerdau Group revenue to US$ 13.7 billion

Revenue in the first three quarters of 2007 was up 16.1 from the same period in 2006 and steel production was up 9.4% to 13 million metric tons

Upon the release of its financial results, the Gerdau Group became the first Brazilian company to adopt the new International Financial Reporting Standards (IFRS). This was done well in advance of the 2010 deadline established for listed companies in the country by the Brazilian Securities Commission (CVM) and represents one more step in Gerdau’s consolidation as a global steelmaker. The IFRS is an accounting standard that helps to converge the international markets and boosts transparency by making the information presented easier to understand. According to the new accounting rules, which the Gerdau Group also applied to the 2006 financial year results in order to allow for direct comparison of equivalent periods, the consolidated revenue for the first three quarters of 2007 was up 16.1% from the same period in 2006, having increased from R$ 21.6 billion (US$ 10.0) to R$ 25.1 billion (US$ 13.7). Total net profit for the period was up 7.6% to R$ 3,4 billion (US$ 1.8), compared to the first nine months of 2006. “The Group’s performance reflects growing demand from the Brazilian market and the consolidation of new companies in the Americas and Europe”, stated Gerdau Group CEO, André Gerdau Johannpeter. “Although it did not take place within the third quarter, I would like to highlight the new blast furnace at Açominas, which came on line at the end of October and was a result of a US$ 1.5 billion investment begun around two years ago”. The third quarter balance sheet for 2007 includes the consolidated results of Siderúrgica Tultitlán (Mexico), Siderúrgica Zuliana (Venezuela), GSB (Spain), , Valley Placers, D&R Steel, Re-bars and Chaparral Steel (United States). The acquisition of Chaparral Steel, the largest acquisition in the Group’s history, was completed in September 2007. Only sixteen days of its performance is reflected in the consolidated results. The results of Siderperú (Peru) and Sheffield Steel (United States) were consolidated in July 2006, and also had a positive effect on the balance sheet. SJK Steel (India), Enco (United States), Trefusa (Spain) and Corsa (Mexico) will be consolidated in the fourth quarter of 2007. The Brazilian operations contributed 47.0% of the consolidated revenue, those in the United States and Canada, 32.8%, those in Latin America (excluding Brazil), 10.6% and those in Spain, 9.6%. Revenue from non-Brazilian operations and from Brazilian exports equaled 61% of the total consolidated revenue. From January through September, the Gerdau Group’s shipments totaled 12.5 million metric tons, up 12.4% from the same period in 2006. Total steel production reached 13 million metric tons (up 9.4%) and rolled product production, 11 million metric tons (up 12.6%). The operations in Brazil sold 5.2 million metric tons of steel (up 7.3%), including 3.6 million metric tons in the domestic market (up 10.9%). This increase resulted from greater demand for steel in the civil construction and industry in Brazil. Part of the company’s exports were diverted to the domestic market, especially in the third quarter, in order to ensure an adequate supply for Brazilian customers. Over those nine months, exports (including those to subsidiaries companies generated revenues of US$ 1.1 billion and they totaled 2 million metric tons, which is at the same level as in the first three quarters of 2006.. To meet this domestic demand, production of steel (slabs, blooms and billets) in Brazil totaled 6 million metric tons, up 4.7%, while rolled product output totaled 4 million metric tons, up 7.3% from the same period in 2006. In North America, shipments were up 6.2%, from 4.7 million to 5 million metric tons. In the same period, production of steel and of rolled products both reached 4.8 million metric tons, up 2.7% and 6.7%, respectively. The Latin American units (Argentina, Chile, Colombia, Mexico, Peru, Uruguay and Venezuela) reported a 48.0% increase shipments to 1.7 million metric tons, up from 1.1 million metric tons for the same period in the previous year. Steel production was up 57.1% to 1.4 million metric tons, and rolled product production was up 44.4% to 1.4 million metric tons. In Spain, shipments totaled 711,000 metric tons, up 40.0%. Production also increased, to 791,000 metric tons of steel (up 39.6%) and 688,000 metric tons of rolled products (up 42.4%).
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