Gerdau Group sales grow to R$ 10 billion in the quarter

EBITDA increases 30.4%, to R$2 billion

The Gerdau Group closed the first quarter of 2008 with R$10 billion in gross sales, an increase of 23.8% compared with the same period of last year because of the consolidation of new companies-most notably Chaparral (United States) and Sidertul (Mexico)-, and because of the growth of demand in Brazil, other countries in Latin America and Spain. As of 2008, the specialty steel segment is reported separately given its growing significance in the Gerdau Group businesses. With the acquisition of Macsteel (United States), for US$1.7 billion, the Gerdau Group became the worldwide leader in the production of long specialty steels for the automotive industry. The specialty steels segment mainly serves the international automotive chain, as well as the petrochemical, energy, and equipment and machinery manufacturing sectors. This segment is comprised of Sidenor (Spain), Gerdau Specialty Steels Piratini (Brazil), Aços Villares (Brazil) and Macsteel (United States), being that the latter will be consolidated on the Gerdau Group balance sheet beginning with the second quarter of 2008. Taken together, these companies have a total installed annual capacity of 3.7 million tons of specialty steels. In the quarter, the operations in Brazil (except for Piratini and Villares) accounted for 36.2% of gross sales, the North American units added 35.3%, the mills in Latin America 10.4% and the specialty steels segment 18.1%. One important indicator to evaluate the efficiency of operational management, EBITDA (earnings before interest, taxes, depreciation and amortization), also known as operational cash generation, evolved 30.4%, reaching R$2 billion. “The performance in the quarter reflects the international growth of the Gerdau Group, the expansion of the demand for steel and the good management of our operations, even in the face of increased cost of raw materials and supplies. I also emphasize the decision to invest in a new expansion stage of Gerdau Açominas, with investments of US$ 835 million for the installation of a rolling mill for thick plate and a rolling mill for medium structural shapes. In addition, we thank our shareholders and the equity market for their confidence, which resulted in a successful increase of capital”, affirms the President and CEO of the Gerdau Group, André Gerdau Johannpeter. The capital increase added R$2.9 billion in new resources. The consolidated net profit reached R$1.1 billion and was slightly below the $R1.2 billion result registered in the first quarter of 2007, due to the financial and principally exchange rate effects verified in the period. Nevertheless, when compared with the fourth quarter of 2007, net profit showed a growth of 14.6%. From January through March, Gerdau Group’s physical sales reached 4.9 million tons, 18.8% more than in the first quarter of 2007. The production of steel in the same period evolved from 4.1 to 5.1 million tons. In Brazil, the operations commercialized 1.6 million tons (+12.5%), 1.2 million tons being destined for the domestic market and 446 thousand tons for export. In order to meet the 37.1% increase in internal demand, exports from the country were reduced by 23.6%. The growth of steel consumption leveraged the production of the Brazilian units, which reached 1.9 million tons of steel. In the quarter, the effects of the crisis in the United States did not impact North American performance. The units in the region reached the mark of 2.2 million tons sold, against a volume of 1.7 million tons verified in the first quarter of 2007. From January through March production also grew and arrived at 2.2 million tons of steel. In the comparison between the first quarter of 2008 and the fourth quarter of 2007, there was also an increase in production (+8.8%) and in sales (+9.2%). Physical sales in Latin America evolved 39.0%, reaching 623 thousand tons and the production volumes accompanied the good moment in the market, totaling 453 thousand tons of steel. In the specialty steels segment, which includes units in Brazil and Spain, 539 thousand tons were sold. This represents growth of 4.5% over the first quarter of 2007. Production in the same period reached 579 thousand tons of steel.
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