Gerdau registers gradual improvement in markets in second quarter

Increases of 10% in Gerdau physical sales and of 22% in production of steel are reflections of the gradual recovery of the world steel market

Gerdau ended the second quarter with growing physical sales and production of steel compared with the months of January through March as a reflection of the gradual recovery of demand in the global steel market. From April through June consolidated physical sales showed a 10.4% increase compared with the first quarter of 2009, reaching 3.4 million tons, especially because of the rebuilding of stocks in the steel consumer supply chain and the gradual recovery of civil construction, especially in Brazil. Signs of recovery are also evidenced by the comparison of consolidated sales volumes in the months of December of 2008 and June of 2009 when an increase of 26.2% was registered. In order to meet the increase in demand, the production of steel in the second quarter increased 21.6% compared with the previous quarter and reached 3.1 million tons.

In spite of the fact that physical sales grew, gross sales were R$7.2 billion, a reduction of 6.5% compared with the first quarter of 2009 and net revenue reached R$6.4 billion due to lower sales prices in different markets and the negative impact of the exchange rate on revenue generated in dollars, which were partially offset by higher sales volume in the period.

From April to June the EBITDA (earnings before interest, taxes, depreciation and amortization), also known as operational cash generation, was R$595 million, in line with the first quarter of 2009.

Not considering non-recurring items in the result, Gerdau consolidated net profit would have been R$467 million. In the quarter, non-recurring items were taken into account as a result of the amortization of fixed assets, intangibles and goodwill, which caused a negative impact on Gerdau’s results, after income tax, of R$796 million. From April through June non-recurring items generated a negative accounting result of R$329 million.

“The quarterly result was affected by non-recurring accounting items without significant impact on cash and therefore does not reflect the operational adjustment efforts carried out in the economic scenario of the period, which was of reduced demand, but that is showing gradual improvement. With the engagement of our teams, we increased cash to R$6.3 billion, highlighted by increased sales volume and reduced working capital, principally of stocks and costs”, states the President and CEO of Gerdau, André B. Gerdau Johannpeter. Throughout the first semester total production costs of the company were reduced by R$2.4 billion, contributing to the increase of the company cash position. In addition, there was an expressive reduction of gross debt in the semester, that went from R$23.2 billion to R$18.9 billion in the period.

In the second quarter, all of the markets where Gerdau operates showed growth. In Brazil (except for the specialty steel-producing operations), physical sales for internal and external markets reached 1.2 million tons, which represents a 10.6 % increase over the previous quarter. In the internal market, the expansion was greater yet at 12.6% compared with the first quarter of 2009, leveraged by the expansion of civil construction and the recovery of industrial activity. Exports from Brazil also increased to 400 thousand tons, a 6.7% increase, generating revenue of R$389 million. Production volumes of Gerdau units in Brazil showed an increase of 32.9%, reaching 1.2 million tons.

In Canada and in the United States (except for the specialty steel-producing units) Gerdau Ameristeel sold 1.2 million tons, 14.7% more than in the first quarter. The production of steel in the same period was 1.2 million tons, an increase of 16.6%.

In Latin America (except Brazil), physical sales reached 507 thousand tons, an increase of 4.1%, while steel production was stable at 317 thousand tons in the second quarter of the year.

In the specialty steel segment (units in Brazil, the United States and Spain,) physical sales were 5.5% greater, reaching 420 thousand tons. In the same period the production of steel was 398 thousand tons, an increase of 28% over the first quarter of the year.


In the second quarter of 2009, spending for projects already underway (fixed assets) totaled US$149 million. Of this total, 49% was spent in Brazil (except the specialty steel-producing units) and 51% in the other operations.
As reported previously, the fixed asset investment plan of the company is US$3.6 billion in the next five years (2009-2013). This number can be reduced due to lower equipment and civil construction costs. In 2009, the forecast for spending is US$550 million and US$390 million were already spent throughout the first semester.

About Gerdau

Gerdau is the leader in the production of long steels in the Americas and is one of the largest suppliers of specialty long steels in the world. It has industrial units in 14 countries, with operations in the Americas, Europe and Asia, which have a total installed capacity of 26 million tons of steel yearly. It is the largest recycler in Latin America and worldwide it transforms 16 million tons of scrap into steel yearly. With more than 140 thousand shareholders, Gerdau’s public companies are listed on the Sao Paulo Stock Exchange (Bovespa: GGBR4, GGBR3, GOAU4, GOAU3 and AVIL3); New York Stock Exchange (Nyse: GNA, GGB); Toronto Stock Exchange (GNA, TO); Madrid Stock Exchange (Latibex: XGGB) and Lima Stock Exchange (BVL: SIDERC1).

Press Office-(51) 3323-2170
Thursday, 6 August 2009

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