Gerdau sales revenue hits R$ 13.5 billion (US$ 6.2 billion) for semester

Gerdau investments for the semester totaled US$ 1.1 billion, of which US$ 697 million was devoted to acquisitions and US$ 392 million to expansion and upgrades of existing installations.physical sales, to a total of 7.4 million metric tons.

In the first semester of 2006, Gerdau repeated the R$ 13.5 billion (US$ 6.2 billion) total sales revenue achieved in 2005, one of the best years in the history of global steelmaking. Of this sum, R$ 8.2 billion (US$ 3.8 billion), 60.8%, was derived from participation in the international market, through exports from Brazil and the performance of Gerdau units in Argentina, Canada, Chile, Colombia, Spain, the United States and Uruguay. In the same period, Gerdau’s consolidated steel production grew 10.4% to 7.7 million metric tons, and production of rolled products was up 17.4%, to 6.3 million metric tons. Rolled products are obtained through the transformation of steel into items such as rebar, bars, profiles and wire rod. Sales revenue from the Brazilian domestic market was up 3.4% on the first six months of 2005, totaling R$ 5.3 billion (US$ 2.4 billion) or 39.2% of the consolidated figure. The volume sold was up 12.1% to 2.0 million metric tons, due chiefly to a recovery in demand from civil construction and continued consumption by industry. “Reduced interest rates and lower Tax on Industrialized Products contributed to the growth of the domestic market, which should continue to be very positive in the coming months”, said senior vice president Frederico Gerdau Johannpeter. In the same period, part of the volume normally exported from Brazil was redirected to meet increasing domestic demand. Shipments abroad were down 12.9% to 1.4 million metric tons, including sales to Gerdau Group companies in a number of countries. Revenues from these shipments totaled US$ 533.4 million. Within this scenario, units in Brazil produced 3.6 million metric tons of steel, up 1.8%, and 2.3 million metric tons of rolled products, up 15.9%. In the United States and Canada, sales were up 9.5% due to strong demand for steel in North America. Sales totaled 3.5 million metric tons, or 47.3% of the Group’s total physical sales. To meet increased demand, the North American mills produced 3.5 million metric tons of steel (up 7.3%) and 3.3 million metric tons of rolled products (up 4.4%). Revenue for the region was stable at R$ 5.8 billion (US$ 2.7 billion) representing 43.0% of the consolidated total. The incorporation of the Sidelpa and Diaco units in Colombia and the increased holdings in Sipar (Argentina) from 38.5% to 74.4% had a positive effect on results for the region. In total, sales from operations in Argentina, Chile, Colombia and Uruguay were up 115.5% from 316,000 to 681,000 metric tons. Gerdau Group sales revenue for South America, less Brazil, exceeded R$ 1 billion for the first time, totaling R$ 1.1 billion (US$ 510 million), up 76.6% on the first semester of 2005. Steel production in the region was up 114.2% to 489,000 metric tons, with rolled product production up 135.9% to 587,000 metric tons. This semester also saw the consolidation of the 40% stake in Corporación Sidenor (Spain), which added R$ 428.7 million (US$ 198.1 million) in revenue and 157,000 metric tons in physical sales. Production totaled 166,000 metric tons of steel and 143,000 metric tons of rolled products. Gerdau’s consolidated profit for the semester was R$ 1.8 billion (US$ 800 million), up 6.2% on the same period of 2005. INVESTMENTS Gerdau continues as one of the consolidators of the steel sector In the first semester of 2006, the Gerdau Group invested more than US$ 1.1 billion. Of this sum, investments in the acquisition of companies totaled US$ 697 million, including the respective debts taken on by Gerdau. The largest investment, of US$ 340.0 million, took place in Spain, with the acquisition of 40% of capital stock of Corporación Sidenor. In the United States, US$ 187.0 million was invested in the acquisition of Sheffield Steel Corporation, with production capacity totaling 600,000 metric tons per year. In South America, the main initiative was the acquisition of the controlling stake in Siderperu (50% of capital stock plus one share) at public auction at the Lima Stock Exchange, for the sum of US$ 60.6 million. With this acquisition, Gerdau also took on debts to the sum of US$ 102.0 million. Investments in expansion and upgrades at existing units totaled US$ 392 million, of which plants in Brazil received 69.0%. The main highlights were the expansion of annual production capacity at Gerdau Açominas (Ouro Branco, state of Minas Gerais) from 3 to 4.5 million metric tons and the construction of the rolling mill at Gerdau São Paulo (Araçariguama, state of São Paulo), both currently underway. The Gerdau São Paulo rolling mill marks a new phase for the unit, whose melt shop was inaugurated in March this year. The North American units received US$ 82.4 million (21.0% of total), directed chiefly at the expansion of production capacity at Gerdau Ameristeel Jacksonville (Florida) and the modernization of the mills acquired in 2004. Industrial plants located in Argentina, Chile, Colombia and Uruguay
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