Greater demand for steel increases Gerdau net revenue to R$ 8,4 billion

Press Release


- Consolidated physical sales reach 4,7 million metric tons, an increase of 16% over the first quarter of 2010.

- Consolidated steel production has an increase of 9% compared to the first quarter of 2010, reaching 4,7 million metric tons.

- Gerdau announces investments of R$ 718 million in the State of São Paulo to meet the demand of the expansion of the automotive industry and civil construction.  In the United States, Gerdau will invest R$ 560 million to expand the production of special steel for the automotive and industrial markets.

A greater demand for steel fueled the growth of Gerdau net revenue in the first quarter of 2011 to R$ 8,4 billion, an increase of 18% compared to the same period  last year. This good performance reflects an increase of 16% in the consolidated physical sales, which reached 4,7 million metric tons. The consolidated steel production grew 9%, compared to the same period of the previous year and reached 4,7 million metric tons.

The  excessive pressure of the raw material costs has had a strong impact on the consolidated operational cash generation (EBITDA),  of R$ 1,1 billion in the first quarter which decreased 21% compared to the same period of the previous year. However, in comparison to the fourth quarter of 2010, the operational cash generation presented a growth of 35%. Net income reached R$ 409 million in the first quarter, which had a reduction of 29%, compared to the same period of last year. But in comparison with the period from October to December of 2010, the net income reduction of 3% happened because the fourth quarter of last year included nonrecurring gains.

“The first quarter showed the best performance in physical sales since late 2008, when the global economic crisis began. This confirms the previously announced expectation of a positive beginning to this year, with recovery of margins against a backdrop of increasing costs. In the second quarter, the economic signs in the countries where we are present, show steadiness, with a tendency to improve the levels of demand recorded so far. We will continue investing to expand our current operations so that we can address market growth with both agility and flexibility. Accordingly, we have decided to invest R$ 718 million in the state of São Paulo to meet the continuing expansion of demand from the automotive and civil construction industries. Additionally, more than R$ 560 million will be invested in our various special steel mills in the U.S. to attend to the growth of the automotive and industrial markets of North America”, says Gerdau Chief Executive Officer, André B. Gerdau Johannpeter.

During the first quarter, there was an increase in the physical sales in all Gerdau operations. In Brazil (except for the special steel mills) 1,7 million metric tons were sold, which represents an increase of 11% compared to the same period last  year. Of this total, 1,2 million metric tons was directed to the domestic market.  Volume was 2% higher compared to the first three months of 2010. In comparison with the fourth quarter, sales to the domestic market showed an increase of 9%. In regard to the 526 million tons of exports from Brazil, there was a 40% rise as compared to the first quarter of 2010 – this performance was affected by the sales of products to the Asian region.

The operations in Canada and the US. (except for the special steel mills) showed a 22% increase in physical sales due to a greater demand from industry and energy sector, reaching 1,6 million tons. The plants in Latin America (except Brazil) totaled 638 thousand tons of products sold, where the markets of Chile and Argentina performed at high levels, amounting to an increase of  17%  when compared to the same period  in 2010.

Gerdau announces investments in Brazil and in the U.S.

Considering the continuous growth of the Brazilian civil construction market and automotive industry, Gerdau announced that it will invest R$ 718 million through 2013 in the state of São Paulo. The funds are intended for the expansion of the special steel mill located in Pindamonhangaba, and the revamping of the Araçariguama mill, as well as the installation of a new plant of ready-to-use products for civil construction also in Pindamonhangaba.

The new investment package planned for São Paulo includes the installation of a new special steel rolling mill in Pindamonhangaba, with an annual installed capacity of 500 thousand tons of round bars. The annual installed capacity of the mill, which allocated 80% of its products for the automotive market, will grow from 700 thousand tons of rolled steel to 1,2 million metric tons. The new equipment will be operational in 2012 and its focus will be to supply the Brazilian market.

A new plant of ready-to-use products for civil construction will also be built in Pindamonhangaba.  Products at this facility will include: specialty meshes, and meshes for concrete, tubes, columns, special meshes as well as trusses - that increase agility and reduce building costs. The new venture is expected to be concluded in 2013. The ready-to-use products will use raw material from the company’s network of Gerdau long steel mills.

In addition, there will be investments for improvements at the Araçariguama rolling mill, bringing productivity gains to the whole business chain. The initiative comprises the installation of a new line GG-50 rebar in coils. Operations are scheduled to start in 2012.

Approximately 2,6 thousand new jobs will be created, with 330 being new direct jobs, 1480 indirect jobs in the productive chain and 780 temporary jobs at the height of the project.

In the U.S. R$ 560 million will be invested through 2014 to increase the installed capacity in the special steel mills, located in Monroe (Michigan), Fort Smith (Arkansas), Jackson (Michigan) and St. Paul (Minnesota). To meet the expansion needs of the automotive market and industry in the country, the annual installed capacity of special steel will grow by 400 thousand tons through 2014. The R$ 560 million investment is in addition to the investments announced at the end of 2010 for the expansion of the installed capacity of the unit in Monroe of approximately 200 thousand tons.

The Company also announced that it has initiated new technical studies for the installation of two new plants in Brazil, one in the north-northeast and another in the Midwest. Each of the projects would have annual installed capacity between 500 and 700 thousand tons for the civil construction and industry. Moreover, studies are underway for a new mill in southern Brazil, with an installed capacity of 600 thousand tons per year.

In North America, there is a study for the construction of a new special steel mill, with installed capacity between 700 and 800 thousand tons to attend to North American demand

During the first quarter, the Company invested R$ 333 million in property, plant and equipment, 73% for Brazil and 27% for other countries. As previously reported, investments of R$ 10.8 billion are planned for the period between 2011-2015, of which approximately 75% will go to Brazil and 25% tor the units in other countries. Costs for the studies mentioned above are not included in the amount of $ 10.8 billion.

Gerdau has successfully concluded the global offering of the Gerdau S.A. shares for R$ 5 billion. The operation involved a primary public offering of new common and preferred shares of Gerdau S.A. worth R$ 3,7 billion, and a secondary public offering of preferred shares of Gerdau S.A., owned by Metalurgica Gerdau S.A. and by Gerdau BG Participações S.A. amounting to R$ 1,3 billion. The primary offering involved the issue of 68,03 million of common shares of Gerdau S.A., whose unit value was R$ 15,60, and 134,83 million of preferred shares of Gerdau S.A., with unit value of R$ 19,25. The secondary offering involved the sale of 69 million of preferred shares, at the same price issued by Gerdau S.A.

However, the final value of the public offering of the shares will be announced after the conclusion of the period for exercising the over-allotment, which could take until May 12.

Dividends to be paid on May 27

On May 27, the publicly traded companies Gerdau S.A. and Metalúrgica Gerdau S.A. will pay dividends referring to the first quarter of the year. The Gerdau S.A. shareholders will receive R$ 102 million (R$ 0,06 per share), and  Metalúrgica Gerdau S.A. shareholders will receive R$ 41 million (R$ 0,10 per share).

About Gerdau
Gerdau is the leading producer of long steel in the Americas and one of the largest suppliers of specialty long steel in the world. It has over 40,000 employees and an industrial presence in 14 countries with operations in the Americas, Europe, and Asia, which together represent an installed capacity of over 25 million metric tons of steel per year. It is the largest recycler in Latin America and around the world it transforms millions of metric tons of scrap into steel every year. Gerdau is listed on the stock exchanges of São Paulo, New York, and Madrid and has around 140,000 shareholders.


 

 
 
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