Improvement in steel consumption increases Gerdau's revenues

- Consolidated gross revenues and physical sales show a growth in the third quarter over the same period last year. Consolidated gross revenues reaches R$ 9.3 billion (+20%) and physical sales rise to 4.4 million metric tons (+14%)

- Consolidated production of crude steel increases % in the third quarter, reaching 4.4 million metric tons.

Greater demand for steel in the world and cost pressures affected Gerdau's performance in the third quarter, a period during which consolidated gross revenues reached R$ 9.3 billion—a 20% growth compared to the months from July to September in 2009. This performance primarily reflects the evolution of 14% in consolidated physical sales to 4.4 million metric tons driven by the Specialty Steel Business Operation, which includes plants in Brazil, United States, and Spain, and by the Brazilian domestic market. The consolidated production of crude steel, in turn, has grown 9% in the third quarter versus the same period last year, also reaching 4.4 million metric tons.
Cost pressures, however, strongly impacted by the prices of raw materials, resulted in an 8% reduction in the generation of operational cash generation (EBITDA), which was R$ 1.3 billion in the quarter. Net income on the other hand was R$ 609 million, 7% lower in relation to the third quarter last year.
As for year to date, consolidated gross revenues reached R$ 26.9 billion, which is an increase of 18% over the first nine months of 2009. Consolidated physical sales from January to September rose 25% to 12.8 million metric tons while consolidated production of crude steel rose 39% reaching 13.5 million metric tons. EBITDA reached R$ 4.4 billion against R$ 2.6 billion recorded in the first nine months of 2009. Net income, though, reached R$ 2 billion.
"The growth in sales and steel production is the result of a stronger demand in the different markets where we operate. The global economic scenario, however, still presents major challenges. The high cost of raw materials, the excess of installed capacity, and the intense competition in all markets where we operate are pressuring margins in the industry as well as impacting our results. In light of this context, Gerdau will continue adapting to market swings with the same agility of decision and flexibility of our operations that has always marked the Company's management throughout its history," says Gerdau's CEO, André B. Gerdau Johannpeter.
There was growth in physical sales in all of Gerdau's operations in the third quarter. In Brazil (excluding specialty steel plants), the sales volume of 1.6 million metric tons exceeded by 12% the sales from the same period last year, and of this total the domestic market consumed 1.2 million metric tons. The performance of the domestic market represented an increase of 18% in sales over the third quarter of 2009, which was driven by higher demand from the industry and from civil construction. Exports from the country, on the other hand, remained practically constant, reaching 424,000 metric tons.
In other countries of Latin America (except Brazil), 565,000 metric tons were sold, which is a 5% increase over the third quarter of 2009. In the United States and Canada (except specialty steel plants), there was a 7% growth in hysical sales to 1.5 million metric tons due to the gradual recovery of the industry.
The Specialty Steel Business Operation (includes units in Brazil, Spain, and United States) totaled 709,000 metric tons sold, which is an increase of 49% compared with the third quarter of 2009, benefiting from the record levels in vehicle production in Brazil, the maintenance of good levels of demand in the automotive sector in the United States, and by the first signs of recovery of this same segment in Spain.
Investments in the quarter reached R$ 3.2 billion
considering acquisitions and fixed assets.
Gerdau invested R$ 3.2 billion in the third quarter as follows: R$ 2.9 billion for acquisitions and R$ 298 million for fixed assets (CAPEX) in its plants.
In relation to acquisitions, Gerdau finalized in August the acquisition of the minority shares of Gerdau Ameristeel — a total of US$ 1.6 billion (R$ 2.8 billion). With this it now owns 100% of Gerdau Ameristeel, closing the capital of this company.
That same month Gerdau completed the purchase of an additional share of 49.1% in the total capital of Cleary Holdings Corp., the controlling company over metallurgical coke production plants and coking coal reserves in Colombia. The transaction involved US$ 57 million (R$ 100 million) and Gerdau also now owns 100% of the company.
Of the total CAPEX recorded in the quarter (R$ 298 million), 68% was destined for Brazil and 32% for the other countries. Year to date, the investments in CAPEX totaled R$ 751 million.
In October, through its wholly-owned subsidiary Gerdau Ameristeel, Gerdau completed the acquisition of Tamco located in California. The company is a producer of rebars and is one of the largest manufacturers of this product on the west coast of the United States with an annual capacity of approximately 500,000 metric tons. The acquisition involved approximately US$ 165 million (R$ 280 million).
Gerdau's plan of investments in fixed assets for the period from 2010 to 2014 is R$ 11 billion, as has already been previously disclosed.
Dividends to be paid on November 26
The publicly listed companies Gerdau S.A. and Metalúrgica Gerdau S.A. shall pay interest on capital stock on November 26 concerning the anticipation of the minimum mandatory dividends for the year 2010. Shareholders of Gerdau S.A. will receive R$ 170 million (R$ 0.12 per share). Shareholders of Metalúrgica Gerdau S.A. on the other hand will receive R$ 73 million (R$ 0.18 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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