- Consolidated net sales advance to R$11.9 billion
- Adjusted EBITDA of R$1.3 billion
- Consolidated adjusted net income of R$193 million
- Free cash generation of R$1.6 billion
- Metalúrgica Gerdau S.A. to carry out a public share offering
Gerdau's net sales reached R$11.9 billion in the third quarter of 2015, up 11% on the same period last year. Net sales growth was driven by the exchange variation gain from the translation into Brazilian real of the revenue generated in U.S. dollar, particularly by the North America BO (includes the long steel producers in Canada, United States and Mexico) and higher exports from Brazil.
Consolidated shipments increased 2% on the third quarter of 2014 to reach 4.7 million tonnes of steel on significant export growth from Brazil in the period. However, the consolidated steel production of 4.2 million tonnes was down 6% from the same period last year, due to inventory adjustments at all business operations, demonstrating the Company's focus on optimizing its working capital.
Gerdau's results in the quarter were influenced by nonrecurring items related to noncash accounting write-offs, particularly of fixed assets and goodwill, in the amount of R$2.2 billion. Therefore, Gerdau is reporting its EBITDA and net income on an adjusted basis to reflect better its performance and the respective internal management efforts in all of its operations. Accordingly, adjusted operating cash generation (EBITDA), excluding nonrecurring items, amounted to R$1.3 billion, up 4% on the same quarter last year, mainly due to the reduction in selling, general and administrative expenses. Meanwhile, adjusted consolidated net income in the quarter came to R$193 million. Considering the impact from nonrecurring items, Gerdau posted a net loss of R$1.9 billion.
"Excluding nonrecurring noncash items, net income and EBITDA growth in the quarter already reflect the comprehensive efforts by our teams to boost competitiveness and capture efficiency gains in all of our operations, which are part of the initiatives under the Project Gerdau 2022. For example, we were able to reduce general, administrative and selling expenses, optimize working capital and generate strong cash flow of R$1.6 billion in the quarter. We also maintained investment grade ratings at the world's three major risk rating agencies, Standard & Poor's, Fitch and Moody's, and negotiated the elimination of financial covenants from our debt agreements, which will enable us to focus our liability management on the long term," said Gerdau CEO André B. Gerdau Johannpeter.
During the quarter, the performance of shipments presented distinct performances in the regions where Gerdau operates. The shipments in Brazil's domestic market of 1.1 million tonnes were down 18% from the same quarter last year, reflecting the contraction in the construction and manufacturing sectors. However, exports from Brazil advanced 179% to 811,000 tonnes.
The operations in Canada and the United States (excluding the mills producing special steels) shipped 1.7 million tonnes, down 3% from the same quarter last year, due to the continued flow of imported goods into the region. In South America (excluding the Brazil operations), shipments came to 583,000 tonnes, up 2% from the third quarter of 2014.
The Special Steel operation (mills in Brazil, United States, Spain and India) shipped 617,000 tonnes, a reduction of 13% from the third quarter of 2014, due to the sharp drop in demand from the auto industry in Brazil and lower shipments to the oil and gas industry in the United States.
Gerdau invests R$509 million in the quarter
In the third quarter, investments in fixed assets (capital expenditure) amounted to R$509 million, a 21% decrease from the second quarter of this year. In the year to September, capital expenditures amounted to R$1.8 billion. The highlights include the ongoing construction of the heavy plates rolling mill at the Ouro Branco Mill in Minas Gerais and the melt shop in Argentina. Both investments are expected to be commissioned in the second half of 2016.
Dividends to be distributed on November 19
On November 19, Gerdau S.A. will pay dividends to shareholders in the amount of R$67.5 million (R$0.04 per share) for the third quarter of 2015, calculated based on consolidated adjusted net income. Despite the nonrecurring items impacting net income, the dividends will be paid from the retained earnings reserve and based on the liquidity position that includes the positive cash generation in the quarter. In the first nine months of 2015, Gerdau S.A. distributed R$253 million in the form of interest on equity and dividends.
Capital increase at Metalúrgica Gerdau S.A. will be used to amortize debt
Metalúrgica Gerdau S.A., one of the listed corporations in Brazil, will carry out a public offering of common and preferred shares (GOAU3 and GOAU4). The transaction will involve the issue of 500 million shares, with the proceeds used to amortize the Company's debt and improve its liquidity position. The offering should be concluded by Nov. 24, 2015.
Gerdau is the leading long steel producer in the Americas and a leading global supplier of special steels. In Brazil, Gerdau also produces flat steel and iron ore, activities that are expanding its product mix and the competitiveness of its operations. Gerdau has industrial operations in 14 countries in the Americas, Europe and Asia with combined installed production capacity of more than 25 million tonnes of steel per year. It is also the largest recycler in Latin America and around the world it transforms each year millions of tons of scrap into steel, reinforcing its commitment to sustainable development in the regions where it operates. Gerdau's shares are listed on the São Paulo, New York and Madrid stock exchanges.