Gerdau's performance in the second quarter of 2012 was mainly driven by a higher demand for long steel products in the Brazilian market, which resulted in an 11% growth in consolidated net revenue against the same period last year, reaching R$ 10 billion. Net revenue saw an 8% growth in comparison with the first quarter of the year.
Consolidated physical sales in turn were 4.8 million tons, a volume roughly in line with what was seen in the second quarter of 2011 and the first quarter of 2012. The consolidated steel production of 5 million tons also remained stable compared to both periods.
As in previous quarters, the increase in raw material costs impacted the generation of cash from operations (EBITDA), which fell by 5% to R$ 1.2 billion. However, in comparison with the first quarter, EBITDA grew 23%.
Consolidated net income reached R$ 549 million in the second quarter, a 9% growth over the same period last year, influenced by a non-recurring financial impact in the second quarter of 2011 due to the advance payment of debts. Consolidated net income presented a 38% increase in comparison with the first quarter of 2012.
"The growth in net revenue, EBITDA, and net income in the second quarter compared with the first quarter demonstrates the recovery of our financial and operational performance in the first half of the year, reflecting a greater demand in the relevant markets and improvement in our cost management. However, we continue facing a strong impact from the costs of raw materials in our operations such as iron ore, coal, and scrap. Considering the global scenario of volatility with the slowdown of the economy in emerging countries and the European crisis, our challenge is to continue seeking to improve operating margins by the continuous improvement of our cost management," says Gerdau's CEO, André B. Gerdau Johannpeter.
During the second quarter, the markets supplied by Gerdau performed differently. In the Brazilian market, physical sales (not including special steel mills) were 1.4 million tonnes, an increase of 10% in relation to the same period in 2011, while exports from the country fell by 26%, totaling 498,000 tonnes, considering that part of the shipments to go abroad was directed to the domestic market.
In the U.S. and Canada (excluding special steel operations), 1.6 million tonnes were sold, which is a 5% decrease against the second quarter of 2011 due primarily to anticipated purchases in the first three months of the year caused by the milder winter in the region.
The units located in Latin America (except Brazil), on the other hand, showed a 6% growth in volumes sold, reaching 685,000 tonnes with the highest growth taking place in Peru and Chile. The Special Steel Business Division (includes plants in Brazil, the United States, and Spain) sold 731,000 tonnes, which is 8% less, mainly due to lower demand from the automotive industry in Brazil and Europe.
Gerdau continues to invest in Brazil and abroad
Gerdau will keep its investment plan of R$ 10.3 billion (2012-2016) despite the global economic uncertainties of the market, but it may be more selective in evaluating projects and flexible in the disbursement schedule, taking advantage of opportunities in markets where it is already present.
In Brazil, the installation of the hot rolled coil mill, which is the company's first in the country, is still in progress at the Açominas mill (MG), and will start operating in late 2012. With an installed capacity of 770,000 tonnes per year, the equipment is geared to meet the demand from the following industries: oil, shipbuilding, construction (metal construction), and heavy equipment (machines and tools).
Furthermore, Gerdau is continuing to make the investments already announced to achieve self-sufficiency in iron ore, and the goal is to reach 11.5 million tonnes of annual installed capacity in 2014. Additionally, the project for the monetization of the surplus production of iron ore is still in progress, which is in the phase of seeking a strategic partner for the venture.
The company also announces today the resumption of the project of R$ 1.1 billion to build a new plant in Mexico through its joint venture with Gerdau Corsa. Focused on the production of structural shapes, it will have an annual installed capacity of 1 million tonnes of steel and 700,000 tonnes of rolled products. This investment will enable the replacement of imports of this product in Mexico and is expected to start up operations in the second half of 2014.
In India, the Gerdau Kalyani joint venture will begin this month of August the operation of the blast furnace, whose production capacity is 350,000 tonnes per year. In the same period, the Company will start the operation of a power generation plant of 6 MW that will use gas from the blast furnace. In the second stage of investment, the new special steel rolling mill will start up its operations with an annual installed capacity of 300,000 tonnes. The company will also continue the implementation of a coking plant with an annual capacity of 200,000 tonnes and integrated into it will be a power generation plant of 15 megawatts.
During the second quarter, Gerdau's total investments in fixed assets (CAPEX) reached R$ 850 million. Accrued in the year, the disbursements totaled R$ 1.5 billion.
Gerdau is the leader in the segment of long steel in the Americas and one of the main suppliers of special long steel in the world. With over 45,000 employees, it has industrial operations in 14 countries—in the Americas, Europe, and Asia—which together represent an installed capacity of over 25 million tonnes of steel per year. It is the largest recycler in Latin America and, in the world, transforms each year millions of tons of scrap into steel, reinforcing its commitment to sustainable development in the regions where it operates. Gerdau is listed on the stock exchanges of São Paulo, New York, and Madrid and has over 140,000 shareholders.