Gerdau Breaks Sales Record in 2011

OREANDA-NEWS. February 20, 2012. GERDAU BREAKS SALES RECORD IN 2011    

- Consolidated shipments reached 4.7 million metric tons in the fourth quarter, and for the year broke the company's record, reaching 19.2 million metric tons.         

- Net revenue grew 16% in the fourth quarter to BRL  9.1 billion and for the year totaled BRL  35.4 billion.

- Consolidated steel production grew 8% in the last quarter of the year and reached 4.7 million metric tons. In twelve months, it reached 19.6 million metric tons.       

- The investment program for the period 2012-2016 will be BRL  10.3 billion.     

Gerdau ended the year 2011 with record consolidated shipments of 19.2 million metric tons, driven by increased demand for long steel in the Americas, especially in the markets of civil construction and industry. The sales volume reached in the year represents 10% growth on the commercial performance of the previous year. Consolidated shipments reached 4.7 million metric tons in the fourth quarter, which is an increase of 4% over the last three months of 2010.           

With the increase in shipments, consolidated net revenue increased 16% in the fourth quarter against the same period last year, reaching BRL  9.1 billion, and in 2011 reaching BRL  35.4 billion. In the fourth quarter, consolidated steel production reached 4.7 million metric tons, which is an increase of 8% over the last three months of 2010. Consolidated steel production grew to 19.6 million metric tons for the year.

From October to December, the generation of cash from consolidated operations (EBITDA) went from BRL  815 million in the fourth quarter of 2010 to BRL  1 billion driven by the expansion of net revenue, while for the year it reached BRL  4.7 billion. Fourth-quarter net profit reached BRL  472 million, representing a 12% growth compared to the last three months of 2010, while the result for the year was BRL  2.1 billion.

"We closed the year 2011 with good operational and financial performance evidenced by breaking the record in shipments, an adequate management of expenditures and comfortable levels of indebtedness even in the face of adversity resulting from the global economic slowdown and the European crisis. So, in the year that we celebrated 110 years of history, we brought to the forefront a management deeply committed to the economic, social and environmental sustainability of our business. Our challenge for 2012 is to continuously improve on our financial results and to do so, we will continuously invest more in order to keep being the company preferred by our customers, as well as to strive to reduce costs especially of the raw materials in our business," says Gerdau's CEO Andre B. Gerdau Johannpeter.       

The best performing markets served by Gerdau with the best performance were Brazil, North America and the other Latin American countries. The Brazilian market (does not include mills producing special steels) demanded 1.2 million metric tons of steel from Gerdau in the fourth quarter of 2011, which represents an increase of 15% over the same period last year. Exports from the country of 551,000 metric tons during this period were reduced by 25% to meet increased domestic demand. For the year, 5.1 million metric tons went to the domestic market and 2 million metric tons to exports.  

The units in Canada and the United States accounted for a 10% increase in shipments in the fourth quarter, totaling 1.6 million metric tons. For the year, 6.5 million metric tons were sold in this region. As for the operations in other Latin American countries (except Brazil), a total of 649,000 metric tons were sold in the fourth quarter, which is a volume 15% higher over the same period of 2010. In 12 months, 2.6 million metric tons were sold in the other Latin American countries.      

Sales in the fourth quarter from the business operation of special steel (including plants in Brazil, United States, and Spain) of 686,000 metric tons remained practically stable compared with the fourth quarter of 2010 given the high levels already reached especially in the United States. Sales of special steel reached 2.9 million metric tons in 2011.   

Gerdau invests BRL  674 million in fourth quarter          

Investments in fixed assets (CAPEX) in the fourth quarter totaled BRL  674 million and for the year they reached BRL  2 billion. Scheduled investments for the next five years (2012-2016) are BRL  10.3 billion, of which approximately 70% will go to operations in Brazil and 30% to units in other countries. Included in the plans are the startup of production of flat steel in Brazil, the expansion of the installed capacity of special steel in Brazil and the United States, as well as increased production of rolled products at the Cosigua (RJ) mill and the startup of operations of the rolling and sintering plant in India.        

In relation to Gerdau’s own production of iron ore, the company continues with the goal of achieving self-sufficiency of Gerdau Acominas, which is the main consumer unit of this raw material. Studies for the commercial exploitation of surplus iron ore located in Minas Gerais will also continue.       

The Company will begin production of flat steel in Brazil in late 2012 with new hot rolling mill of coils at Gerdau Acominas (MG), which will have installed capacity of 770,000 metric tons per year. The coils will be primarily used in the construction industry (steel construction), oil, shipbuilding, machinery and implements.        

To meet the needs of the civil construction market in Brazil, Gerdau expanded the installed capacity of the structural shapes rolling mill in 2011, which is also located in Gerdau Acominas, from 520,000 metric tons to 700,000 metric tons per year. Considering the prospect of continued growth in demand, the company has already initiated studies to expand the annual production capacity of structural shapes to 1 million metric tons the annual production capacity of structural shapes. Structural shapes are used in construction and the oil industry, as well as for machinery and equipment.          

Gerdau will start up operations of a rolling mill for special steel and rebars in 2012 in India with an installed capacity of 300,000 metric tons, along with sintering, besides continuing with the installation of a coke plant and carrying out projects in the area of power generation.   

The annual installed capacity of the Midlothian plant in Texas in the U.S., Gerdau's largest steel mill in North America, will evolve to 1.8 million metric tons of steel. The installed capacity of rebars will also be expanded in the same unit to 550,000 metric tons per year. Both initiatives will start operations in 2014. Furthermore, a new reheating furnace will be inaugurated at the Calvert City (Kentucky) plant at the end of 2012.     

A new drawing mill and rolling mill for rebars and light commercial profiles is scheduled to start up operations in Guatemala, strengthening our service capacity in the domestic market and neighboring countries. The new mill will have an annual installed capacity of 200,000 metric tons.          

The resumption of operations was recently announced in Colombia for the mill located in Yumbo, Vale del Cauca, which is geared to supply the construction industry. Investments are also planned to increase the capacity of the mills and plants of Tocancipa and Tuta in 2012, adding 80,000 metric tons to their annual installed capacity. Furthermore, the opening of a port terminal in the country is scheduled in 2012 for shipment of coal and coke, which are important raw materials for steel production. The port will serve mainly the markets of Brazil, Mexico and the U.S.         

Gerdau is recognized as investment grade by risk rating agencies

In 2011 the agencies Standard & Poor's and Fitch Ratings maintained an investment grade rating of BBB- for Gerdau. In addition, Moody's risk rating agency assigned to the Company an investment grade of Baa3 with a stable outlook. As a result, the Company received an investment grade by all three most known risk rating agencies in the capital market, which demonstrates the market's confidence in the company’s management. 

Dividends to be paid on March 8         

The payment of dividends for the fourth quarter results to shareholders of the publicly traded companies Gerdau S.A. and Metalurgica Gerdau S.A. will take place on March 8. USD 136.4 million will be paid to holders of Gerdau S.A. shares (BRL  0.08 per share) and BRL  44.7 million for those of Metalurgica Gerdau S.A. (BRL  0.11 per share). The remuneration for the whole year to shareholders of Gerdau S.A. totaled BRL  597 million (BRL  0.35 per share) and Metalurgica Gerdau S.A. was BRL  224 million (BRL  0.55 per share).