Brazil’s Gerdau reorganizes to face challenges

OREANDA-NEWS. July 17, 2015. Brazil's largest steel maker Gerdau plans to reorganize its operating units and simplify its ownership structure to better face the "currently highly competitive situation."

Gerdau said that as part of its reorganization it will spend about 2bn Brazilian reais (\\$640mn), in cash and share transfers, to buy the stakes it does not own in subsidiaries Seiva Floresta and Industries, Gerdau Latin America Holdings, and Itaquia Commerce, Import and Export.

The board of directors of Gerdau and of affiliate Seiva Floresta and Industries authorized their management to assess alternatives to merge the units into Gerdau.

Gerdau's Mexico operations and its joint ventures in the Dominican Republic, Guatemala and Mexico will become part of the North American business operation, which is currently formed by the long-steel operations in Canada and the US.

A South American business operation unit will be created, which will consist of the long-steel operations in Argentina, Chile, Colombia, Peru, Venezuela and Uruguay.

The iron ore operation will merge into the Brazil business operation, which currently includes the long and flat steel operations in Brazil and metallurgical coal and coke in Colombia.

The specialty steel business operation, which covers specialty steel operations in Brazil, Spain, the US and India, will remain unchanged.

Gerdau, with steel output of 19mn t in 2014, is the 16th largest steelmaker in the world and the largest in Latin America, according to the World Steel Association.