GERDAU LONG STEEL NORTH AMERICA HEADLINESSteel Producers /
Gerdau Long Steel North America
Gerdau Ameristeel to Close Perth Amboy Meltshop
Sep. 14, 2006
Sep. 14, 2006 — Gerdau Ameristeel Corp. announced that it will close the meltshop operations at its Perth Amboy, N.J., wire rod mill early in the fourth quarter of 2006.
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“The company believes that closure of the relatively non-competitive Perth Amboy meltshop is consistent with global industry trends toward consolidation and rationalization,” commented Mario Longhi, President and CEO of Gerdau Ameristeel.
“Despite focused efforts over the last several years we have been unable to bring the Perth Amboy meltshop up to performance and cost standards dictated by the competitive nature of our business.
Longhi says the more efficient semi-finished billet supply from the company's other steelmaking facilities—and the flexibility to produce higher-quality finished wire rod—is expected to improve the company's future cash flows and returns.
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The company says it plans to continue operating the Perth Amboy rolling mill at its current production level of approximately 500,000 tons of finished wire rod annually. After closure of the meltshop, semi-finished steel billets will be more efficiently supplied to the Perth Amboy rolling mill from available billet-making capacity at other Gerdau Ameristeel meltshop operations. Higher-grade billets will also be supplied from Gerdau Ameristeel's majority shareholder Gerdau SA in Brazil and other third-party billet suppliers.
Closure of the meltshop operations will result in an estimated $27 million after-tax charge (approximately 9 cents per share) to third quarter 2006 earnings. Most of the charge, approximately $23 million, is a non-cash charge to write off the book value of the meltshop buildings and equipment. Approximately $4 million of the charge consists of cash costs for severance and take-or-pay contract settlements.
“This is a very difficult decision to make, as it impacts dedicated, hard-working employees,” commented Mario Longhi, President and CEO of Gerdau Ameristeel. “Gerdau Ameristeel will provide outplacement support and make every effort to help the displaced employees through this time of transition. However, the company believes that closure of the relatively non-competitive Perth Amboy meltshop is consistent with global industry trends toward consolidation and rationalization.
“Despite focused efforts over the last several years, we have been unable to bring the Perth Amboy meltshop up to performance and cost standards dictated by the competitive nature of our business. The more efficient semi-finished billet supply from the company's other steelmaking facilities, and the flexibility to produce higher-quality finished wire rod, is expected to improve the company's future cash flows and returns,” concluded Longhi.
Gerdau Ameristeel is the second-largest minimill steel producer in North America with annual manufacturing capacity of over 9.0 million tons of mill-finished steel products. Through its vertically integrated network of 17 minimills (including one 50%-owned minimill), 17 scrap recycling facilities and 46 downstream operations, Gerdau Ameristeel primarily serves customers in the eastern two-thirds of North America.