The recovery of global demand for steel has driven Gerdau’s consolidated gross revenues to R$ 9.5 billion in the second quarter of 2010, a 31% increase on the same period of 2009.
Physical sales have reached 4.4 million tonnes, a volume 30% higher than that of the second quarter of 2009. Performance was mainly driven by sales growth in Brazil and in the Specialty Steel Operation, which combines units in Brazil, the United States, and Spain.
Consolidated production of crude steel rose 52%, reaching 4.7 million tonnes.
Year-to-date gross revenues have reached R$ 17.6 billion, an 18% increase on the first half of 2009. From January to June, physical sales reached 8.4 million tonnes (up 31% compared to last year), and the production of crude steel for the period reached 9.1 million tonnes (an increase of 61%).
“2010 will be a year of growth for Gerdau, mainly due to the demand in emerging markets, such as China, Brazil, and India, whereas Europe, the United States, and Japan continue their process of gradual economic recovery. We will continue to monitor the evolution of markets and to invest in order to meet the future growth in demand, according to our long-term vision,” said Gerdau CEO André B. Gerdau Johannpeter.
The consolidated EBITDA reached R$ 1.7 billion in the second quarter, vs. R$ 595 million in the period between April and June of 2009. This growth was the result of increased sales volumes and improved results from shared control companies and joint ventures. From January to June, the EBITDA rose to R$ 3.1 billion.
During the second quarter, all operations presented evolution in sales volumes. In Brazil (excluding specialty steel production units), 1.7 million tonnes were sold (+38%), 1.3 tonnes of which were directed to the domestic market (+57%), whose sales were driven by the demand in the industry and civil construction. Exports totaled 394,000 tonnes, in line with the second quarter of 2009.
Units in other Latin American countries sold 535,000 tonnes, which represents a 6% increase compared to Q2 2009, with the Chilean and Argentinean markets as the highlights in the region.
In Canada and the United States (excluding specialty steel production units), 1.4 million tonnes were sold, a 17% increment on the second quarter of 2009. In the Specialty Steel Business Operation (units in Brazil, the United States and Spain), there was a 73% increase in sales, which reached 727,000 tonnes, especially due to the expansion in the Brazilian automotive industry and to the evolution of the segment in the United States.
Expansions in rolling and iron ore processing capacity are highlights in the company’s investment plan. In the second quarter, Gerdau disbursed R$ 220 million in investments, 62% of which was allocated to Brazil and 38% of which was allocated to other countries. For the accrued year, disbursements reached R$ 453 million.
To meet the growing demand for steel over the next few years, the company has expanded its investment plan for the 2010-2014 period, from R$ 9.5 billion, as previously disclosed, to R$ 11 billion. Units in Brazil will receive 80% of the total amount to be invested in the period.
Gerdau restates that it will invest in expanding the specialty long steel rolling capacity in Brazil, a project that had been under consideration and which had been disclosed with the results of the first quarter of 2010. The initiative involves R$ 350 million in the installation of a new rolling mill for specialty long steel, aimed at meeting the growing demand from the automotive industry. With an installed capacity of 500,000 tonnes per year, the equipment will start operation in 2012.
Studies for the definition of the investment’s geographic location are being completed, and details about the project will be disclosed soon, according to Gerdau.
The implementation of a new rolling mill of rolls in Brazil, aimed at serving the civil construction and industrial markets. The investment, at a location that remains to be defined, totals R$ 490 million in resources and 600,000 tonnes of installed capacity. The equipment is scheduled to start operation in 2013.
Investments in the mining segment, in the state of Minas Gerais, Brazil, will also be expanded, from R$ 352 million, as previously disclosed, to R$ 533 million. The R$ 352 million investment plan included the installation of a second iron ore processing unit in Miguel Burnier—with the capacity to produce 5.6 million tonnes per year—and, in the new project, a logistics structure will be added to transport the inputs from the mines to the mill in Ouro Branco.
The logistics structure includes, among other things, a 9-km-long belt system equipped with the latest technology to transport the materials from the Miguel Burnier processing unit to the Ouro Branco mill. In 2012, the capacity for Gerdau’s own production of iron ore will reach approximately 7 million tonnes, meeting 100% of the consumption needs for the integrated mill in Ouro Branco.
Gerdau has recently disclosed to the market a new investment in this same unit: the installation of a hot-rolled coil mill, the company’s first one in Brazil. Two new rollers for flat steel will be installed in this mill, one aimed at the production of thick plates and the other meant for the production of hot-rolled coils. Combined, the equipment total R$ 2.4 billion in investments, reaching an installed capacity of 1.9 million tonnes per year.
The rolling mills are scheduled to start operation in 2012. In the future, the joint capacity of the two rolling mills can be expanded to 3 million tonnes per year. Both products (hot-rolled coils and thick plates) are meant to service the oil, naval, civil construction (metallic construction), and heavy machinery industries.
Another recent highlight was the start of the commercial operation in hydroelectric power station of Caçu and Barra dos Coqueiros (state of Goiás) in July. Together, the mills have a total generation capacity of 155 MW, whose energy will be used to supply the company's own consumption demand. They represent R$ 670 million in investments.
Gerdau is the leading producer of long steel in the Americas and one of the largest suppliers of specialty long steel in the world. It has over 40,000 employees and industrial presence in 14 countries, with operations in the Americas, Europe and Asia, which combined have an installed capacity of more than 25 million tonnes of steel. It is the largest recycler in Latin America.