Brazilian steel maker,
) reported an impressive financial result for first quarter 2014.
Net income was R$440.1 million (US$186.5 million), soaring up 175%
from R$160 million (US$80.0 million) in the year-ago quarter.
The bottom line improvement was driven primarily by healthy top
line performance and increased gains from exchange variations,
offset partially by a rise in costs and expenses.
Gerdau's net sales were R$10,553.8 million (US$4,471.9 million),
reflecting an increase of 15.1% year over year.
Effective first quarter 2014, Gerdau added a new business operation
(BO), Iron Ore, to its existing four business operations, including
Brazil BO, North America BO, Latin America BO and Special Steel
Gerdau's Brazilian business accounted for 35.0% of net revenue in
the quarter and registered a 5.7% year-over-year increase. Revenues
generated in North America rose 11.4% and contributed 30.0% to net
revenue, while Latin American revenues represented 13.1% of net
revenue and increased 22.3% year over year. Revenues from Special
Steel business operations stepped up 24.8% year over year and
accounted for about 19.7% of net revenue. Iron Ore business
accounted for 2.2% of total revenue and revenues generated grew
Crude steel production in the quarter increased 3.3% year over year
to 4,557 million tons. Shipments fell 3.7% to 4,387 million tons.
Gerdau's cost of sales increased 11.9% year over year and
represented 87.5% of total revenue. The top line improvement though
partially offset by higher cost of sales led to roughly 44.9%
increase in gross profit. Gross margin in the quarter was at 12.5%,
up 260 basis points (bps) year over year.
Selling expenses, as a percentage of revenue, were flat at 1.6%.
General and administrative expenses decreased 30 bps year over year
Earnings before interest, taxes, depreciation and amortization
(EBITDA) were R$1,196.0 million (US$506.8 million), up 48.6% year
over year with a margin of 11.3% in the quarter. Operating margin
was 6.2% versus 3.7% in the year-ago quarter.
Exiting the first quarter 2014, Gerdau had cash and cash
equivalents of R$1,870.9 million (US$827.8 million), down 10.9%
over the preceding quarter. Long-term debt increased 0.7%
sequentially to R$14,583.3 million (US$6,179.4 million).
Gerdau generated cash of approximately R$167.0 million (US$70.8
million) from its operating activities in the first quarter 2014,
down 64.2% year over year. Capital spent on annexations of
property, plant and equipment increased 18.4% to R$676.8 million
(US$286.8 million). Of the total capital spending, the company
invested around 49.1% in its Brazilian operations, 20.2% in Special
Steel, 11.7% in North American operations, 11.5% in Latin American
operations and 7.5% in Iron Ore operations.
Gerdau currently has a market capitalization of $11.0 billion and
carries a Zacks Rank #3 (Hold). Some better-ranked companies in the
ArcelorMittal South Africa Limited
General Steel Holdings, Inc.
). All of these companies hold a Zacks Rank #2 (Buy).
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