GGB's 4Q Surges Y/Y; FY Plummets - Analyst Blog


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Brazilian steel producer,  Gerdau S.A. ( GGB ) reported its financial results for the fourth quarter and fiscal year 2011 on February 15, 2012. The company's net income increased 12.0% year over year to R$472 million (US$262.2 million). The bottom-line results were driven by higher shipments and financial income as well as lower income taxes in the quarter. These were partially offset by higher cost of sales.

In the fiscal year, net income plummeted 15% year over year to R$2,098 million (US$1,256.3 million).


Net revenue in the fourth quarter jumped 16% year over year to R$9,065.8 million (US$5,036.6 million), primarily attributable to higher shipments in the quarter.  

As for the net revenue, Brazilian business accounted for 35.5% and registered a 6% increase over the year-ago quarter. North American revenue increased 29% and contributed 31.1% to net revenue while Latin American revenue represented 12.9% of net revenue and spiked 35% over the year-ago period. Revenue from Specialty Steel grew 10% year over year and accounted for about 20.5% of net revenue.

Crude steel production increased 8% year over year but plummeted 6% sequentially to 4,732 million tones in the quarter. Long steel production jumped 9% year over year and went down 5% sequentially to 3,982 million tones.

Shipments were strong in the quarter at 4,709 million tones and represented a 4% year - over- year and 3% sequential decline.

In the fiscal year 2011, net revenue approximated to R$35,406.8 million (US$21,201.7 million), up 13% year over year.


Gross margin in the fourth quarter was at 13.2%, up compared with 12.2% in the year-ago quarter. Selling expenses, as a percentage of revenue, were at 1.7%, down compared with 2.0% in the year-ago quarter. General and administrative expenses plummeted 80 basis points year over year to 5.3%.

EBITDA at R$1,025 million (US$569.4 million) was up 26% year over year with a margin of 11% in the quarter. Operating margin was 6.3% versus 8.7% in the year-ago quarter.

Balance Sheet

Exiting the fourth quarter, Gerdau had cash and cash equivalents of approximately R$ 1,476.6 million (US$793.9 million), reflecting sequential increase of 15.5%. Long-term debt was roughly flat at R$11,182.3 million (US$6,012.0 million).

Cash Flow

Net cash flow from operating activities in the fiscal year 2011 was R$1,710.0 million (US$1,024.0 million), down 58.7% year over year. Capital spending increased 52.2% in the year to R$1,961.4 million (US$1,174.5 million).

Gerdau S.A. is one of the leading Brazilian steel makers. The company plans to spend roughly R$10.3 billion for the period from 2012 to 2016. The company faces stiff competition from its peers like Companhia Siderurgica Nacional ( SID ), Arcelor Mittal ( MT ) and Usinas Sider (USNZY.PK).

GERDAU SA ADR ( GGB ): Free Stock Analysis Report
ARCELOR MITTAL ( MT ): Free Stock Analysis Report
CIA SIDERUR-ADR ( SID ): Free Stock Analysis Report
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