Gerdau 2nd-qtr profit soars 85 pct on strong sales

Tag : Steel Products
Brazil - (Adds comments, details on exports, investment plans, byline)
By Todd Benson
SAO PAULO, (Reuters) - Brazilian steelmaker Gerdau said Wednesdayits net profit soared 85 percent in the second quarter, lifted byred-hot demand for steel products around the globe and a bigincrease in output.
Net income surged to 2.12 billion reais ($1.35 billion) from 1.15billion reais in the second quarter of 2007 and 1.09 billion reaisin the first quarter of this year, Grupo Gerdau said in a filingwith Brazil's securities regulator.
Gerdau, which has operations throughout the Americas and Europe,said strong demand for steel in all the countries where it operateshelped propel sales sharply higher.
The company's shares gained on the strong earnings report, climbingalmost 2 percent to 32.30 reais in afternoon trading in Sao Paulo,outpacing a 1.44 percent gain in the benchmark Bovespa index.
Net revenue rose 47 percent in the quarter to 11.1 billion reais,led by a 59 percent jump in sales in North America, where demandfor steel remains robust despite the economic slowdown in theUnited States.
"The U.S. financial crisis has had little impact on ourperformance," Chief Executive Andre Gerdau Johannpeter said on aconference call. "We're monitoring the economy closely, but we'reoptimistic about the rest of the year."
A weak U.S. dollar allowed Gerdau's mills in the United States toincrease exports significantly, mostly to Central America, theCaribbean, Asia and even South America.
As a result, the company expects to ship as much as 500 milliontonnes of steel from the United States this year, Johannpeter said.
In Brazil, Gerdau's second-biggest market after North America, netrevenue increased 47.5 percent, driven by robust demand from theconstruction and automobile industries. The company cut back onexports from its Brazilian operations to funnel more steel to thebooming domestic market.
Gerdau also significantly increased production last quarter thanksto a slew of recent acquisitions and the inauguration of a newblast furnace at its Gerdau Acominas unit in Brazil.
Output of raw steel products like steel plates rose 26.2 percent to5.64 million tonnes, led by a 39.1 percent increase in NorthAmerica, where Gerdau completed its takeover of Chaparral Steel (nasdaq: CHAP - news - people ). In Brazil, output climbed 15.8 percent.

PLANS TO INCREASE CAPACITY
With Brazil's economy growing at its fastest pace in decades,Johannpeter said Gerdau is looking to increase production furtherto keep up with demand.
Gerdau's board recently approved plans to invest $277 million tofurther expand capacity at its Acominas unit to 5 million tonnesannually in 2010 from 4.5 million tonnes currently, he said.
The company is also conducting feasibility studies for an all-newmill in the northeastern state of Pernambuco. Initially, the plantwould require $400 million in investments and would start offproducing 500,000 tonnes a year.
"The Brazilian economy is in a new phase of growth and this projectfits into that outlook," Johannpeter said.
Earnings before interest, taxes, depreciation and amortization, ameasure of cash flow known as EBITDA, jumped 72 percent to 2.747billion reais in the second quarter, helped by a smaller increasein operational costs.
Besides Brazil, Gerdau also has affiliates in the United States,Canada, Argentina, Chile, Colombia, the Dominican Republic,Guatemala, Mexico, Peru, Spain, Uruguay and Venezuela. ($1=1.575reais) (Reporting by Todd Benson, editing by Dave Zimmerman andGerald E. McCormick) Copyright 2008 Reuters, Click for Restriction
Investors Wait for Fed Decision
Bulls Charge Into April