Brazilian steel producer, Gerdau S.A. (GGB) reported its financial results for the third quarter of 2012, on November 1, 2012. The company’s net income decreased 43% year over year to R$408.4 million (US$204.2 million). The bottom-line results were largely impacted by higher cost of sales, offset partially by better financial results.
Revenue
Net revenue in the third quarter jumped 9.5% year over year to R$9,819.1 million (US$4,909.6 million).
As for the net revenue, Brazilian business accounted for about 36.3% and registered a 1% decline over the year-ago quarter. North American revenue increased 28% and contributed 34.8% to net revenue while Latin American revenue represented 13.5% of net revenue and spiked 27% over the year-ago period. Revenue from Specialty Steel declined 6% year over year and accounted for about 17.8% of net revenue.
Crude steel production in the quarter declined 5% year over year to 4,747 million tons, especially due to weaker performance in the Special Steel and disruption in Brazilian production. Shipments were also down 2% year over year to 4,774 million tons; with dismal performance in all business operations, except for North American business that increased 8% in the quarter.
Margins
Gross margin in the quarter went down by 270 basis points to settle at 12.2%, as revenue growth was more than offset by a 13.0% increase in cost of sales. Selling expenses, as a percentage of revenue, were at 1.53%; down compared with 1.68% in the year-ago quarter. General and administrative expenses dipped 3 basis points year over year to 4.89%.
EBITDA at R$1,033 million (US$516.5 million) was down 15% year over year with a margin of 11% in the quarter. Operating margin was 5.8% versus 8.7% in the year-ago quarter.
Balance Sheet
Exiting the third quarter, Gerdau had cash and cash equivalents of approximately R$1,665.6 million (US$832.8 million) versus R$1,664.1 million (US$800.0 million) in the previous quarter. Long-term debt increased 2.4% to R$11,571.3 million (US$5,785.7 million).
Cash Flow
Net cash flow from operating activities in the third quarter 2012 was R$1,310.0 million (US$655.0 million) as against a cash inflow of R$337.7 million (US$207.2 million) in the year-ago quarter. Capital spending increased 46.7% to R$903.9 million (US$452.0 million).
Gerdau S.A., one of the foremost steel producers in Brazil, 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
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