Gerdau SA (NYSE:GGB)’s unnerving Q2 earnings

Posted by Lacee Page August 5, 2013 0 Comment 866 views

Gerdau SA (NYSE:GGB), the Brazilian steel producer reported extremely disappointing 2013 Q2 earnings results. Year-on-year, there was a 26.9% net income drop from $194.7M. Net revenue also dipped 0.9% y-o-y to $4,797.3M.

There was a 1.2% decline in the net revenue and the company’s Brazilian business accounted for around 37.2%.

Less for the quarter

There was a 2.9% decrease in the revenue that was generated from North America. This contributed 31.3 percent to the net revenue. The Latin American revenue accounted for 13.5% of the net revenue and there was a y-o-y rise of 4.6%. There was a 2.5% y-o-y rise from Specialty Steel and this accounted for around 21.5% of the net revenue. There was a 7.9% y-o-y drop in crude steel production to 4,646M tons in the quarter.

All round losses

This was attributed to dismal performances in all the operating regions. There was a 3% decline in production in Brazil while North American operations experienced a drop of 11%. Latin American production saw a drop of 17.2%. Specialty Steel production dropped by 6.4% and y-o-y shipments were down by 3% and stopped at 4,634M tons.

In the Q2, GGB’s gross margin dropped 70 basis points and settled at 13.6 percent. This was attributed to a slight drop in the revenue and an almost plateaued cost of sales. There was 10 basis point y-o-y increase in administrative and general expenses, to 4.8%. At $580.6M, EBITDA was 3.9% less with a 12.1% margin in the latest quarter. The operating margin was 7.3 percent in comparison to 7.9 percent that it stood at a year ago.

More numbers

The company generated net cash of around $440.2M from its operating activities which was a 13.3% drop from the same quarter a year ago. Capital spending dropped by 27.1% to $301.0M. Gerdau SA (NYSE:GGB) is one of Brazil’s prominent steel producers. It plans on spending approximately R$8.5B from 2013-2017.

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Lacee Page is our White House and political campaign reporter. Lacee also covers justice and national law enforcement issues and congressional reporter focusing on the outputs of the legislative process: government spending, agency regulation and congressional oversight. Lacee received a national Edward R. Murrow for spot news award and the regional Associated Press award for best newscast. Lacee attended Riverview High School near Coshocton, and graduated from Ashland College in Ashland, Ohio with a Bachelor of Arts degree in Communications.

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