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