FORM 6-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
Dated May 7, 2015
Commission File Number 1-14878
GERDAU S.A.
(Exact Name as Specified in its Charter)
N/A
(Translation of Registrants Name)
Av. Farrapos 1811
Porto Alegre, Rio Grande do Sul - Brazil CEP 90220-005
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 7, 2015
|
GERDAU S.A. |
|
|
|
|
|
By: |
/s/ André Pires de Oliveira Dias |
|
Name: André Pires de Oliveira Dias |
|
Title: Executive Vice President |
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Investor Relations Officer |
2
EXHIBIT INDEX
Exhibit |
|
Description of Exhibit |
|
|
|
99.1 |
|
Quarterly Results1Q15 Gerdau S.A. and subsidiaries May 6, 2015 |
3
Exhibit 99.1
Mission
To create value for our customers, shareholders, employees and communities by operating as a sustainable steel business.
Vision
To be a global organization and a benchmark in any business we conduct.
Values
Be the CUSTOMERS choice
SAFETY above all
Respected, engaged and fulfilled EMPLOYEES
Pursuing EXCELLENCE with SIMPLICITY
Focus on RESULTS
INTEGRITY with all stakeholders
Economic, social and environmental SUSTAINABILITY
Gerdau is the leading manufacturer of long steel in the Americas and a major global supplier of special steel. In Brazil, Gerdau also produces flat steel and iron ore, activities that are expanding its product mix and the competitiveness of its operations. Gerdau has industrial operations in 14 countries in the Americas, Europe and Asia with a combined installed capacity of more than 25 million tonnes of steel a year. It is also Latin Americas biggest recycler and, worldwide, transforms millions of tonnes of scrap metal into steel every year, reinforcing its commitment to sustainable development in the regions where it operates. With more than 120,000 shareholders, Gerdaus shares are listed on the New York, São Paulo and Madrid stock exchanges.
Highlights in the first quarter of 2015
Key Information |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Steel |
|
|
|
|
|
|
|
|
|
|
|
Production of Crude Steel (1,000 tonnes) |
|
4,341 |
|
4,557 |
|
-4.7 |
% |
4,323 |
|
0.4 |
% |
Shipments (1,000 tonnes) |
|
4,143 |
|
4,387 |
|
-5.6 |
% |
4,399 |
|
-5.8 |
% |
Net Sales (R$ million) |
|
10,447 |
|
10,554 |
|
-1.0 |
% |
10,843 |
|
-3.7 |
% |
SG&A (R$ million) |
|
(660 |
) |
(707 |
) |
-6.6 |
% |
(681 |
) |
-3.1 |
% |
EBITDA(1) (R$ million) |
|
1,089 |
|
1,196 |
|
-8.9 |
% |
1,238 |
|
-12.0 |
% |
Net Income (R$ million) |
|
267 |
|
440 |
|
-39.3 |
% |
393 |
|
-32.1 |
% |
Gross margin |
|
10.6 |
% |
12.5 |
% |
|
|
11.8 |
% |
|
|
EBITDA Margin |
|
10.4 |
% |
11.3 |
% |
|
|
11.4 |
% |
|
|
Shareholders equity (R$ million) |
|
36,440 |
|
31,643 |
|
|
|
33,255 |
|
|
|
Total Assets (R$ million) |
|
70,843 |
|
57,554 |
|
|
|
63,042 |
|
|
|
Gross debt / Total capitalization (2) |
|
39.0 |
% |
34.0 |
% |
|
|
36.0 |
% |
|
|
Net debt(3) / EBITDA(4) |
|
3.2 |
x |
2.5 |
x |
|
|
2.4 |
x |
|
|
(1) - EBITDA adjusted in the 4Q14 = EBITDA CVM Instruction 527 + Impairment of assets - Gains in joint venture operations.
(2) - Total capitalization = shareholders equity + gross debt (principal)
(3) - Net debt = gross debt (principal) - cash, cash equivalents and short-term investments
(4) - EBITDA in the last 12 months, note that, 4Q14 includes gains in joint venture operations.
1
World Steel Market
· On April 20, 2015, World Steel Association released its latest Short Range Outlook containing forecasts for global apparent steel consumption in 2015 and 2016, in which it estimated growth of 0.5% and 1.4%, respectively. The association expects moderate demand growth, which is explained by deceleration in China and the influence of structural adjustments in most economies due to limited investment growth post-2008. Apparent steel consumption in China is projected to contract by 0.5% in both 2015 and 2016, given the rebalancing of the economy for a new stage of development. Demand growth in emerging and developing economies (excluding China) should remain weak in 2015, though positive growth is expected in certain economies, such as India, Indonesia, Vietnam and Egypt, where local steel markets are still developing. In these economies, apparent steel consumption should grow by 2.4% in 2015 and 4.0% in 2016. Growth in developed economies should be moderate in 2015, due to the strong base and the less favorable environment for steel in certain countries. The recovery in the European Union remains moderate, given the low investment activity and high unemployment. Apparent steel consumption in developed economies is expected to grow by 0.2% in 2015 and 1.8% in 2016.
Gerdaus performance in the first quarter of 2015
The Consolidated Financial Statements of Gerdau S.A. are presented in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the accounting practices adopted in Brazil, which are fully aligned with the international accounting standards issued by the Accounting Pronouncement Committee (CPC).
The information in this report does not include data for jointly controlled entities and associate companies, except where stated otherwise.
Consolidated Information
Consolidated (1,000 tonnes) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Production of crude steel |
|
4,341 |
|
4,557 |
|
-4.7 |
% |
4,323 |
|
0.4 |
% |
Shipments of steel |
|
4,143 |
|
4,387 |
|
-5.6 |
% |
4,399 |
|
-5.8 |
% |
· Consolidated crude steel production decreased in 1Q15 in relation to 1Q14, mainly in the Brazil and North America Business Operations, accompanying the lower shipments in the period.
· Consolidated shipments decreased in 1Q15 compared to both 1Q14 and 4Q14, reflecting the lower steel shipments in nearly all business operations.
Consolidated Results
Net sales, cost and gross margin
Consolidated (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Net Sales |
|
10,447 |
|
10,554 |
|
-1.0 |
% |
10,843 |
|
-3.7 |
% |
Cost of Goods Sold |
|
(9,335 |
) |
(9,238 |
) |
1.1 |
% |
(9,559 |
) |
-2.3 |
% |
Gross profit |
|
1,112 |
|
1,316 |
|
-15.5 |
% |
1,284 |
|
-13.4 |
% |
Gross margin (%) |
|
10.6 |
% |
12.5 |
% |
|
|
11.8 |
% |
|
|
· Consolidated net sales fell in 1Q15 compared to 1Q14 and 4Q14, since the lower shipments were partially offset by the increase in net sales per tonne sold, the latter reflected the effects from exchange variation caused by the depreciation in the average price of the Brazilian real against the currencies of the countries where Gerdau operates.
· On a consolidated basis, gross profit and gross margin decreased in 1Q15 compared to 1Q14, due to the weaker performance of the Brazil and Iron Ore BOs, which was partially offset by the better performance of the North
2
America BO, reflecting the Companys geographic diversification. Compared to 4Q14, consolidated gross profit and gross margin decreased due to the weaker performance of the Brazil BO.
Operating expenses
Consolidated (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
SG&A |
|
(660 |
) |
(707 |
) |
-6.6 |
% |
(681 |
) |
-3.1 |
% |
Selling expenses |
|
(180 |
) |
(173 |
) |
4.0 |
% |
(166 |
) |
8.4 |
% |
General and administrative expenses |
|
(480 |
) |
(534 |
) |
-10.1 |
% |
(515 |
) |
-6.8 |
% |
Other operating income (expenses) |
|
27 |
|
19 |
|
42.1 |
% |
33 |
|
-18.2 |
% |
Impairment of assets |
|
|
|
|
|
|
|
(339 |
) |
|
|
Gains in joint ventures operations |
|
|
|
|
|
|
|
637 |
|
|
|
Equity in earnings of unconsolidated companies |
|
7 |
|
27 |
|
-74.1 |
% |
13 |
|
-46.2 |
% |
· The increase in selling expenses in 1Q15 compared to 1Q14 was mainly due to the effect from exchange variation in the period. Excluding this effect, selling expenses would have decreased.
· General and administrative expenses decreased in 1Q15 compared to 1Q14 and 4Q14, demonstrating the Companys efforts over the course of the periods to rationalize these expenses, which led them to decline as a ratio of net sales.
· The variation in Gains in joint venture operations in 4Q14 is explained by the divestment of the 50% interest in Gallatin Steel Company, on October 8, 2014. With this divestment, the Company ceased to recognize equity in earnings from Gallatin Steel Company as from 4Q14.
EBITDA
Breakdown of Consolidated EBITDA (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Net income |
|
267 |
|
440 |
|
-39.3 |
% |
393 |
|
-32.1 |
% |
Net financial result |
|
898 |
|
101 |
|
789.1 |
% |
673 |
|
33.4 |
% |
Provision for income and social contribution taxes |
|
(680 |
) |
113 |
|
|
|
(120 |
) |
466.7 |
% |
Depreciation and amortization |
|
604 |
|
542 |
|
11.4 |
% |
590 |
|
2.4 |
% |
EBITDA (1) |
|
1,089 |
|
1,196 |
|
-8.9 |
% |
1,536 |
|
-29.1 |
% |
EBITDA Margin |
|
10.4 |
% |
11.3 |
% |
|
|
14.2 |
% |
|
|
Impairment of Assets |
|
|
|
|
|
|
|
339 |
|
|
|
Gains in joint ventures operations |
|
|
|
|
|
|
|
(637 |
) |
|
|
Adjusted EBITDA(1) |
|
1,089 |
|
1,196 |
|
-8.9 |
% |
1,238 |
|
-12.0 |
% |
Adjusted EBITDA Margin |
|
10.4 |
% |
11.3 |
% |
|
|
11.4 |
% |
|
|
(1) - Includes the results from jointly controlled entities and associate companies based on the equity income method.
Note: EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is not a method used in accounting practices, does not represent cash flow for the periods in question and should not be considered an alternative to cash flow as an indicator of liquidity.
The Companys EBITDA was calculated pursuant to Instruction 527 of the CVM, as well as EBITDA adjusted to provide more information on the cash flow generation in the period.
Conciliation of Consolidated EBITDA (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
4th Quarter 2014 |
|
EBITDA (1) |
|
1,089 |
|
1,196 |
|
1,536 |
|
Depreciation and amortization |
|
(604 |
) |
(542 |
) |
(590 |
) |
OPERATING INCOME BEFORE FINANCIAL RESULT AND TAXES(2) |
|
485 |
|
654 |
|
946 |
|
(1) - Non-accounting measure calculated pursuant to Instruction 527 of the CVM.
(2) - Accounting measurement disclosed in consolidated Statements of Income. |
|
3
Consolidated EBITDA (R$ million) and EBITDA Margin (%)
· EBITDA and EBITDA margin decreased in 1Q15 compared to 1Q14 and 4Q14, accompanying the decreases in gross profit and gross margin and reflecting mainly the weaker performance of the Brazil BO. Specifically compared to 1Q14, the better performance of the North America BO partially offset the weaker performance of the Brazil and Iron Ore BOs.
Net financial result and net income
Consolidated (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Income before financial income (expenses) and taxes (1) |
|
485 |
|
654 |
|
-25.8 |
% |
946 |
|
-48.7 |
% |
Financial Result |
|
(898 |
) |
(101 |
) |
789.1 |
% |
(673 |
) |
33.4 |
% |
Financial income |
|
109 |
|
62 |
|
75.8 |
% |
60 |
|
81.7 |
% |
Financial expenses |
|
(372 |
) |
(289 |
) |
28.7 |
% |
(392 |
) |
-5.1 |
% |
Exchange variation, net |
|
(651 |
) |
128 |
|
|
|
(372 |
) |
75.0 |
% |
Exchange variation on net investment hedge |
|
(575 |
) |
83 |
|
|
|
(214 |
) |
168.7 |
% |
Exchange variation - other lines |
|
(76 |
) |
45 |
|
|
|
(158 |
) |
-51.9 |
% |
Gains (losses) on financial instruments, net |
|
16 |
|
(2 |
) |
|
|
31 |
|
-48.4 |
% |
Income before taxes (1) |
|
(413 |
) |
553 |
|
|
|
273 |
|
|
|
Income and social contribution taxes |
|
680 |
|
(113 |
) |
|
|
120 |
|
466.7 |
% |
On net investment hedge |
|
575 |
|
(83 |
) |
|
|
214 |
|
168.7 |
% |
Other lines |
|
105 |
|
(30 |
) |
|
|
(94 |
) |
|
|
Consolidated Net Income (1) |
|
267 |
|
440 |
|
-39.3 |
% |
393 |
|
-32.1 |
% |
(1) - Includes the results from jointly controlled entities and associate companies based on the equity income method.
· In 1Q15 compared to 1Q14, the higher negative financial result mainly reflects the higher negative exchange variation on liabilities contracted in U.S. dollar (depreciation in the end-of-period price of the Brazilian real against the U.S. dollar of 20.8% in 1Q15 versus appreciation of 3.4% in 1Q14) and higher financial expenses resulting from the increase in gross debt in the comparison periods.
· Compared to 4Q14, the higher negative financial result is mainly explained by the higher negative exchange variation (depreciation in the end-of-period price of the Brazilian real against the U.S. dollar of 20.8% in 1Q15 and 8.4% in 4Q14).
· Note that, in accordance with the IFRS, the Company designated the bulk of its debt in foreign currency contracted by companies in Brazil as a hedge for a portion of the investments in subsidiaries located abroad. As a result, only the effect from exchange variation on the portion of debt not linked to investment hedge is recognized in the financial result, with this effect neutralized by the line Income and Social Contribution taxes on net investment hedge.
4
· Consolidated net income decreased in 1Q15 compared to 1Q14 and 4Q14, due to the lower operating income and higher negative financial result.
Dividends
· Gerdau S.A., based on the results in 1Q15, approved the prepayment of the minimum mandatory dividend, in the form of interest on equity, of R$ 101.2 million (R$ 0.06 per share).
Payment date: June 2, 2015
Record date: close of trading on May 21, 2015
Ex-dividend date: May 22, 2015
Investments
· In 1Q15, investments in CAPEX amounted to R$ 612.3 million. Of the amount invested in the quarter, 43.8% was allocated to the Brazil BO, 23.5% to the Special Steel BO, 12.0% to the North America BO, 18.5% to the Latin America BO and 2.2% to the Iron Ore BO.
· Based on the investments scheduled for 2015, Gerdau plans to invest R$ 1.9 billion, considering the investments in productivity improvements and maintenance.
Working Capital and Cash Conversion Cycle
· In March 2015, the cash conversion cycle (working capital divided by daily net sales in the quarter) increased in relation to December 2014, reflecting the 16.4% increase in working capital compared to the 3.7% decrease in net sales.
· Note that the increase in working capital between December 2014 and March 2015 includes the effects from exchange variation (depreciation in the end-of-period price of the Brazilian real against the U.S. dollar of 20.8% in 1Q15) on the working capital of companies abroad, which corresponded to approximately 10 days of the cash conversion cycle.
5
Financial Liabilities
Debt composition (R$ million) |
|
03.31.2015 |
|
12.31.2014 |
|
03.31.2014 |
|
Short Term |
|
2,366 |
|
2,038 |
|
1,756 |
|
Local Currency (Brazil) |
|
712 |
|
79 |
|
539 |
|
Foreign Currency (Brazil) |
|
129 |
|
304 |
|
290 |
|
Companies abroad |
|
1,525 |
|
1,655 |
|
927 |
|
Long Term |
|
20,916 |
|
17,484 |
|
15,004 |
|
Local Currency (Brazil) |
|
3,351 |
|
3,403 |
|
3,396 |
|
Foreign Currency (Brazil) |
|
11,680 |
|
11,387 |
|
8,381 |
|
Companies abroad |
|
5,885 |
|
2,694 |
|
3,227 |
|
Gross Debt (principal + interest) |
|
23,282 |
|
19,522 |
|
16,760 |
|
Interest on the debt |
|
(400 |
) |
(344 |
) |
(374 |
) |
Gross Debt (principal) |
|
22,882 |
|
19,178 |
|
16,386 |
|
Cash, cash equivalents and short-term investments |
|
5,847 |
|
5,849 |
|
3,520 |
|
Net Debt(1) |
|
17,035 |
|
13,329 |
|
12,866 |
|
(1) - Net debt = gross debt (principal) - cash, cash equivalents and short-term investments
· On March 31, 2015, the composition of gross debt (principal) was 8.6% short term and 91.4% long term. The foreign currency exposure of gross debt (principal + interest) stood at 82.5%. The R$ 3.8 billion increase in gross debt between December 2014 and March 2015 is mainly explained by the effects from exchange variation in the period.
· On March 31, 2015, 41.3% of this cash was held by Gerdau companies abroad and denominated mainly in U.S. dollar.
· The increase in net debt on March 31, 2015 compared to December 31, 2014 was due to the growth in gross debt.
· On March 31, 2015, the nominal weighted average cost of gross debt (principal) was 6.6%, or 10.1% for the portion denominated in Brazilian real, 6.0% plus exchange variation for the portion denominated in U.S. dollar contracted by companies in Brazil, and 5.9% for the portion contracted by subsidiaries abroad. On March 31, 2015, the average gross debt term was 6.9 years.
· The Companys main debt indicators are shown below:
Indicators |
|
03.31.2015 |
|
12.31.2014 |
|
03.31.2014 |
|
Gross debt / Total capitalization (1) |
|
39 |
% |
36 |
% |
34 |
% |
Net debt(2) / EBITDA (3) |
|
3,2x |
|
2,4x |
|
2,5x |
|
EBITDA (3) / Net financial expenses (3) |
|
4,9x |
|
5,1x |
|
6,7x |
|
(1) - Total capitalization = shareholders equity + gross debt (principal)
(2) - Net debt = gross debt (principal) - cash, cash equivalents and short-term investments
(3) - EBITDA in the last 12 months.
Note: EBITDA in the last 12 months, note that, 4Q14 includes gains in joint venture operations.
Indebtedness
(R$ billion)
6
· On March 31, 2015, the gross debt (principal) payment schedule was as follows:
Amortization schedule of gross debt (principal)
|
|
|
|
Short Term |
|
R$ million |
|
2nd quarter of 2015 |
|
393 |
|
3rd quarter of 2015 |
|
718 |
|
4th quarter of 2015 |
|
133 |
|
1st quarter of 2016 |
|
722 |
|
Total |
|
1,966 |
|
Long Term |
|
R$ million |
|
2016 |
|
734 |
|
2017 |
|
3,987 |
|
2018 |
|
817 |
|
2019 and after |
|
15,378 |
|
Total |
|
20,916 |
|
Business Operations (BO)
The information in this report is divided into five Business Operations (BO), in accordance with Gerdaus corporate governance, as follows:
· Brazil BO includes the steel operations in Brazil (except special steel) and the metallurgical and coking coal operation in Colombia;
· North America BO includes all North American operations, except Mexico and special steel;
· Latin America BO includes all Latin American operations, except the operations in Brazil and the metallurgical and coking coal operation in Colombia;
· Special Steel BO includes the special steel operations in Brazil, Spain, United States and India;
· Iron Ore BO includes the iron ore operations in Brazil.
Net sales
7
EBITDA and EBITDA Margin
Brazil BO
Production and shipments
Brazil BO (1,000 tonnes) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Production of crude steel |
|
1,528 |
|
1,609 |
|
-5.0 |
% |
1,619 |
|
-5.6 |
% |
Shipments of steel |
|
1,557 |
|
1,597 |
|
-2.5 |
% |
1,738 |
|
-10.4 |
% |
Domestic Market |
|
1,252 |
|
1,442 |
|
-13.2 |
% |
1,357 |
|
-7.7 |
% |
Exports |
|
305 |
|
155 |
|
96.8 |
% |
381 |
|
-19.9 |
% |
· Crude steel production decreased in 1Q15 compared to both 1Q14 and 4Q14, reflecting the adjustment to the weaker demand in the Brazilian steel market.
· Steel shipments decreased in 1Q15 compared to 1Q14, due to weaker demand in the domestic market caused by slower growth in the construction and manufacturing industries, which was partially offset by higher exports in 1Q15. Note that 1Q14 benefitted from the infrastructure projects for the World Cup. Compared to 4Q14, shipments decreased in 1Q15, reflecting the political and economic uncertainties that resulted in weaker domestic demand.
Operating result
Brazil BO (R$ million) |
|
1th Quarter 2015 |
|
1th Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Net Sales |
|
3,266 |
|
3,655 |
|
-10.6 |
% |
3,634 |
|
-10.1 |
% |
Domestic Market |
|
2,776 |
|
3,360 |
|
-17.4 |
% |
3,039 |
|
-8.7 |
% |
Exports(1) |
|
490 |
|
295 |
|
66.1 |
% |
595 |
|
-17.6 |
% |
Cost of Goods Sold |
|
(2,763 |
) |
(2,906 |
) |
-4.9 |
% |
(2,915 |
) |
-5.2 |
% |
Gross profit |
|
503 |
|
749 |
|
-32.8 |
% |
719 |
|
-30.0 |
% |
Gross margin (%) |
|
15.4 |
% |
20.5 |
% |
|
|
19.8 |
% |
|
|
EBITDA |
|
515 |
|
731 |
|
-29.5 |
% |
738 |
|
-30.2 |
% |
EBITDA margin (%) |
|
15.8 |
% |
20.0 |
% |
|
|
20.3 |
% |
|
|
(1) - Includes coking coal and coke net sales.
· The lower net sales in 1Q15 compared to 1Q14 was mainly due to the lower shipments in the domestic market and resulting less favorable market mix. Compared to 4Q14, the decrease in net sales was due to the lower shipments in the period in both the domestic and export markets.
8
· Cost of goods sold decreased in 1Q15 compared to 1Q14, accompanying the lower shipments in the period and the optimization of capacity utilization in late 2014. The decrease in net sales at a faster pace than the decrease in cost of goods sold led to gross margin compression in the period. Compared to 4Q14, the decrease in gross margin is mainly explained by the lower dilution of fixed costs.
· EBITDA and EBITDA margin in 1Q15 accompanied the declines in gross profit and gross margin in comparison with both 1Q14 and 4Q14.
EBITDA (R$ million) and EBITDA Margin (%)
North America BO
Production and shipments
North America BO (1,000 tonnes) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Production of crude steel |
|
1,546 |
|
1,649 |
|
-6.2 |
% |
1,509 |
|
2.5 |
% |
Shipments of steel |
|
1,393 |
|
1,452 |
|
-4.1 |
% |
1,402 |
|
-0.6 |
% |
· Production decreased in 1Q15 compared to 1Q14, mainly due to the lower shipments and efforts to optimize inventories.
· Shipments decreased in 1Q15 compared to 1Q14, due to higher pressure from imported products in the region.
Operating result
North America BO (R$ million) |
|
1th Quarter 2015 |
|
1th Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4rd Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Net Sales |
|
3,648 |
|
3,258 |
|
12.0 |
% |
3,516 |
|
3.8 |
% |
Cost of Goods Sold |
|
(3,423 |
) |
(3,159 |
) |
8.4 |
% |
(3,284 |
) |
4.2 |
% |
Gross profit |
|
225 |
|
99 |
|
127.3 |
% |
232 |
|
-3.0 |
% |
Gross margin (%) |
|
6.2 |
% |
3.0 |
% |
|
|
6.6 |
% |
|
|
EBITDA(1) |
|
226 |
|
70 |
|
222.9 |
% |
199 |
|
13.6 |
% |
EBITDA margin (%)(1) |
|
6.2 |
% |
2.1 |
% |
|
|
5.7 |
% |
|
|
(1) Adjusted EBITDA and adjusted EBITDA margin in the 4Q14 (does not include gains in joitn venture operations).
· Net sales increased in 1Q15 compared to 1Q14, mainly due to the effect from exchange variation (21.3% depreciation in the average price of the Brazilian real against the U.S. dollar), despite the lower shipments. Compared to 4Q14, net sales increased, due to the effect from exchange variation in the period (12.9% depreciation in the average price of the Brazilian real against the U.S. dollar), despite the decrease in net sales per tonne sold in US dollars.
· Cost of goods sold increased in 1Q15 compared to 1Q14 at a slower pace than the increase in net sales, due to lower scrap costs, supporting gross margin expansion.
9
· The higher EBITDA recorded in 1Q15 compared to 1Q14 is explained by the increase in gross profit, which supported EBITDA margin expansion. Note that, as from 4Q14, the result of this operation does not include the equity in earnings from Gallatin Steel Company, due to the assets divestment on October 8, 2014.
EBITDA (R$ million) and EBITDA Margin (%)
Latin America BO
Production and shipments
Latin America BO (1,000 tonnes) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Production of crude steel |
|
408 |
|
441 |
|
-7.5 |
% |
384 |
|
6.3 |
% |
Shipments of steel |
|
634 |
|
681 |
|
-6.9 |
% |
664 |
|
-4.5 |
% |
· Production and shipments decreased in 1Q15 compared to 1Q14, due to higher imports and slower economic growth in the region.
Operating result
Latin America BO (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Net Sales |
|
1,509 |
|
1,399 |
|
7.9 |
% |
1,541 |
|
-2.1 |
% |
Cost of Goods Sold |
|
(1,341 |
) |
(1,214 |
) |
10.5 |
% |
(1,377 |
) |
-2.6 |
% |
Gross profit |
|
168 |
|
185 |
|
-9.2 |
% |
164 |
|
2.4 |
% |
Gross margin (%) |
|
11.1 |
% |
13.2 |
% |
|
|
10.6 |
% |
|
|
EBITDA(1) |
|
140 |
|
143 |
|
-2.1 |
% |
109 |
|
28.4 |
% |
EBITDA margin (%)(1) |
|
9.3 |
% |
10.2 |
% |
|
|
7.1 |
% |
|
|
(1) Adjusted EBITDA and adjusted EBITDA margin in 4T14 (does not include the impairment of assets).
· Net sales increased in 1Q15 compared to 1Q14, which is explained by the effect from exchange variation resulting from the depreciation in the average price of the Brazilian real against the currencies of the countries where Gerdau operates, despite the reduction in shipments. Compared to 4Q14, the decrease in net sales was mainly due to the lower shipments.
· Cost of goods sold increased in 1Q15 compared to 1Q14, mainly due to the effects from exchange variation and to the lower dilution of fixed costs given the lower shipments.
10
· EBITDA remained relatively flat in 1Q15 compared to 1Q14. Compared to 4Q14, EBITDA and EBITDA margin increased due to the reduction in selling, general and administrative expenses.
EBITDA (R$ million) and EBITDA Margin (%)
Special Steel BO
Production and shipments
Special Steel BO (1,000 tonnes) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Production of crude steel |
|
859 |
|
858 |
|
0.1 |
% |
811 |
|
5.9 |
% |
Shipments of steel |
|
696 |
|
758 |
|
-8.2 |
% |
677 |
|
2.8 |
% |
· Crude steel production remained stable in 1Q15 compared to 1Q14. Compared to 4Q14, the increase in production was mainly due to higher production at the units in Spain, where demand from the automotive industry has been improving.
· Shipments in 1Q15 compared to 1Q14 posted a decrease due to sharp drop in demand in Brazil and the learning curve from the new rolling mill in Monroe, United States. Compared to 4Q14, the higher shipments mainly reflect the stronger demand from Europes automotive industry.
Operating result
Special Steel BO (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Net Sales |
|
2,246 |
|
2,263 |
|
-0.8 |
% |
2,104 |
|
6.7 |
% |
Cost of Goods Sold |
|
(2,036 |
) |
(2,101 |
) |
-3.1 |
% |
(1,911 |
) |
6.5 |
% |
Gross profit |
|
210 |
|
161 |
|
30.4 |
% |
193 |
|
8.8 |
% |
Gross margin (%) |
|
9.3 |
% |
7.1 |
% |
|
|
9.2 |
% |
|
|
EBITDA |
|
260 |
|
203 |
|
28.1 |
% |
254 |
|
2.4 |
% |
EBITDA margin (%) |
|
11.6 |
% |
9.0 |
% |
|
|
12.1 |
% |
|
|
· Net sales remained practically stable in 1Q15 compared to 1Q14, despite the lower shipments, due to the effects from exchange variation on shipments at the units abroad and the increase in net sales per tonne sold at the
11
units in Brazil. The exchange variation and the increase in net sales per tonne sold at the units in Brazil supported growth in net sales also in 1Q15 compared to 4Q14.
· Cost of goods sold decreased in 1Q15 compared to 1Q14 due to the reductions in shipments and in raw material costs, which were partially offset by the effects from exchange variation on special steel operations at the units abroad. The increase in gross margin in 1Q15 compared to 1Q14 was due to the increase in net sales per tonne sold at the units in Brazil.
· EBITDA growth in 1Q15 compared to 1Q14 was driven by the growth in gross profit, which supported EBITDA margin expansion.
EBITDA (R$ million) and EBITDA Margin (%)
Iron Ore BO
Production and shipments
Iron Ore BO (1,000 tonnes) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Production |
|
1,481 |
|
1,736 |
|
-14.7 |
% |
1,681 |
|
-11.9 |
% |
Shipments |
|
1,463 |
|
2,000 |
|
-26.9 |
% |
2,254 |
|
-35.1 |
% |
Gerdau units |
|
1,164 |
|
812 |
|
43.3 |
% |
1,281 |
|
-9.1 |
% |
Third parties |
|
299 |
|
1,188 |
|
-74.8 |
% |
973 |
|
-69.3 |
% |
· Production decreased in 1Q15 compared to 1Q14 and 4Q14, due to the operations adjustment to the low international iron ore prices.
· Shipments decreased in 1Q15 compared to 1Q14 and 4Q14, mainly due to the lower volumes shipped to third parties.
Operating result
Iron Ore BO (R$ million) |
|
1st Quarter 2015 |
|
1st Quarter 2014 |
|
Variation 1Q15/1Q14 |
|
4th Quarter 2014 |
|
Variation 1Q15/4Q14 |
|
Net Sales |
|
125 |
|
316 |
|
-60.4 |
% |
205 |
|
-39.0 |
% |
Gerdau units |
|
76 |
|
105 |
|
-27.6 |
% |
80 |
|
-5.0 |
% |
Third parties |
|
48 |
|
211 |
|
-77.3 |
% |
125 |
|
-61.6 |
% |
Cost of Goods Sold |
|
(119 |
) |
(197 |
) |
-39.6 |
% |
(228 |
) |
-47.8 |
% |
Gross profit |
|
6 |
|
119 |
|
-95.0 |
% |
(23 |
) |
|
|
Gross margin (%) |
|
4.8 |
% |
37.7 |
% |
|
|
-11.2 |
% |
|
|
EBITDA |
|
6 |
|
121 |
|
-95.0 |
% |
(24 |
) |
|
|
EBITDA margin (%) |
|
4.8 |
% |
38.3 |
% |
|
|
-11.7 |
% |
|
|
12
· Net sales decreased in 1Q15 compared to 1Q14, which is explained by lower international prices and lower iron ore shipments to third parties. Compared to 4Q14, the decrease in net sales was mainly due to lower shipments to third parties.
· Cost of goods sold decreased in 1Q15 compared to 1Q14 and 4Q14, due to lower shipments to third parties. Gross profit and gross margin decreased in 1Q15 compared to 1Q14, due to lower international iron ore prices. Compared to 4Q14, the gross profit and gross margin expansions reflects the lower share of shipments to third parties.
· EBITDA and EBITDA margin decreased in 1Q15 compared to 1Q14 and increased compared to 4Q14, accompanying the performance in gross profit and gross margin.
EBITDA (R$ million) and EBITDA Margin (%)
Corporate Governance
Gerdaus Annual and Extraordinary Shareholders Meeting
· Gerdau S.A. held, cumulatively, the Annual and Extraordinary Shareholders Meetings on April 29, 2015, which elected six Board members, two of them independent members, and resolved, through an amendment to the Bylaws of the Company, to set up an Advisory Board. Five members were elected to the Audit Board. The Meetings also resolved on the Companys continuation in Level 1 corporate governance of BM&FBOVESPA.
Repurchase of shares
· Gerdau S.A. implemented a share buyback program from January 19, 2015 to April 17, 2015, inclusive, in which it purchased an aggregate 19.9 million preferred shares (GGBR4), for total investment of R$ 189.2 million.
Annual Report
· The Gerdau Annual Report for fiscal year 2014 is already available at www.gerdau.com/ri. With the theme Power of Transformation, the report presents Gerdaus strength, which is manifested in its capacity to transform challenges into opportunities by recycling millions of tonnes of scrap to produce quality steel. This strength has been part of Gerdau since its creation and has helped it to become the leading producer of long steel in the Americas and one of the worlds largest suppliers of special steel. It is this strength that Gerdau draws on every day to consolidate its relationship of respect, transparency and mutual gains with its stakeholders. It also helps transform peoples dreams into reality, with its products used to build homes and large infrastructure works, as well as cars, wind turbine towers and many other products. It also fosters the development of communities by supporting over one thousand social projects around the world.
13
THE MANAGEMENT
This document contains forward-looking statements. These statements are based on estimates, information or methods that may be incorrect or inaccurate and that may not occur. These estimates are also subject to risk, uncertainties and assumptions that include, among other factors: general economic, political and commercial conditions in Brazil and in the markets where we operate and existing and future government regulations. Potential investors are cautioned that these forward-looking statements do not constitute guarantees of future performance, given that they involve risks and uncertainties. Gerdau does not undertake and expressly waives any obligation to update any of these forward-looking statements, which are valid only on the date on which they were made.
14
GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
March 31, 2015 |
|
December 31, 2014 |
|
CURRENT ASSETS |
|
|
|
|
|
Cash and cash equivalents |
|
3,596,164 |
|
3,049,971 |
|
Short-term investments |
|
|
|
|
|
Held for Trading |
|
2,251,062 |
|
2,798,834 |
|
Trade accounts receivable - net |
|
5,271,932 |
|
4,438,676 |
|
Inventories |
|
10,190,200 |
|
8,866,888 |
|
Tax credits |
|
747,480 |
|
686,958 |
|
Income and social contribution taxes recoverable |
|
397,118 |
|
468,309 |
|
Unrealized gains on financial instruments |
|
64,358 |
|
41,751 |
|
Other current assets |
|
388,710 |
|
331,352 |
|
|
|
22,907,024 |
|
20,682,739 |
|
|
|
|
|
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
Tax credits |
|
80,775 |
|
78,412 |
|
Deferred income taxes |
|
3,551,951 |
|
2,567,189 |
|
Related parties |
|
121,420 |
|
80,920 |
|
Judicial deposits |
|
1,501,326 |
|
1,430,865 |
|
Other non-current assets |
|
393,325 |
|
375,732 |
|
Prepaid pension cost |
|
163,017 |
|
196,799 |
|
Investments in associates and jointly-controlled entities |
|
1,667,710 |
|
1,394,383 |
|
Goodwill |
|
14,969,925 |
|
12,556,404 |
|
Other Intangibles |
|
1,715,533 |
|
1,547,098 |
|
Property, plant and equipment, net |
|
23,771,383 |
|
22,131,789 |
|
|
|
47,936,365 |
|
42,359,591 |
|
|
|
|
|
|
|
TOTAL ASSETS |
|
70,843,389 |
|
63,042,330 |
|
15
GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
March 31, 2015 |
|
December 31, 2014 |
|
CURRENT LIABILITIES |
|
|
|
|
|
Trade accounts payable |
|
3,745,251 |
|
3,236,356 |
|
Short-term debt |
|
2,365,802 |
|
2,037,869 |
|
Taxes payable |
|
461,249 |
|
405,490 |
|
Income and social contribution taxes payable |
|
182,425 |
|
388,920 |
|
Payroll and related liabilities |
|
532,908 |
|
668,699 |
|
Dividends payable |
|
|
|
119,318 |
|
Employee benefits |
|
36,811 |
|
34,218 |
|
Environmental liabilities |
|
22,118 |
|
23,025 |
|
Other current liabilities |
|
713,278 |
|
858,901 |
|
|
|
8,059,842 |
|
7,772,796 |
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
Long-term debt |
|
20,587,831 |
|
17,148,580 |
|
Debentures |
|
328,595 |
|
335,036 |
|
Deferred income taxes |
|
1,243,095 |
|
944,546 |
|
Unrealized losses on financial instruments |
|
7,376 |
|
8,999 |
|
Provision for tax, civil and labor liabilities |
|
1,653,653 |
|
1,576,355 |
|
Environmental liabilities |
|
102,165 |
|
93,396 |
|
Employee benefits |
|
1,516,903 |
|
1,272,631 |
|
Other non-current liabilities |
|
904,352 |
|
635,457 |
|
|
|
26,343,970 |
|
22,015,000 |
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Capital |
|
19,249,181 |
|
19,249,181 |
|
Treasury stocks |
|
(363,507 |
) |
(233,142 |
) |
Capital reserves |
|
11,597 |
|
11,597 |
|
Retained earnings |
|
11,658,949 |
|
11,366,957 |
|
Operations with non-controlling interests |
|
(1,732,962 |
) |
(1,732,962 |
) |
Other reserves |
|
6,490,083 |
|
3,539,188 |
|
EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT |
|
35,313,341 |
|
32,200,819 |
|
|
|
|
|
|
|
NON-CONTROLLING INTERESTS |
|
1,126,236 |
|
1,053,715 |
|
|
|
|
|
|
|
EQUITY |
|
36,439,577 |
|
33,254,534 |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
70,843,389 |
|
63,042,330 |
|
16
GERDAU S.A.
CONSOLIDATED STATEMENTS OF INCOME
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
For the three-month period ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
|
|
|
|
|
|
NET SALES |
|
10,447,376 |
|
10,553,776 |
|
|
|
|
|
|
|
Cost of sales |
|
(9,335,523 |
) |
(9,238,024 |
) |
|
|
|
|
|
|
GROSS PROFIT |
|
1,111,853 |
|
1,315,752 |
|
|
|
|
|
|
|
Selling expenses |
|
(179,519 |
) |
(173,583 |
) |
General and administrative expenses |
|
(480,442 |
) |
(533,805 |
) |
Other operating income |
|
56,851 |
|
46,866 |
|
Other operating expenses |
|
(30,038 |
) |
(27,681 |
) |
Equity in earnings of unconsolidated companies |
|
6,535 |
|
26,633 |
|
|
|
|
|
|
|
INCOME BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES |
|
485,240 |
|
654,182 |
|
|
|
|
|
|
|
Financial income |
|
109,116 |
|
62,048 |
|
Financial expenses |
|
(372,064 |
) |
(288,726 |
) |
Exchange variations, net |
|
(651,254 |
) |
127,678 |
|
Gain and losses on financial instruments, net |
|
15,637 |
|
(2,470 |
) |
|
|
|
|
|
|
INCOME (LOSS) BEFORE TAXES |
|
(413,325 |
) |
552,712 |
|
|
|
|
|
|
|
Current |
|
(45,385 |
) |
(105,563 |
) |
Deferred |
|
726,071 |
|
(7,058 |
) |
Income and social contribution taxes |
|
680,686 |
|
(112,621 |
) |
|
|
|
|
|
|
NET INCOME |
|
267,361 |
|
440,091 |
|
|
|
|
|
|
|
ATTRIBUTABLE TO: |
|
|
|
|
|
Owners of the parent |
|
293,062 |
|
397,224 |
|
Non-controlling interests |
|
(25,701 |
) |
42,867 |
|
|
|
267,361 |
|
440,091 |
|
17
GERDAU S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of Brazilian reais (R$)
(Unaudited)
|
|
For the three-month period ended |
|
|
|
March 31, 2015 |
|
March 31, 2014 |
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
Net income for the period |
|
267,361 |
|
440,091 |
|
Adjustments to reconcile net income for the period to net cash provided by operating activities |
|
|
|
|
|
Depreciation and amortization |
|
603,272 |
|
541,660 |
|
Equity in earnings of unconsolidated companies |
|
(6,535 |
) |
(26,633 |
) |
Exchange variation, net |
|
651,254 |
|
(127,678 |
) |
(Gains) Losses on financial instruments, net |
|
(15,637 |
) |
2,470 |
|
Post-employment benefits |
|
66,072 |
|
56,626 |
|
Stock based remuneration |
|
5,224 |
|
9,222 |
|
Income tax |
|
(680,686 |
) |
112,621 |
|
(Gains) Losses on disposal of property, plant and equipment and investments, net |
|
(1,732 |
) |
372 |
|
Allowance for doubtful accounts |
|
18,432 |
|
9,536 |
|
Provision for tax, labor and civil claims |
|
73,998 |
|
76,929 |
|
Interest income on investments |
|
(59,016 |
) |
(42,629 |
) |
Interest expense on loans |
|
318,929 |
|
250,066 |
|
Interest on loans with related parties |
|
(649 |
) |
(1,757 |
) |
Provision (Reversal) for net realizable value adjustment in inventory |
|
1,110 |
|
1,880 |
|
|
|
1,241,397 |
|
1,302,776 |
|
Changes in assets and liabilities |
|
|
|
|
|
Increase in trade accounts receivable |
|
(228,810 |
) |
(546,540 |
) |
Increase in inventories |
|
(318,686 |
) |
(452,956 |
) |
Increase in trade accounts payable |
|
33,721 |
|
20,754 |
|
Increase in other receivables |
|
(96,355 |
) |
(222,337 |
) |
Increase (Decrease) in other payables |
|
76,691 |
|
(124,658 |
) |
Dividends from associates and jointly-controlled entities |
|
|
|
12,254 |
|
Purchases of trading securities |
|
(255,290 |
) |
(761,128 |
) |
Proceeds from maturities and sales of trading securities |
|
973,361 |
|
1,271,185 |
|
Cash provided by operating activities |
|
1,426,029 |
|
499,350 |
|
|
|
|
|
|
|
Interest paid on loans and financing |
|
(194,720 |
) |
(241,842 |
) |
Income and social contribution taxes paid |
|
(287,306 |
) |
(90,534 |
) |
Net cash provided by operating activities |
|
944,003 |
|
166,974 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Additions to property, plant and equipment |
|
(612,344 |
) |
(676,755 |
) |
Proceeds from sales of property, plant and equipment, investments and other intangibles |
|
3,974 |
|
3,461 |
|
Additions to other intangibles |
|
(23,649 |
) |
(49,813 |
) |
Capital increase in jointly-controlled entity |
|
(40,524 |
) |
|
|
Net cash used in investing activities |
|
(672,543 |
) |
(723,107 |
) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Purchase of treasury shares |
|
(161,278 |
) |
|
|
Proceeds from exercise of shares |
|
|
|
3,220 |
|
Dividends and interest on capital paid |
|
(120,888 |
) |
(124,368 |
) |
Proceeds from loans and financing |
|
913,026 |
|
747,190 |
|
Repayment of loans and financing |
|
(670,699 |
) |
(227,433 |
) |
Intercompany loans, net |
|
(39,851 |
) |
(547 |
) |
Net cash (used) provided in financing activities |
|
(79,690 |
) |
398,062 |
|
|
|
|
|
|
|
Exchange variation on cash and cash equivalents |
|
354,423 |
|
(70,254 |
) |
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
546,193 |
|
(228,325 |
) |
Cash and cash equivalents at beginning of period |
|
3,049,971 |
|
2,099,224 |
|
Cash and cash equivalents at end of period |
|
3,596,164 |
|
1,870,899 |
|
18
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