Gerdau net profit skyrockets 158% in 2004

Higher steel prices on the international market and strong exports sent net earnings for Brazilian steelmaker Gerdau (NYSE: GGB) soaring 158% to 3.24bn reais (US$1.24bn) in 2004, up from 1.25bn reais in 2003, the company said in a statement. Consolidated sales revenue surged 48% in 2004 to 23.4bn reais, up from 15.7bn reais in 2003. Production in crude steel such as slabs, blooms and billets rose 9% to 13.4Mt in 2004, up from 12.3Mt the previous year. Laminated steel jumped 13.6% to 10.3Mt, up from 9Mt in 2003. Overall, Gerdau delivered 12.6Mt of steel in 2004, up 3.4% from 12.1Mt a year earlier. "Steel production hit a record," vice-president Frederico Carlos Gerdau Johannpeter told a conference call to discuss the financial results. Gerdau's forecast is for 4% growth in 2005, he said. For the fourth quarter of 2004, Gerdau posted net earnings of 749mn reais, 63% higher than 4Q03, when Gerdau had net earnings of 460mn reais. Higher steel prices on the international market offset a 0.5% year-on-year drop in sales, which fell to 3.1Mt in 4Q04. Crude steel production rose 9.5% to 3.47Mt, while production of laminated steel was up 9.2% to 2.58Mt in 4Q04. Porto Alegre-based Gerdau said it plans to invest more than US$3bn through 2007 to expand global production capacity. Crude steelmaking capacity in Brazil will increase to 11.7Mt/y from 7.5Mt/y. Annual production of laminated steel will rise to 6.6Mt from 4.7Mt. Global production will be boosted to 21.1Mt of crude steel and 15.4Mt of laminated steel annually by 2007, Osvaldo Schirmer, vice-president for finance, told reporters. The new steel plant at Aracariguama in São Paulo, which will produce 900,000t/y, will start production in May, while the laminated steel production will begin in April 2006. Gerdau also announced a reorganization plan and the formation of a holding company, Gerdau Participacoes, to better manage its various steelmaking operations. "We have businesses with different natures. We imagine that we can maximize our efficiencies and strategies with this reorganization," said Schirmer in the conference call. Gerdau Participacoes will serve as an umbrella company for Gerdau's steelmaking operations. Gerdau is still working on specific measures it will take in the reorganization, Schirmer added. Gerdau is the largest long steelmaker in the Americas with operations in Chile, Argentina and Uruguay as well as North America and Brazil.