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 Registrant’s 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

 

Investor Relations Officer

 

2



 

EXHIBIT INDEX

 

Exhibit

 

Description of Exhibit

 

 

 

99.1

 

Quarterly Results—1Q15 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 CUSTOMER’S 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 America’s 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, Gerdau’s 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.

 

Gerdau’s 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 BO’s, which was partially offset by the better performance of the North

 

2



 

America BO, reflecting the Company’s 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 Company’s 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 Company’s 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 Company’s 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 Gerdau’s 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 asset’s 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 Europe’s automotive industry.

 

Operating result

 

Special Steel BO
(R$ mil
lion)

 

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 operation’s 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

 

Gerdau’s 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 Company’s 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 Gerdau’s 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 world’s 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 people’s 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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