GGB's 1Q Plummets on Expenses - Analyst Blog
06 Maggio 2011 - 5:47PM
Zacks
Brazilian steel producer, Gerdau S.A.’s (GGB)
first quarter 2011 net income plummeted 29% year over year to R$409
million (US$246.4 million) and registered a sequential decline of
3%. Earnings per share (EPS) were R$0.26 (16 cents per ADR) down
compared with R$0.35 (19 cents per ADR) in the year-ago period.
Results were, however, above the Zacks Consensus Estimate of 8
cents per ADR.
The bottom-line results were negatively affected by higher cost
of sales and operating expenses, which more than offset higher
revenue in the quarter.
Revenue
Net revenue was R$8,363.8 million ($5,038.4 million), up 17.7%
year over year and 7% sequentially. The revenue increase was
primarily due to higher shipments in the quarter.
Of the net revenue, Brazilian business accounted for 35.3% and
registered a growth of 3% year over year. North American revenue
increased 31% and contributed 31.4% to net revenue while Latin
American revenue represented 12.3% of net revenue and spiked 28%
over the year-ago period. Revenue from Specialty Steel grew 22%
year over year and accounted for 21.0% of net revenue.
Crude steel production increased 9% year over year and 8%
sequentially to 4,749 million tons in the quarter, primarily due to
growing demand globally. Long steel production jumped 13% year over
year and 11% sequentially to 4,049 million tons.
Shipments were strong in the quarter at 4,710 million tons and
represented a 16% year-over-year and 4% sequential growth.
Margins
Gross margin in the first quarter was weak at 13.9% down from
19.8% in the year-ago quarter. The year-over-year weakness can be
attributed to a 26.3% increase in cost of sales, driven by higher
raw material costs. Selling expenses, as a percentage of
revenue was stable at 1.7%, while general and administrative
expenses plummeted 10 basis points year over year.
EBITDA at R$1,102 million (US$663.9 million) was down 21% year
over year and up 35% sequentially with a margin of 13% in the
quarter. Operating income was R$654.6 million (US$394.3 million),
down 30.5% year over year. Operating margin was 7.8% versus 13.2%
in the year-ago quarter.
Balance Sheet
Exiting the first quarter, Gerdau had cash and cash equivalents
of approximately R$1,078.5 million (US$657.6 million) compared with
R$1,061.0 million ($647.0 million) in the previous quarter.
Long-term debt was R$11,844.5 million (US$7,222.3 million) versus
R$12,360.1 million ($7,536.6 million) in the previous quarter.
Cash Flow
Net cash flow from operating activities increased 13.6% year
over year to R$1,190.9 million (US$717.4 million) in the first
quarter. Capital spending was up 42.8% year over year to R$333.2
million (US$200.7 million).
Gerdau S.A. is one of the leading Brazilian steel makers. The
company plans to spend roughly R$10.8 billion for the period from
2011 to 2015. The company faces stiff competition from its peers
like Companhia Siderurgica Nacional (SID),
Arcelor Mittal (MT) and Usinas Sider.
GERDAU SA ADR (GGB): Free Stock Analysis Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
CIA SIDERUR-ADR (SID): Free Stock Analysis Report
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