Brazil's Gerdau: IFRS Impairment Tests Behind 2Q Loss
06 Agosto 2009 - 6:53PM
Dow Jones News
Impairment tests required by international accounting rules
undercut second-quarter results at Brazilian long-steel maker
Gerdau SA (GGB), which plummeted because of non-recurring charges,
the company's chief financial officer said Thursday.
Gerdau reported a second-quarter net loss of 329 million
Brazilian reals ($181 million), down from a net profit of BRL2.12
billion in the same quarter a year ago. During the quarter, Gerdau
posted a non-recurring charge of BRL1.08 billion, the company
said.
"It's very important to understand that 90% of the charge has no
impact on cash flow," CFO Osvaldo Schirmer said during a conference
call.
Gerdau was forced to take the write-downs for idled steel
capacity, intangible assets and goodwill under impairment tests
required by International Financial Reporting Standards, Schirmer
said.
The tests reconcile the present value of assets with future
estimated earnings and book values, the executive said.
Gerdau idled several blast furnaces and reduced production
capacity amid the broader economic slowdown. It also had to
recognize goodwill amortizations for a flurry of acquisitions made
in recent years.
The charges should be reverted as capacity is brought back
online, a process that is under way on signals that demand is
returning, Schirmer said.
Gerdau plans to keep several blast furnaces in the U.S.
operating - they had previously been expected to be shut down. In
Brazil, the No. 2 blast furnace at Acominas will be kept hot after
the company shelved plans to shut it down for maintenance.
"In general, steel operations are working at about 60% to 70% of
capacity," Gerdau Chief Executive Andre Gerdau Johannpeter
said.
-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085;
Jeff.Fick@dowjones.com