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Gerdau (GGB) Q2 Earnings Decrease Y/Y on Lower Revenues
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Brazilian steel producer Gerdau S.A. (GGB - Free Report) reported disappointing results for second-quarter 2016. The company’s adjusted net income plunged nearly 30.3% year over year to R$184.3 million (US$52.7 million). The fall was triggered primarily by lower revenue generation, weak results of subsidiaries and higher financial expenses.
Talking about Gerdau’s top-line results, net sales declined 4.7% year over year to R$10,248.8 million (US$2,928.2 million).
Crude steel production in the quarter declined 2.9% year over year to 4.304 million tons, while shipments inched down 0.7% to 4.240 million tons.
Segmental Details
A brief discussion on Gerdau’s segmental result is provided below.
Revenues sourced from the Brazil BD (business division) accounted for 27.8% of net sales, down 6.6% year over year, while that from North America BD represented roughly 40.5% of net sales, down 1% year over year. The South America BD revenues constituted 12.2% of net sales, down 2.7% year over year. Revenues from Special Steel BD decreased 13%, comprising 19.5% of net sales.
Margins
In the quarter, Gerdau’s margins suffered weakness, with cost of sales representing 89.4% of net sales compared with 89% in the year-ago quarter. Gross margin was down 40 basis points (bps) to 10.6%.
Selling expenses, as a percentage of revenues, were 1.7%, while general and administrative expenses were 3.9%. Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were R$1,201 million (US$343.1 million), up 0.8% year over year. EBITDA margin came in at 11.7% compared with 11.1% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting second-quarter 2016, Gerdau’s cash and cash equivalents decreased 19.5% sequentially to R$3,809.4 million (US$1,179.4 million). Long-term debt was R$18,496.9 million (US$5,726.6 million), down from R$20,992.6 million (US$5,847.5 million) at the end of the previous quarter.
In addition, Gerdau’s net cash generation from operating activities decreased 33.8% year over year to R$1,472.8 million in the first half of 2016. Capital spent on purchase of property, plant and equipment totaled R$811.5 million, down 35.6% year over year.
Outlook: For 2016, Gerdau expects capital expenditure to be R$1.5 billion, down 35% year over year.
Gerdau, with a market capitalization of $4.6 billion, currently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include ArcelorMittal (MT - Free Report) , Schnitzer Steel Industries, Inc. and ThyssenKrupp AG (TYEKF - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
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Gerdau (GGB) Q2 Earnings Decrease Y/Y on Lower Revenues
Brazilian steel producer Gerdau S.A. (GGB - Free Report) reported disappointing results for second-quarter 2016. The company’s adjusted net income plunged nearly 30.3% year over year to R$184.3 million (US$52.7 million). The fall was triggered primarily by lower revenue generation, weak results of subsidiaries and higher financial expenses.
Talking about Gerdau’s top-line results, net sales declined 4.7% year over year to R$10,248.8 million (US$2,928.2 million).
Crude steel production in the quarter declined 2.9% year over year to 4.304 million tons, while shipments inched down 0.7% to 4.240 million tons.
Segmental Details
A brief discussion on Gerdau’s segmental result is provided below.
Revenues sourced from the Brazil BD (business division) accounted for 27.8% of net sales, down 6.6% year over year, while that from North America BD represented roughly 40.5% of net sales, down 1% year over year. The South America BD revenues constituted 12.2% of net sales, down 2.7% year over year. Revenues from Special Steel BD decreased 13%, comprising 19.5% of net sales.
Margins
In the quarter, Gerdau’s margins suffered weakness, with cost of sales representing 89.4% of net sales compared with 89% in the year-ago quarter. Gross margin was down 40 basis points (bps) to 10.6%.
Selling expenses, as a percentage of revenues, were 1.7%, while general and administrative expenses were 3.9%. Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were R$1,201 million (US$343.1 million), up 0.8% year over year. EBITDA margin came in at 11.7% compared with 11.1% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting second-quarter 2016, Gerdau’s cash and cash equivalents decreased 19.5% sequentially to R$3,809.4 million (US$1,179.4 million). Long-term debt was R$18,496.9 million (US$5,726.6 million), down from R$20,992.6 million (US$5,847.5 million) at the end of the previous quarter.
In addition, Gerdau’s net cash generation from operating activities decreased 33.8% year over year to R$1,472.8 million in the first half of 2016. Capital spent on purchase of property, plant and equipment totaled R$811.5 million, down 35.6% year over year.
Outlook: For 2016, Gerdau expects capital expenditure to be R$1.5 billion, down 35% year over year.
GERDAU SA ADR Price, Consensus and EPS Surprise
GERDAU SA ADR Price, Consensus and EPS Surprise | GERDAU SA ADR Quote
Zacks Rank & Other Stocks to Consider
Gerdau, with a market capitalization of $4.6 billion, currently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include ArcelorMittal (MT - Free Report) , Schnitzer Steel Industries, Inc. and ThyssenKrupp AG (TYEKF - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>