As Brazilian steelmaker Gerdau looks for ways to reduce costs in order to increase the company’s competitiveness, it also sees positive perspectives for its operations in the US, which are helping the long steel producer to find a balance in a scenario of declined sales and reduced demand at its home market, Brazil.
In a meeting with investors and analysts on Wednesday, Gerdau highlighted what labeled as the company’s “current challenges”, which are transforming the Gerdau’s family business.
The company said it has been more “selective” in Capex, as it expects to spend $700 million in 2015, down from $960 million in 2014 and $1.2 billion in 2013. In the accumulated period of January to September this year, the company invested about $559 million.
While talking to analysts and investors, the company argued it has been “adjusting” its operations, in order to guarantee the company’s sustainability. Adjustment measures include the sale of non-core assets and properties, and mills as well, as it’s the case of Bright Bar in the US.
In the cost reduction side, Gerdau said it managed to diminish selling, general & administrative expenses (SG&A) by 32 percent in the nine-month period from January to September, to about $608 million.
Gerdau also said the different mills it has in different parts of the world help it to achieve a balance in its financial results.
Gerdau said the exposure to the US market contributes to the balance of the company’s results, as 37 percent of the company’s revenue from September last year to September this year came from its North American operations.
Gerdau said it sees a significant evolution of the non-residential construction sector in the US and expects exports in 2015 to double, despite still low margins, said the company, quoted by local media.
In its presentation, Gerdau highlighted the US market is expected to see its GDP grow 2.8 percent in 2016, while apparent steel consumption is expected to rise 1.3 percent in the year to come.
It said the current scenario for the automotive segment in the US and India is positive, as opposed to the bearish expectations for the Brazil automotive industry.
Gerdau estimated the size of the specialty steel market in 2015 and 2016 to reach 9.3 and 9.6 million mt in Europe; to remain stable in the US at 5.2 million mt in 2015 and 2016; and to increase from 3.9 million mt in 2015 to 4.1 million mt in 2016 in India. As for Brazil, the size of the specialty steel market should decline from 1 million mt in 2015 to 900,000 mt in 2016.
The Porto Alegre headquartered company said Brazil’s economy retraction is still impacting domestic demand for steel. Brazil’s GDP is expected to decline 2 percent in 2016, according to Gerdau, while apparent steel consumption should diminish by 4-6 percent in the year to come.
Gerdau said its debt is currently “under control”, despite the strong devaluation of the BRL over the USD.
Media reports on Wednesday added Gerdau started to see signs of stability in global steel prices, but “at still low levels.”