Gerdau’s gains with the sale of steel in the US are expected to be offset by both the challenging economic scenario Brazil currently faces, as well as by the increase of Gerdau’s debt, financial analysts said.
Revenues at the Brazilian steelmaker are expected to increase in Q2 due to a more devaluated BRL, while profit is forecast to decline as a result of a negative outlook for the country’s economy and because of the company’s growing debt.
The average net profit analysts from J.P. Morgan, Morgan Stanley and Santander expect for Gerdau in Q2 is BRL 216 million, which could mean a 39.5 percent decline in Q2, year-on-year, in case the projections prove to be true. Lower margins and an increasing debt in US dollar also put some pressure on Gerdau’s quarterly performance.
A J.P. Morgan analyst said Gerdau should see a double-digit decline, year-on-year, in steel sales in Q2, while earnings at the company’s specialty steel segment, as well as in the rest of Latin America, are also expected to worsen in Q2.
A media report said that a compilation of Gerdau’s expected results for Q2 show a BRL 11.3 billion net revenue, 8.3 percent up, year-on-year, while EBITDA is expected to decline 8 percent, year-on-year, to BRL 1.17 billion.
In July this year, a Gerdau executive said the decline in steel demand has been equal to both long and flat steel. “Our HRC laminator in Ouro Branco [in the state of Minas Gerais] initiated operations in August 2013 and its production volumes are meeting the expected levels,” the executive said at that time, adding the equipment is production steel of different gauges and quantities.
However, the specialty steel segment faces an even more adverse situation. According to Andre Johannpeter, Gerdau’s CEO, Gerdau’s specialty capacity is at 60 percent, due to the pessimistic prospects for the Brazilian automotive industry.