Gerdau posts $10.6 million net loss in Q1

Thursday, 04 May 2017 00:10:14 (GMT+3)   |   Sao Paulo
       

Brazilian integrated steelmaker Gerdau posted an unexpected net loss of BRL 34 million ($10.6 million) in Q1, reverting the BRL 14 million ($4.38 million) net profit it reported in the same quarter of the year prior.
 
Investors and analysts expected the company to post a net profit of BRL 70.9 million ($22.2 million) in Q1.
 
The unexpected net loss reflects a declining revenue of BRL 8.45 billion ($2.6 billion), which dropped 16.1 percent in Q1, year-on-year, on currency exchange fluctuations at its mills outside Brazil and due to the sale of its specialty steel unit in Spain.
 
Other factors that negatively impacted Gerdau’s Q1 results included declining gross profit and adjusted EBITDA in Q1, which fell 19.6 percent and 8.3 percent, year-on-year, to BRL 654 million ($204.8 million) and BRL 853 million ($267.1 million), respectively.
 
Considering a recent ruling by the Brazilian Supreme Court (STF) on the company’s booking of contingent liabilities, which could revert provisions the company already made on taxes it is currently disputing, net profit could have surged by 5,785 percent in Q1, year-on-year, to BRL 824 million ($258 million).
 
In fact, Gerdau stated the impressive profit growth at its Q1 earnings release, but it made it clear it would not pay dividends as the contingent liabilities issue is not yet settled. There could be a setback or the recent ruling favoring Gerdau could be maintained. 
 
“In Q1 17, the company and its subsidiaries reversed the provision for contingencies related to the exclusion of the ICMS tax from the tax base for contributions to PIS and COFINS accrued from 2009 to 2016. This reversal was based on the conclusion of the trial by the Federal Supreme Court (STF) sitting en banc, which declared unconstitutional the inclusion of the ICMS tax in said tax base, and is supported by the position of the Company’s legal counsel that the probability of loss in the pending lawsuits became remote after the decision by the STF,” the company explained, while talking about the provision for contingencies.
 
Gerdau emphasizes, however, that there is a possibility that the STF may understand that the application of the modulation mechanism necessarily applies to this decision, which is used to determine the effects in time of a decision to declare unconstitutionality. If the STF applies the modulation mechanism, limiting the effects of the decision in time, it may be necessary to reassess the risk of loss associated with said lawsuits, which consequently may require the accrual of new provisions related to this matter in the future.”
 
Gerdau’s crude steel output in Q1 declined 3.3 percent, year-on-year, to 4 million mt, while steel sales volumes in the same period fell 6.8 percent, year-on-year, to 3.5 million mt. The decreased crude steel output is due to a still sluggish domestic demand, while the lower steel sales volumes reflect diminishing exports.

Similar articles

Gerdau sees lower net profit and revenues in Q3

07 Nov | Steel News

Gerdau’s net profit declines in Q2

09 Aug | Steel News

Net profit increases in the first quarter at Gerdau

04 May | Steel News

Gerdau’s net profit declines in 2022

01 Mar | Steel News

Gerdau’s net profit declines in the third quarter

09 Nov | Steel News

Gerdau’s net profit increases sharply in Q2

03 Aug | Steel News

Gerdau sees profit rise 237 percent in Q4 2021

24 Feb | Steel News

CSN, Gerdau and Usiminas to post weaker profits in Q4

13 Jan | Steel News

Gerdau’s profit surges to $1 billion in Q3

27 Oct | Steel News

Gerdau sees profit spike in Q2

04 Aug | Steel News