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Gerdau Posts Profit, Boosts Investment on Demand

Gerdau SA, Latin America’s largest steelmaker, reported a second-quarter profit and boosted planned investments to 11 billion reais ($6.3 billion) as Brazilian demand rebounds from the global economic crisis.

Net income was 733.1 million reais, or 52 centavos a share, compared with a loss of 266.1 million reais, or 19 centavos, in the year-earlier period, the Porto Alegre, Brazil-based company said today in a regulatory filing. The earnings beat the mean estimate of 45 centavos a share in a Bloomberg survey of 10 analysts.

Gerdau increased its 2010-2014 investment plan by 16 percent as it seeks to boost steel production capacity in Brazil, Peru and India. Sales rose 30 percent to 8.3 billion reais amid rising demand in Brazil, which is expected to grow this year at the fastest pace in more than two decades.

“The earnings were mainly a result of higher volumes in the domestic market, and good margins as well,” Marcelo Varejao, an analyst at Sao Paulo-based brokerage Socopa Corretora who rates Gerdau “market perform,” said by telephone before the release. “Prices and volumes were higher than a year ago.”

Brazilian steel sales jumped 57 percent in the first half of this year, steel industry association Aco Brasil said on July 28.

U.S. Demand

Demand in the U.S. from carmakers and energy companies is growing “gradually,” while purchases by builders is still slow, Chief Executive Officer Andre Gerdau Johannpeter said today on a conference call.

Gerdau, which is raising steel prices in some regions of Brazil this quarter, will probably leave prices unchanged in coming quarters, Johannpeter said, declining to elaborate on the increases.

The steelmaker said its plan to take Gerdau Ameristeel Corp. private at a cash price of $11 per common share, or about $1.6 billion, was approved by Ameristeel’s board and will be submitted to shareholders in an Aug. 10 meeting.

Gerdau fell 0.8 percent, or 22 centavos, to 26.62 reais in Sao Paulo trading at 11:30 a.m. New York time. Before today, the stock dropped 7.9 percent this year, more than a 0.5 percent decline for Brazil’s benchmark Bovespa index.

The earnings report was released before the start of regular trading. Gerdau posts earnings under international financial reporting standards.

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