Top Brazil Steelmaker Leans on U.S. to Counter Slump at Home

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Steelmaker Gerdau SA is increasingly relying on its North American operations to compensate slumping demand in the domestic Brazilian market.

Second-quarter earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 1.2 percent to from a year earlier to 1.18 billion reais ($341 million), the Porto Alegre, Brazil-based steelmaker said Wednesday in a statement. That compared with the 1.14 billion-real average estimate of six analysts tracked by Bloomberg. Net income fell to 256 million reais from 356 million reais.

Shares of the steelmaker are trading close to a 12-year low as steel demand in Latin America’s largest economy collapses amid a moribund economic outlook. The company has trimmed investments, shut units and halted the expansion of its iron-ore business as it attempts to cut leverage.

“We expect Brazilian results to remain pressured and see margins declining in the second half of 2015,” Bank of America Corp. analysts led by Thiago Lofiego wrote in a research note Wednesday. “On the positive side, Gerdau is well-diversified and should continue to enjoy good results in its U.S. operations.”

Sales rose to 10.8 billion reais, also in line with the average analyst estimate of 10.9 billion reais, Gerdau said. While revenue from Brazil’s operations declined 7.2 percent in the quarter, sales in the North American business grew 15 percent amid a weaker real.

Gerdau dropped 1 percent to 5.80 reais at the close in Sao Paulo on Wednesday, extending its 12-month decline to 55 percent.

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