Gerdau Quarterly Profit Misses Estimates on U.S. Sales

Gerdau SA, Latin America’s largest steelmaker, reported fourth-quarter profit that plunged 70 percent and missed analysts’ estimates after sales declined at its North American unit. The company cut its investment plan.

Net income dropped to 131 million reais ($66.8 million) from 438.8 million reais in the year-earlier period, the Porto Alegre, Brazil-based company said today in a statement. Gerdau was expected to post a 230.6 million-real profit excluding items, the average of seven analysts’ estimates compiled by Bloomberg.

Steelmakers from Brazil to Europe are facing declining profits as excess capacity and higher operating costs erode margins. Gerdau’s earnings were the lowest in more than three years and follow the fourth consecutive loss posted by rival Usinas Siderurgicas de Minas Gerais SA earlier this week.

“The potential recovery in North America remains blurred,” Brasil Plural CCTVM analysts Renato Antunes and Aristoteles Nogueira said in a note to clients today.

Net sales declined 1 percent to 8.99 billion reais in the quarter. The volume of shipments from Gerdau’s North American unit, which accounts for about a third of revenue, declined 15 percent, while sales volumes in Brazil fell 6 percent.

Reduced Investments

Gerdau, which in November put its expansion plan under review because of fluctuations in the global economy, said today that it cut investments for the 2013-2017 period to 8.5 billion reais. That’s an 18 percent reduction from its previous plan of 10.3 billion reais.

The company’s profit is set to recover this year as Brazil’s growth recovers and the U.S. economy expands, Chief Executive Officer Andre Gerdau Johannpeter told reporters on a conference call today.

“The result of the fourth quarter of 2012 doesn’t represent a trend for the performance of Gerdau in 2013,” he said. “The positive growth outlook combined with operational enhancements should improve profitability.”

Gerdau rose 2.8 percent to 16.14 reais at the close in Sao Paulo today, the first increase in six days. The stock has declined 8.9 percent in the past 12 months, less than the 15 percent decline in Brazil’s benchmark Bovespa index.

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