Gerdau ends 2018 with adjusted net income of BRL 2.5 billion
Gerdau ended the 2018 fiscal year with BRL 46.2 billion in net revenue, 25% more than in the previous year, driven by higher sales volume in the Brazilian domestic market, improved export profitability and a positive exchange rate effect of revenues generated abroad to real. Physical steel sales were 14.6 million tons during the year, representing a 3% reduction due to the sale of some rebar and wire rod production units in the United States, as well as operations in Chile and India. Gerdau divestments also influenced production volumes in the period, which were 15.3 million tons, a decrease of 5% compared to the previous year.
EBITDA - operating cash generation - showed a significant evolution in 2018, from 54% to BRL 6.7 billion. Sales, general and administrative expenses (SG & A) accounted for 3.6% of net revenue in 2018, compared to 4.5% in 2017, reaching the best historical percentage. Adjusted net income, in turn, was more than four times higher than in 2017, reaching BRL 2.5 billion.
Mr Gustavo Werneck CEO said that "We ended 2018 with the successful completion of Gerdau's divestment plan - reaching more than BRL 7 billion in the last four years -, we significantly reduced our indebtedness to 1.7x EBITDA, and generated the largest volume of free cash flow in recent years of BRL 2.6 billion. We also had an important evolution in the EBITDA margin in the North American operation, one of our main markets. As a result of the dedication of our teams and the evolution of the market, we have achieved the best result of Gerdau of the last ten years and we remunerated the capital invested by our shareholders in higher levels compared to the last years. So far, we see optimistic prospects for our main markets, which can generate consistent results in 2019. Against this, we will invest BRL 7.1 billion over the next three years, which can be adjusted according to the evolution of market.”
The fourth quarter of 2018, despite the reduction in international steel prices, was the best in the last ten years compared to the same periods of previous years. Net sales revenue grew 11% to BRL 10.9 billion, while EBITDA reached BRL 1.4 billion, up 19% over the fourth quarter of 2017. In the last three months of 2018, net income adjusted net income was BRL 312 million, an increase of 19% over the fourth quarter of 2017.
In relation to the profitability of operations in 2018, the highlight was the Brazil operation. In the 12 months of the year, Brazil (excluding special steel mills) reached 19.3% of EBITDA margin (compared to EBITDA) compared to 15.3% in 2017. North America (excluding steel mills EBITDA margin reached 9% in the 12 months of 2018 compared to 5.2% in 2017. The Special Steel Business Operation (includes plants in Brazil and the United States), however, showed a reduction in the EBITDA margin of 18, 3% to 15.9%, impacted by higher input and raw material costs, especially electrodes, scrap and alloys, and the economic crisis in Argentina, the main export destination of the Brazilian automotive industry. The EBITDA margin of the South America Business Operation, which does not include Brazil, reached 17.9% versus 14.1%.
IGerdau invested BRL 1.2 billion in property, plant and equipment (CAPEX), in line with that announced at the beginning of 2018. Of this total, BRL 560 million was allocated to Brazil, BRL 388 million to North America, BRL 194 million for Special Steel Operations (including plants in Brazil and the United States) and BRL 53 million for other Latin American countries (excluding Brazil).
As of that year, Gerdau started to disclose its investment program (CAPEX) for the three-year period (2019-2021) as an evolution of the company's governance process. The investments totaled BRL 7.1 billion and are classified into three categories: general maintenance, maintenance at the Ouro Branco (MG) plant - Gerdau's largest plant - and expansion and technological upgrading.
Investments in general maintenance refer to recurring initiatives to increase operational excellence in existing assets. Ouro Branco's maintenance investments cover a series of initiatives related to the planned shutdown of the plant's modernization in 2022. In 2019, there will be a 60-day shutdown in blast furnace 1 of the Ouro Branco mill and in 2020 and 2021 gradual reforms. In the period, strategic stocks will be formed for the regular supply of our customers.
Source : Strategic Research Institute