Gerdau remains profitable in lower output environment

Brazil-based electric arc furnace (EAF) steelmaker Gerdau S.A. has announced second-quarter 2020 net sales that fell by 14 percent compared with the same quarter in 2019, and earnings before interest, taxes, depreciation and amortization (EBITDA) that dropped by 16 percent.

The firm’s production of crude steel fell by 29 percent in the quarter compared with the second quarter of 2019, however its North American operations experienced just a 14 percent decline. The North American decline compares favorably with a 30 percent output drop in Brazil and a 50 percent drop in Gerdau’s South America division, which includes Argentina, Peru, Uruguay and Venezuela.

In the North American market, Gerdau says its decline in output and shipments were “caused by the COVID-19 pandemic, especially in April. Despite the decline, May and June registered a recovery, reflecting the resilience of construction activities in general.”

Gerdau says a “slight increase in the metals spread” in the second quarter helped it maintain profitability in North America. Additionally, “the company has been making efforts to reduce its fixed and variable costs, such as idling its mill in St. Paul, Minnesota,” the steelmaker says in notes accompanying its results.

Although its North America Business Division represents 38 percent of Gerdau’s sales, only 5.3 percent of its capital expenditures in the second quarter of 2020 was directed toward North America.