• EBITDA of R$1,484 million in 1Q18, up 74% from 1Q17, with EBITDA
margin of 14.3%.
• Reduction in selling, general and administrative expenses in 1Q18,
which corresponded to 4.0% of net sales, compared to 5.2% in 1Q17.
• Financial leverage measured by net debt/adjusted EBITDA ratio falls to
2.7x as of March 31, 2018.
• Adjusted net income of R$ 451 million in 1Q18, with dividend
distribution of R$136.1 million, equivalent to the amount distributed in
the whole of 2017.
Gerdau’s performance in the first quarter of 2018
The Consolidated Financial Statements of Gerdau S.A. are presented in
accordance with the International Financial Reporting Standards (IFRS)
and the accounting practices adopted in Brazil, which are fully aligned
with the accounting standards issued by the Accounting Pronouncements
Committee (CPC). The information in this report does not include data of
associates and jointly controlled entities, except where stated
Production and shipments
• On a consolidated basis, crude steel production and shipments
increased in 1Q18 compared to 1Q17, due to stronger steel demand, led by
the Brazil and North America BDs.
• In relation to 4Q17, consolidated shipments also increased, due to
stronger demand in the North America and Special Steel BDs.
• In 1Q18, consolidated net sales increased in relation to 1Q17, due to
the higher net sales per tonne at all BDs, supported by the higher
• Consolidated cost of goods sold increased in 1Q18 compared to 1Q17 and
4Q17, reflecting the higher raw material costs.
• Consolidated gross profit more than doubled in relation to 1Q17, due
to the better performance of the Brazil and North America BDs.
Meanwhile, gross margin expanded, with higher prices more than
offsetting the increase in raw material costs in the period.
• The reduction in selling, general and administrative expenses in 1Q18,
which correspond to 4.0% of net sales, compared to 5.2% of net sales in
1Q17, reflects the continuous efforts made to streamline all business
divisions and the net sales growth in the period.
• Gerdau S.A. approved the payment of dividends in the form of interest
on equity in the amount of R$ 136.1 million (R$ 0.08 per share) in 1Q18,
distributed as an advance of the minimum mandatory dividend stipulated
in the Bylaws. Payment date: June 1, 2018 Record date: close of trading
on May 21, 2018 Ex-dividend date: May 22, 2018
• On March 31, 2018, gross debt was 13.0% short term and 87.0% long
term, with 17.6% denominated in Brazilian real, 80.0% in U.S. dollar and
2.4% in other currencies.
• On March 31, 2018, 65.7% of cash was held by Gerdau companies abroad
and denominated mainly in U.S. dollar.
• In 1Q18, CAPEX amounted to R$217 million. Of the amount invested in
the quarter, 43.4% was allocated to the Brazil BD, 36.7% to the North
America BD, 15.4% to the Special Steel BD and 4.5% to the South America
• CAPEX projected for 2018 is R$ 1.2 billion, which will focus on
productivity gains and maintenance.
• On March 31, 2018, the nominal weighted average cost of gross debt was
6.6%, or 7.8% for the portion denominated in Brazilian real, 5.6% plus
exchange variation for the portion denominated in U.S. dollar contracted
by companies in Brazil and 7.9% for the portion contracted by
subsidiaries abroad. On March 31, 2018, the average gross debt term was
• According to the material fact notice dated January 2, 2018, the
Company entered into a final agreement for the sale of certain rebar
production units, fabricated rebar units and distribution centers in the
United States, to Commercial Metals, for US$ 600 million (equivalent to
R$ 2.0 billion), subject to adjustments to the acquisition price typical
of transactions of this kind. The agreement includes mills in
Jacksonville (Florida), Knoxville (Tennessee), Rancho Cucamonga
(California) and Sayreville (New Jersey) with combined annual production
capacity of 2.5 million short tonnes, in addition to the rebar
processing and distribution units in the United States, which are
reported in the North America segment. The transaction is subject to
authorization by regulatory agencies and to typical settlement
conditions, which should occur by the end of 2018. Furthermore, due to
the measurement of net assets classified as held for sale at the lowest
of carrying amount or fair value less selling expenses, the Company
recognized an expense, net of income tax, of R$ 649 million in the line
Income (expense) from transactions with subsidiaries in its Income
• On January 31, 2018, the Company announced a final agreement for the
sale of its wire-rod production unit located in Beaumont, Texas and two
processing units to Optimus. On March 30, 2018, the Company concluded
the sale for US$ 99.5 million (equivalent to R$ 330.7 million). The sale
includes the Company’s mill located in Beaumont, Texas and the
processing units Beaumont Wire Products and Carrollton Wire Products.
The mill has a melt shop with annual capacity of approximately 700,000
tons, and is capable of producing both wire rod and coiled rebar.
Although the proceeds are reflected in 1Q18, the deconsolidation effect
will be registered as from 2Q18.
• On February 14, 2018, the Company issued a notice on the sale of its
two hydropower plants in Goiás for R$ 835 million to Kinross Brasil
Mineração, a wholly-owned subsidiary of the mining company Kinross Gold
Corporation. The plants Caçu and Barra dos Coqueiros, inaugurated in
2010, have total installed capacity of 155 MW. The transaction is
subject to authorization from regulatory agencies and typical settlement
• Gerdau maintains its strategy of focusing on its more profitable
assets and, since 2014, has conducted divestments in the United States,
Europe, Latin America and Brazil, with aggregate economic value of R$6
billion. The transactions are aligned with the process to optimize the
Company’s asset portfolio with a focus on deleveraging.
Free Cash Flow (FCF)
• In 1Q18, free cash flow amounted to R$ 65 million generated by
adjusted EBITDA, which was sufficient to honor the CAPEX, income tax and
interest commitments, as well as the working capital consumption,
reversing a historical standard of seasonality in the period.
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