Brazilian Steel Company Subsidiary Ends Year Strong

by Nicole Duarte

published by the Medill News Service, February 08, 2006

Gerdau Ameristeel Corp., North America's second-largest minimill steel producer, posted a fourth-quarter earnings increase in spite of an overall profit decline in 2005.

Florida-based Gerdau, which operates mills in Decatur, Sterling and Urbana, Ill., reported net income of $80.39 million or 26 cents per diluted share in the quarter ended Dec. 31. In the year-prior quarter, the company posted $66.41 million or 23 cents per diluted share.

The company, an indirect subsidiary of Gerdau S.A., a Brazilian steel company, beat analyst estimates of 20 cents per share and $853.3 million in revenues for the quarter.

The company said it shipped 1.5 million tons of steel in the fourth quarter of 2005, a 14 percent advance over the year-prior quarter. Sales in the fourth quarter topped $934.24 million, up from $849.24 million in the year-earlier quarter.

Additionally, the company held $414.26 million in cash at the close of the fourth quarter compared with $88.13 million a year earlier. In a conference call, Gerdau did not offer any indication of what it intended to do with the cash, but said it did not presently intend to pay another special dividend.

The company announced Tuesday it will pay a quarterly cash dividend of 2 cents per common share and a special dividend of 22 cents per share, payable Mar. 9 to shareholders of record on Feb. 22.

Gerdau suspended operations at its Beaumont, Texas plant from May to December because of a labor dispute. Ultimately the company did not settle on a contract with the union, but the plant resumed full operations in mid-December. Gerdau calculated the cost of the work stoppage at $4 million for the quarter and $14 million for the year.

"The overall supply and demand picture for our steel products appears reasonably well balanced as we enter 2006, and we expect to see our normal seasonal strengthening of demand as we approach springtime," Mario Longhi, president and CEO of Gerdau Ameristeel, said in a release.

The company didn't provide specific earnings per share guidance, but said it expected shipping to rebound over the slower December quarter, which had fewer shipping days because of the holidays. Additionally, it said it expected increased demand and firm prices for flat rolled steel in the first quarter of 2006.

Longhi also said the company's focus was "to continue building on the significant mill productivity gains we achieved in 2005," indicating the company budgeted $200 million to $230 million for capital investments in 2006.

"We see the potential to build off of our solid 2005 results, although we still recognize that we work in a cyclical and changing sector with limited forward visibility," Longhi said.

Gerdau reported $3.4 billion in sales for the year 2005, up 30 percent from $3.01 billion in 2004.

Earnings for the year fell to $295.5 million or 97 cents per diluted share from $337.34 million or $1.45 per diluted share.

The stock closed at $7.28, up 17 cents or 2.3 percent.