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Gerdau's (GGB) Q4 Loss Widens Y/Y on Weak Segmental Sales
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Brazilian steel producer Gerdau S.A. (GGB - Free Report) reported weak results for fourth-quarter 2016. The company recorded adjusted net loss of R$203.4 million ($61.6 million), wider than the loss of R$40.9 million ($10.6 million) in the year-ago quarter.
For 2016, the company’s net income plunged 86.8% year over year to R$90.2 million ($25.8 million).
Revenues
In the quarter, Gerdau’s net sales totaled R$8,619.6 million ($2,612 million), down 17.5% year over year primarily due to forex woes and special steel units divestment in Spain.
Crude steel production declined 14.5% year over year to 3.326 million tons, while shipments of steel fell 2.3% to 3,799 million tons. Production decline was due to inventory optimization at Brazil and North America business divisions as well as divestment of Spain-based special steel units.
Segmental Details: A brief discussion on Gerdau’s segmental results is provided below.
Revenues sourced from the Brazil BD (business division) accounted for 30.1% of net sales, up 9.1% year over year, while that from North America BD represented roughly 39.9% of net sales, down 21.8% year over year. The South America BD revenues constituted 12.2% of net sales, down 18.3% year over year. Revenues from Special Steel BD decreased 37.5%, comprising 17.8% of net sales.
For 2016, the company’s net sales were R$37,651.7 million ($10,788.5 million), down 13.6% year over year.
Margins
In the quarter, Gerdau’s margins suffered due to fall in net sales, partially gaining from decrease in cost of sales. As a percentage of net sales, cost of sales was 93.9% down from 92.5% in the year-ago quarter. Gross margin was down 140 basis points (bps) to 6.1%.
Selling expenses, as a percentage of revenues were 2.1%, while general and administrative expenses were 4.1%. Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were R$716 million ($217 million), down 21.4% year over year. EBITDA margin came in at 8.3% compared with 8.7% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the fourth quarter, Gerdau had cash and cash equivalents of R$5,063.4 million ($1,558 million), up from R$3,948.6 million ($1,215 million) in the preceding quarter. Long-term debt was R$15,959.6 million ($4,910.6 million), down 14.7% from R$18,703.3 million ($5,754.9 million) at the end of the previous quarter.
In 2016, Gerdau generated net cash of R$3,516.4 million ($1,007.6 million) from its operating activities, down 50.9% year over year. Capital spent on purchase of property, plant and equipment totaled R$1,323.9 million ($379.3 million), down 43.1% year over year. Dividend payments in the year totaled R$85.4 million ($25.9 million)
Outlook
For 2017, Gerdau expects capital expenditure to be R$1.3 billion on productivity and maintenance enhancement.
With a market capitalization of $7.3 billion Gerdau currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Angang Steel Company Limited , Aperam (APEMY - Free Report) and Ternium S.A. (TX - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Angang Steel Company Limited’s earnings estimates for 2017 have been revised upward over the last 60 days.
Aperam’s bottom-line expectations for 2017 and 2018 have improved over the last 60 days.
Ternium S.A.’s earnings estimates for 2017 and 2018 have improved over the past 60 days. Its average earnings surprise is a positive 16.43% for the last four quarters.
Zacks' Top 10 Stocks for 2017
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Gerdau's (GGB) Q4 Loss Widens Y/Y on Weak Segmental Sales
Brazilian steel producer Gerdau S.A. (GGB - Free Report) reported weak results for fourth-quarter 2016. The company recorded adjusted net loss of R$203.4 million ($61.6 million), wider than the loss of R$40.9 million ($10.6 million) in the year-ago quarter.
For 2016, the company’s net income plunged 86.8% year over year to R$90.2 million ($25.8 million).
Revenues
In the quarter, Gerdau’s net sales totaled R$8,619.6 million ($2,612 million), down 17.5% year over year primarily due to forex woes and special steel units divestment in Spain.
Crude steel production declined 14.5% year over year to 3.326 million tons, while shipments of steel fell 2.3% to 3,799 million tons. Production decline was due to inventory optimization at Brazil and North America business divisions as well as divestment of Spain-based special steel units.
Segmental Details: A brief discussion on Gerdau’s segmental results is provided below.
Revenues sourced from the Brazil BD (business division) accounted for 30.1% of net sales, up 9.1% year over year, while that from North America BD represented roughly 39.9% of net sales, down 21.8% year over year. The South America BD revenues constituted 12.2% of net sales, down 18.3% year over year. Revenues from Special Steel BD decreased 37.5%, comprising 17.8% of net sales.
For 2016, the company’s net sales were R$37,651.7 million ($10,788.5 million), down 13.6% year over year.
Margins
In the quarter, Gerdau’s margins suffered due to fall in net sales, partially gaining from decrease in cost of sales. As a percentage of net sales, cost of sales was 93.9% down from 92.5% in the year-ago quarter. Gross margin was down 140 basis points (bps) to 6.1%.
Selling expenses, as a percentage of revenues were 2.1%, while general and administrative expenses were 4.1%. Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were R$716 million ($217 million), down 21.4% year over year. EBITDA margin came in at 8.3% compared with 8.7% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the fourth quarter, Gerdau had cash and cash equivalents of R$5,063.4 million ($1,558 million), up from R$3,948.6 million ($1,215 million) in the preceding quarter. Long-term debt was R$15,959.6 million ($4,910.6 million), down 14.7% from R$18,703.3 million ($5,754.9 million) at the end of the previous quarter.
In 2016, Gerdau generated net cash of R$3,516.4 million ($1,007.6 million) from its operating activities, down 50.9% year over year. Capital spent on purchase of property, plant and equipment totaled R$1,323.9 million ($379.3 million), down 43.1% year over year. Dividend payments in the year totaled R$85.4 million ($25.9 million)
Outlook
For 2017, Gerdau expects capital expenditure to be R$1.3 billion on productivity and maintenance enhancement.
Gerdau S.A. Price and Consensus
Gerdau S.A. Price and Consensus | Gerdau S.A. Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $7.3 billion Gerdau currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Angang Steel Company Limited , Aperam (APEMY - Free Report) and Ternium S.A. (TX - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Angang Steel Company Limited’s earnings estimates for 2017 have been revised upward over the last 60 days.
Aperam’s bottom-line expectations for 2017 and 2018 have improved over the last 60 days.
Ternium S.A.’s earnings estimates for 2017 and 2018 have improved over the past 60 days. Its average earnings surprise is a positive 16.43% for the last four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>