Gerdau AmeriSteel Corp. (GNA)

[eastunder]

Gerdau Ameristeel Announces 2009 First Quarter Results

Thursday , May 07, 2009 08:15ET

TAMPA, FL, May 7, 2009 (Canada NewsWire via COMTEX) -- Gerdau Ameristeel Corporation (NYSE: GNA; TSX: GNA) today reported a net loss of $32.7 million ($0.08 per share fully diluted) for the three months ended March 31, 2009, in comparison to net income of $163.0 million ($0.38 per share fully diluted) for the three months ended March 31, 2008.

During the first quarter of 2009, as a consequence of the global liquidity crisis and the resulting downturn in global economic activity, the Company's shipment volume for its products remained low. Net sales for the three months ended March 31, 2009 decreased 50% to $1.0 billion from $2.0 billion for the three months ended March 31, 2008. For the three months ended March 31, 2009, finished steel shipments were 1.2 million tons, a decrease of 50% from the three months ended March 31, 2008. In comparison to the fourth quarter of 2008, shipment volume decreased 12%. Despite the sharp decrease in volume in comparison to the three months ended March 31, 2008, average mill finished steel selling prices for the three months ended March 31, 2009 were essentially flat with the level in the same period in 2008. However selling prices decreased $173 per ton in comparison to the three months ended December 31, 2008.

For the three months ended March 31, 2009, metal spread, the difference between mill selling prices and scrap raw material costs, was $528 per ton, an increase of $70 per ton from the same period in 2008. In comparison to the three months ended December 31, 2008, metal spreads decreased by $108 per ton as the decrease in selling prices was much greater than the decrease in scrap raw material costs. Scrap raw material cost used in production for the three months ended March 31, 2009 decreased $77 per ton, or 28%, compared to the three months ended March 31, 2008.

EBITDA was $48.6 million for the three months ended March 31, 2009, compared to EBITDA of $387.4 million for the three months ended March 31, 2008. In comparison to the three months ended December 31, 2008, EBITDA increased by 151% from the $19.4 million earned in the prior period, primarily as a result of the cost reduction initiatives undertaken by the Company.

Included in cost of sales (exclusive of depreciation and amortization) for the three months ended March 31, 2009 is a pre-tax charge of $18.4 million to write down the value of certain of the Company's inventory to its current market value. The impact of market forces can have a significant effect on the selling prices of certain of the Company's products. The writedown of the Company's inventory was primarily related to the impact of certain high-priced raw materials purchased by the Company prior to the decline in market selling prices for the Company's finished products experienced since the fourth quarter. Generally, raw material costs fluctuate with the market selling prices of finished product. However, as production rates have been curtailed since the fourth quarter, the consumption of the higher-priced raw material inventory did not keep pace with the reduction in selling prices for the Company's finished products, resulting in the need for a lower of cost or market writedown.

At March 31, 2009, the Company had $865.2 million of cash and short-term investments an increase of $176.9 million from the levels at December 31, 2008. In addition, the Company had approximately $671.4 million of availability under secured credit facilities which resulted in a total liquidity position of approximately $1.5 billion at March 31, 2009.

Because of continued weakness in the economy and the Company's desire to be prudent given current economic circumstances, the Board of Directors decided not to declare the usual $0.02 per share dividend this quarter. Consistent with its dividend policy, the Board intends to reevaluate the payment of dividends in subsequent quarters.

CEO Comments

Mario Longhi, President and CEO of Gerdau Ameristeel, commented:

"The improvement in EBITDA in the quarter is the result of the aggressive actions that we initiated during the fourth quarter to curtail production, reduce inventory levels and improve our cost structure. Our early recognition of the severe impact of the global economic slowdown on our business allowed us to operate our facilities during the first quarter of 2009 at increased production rates in comparison to the fourth quarter of 2008, to realize the benefit of cost reduction efforts through reduced manufacturing costs and to continue to generate strong cash flows.

The outlook of the economy for the balance of 2009 remains uncertain so we remain focused on what we can control. We continue to reduce our investment in working capital while ensuring that we have the right inventory available for our customers and we continue to seek further opportunities to reduce our costs. We further enhanced our liquidity during the quarter and we continue to focus on maintaining our strong balance sheet. As we primarily serve the non-residential construction industry, we believe we are well-positioned to benefit from the recently announced economic stimulus package and infrastructure development programs."

IFRS Conversion

In order to align the Company's financial reporting requirements with its majority shareholder Gerdau S.A., the Company is anticipating the early adoption of International Financial Reporting Standards ("IFRS") to replace its current US GAAP reporting requirements. While US GAAP is in many respects similar to IFRS, the conversion is expected to result in differences in recognition, measurement and disclosures in the Company's financial statements which the Company is continuing to assess.

financials continued at :

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