Gerdau AmeriSteel Corp. (GNA)

[eastunder]

Gerdau Ameristeel Announces 2009 Second Quarter Results

Thursday , August 06, 2009 08:35ET

TAMPA, FL, Aug. 6 /PRNewswire-FirstCall/ - Gerdau Ameristeel Corporation (NYSE: GNA; TSX: GNA) today reported a net loss of $57.6 million ($0.13 per share fully diluted) for the three months ended June 30, 2009, in comparison to net income of $262.1 million ($0.60 per share fully diluted) for the three months ended June 30, 2008. Included in these results is a $36.5 million pre-tax non-cash charge related to actions announced in early June to close or suspend production at certain of the Company's steel mills. Excluding these charges, the Non-GAAP Adjusted Net Loss was $30.7 million ($0.07 per share fully diluted).

For the six months ended June 30, 2009, the Company incurred a net loss of $90.3 million ($0.21 per share fully diluted) compared to net income of $425.1 million ($0.98 per share fully diluted) for the six months ended June 30, 2008. The Non-GAAP Adjusted Net Loss for the six months ended June 30, 2009, excluding the non-cash charges described above, was $63.4 million ($0.15 per share fully diluted).

During the second quarter of 2009, net sales were $1.0 billion and remained flat in comparison to the three months ended March 31, 2009, but decreased 60% from the $2.5 billion for the three months ended June 30, 2008. Weighted average mill selling price decreased 16% or $116 per ton in comparison to the three months ended March 31, 2009 and decreased 31% or $270 per ton in comparison to the second quarter of 2008. Finished steel shipments were 1.3 million tons for the three months ended June 30, 2009, an increase of 13% in comparison to the first quarter of 2009 but a decrease of 46% from the three months ended June 30, 2008.

Net sales for the six months ended June 30, 2009 were $2.1 billion compared to net sales of $4.6 billion from the same period in 2008. Weighted average mill selling price for the six months ended June 30, 2009 decreased 18% or $143 per ton compared to the same period in 2008 while finished steel shipments decreased 48% to 2.5 million tons for the six months ended June 30, 2009 compared to 4.9 million tons for the same period in 2008.

For the three months ended June 30, 2009, metal spread, the difference between mill selling prices and scrap raw material costs, was $440 per ton, a decrease of $59 per ton from the same period in 2008. In comparison to the three months ended March 31, 2009, metal spreads decreased by $88 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 June 30, 2009 was $172 per ton, a decrease of $211 per ton compared to the three months ended June 30, 2008 and a decrease of $28 per ton compared to the three months ended March 31, 2009. For the six months ended June 30, 2009, metal spread was $481 per ton and remained flat in comparison to the same period in the prior year.

EBITDA was $64.8 million for the three months ended June 30, 2009, compared to EBITDA of $521.1 million for the three months ended June 30, 2008. Despite the reduction in metal spread outlined above, EBITDA improved 33% from the $48.7 million for the three months ended March 31, 2009. For the six months ended June 30, 2009, EBITDA was $113.5 million compared to EBITDA of $908.5 million for the six months ended June 30, 2008.

Included in cost of sales (exclusive of depreciation and amortization) for the three and six months ended June 30, 2009 is a pre-tax charge of $14.6 million and $33.0 million to write down the value of certain of the Company's inventory to its current market value. 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.

During the three months ended June 30, 2009, the Company incurred a $14.5 million foreign exchange loss as the Canadian dollar strengthened approximately 8% in comparison to the US dollar. This charge arose from the revaluation of US dollar investments held by our Canadian entities.

At June 30, 2009, the Company had $1.1 billion of cash and short-term investments an increase of $443.9 million from the levels at December 31, 2008. In addition, the Company had approximately $538.7 million of availability under secured credit facilities which resulted in a total liquidity position of approximately $1.7 billion at June 30, 2009. On July 17, 2009, the Company announced its intention to utilize some of its cash to fully redeem its $405 million 10 3/8% senior notes due in 2011 on August 31, 2009.

The Company announced in early June that it would suspend production at the Sayreville, New Jersey steel mill, close the rolling mill in Perth Amboy, New Jersey and also enter into discussions with the United Steel Workers regarding the potential closure of the Company's steel mill located in Sand Springs, Oklahoma. The Company has entered into a closing agreement with the USW with respect to the Perth Amboy facility and discussions regarding the potential closure of Sand Springs facility are continuing. However, after further evaluation of our markets and production capabilities, the Company has decided not to suspend production at the Sayreville mill. As noted above, the Company recorded a $36.5 million charge during the three months ended June 30, 2009. Depending on the outcome of the Sand Springs discussions, further charges of up to $50 million, on an after tax basis, could be incurred.


CEO Comments


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

"While market conditions continue to present a difficult operating environment, we did see promising signs that conditions may have reached a bottom. During the quarter, we saw a stabilization of volumes as destocking by our customers appears to be slowing, as well as a firming of steel prices across all steel products.

We have made tremendous progress on further reducing costs and implementing productivity initiatives which have resulted in improved EBITDA despite the pressure experienced with respect to selling prices. In addition, we continue to focus on further strengthening our balance sheet which has resulted in continued liquidity growth. We believe this focus will ensure that Gerdau Ameristeel can continue to perform in an otherwise difficult operating environment and position us well for when conditions improve."


IFRS Conversion


The Company has applied with the Ontario Securities Commission (the "OSC") for approval to adopt International Financial Reporting Standards ("IFRS") with an adoption date of January 1, 2009 and a transition date of January 1, 2008. The Company believes that the adoption of IFRS is in the best interests of the Company and the users of its financial information because the adoption of IFRS-IASB will align the bases of accounting under which the Company and its majority owner, Gerdau S.A., prepare their financial statements and increase the comparability of the Company's financial statements to those of a number of global issuers, including competitors within the steel industry, who already prepare, or will soon be required to prepare, financial statements in accordance with IFRS.

financials continued at :

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