Gerdau AmeriSteel Corp. (GNA)

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Gerdau Ameristeel Announces 2009 Third Quarter Results

Thursday , November 05, 2009 07:15ET

TAMPA, FL, Nov. 5 /PRNewswire-FirstCall/ - Gerdau Ameristeel Corporation (NYSE: GNA; TSX: GNA) today reported a net loss of $25.4 million ($0.06 per share fully diluted) for the three months ended September 30, 2009, in comparison to net income of $316.9 million ($0.73 per share fully diluted) for the three months ended September 30, 2008. Included in these results is a $78.5 million pre-tax charge related to actions announced earlier this year to stop production at certain of the Company's steel mills and a pre-tax charge of $11.9 million related to the early extinguishment of certain debt obligations. Excluding these charges, the Non-GAAP Adjusted Net Income was $33.5 million ($0.08 per share fully diluted).

For the nine months ended September 30, 2009, the Company incurred a net loss of $115.6 million ($0.27 per share fully diluted) compared to net income of $742.0 million ($1.71 per share fully diluted) for the nine months ended September 30, 2008. The Non-GAAP Adjusted Net Loss for the nine months ended September 30, 2009, excluding the charges described above, was $30.0 million ($0.07 per share fully diluted).

During the third quarter of 2009, net sales were $1.1 billion, an increase of $110.2 million in comparison to the three months ended June 30, 2009, but a decrease of 56% from the $2.5 billion for the three months ended September 30, 2008. Weighted average mill selling price remained flat in comparison to the three months ended June 30, 2009 but represented a decrease of 41% or $437 per ton in comparison to the third quarter of 2008. Finished steel shipments were 1.5 million tons for the three months ended September 30, 2009, an increase of 12% in comparison to the second quarter of 2009 but a decrease of 29% from the three months ended September 30, 2008.

Net sales for the nine months ended September 30, 2009 were $3.2 billion compared to net sales of $7.1 billion for the same period in 2008. Weighted average mill selling prices for the nine months ended September 30, 2009 decreased 26% or $233 per ton compared to the same period in 2008 while finished steel shipments decreased 43% to 4.0 million tons for the nine months ended September 30, 2009 compared to 7.0 million tons for the same period in 2008.

For the three months ended September 30, 2009, metal spread, the difference between mill selling prices and scrap raw material costs, was $405 per ton, a decrease of $257 per ton from the same period in 2008. In comparison to the three months ended June 30, 2009, metal spreads decreased by $35 per ton due primarily to an increase in scrap raw material costs. Scrap raw material cost used in production for the three months ended September 30, 2009 was $213 per ton, a decrease of $180 per ton compared to the three months ended September 30, 2008. For the nine months ended September 30, 2009, metal spread was $452 per ton and decreased $78 per ton in comparison to the same period in the prior year.

EBITDA was $163.0 million for the three months ended September 30, 2009, compared to EBITDA of $581.4 million for the three months ended September 30, 2008. Despite the reduction in metal spread outlined above, EBITDA improved 152% from the $64.8 million for the three months ended June 30, 2009. For the nine months ended September 30, 2009, EBITDA was $276.4 million compared to EBITDA of $1.5 billion for the nine months ended September 30, 2008.

During the three and nine months ended September 30, 2009, the Company incurred a foreign exchange loss of $18.8 million and $30.5 million, respectively, as the Canadian dollar strengthened approximately 7% and 12% in comparison to the US dollar. This charge arose from the revaluation of US dollar investments held by the Company's Canadian entities.

During the second quarter of 2009, as a result of the significant downturn in the economy and declining demand for its products, the Company announced its plans to stop production at certain facilities. The Company stopped production at its Perth Amboy, New Jersey and Sand Springs, Oklahoma facilities during the third quarter of 2009. The Company recorded a $78.5 million and $115.0 million pre-tax charge for the three and nine months ended September 30, 2009, respectively, related to these actions.

On August 31, 2009, the Company completed the previously announced redemption of its $405 million 10 3/8% Senior Notes due in 2011 (the "Notes") at a redemption price in the amount of $412.3 million representing 101.792% of the outstanding principal amount (the "Redemption Price"). The Redemption Price was paid entirely with cash and the Notes were paid in full and are no longer outstanding. For the three and nine months ended September 30, 2009, the Company recorded a charge of $11.9 million related to this redemption.

At September 30, 2009, the Company had $821.1 million of cash and short-term investments, an increase of $132.7 million from the levels at December 31, 2008. Excluding the above noted redemption of Notes, the Company has generated $545.0 million in cash and short-term investments in 2009. In addition, the Company had approximately $570.3 million of availability under secured credit facilities which resulted in a total liquidity position of approximately $1.4 billion at September 30, 2009.


CEO Comments


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

"We have continued to make progress in a number of areas during the past quarter which has resulted in the third successive quarterly growth in EBITDA. This is a testament of our ability to quickly respond to market conditions and has resulted in the generation of $276.4 million of EBITDA for the nine months ended September 30, 2009. Destocking of inventory by our customers seems to have been completed and resulted in a 12% quarter over quarter increase in our shipment levels. To keep pace, the capacity utilization levels of our mills improved as production increased approximately 24% in comparison to the second quarter and manufacturing costs continued their downward trend as our employees continue to seek more efficient ways of producing steel.

We have substantially completed the activities related to the previously announced actions at our Sand Springs and Perth Amboy locations. As a result of leveraging our extensive network of steel producing facilities, we have been able to meet all of our customers' needs during this process. Our ability to continue providing superior service to our customers has been critical in the growth of our order rate. This focus on developing long-term service relationships is also being applied to our export customers as we expect this market will continue to provide opportunities for us in the future.

We expect normal seasonal market softness during the fourth quarter of 2009 and production will be adjusted to meet demand. However, we are confident that the actions we have taken are sustainable and will provide for attractive returns for our shareholders as conditions improve."


IFRS Conversion


In 2008, the Canadian Accounting Standards Board confirmed that Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards ("IFRS") for interim and annual financial statements related to fiscal years beginning on or after January 1, 2011. The Canadian securities regulatory authorities have granted approval for the Company to early adopt IFRS for its financial statements for periods beginning on or after January 1, 2009. The Company had previously announced that it would report under IFRS for the first time during 2009, however, the Company is currently contemplating deferring the first time adoption of IFRS until 2010. The Company has substantially completed the process to transition from US GAAP to IFRS and has met the objectives of its comprehensive IFRS conversion plan.


Forward Looking Statements


In this press release, "Gerdau Ameristeel" and "Company" refer to Gerdau Ameristeel Corporation and its subsidiaries and 50%-owned joint ventures. Certain statements in this press release, including, without limitation, the section entitled "CEO Comments" constitute forward-looking statements. Such statements describe the Company's assumptions, beliefs and expectations with respect to its operations, future financial results, business strategies and growth and expansion plans can often be identified by the words "anticipates," "believes," "estimates," "expects," "intends," "plans," and other words and terms of similar meaning. The Company cautions readers that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently projected by the Company. In addition to those noted in the statements themselves, any number of factors could affect actual results, including, without limitation:

Excess global steel industry capacity and the availability of competitive substitute materials; the cyclical nature of the steel industry and the industries served by the Company and economic conditions in North America and worldwide; increases in the cost of steel scrap, energy and other raw materials; steel imports and trade regulations; a change in China's steelmaking capacity or slowdown in China's steel consumption; the Company's participation in the consolidation of the steel industry; the substantial capital investment and similar expenditures required in the Company's business; unexpected equipment failures and plant interruptions or outages; the Company's level of indebtedness; the cost of compliance with environmental and occupational health and safety laws; the enactment of laws intended to reduce greenhouse gases and other air emissions; the Company's ability to fund its pension plans; the ability to renegotiate collective bargaining agreements and avoid labor disruptions; currency exchange rate fluctuations; actions or potential actions taken by the Company's principal stockholder, Gerdau S.A., the liquidity of the Company's long-term investments, including investments in auction rate securities, and the Company's reliance on its 50%-owned joint ventures that it does not control.

Any forward-looking statements in this press release are based on current information as of the date of this press release and the Company does not undertake any obligation to update any forward-looking statements to reflect new information, future developments or events, except as required by law.


Notice of Conference Call


Gerdau Ameristeel invites you to listen to a live broadcast of its second quarter conference call on Thursday, November 5, 2009, at 1:30 pm EST. The call will be hosted by Mario Longhi, President and CEO, and Barbara Smith, VP and CFO, and can be accessed via the Company's Web site at www.gerdauameristeel.com. Web cast attendees are welcome to listen to the conference in real-time or on-demand at your convenience.


About Gerdau Ameristeel


Gerdau Ameristeel is the second largest mini-mill steel producer in North America with annual manufacturing capacity of approximately 12 million tons of mill finished steel products. Through its vertically integrated network of mini-mills, scrap recycling facilities and downstream operations, Gerdau Ameristeel serves customers throughout the United States and Canada. The Company's products are generally sold to steel service centers, steel fabricators, or directly to original equipment manufacturers ("OEMs") for use in a variety of industries, including non-residential, infrastructure, commercial, industrial and residential construction, metal building, manufacturing, automotive, mining, cellular and electrical transmission and equipment manufacturing. Gerdau Ameristeel's majority shareholder is the Gerdau Group, a 100+ year old steel company, the leading company in the production of long steel in the Americas and one of the major specialty long steel suppliers in the world. Gerdau Ameristeel's common shares are traded on the New York Stock Exchange and the Toronto Stock Exchange under the ticker symbol GNA.


GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS ....

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