Brazilian steelmaker Gerdau has reported second quarter net income that beat analysts' estimates as a decline in taxes offset a surge in foreign debt servicing costs.

Gerdau earned BRL 549 million in the quarter as compared with BRL 503 million a year earlier. The company had profit of BRL 397 million in the first quarter.

A Reuters' poll of 11 analysts had forecast an average net profit of BRL 428.4 million for the period, mainly after estimates accounted for a bigger impact of an 11% tumble in the Brazilian currency on foreign sales of rods and other steel products.

On a quarter over quarter basis, results signaled that activity in the sector is at a turning point and is bound to recover despite high raw materials costs, mounting competition from imports and an abrupt economic slowdown in Brazil.

Gerdau will resume a plan to build a plant worth BRL 1.1 billion in Mexico to produce profiles in cold bended steel, the filing added. The mill will have capacity to produce 1 million tonnes of steel and 700,000 tonnes of rolled products and should begin operations by 2014.

Production of raw steel fell 1.5% YoY to 5.046 million tonnes but gained 2.1% QoQ. Sales slipped 2.4% from the second quarter of 2011, yet climbed 1.1% from the prior three months.

Revenue rose 11% to BRL 9.975 billion from a year earlier, and 8.4% from the first quarter. Costs rose 12.4% on an annual basis, and 5.7% on a sequential basis.

EBITDA fell 5% to BRL 1.244 billion from a year earlier. The indicator, known as EBITDA, jumped 23% from the first quarter. EBITDA came slightly below analysts' average forecast of BRL 1.270 billion.

Source - Reuters

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