October 14, 2008

Gerdau CCA purchase a strategic move – Mr Nascimento

BNamericas reported that Brazil steelmaker Grupo Gerdau's USD 180 million purchase of a 30% stake in Guatemalan steelmaker Corporación Centroamericana del Acero has tremendous strategic potential.

Mr Raphael Nascimento an analyst at local bank BRG Capital told BNamericas that the most significant aspect of the Gerdau purchase is CCA's importance in terms of distribution assets in Central America.

He said that "CCA is actually a small family owned company but offers great potential and should guarantee a solid introduction of Gerdau in Central America adding that CCA's facilities account for just 2% to 3% of Gerdau's total assets.

Mr Nascimento also said the purchase will avert the entrance of more competitors into the region. He pointed out that ArcelorMittal, for example, also showed some interest in acquiring CCA.

The analyst said that in the recent past Gerdau has been known for buying small and mid sized companies snapping up several firms in a number of countries last year and implementing different strategies. With the CCA deal, the company now has a strong presence in a fast growing market in terms of per capita consumption. He added that if all works out well for Gerdau, the group should increase its share at CCA.

CCA distributes and produces long steel supplying the construction, automotive and capital goods sectors. It is considered to be the largest manufacturer in the region and has an annual capacity to produce 500,000 tonnes of steel and 690,000 tonnes of rolled products.