(Adds share price, comments, iron ore context)
By Stephen Eisenhammer
RIO DE JANEIRO, July 30 (Reuters) - Brazil's steelmaker Gerdau SA posted a slight decline in second-quarter profit but topped analysts' expectations as strong U.S. exposure helped to offset weakness from a faltering Brazilian economy and lower iron ore prices.
Sales in North America rose 6.9 percent during the period as demand jumped in the region's nonresidential construction sector. Gerdau is the largest producer of long steel, used for construction, in the Americas.
Despite a stronger performance in the United States, the company gave a cautious outlook reflecting a weaker Brazilian and international steel market. It cut planned investment for the year by 17 percent to 2.4 billion reais.
Gerdau shares fell as much as 1.9 percent in Sao Paulo trading, reflecting a wider market malaise over Brazilian steel. Rivals Usinas Siderúrgicas de Minas Gerais SA and Cia Siderurgica Nacional SA were down 2.5 percent and 0.5 percent respectively.
"Unfortunately, the second-half outlook is looking increasingly challenging in Brazil, and with domestic premiums above 20 percent, some price discounting may be inevitable," Leonardo Correa, an analyst at BTG Pactual SA, wrote in a note to clients following Gerdau's results.
Gerdau is running its Brazilian mills at 70 percent capacity, compared with usual levels of 80 percent to 85 percent, Chief Executive Officer André Gerdau Johannpeter told reporters on a conference call.
The steelmaker reported net income of 393 million reais ($176 million) on revenue of 10.4 billion reais. Net income was down 2.5 percent from the same period last year but ahead of the average analyst target of 386.75 million reais, according to a Reuters poll.
Further reflecting weakness in Brazil's steel market, Gerdau's earnings before interest, taxes, depreciation and amortization (EBITDA) from the country fell 18 percent from the first quarter.
The Brazilian economy has stagnated over the past 12 months and industrial output has fallen for three straight months through May.
With the company's revenue mix of about 40 percent each from operations in the United States and Brazil, it can better weather faltering demand in Brazil than rivals like Usiminas, which missed profit estimates by nearly 10 percent. .
EBITDA from iron ore fell by half in the quarter as prices slid to 22-month lows and the company struggled with logistical problems. Gerdau has invested heavily in the business, with a target of producing 18 million tonnes of iron ore by 2016.
Chief Financial Officer Andre Pires de Oliveira Dias said problems might continue as Gerdau waits to use the Sudeste port, which should begin operations later this year.
"We still have some logistical difficulties, with the Sudeste Port not yet finished ... We'll probably see some impact (next quarter)." ($1 = 2.23 Brazilian reais) (Reporting by Stephen Eisenhammer; Editing by Jeffrey Benkoe and Nick Zieminski)