UPDATE 2-Gerdau Q2 offsets Brazilian weakness with U.S. exposure

miércoles 30 de julio de 2014 14:53 GYT

(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.   Continuación...