May 6, 2020 / 5:07 PM / a month ago

UPDATE 1-Brazilian steelmaker Gerdau eyes construction rebound after profit drop

(Updates with management comments, adds share price)

SAO PAULO, May 6 (Reuters) - Brazilian steelmaker Gerdau plans to restart the blast furnace at its mill in the town of Ouro Branco at the end of June or beginning of July, as the company expects a gradual rebound in orders, Chief Executive Gustavo Werneck said on Wednesday.

Earlier in the day, Gerdau said its first-quarter profit fell by half to 221 million reais ($39.6 million) compared with a year ago due to weaker sales in South America, although sales in the United States were more resilient.

In a securities filing, Gerdau said investment this year will be cut to 1.6 billion reais from a previous forecast of 2.6 billion reais, adding that Brazilian and U.S. raw steel sales fell in the tail end of the quarter due to auto production suspensions related to the coronavirus outbreak.

However, Werneck attempted to strike an upbeat tone on a call with analysts, saying that residential building activity should pick up in the second half of 2020.

“The most difficult moment has perhaps already passed,” Werneck said.

“May could end with a 25% fall in orders versus January and February. I think (afterward) there should be a more consistent recovery, especially in civil construction.”

Gerdau’s Brazil-listed preferred shares were down 3.2% in afternoon trading, while Brazil’s benchmark Bovespa equities index was off 0.5%. (Reporting by Marcelo Rochabrun and Alberto Alerigi Jr., Writing by Gram Slattery Editing by Louise Heavens and Paul Simao)

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