GERDAU AZA - Compendio de Normas Técnicas para Productos de Acero
Gerdau: Informe Anual edición 2012
-
Upload
gerdau-en-chile -
Category
Documents
-
view
226 -
download
0
Transcript of Gerdau: Informe Anual edición 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
1/43
ANNUAL REPORT 2012 BUILDING OPPORTUNITIES
-
7/28/2019 Gerdau: Informe Anual edicin 2012
2/43
BUILDING OPPORTUNITIES
Gerdau
Gerdau faces the challenges of the present with an eye
on the future. That is why it is always looking to build new
business opportunities that can generate outstanding returns
and ensure its sustainable development. Stemming from a
relationship of respect, integrity, transparency, and continuous
search for mutual gains, Gerdau seeks to contribute toward
the development of its customers, suppliers, employees, and
communities where it operates, while creating value for its
shareholders.
Gerdaus history began in 1901 as a small nail factory in Porto
Alegre (RS). Today Gerdau is the leader in the segment of
long steel in the Americas and one of the largest suppliers of
special steel in the world.
Pictures on the Cover
Gerdau is continuously investing in building new business opportunities.
Below are some examples:
1. The construction of a new area of the rolling mill in Ouro Branco (MG) to
manufacture hot rolled coils, making it possible to start the production of at
steel in Brazil in 2013.
2. The increase in production capacity of special bar quality (SBQ) in mills
located in Brazil and the United States.
3. The start of production of special steel in India to supply the automotive
market.
4. The expansion of production capacity of iron ore in Brazil.
It has industrial units in the Americas, Europe, and Asia, which
together represent an installed capacity of over 25 million
metric tons per year. It is the largest scrap recycler in Latin
America and worldwide transforms millions of metric tons of
this raw material into new steel products each year.
Gerdau steel is used in homes, cars, freeways, bridges,
agricultural machinery, home appliances, telephone and
electricity towers, among other uses and is part of the lives of
millions of people everyday.
1 2 3 4
-
7/28/2019 Gerdau: Informe Anual edicin 2012
3/43
Consolidated nancial performance
(R$ million)
*Represents earnings before interest, taxes, depreciation,
and amortization. It is calculated in accordance with CVM
Instruction no. 527.
KEY INDICATORS*
0
10,000
20,000
30,000
40,000
2012 2011
2,098
4,651
35,407
1,496
4,176
37,982
Net sales
EBITDA*
Net income
*Lost-time accident frequency rates per million hours worked,
including employees and service providers. The data also includes
restricted work and change of function (OSHA recordable treated as
LT accidents).
*Ratio between the dividend paid per share and the preferred share priceon the last day of the year.
*The appreciation of the shares was calculated considering the local
currency at the beginning and at the end of the year.
Environmental management 2012 2011
Reuse of by-products(% of total generated)
74.8 78.3
Investments (R$ million) 178.4 370.9
Social Responsibility 2012 2011
Investments (R$ million) 52.7 61.0
Volunteer employees(thousand people) 7.9 9.5
Capital markets 2012 2011
Metalrgica Gerdau S.A.
Dividends (R$ per share) 0.32 0.55
Dividend yield (%)* 1.4 3.1
Gerdau S.A.
Dividends (R$ per share) 0.24 0.35
Dividend yield (%)* 1.3 2.4
Valuation of shares* 2012
Metalrgica Gerdau S.A. PN (GOAU4) - R$ 30.2%
Metalrgica Gerdau S.A. ON (GOAU3) - R$ 20.3%
Gerdau S.A. PN (GGBR4) - R$ 25.7%
Gerdau S.A. ON (GGBR3) - R$ 28.4%
Gerdau S.A. ADRs Nyse (GGB) - US$ 17.0%
Gerdau S.A. - Latibex (XGGB) - 12.5%
Ibovespa (So Paulo) - R$ 7.4%Dow Jones (New York) - US$ 7.3%
Latibex (Madrid) - -10.7%
Production and shipments 2012 2011
Steel production(thousand metric tons)
18,920 19,623
Consolidated shipments(thousand metric tons)
18,594 19,164
People 2012 2011
General Satisfaction Index(internal climate)
76% 75%
Accident frequency rate* 1.06 1.59
Financial margins 2012 2011Gross margin 13% 14%
Net margin 4% 6%
EBITDA Margin 11% 13%
*The dollar exchange rate on December 31, 2012 was R$ 2.0435.
-
7/28/2019 Gerdau: Informe Anual edicin 2012
4/43
MISSION
To create value for our customers,
shareholders, employees, and communities
by operating as a sustainable steel business.
VISION
To be a global organization and a benchmark
in any business we conduct.
VALUES
Be the CUSTOMERs choice
SAFETY above all
Respected, engaged and fulfilled EMPLOYEES
Pursuing EXCELLENCE with SIMPLICITY
Focus on RESULTS
INTEGRITYwith all stakeholders
Economic, social and environmental SUSTAINABILITY
CANADA
UNITED STATES
DOMINICAN REPUBLIC
VENEZUELA
BRAZIL
URUGUAY
ARGENTINA
CO
ATEMALA
HONDURAS
COLOMBIA
PERU
BOLIVIA
CHILE
INDIA
SPAIN
60
148
4
62
4
135
3
* Scrap collection and processing facilities, solid pig
iron production facilities, and coal units.
Countries where Gerdau has jointly controlled
entities: Guatemala, Mexico, and the
Dominican Republic
GERDAU AROUND THE WORLD
Steel mills
Downstream operations
Iron ore extraction areas
Scrap collection and processing facilities *
Power plants
Retail facilities
Private port terminals
Gerdau Headquarters
-
7/28/2019 Gerdau: Informe Anual edicin 2012
5/43
4
Message from the Chairman of the Board
Message from the CEO
Corporate governanceStrategy and competitive advantage
Business
Performance of operations
Finances
Relationships
Employees
05
06
0711
12
12
18
20
20
Customers
Suppliers
ShareholdersSociety
Environment
Timeline
Summarized nancial statements
Credits and contacts
24
25
2627
28
30
36
40
2012 HIGHLIGHTS
Gerdau announces new investments in mining to increase
its annual installed capacity from 11.5 million to 18 million
metric tons by 2016. Besides that, the rst shipments of
iron ore were made to the international market, totaling
325,000 metric tons.
Investments continue to be made to begin the production
of at steel in Brazil. With an installed capacity of 800,000
metric tons per year, the hot rolled coil mill will begin
operations in 2013.
The company announces the construction of a new melt
shop at its Riograndense mill located in Sapucaia do Sul
(RS) with an installed capacity of 650,000 metric tons per
year, which will replace the current melt shop.
The project for building a new plant in Mexico has
resumed as the joint venture Gerdau Corsa. Focused on
the production of structural shapes, the plant will have an
annual installed capacity of 1 million metric tons of steel
and 700,000 metric tons of rolled products.
Gerdau starts up the blast furnace operation in India along
with the power generation plant, the sinter plant, the melt
shop, and the new special steel rolling mill.
A new continuous casting plant is inaugurated in Monroe,
Michigan (U.S.) in 2012 as part of the investment to
expand the installed capacity of special steels to meet the
growing demand of the automotive market in the region.
TABLE OF CONTENTS
GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
6/43
-
7/28/2019 Gerdau: Informe Anual edicin 2012
7/43
6
Andr B. Gerdau Johannpeter
Gerdau Chief Executive Ofcer
MESSAGE FROM THE CEO
We built new business opportunities and seek to enhance
our operational efciency in a scenario marked
by signicant challenges.
Management efforts and construction ofopportunities
For Gerdau, the year 2012 was marked by signicant
challenges, mainly due to strong competition in the global
steel market. Because of this, we sought to expand our
operational efciency and build new business opportunities
in an economic scenario characterized by a slowdown in
China and other emerging countries, the European crisis,
and by the uncertainty over the scal policy in the United
States, which resulted in a lower global demand than
initially expected. At the same time, we are experiencing
an increase in the costs of raw materials and freight.
Nevertheless, we increased our net sales by 7% to R$
38 billion, even with the 3% reduction in shipments,
which totaled 18.6 million metric tons in 2012.
EBITDA in turn was R$ 4.2 billion, a 10% reduction
compared to the previous year. Consolidated net
income was R$ 1.5 billion, 29% lower than in 2011.
During the year we worked hard to build new business
opportunities such as increased investments in mining,
which will generate signicant results with exporting this
raw material to the international market. We are also
going to expand the product mix in Brazil with the start
of production of at steel products in 2013. Furthermore,
we strengthened our presence in India where we started
producing special steel, a high added-value segment.
All this would not be possible without the commitment
of our employees in a positive work climate, which can be
seen by the high satisfaction rate on the Opinion Survey
that increased from 75% in 2011 to 76% in 2012. We also
believe that Gerdaus growth is directly related to its respect
for the environment and with the development of the steel
business chain. That is why we have invested in more than
900 social projects and in the most advanced technologies
to minimize the impact of our operations on nature.
Outlook
Considering the investments made in 2012 and the
uncertainties about the global economic market, we will be
more selective in evaluating future projects. Investments of
R$ 8.5 billion have been planned for the period of 2013-
2017, considering both the steel and mining activities.
For 2013, we expect a gradual evolution of the U.S.
economy and a recovery of Brazils, as well as continued
growth in China and other countries in Latin America.
These positive perspectives combined with the internal
actions to improve our operating efciency should
improve Gerdaus protability throughout the year.
Acknowledgments
I would like to thank our employees for their dedication
and the condence of our customers, shareholders,
suppliers, and communities, as they are fundamental to the
continuation of our trajectory of sustainable development.
GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
8/43
7
A solid governance structure andtransparency with our stakeholdersare at the core of Gerdau
Gerdau follows strict ethical principles that have been
consolidated along its centennial trajectory, and it is
continually striving to improve its relationship with all of
its stakeholders. It has a solid governance structure
and uses modern management tools that make it
possible to build business opportunities, achieve increasing
levels of excellence and competitiveness, as well as
achieve the highest quality in everything it does.
Gerdau currently has three publicly traded companies:
Gerdau S.A., Metalrgica Gerdau S.A., and Empresa
Siderrgica Del Per S.A.A. (Siderperu). The Gerdau S.A.
shares are traded on BM&FBOVESPA (So Paulo),
on the New York Stock Exchange (NYSE), and on
the Madrid Stock Exchange (Latibex). Because it has
shares traded on the U.S. market, Gerdau S.A. follows
the requirements of the Sarbanes-Oxley (SOX) act,
which sets stringent corporate governance practices
and internal controls. The shares of Metalrgica
Gerdau S.A. are traded on BM&FBOVESPA (So Paulo)
and those of Siderperu on the Lima Stock Exchange.
Corporate governance structure
The Board of Directors of Gerdau S.A. is responsible for
dening the Companys long-term strategies and to monitor
the execution of the policies it establishes. In addition, this
body makes decisions about issues considered relevant
within the business and operations, as well as appointing
the Gerdau Executive Committee (CEG) members. The
Board of Directors has nine members, including external
directors, who meet between eight to ten times a year. It is
assisted by the following committees: Strategy Committee,
Corporate Governance Committee, Compensation
and Succession Committee, and Risk Committee.
The Board of Directors of Metalrgica Gerdau S.A.,
on the other hand, has 11 members, nine of which are
also a part of the Board of Directors of Gerdau S.A.
and two are elected by the minority shareholders. In
both companies, the term of ofce of each member
is one year with the possibility of re-election.
It should also be pointed out that Gerdau S.A. and
Metalrgica Gerdau S.A. have audit committees that
monitor and inspect the actions of the board members
as well as give their opinions and advice on the nancial
statements. The members of the Board of Directors and
of the Audit Committee in each one of the companies
are elected at the Ordinary General Meeting (OGM).
Corporate management is the responsibility of the
Board of Directors, whose Executive Committee
(CEG) coordinates and supervises the Companys
Business Operations and the Functional Processes,
working in accordance with the policies established by
the Board of Directors. Composed of a CEO and ve
Executive Vice-Presidents, the CEG has the support of
committees set up according to criteria of expertise.
Risk management
A structured and continuously updated management
system monitors all the variables that may pose
risks to Gerdaus business and operations. In 2012,
the Company consolidated its best practices in this
area and formalized its Risk Management Policy,
which was approved by the Board of Directors.
Furthermore, the Risk Committee, which is responsible
for managing and monitoring possible risks that
may generate impacts directly or indirectly on the
Company, began reporting directly to the Board of
Directors and no longer as a committee of the CEG.
Independent Audit
Gerdaus publicly traded companies regularly submit
their nancial statements for external audit. In the
case of needing to contract eventual services not
related to external auditing by the independent
auditor, the Company bases this on the principles
that preserve the auditors independence.
CORPORATE GOVERNANCE
GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
9/43
8
Corporate Governance Structure
Read more about the Gerdau governance structure athttp://www.gerdau.com.br/sobre-gerdau/governanca-corporativa.aspx?language=en-US
Board ofDirectors
Corporate Governance, Strategy,Compensation & Succession,
and Risk Committees
Board ofAuditors
Gerdau Officersand Executive
Committee
BusinessDivisions
BrazilSpecialSteel
NorthAmerica
LatinAmerica
SupportCommittees
Macroprocesses
ShareholdersMeeting
CORPORATE GOVERNANCE
GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
10/43
9
Jorge Gerdau JohannpeterChairman
Klaus Gerdau JohannpeterVice-Chairman
Germano H. Gerdau JohannpeterVice-Chairman
Affonso Celso PastoreBoard Member
Oscar de Paula Bernardes NetoBoard Member
Alfredo HuallemBoard Member
Frederico C. Gerdau JohannpeterVice-Chairman
Claudio Gerdau JohannpeterBoard Member
Andr B. Gerdau JohannpeterBoard Member
Gerdau S.A. Board of Directors
CORPORATE GOVERNANCE
GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
11/43
10
1. Andr B. Gerdau Johannpeter
Chief Executive Ofcer (CEO) and Chairman of the Gerdau Executive Committee (CEG)
2. Andr Pires de Oliveira Dias
Executive Vice President of Finance, Auditing, and Investor Relations
3. Expedito Luz
Executive Vice President of Legal Affairs and Compliance
4. Francisco Deppermann Fortes
Executive Vice President of Human Resources, Management, and Organizational Development
5. Manoel Vitor de Mendona Filho
Executive Vice President of Brazil Business Division
6. Ricardo Giuzeppe Mascheroni
Executive Vice President of North America and Latin America Business Divisions
CORPORATE GOVERNANCE
Gerdau Executive Committee (CEG)
4 1 23 65
GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
12/43
11
Searching for new business opportunitiesensures sustainable development
Gerdau builds business opportunities in order togenerate outstanding returns and sustainable
development from its operations. Within this scenario,
it currently has three highlights in its investment plan:
expansion of the mining activity, production of at steel
in Brazil, and manufacturing of special steel in India.
In the mining area, the Company has been working over
the past few years to gradually become an international
supplier of iron ore, which began at the end of 2012. In
addition, in the segment of steel, it is working to consolidate
itself as a player in all segments of the market and,
therefore, it is investing to begin production of at steel
in Brazil with the startup of operation of a rolling mill for
hot rolled coils in 2013, and eventually for heavy plates.
In India, industrial production started in 2012 in order to
meet needs of the special steel market in the region.
Unique Features of Gerdau Management
Gerdau Business System (GBS)
Taking actions as a fully integrated organization is the basis
of Gerdaus strategy. To do so, it uses the Gerdau Business
System (GBS), a management system that standardizes,
enhances, and transfers the best practices to all of
the Companys units around the world. The GBS also
contributes to spreading Gerdaus corporate culture,
further expanding the integration between operations.
Gerdau TemplateSince 2010, Gerdau has invested heavily in implementing
a single and global information technology platform
in all of its units around the world. The project, which has
a permanent team of more than 250 employees, provides
greater efciency, security, and speed to customer service
and in sharing information between units, which also
contributes to the Companys greater integration. The units
located in Colombia, Mexico, and Peru were the pioneers
in using the new system, and have already shown positive
results. In 2012, the system was deployed in operations in
Argentina, Canada, Chile, the United States, and Uruguay.
Now in 2013, the initiative will be expanded to other units
in the United States and the project will start up in Brazil.
EBITDA Deployment
In order to increase its protability, Gerdau began the
EBITDA Deployment project in 2012, which included the
alignment of targets and identifying gaps that impact the
generation of the Companys operating cash ow. The
project, which has a global scope, involves building a
breakdown plan of the EBITDA targets in which benchmarks
are established. To do this, the teams use management
techniques to continually monitor results, correct deviations,
as well as make any adjustments in the action plans.
GERDAU STRATEGY
Integrated Organization
Relevance inthe markets
Businesscompetitiveness
Player inall segments
Geographicdiversification
Profitabilityand Growth with Sustainability
STRATEGY AND COMPETITIVE ADVANTAGE
GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
13/43
12
Brazilian market stands out in Gerdausperformance
Strong global competition in the steel market due to
the slowdown in China and other emerging countries,
the European crisis and uncertainty over the scal
policy in the United States inuenced the reduction of
3% in the volume of Gerdaus consolidated shipments
in 2012, which was 18.6 million metric tons.
Throughout the year, the effects of the global economic
scenario were felt at different levels, depending on
the business segment and geographic region of the
operations. The positive highlight for the year was the
Companys performance in the Brazilian domestic market
(excluding special steel mills), despite the lower economic
activity recorded in the country, with an expansion in its
net sales (12%) and the volume of shipments (+5%).
Gerdaus consolidated steel production in 2012, in turn,
was 18.9 million metric tons, 4% less compared to 2011.
BUSINES
S
Shipments per Business Division
18.6 million metric tons
Note: The above information does not include the shipments
volumes from afliated companies and jointly-owned
subsidiaries, neither of coal and coke.
Gerdau expands investments in mining to become an international supplier of iron ore
PERFORMANCE OF OPERATIONS
North America
34%Includes long steel
operations in the United
States and Canada
Brazil
38%Except special
steel mills
Special Steel
14%
Includes special
steel operationsin Brazil, Europe,
and the United States
Latin America
14%
Except Brazil
GERDAU ANNUAL REPORT 2012 | PERFORMANCE OF OPERATIONS
-
7/28/2019 Gerdau: Informe Anual edicin 2012
14/43
13
Brazil(except special steel mills)
Gerdau operates in Brazil with 15 mills producing steel
and rolled products, 3 downstream operations, 39
fabricated reinforcing steel facilities, 5 at steel service
centers, 9 scrap collection and processing units, and
4 iron ore extraction areas. It also has 88 distribution
branches ofComercial Gerdau, which ensures an
agile and efcient distribution of at and long steel,
as well as greater proximity to customers.
The global steel market should show signs of
recovery in 2013. According to the World Steel
Association, steel consumption is expected to
grow 3.2%, reaching 1.46 billion metric tons.
Gerdau is prepared to meet the growing demand
for steel in the world. For the period of 2013-2017,
R$ 8.5 billion are scheduled in investments in its
industrial units, considering both the steel and
mining activities.
In a scenario of signicant cost pressures, especially
of raw materials, and the deindustrialization of the
country, the main challenge for Gerdau was to improve
operational efciency and the competitiveness
of its units. To do this, the Company continued its
investments in the technological modernization ofits units, expanded its mining operations as a way
to increase its protability, and continued investing
to begin the production of at steel in Brazil.
As for the mining area, the Company plans to
achieve an installed capacity of 11.5 million metric
tons in 2013. Moreover, Gerdau has already made
its rst shipments of iron ore to the international
market, totaling 325,000 metric tons.
At the end of 2012, Gerdau announced additional
investments to expand its production capacity of iron ore
to 18 million metric tons by 2016, and implement a rail
terminal in Miguel Burnier (MG) for shipping the product
easily. With these investments, the Company will have
a broad portfolio of iron ore products concentrates,
sinter feed, and granulated materials with a quality to
meet the requirements of the most demanding markets.
Gerdaus volume of mineral resources today reaches
Gerdau will start the production of at steel in Brazil in 2013
OUTLOOK: WORLD
PERFORMANCE OF OPERATIONS | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
15/43
-
7/28/2019 Gerdau: Informe Anual edicin 2012
16/43
15
To reduce costs, Gerdau acquired Cycle Systems
Inc. in early 2013, a company with facilities located
in Virginia for recycling and processing scrap steel,
which is a key raw material for producing steel. It
also continued with the implementation of a single
information technology system, which will further
ensure its customer service quality (see the section
Strategies and Competitive Advantages, p. 11).
For 2013, we expect a gradual recovery of the
economies of the countries in North America.
In the United States, the increase in the production of
shale gas should generate new market opportunities
for Gerdau due to the infrastructure necessary for the
exploration of this input, as well as allow the reduction
of operating costs with a cheaper access to an
alternative energy source.
Regarding steel consumption in the region, the World
Steel Association forecasts growth of 3.6% in 2013 in
the United States, reaching 100 million metric tons. In
Canada, in turn, the consumption of steel should have
a rise of 2.9%, reaching 15 million metric tons.
OUTLOOK: NORTH AMERICA
Latin America (except Brazil)
In 2012, Gerdaus units in Latin America faced heavy
pressure from raw material costs and signicant growth in
imports. Faced with this scenario, the Company worked
to adjust its operations with agility and exibility.
Besides seeking to increase operational efciency
and competitiveness in the markets where it operates,
Gerdau invested to expand its product line in the region.
The main highlight was the resumption of the project
to build a new plant in Mexico through its joint venture
Gerdau Corsa. Focused on the production of structural
shapes, the plant will have an annual installed capacity
of 1 million metric tons of steel and 700,000 metric
tons of rolled products. This investment will enable the
replacement of imports of this product in the country
and is expected to start up in the beginning of 2014.
In Guatemala, Gerdau inaugurated a new factory
of welded wire mesh focused on selling to the
construction industry. Furthermore, it continued with
the installation of a new rolling mill for rebars and light
commercial proles with an annual capacity of 200,000
metric tons that will go into operation in 2013.
In Venezuela, the Company is investing in the
technological upgrade of its mill with the objective
Gerdaus CEO announces resumption of the project to build a new plant in Mexico
PERFORMANCE OF OPERATIONS | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
17/43
16
Special Steel
(includes special steel operations in Brazil,
Europe, the U.S., and India)
With steel mills producing special steel in Brazil, the
U.S., Spain, and India, Gerdau is a leading global
supplier to the automotive industry, besides selling
to the segments of oil & gas, wind energy, agricultural
machinery & equipment, mining, among others.
In the Brazilian market, the production of medium and
heavy vehicles (trucks and buses) showed a signicant
reduction over the year, of 38%, caused by the effect
of anticipated manufacturing of heavy vehicles at the
end of 2011 due to new Euro 5 regulations for diesel
engines, which became effective in January 2012. In
the segment of cars and light commercial vehicles, the
reduction of the excise tax (IPI) caused production to
move forward 1% to 3.2 million units according to the
National Association of Vehicle Manufacturers (Anfavea).
Nevertheless, Gerdau continued its investments to expand
the capacity of its plants, focused on expand of future
Gerdaus special steels are used in automotive parts
that require high safety, quality, and reliability
of improving its operational safety and expanding the
production capacity of steel and rolled products in
order to meet the growing demand in the country.
In order to get even closer to the civil construction market
in Chile, Gerdau is building a new fabricated reinforcingsteel facility that will begin operations in 2013.
According to estimates from the World Steel
Association, steel consumption should evolve 6.4%
in Latin America (excluding Brazil), reaching 43.5
million metric tons.
The markets in this region have great growthpotential for 2013 as compared to 2012. Because
of this, Gerdau will continue investing to meet the
future expansion of the market and the specic
needs of its customers.
OUTLOOK: LATIN AMERICA
demand for special steel in the country. In 2013, the new
rolling mill for round bars will start up operations at the
Pindamonhangaba (SP) mill with an annual capacity
of 500,000 metric tons. In addition, the capacity of the
Mogi das Cruzes (SP) rolling mill will grow in 2013 from
216,000 metric tons to 276,000 metric tons per year.
As for the North America market (Canada, U.S., and
Mexico), the production of light, medium, and heavy vehicles
grew signicantly during the year with an 18% evolution in
the automotive segment and 8% in the segment of medium
and heavy vehicles. In total, 15.8 million vehicles (light,
medium, and heavy) were produced and, additionally, there
was a higher local production of automotive components.
To meet the development of the current and future
demand, Gerdau started the operation of a new
continuous casting in Monroe mill (Michigan) as well as
continuing with its modernization and expansion of the
installed capacity of this mill unit, which will increase
from 500,000 to 800,000 metric tons per year by 2014.
In Europe, meanwhile, the economic crisis experienced
in the region led to a decrease in the production of light,
medium, and heavy vehicles in 2012. For example,
the production of light vehicle of 12.5 million units fell
by 8%. The production of medium and heavy vehicles
GERDAU ANNUAL REPORT 2012 | PERFORMANCE OF OPERATIONS
-
7/28/2019 Gerdau: Informe Anual edicin 2012
18/43
17
For 2013, the markets of Brazil, the U.S., and India
should show growth while Europe should start its
process of recovering demand in 2014.
In Brazil, Anfaveas projections indicate that the
production of cars will grow 4.5% and trucks 7%.
In the United States, the stronger demand in the
region is expected to drive growth in the production
of light vehicles and medium and heavy commercial
vehicles by 4%, according to market forecasts.
In India, it is estimated that the production of light
and heavy vehicles will present a growth compared
to the previous year.
OUTLOOK: SPECIAL STEEL
Gerdau starts up the production of special steel in India to supply the regions market
was of 378,000 units, a drop of 11% compared with the
previous year. However, the Company continued investing
in the technological upgrading of its operations located
in Spain, such as the modernization of the continuous
casting at the Basauri mill, in order to enhance the
quality of its products and increase its productivity.
Gerdau has started the operation of a blast furnace in
India, a large potential market, with an annual installed
capacity of 350,000 metric tons, the power generation
plant that will use blast furnace gas, sintering, the melt
shop, and the new special steel rolling mill with an annual
installed capacity of 300,000 metric tons. Two new
inspection lines of bars will start operating in 2013, and
already in the plans for 2014 is the implementation of a
coking plant with an annual capacity of 200,000 metric
tons and integrated into it is a power generation plant.
PERFORMANCE OF OPERATIONS | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
19/43
18
Composition of consolidated EBITDA* (R$ million) 2012 2011
Net income 1,496 2,098
Net nancial income 789 528
Provision for income tax and social contribution 63 253
Depreciation and amortization 1,828 1,772
EBITDA 4,176 4,651
EBITDA Margin 11% 13%
* Includes the results of associated companies and jointly-controlled entities according to the equity method.
* Years ended on December 31, 2012 and 2011.
Consolidated statement of income - summarized*Gerdau S.A. and subsidiaries (R$ millions)
2012 2011
Net sales 37,982 35,407
Cost of sales -33,234 -30,298
Gross prot 4,748 5,109
Operating expenses -2,400 -2,230
Income before nancial income and taxes 2,348 2,879
Financial income -789 -528
Income before taxes 1,559 2,351
Income tax and social contribution -63 -253
Net income for period 1,496 2,098
Net Sales Grows 7% in 2012
Net sales
Gerdau closed the year 2012 with aconsolidated net sales of R$ 38 billion, which
is a growth of 7% compared to last year.
Cost of sales and operating expenses
In 2012, the cost of sales in consolidated terms was
R$ 33.2 billion, 10% above that recorded in 2011.
This increase reects the rising costs of key raw
materials for the steel production process and lower
dilution of xed costs due to lower volumes sold.
Selling, general, and administrative expenses
grew 3% to R$ 2.5 billion. However, its part in
relation to net revenues proved to be stable in
2012 compared with the previous year.
FINANCES
Source of net sales
R$ 38 billion
Note: The information above does not include data from
afliated companies and jointly owned subsidiaries.
Brazil
36%Except special
steel mills
North America32%Includes long steel
operations in the
United States and Canada
Latin America
13%Except Brazil
Special Steel
19%Includes special
steel operations in
Brazil, Europe, and
the United States
GERDAU ANNUAL REPORT 2012 | FINANCES
-
7/28/2019 Gerdau: Informe Anual edicin 2012
20/43
19
EBITDA
EBITDA (earnings before interest, taxes, depreciation
and amortization) was R$ 4.2 billion, which is a 10%
reduction compared to the previous year inuenced
mainly by rising costs of key raw materials and lower
equity in earnings of subsidiaries and associatedcompanies. As a result, the EBITDA margin was also
impacted, going from 13% last year to 11% in 2012.
Financial expenses and incomes
The higher net nancial expenses, which reached
R$ 789 million against R$ 528 million in 2011, were
primarily due to a lower net income and foreign
exchange losses on the hedge of net investment.
Net protFor the year, consolidated net prot went from R$ 2.1
billion in 2011 to R$ 1.5 billion in 2012, which was
mainly due to lower operating and nancial results.
Added value breakdown
The added value of Gerdau companies in consolidated
terms reached R$ 10 billion in 2012, which is a 2% increase
on the previous year. This good performance is a result
of revenues from products and services net of discounts,
which reached R$ 39.6 billion, net of costs of R$ 29.6
billion related to raw materials and consumer goods,
outsourced services, depreciation and amortization, equity
in earnings, and nancial income, among other items.
Added Value Breakdown
R$ 10 billion
Financial liabilities
On 31 December 2012, Gerdaus net debt (gross debt
minus cash on hand and nancial investments) was
R$ 12.2 billion against the R$ 9.1 billion recorded at
the end of 2011. This increase in net debt is a reection
primarily of the exchange rate effect on debts in foreign
currencies, the increased need for working capital
throughout 2012, and investments made during the year.
Gross debt at the end of the year was R$ 14.7 billion, of
which 82% was long-term and 18% short-term. Of the
total gross debt, 47% was in foreign currency contracted
by the subsidiaries in Brazil, 33% in different currencies
contracted by subsidiaries abroad, and 20% in reais.
On December 31, 2012, Gerdaus available cash,
cash equivalents, and investments were R$ 2.5
billion, of which 35% was held by the Gerdau
companies abroad, mainly in U.S. dollars.
The ratio between net debt and EBITDA reached 2.9
times in December 2012 against 2.0 times in December
2011. The ratio between gross debt and EBITDA, in turn,
reached 3.5 times versus 2.9 times in the previous year.
Indebtedness(R$ million)
12/31/2012 12/31/2011
Current 2,583 1,757
Non-current 12,086 11,927
Gross debt 14,669 13,684
Cash, cash equivalents,and nancial investments
2,497 4,578
Net debt 12,172 9,106
Salaries, benefits,
profit sharing,
and training
49%(R$ 4.9 bi)
Dividends and interest
on shareholders equity
4%(R$ 0.4 bi)
Reinvestments
of profits
11%(R$ 1.1 bi)
Interest
on financing
11%(R$ 1.1 bi)
Taxes
and social
contributions
25%(R$ 2.5 bi)
FINANCES | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
21/43
20
RELATIONSHIPS
Gerdaus corporate culture is the basefor the efciency needed to face theglobal challenges
Gerdaus corporate culture, made up of values,history, and attitudes, is shared by its more than
45,000 employees. And this is what forms the basis of
the existence of this centennial Company. Knowledge
of the business, focus on results, continuous search
for customer preference, quality, commitment, integrity,
safety, social responsibility, and recognition are
concepts that permeate daily operations and contribute
toward Gerdau building new business opportunities
and consolidating itself in the global steel market.
Strengthening this culture, which was one of the main
highlights in the area of human resources in 2012,
has contributed toward the Company responding to
the challenges posed by the current global economic
scenario in an increasingly integrated and agile way.
This is achieved through communicating the Companys
values, by setting up and aligning processes and
practices in all business operations, implementing
processes and tools for managing people, and developing
The safety of people in the work environment is a top priority in all of Gerdaus operations
The book Our Culture Unites Us
- Lessons from Our History with
stories about the experiences
of employees in their daily work
routines, was distributed to all of
Gerdaus operations worldwide
leaders who act as clear agents of Gerdaus corporate
culture, spreading the Companys values to their teams
through personal examples, along with enhancing the
employees autonomy and showing respect to people.
During the year, for example, meetings were held between
members of the Board of Directors and the Gerdau
Executive Committee with over 1,000 employees in
Chile, the United States, and Peru. The perspective
is that all the leaders in Gerdau participate in
these meetings over a period of two years.
EMPLOYEES
GERDAU ANNUAL REPORT 2012 | EMPLOYEES
-
7/28/2019 Gerdau: Informe Anual edicin 2012
22/43
21
Health and safety
Peoples safety is a fundamental value for Gerdau. That
is why the Company has a strict set of practices that are
part of its Safety Management System, which involves
investment in new technologies, equipment, and global
management systems. In 2012, this area receivedR$ 92.7 million, 31% more than the previous year.
With the objective of improving safety in the work
environment, the Company has developed a manual in line
with the best global practices with guidelines on behavioral
management. In parallel, it initiated specic training on the
topic for the leaders of the operations in Argentina, Brazil,
and Spain. In 2013, the training will be extended to the other
operations in Latin America and in 2014 to North America.
These initiatives contributed so that the accident frequency
rate per million hours worked (international index that
measures the occurrence of accidents in the workplace)
decreased from 2.31 in 2010 to 1.06 in 2012. This level
is below the world average for the sector, whose latest
gure released by the World Steel Association is 1.9.
Furthermore, Gerdau received the Safety and
Health Excellence Recognition for the third time,
Accident frequency rate*
*Lost-time accident frequency rates per million hours
worked, including employees and service providers. The
data also includes restricted work and change of function
(OSHA recordable treated as LT accidents).
Investments in occupational
health & safety (R$ million)
0
20
40
60
80
100
201220112010
49.1
71.0
92.7
0
0.5
1.0
1.5
2.0
2.5
201220112010
2.31
1.59
1.06
Gerdau receives for the third time the Safety and Health
Excellence Recognition awarded by the World Steel Association
which is awarded by the World Steel Association.
The Company was awarded for the project Safety
Multipliers, which recorded positive results since
its implementation in 2004. The project consists of
train operators who encourage and offer support to
their colleagues to put into practice solutions that
make the work environment 100% accident free.
EMPLOYEES | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
23/43
22
Internal climate
The favorability index of the Opinion Survey, which
evaluates the Companys internal climate, once again
reected a high level of engagement of its employees.
The indicator rose from 75% in 2011 to 76% in 2012, with
a highlight being the growth in operations of long steeland special steels in North America. The performance
was ve percentage points above the world market
average, which includes global companies with excellent
nancial performance and/or that are part of the ranking
of the most admired companies in Fortune magazine.
Moreover, Gerdau was elected as the best company
to work for in the steel and metallurgy industry in Brazil
by Guia Exame/Voc S.A., a leading benchmark in the
country in this area. The Company is among the 150
organizations best positioned in this ranking since 2007.
Training
Gerdau seeks to invest heavily in training its team of
employees, which already includes about 600 people
with masters and doctorate degrees. The main
objective is working with high performers who are
aligned with the strategic business objectives, besides
forming global leaders. In 2012, the investments
in this area reached R$ 37.2 million. The activities
involved 2.2 million hours, which represents an
average of 52 hours of training per employee.
The Gerdau Business Program (GBP) is one of the
highlights in this area. Lasting two years, this initiative was
developed in partnership with the Institute of Education
and Research (Insper) in So Paulo and consists of a
specic MBA degree conducted in accordance with the
needs of Gerdau. The executives selected for this program
are of high potential and participate in modules in leading
universities worldwide such as Insead in France and
Darden in the United States. The third edition of the GBP
is in progress with the participation of 32 executives from
Brazil, Chile, Mexico, Peru, and the Dominican Republic.
In 2012, the Company launched a program structured
for training controllers with the aim of increasing the
alignment and synergy of this function in all of its
operations. The training also aims to meet the standards
of the Gerdau Business System (GBS) and currently there
are a total of 12 professionals participating.
Training and development 2012 2011Investments (R$ million) 37.2 32.1
Number of training hours per employee 52.4 53.4
Knowledge Management
Knowledge Management is an initiative on Gerdaus
part to have a set of strategies to maximize the use of
existing knowledge in the Company, generating positive
impacts such as increased efciency and operational
productivity, while at the same time reducing costs. One
of the main strategies adopted is the Communities of
Practice, which facilitate interaction between employees in
different countries through a virtual network for sharing of
best practices. This way, for example, it is possible for an
employee from one country to have an issue cleared up by
a colleague from across the world with speed and clarity.
In the fth year since it began, the Communities of
Practice have already gathered together more than
5,000 employees in 36 communities, exceeding
58,000 posts. Posts can take on the form of
questions, answers, documents, and news, and they
take place between 95 plants in 14 countries. The
operation in India began its participation in 2012.
Autonomy and Creativity
Gerdau encourages delegation, autonomy, and creativity
in its teams. One example of this is the program
Management Focused on the Operator (MFO) where
employees, besides performing their usual activities,
help control processes such as quality, safety, cost,
maintenance, and the environment. This shared
management encourages professionals to overcome their
challenges, expand the productivity of processes and
quality of nal products. The program has been deployed
in plants in Argentina, Brazil, Chile, Colombia, the United
States, Mexico, the Dominican Republic, and Uruguay. In
2013, it will be expanded to eight more industrial plants.
GERDAU ANNUAL REPORT 2012 | EMPLOYEES
-
7/28/2019 Gerdau: Informe Anual edicin 2012
24/43
23
The active participation of employees is also present
in two other programs: Quality Improvement Story
(QIS) and Ideas. In the QIS, teams of three to seven
people offer creative solutions to problems in their daily
operations. In 2012, 6,800 employees in 11 countries
participated with 437 projects, which generated earningsworth US$ 145.3 million. The Ideas program, on the
other hand, encourages the search for innovative
solutions both individually or in groups. During the year,
the project involved 13,800 people from eight countries
who registered over 97,000 new ideas. Of this total, the
Company implemented 73,000 suggestions throughout
the year that yielded earnings of US$ 20.2 million.
executives are prepared to take strategic positions in the
Company. In 2012, there were 211 of these committees
set up in various countries where Gerdau operates.
Gerdau Future Trainees
The Gerdau Future Trainee Program is the mainentrance of young professionals into the Company.
For a two-year period, the trainees work on projects and
activities that challenge their professional skills while also
bringing good results to the business. Furthermore, the
trainees receive training and evaluations that help their
learning and development process. Currently, Gerdau
has 382 trainees in this program in ten countries.
Compensation and benets
Gerdau maintains a compensation policy of xed and
variable amounts based on the achievement of individual,
team, and operations targets. In addition to this, the
Company offers a benet plan for employees and their
families. The benets vary according to the needs of
each region where Gerdau operates.
A new health insurance model was launched in Brazil
in 2012. In line with the best market practices, the plan
gives the option for more coverage and exibility for
employees with more competitive costs for Gerdau.
Furthermore, close to 100% of the employees in Brazil
participate in the complementary pension plan with a
dened contribution, and the Company adds 150%
of that amount as a contribution to the employee.
Benets (R$ million) 2012 2011
Meals 94.7 71.7
Transportation 75.4 68.6
Health Insurance 401.4 299.0
Private Pension Plan 170.7 137.3
Labor union agreements
Gerdau guides its relationship with the unions by
seeking mutual gains, taking into account the labor
demands and the Companys sustainability. During the
year, 15 agreements were made in Brazil, Canada,
Chile, the United States, Mexico, and Venezuela.
Management of high potentials
To be able to count on outstanding professionals who
are prepared to take on positions of high responsibility
is another of Gerdaus concerns. In this sense, external
consultants contribute to enhance the training of the
Companys employees through the External Executive
Coaching Program, an initiative launched in 2012.
Parallel to this, 14 of Gerdaus leaders with higher level of
knowledge and experience, among them members of the
Board of Directors and the Gerdau Executive Committee,
supported during the exercise the development of
19 executives through the Mentoring Program.
Succession
Discussions about careers and succession at Gerdau
are held in the People Development Committees
made up of leaders from different areas. This way, new
The teams that reach the most signicant results are
recognized at the QIS global meetings
EMPLOYEES | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
25/43
24
CUSTOMERS
Innovative solutions contribute to increasingthe competitiveness of customers
Gerdau seeks to establish a relationship of mutual
gains with its more than 130,000 customers,
contributing to the development of the consumer chain
of steel. It also strives for excellence in all aspects of
its business, all the way from the quality of its products
and services to delivery and technical assistance. To
do this, it has a team of highly specialized employees
and takes surveys to monitor customer satisfaction
and improve its services to each market segment, as
well as carrying out specic relationship programs.
Toward this end, Gerdau held a survey in 2012 with
more than 500 civil construction technicians in Brazil to
understand fabricated reinforcing steel market needs.
As a result it adopted new technologies and internal
processes, set up monitoring systems to increase the
predictability of deliveries, and also trained sales teams
for giving technical support to contractors. These new
practices will be applied in Gerdaus more than 100
fabricated reinforcing steel facilities around the world. The
cutting and bending system makes it possible to deliver
the steel in quantities, shapes, and sizes according to the
demands of each project and can increase productivity by
up to 70% in the structure assembly stage at the jobsite.
Gerdau steel also contributes for building projects
to receive environmental certications for their
work because it is 100% recyclable. The Leadership in
Energy and Environmental Design (LEED) certication,
for example, has already been granted to several
projects that use the Companys products. Among
the projects certied are the Duke Energy Center
in the United States, the Oscar Niemeyer Tower in
Brazil, and the Transoceanic Building in Chile.
Gerdaus Research and Development Centers
for the special steel sectorlocated in Brazil and
Spain are another highlight of its services for the
industry. Currently the Company is participating in
more than 70 projects for the automotive, energy,
and naval sectors. These initiatives are aimed at
continually improving the mechanical properties of
steel, resulting in better performance in use and gains
in efciency along the chains supplied by Gerdau.
Two of these projects are focused on developing
nano-alloyed steels for the automotive industry.
Regarding the at steel segment, Gerdau is
conducting an intense market mapping in order to
understand customer needs before the startup of
operations of a hot rolled coil mill in Brazil (read
more on this topic in chapter Business, p. 14).
Fabricated reinforcing steel facilities adopt new practices and processes to improve customer service
GERDAU ANNUAL REPORT 2012 | CUSTOMERS
-
7/28/2019 Gerdau: Informe Anual edicin 2012
26/43
25
SUPPLIERS
Participants of the Supplier Development Program receive
certicates in Peru
Supporting the sustainable developmentof suppliers strengthens the steelbusiness chain
Gerdau establishes long-term relationships with its
suppliers based on a direct, transparent and in search
for mutual gains relationship. It gives preference to
contracting suppliers that share its policy of respect for
people and the environment because it believes that the
sustainability of its business also passes through the
steel chain. Because of this, it requires strict compliance
with the laws in each country where it operates and
carries out periodic audits to make sure that the supply
chain is complying with its levels of excellence.
With operations in the Americas, Europe, and Asia, Gerdau
currently has a network of more than 30,000 suppliers,
60% of which are micro, small and medium enterprises
that strengthen the local economies where it operates.
For this reason, the Company has supported its Supplier
Development Program since 2007 in order to improve the
management performance of these organizations. This
initiative, developed with partner organizations, ranges
from giving courses and on-site consulting to designing and
monitoring the execution of action plans. In total, more than
500 training hours are devoted to addressing issues
related to management improvement, quality &
productivity, encouraging entrepreneurship, citizenship,and sustainability over a period of 24 months.
The program has had a direct impact on Gerdaus
competitiveness as it prepares the way to receive products
and services of better quality, punctual delivery, and building
long-term relationships, as well as sharing its ethical values
along its business chain. Moreover, by strengthening these
micro, small, and medium enterprises, this stimulates
market growth and generates jobs and wealth based on
projects with a strong social content. In 2012, the program
involved 404 micro, small, and medium enterprises in
Argentina, Brazil, Colombia, Mexico and Peru. As a result,
the business volume between Gerdau and the participating
companies grew 24% compared to 2011. For 2013, the
program will be expanded to suppliers in Chile, India,
the the Dominican Republic, Uruguay, and Venezuela.
Regarding the supply of scrap steel, a key raw material
in steel production, Gerdau has its own collection and
processing units of scrap, especially in Brazil and North
America. In order to expand the supply of this raw material
and develop micro and small suppliers, programs to
develop technical and managerial skills were promoted
in 2012 for about 90 companies and scrap cooperatives
in Brazil, Chile, Colombia, Peru, Uruguay, and Venezuela
that increased their sales to Gerdau by 125%.
At the same time, Gerdau is increasingly seeking to expand
the synergy among its operations around the world through
a global procurement structure that makes it possible to
reach economies of scale, productivity, and cost reduction
in the purchase of equipment and inputs. Additionally,
the new structure generates for the large suppliers the
opportunity to expand their business in different countries
and regions, as well as to streamline their logistics delivery.
SUPPLIERS | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
27/43
26
Transparency and agility characterizeGerdaus relationship with its shareholders
Conservative nancial management, exibility, geographicdiversication of operations, and ability to take advantage
of opportunities were Gerdaus characteristics recognized
by the capital market. As a result, the shares of Gerdau S.A.
appreciated by 26% and those of Metalrgica Gerdau S.A.
by 30%, respectively, over 2012, which is one ofbest
performance among companies in the global
steel industry.
Relationship actions with shareholders
With over 65 years of experience in capital markets,
Gerdau is always working hard to improve its relationship
with its more than 130,000 shareholders. In 2012, it
held over 500 meetings with shareholders, investors,
and investment analysts, the main ones being 13
non-deal road shows in Brazil, in the United States,
and in countries in Europe and Asia, and participated
in two meetings of the Association of Capital Market
Analysts and Professionals (APIMEC) in Brazil.
Gerdau also launched a new website (www.gerdau.com/ri)
in order to improve its services to the capital markets such
as increasing the speed of browsing and access to
information. This new communication channel also provides
content specic for individual shareholders and institutional
investors in Portuguese, English, and Spanish.
Shareholder compensation
Gerdaus three publicly listed companies Gerdau S.A.,
Metalrgica Gerdau S.A., and Empresa Siderrgica del
Per S.A.A. have clear remuneration policies that are
in line with market practices. Metalrgica Gerdau S.A.
and Gerdau S.A. pay dividends and/or interest every
three months on capital of at least 30% of adjusted
net income for the year calculated in accordance with
Brazilian accounting practices. It is worth noting that
this percentage is higher than the level of 25% set bycorporate law in Brazil. The compensation policy for the
company Siderrgica del Per S.A.A. on the other hand,
is to pay dividends of up to 33% of its adjusted net prot.
In 2012, the shareholders of Metalrgica Gerdau S.A.
received R$ 130 million in dividends and interest on capital,
which is equivalent to R$ 0.32 per share and Gerdau S.A.
R$ 408 million, equivalent to R$ 0.24 per share.
Recognition from capital marketIn recognition of Gerdaus management capacity, the three
major rating agencies in the capital market maintained
the Companys investment grade in 2012. Standard &
Poors and Fitch Ratings kept their rating level at BBB-,
while Moodys maintained an investment grade of Baa3.
For the seventh consecutive year, Gerdau S.A. and
Metalrgica Gerdau S.A. have been a part of the Corporate
Sustainability Index (ISE) portfolio of BM&FBOVESPA. This
index is made up of shares of companies that stand out
for their more sustainable practices in the long term and
have a high degree of commitment on issues of corporate
governance, social responsibility, and the environment.
Moreover, Gerdaus publicly listed companies in Brazil
are part of the main index of BM&FBOVESPA, Ibovespa,
in which Gerdau S.A. has the 11th highest liquidity among
companies that make up this indicator. They are also listed
on the Special Corporate Governance Stock Index (IGC),
the Share Index with Differentiated Tag Along Rights (ITAG),
on the Brazil Index 50 (IBrX50), on the Index of Basic
Materials (IMAT), and on the Industrial Sector Index (INDX).
SHAREHOLDERS
GERDAU ANNUAL REPORT 2012 | SHAREHOLDERS
-
7/28/2019 Gerdau: Informe Anual edicin 2012
28/43
27
The Gerdau Volunteer Olympics was one of the highlights among the volunteer activities done in 2012
Volunteer work from employees is criticalto the development of social programs
Over the years, Gerdau has been improving its role insocial responsibility and consolidating the theme in its
business strategy. With the belief that the growth of its
operations is directly related to developing its business
chain and the communities where its plants are
located, the Company has expanded, standardized, and
internationalized its practices for this area over the last few
years. It also began to apply management methodologies
in planning, implementation, and monitoring of social
projects in order to achieve even more effective results.
In 2012, R$ 52.7 million was invested in more than
900 social projects that were conducted in 13
countries where Gerdau operates. These initiatives
are led by Gerdau Institute, which is responsible
for the Companys social responsibility policies and
guidelines, and are focused in the areas of education,
emergency assistance, and quality management.
Moreover, Gerdau believes that volunteering is an
important transforming agent of change in society.
For this reason it offers specic training courses to
its employees who want to get involved in volunteer
activities. As a result, in 2012, approximately
8,000 employees participated in the Gerdau
Volunteer Program (PVG) by working actively insocial projects supported by the Company.
One of the highlights among the volunteering actions
undertaken during the year was the Gerdau Volunteer
Olympics, a competition held in nine countries: Argentina,
Brazil, Chile, Colombia, Spain, Mexico, Peru, Uruguay,
and Venezuela. Under the slogan United for Safety:
victory belongs to us all, 13,000 volunteer employees
helped promote improvements and awareness activities
to encourage safe habits and behaviors in the daily
activities of about 800 micro and small enterprises,
schools, daycare centers, and other social organizations.
Gerdau also develops partnerships with major
institutions that implement programs to encourage
quality in management and entrepreneurship along
the steel business chain. Furthermore, the Company
supports institutions that promote transforming
actions in society such as the Competitive Brazil
Movement, Everyone for Education Movement, Junior
Achievement, and the World Childhood Foundation.
SOCIETY
SOCIETY | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
29/43
28
ENVIRONM
ENT
Gerdau contributes to the sustainability ofthe communities and their businesses bytransforming scrap into steel
For Gerdau, recycling is not just an initiative of
environmental protection, but it is also part of its business
strategy. Every year, it transforms more than 15 million
metric tons of steel scrap, making it the largest scrap
recycler in Latin America. The use of this raw material
reduces the volume of material deposited in inappropriate
places and reduces the consumption of energy as well as
other natural resources in the steel production process,
while minimizing emissions of greenhouse gases such
as CO2. Moreover, the collection and processing of
scrap generate jobs over a long chain of small, medium
and large entrepreneurs who live off of this activity.
Gerdau has been developing projects in partnership with
the public sector in Brazil, Colombia, and Peru in order
to further expand scrap collection in the regions where
it operates and promote proper disposal of cars, trucks,
and buses that are no longer in circulation. Besides
contributing to the environment, these initiatives play
an important socio-economic role, because they reduce
the costs of governments with its storage, generate
revenue from the sale of scrap, and also create new
job opportunities in the processing of this raw material.
Since 2010 when the project began, over 36,000
metric tons of scrap have already been recycled.
Stringent environmental management practices
Gerdaus strong commitment to the environment is
reected in its stringent practices in this area along with
its ISO 14001 certication, of which the Environmental
Management System (EMS) is a part. The Company
uses the EMS to monitor the entire production cycle of
steel, beginning from the collection of raw materials all
the way to delivering the nal product and the disposal of
by-products. Currently 48 industrial plants are ISO 14001
certied, which corresponds to 89% of the total.
By-products
Through continuous investment, improvements in
processes, and studies in partnership with universities,
research entities and companies, Gerdau seeks intelligent
and sustainable alternatives for the application of
its by-products. As a result of these initiatives, in 2012,
the reuse rate of these materials reached 74.8%.
Air
The dust removal systems at Gerdaus plants capture with
high efciency the solid particles generated by the steelmaking
Gerdau invested in the expansion and modernization of the dust removal system in plants in Canada, Colombia (photo), and Chile
GERDAU ANNUAL REPORT 2012 | ENVIRONMENT
-
7/28/2019 Gerdau: Informe Anual edicin 2012
30/43
29
process, which are later processed into by-products used
in other segments of the industry. In 2012, the Company
invested in the expansion and modernization of the dust
removal system in plants in Canada, Colombia, and Chile.
WaterGerdau has one of the best water recirculation rates
in the global steel industry today with an average rate
exceeding 97%. This percentage represented in 2012 over
2 trillion liters of recycled water to be used internally in the
production of steel. The volume, if captured, corresponds
to a supply of water for a period of two years from the
state of New York (United States), which has over 19
million inhabitants, considering an average consumption
of 150 liters per person per day. The small amount not
reused corresponds mainly to evaporative losses.
to increase energy savings in auxiliary equipment
to the steel production process, which represent
approximately 40% of the energy consumed in the mills.
The project goal is to achieve a reduction of 2.5% of total
energy consumed by 2014. To start this process, teamsfrom all the industrial mills in Brazil ran a diagnostics
of savings opportunities, which were transformed
into more than 1,300 actions. This project will also be
applied in other countries where Gerdau operates.
Gerdau also optimizes the use of energy by expanding
the use of by-products from the production process
of its mills. In addition, the Company is increasing
its use of natural gas in its operations, which is
already applied in 94% of its mills worldwide.
Biodiversity
Gerdau maintains green areas at its mills for the purpose
ofimproving the quality of the air and maintain local
biodiversity. Currently, of its total 17,000 hectares of
Company property, 3,000 hectares are preserved native
forests made up of legal reserves, permanent preservation
areas, and private reserves of natural heritage. Over
4,000 hectares are areas preserved voluntarily.
Environmental education
As part of its environmental management practices,
Gerdau promotes awareness campaigns, conferences,
and training courses for employees and third parties.
In 2012, these activities totaled 48,200 hours with
the involvement of about 26,000 people.
One of the initiatives created during 2012 was the
Environmental Laboratory, which seeks to improve social-
environmental practices and knowledge of educators
in the municipal and state schools in the region of
Ouro Branco (MG). For the year, 292 professionals
participated in 22 courses and workshops.
Water treatment system in Peru will increase the mills
recirculation rate to more than 98%
These achievements in the process of reusing water are
due to continuous investments in advanced closed water
treatment and recirculation systems. In 2012, for example, a
new water treatment plant was constructed at the Reinosa
mill located in Spain. With this, the amount of water captured
externally by the plant decreased by 50%. Also, in Peru, a
project is currently underway to improve and upgrade the
water treatment system in order to increase the level of
the plants recirculation from 95.1% to more than 98%.
Energy
In order to expand its energy efciency, Gerdau
invests continuously in improving and optimizing its
industrial processes. In 2012, for example, the Company
initiated a pilot project in operations in Brazil in order
ENVIRONMENT | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
31/43
-
7/28/2019 Gerdau: Informe Anual edicin 2012
32/43
31
Steel production begins with
Riograndense known as Usina
Farrapos (UFA) in Porto Alegre
(state of Rio Grande do Sul,
Brazil), with forward-thinking
conception of the mini-mill, a
model based on the use of scrap
and regional sales, enabling more
competitive operational costs.
The second Riograndense
unit starts up operation
in Sapucaia do Sul (RS).
The mill was also known
as Rio dos Sinos mill.
The Gerdau Foundation
is created, with health,
education, housing
and social assistance
programs, reinforcing
the culture of social
responsibility within
the Organization.
The So Judas Tadeu
Wire Factory is set up
in So Paulo (state
of So Paulo, Brazil),
marking the companys
expansion into the
Brazilian southeast.
Germano, Klaus, and
Jorge Gerdau Johannpeter
take on leadership
positions in the Company,
and, in 1971, Frederico
Gerdau Johannpeter also
becomes part of the board.
Gerdau acquires the
Aonorte steel plant (state
of Pernambuco, Brazil),
whose facilities were being
transferred from Tio (in
the city of Iguarassu) to the
industrial district of Curado
(in the city of Recife).
Siderrgica Riograndense
publicly launches shares on
the Rio de Janeiro and So
Paulo stock exchanges.
1957
1963
1964 1970
1948 1967 1969
TIMELINE | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
33/43
32
Gerdaus executive
leadership begins
to be in the hands
of Jorge Gerdau
Johannpeter (CEO)
and Germano, Klaus,
and Frederico Gerdau
Johannpeter
(Vice Chairmen).
Construction of Cosigua mill
(RJ) begins in the IndustrialDistrict of Santa Cruz, which
was completed in record
time of 14 months. The
project had the participation
of Thyssen ATH and was
nanced by the World Bank
through the International
Finance Corporation
(IFC), among others.
Germano, Klaus,
Jorge, and FredericoGerdau Johannpeter
became part of
the Gerdau Board
of Directors.
Steel distribution activities start
with the rst Comercial Gerdau in
the state of So Paulo (Brazil).
Gerdau assumes control of the
Guara plant, a steel production
pioneer in the state of Paran (Brazil).
Beginning of
internationalization
with the acquisition of
Laisa in Uruguay.
Cosigua begins to have
its shares traded on the
Stock Exchanges in So
Paulo and Rio de Janeiro.
Operation begins at
the Cearense plantin Maracana (state
of Cear, Brazil).
Cosigua shares are
publicly released,which earns the
company more
than 60,000 new
shareholders.Second Gerdau
plant in the state of
Paran (Brazil) begins
operation, in Araucria.
Gerdau wins its
rst privatization
auction in Brazil
and acquires
the Baro de
Cocais steel mill
(state of Minas
Gerais, Brazil).
1982 1984
1983
1973
1971 1980 1988
GERDAU ANNUAL REPORT 2012 | TIMELINE
-
7/28/2019 Gerdau: Informe Anual edicin 2012
34/43
33
Acquire part of the capital
stock of Sipar rolling mill in
Argentina. In 2005, Gerdau
takes a controlling stake.
The Company acquires AZA in
Chile and Aos Finos Piratini (stateof Rio Grande do Sul, Brazil).
The GG 50 rebar, a Gerdau agship
product in Brazil, is launched.
Gerdau acquires
Siderrgica
Pains, now called
Divinpolis mill.
Gerdau acquires
MRM in the
province of
Manitoba, Canada.
Gerdau becomes a
partner of Aominas witha small ownership stake.
Gerdau acquires control of
Ameristeel, marking its arrival
in the United States.
Gerdau S.A., a publicly
traded company in Brazil,
is listed on the New York
Stock Exchange (NYSE).
1992 1997
1994 1995 1998 1999
Gerdau enters
North America with
the acquisition of
Courtice Steel,
which later took
on the name
of Cambridge in
the province of
Ontario (Canada).
Gerdau acquires
Usiba (state of
Bahia, Brazil) at a
privatization auction.
1989
TIMELINE | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
35/43
34
Gerdau celebrates 100 years
in business with an installed
steel production capacity of 8.4
million metric tons per year.
Gerdau takes a controlling
stake in Gerdau Aominas
(state of Minas Gerais,
Brazil), its largest mill.
Gerdau acquires the Cartersville
plant (United States).
The merger of Gerdau
and Co-Steel, in North
America, creates
Gerdau Ameristeel.
Diaco (Colombia) and
North Star Steel (United
States) are acquired.
Gerdau enters Europe,
acquiring 40% of Sidenor. As
a result of this acquisition, the
Company takes an indirect
stake in Aos Villares (Brazil).
The Gerdau Institute, responsible
for coordinating the Companys
social responsibility policies and
guidelines, is created, broadening
the scope of the Gerdau
Foundation, established in 1963.
Gerdau acquires Siderperu (Peru),
Shefeld Steel (United States),
Callaway Building Products (United
States), and GSB (Spain).
The Company announces its
joint venture Pacic Coast
Steel (United States).
Gerdau So Paulo mill
(state of So Paulo, Brazil)
commences operations.
Andr B. Gerdau Johannpeter takes over as Chief
Executive Ofcer (CEO) and Claudio Gerdau
Johannpeter becomes Chief Operating Ofcer (COO).
Gerdau acquires Chaparral Steel, one of
the largest producers of structural steel inthe United States, thus marking the greatest
acquisition in the history of the Company.
The Company enters Mexico (Siderrgica
Tultitln) and Venezuela (Siderrgica Zuliana).
The Organization also acquires a stake in the
Dominican Republic (Industrias Nacionales - Inca)
and in Aceros Corsa (Mexico), signs agreement
for purchase of Macsteel (United States), and
starts the Kalyani Gerdau joint venture (India).
Gerdau Aominas (state of Minas Gerais,
Brazil) increases its production capacity by
50% to 4.5 million metric tons per year.
2002
2004
2006
2001
2005
2007
GERDAU ANNUAL REPORT 2012 | TIMELINE
-
7/28/2019 Gerdau: Informe Anual edicin 2012
36/43
35
The Company acquires a 50.9%
stake in Cleary Holdings (Colombia),
a metallurgical coke producer and
holder of coking coal reserves.
Gerdau enters Central America, with a 30%
stake in Corporacin Centroamericana
del Acero, in Guatemala.
Gerdau takes over Macsteel
operations (United States), a
producer of special steels.
The Vrzea do Lopes mine (state
of Minas Gerais, Brazil) is initiated
with the production of iron ore.
The Companys entering
into the at steel sector
in Brazil is disclosed.
Company announces new
investments in India.
Gerdau incorporates Aos Villares, a special
steel producer in Brazil, in which the Company
already had an 87% direct and indirect stake.
An additional stake of 49.1% is acquired in Cleary
Holdings (Colombia), granting Gerdau 100%
ownership of the companys capital.
Gerdau gains 100% ownership of Gerdau Ameristeel, with the
acquisition of approximately 34% of the companys minority
shares. As a result, the company shares are no longer
traded on the Toronto and New York stock exchanges.
Gerdau acquires Tamco (United States), a leading producer
of rebars on the west coast of the United States, with
production capacity of 500,000 metric tons per year.
Gerdau invests to expand its
own production of iron ore.
Gerdau completes 110 years of business,
reaching an annual production capacity of 25
million metric tons and revitalizes its brand.
Gerdau announces new
investments in mining
to increase its annual
installed capacity to 18
million metric tons by 2016.
Later, it celebrates the
rts shipments of iron ore,
marking its entry into the
international mining market.
The Mission, Vision, Values, and Code of
Ethics are revised and unied at a global level,
strengthening Gerdaus corporate culture.
Gerdau begins studies for commercial
exploration of part of its iron ore
resources located in Minas Gerais.
The rst phase for implementing the Gerdau
Template, which aims to deploy a single system of
information technology using SAP in all countries
where the Company operates, is completed.
Gerdau announces investments to increase the installed
capacity in special steel mills in Brazil and the United States.
Production of special steel
in India begins, in order to
supply the regions market.
The Company completes
20 years of experience in
the special steel sector.
2009 2011 2012
2008 2010
TIMELINE | GERDAU ANNUAL REPORT 2012
-
7/28/2019 Gerdau: Informe Anual edicin 2012
37/43
36
CONSOLIDATED BALANCE SHEETS
GERDAU S.A.As of December 31, 2012 and 2011
(In thousands of Brazilian reais)
Non-current assets
Deferred income and social contribution taxes 2,210,300 1,547,967
Other non-current assets 1,958,863 2,034,819
Investments in associates and jointly-controlled entities 1,425,605 1,355,291
Goodwill and other intangible assets 11,397,812 10,429,497
Property, plant, and equipment 19,690,181 17,295,071
36,682,761 32,662,645
Total assets 53,093,158 49,981,794
Total liabilities and equity 53,093,158 49,981,794
Current liabilities
Trade Accounts Payable 3,059,684 3,212,163Short-Term Debt and Debentures 2,582,353 1,756,993
Taxes payable 528,698 591,983
Payroll and related liabilities 558,634 617,432
Other current liabilities 1,093,813 598,430
7,823,182 6,777,001
2012 2011
Current assets
Cash and cash equivalents 1,437,235 1,476,599
Short-term investments 1,059,605 3,101,649
Trade accounts receivable 3,695,381 3,602,748
Inventories 9,021,542 8,059,427
Other current assets 1,196,634 1,078,726
16,410,397 17,319,149
SUMMARIZED FINANCIAL STATEMENTS
Non-current liabilities
Long-Term Debt and Debentures 12,086,202 11,926,535
Deferred income taxes 1,795,963 1,858,725
Employee benets 1,187,621 1,089,784Other non-current liabilities 1,402,273 1,809,946
16,472,059 16,684,990
Shareholders equity
Attributable to the equity holders of parent 27,245,604 24,997,469
Non-controlling interests 1,552,313 1,522,334
28,797,917 26,519,803
GERDAU ANNUAL REPORT 2012 | FINANCIAL STATEMENTS
-
7/28/2019 Gerdau: Informe Anual edicin 2012
38/43
37
CONSOLIDATED STATEMENTS OF INCOME (In thousands of Brazilian reais)
Income before nancialincome and taxes
2,348,205 2,879,008
Net nancial income (expenses) -654,615 -580,093
Exchange variations, net -134,128 51,757
Earnings per share - common and preferred 0.84 1.22
2012 2011
Net sales 37,981,668 35,406,780
Cost of sales -33,234,102 -30,298,232
Gross prot 4,747,566 5,108,548
Selling, general, and administrative expenses -2,471,675 -2,401,684
Other Operating Income (expenses), net 72,314 172,144
Income before taxes 1,559,462 2,350,672
Income and social contribution taxes -63,222 -253,096
Net income 1,496,240 2,097,576
Attributed to:
Owners of the parent 1,425,633 2,005,727
Non-controlling interests 70,607 91,849
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of Brazilian reais)
Net cash used in investing activities -3,438,025 -2,111,158
Net cash generated by operating activities 4,344,047 1,710,018
Net cash used in nancing activities -1,036,294 727,064
Effect of exchange rate variation on cash and cash equivalents 90,908 89,641
(Decrease) Increase in cash and cash equivalents -39,364 415,565
Cash and cash equivalents at beginning of year 1,476,599 1,061,034
Cash and cash equivalents at end of year 1,437,235 1,476,599
2012 2011
Net income 1,496,240 2,097,576
Adjustments to reconcile net income with net cash 3,048,240 2,794,863
Changes in assets and liabilities (net of interest and income tax) -200,433 -3,182,421
FINANCIAL STATEMENTS | GERDAU ANNUAL REPORT 2012
Read more on the nancial statements of Gerdau S.A. at www.gerdau.com/ri
-
7/28/2019 Gerdau: Informe Anual edicin 2012
39/43
38
CONSOLIDATED BALANCE SHEETS (In thousands of Brazilian reais)
Non-current assets
Deferred income and social contribution taxes 2,376,709 1,658,416
Other non-current assets 1,959,459 2,005,594
Investments in associates and jointly-controlled entities 1,425,605 1,355,291
Goodwill and other intangible assets 11,489,825 10,521,510
Property, plant, and equipment 19,690,863 17,295,833
36,942,461 32,836,644
Total assets 53,370,116 50,172,211
Total liabilities and equity 53,370,116 50,172,211
Current liabilities
Trade Accounts Payable 3,059,814 3,212,278Short-Term Debt and Debentures 3,888,232 1,760,780
Taxes payable 534,631 594,532
Payroll and related liabilities 558,634 617,432
Other current liabilities 1,088,177 588,906
9,129,488 6,773,928
2012 2011
Current assets
Cash and cash equivalents 1,437,724 1,477,020
Short-term investments 1,059,605 3,101,649
Trade accounts receivable 3,695,381 3,602,748
Inventories 9,021,542 8,059,427
Other current assets 1,213,403 1,094,723
16,427,655 17,335,567
Non-current liabilities
Long-Term Debt and Debentures 12,073,867 13,223,260
Deferred income taxes 1,844,731 1,907,493
Employee benets 1,187,621 1,089,784Other non-current liabilities 2,316,057 2,626,758
17,422,276 18,847,295
Shareholders equity
Attributable to the equity holders of parent 9,965,945 9,040,054
Non-controlling interests 16,852,407 15,510,934
26,818,352 24,550,988
METALRGICA GERDAU S.A.As of December 31, 2012 and 2011
SUMMARIZED FINANCIAL STATEMENTS
GERDAU ANNUAL REPORT 2012 | FINANCIAL STATEMENTS
-
7/28/2019 Gerdau: Informe Anual edicin 2012
40/43
39
CONSOLIDATED STATEMENTS OF INCOME (In thousands of Brazilian reais)
Income before nancialincome and taxes
2,320,455 2,868,471
Net nancial income (expenses) -835,573 -740,152
Exchange variations, net -134,128 51,754
Earnings per share - common and preferred 1.12 1.87
2012 2011
Net sales 37,981,668 35,406,780
Cost of sales -33,234,102 -30,298,231
Gross prot 4,747,566 5,108,549
Selling, general, and administrative expenses -2,477,894 -2,422,943
Other operating income (expenses), net 50,783 182,865
Income before taxes 1,350,754 2,180,073
Income and social contribution taxes -18,077 -200,424
Net income 1,332,677 1,979,649
Attributed to:
Owners of the parent 456,731 760,522
Non-controlling interests 875,946 1,219,127
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of Brazilian reais)
Net cash used in inves