2013 ANNUAL REPORT
THE STRENGTH OF TRANSFORMATION
Gerdau
THE STRENGTH OF TRANSFORMATION
A strength that creates new paths is what drives Gerdau. It
It is with this same strength that Gerdau continuously
is manifested in its ability to overcome challenges, transform
develops its relationship of respect, transparency, and
and expand business, and recycle millions of tons of scrap
mutual gains with customers, suppliers, communities,
to produce quality steel. This strength has accompanied
shareholders, and with its more than 45,000 employees
Gerdau since its inception in 1901 with the founding of a
worldwide. It also helps make people’s dreams become
small nail factory. Today, Gerdau has industrial operations
a reality since its products are part of building homes and
in 14 countries – in the Americas, Europe, and Asia –, with
major infrastructure projects such as schools, hospitals,
a total annual capacity of more than 25 millions metric tons,
bridges, dams, and roads besides being present in cars,
and is a leading producer of long steel in the Americas and
trucks, wind towers, among others. It also contributes to the
one of the largest suppliers of special steel in the world.
development of communities through the support of more
Recently, the Company also entered two new markets in
than 900 social projects in the world. Gerdau believes that it
Brazil with its own production of flat steel at its mill in Ouro
is this strength of transformation that makes it possible for it
Branco (state of Minas Gerais, Brazil) and the expansion of
to be a better company today and in the future.
its iron ore mining activities.
Gerdau’s steel has the strength to transform. To decrease
distances is a way to connect people and create more
development. Gerdau’s steel is transformed to create new
paths. We recycle millions of tons of scrap steel to produce
quality steel. Here are some applications of our products.
1
1. Railing in Bars:
2
3
▪▪ Round Bars
▪▪ Flat Bars
2. Bridge Slab:
▪▪ Welded mesh
4
5
▪▪ Truss Frames
▪▪ Fabricated Rebars
3. Girders and Crossbeams:
▪▪ Structural Shapes
6
4. Truss Beams:
▪▪ Structural Shapes
▪▪ Angle Bars
5. Beams:
▪▪ Made of Flat Steel
6. Foundation:
▪▪ Fabricated Rebars
GERDAU 2013 ANNUAL REPORT
KEY INDICATORS*
ENVIRONMENTAL MANAGEMENT
2013
2012
82.5
74.8
Investments (R$ million)
160.5
180.0
SOCIAL RESPONSIBILITY
2013
2012
Investments (R$ million)
62.4
52.7
Employee Volunteerism
(% of workforce)
28.4
18.9
PEOPLE
2013
2012
Favorability index (internal environment)
75%
76%
Net Revenue
Accident frequency rate*
1.10
1.06
EBITDA*
Investments in training
(R$ million)
34.3
37.2
CONSOLIDATED FINANCIAL PERFORMANCE
R$ million
50,000
40,000
39,863
37,982
30,000
20,000
10,000
Reuse of byproducts
(% of total generated)
4,784
1,694
4,176
1,496
0
2013
2012
Net Profit
* 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
LTA accidents).
* Represents earnings before interest, taxes,
depreciation and amortization, also known as
cash generation from operations.
CAPITAL MARKET
2013
2012
0.37
0.32
1.6
1.4
0.28
0.24
1.5
1.3
Metalúrgica Gerdau S.A.
FINANCIAL MARGINS
Gross margin
Net margin
EBITDA margin
2013
2012
12.9%
12.5%
4.2%
3.9%
12.0%
11.0%
Dividends (R$ per share)
Dividend yield (%)*
Gerdau S.A.
Dividends (R$ per share)
Dividend yield (%)*
Production and shipments
2013
2012
Steel production (thousand metric tons)
18,009
18,920
Shipments (thousand metric tons)
18,519
18,594
* The dollar exchange rate on December 31, 2013 was R$ 2.3426.
* Ratio between the dividend paid per share and the share price
on the last day of the year.
1
2
GERDAU 2013 ANNUAL REPORT
CANADA
UNITED STATES
MEXICO
DOMINICAN REPUBLIC
GUATEMALA
HONDURAS
VENEZUELA
COLOMBIA
PERU
BOLIVIA
BRAZIL
CHILE
URUGUAY
ARGENTINA
MISSION
VALUES
To create value for our customers,
shareholders, employees, and communities
by operating as a sustainable steel business.
Be the CUSTOMER’s choice
SAFETY above all
Respected, engaged and fulfilled EMPLOYEES
Pursuing EXCELLENCE with SIMPLICITY
VISION
Focus on RESULTS
To be a global organization and a benchmark
in any business we conduct.
Economic, social and environmental SUSTAINABILITY
INTEGRITY with all stakeholders
GERDAU 2013 ANNUAL REPORT
SPAIN
INDIA
GERDAU AROUND THE WORLD
58
151
4
67
4
157
3
Steel mills
Downstream operations
Iron ore units
Scrap collection and processing facilities *
Power plants
Retail facilities
Private port terminals
Gerdau Headquarters
Countries where Gerdau has jointly controlled
entities: Guatemala, Mexico, and the
Dominican Republic.
* Scrap collection and processing facilities, solid pig
iron production facilities, and coal units.
3
4
GERDAU 2013 ANNUAL REPORT
TABLE OF CONTENTS
05 Message from the Chairman of the Board
26 Customers
06 Message from the CEO
27 Suppliers
07 Corporate governance
28 Shareholders
11 Strategy and competitive advantages
29 Society
14 Business
30 Environment
14 Performance of operations
20 Finances
34 Timeline
40 Summarized financial statements
22 Relationships
44 Credits and contacts
22 Employees
2013 HIGHLIGHTS
▪▪ Gerdau started up its own production of flat steel in Brazil
expanding its annual installed capacity from 700,000 metric
by opening a hot rolled coil mill at its plant in Ouro Branco
tons of rolled products to 1.2 million metric tons, which is a
(state of Minas Gerais, Brazil).
volume focused primarily to supply the automotive industry.
▪▪ A second iron ore processing unit is opened in Minas Gerais,
▪▪ Gerdau continued its investments for modernization and
increasing Gerdau’s production capacity to 11.5 million metric
expansion of its Monroe mill (Michigan), which will bring the
tons per year.
annual installed capacity to 800,000 short tons.
▪▪ The construction of a new structural shapes mill in Mexico
▪▪ In India, the rolling and first inspection line of bars comes
with an annual production capacity of 1 million metric tons of
into operation, improving the quality of products in special
steel continues in full swing.
steel as part of a set of equipment being installed.
▪▪ A new special steel rolling mill started up its operation
at the Pindamonhangaba mill (state of São Paulo, Brazil),
GERDAU 2013 ANNUAL REPORT
MESSAGE FROM THE CHAIRMAN OF THE BOARD
“I have confidence in Gerdau’s strength and ability to respond to the challenges
of a market that is constantly changing, creating the necessary conditions for
improving the efficiency of our operations.”
Jorge Gerdau Johannpeter
Chairman of the Gerdau Board of Directors
Confidence in the ability to expand the efficiency of the operations
Throughout 2013, the steel market showed improvements
companies at a global level over the coming years, with the
in different regions of the world, despite going through a
best ones coming out even stronger.
time of lower profitability compared to historic levels. The
global surplus of steel, the high cost of raw materials and a
I have confidence in Gerdau’s strength and ability to
currency war continue to be the most important challenges
respond to the challenges of a market that is constantly
for the industry.
changing, creating the necessary conditions for improving
the efficiency of our operations. Having more than a
Despite this increasingly competitive environment,
century of experience and the ability to manage our
Gerdau has shown a good operational and financial
teams efficiently give us full assurance that Gerdau
performance. This is primarily due to the attitudes of our
will continue building a successful path as it strives to
employees who continuously strive to turn these challenges
generate outstanding returns from win-win relationships
into business opportunities. We work with a clear and
with customers, suppliers, shareholders, employees, and
consistent view of the paths the Company should follow
communities.
in order to reach our long-term strategy of balancing
profitability and growth with sustainability. The foundation for
To conclude, I would like to thank the Board of Directors,
this is in Gerdau’s corporate culture, which is one of our
the Executive Committee, and all our employees for their
main competitive advantages in the global steel market.
continuous efforts to make Gerdau a better company.
For 2014, the forecast is for improvement. Nevertheless,
the challenging scenario that the sector will continue to
face should promote a kind of natural selection among
5
6
GERDAU 2013 ANNUAL REPORT
MESSAGE FROM THE CEO
“Though we are experiencing adversities from the global economic scenario, we
continue to expand our operations in a significant way, especially in Brazil with the
startup of production of flat steel and the expansion of our mining activities.”
André B. Gerdau Johannpeter
Gerdau Chief Executive Officer
Specialized management to increase profitability
The year 2013 was marked by challenges and opportunities
variation, which increased liquidity and improved the
for Gerdau. Though we are experiencing adversities from
Company’s indicators of indebtedness. We also carried
the global economic scenario, we continue to expand our
out a full integration of long steel operations in
operations in a significant way, especially in Brazil with the
Brazil, continued deploying a global IT platform, and
startup of production of flat steel and the expansion of our
we developed the EBITDA Breakdown project by our
mining activities. We also increased the global installed
employees. In the area of safety in the workplace, we
capacity of special steel, which are directed primarily to
reinforced the concepts of safe behavior while striving for
supply the automotive industry, with investments in Brazil
zero accidents at Gerdau.
and the United States, and we completed the first year of
operations in India.
We also believe that Gerdau’s development includes
expanding the quality of life of the communities and
Gerdau closed the year with a consolidated net revenue of
the strengthening of the steel industry. That is why we
R$ 39.9 billion, 5% higher than the previous year.
participate in more than 900 social projects in 14 countries,
Consolidated shipments remained stable at 18.5 million tons
counting on the volunteer work of over 11,000 employees
compared to 2012, while steel production was 18 million
for most of them. In the environmental area, in turn, we
tons, a volume 4.8% lower due to efforts to reduce the
continued to make investments in technologies for the
Company’s inventories, which resulted in the optimization of
preservation of air, water, and soil, seeking to reduce the
its working capital. The consolidated operating cash flow
impact on the environment.
(EBITDA) grew 14.6% over the previous year, reaching
R$ 4.8 billion, while the consolidated net profit reached
For 2014, higher global economic activity is expected
R$ 1.7 billion with a 13.2% increase.
compared to 2013, which may cause a higher consumption
of steel, despite the uncertainties. Because of that, Gerdau
Gerdau’s increased performance in 2013 reflects our
has maintained, in a selective manner, its investment plan
efforts to enhance the efficiency of our operations and
for the execution of the Company’s long-term strategy.
the development of certain markets, even though they
have been growing less than expected. This would not be
I would like to thank our customers, suppliers, shareholders,
possible without the dedication of our teams whose daily
and communities for the trust placed in our management.
commitment makes Gerdau a unique company in the steel
I would also like to give a special recognition to our more
market. The results from these efforts can be observed,
than 45,000 employees. We count on a partnership with all
for example, by the almost R$ 1 billion reduction in the
of you so that in 2014 we can reach even better results.
working capital for the year, excluding the exchange
GERDAU 2013 ANNUAL REPORT
CORPORATE GOVERNANCE
Transparency and respect for all stakeholders characterize Gerdau’s operations
Gerdau has a sound governance structure whose conduct
The corporate governance structure also includes
follows the Company’s century-old values. In daily corporate
the audit committees of Gerdau S.A. and Metalúrgica
practices, this is reflected in the ability to build new business
Gerdau S.A., which monitor and supervise the actions
opportunities and at the same time generate outstanding
of the management, in addition to expressing opinions
profitability, following the principles of transparency
and advising on the financial statements. In each of the
and respect for all stakeholders – customers, suppliers,
companies, the Board of Directors and the Board of
shareholders, employees, and communities.
Auditors members are appointed at the Annual General
Meeting (AGM).
Gerdau currently has three publicly traded companies:
Gerdau S.A., Metalúrgica Gerdau S.A., and Empresa
Gerdau’s corporate management is carried out by the
Siderúrgica Del Perú S.A.A. (Siderperu). Gerdau S.A.
Board of Directors, whose Gerdau Executive Committee
shares are traded on BM&FBOVESPA (state of São Paulo,
(CEG) is composed of a Chief Executive Officer and six
Brazil), New York Stock Exchange (NYSE), and on the
Vice Presidents. The CEG coordinates and supervises the
Madrid Stock Exchange (Latibex). Because it operates
Business Divisions and Functional Processes in accordance
in the capital markets of the United States, Gerdau S.A.
with the policies established by the Board of Directors. To
follows the requirements of the Sarbanes-Oxley Act (SOX),
do so, it has the support of subcommittees set up according
which establishes good corporate governance practices, as
to criteria of expertise.
well as strict control over internal processes.
The shares of Metalúrgica Gerdau S.A., however, are
RISK MANAGEMENT AND COMPLIANCE
traded on BM&FBOVESPA (state of São Paulo, Brazil) and
A structured risk management system monitors all the
Siderperú on the Lima Stock Exchange.
internal and external variables that may impact the
business and Gerdau’s operational efficiency. This system
CORPORATE GOVERNANCE STRUCTURE
is being constantly updated, and in 2013, under the guidance
The Board of Directors of Gerdau S.A. is responsible for
of the Risk Committee, studies were carried out on the risks
defining the Company’s long-term strategies and monitoring
arising from expanding activities in the area of mining.
the execution of the policies it establishes. In addition to
naming the members of the Gerdau Executive Committee
Furthermore, Gerdau has a clear compliance system
(CEG), this body makes decisions on relevant issues
that makes sure the current legislation is followed in all
pertaining to the business and its operations. The nine
the countries where the Company operates. This system
members, including external representatives, meet between
also detects and deals with any possible deviation or
eight and ten times a year and are advised by the Strategy,
inconformity that might occur in relation to the Company’s
Corporate Governance, Compensation & Succession, and
internal policies.
Risks Committees.
INDEPENDENT AUDIT
The Board of Directors of Metalúrgica Gerdau S.A., in turn,
An external audit of the financial statements of Gerdau’s
consists of eleven members, nine of whom are also part of
publicly traded companies are regularly conducted. In case
the Board of Directors of Gerdau S.A. The term of office for
of contracting any services not related to external auditing
each of its members in both companies is one year with the
by the independent auditor, the Company bases this on the
possibility of re-election.
principles that preserve the auditor’s independence.
7
8
GERDAU 2013 ANNUAL REPORT
CORPORATE GOVERNANCE STRUCTURE
Shareholders’
Meeting
Board of
Auditors
Corporate Governance, Strategy,
Compensation & Succession,
and Risks Committees
Board of
Directors
Gerdau Officers
and Executive
Committee
Support
Committees
Functional
Processes
Business
Operations
Brazil
Special
Steel
North
America
Read more about the Gerdau governance structure at:
www.gerdau.com/sobre-gerdau/governanca-corporativa.aspx
Latin
America
GERDAU 2013 ANNUAL REPORT
GERDAU S.A. BOARD OF DIRECTORS
Jorge Gerdau Johannpeter
Chairman
Germano H. Gerdau Johannpeter
Vice Chairman
Klaus Gerdau Johannpeter
Vice Chairman
Frederico C. Gerdau Johannpeter
Vice Chairman
André B. Gerdau Johannpeter
Board Member
Claudio Gerdau Johannpeter
Board Member
Affonso Celso Pastore
Board Member
Alfredo Huallem
Board Member
Oscar de Paula Bernardes Neto
Board Member
9
10
GERDAU 2013 ANNUAL REPORT
GERDAU EXECUTIVE COMMITTEE
1. André B. Gerdau Johannpeter
Chief Executive Officer (CEO) and Chairman of the Gerdau Executive Committee (CEG)
2. André Pires de Oliveira Dias
Executive Vice President, Finance, Auditing, and Investor Relations
3. Claudio Gerdau Johannpeter
Executive Vice President
4. Expedito Luz
Executive Vice President of Legal Affairs and Compliance
5. Francisco Deppermann Fortes
Executive Vice President of Human Resources, Management, and Organizational Development
6. Manoel Vitor de Mendonça Filho
Executive Vice President, Brazil Business Operation
7. Ricardo Giuzeppe Mascheroni
Executive Vice President of Latin America Business Operation
2
5
6
1
3
7
4
GERDAU 2013 ANNUAL REPORT
STRATEGY AND COMPETITIVE ADVANTAGES
Gerdau reviews its long-term strategy and enhances its management methodologies
to ensure sustainable development
Gerdau guides its action based on the sustainable growth
to the integration of new business fronts and has also
of its operations and the quest to create value for its
collaborated so that Gerdau can respond to the challenges
shareholders while following the vision to be a global
posed by the current global economic scenario in an agile
organization and a benchmark in any business it conducts.
and integrated way.
In 2013, the Company reviewed its long-term strategy in
order to better define the path to follow in the coming
During the year, 3,100 leaders from various countries
years to increase its competitiveness in the world market,
participated in meetings that were organized to
even in challenging business environments.
disseminate and engage all leaders through stories,
values, and attitudes that continue transforming the
During this process, Gerdau confirmed choices that were
Company. Presenters at these meetings included
already part of its strategy such as maintaining a focus
members of the Board of Directors and the Gerdau
on the steel industry, which includes opportunities for new
Executive Committee. More of these meetings are being
business in this market. One example of this is the start-up
planned for 2014 in Brazil, Canada, and India.
of its own production of flat steel in Brazil and the expansion
of mining activities. Additionally, the Company reaffirmed its
In addition, the Company has developed a training module
management practices, which seek to involve all employees
on Gerdau Corporate Culture in line with the Company’s
in the challenges ahead and Gerdau’s vision of the future
values, which were updated in 2011. During 2013,
and, this way, bring superior results to the business.
900 executives participated in these trainings. These
executives have the mission to serve as multiplication
GERDAU CORPORATE CULTURE
hubs for spreading the Company’s values to their teams
With 113 years of history, Gerdau’s corporate culture is
through personal examples, besides enhancing the
the foundation for the Company’s sustainable growth
employees’ autonomy and showing respect to people.
and one of its main competitive advantages in the global
Another key factor of Gerdau’s corporate culture is its
steel market. The strengthening of this culture, a focus
strong focus on social responsibility and encouraging the
of the human resources department, has contributed
practice of volunteering.
GERDAU STRATEGY
Profitability and
Growth with Sustainability
Relevance
in the markets
Business
competitiveness
Player in all
segments
Integrated Organization
Geographic
diversification
11
12
GERDAU 2013 ANNUAL REPORT
Business Divisions with the possibility of it being replicated
in the following years to all operations. The program will also
keep its focus on special steel, seeking to develop products
and services with greater added value for its customers.
The Company will also expand its Ideas program, which is
currently focused on mills and factories, to other processes
to include the Organization’s managerial levels.
GERDAU BUSINESS SYSTEM (GBS)
Gerdau has implemented the Gerdau Business System
Over 3,000 leaders participated in meetings about Gerdau’s
corporate culture with members of the Board of Directors.
(GBS) for over 10 years now. It is a single management
system that identifies, consolidates, and shares the
Company’s best practices throughout all its processes.
EBITDA BREAKDOWN
Currently all of Gerdau’s operations located in 14 countries
Since 2012, Gerdau has developed the EBITDA
are using the system in an integrated and aligned way,
Breakdown Project, which is an innovative initiative
enabling the Company to reach higher levels of productivity
where each employee begins to get to know exactly
and quality in everything it does.
what his or her role is and their contribution in reaching
the Company’s targets of cash from operations (EBITDA).
GERDAU TEMPLATE
Throughout 2013, the Company involved all its employees
Gerdau is in the process of implementing a single,
worldwide, both in industrial units as well as those in non-
global information technology platform in order to better
industrial processes. They also began to work on identifying
manage its operations around the world. Currently, units
opportunities for gains in EBITDA and building action
responsible for 48% of the Company’s production volume
plans to support reaching the targets within each Business
are already working using this tool. The initiative will be
Division. In 2014, Gerdau plans to further consolidate this
expanded to other plants and reach 87% of the produced
method of action, emphasizing the impact employees have
steel volume by 2015. Due to this, the Company will be able
on increasing profitability and ensuring the sustainability of
to extend the efficiency, safety, and agility when sharing
its operations in the short, medium, and long term.
internal information, as well as enhance its customer service
in all the countries where it operates.
INNOVATION PROGRAM
In 2013, Gerdau made a significant move to strengthen
OUR CAUSE PROJECT
its innovation efforts. The Company launched the
Gerdau works diligently to increase the efficiency of its
Innovation Program globally to identify new and long
operations, which has resulted in more than R$ 500 million
lasting opportunities to create value for its business using
worth of operating synergies in Brazil within a period less
innovative solutions for products and services, internal
than two years. Through Our Cause Project, which began
processes, management, or business models. During the
in 2012, a team of more than 1,000 employees worked
year, for example, specific methodologies were developed
together to consolidate the production management process
to strengthen Gerdau’s innovative capacity and
for long steel, iron ore, and solid fuels, as well as their
technological expertise on four fronts: flat steel, special
respective support areas in Brazil. The gains achieved by
steel, information technology, and energy efficiency.
the end of 2013 account for more than half of the target set
at the beginning of the project, which was R$ 1 billion by
In 2014, the program will develop a long-term planning
2015. That is why the deadline for reaching the target was
process that will include identifying opportunities for
anticipated to the end of 2014, which should contribute to
innovation and differentiation in each of the Company’s
the Company’s increased liquidity during the year.
GERDAU 2013 ANNUAL REPORT
PARTICIPATIVE PROGRAMS
SIX SIGMA PROGRAM
Gerdau encourages creativity and teamwork from
In 2013, the 181 projects developed with the Six Sigma
its employees to build continuous improvement of its
methodology generated US$ 179 million of the Company’s
processes. Quality Improvement Story (QIS) Groups, for
financial return. The use of this management tool by
example, bring together three to seven people who use
especially trained professionals enables increased
management tools to solve everyday problems in the
productivity and improvement of processes and products,
processes. In 2013, 688 QIS groups participated in the
leveraging results faster.
initiative to find improvements, which generated gains of
US$ 184 million for Gerdau. The Ideas program, where
MANAGEMENT FOCUSED ON THE OPERATOR
employees identify opportunities to improve the results in
To further stimulate the autonomy and development of its
their areas, resulted in more than 107,000 suggestions that
teams around the world, Gerdau continues deploying the
netted gains worth US$ 44 million.
Management Focused on the Operator (MFO) program.
Through this initiative, employees help in managing
their work cell and controlling its processes with
NUMBER OF IDEAS SUGGESTED
BY EMPLOYEES
120,000
107,198
safety, quality, costs, maintenance, and the environment.
Already implemented in several of the Company’s units in
eight countries, the MFO was expanded in 2013 to other
99,765
industrial plants in Brazil, the United States, and Venezuela.
100,000
In 2014, it will be implemented in mills in Spain and Peru, as
well as additional mills located in the United States.
80,000
59,725
60,000
KNOWLEDGE MANAGEMENT
40,000
One of the tools used most in Gerdau’s everyday operations
20,000
network where employees from all of the Company’s units
is the Communities of Practice, an internal virtual
around the world share best practices and find solutions to
0
problems by sharing experiences.
2013
2012
2011
In 2013, a total of 5,700 professionals from 14 countries
participated in this initiative, which is part of the Knowledge
Management program-a set of strategies developed to
maximize the use of existing knowledge in Gerdau.
Gerdau teams that achieved the most significant results are recognized annually at the global meetings for Quality Improvement Story (QIS) groups.
13
14
Business
GERDAU 2013 ANNUAL REPORT
Gerdau starts its own production of hot rolled coils at its mill in Ouro Branco (state of Minas Gerais, Brazil).
PERFORMANCE OF OPERATIONS
Gerdau improves management to expand operating results
Throughout 2013, Gerdau’s consolidated shipments
PERSPECTIVES: WORLD
remained stable compared to 2012, reaching 18.5 million
metric tons. At the same time, steel production was
▪▪ The estimates of the International Monetary
18 million metric tons, 4.8% lower. During the year,
Fund (IMF) for the global GDP point to a growth of
Gerdau invested R$ 2.6 billion in fixed assets (CAPEX),
3.7% in 2014. Therefore, there is an expectation
mainly for projects already underway.
of increased global economic activity this year
compared to 2013, which may be reflected in a
higher consumption of steel.
Shipments Per Business Division
18.5 million metric tons
Latin America
15%
Except Brazil
Special Steel
15%
Includes special
steel operations
in Brazil, Spain,
the United States,
and India
▪▪ Given this scenario, the World Steel Association
Brazil
38%
Except
special
steel mills
North America
32%
Includes long steel
operations in the
United States
and Canada
estimates a 3.3% growth in steel consumption in
2014, reaching a level of 1.52 billion metric tons.
▪▪ Despite the uncertainties in the global economic
market, Gerdau has maintained its strategic
investment plan for the execution of its long-term
plan.
GERDAU 2013 ANNUAL REPORT
BRAZIL
will go into operation, which will expand the surface quality
(excluding special steel mills)
of the products. The second stage of the investment plan in
During the year, sales to the Brazilian market (excluding
flat steel is installing a plate mill in this same plant.
special steel mills) totaled 5.9 million tons, 10.6% over 2012,
which included the sales of semi-finished products (slabs
Another highlight was the continuity of Gerdau’s
and billets) and rolled products. Exports from Brazil were
investments in the mining segment. Shipments of iron
1.4 million tons and 29.4% lower because of lower demand
ore to the international market, for example, were expanded
in the international market and excess installed capacity of
from 325,000 metric tons in 2012 to 1.2 million metric tons
steel in the world. Added to this are the impacts of the Brazil
in 2013. In addition, the Company opened the second iron
cost and the exchange variation, which are factors that limit
ore processing unit (UTM II) located in Miguel Burnier (state
the competitiveness of Brazil’s industry. The operating cash
of Minas Gerais, Brazil), which made it possible to expand
flow (EBITDA) in Brazil, however, was R$ 3.2 billion, up
the Company’s production capacity from 6.5 million to
34.8% year-over-year.
11.5 million metric tons of iron ore.
Gerdau operates in the Brazilian market with 11 mills
During the year, Gerdau was also awarded the
that produce steel and rolled products, 3 downstream
environmental permit to increase the rate of production
operations, 39 fabricated reinforcing steel facilities, 5 flat
from 1.5 million to 6 million tons at its Várzea do Lopes
steel service centers, 9 scrap collection and processing
mine, therefore expanding the Company’s iron ore
units, and 4 iron ore units. It is one of the largest distributors
mining capacity. In the coming years, investments in this
of steel in the country with 90 branches located in several
segment include building a rail terminal to streamline
states, which ensures an efficient and fast supply to its
the transportation of products to the port terminals in the
customers. In order to constantly improve its management
southeastern region of the country, the implementation of
of costs and increase its efficiency, the Company
a private road to facilitate the transportation of the raw ore
consolidated the production management operations for
mineral (ROM) from the Várzea do Lopes mine to Miguel
long steel, iron ore, and solid fuels, as well as its respective
Burnier, and a 9-kilometer long conveyor belt system to
areas of support in Brazil.
transport the processed iron ore to the Ouro Branco mill.
As for the long steel segment, Gerdau continues to invest
in expanding the Cosigua (state of Rio de Janeiro,
Brazil) mill with the intent of expanding sales to industrial
and civil construction sectors. To support this, a new rolling
mill with an annual installed capacity of 600,000 metric tons,
that could be expanded in a second phase, will be installed
for wire rod and rolled rebar.
Gerdau announced investments focused mainly on the
expansion of its iron ore mining activities to the Government
of the state of Minas Gerais.
The Company is also building a new melt shop with an
annual capacity of 650,000 metric tons of steel at the
Riograndense mill located in Sapucaia do Sul (state
The search for greater profitability in the business also
of Rio Grande do Sul, Brazil). Those undertaking will
included the Company’s start up of its own production
replace the existing melt shop and will add 200,000
of flat steel in the country. The rolling mill for hot rolled
metric tons to the mill’s annual capacity. The investment
coils started operations in August with the annual capacity
will also increase productivity, operational safety, product
of 800,000 metric tons at the Ouro Branco (state of Minas
quality, and environmental protection, while reducing the
Gerais, Brazil) mill. In 2014, a line of finishing hot rolled coils
mill’s energy consumption.
15
16
GERDAU 2013 ANNUAL REPORT
A second iron ore processing unit goes into operation, expanding the Company’s production capacity.
PERSPECTIVES: Brazil
NORTH AMERICA
(includes long steel operations in the United States
▪▪ The expectation for 2014 is for continued growth
in the Brazilian market, which should be reflected
in steel consumption that is expected to reach 27.4
million metric tons, an increase of 3.2% over 2013
according to the Brazil Steel Institute.
and Canada)
In 2013, the U.S. economy continued its gradual recovery
process. However, the steel market was mainly impacted
by the growing share of imported products due to the
appreciation of the U.S. dollar and the global oversupply
▪▪ In relation to the construction industry, which is
of steel. During the year, Gerdau’s sales in the United
a major consumer of Gerdau steel, the forecast
States and Canada (excluding special steel mills), totaled
for the GDP is 2.4% in 2014 according to IBGE,
6.1 million metric tons, 5.1% less compared to 2012. The
driven by the continued growth of real wages,
the supply of housing credit, the completion of
infrastructure projects in the country, and initiatives
related to the World Cup and the Olympics. Due
to this, Gerdau continues to actively supply steel
for important building projects in Brazil, such as
airports, urban mobility projects, and projects
related to energy.
EBITDA of the Business Division, on the other hand, was
37.6% lower compared to the previous year impacted by the
lower dilution of fixed costs due to the lower utilization of our
units’ installed capacity in the region.
Due to the decrease in demand, the Company made the
difficult decision to cease operations of its small unit in Joliet
(Illinois) that had a rolling capacity of 70,000 metric tons per
▪▪ Considering the future growth potential of the
year. The Company also decided to temporarily suspend
Brazilian market, Gerdau continues to be fully
the melt shops’ activities of its Cambridge steel mill located
prepared to meet the needs of its customers,
in Canada, which can begin to operate again when the
with whom it has a close relationship, and
demand in the region improves.
to continuously improve the efficiency of its
operations.
Given this scenario, Gerdau continued seeking to
improve its management processes in order to operate
the business in an increasingly efficient manner. To
GERDAU 2013 ANNUAL REPORT
do this, the Company implemented a new management
currencies, caused a high level of imports in the region.
software system in all of its units in the region to optimize its
Due to this scenario, market developments and the
internal processes and further qualify its customer service.
Company’s initiatives to improve its management
In 2013, Gerdau also started up the operations of a new
processes contributed to greater efficiency and
reheating furnace at its mill in Calvert City (Kentucky).
increased the Company’s margins. The operating cash
The investments made in the implementation of a new
flow (EBITDA) of this Business Division, for example, grew
continuous casting plant in St. Paul (Minnesota) continue
137.8% compared to 2012, reaching R$ 428 million due to
strong. It will replace the existing one with an annual
higher sales volumes and consequently higher dilution of
production capacity of 550,000 metric tons. The equipment
fixed costs along with cost optimization efforts.
is designed to produce special bar quality (SBQ) steel and
will begin operations in 2014.
PERSPECTIVES: NORTH AMERICA
▪▪ In 2014, the U.S. economy is expected to show
growth, which should increase the consumption of
steel. The non-residential construction activity, for
Despite this scenario, Gerdau continued its investments
in Latin America. In Mexico, the Company continues the
construction of a new mill for producing structural
shapes, with its joint venture Gerdau Corsa. Most of the
equipment has already been delivered by the manufacturers
and the construction is fully underway. The new unit should
example, has already shown some signs of recovery.
become fully operational in 2015 and will have an annual
According to the U.S. Department of Commerce,
production capacity of 1 million metric tons of steel and
investments in this segment increased 4.6% in 2013.
700,000 metric tons of rolled products. The venture will
▪▪ The Purchasing Managers Index (PMI) of the
Institute for Supply Management, the main indicator of
U.S. industrial production, achieved the best result of
the year in December with 56.5 points, anything above
50 represents growth. Despite the country’s harsh
winter, the indicator reached 51.3 points in January
2014, thus remaining on a positive trend.
cater primarily to the metal construction and industrial
sectors in the country.
In Guatemala, Gerdau has joint ownership in Corporación
Centro Americana del Acero, where a new rolling mill
for rebars and light commercial profiles was opened in
2013. The annual capacity of this operation is 200,000
metric tons. Investments are also being made in the
▪▪ The outlook for the U.S. economy in 2014 is optimistic.
technological upgrading of its mills in Tocancipá and Tuta,
The IMF estimates that the United States should have
both in Colombia.
a 2.8% growth in its GDP. According to the World Steel
Association, the steel consumption in the country should
increase 3% during the year, reaching 99.8 million metric
PERSPECTIVES: LATIN AMERICA
tons, mainly influenced by the automotive, energy, heavy
▪▪ According to the IMF, most Latin American countries
equipment, and non-residential construction sectors.
where Gerdau has operations should show growth
in their GDP in 2014, especially Peru (5.7%), Chile
(4.5%), and Colombia (4.2%).
LATIN AMERICA
▪▪ Steel consumption in this region (excluding Brazil)
(excluding Brazil)
should grow 5.9% in 2014, reaching 44.9 million metric
In 2013, Gerdau’s sales in Latin America (excluding Brazil)
tons according to data from the World Steel Association.
rose 3.7%, reaching 2.8 million metric tons, which reflects
the region’s economic growth. However, it is important to
point out that the global surplus of steel, plus the impact
of the exchange rate variation of the dollar against local
▪▪ The Company continues to heavily monitor the high
level of steel imports into the region.
17
18
GERDAU 2013 ANNUAL REPORT
Gerdau continues investing in a new structural shapes mill in Mexico.
SPECIAL STEEL
the substitution of imports and the expansion of exports.
(includes special steel operations in Brazil,
The production of light and heavy vehicles in
the United States, Spain, and India)
2013 increased 10% compared to 2012, reaching
Gerdau’s Special Steel Business Division includes 13 mill
3.7 million units.
located in Brazil, Spain, the United States, and India. This
geographic diversification allows the Company to meet the
Gerdau continued to invest heavily in its special steel
specific needs of its global clients and ranks it as the world’s
units in Brazil. In its Pindamonhangaba (state of São
largest supplier of special steel for the automotive industry.
Paulo, Brazil) mill, for example, a new rolling mill began
In addition, Gerdau provides special steel to the oil & gas,
operating in December 2013 with an annual capacity of
wind energy, agricultural machinery, and mining industries,
500,000 metric tons. Thus, the plant’s installed capacity,
among others.
which distributes 80% of its products to the automotive
sector, rose from 700,000 to 1.2 million metric tons per year.
In 2013, the sales of special steel grew by 7.5%, totaling
The mill in Mogi das Cruzes (state of São Paulo, Brazil) will
2.9 million metric tons. This good performance was due
also expand its rolling capacity from 216,000 to 276,000
to improvements in the heavy vehicle market in Brazil
metric tons per year beginning in 2014.
and the sales made by the plant in India in its first year
of operation. EBITDA, however, was R$ 909 million, 15.3%
In North America, demand for special steel increased with
lower compared to 2012, primarily due to higher costs
the recovery of light vehicle sales, which slightly offset the
related to the learning curve of the start of operations in
decline in the production of heavy trucks and lower activity
India and Europe’s economic situation.
in oil & gas exploration. During the year there was a 4.5%
increase in total production of vehicles, reaching 15.5 million
In Brazil, the heavy vehicles market recorded a significant
units. Due to this, Gerdau decided to continue various
recovery after a weak performance in 2012 with the Euro 5
investments, such as the modernization and expansion
legislation coming into force. Despite the drop in sales of
of the Monroe mill (Michigan), whose annual production
light vehicles, production progressed substantially well with
capacity will reach 800,000 metric tons upon completion.
GERDAU 2013 ANNUAL REPORT
Meanwhile, the main markets for special steel in Europe
PERSPECTIVES: SPECIAL STEEL
showed a recovery in the fourth quarter of 2013. The
registration of automobiles, for example, increased by 6%
▪▪ The outlook in 2014 is positive for most of the
compared to the same period in 2012. However, 2013 was
regions where Gerdau operates. In Brazil, Anfavea’s
still a difficult year for the light and heavy vehicle markets,
projections indicate that the production of light and
resulting in a 2% decline.
heavy vehicles should reach 3.8 million units, which is
1.4% higher than 2013.
Despite the recovery that began in the fourth quarter of
2013 in India, the main markets for special steel (light and
heavy vehicles) decreased over the year due to the slower
pace of economic growth. This slower rate of growth was
caused by rising interest rates and a drop in the mining
▪▪ In the United States, the recovery of the heavy truck
market and the continued growth in light vehicle sales
should reflect positively on the portfolio of orders at
Gerdau’s special steel units in 2014.
activity, which primarily affected the segment of heavy
▪▪ In Europe, the recovery should continue occurring
vehicles. Despite this, Gerdau began operating its new
gradually with the improvement of the economy and
bar inspection line in 2013, which has an annual capacity
of 300,000 metric tons. The installation of a second line
the need for replenishing inventory levels, which may
increase the sales of special steel.
of bar inspection is fully underway in order to ensure
▪▪ In India, the recovery that started in the last quarter
superior quality in the products. Also in progress is the
of the year should continue into 2014 supported also
implementation of a coke mill with an annual capacity of
by the prospect of higher volume of public spending.
200,000 metric tons that is integrated into a 15 MW power
generation mill.
A new special steel rolling mill with an annual capacity of 500,000 metric tons is opened in Pindamonhangaba (state of São Paulo, Brazil).
19
20
GERDAU 2013 ANNUAL REPORT
FINANCES
Gerdau’s net revenue grows 5% in 2013
NET REVENUE
Gerdau’s consolidated net revenue reached
R$ 39.9 billion, 5% increase over 2012.
OPERATING EXPENSES
In consolidated terms, cost of sales were R$ 34.7 billion,
4.5% above 2012. However, selling, general, and
administrative expenses, grew 5.7%, reaching
SOURCE OF NET REVENUE
R$ 39,9 bilhões
Special Steel
19%
Brazil
37%
Includes special
steel operations
in Brazil, Spain,
the United States,
and India
Except special
steel mills
R$ 2.6 billion. In 2013, operating expenses represented 6.6%
of the consolidated net revenue compared to 6.5% in 2012.
Latin America
13%
EBITDA
North America
Except Brazil
31%
Includes long steel
operations in the United
States and Canada
The consolidated operating cash flow (EBITDA) grew
14.6% over the previous year, reaching R$ 4.8 billion,
influenced mainly by the increased participation of Brazil.
The EBITDA margin also improved, reaching 12%
Note: The above information does not include data from
affiliated companies or jointly-owned subsidiaries.
against 11% the previous year.
CONSOLIDATED STATEMENT OF INCOME - SUMMARIZED*
Gerdau S.A. and subsidiaries (R$ millions)
2013
2012
% 2013/2012
39,863
37,982
5.0%
(34,728)
(33,234)
4.5%
5,135
4,748
8.2%
(2,381)
(2,400)
-0.8%
2,754
2,348
17.3%
Net financial income
(1,301)
(789)
64.9%
Income before taxes
1,453
1,559
-6.8%
241
63
482.5%
1,694
1,496
13.2%
Net sales revenue
Cost of sales
Gross income
Operating expenses
Income before financial income and taxes
Income and social security taxes
Net income for the year
* Years ended on December 31, 2013 and 2012.
COMPOSITION OF CONSOLIDATED EBITDA* (R$ MILLION)
2013
2012
Net Income
1,694
1,496
Net financial income
1,301
789
Provision for income tax and social contribution
(241)
63
Depreciation and amortization
2,030
1,828
EBITDA
4,784
4,176
12.0%
11.0%
EBITDA Margin
*Includes the results of affiliated companies and jointly owned subsidiaries according to the equity method.
GERDAU 2013 ANNUAL REPORT
NET INCOME
Despite the devaluation of the Real by 14.6% against
Gerdau’s net income in 2013 was R$ 1.7 billion,
the U.S. Dollar between 2012 and 2013, the exposure
13.2% higher compared to 2012 due to improved
of the gross debt in a foreign currency showed a slight
operating performance.
decrease, going from 80.3% in 2012 to 79.5% in 2013.
This lower exposure is a result of the Company’s financial
Value Added Breakdown
management initiatives to minimize the foreign exchange
In 2013, Gerdau companies generated in consolidated
risk in a period of the Brazilian Real’s volatility.
terms R$ 11.2 billion in value added products, 12.7%
higher than in 2012. This good performance is a result of
The increase in cash (cash, cash equivalents, and
revenues from products and services net of discounts,
investments), which was R$ 2.5 billion in 2012 and reached
which reached R$ 42.1 billion, net of costs of R$ 30.9 billion
R$ 4.2 billion in 2013, occurred due to the reduction of
related to raw materials and consumer goods, outsourced
working capital in the period and the higher generation of
services, depreciation and amortization, equity in earnings,
cash from operations. In 2013, 49.3% of the cash was held
and financial income, among other items.
by the Gerdau companies abroad, mainly in U.S. Dollars.
The 1.9% increase in net debt is a result of the increase
in gross debt, partially offset by the Company’s increase
VALUE ADDED BREAKDOWN
R$ 11.2 billion
of cash in the period. Furthermore, the average nominal
cost of the gross debt (principal) was 6.5%, and 8.6% was
Reinvestments
of profits
Taxes and
social contributions
the amount denominated in Reais, 5.9% plus exchange
10%
rate variation on the total amount in US Dollars taken
from Brazil, 6.1% on the amount taken by the subsidiaries
24%
Salaries, benefits,
profit sharing,
and training
47%
Interest on
financing
14%
abroad. On December 31, 2013, the average payment
maturity of gross debt was 5.3 years.
The ratio between net debt and EBITDA showed an
improvement in the year, reaching 2.5 times in 2013
Dividends and interest
on shareholder’s equity
5%
compared to 2.8 times in 2012, a result from the Company’s
efforts to reduce working capital and improve the generation
of cash from its businesses.
INDEBTEDNESS
(R$ MILLION)
December
31, 2013
December
31, 2012
1,838
2,583
Non-current
14,869
12,086
91.1% long term. The increase in the gross debt in
Gross debt
16,707
14,669
relation to the previous period was primarily due to the
Interest on debt
(391)
(309)
effect of the exchange rate on the loans denominated in
Cash, cash equivalents,
and financial investments
4,222
2,497
12,094
11,863
FINANCIAL LIABILITIES
On December 31, 2013, the gross debt (principal) of
R$ 16.3 billion was comprised of 8.9% short term and
different currencies.
Current
Net debt
21
22
Relationships
GERDAU 2013 ANNUAL REPORT
Gerdau continually invests in training, new technologies, and equipment to ensure safety in the workplace.
EMPLOYEES
Investments in training contribute to reaching the Company’s
challenging goals
Gerdau encourages its more than 45,000 professionals
Within this new structure, and with a focus on Technical
to surpass their own goals and transform their expertise
Training of Operations, the Technical School project
into superior results for the business. To achieve this, the
was developed to reorganize the company’s technical
Company believes it is essential to continuously develop
development initiatives and accelerate the dissemination of
its employees at all levels within the Organization. In
knowledge, especially among the operators and facilitators
2013, each employee dedicated an average of 48 hours to
in the melt shop, rolling mill, quality, procurement and
training, resulting in a total investment of R$ 34.3 million.
recycling departments. This is why more than 250 employees
from nine countries where Gerdau operates participated in
During the year, Gerdau restructured its internal education
developing 150 new training courses in 2013, each of which
and training initiatives for employees to expand their
are available in three languages (Portuguese, Spanish,
skill set and to encourage innovation that will promote
and English). To broaden access to this and other training
a performance improvement for the business. Today,
programs to its employees, Gerdau developed a Corporate
Gerdau’s Corporate Education is organized into four main
Education portal. The portal was made available to more than
areas of training and development: basic training, technical
20,000 employees in Argentina, Canada, Chile, Colombia,
training of operations, training in support processes, and
the United States, Mexico, and Uruguay. In 2014, it will be
leadership training.
available to another 23,000 employees in Brazil and Peru.
GERDAU 2013 ANNUAL REPORT
To accomplish the task of training global leaders, Gerdau
has created the Gerdau Business Program (GBP), which
is a customized two-year MBA that meets the needs of the
Company. The program is conducted in partnership with
the Institute of Education and Research (Insper) from São
Paulo and also involves world-renowned universities, such
as Insead in France and Darden in the United States, which
increases the international exposure of the participants. The
INVESTMENTS IN OCCUPATIONAL
SAFETY AND HEALTH
R$ million
120
100
third edition of the GBP was completed in August 2013 and
80
had participation from 32 executives in Brazil, Chile, Mexico,
60
Peru, and the Dominican Republic.
102.3
92.7
71.0
40
During the year, Gerdau also continued its Accelerated
20
Training of Engineers program, which is an initiative aimed
to accelerate and strengthen the technical capacity of its
0
2013
participants. With the participation of 19 engineers, the
2012
2011
program guided the development of professionals in the
implementation and management of investments in the
Company’s capital goods (CAPEX). The program included
484 hours of classroom training, technical visits to areas,
and the study of investments, along with the individual
follow-up of mentors and of internal coaches.
TRAINING AND DEVELOPMENT
2013
2012
Investments (R$ million)
34.3
37.2
Number of training hours per employee
48.0
44.6
HEALTH & SAFETY
All of Gerdau’s operations in the world follow the Safety
Management System, which is a strict set of practices
that involve continuous investments in new technologies,
equipment, and global management systems. In 2013, this
area received R$ 102.3 million, a 10% increase from the
previous year.
To further enhance safety in the workplace, Gerdau pursues
continuous improvement of the attitudes and behaviors of
its employees in relation to safety. Since 2012, the company
has been training its leaders through the Handbook on
Behavioral Management in Occupational Safety, which is
a material that has been customized and aligned with best
practices worldwide. Implementation of this training earned
the Company the 2013 Safety and Health Excellence
For the third year in a row, Gerdau is recognized for its
initiatives in safety.
23
24
GERDAU 2013 ANNUAL REPORT
Recognition award from the World Steel Association, which
honors successful programs implemented in the area of
occupational health and safety.
During the year, Gerdau also updated and expanded
the mapping of critical operational risks of its production
processes with a focus mainly on its mining activities. Specific
guidelines were established toward this, accompanied with a
training for employees and third-party service providers at the
mines of Várzea do Lopes and Miguel Burnier, both located in
the state of Minas Gerais in Brazil.
As a result of these actions, the accident frequency
A global intranet enables fast and easy access to global and local
content using a single interface.
rate per million hours worked (international index that
measures the occurrence of accidents in the workplace)
Trainees Program in North America and several countries
remained 1.10, which is lower than the world average
in Latin America, including Brazil. For over two years, the
for the steel industry, whose latest figure released by the
trainees receive on-the-job training to learn the industrial
World Steel Association is 1.41.
and commercial processes. As part of the program, Gerdau
trainees also participate in an individual mentoring program to
GLOBAL INTERNAL RECRUITMENT
develop a project about a strategic theme related to their work
To meet the career development aspirations of its
process or area of expertise. According to a survey conducted
employees and to strengthen the engagement and retention
in 2013 to measure the degree of satisfaction of managers and
of internal professionals, Gerdau created the Global Internal
participants, the favorability index to the program is quite high.
Recruitment program. In 2013, more than 500 positions
In 2014, 127 new trainees will join the Company.
were filled with employees through the internal disclosure of
opportunities, including international openings.
MANAGEMENT OF HIGH POTENTIALS
AND SUCCESSION
EMPLOYEE COMMUNICATIONS
One of the Company’s challenges is the succession
Gerdau is constantly seeking to improve its internal
planning for professionals who will take on positions of
communication practices. Therefore, in 2013 the Company
leadership following Gerdau’s corporate culture. It is
built a global intranet that makes it fast and easy to access
with this objective that every year People Development
global and local content from a single platform. The project,
Committees are held in the various Business Divisions
which was developed over one year by a team of 36
to internally analyze and identify professionals with
employees from all Business Divisions in the Company, was
outstanding potential for career development in the
launched globally in early 2014. The initiative incorporated
Company. Gerdau held 240 of these committees in 2013,
external benchmarks and already existing intranets used by
where division leaders analyzed and proposed career
several of Gerdau’s operations.
development actions for over 9,000 professionals.
FUTURE GERDAU TRAINEES
To support the development of these professionals,
Gerdau continually invests in attracting and retaining
mentoring and external coaching programs were also
new talent. The Company currently has
conducted. The mentoring program is guided by a
110 young professionals attending the Future Gerdau
methodology developed internally and has mentors and
GERDAU 2013 ANNUAL REPORT
mentees meet regularly to enlarge the strategic vision of the
Cause Project was created to seek greater integration and
business, disseminate the corporate culture, and develop
engagement from more than 24,000 employees who are
individual skills. Currently, 22 executives participate in the
involved in this project. To achieve the proposed results, the
program as mentees and are paired individually by
Company turned its efforts to strengthening its corporate
14 mentors with a high level of knowledge and
culture among the leadership, as well as to work hard to
experience, among them members of the Board of
define benchmarks and targets shared among the teams,
Directors and Executive Committee.
and to streamline internal processes while encouraging
the culture of innovation and meritocracy. By this, it is
The external coaching program seeks to develop skills
expected that the challenges imposed are well managed
typically pertaining to leadership, team management,
and absorbed by all, always seeking the achievement of its
communication, and influence, among others. Therefore,
employees and their satisfaction in the workplace.
the external coaching consists of a structured, personalized,
and individual process conducted by a professional from
COMPENSATION AND BENEFITS
the market with training and specific experience and who
Gerdau’s compensation systems are designed to enhance
has been previously accredited by the Company for the
and encourage employees by recognizing their outstanding
development of this program.
performance and contributions. In addition to a fixed salary,
the professionals receive variable compensation based on
INTERNAL CLIMATE
reaching individual, team, unit, and operation goals. Gerdau
In 2013, the favorability index of the Employee Opinion
also offers benefits in line with the needs of each region
Survey, which is one of the main tools used for
where it operates. In 2013, the Company changed the long-
assessing the Company’s internal environment, proved
term compensation plan for its executives to make it even
once again a high level of employee satisfaction. The
more efficient, besides contributing to the attraction and
indicator was 75% favorable, six percent higher than the
retention of talents.
world market average, which includes global companies
with excellent financial performance and/or are ranked one
of the companies most admired by Fortune magazine.
LABOR UNION AGREEMENTS
BENEFITS (R$ million)
2013
2012
Meals
94.3
94.7
In addition, Gerdau was featured in the category leadership
Transportation
75.6
75.4
in the magazine Guia Você S/A that assesses the best
Health
378.2
401.4
companies to work for in Brazil according to the perception
Retirement Plan*
208.6
170.7
of its professionals and evaluation of the management
practices by people from the Company. Since 2008, the
* Brazil, USA, Canada, and Chile.
Company scored among the 150 organizations best
Gerdau’s union negotiations are conducted with
positioned in the ranking.
transparency and focus on the sustainability of the
business as well as common interests. In 2013, the
OUR CAUSE PROJECT
Company secured 15 mutually-satisfying agreements in
Throughout 2013, Gerdau overcame important challenges
Brazil, Canada, Chile, Colombia, Spain, the United States,
in Brazil with the full integration of its long steel operations,
and Mexico.
the start-up of flat steel production, and the expansion of
mining activities. To support the Company’s growth, the Our
25
26
GERDAU 2013 ANNUAL REPORT
CUSTOMERS
New products and unique solutions increase the competitiveness of
Gerdau’s customers
Gerdau works to add value to the business of its more
to the reduction of vehicle emissions. In Spain, for example,
than 130,000 customers worldwide by developing new
a steel grade with high mechanical and corrosion resistance
products, services, and applications for steel. This is
was designed to be used in diesel engine pistons, which
because the Company believes that its sustainability
experience high temperatures and pressure in the
is directly related to the strengthening of the steel
combustion chamber.
business supply chain and helping their customers stand
out before their competitors.
Another way Gerdau contributes to increasing the
competitiveness of its customers is by conducting courses
One example of this is the Company starting up its own
and seminars that provide a deeper technical knowledge
production of flat steel in Brazil in 2013, which made it
of the manufacturing process of special steel and their
possible to expand the product mix and meet the specific
applications. Through the program, The World of Special
demands of each segment of steel. Before starting its
Steel, for example, Gerdau holds lectures and technical
own production and sales of hot rolled coils, the Company
visits at their mills in Brazil. Throughout the year, this
took the time to understand the needs of this new market
initiative involved the participation of 11 companies and
segment by visiting customers and conducting external
benefited more than 150 customers.
benchmarks with suppliers and international producers
of flat steel. Gerdau also invested heavily in the training
of more than 500 professionals, including technicians,
managers, salespeople, and sales reps.
Similarly, in Mexico, Gerdau sought to broaden the
knowledge of its clients about methods for applying steel
structures in construction projects. The focus of the initiative
was to expand the market for selling structural shapes
with the start-up of operations at a new Gerdau mill in the
country (read more on this subject on p. 17). Some of the
highlights of the actions taken are the 50 conferences
organized for about 3,000 people, including engineers,
students, and industry professionals, totaling 5,000 hours
of activities.
In the special steel sector, the focus is on innovation. In
2013, about 10% of the volume sold by Gerdau’s special
steel operations in the world corresponded to products
created in the last three years by the Company’s research
and development centers, especially projects that contribute
Gerdau provides opportunities for its customers to expand their
knowledge of the production of special steel and their applications.
GERDAU 2013 ANNUAL REPORT
SUPPLIERS
Building long-term relationships with suppliers contributes to increasing
Gerdau’s competitiveness
Gerdau believes that building long-term relationships with
Gerdau gives preference to suppliers that share its values
its suppliers is critical to enhancing its efficiency practices,
of respect for people and the environment. In addition to
which translates to manufacturing products with better
requiring strict compliance with the laws in each country
quality, optimizing processes, and reducing costs. In all
where it operates, the Company also performs periodic
countries in which it operates, Gerdau seeks to establish
audits to ensure the compliance of its suppliers to Gerdau’s
partnerships with large and small suppliers in order to
levels of excellence.
gain the knowledge and innovation of global players,
while also contributing to the economic development
DEVELOPMENT OF MICRO AND
of the regions where it operates by supporting smaller
SMALL ENTERPRISES
suppliers that generate local income and jobs.
With more than 30,000 suppliers worldwide, Gerdau
invests in initiatives to improve the management
In 2013, for example, the Company was able to reduce the
practices of micro and small enterprises, which
cost of refractories, which is an important raw material used
represent 60% of its network of suppliers. The Supplier
in electric furnaces that is resistant to high temperatures,
Development Program (SDP), for example, offers more than
contributing to a better operating cash flow (EBITDA).
500 hours of training over 18 months by means of courses
Carried out in partnership with its suppliers, the initiative
and on-site consulting services. This initiative also includes
helped to reduce the consumption of this material in mills
the planning and execution of action plans, participating
located in nine countries. In 2014, the project should be
in trade shows and business trade meetings, as well as
implemented in other Gerdau mills around the world.
visiting other companies to learn practices. Throughout
2013, more than 383 suppliers were trained in Argentina,
The Company has also adopted a new practice in its
Brazil, Mexico, Peru, and Venezuela. As a result, Gerdau
business relationship with some market segments: the
increased the volume of business for these companies by
reverse auction. This initiative uses an online trading
20% over the previous year.
platform where the buyer announces his purchasing
needs and invites suppliers to submit their sales proposals
Because steel scrap is one of its main raw materials, Gerdau
for the product, which brings opportunities for a greater
is also dedicated to the development and improvement
number of companies to participate in the bids. This way
of micro and small scrap dealers as well as recycling
the Company is benefited because it can count on a wider
cooperatives in different countries. In 2013, it promoted
variety of prices, advantages, and terms that best align
projects of technical and managerial training to 150 scrap
to its needs, as well as the supplier since it can measure
suppliers in Brazil, Chile, Peru, Uruguay, and Venezuela.
the market demand and improve the proposals presented.
During these training programs, good practices were shared
In 2013, one-hundred and nineteen auctions were held in
relating to management, quality, and occupational health
Brazil, Chile, Colombia, the United States, and Mexico,
and safety, as well as sustainable initiatives in social and
mostly for purchasing indirect materials, which are not
environmental areas. Ethical values were also shared in all
connected to the steelmaking process. In 2014, this action
these projects and in the case of micro and small enterprises,
should be extended to the other countries where the
there was a significant social focus.
Company operates.
27
28
GERDAU 2013 ANNUAL REPORT
SHAREHOLDERS
Speed and quality characterize Gerdau’s relationship with the capital market
With over 65 years of experience in capital markets,
assessment agencies maintained Gerdau’s investment
Gerdau follows principles of transparency, agility and
grade in 2013. Standard & Poor’s and Fitch Ratings kept
quality when disclosing information, which contributes
their rating level at BBB-, while Moody’s confirmed the
to building a close and long-term relationship with its more
investment grade of Baa3.
than 120,000 shareholders worldwide.
Moreover, Gerdau S.A. and Metalúrgica Gerdau S.A.
Throughout 2013, the Company sought to improve and
were placed for the eighth year in a row in the portfolio of
intensify its activities with the capital markets. During 17
BM&FBOVESPA’s Corporate Sustainability Index (ISE)
non-deal road shows, one deal road show (fixed income),
that highlights institutions with a high level of sustainability
and 16 conferences, 873 meetings were held with
and commitment in the areas of governance, social
shareholders, investors, and market analysts. Gerdau
responsibility, and environment. The Gerdau companies
also participated in two meetings with the Association
are also listed on the main indicator of BM&FBOVESPA,
of Capital Market Analysts and Professionals (APIMEC)
the Ibovespa, in which Gerdau S.A. holds the 11th position
in Brazil, one in Rio de Janeiro and one in São Paulo.
among companies with the highest liquidity.
The meeting held in São Paulo was recognized by the
organization as one of the best meetings in 2013 based
SHAREHOLDER’S DIVIDENDS
on the evaluation of the professionals who participated in
Gerdau’s three publicly listed companies – Gerdau S.A.,
events of publicly-held companies.
Metalúrgica Gerdau S.A., and Empresa Siderúrgica del
Perú S.A.A – have dividends policies aligned with
Another important initiative was the improvement of the IR
industry standards. The shareholders of Metalúrgica
website (www.gerdau.com/ri), which received the award
Gerdau S.A. and Gerdau S.A. receive dividends
for Best Investor Relations Website - Large Cap from the
and/or interest on capital of at least 30% of the
IR Magazine Awards Brazil 2013. The award recognizes
adjusted net profit for the year as determined under
Brazilian companies that stand out for their excellence in
Brazilian accounting practices, with quarterly payments.
transparency and communication with shareholders. During
Siderúrgica del Peru S.A.A., however, pays dividends up
the year, Gerdau was also ranked in eight categories of the
to 33% of its adjusted net profit.
Institutional Investor Magazine, which every year selects the
best IR professionals in Latin America through a survey with
In 2013, the distribution of dividends and interest on capital
450 analysts and fund managers.
for shareholders of Gerdau S.A. totaled R$ 476.7 million,
representing R$ 0.28 per share. The dividends for those
PRACTICES RECOGNIZED BY THE MARKET
owning Metalúrgica Gerdau S.A. shares reached
In recognition of its management capacity and
R$ 150.4 million, which represented R$ 0.37 per share.
diversification of Gerdau’s business, the major risk
GERDAU 2013 ANNUAL REPORT
SOCIETY
Gerdau makes special efforts to improve the quality of life in its communities and to
strengthen the steel business supply chain
In the social projects that it supports, Gerdau believes
on p. 27). Moreover, because steel scrap is one of its main
that one of its major contributions is to share knowledge
raw materials, the Company also focused its efforts on
in management. That is why it encourages the volunteer
the scrap recycling industry through a partnership with the
work of its employees worldwide. Currently, 11,000
Agency for International German Technical Cooperation
employees devote part of their time to make it so
(GIZ). The project started in 2010 and has also prepared
that the social organizations are able to reach their
customers and suppliers of materials and services, along
objectives and remain sustainable. This is achieved
with professionals working with steel and civil construction.
by the application of management methodologies in the
During this period, 9,000 people and 378 companies were
development of social projects.
benefited in Brazil, Chile, Peru, and Uruguay.
In 2013, Gerdau invested R$ 62.4 million in social projects.
In the state of Minas Gerais in Brazil, the most important
The definition of these investments is determined by the
region of Gerdau’s growth, the Company became a
Gerdau Institute, which is responsible for the policies and
sponsor of the Museum of Mining and Metal located in
guidelines of the Company’s social responsibility efforts. The
Belo Horizonte. With a monthly average of 5,000 visitors,
practices of social responsibility permeate the Company’s
the museum houses an important collection on mining
entire 100-year history and began in the late 19th century,
and metallurgy and records the relationship between the
a legacy of the Gerdau Johannpeter family. In the 60s,
history and culture of Minas Gerais with its natural wealth.
the Company innovated when it created the Gerdau
Gerdau also expanded its partnership with the Flávio
Foundation, offering benefits to employees and their families
Gutierrez Cultural Institute, which contributes to the training
and continuing to support the community social projects.
of young people in areas of social risk through courses in
Today, the Gerdau Institute has developed approximately
conservation and restoration of historical heritage. In 2013,
900 social responsibility initiatives in more than 205
the program trained more than 120 students, 85% of whom
communities in 14 countries. At every plant location, the
have already been emerged into the job market.
Company seeks to create value for the communities, the
business supply chain, and society as a whole. Leaders
Gerdau also has partnerships with key institutions that
and local teams organized into Gerdau Institute Committees
promote transformative actions in society, such as
guide the various initiatives supported by thousands of
Todos pela Educação, the Competitive Brazil Movement,
volunteer employees.
and the World Childhood Foundation (WCF). A highlight
during the year was the launch of the National Observatory
Gerdau has also expanded its role in the development of
of the National Plan of Education, sponsored by
micro and small entrepreneurs who are part of the steel
Todos pela Educação in Brazil. The online platform
business supply chain. In 2013, this initiative benefited more
(www.observatoriodopne.org.br) was designed based on
than 3,500 customers, suppliers, and professionals who use
about 300 performance indicators and makes it possible to
products in steel, contributing to improving the management
monitor the evolution of the 20 targets set by the Federal
of these businesses. During the year, for example, Gerdau
Government to expand people’s education, improve the
consolidated one more cycle in the Supplier Development
quality of education, and thereby reduce social inequalities
Program, which is aimed at improving the management
in the country.
of micro and small enterprises, which represent 60% of
Gerdau’s network of suppliers (read more on this subject
29
30
Environment
GERDAU 2013 ANNUAL REPORT
Gerdau’s Germinate Program, which has helped more than 250,000 people, is one of the Company’s most important environmental education initiatives.
Gerdau contributes to reducing the consumption of natural resources by recycling
scrap and reusing byproducts
Based on the development of sustainable practices at
implementation of this project in 2010, more than 28,000
its industrial operations, Gerdau continually invests in
vehicles have already been recycled.
measures to reduce the environmental impact of its
processes. At its mills, the concept of recycling is present
The concept of recycling is also part of the management
in different stages of the steel production cycle, thus
of byproducts resulting from the steelmaking process. In
reducing the consumption of natural resources. In 2013,
2013, 82.5% of byproducts generated by Gerdau were
about 75% of the steel produced by Gerdau was made from
reused internally and by different segments of the economy,
recycled steel scrap, which are materials deemed no longer
a growth of 10% over the previous year. Currently, the
useful by society. This means that approximately
byproducts represent an alternative of sustainable raw
15 million metric tons of scrap was removed from landfills
material for the civil construction, cement, and ceramics
and transformed into useful products. The use of scrap also
industries. These materials are used in railroad ballasts
helps to reduce energy consumption, as well as minimize
and foundries, as well as for manufacturing cement and
the emission of carbon dioxide into the atmosphere.
ceramics, producing ferro-alloy, building roads, and paving
Gerdau has been developing projects in partnership with
streets, among other applications. Furthermore, they
the public sector, mainly in Latin America, in order to further
contribute to a cost savings of 30% to 50% over traditional
expand the collection of this raw material in the regions
materials, while reducing energy consumption and carbon
where it operates, and to promote the proper disposal of
emissions. The sale of these byproducts in 2013 generated
cars, trucks and buses that are no longer in use. Since the
revenue of R$ 255 million for Gerdau. Moreover, to improve
GERDAU 2013 ANNUAL REPORT
the processes that enable the recycling of these materials,
materials to delivery of the final product, including the
the Company has invested in the expansion and processing
recycling of byproducts. Gerdau’s care for the environment
of its wastes, which should further expand its eco-efficiency
also includes ongoing investments in upgrading the
indexes over the coming years of these by products.
efficiency of its units. For example, the Company allocated
more than R$ 160 million for environmental efficiency
upgrades in 2013.
REUSE OF BYPRODUCTS
% of total generated
ENERGY
Gerdau’s contribution to the preservation of natural
100
82.5
80
74.8
78.3
resources also includes the improvement and optimization
of its industrial processes. The Company aims to reduce
the total energy consumption for steel production in
Brazil by 2.5% by the end of 2014, which should also
60
generate savings of around R$ 40 million.
40
To reach this goal, the Company started developing a pilot
20
project in 2012 to increase energy savings on auxiliary
0
equipment to the steel production process, which represents
2013
2012
2011
approximately 40% of the consumption of its operations.
By the end of 2013, the energy efficiency project resulted
in savings of R$ 36 million. The project is also being
implemented in Gerdau’s units in the United States and will
be expanded to other countries, starting with its operations
in Mexico and Colombia.
AIR
Gerdau’s mills have modern baghouse gas systems
that helps to protect the atmosphere. These systems
capture solid particles generated during the production of
steel and turns them into byproducts. Since these systems
are essential for the mill’s operation and require highly
specialized knowledge to be used properly, Gerdau initiated
a pilot project to train operators and its engineering and
environmental teams on how to work with the dust removal
systems on electric furnaces. In the first stage of the project,
Gerdau’s byproducts are used on roads and pavements, among
other applications.
the Company will focus its efforts on the mills located in Brazil
and other Latin American countries, then it will shift focus to
the operations in North America and Spain. The goal is to
ENVIRONMENTAL MANAGEMENT
train more than 1,000 employees in 12 countries by 2015.
Gerdau’s production processes follow the guidelines set
by the Environmental Management System (EMS), a set
WATER
of strict practices aligned with the ISO 14001 standard.
In 2013, the index of water reused in Gerdau’s mills
The EMS evaluates all of Gerdau’s activities from an
was 97.5%, one of the best results in the steel industry
environmental perspective, everything from receiving raw
worldwide. This percentage is a result of constant
31
32
GERDAU 2013 ANNUAL REPORT
Gerdau has modern dust removal systems at its mills in order to make sure the atmosphere is protected.
investments in closed systems of water treatment and
BIODIVERSITY
recirculation. In Peru, for example, the water reuse index
Gerdau helps to improve air quality and maintain
reached 100%, which caused this operation to receive the
local biodiversity by preserving green belts around
Corporate Eco-Efficiency Award 2013 in the category Eco-
its industrial units. From a total of 17,000 hectares of its
Efficiency in Water Management granted by the country’s
own property, the Company maintains 3,000 hectares of
Ministry of Environment, the Scientific University of the
preserved forests made up of legal reserves or permanent
South (UCSUR), and by the National Confederation of
preservation areas. Another 4,000 hectares are forests
Private Business Institutions (CONFIEP).
preserved voluntarily. In 2013, more than 33,100 seedlings
were planted near its units around the world.
WATER RECIRCULATION RATE
%
100
97.5
97.0
97.1
ENVIRONMENTAL EDUCATION
Gerdau promotes awareness campaigns, lectures, and
training on environmental preservation for employees,
their families, and in the surrounding communities. In
2013, the activities involved 24,600 people in 51,800
80
hours of training. One of the Company’s most important
60
environmental education initiatives is the Gerdau
40
Germinate Program, which has benefited more than
250,000 people since 1990. In addition to courses for
20
educators, the project provides technical visits, lectures,
0
2013
2012
2011
workshops, and other social-environmental actions for
students and teachers of public schools in Ouro Branco
(state of Minas Gerais, Brazil) and region.
GERDAU 2013 ANNUAL REPORT
SUSTAINABLE PRODUCTS
for the Hugo Werneck award for Sustainability & Love
Gerdau’s products contribute so that contractors can receive
to Nature granted by the Government of Minas Gerais
environmental certifications for their building projects
in partnership with business entities in the state. The
because the products are 100% recyclable and meet one
award recognizes the best social-environmental actions of
of the requirements included in the evaluations of these
individuals, companies, educational institutions, and the
ventures. The Leadership in Energy and Environmental
NGO’s. Furthermore, Gerdau’s Germinate Program ranked
Design (LEED) seal, a benchmark in the world, was
5th in the list of Benchmarking Brazil 2013, which highlights
awarded to several green buildings that used Gerdau steel.
the managerial excellence of sustainable practices in
These buildings include the New Central Library in San
Brazilian companies. In Chile, the Center for Research,
Diego (United States), the Eldorado Business Tower in
Development, and Innovation of Structures and Materials
São Paulo (Brazil), and the Transoceânica Business Park
honored Gerdau’s pioneering spirit in Latin America in
building in Santiago (Chile).
preparing the Environmental Product Declaration (EPD)
for rebars and rolled shapes, which helped to make the
HONORS
life cycle of these products and their impacts on the
Gerdau’s eco-efficiency practices were recognized in
environment even more transparent.
2013. In Brazil, the Company was one of the honorees
Students and teachers of public schools from Ouro Branco (state of Minas Gerais, Brazil) and region participate in the Gerdau Germinate
Program aimed at social-environmental education.
33
34
GERDAU 2013 ANNUAL REPORT
TIMELINE
Learn about the important events that mark Gerdau’s history
The business started by João
Gerdau is divided into two
independent companies: Hugo
runs the nail factory and his brother
Walter assumes responsibility
for the Gerdau Furniture Factory,
both in Porto Alegre (state of Rio
Grande do Sul, Brazil). Later, in
1930, Hugo and Walter Gerdau
The Nail Factory is expanded
The Nail Factory – today
take part in the creation of the
with the construction of a
Metalúrgica Gerdau S.A. –
State center for the Manufacturing
new plant in Passo Fundo
becomes a public company
industry, future Federation of
(state of Rio Grande do Sul,
and begins trading on the
industries of the State.
Brazil), active until 1964.
Porto Alegre stock exchange.
1907
1933
1947
1901
1914
1946
João Gerdau and his son Hugo
Hugo Gerdau becomes a
Curt Johannpeter,
lay the foundation of Gerdau
founding member of the Cia
son-in-law of Hugo,
with the Pontas de Paris Nail
Geral de Indústrias (state of
takes control of the
Factory in Porto Alegre (state
Rio Grande do Sul, Brazil),
company and expands
of Rio Grande do Sul, Brazil).
which later becomes Fogões
the business oversees.
Geral. He later assumes
control of the company and in
1947 leaves the business.
GERDAU 2013 ANNUAL REPORT
35
Steel production begins with
The Gerdau Foundation
The São Judas
Gerdau acquires the
Riograndense – known as Usina
is created, with health,
Tadeu Wire Factory
Açonorte steel plant (state
Farrapos (UFa) – in Porto Alegre
education, housing
is established in
of Pernambuco, Brazil),
(state of Rio Grande do Sul, Brazil),
and social assistance
São Paulo (state
whose facilities were being
with forward-thinking conception of the
programs, reinforcing
of São Paulo,
transferred from Tição (in
mini-mill, a model based on the use
the culture of social
Brazil), marking the
the city of Iguarassu) to the
of scrap and regional sales, enabling
responsibility within
company’s expansion
industrial district of Curado
more competitive operational costs.
the Organization.
into southeast Brazil.
(in the city of Recife).
1948
1963
1967
1969
1957
1964
1970
The second Riograndense
Germano, Klaus,
unit starts up operation in
and Jorge Gerdau
Sapucaia do Sul (state of
Johannpeter take on
shares on the Rio de
Rio Grande do Sul, Brazil).
leadership positions
Janeiro and São Paulo
The mill was also known
as Rio dos Sinos mill.
in the Company, and
in 1971 Frederico
Gerdau Johannpeter
also becomes part
of the board.
Siderúrgica Riograndense
publicly launches
stock exchanges.
36
GERDAU 2013 ANNUAL REPORT
Gerdau’s executive
Gerdau wins its
leadership begins to be
first privatization
of Laisa in Uruguay.
in the hands of Jorge
auction in Brazil
Gerdau Johannpeter
and acquires
Cosigua begins to have
(CEO), Germano,
the Barão de
Become an international
Steel distribution activities start
company with the acquisition
with the first Comercial Gerdau in
the state of São Paulo (Brazil).
its shares traded on the
Klaus, and Frederico
Cocais steel mill
Stock Exchanges in São
Gerdau Johannpeter
(state of Minas
Paulo and Rio de Janeiro.
(Vice Chairmen).
Gerais, Brazil).
1980
1983
Gerdau assumes control of the Guaíra
plant, a steel production pioneer
in the state of Paraná (Brazil).
1971
1973
1982
1988
1984
Construction of Cosigua mill
Germano, Klaus,
Operations begin at
Cosigua shares
(state of Rio de Janeiro, Brazil)
Jorge, and Frederico
the Cearense plant
are publicly traded,
begins in the Industrial District
Gerdau Johannpeter
in Maracanaú (state
of Santa Cruz, which was
become part of
completed in record time (14
the Gerdau Board
months), in partnership with
of Directors.
Thyssen ATH, and was funded
by the World Bank through
the International Financial
Corporation (IFC), among
other financing institutions.
which gains
of Ceará, Brazil).
over 60,000 new
Second Gerdau
shareholders for
plant in the state of
Paraná (Brazil) begins
operation, in Araucária.
the Company.
GERDAU 2013 ANNUAL REPORT
Gerdau acquires
Usiba (state of
Bahia, Brazil) at a
privatization auction.
Gerdau enters
Gerdau acquires
Siderúrgica
Pains, currently
Divinópolis mill.
North America with
the acquisition of
Gerdau expands to the
Courtice Steel,
Gerdau acquires part of
which later took
Gerdau
on the name of
acquires MRM
the capital stock of Sipar
Cambridge in
in the province
rolling mill in Argentina.
the province of
of Manitoba
Ontario (Canada).
(Canada).
1989
1994
In 2005, Gerdau takes
a controlling stake.
1995
1998
1992
1997
The Company acquires AZA in
Gerdau becomes a
Chile and Aços Finos Piratini (state
partner of Açominas with
of Rio Grande do Sul, Brazil).
a small ownership stake.
The GG 50 rebar, a
Gerdau flagship product
in Brazil, is released.
United States with the
acquisition of Ameristeel.
Gerdau S.A., a public company
in Brazil, is listed on the New
York Stock Exchange (NYSE).
1999
37
38
GERDAU 2013 ANNUAL REPORT
André B. Gerdau Johannpeter takes over as Chief
Executive Officer (CEO) and Claudio Gerdau
Johannpeter becomes Chief Operating Officer (COO).
Gerdau acquires Chaparral Steel, one of the largest producers
of structural shapes in the United States, thus marking
the greatest acquisition in the history of the Company.
The Company enters Mexico (Siderúrgica
Gerdau celebrates 100 years
Tultitlán) and Venezuela (Siderúrgica Zuliana).
in business with an installed
steel production capacity of 8.4
The Organization also acquires a stake in the
million metric tons per year.
Dominican Republic (Industrias Nacionales - Inca)
and in Aceros Corsa (Mexico); signs agreement
Gerdau takes a controlling
stake in Gerdau Açominas
for purchase of Macsteel (United States), and
(state of Minas Gerais,
starts the Kalyani Gerdau joint venture (India).
Brazil), its largest mill.
Diaco (Colombia) and
Gerdau Açominas (state of Minas Gerais,
Gerdau acquires the Cartersville
North Star Steel (United
plant (United States).
States) are acquired.
2001
2004
2002
The merger of Gerdau and
Brazil) increases its production capacity by
50% to 4.5 million metric tons per year.
2007
2005
Gerdau expands to Europe,
Co-Steel, in North America,
acquiring 40% of Sidenor. As
creates Gerdau Ameristeel.
a result of this acquisition, the
Company takes an indirect
stake in Aços Villares (Brazil).
The Gerdau Institute, responsible
for coordinating the Company’s
2006
Gerdau acquires Siderperu (Peru),
Sheffield Steel (United States),
Callaway Building products (United
States), and GSB (Spain).
The Company announces its
joint venture Pacific Coast
Steel (United States).
social responsibility policies and
guidelines, is created, broadening
the scope of the Gerdau Foundation,
which was established in 1963.
Gerdau São Paulo mill
(state of São Paulo, Brazil)
commences operations.
GERDAU 2013 ANNUAL REPORT
39
Gerdau invests to expand its
own production of iron ore.
Gerdau acquires Tamco (United
States), a leading producer of
rebars on the west coast.
Gerdau announces new
investments in mining to
increase its annual installed
capacity to 18 million metric
Gerdau enters Central America, with a 30%
Gerdau gains 100% ownership
tons by 2016. Later, it
stake in Corporación Centroamericana
of Gerdau Ameristeel, with the
celebrates the first shipment of
del Acero, in Guatemala.
acquisition of approximately 34%
iron ore, marking its entry into
of the company’s minority shares.
the international mining market.
The Company acquires a 50.9%
As a result, the company is no
stake in Cleary Holdings (Colombia),
longer traded on the Toronto and
a metallurgical coke producer and
New York stock exchanges.
The Company completes
20 years of experience in
the special steel sector.
holder of coking coal reserves.
An additional stake of 49.1%
Gerdau takes over Macsteel
is acquired in Cleary Holdings
Production of special steel
operations (United States), a
(Colombia), granting Gerdau 100%
in India begins, in order to
producer of special steel.
ownership of the company’s capital.
supply the region’s market.
2008
2010
2012
2009
2011
2013
The Várzea do Lopes mine (state
Gerdau celebrates 110 years in business,
Gerdau starts up its own
of Minas Gerais, Brazil) is started
with an installed steel production capacity of
production of hot rolled
with the production of iron ore.
25 million metric tons of steel per year. The
coils in Brazil by opening
Company also updates the design of its logo.
a hot rolled coil mill at its
The Company reveals it
plant in Ouro Branco (state
is entering into the flat
steel sector in Brazil.
of Minas Gerais, Brazil).
The Mission, Vision, Values, and Code of
Gerdau announces new
Ethics are revised and unified at a global level,
investments in India.
strengthening Gerdau’s corporate culture.
Gerdau’s second iron ore
processing unit starts to operate
at Miguel Burnier (state of
Gerdau begins studies for commercial
Minas Gerais, Brazil), making
exploration of part of its iron ore
it possible to expand the total
resources located in Minas Gerais.
production capacity of iron
The first phase for implementing the Gerdau
million metric tons per year.
ore from 6.5 million to 11.5
Template is completed, which aims to deploy a
single system of information technology using SAP
Gerdau completes its first
in all countries where the Company operates.
year of operations in India
Gerdau announces investments to increase the installed capacity
at its special steel mills in Brazil and the United States.
and starts selling special
steel in the country.
40
GERDAU 2013 ANNUAL REPORT
SUMMARIZED FINANCIAL STATEMENTS
METALÚRGICA GERDAU S.A.
As of December 31, 2013 and 2012
CONSOLIDATED BALANCE SHEETS
(In thousands of Brazilian reais)
2013
2012
Cash and cash equivalents
2,099,638
1,437,724
Short-term investments
2,123,168
1,059,605
Trade accounts receivable
4,078,806
3,695,381
Inventories
8,499,691
9,021,542
Other current assets
1,407,037
1,213,403
18,208,340
16,427,655
Deferred income taxes
2,220,085
2,376,709
Other non-current assets
2,122,788
1,959,459
Investments in associates and jointly-controlled entities
1,590,031
1,425,605
Current assets
Non-current assets
Goodwill and other intangible assets
12,942,977
11,489,825
Property, plant and equipment
21,419,743
19,690,863
40,295,624
36,942,461
58,503,964
53,370,116
Trade accounts payable
3,271,449
3,059,814
Short-term debt and debentures
TOTAL ASSETS
Current liabilities
1,901,679
3,888,232
Taxes payable
671,316
534,631
Payroll and related liabilities
655,962
558,634
Other current liabilities
805,250
1,088,177
7,305,656
9,129,488
16,107,308
12,073,867
Non-current liabilities
Long-term debt and debentures
Deferred income taxes
1,187,251
1,844,731
942,319
1,187,621
2,791,891
2,316,057
21,028,769
17,422,276
Attributable to the equity holders of parent
11,116,909
9,965,945
Non-controlling interests
19,052,630
16,852,407
30,169,539
26,818,352
58,503,964
53,370,116
Employee benefits
Other non-current liabilities
Shareholder's equity
Total liabilities and equity
GERDAU 2013 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Brazilian reais)
2013
2012
Net sales
39,863,037
37,981,668
Cost of sales
-34,728,460
-33,234,102
Gross profit
5,134,577
4,747,566
Selling, general and administrative expenses
-2,617,786
-2,477,894
200,720
50,783
2,717,511
2,320,455
Net financial income (expenses)
-926,644
-835,573
Exchange variations, net
-544,177
-134,128
1,246,690
1,350,754
273,790
-18,077
1,520,480
1,332,677
505,124
456,731
1,015,356
875,946
1.24
1.12
Other operating income (expenses), net
Income before financial income and taxes
Income before taxes
Income and social contribution taxes
Net income
Attributed to:
Owners of the parent
Non-controlling interests
Earnings per share - common and preferred
CONSOLIDATED STATEMENTS OS CASH FLOWS
(In thousands of Brazilian reais)
2013
2012
Net income
1,520,480
1,332,677
Adjustments to reconcile net income with net cash
3,426,066
3,184,771
-990,915
-244,475
3,955,631
4,272,973
Net cash used in investing activities
-2,703,565
-3,438,025
Net cash used in financing activities
-661,827
-965,152
71,675
90,908
Changes in assets and liabilities (net of interest and income tax)
Net cash provided by operating activities
Effect of exchange rate variation on cash and cash equivalents
661,914
-39,296
Cash and cash equivalents at beginning of year
Increase (decrease) in cash and cash equivalents
1,437,724
1,477,020
Cash and cash equivalents at end of year
2,099,638
1,437,724
41
42
GERDAU 2013 ANNUAL REPORT
SUMMARIZED FINANCIAL STATEMENTS
GERDAU S.A.
As of December 31, 2013 and 2012
CONSOLIDATED BALANCE SHEETS
(In thousands of Brazilian reais)
2013
2012
Cash and cash equivalents
2,099,224
1,437,235
Short-term investments
2,123,168
1,059,605
Trade accounts receivable
4,078,806
3,695,381
Inventories
8,499,691
9,021,542
Other current assets
1,376,333
1,196,634
18,177,222
16,410,397
Deferred income taxes
2,056,445
2,210,300
Other non-current assets
2,121,304
1,958,863
Investments in associates and jointly-controlled entities
1,590,031
1,425,605
Current assets
Non-current assets
Goodwill and other intangible assets
12,850,964
11,397,812
Property, plant and equipment
21,419,074
19,690,181
40,037,818
36,682,761
58,215,040
53,093,158
Trade accounts payable
3,271,419
3,059,684
Short-term debt and debentures
Total assets
Current liabilities
1,838,367
2,582,353
Taxes payable
651,207
528,698
Payroll and related liabilities
655,962
558,634
Other current liabilities
819,675
1,093,813
7,236,630
7,823,182
14,868,408
12,086,202
Non-current liabilities
Long-term debt and debentures
Deferred income taxes
Employee benefits
Other non-current liabilities
1,187,252
1,795,963
942,319
1,187,621
1,959,674
1,402,273
18,957,653
16,472,059
30,339,079
27,245,604
Shareholder's equity
Attributable to the equity holders of parent
Non-controlling interests
Total liabilities and equity
1,681,678
1,552,313
32,020,757
28,797,917
58,215,040
53,093,158
GERDAU 2013 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Brazilian reais)
2013
2012
Net sales
39,863,037
37,981,668
Cost of sales
-34,728,460
-33,234,102
Gross profit
5,134,577
4,747,566
Selling, general and administrative expenses
-2,611,876
-2,471,675
231,722
72,314
2,754,423
2,348,205
Net financial income (expenses)
-757,621
-654,615
Exchange variations, net
-544,156
-134,128
1,452,646
1,559,462
241,056
-63,222
1,693,702
1,496,240
1,583,731
1,425,633
109,971
70,607
0.93
0.84
Other operating income (expenses), net
Income before financial income and taxes
Income before taxes
Income and social contribution taxes
Net income
Attributed to:
Owners of the parent
Non-controlling interests
Earnings per share - common and preferred
CONSOLIDATED STATEMENTS OS CASH FLOWS
(In thousands of Brazilian reais)
2013
2012
Net income
1,693,702
1,496,240
Adjustments to reconcile net income with net cash
3,288,367
3,048,240
-883,657
-200,433
4,098,412
4,344,047
Net cash used in investing activities
-2,703,565
-3,438,025
Net cash used in financing activities
-804,533
-1,036,294
71,675
90,908
Changes in assets and liabilities (net of interest and income tax)
Net cash provided by operating activities
Effect of exchange rate variation on cash and cash equivalents
661,989
-39,364
Cash and cash equivalents at beginning of year
Increase (decrease) in cash and cash equivalents
1,437,235
1,476,599
Cash and cash equivalents at end of year
2,099,224
1,437,235
43
44
GERDAU 2013 ANNUAL REPORT
INFORMATION AND CONTACTS
CREDITS
Gerdau
Coordination
Av. Farrapos, 1811
Porto Alegre – RS – Brazil
CEP 90.220-005
Phone: (+55 51) 3323-2000
www.gerdau.com
Shareholders Relations
Itaú Corretora de Valores S.A.
Gerdau Corporate Communications and Public Affairs
Editing and production supervision
Gerdau Corporate Communications and Public Affairs and Odin
Arte & Comunicação
Graphic Design
Néktar Design
investfone@itau.com.br
Printing
Phone: 3003-9285 (Capital Cities)
Gráfica Comunicação Impressa
Phone: 0800.720-9285 (Other Regions)
Paper and ink
Custodian Bank in Brazil
Couché Matte 240g (cover) and Couché Matte 120g (content).
Itaú Corretora de Valores S.A.
Printed with soy-based inks.
investfone@itau.com.br
Phone: 3003-9285 (Capital Cities)
Phone: 0800.720-9285 (Other Regions)
Phone: 0800.722-1722 (Hearing and speech impaired)
Depositary Bank Overseas
JpMorgan Chase Bank N.A.
jpmorgan.ard@wellsfargo.com
Phone: (800) 990-1135 (from the United States)
Phone: (651) 453-2128 (outside the United States)
Circulation
300 copies in Portuguese and 150 in English.
Photo credits and illustrations
Ana Fuccia (page 13), Gerdau File (page 32), Duda Bussolin
(page 31), Eduardo Colesi (page 22), Eduardo Rocha (pages 11,
14, 16, 30, and 33), Emmanuelle Bernard (page 9), Foguinho/
Save the image (page 26), Ivson Miranda (pages 6, 9, 10, and
19), Saúl Lugardo Pérez (page 17), WorldSteel (page 23), and
Vinícius Vogel (page 12).
Investor and Analyst Service
Av. Farrapos, 1811
We would like to thank all of those who contributed by
Porto Alegre – RS – Brazil
supplying information and images for this publication.
CEP 90.220-005
inform@gerdau.com.br
Gerdau believes in the importance of seeking continuous
Phone: (+55 51) 3323-2703
improvement in all its processes, products and services.
Fax: (+55 51) 3323-2281
Therefore, we would like to hear your opinion about the
Independent Auditor
PriceWaterhouseCoopers
2013 annual report. Evaluate its scope, relevance, quality of
information, and graphic presentation. Your opinion is very
important to us.
To submit your feedback, visit www.relatoriogerdau.com.br
and answer the opinion survey or send an email to
gerdau@gerdau.com, with suggestions for improvement.
We thank you in advance for your participation.
www.gerdau.com
ARGENTINA
www.gerdau.com.ar
BRAZIL
www.gerdau.com.br
CANADA
www.gerdau.com/longsteel
CHILE
www.gerdau.cl
COLOMBIA
www.gerdau.com.co
DOMINICAN REPUBLIC
www.industriasnacionales.com
GUATEMALA
www.acerosdeguatemala.com
INDIA
www.gerdau.in
MEXICO
www.gerdaucorsa.com.mx
PERU
www.sider.com.pe
SPAIN
www.gerdau.es
UNITED STATES
www.gerdau.com/longsteel
www.gerdau.com/specialsteel
URUGUAY
www.gerdau.com.uy
VENEZUELA
www.sizuca.com.ve