EX-99.1 2 a16-16432_3ex99d1.htm EX-99.1

Exhibit 99.1

 

 

 

Highlights in the second quarter of 2016

 

Main Highlights

 

·                  EBITDA and EBITDA margin improved in all business divisions in 2Q16 compared to 1Q16.

 

·                  Positive free cash flow of R$ 807 million in 2Q16: higher EBITDA, lower capex and working capital released.

 

·                  Selling, general and administrative expenses decreased 10% from 1Q16, reflecting the Company’s management efforts.

 

·                  Gross debt declines R$ 3.0 billion between March and June 2016, with a consequent reduction in the Net Debt/EBITDA ratio to 3.6 times.

 

·                  Cash conversion cycle decreased to 71 days, setting a new record for the Company.

 

Key Information

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

Steel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production of Crude Steel (1,000 tonnes)

 

4,304

 

4,431

 

-2.9

%

4,154

 

3.6

%

8,458

 

8,772

 

-3.6

%

Shipments (1,000 tonnes)

 

4,240

 

4,271

 

-0.7

%

3,851

 

10.1

%

8,091

 

8,414

 

-3.8

%

Net Sales (R$ million)

 

10,249

 

10,759

 

-4.7

%

10,085

 

1.6

%

20,334

 

21,207

 

-4.1

%

Cost of Goods Sold (R$ million)

 

(9,165

)

(9,578

)

-4.3

%

(9,272

)

-1.2

%

(18,437

)

(18,914

)

-2.5

%

SG&A (R$ million)

 

(578

)

(637

)

-9.3

%

(644

)

-10.2

%

(1,222

)

(1,296

)

-5.7

%

Adjusted EBITDA(1) (R$ million)

 

1,201

 

1,192

 

0.8

%

930

 

29.1

%

2,131

 

2,298

 

-7.3

%

Net Income(2) (R$ million)

 

184

 

265

 

-30.6

%

14

 

1214.3

%

198

 

532

 

-62.8

%

Free Cash Flow (R$ million)

 

807

 

650

 

24.2

%

11

 

7236.4

%

818

 

148

 

452.7

%

Gross margin

 

10.6

%

11.0

%

 

 

8.1

%

 

 

9.3

%

10.8

%

 

 

EBITDA Margin

 

11.7

%

11.1

%

 

 

9.2

%

 

 

10.5

%

10.8

%

 

 

Shareholders’ equity (R$ million)

 

27,761

 

35,462

 

 

 

30,286

 

 

 

27,761

 

35,462

 

 

 

Total Assets (R$ million)

 

58,234

 

68,778

 

 

 

65,005

 

 

 

58,234

 

68,778

 

 

 

Gross debt / Total capitalization(3)

 

42

%

38

%

 

 

43.0

%

 

 

42

%

38.0

%

 

 

Net debt(4) (R$) / EBITDA(5) (R$)

 

3.6

x

3.0

x

 

 

4.1

x

 

 

3.6

x

3.0

x

 

 

Net debt(4) (US$) / EBITDA(5) (US$)

 

4.1

x

2.6

x

 

 

4.0

x

 

 

4.1

x

2.6

x

 

 

 

(1) - Adjusted EBITDA = non-accounting mesurement prepared by the Company.

(2) - In the 2Q16 and 1H16, the net income was adjusted by the extraordinary events

(3) - Total capitalization = shareholders’ equity + gross debt - interest on debt

(4) - Net debt = gross debt - interest on debt - cash, cash equivalents and short-term investments

(5) - Adjusted EBITDA in the last 12 months.

 

World Steel Market

 

·      On April 13, worldsteel published its latest Short Range Outlook containing forecasts for global apparent steel use. For 2016, the forecast calls for global steel demand to contract by 0.8%. Excluding China, the forecast calls for demand to grow by 1.8%. The weak performance of the construction industry and lower level of infrastructure investments in China should lead the country’s steel demand to decline by 4% in 2016, after peaking in 2013. In developing economies excluding China, lower commodity prices and political instability in certain countries have been affecting economic growth. Consequently, consumption in 2016 should grow more moderately, by around 1.8%. Meanwhile, in developed countries, the expectation is for continued recovery in their economies, with steel consumption in 2016 growing by 1.7%.

 

1


 

Consolidated Information

 

Gerdau’s performance in the second quarter of 2016

 

The Consolidated Financial Statements of Gerdau S.A. are presented in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the accounting practices adopted in Brazil, which are fully aligned with the international accounting standards issued by the Accounting Pronouncement Committee (CPC).

 

The information in this report does not include data for jointly controlled entities and associate companies, except where stated otherwise.

 

Consolidated Results

 

Production and shipments

 

Consolidated
(1,000 tonnes)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

Production of crude steel

 

4,304

 

4,431

 

-2.9

%

4,154

 

3.6

%

8,458

 

8,772

 

-3.6

%

Shipments of steel

 

4,240

 

4,271

 

-0.7

%

3,851

 

10.1

%

8,091

 

8,414

 

-3.8

%

 

·                  Consolidated crude steel production decreased in 2Q16 compared to 2Q15, mainly due to the optimization of inventories in the Special Steel units in Brazil and to the divestiture of the special steel units in Spain. Compared to 1Q16, crude steel production increased due to inventory rebuilding in the Brazil and North America BDs.

 

·      Consolidated shipments remained relatively stable in 2Q16 compared to 2Q15, with higher exports from Brazil neutralizing the lower shipments from the Special Steel BD due to the divestment of the units in Spain.  Compared to 1Q16, consolidated shipments increased in all business divisions, except the Special Steel BD.

 

Net sales, cost and gross margin

 

Consolidated
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

Net Sales

 

10,249

 

10,759

 

-4.7

%

10,085

 

1.6

%

20,334

 

21,207

 

-4.1

%

Cost of Goods Sold

 

(9,165

)

(9,578

)

-4.3

%

(9,272

)

-1.2

%

(18,437

)

(18,914

)

-2.5

%

Gross profit

 

1,084

 

1,181

 

-8.2

%

813

 

33.3

%

1,897

 

2,293

 

-17.3

%

Gross margin (%)

 

10.6

%

11.0

%

 

 

8.1

%

 

 

9.3

%

10.8

%

 

 

 

·      Consolidated net sales decreased in 2Q16 compared to 2Q15, mainly due to lower shipments in the domestic market in Brazil and Special Steel BDs. Compared to 1Q16, consolidated net sales increased slightly mainly due to higher shipments in practically all business divisions, which were partially neutralized by the reduction in net sales per tonne sold caused by the effects from exchange variation on operations located abroad (appreciation in the average price of the Brazilian real against the U.S. dollar of 10.1% in 2Q16 compared to 1Q16).

 

·      On a consolidated basis, gross profit and gross margin decreased slightly in 2Q16 compared to 2Q15, due to the weaker performances of the Brazil and North America BDs, which were partially offset by the better performances of the South America and Special Steel BDs. Compared to 1Q16, the improvements in consolidated gross profit and consolidated gross margin were due to the better performance of all business divisions, except for the South America BD.

 

2


 

Operating expenses

 

Consolidated
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

SG&A

 

(578

)

(637

)

-9.3

%

(644

)

-10.2

%

(1,222

)

(1,296

)

-5.7

%

Selling expenses

 

(176

)

(185

)

-4.9

%

(214

)

-17.8

%

(390

)

(364

)

7.1

%

General and administrative expenses

 

(402

)

(452

)

-11.1

%

(430

)

-6.5

%

(832

)

(932

)

-10.7

%

Other operating income (expenses)

 

28

 

6

 

366.7

%

40

 

-30.0

%

68

 

33

 

106.1

%

Result in operations with jointly controlled entities

 

(105

)

—

 

—

 

—

 

—

 

(105

)

—

 

—

 

Equity in earnings of unconsolidated companies

 

—

 

7

 

—

 

(8

)

—

 

(8

)

14

 

—

 

 

·      The decrease in selling, general and administrative expenses in 2Q16 compared to 2Q15 demonstrates the Company’s efforts over the periods to rationalize these expenses in all business divisions, despite the effects from exchange variation in the comparison period. Compared to 1Q16, the reduction in these expenses demonstrates the Company’s efforts to rationalize these expenses, especially in Brazil, in addition to the effects from exchange variation in the comparison period. These efforts led to a reduction in selling, general and administrative expenses as a ratio of net sales, from 5.9% in 2Q15 to 5.6% in 2Q16.

 

·      The negative result from transactions with subsidiaries was due to the divestment, on June 23, 2016, of the special steel operations in Spain, as described in the section “Business Divisions (BD).”

 

EBITDA

 

Breakdown of Consolidated EBITDA
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

Net income

 

79

 

265

 

-70.2

%

14

 

464.3

%

93

 

532

 

-82.5

%

Net financial result

 

23

 

207

 

-88.9

%

(39

)

—

 

(16

)

1,105

 

—

 

Provision for income and social contribution taxes

 

327

 

86

 

280.2

%

226

 

44.7

%

553

 

(594

)

—

 

Depreciation and amortization

 

617

 

626

 

-1.4

%

681

 

-9.4

%

1,298

 

1,229

 

5.6

%

EBITDA - Instruction CVM (1)

 

1,046

 

1,184

 

-11.7

%

882

 

18.6

%

1,928

 

2,272

 

-15.1

%

Result in operations with jointly controlled entities

 

105

 

—

 

—

 

—

 

—

 

105

 

—

 

—

 

Equity in earnings of unconsolidated companies

 

—

 

(7

)

—

 

8

 

—

 

8

 

(14

)

—

 

Proportional EBITDA of associated companies and jointly controlled entities

 

50

 

15

 

233.3

%

40

 

25.0

%

90

 

40

 

125.0

%

Adjusted EBITDA(2)

 

1,201

 

1,192

 

0.8

%

930

 

29.1

%

2,131

 

2,298

 

-7.3

%

Adjusted EBITDA Margin

 

11.7

%

11.1

%

 

 

9.2

%

 

 

10.5

%

10.8

%

 

 

 

(1) - Non-accounting measurement calculated pursuant to Instruction 527 of the CVM.

(2) - Non-accounting mesurement prepared by the Company.

Note: EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is not a method used in accounting practices, does not represent cash flow for the periods in question and should not be considered an alternative to cash flow as an indicator of liquidity.

The Company presents adjusted EBITDA to provide additional information regarding cash flow generation in the period.

 

Conciliation of Consolidated EBITDA
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

1st Quarter
2016

 

1st Half
2016

 

1st Half
2015

 

EBITDA - Instruction CVM (1)

 

1,046

 

1,184

 

882

 

1,928

 

2,272

 

Depreciation and amortization

 

(617

)

(626

)

(681

)

(1,298

)

(1,229

)

OPERATING INCOME BEFORE FINANCIAL RESULT AND TAXES(2)

 

429

 

558

 

201

 

630

 

1,043

 

 

(1) - Non-accounting measure calculated pursuant to Instruction 527 of the CVM.

(2) - Accounting measurement disclosed in consolidated Statements of Income.

 

Consolidated EBITDA (R$ million) and EBITDA Margin (%)

 

 

·                  Adjusted EBITDA and adjusted EBITDA margin increased slightly in 2Q16 compared to 2Q15, in contrast to the decreases in gross profit and gross margin, which is explained by the decrease in selling, general and administrative expenses and by the increase in proportional EBITDA of associated companies and jointly

 

3


 

controlled entities. Compared to 1Q16, adjusted EBITDA and adjusted EBITDA margin increased in line with gross profit and gross margin.

 

Financial result and net income

 

Consolidated
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
 2015

 

Variation 
2Q16/2Q15

 

1st Quarter
 2016

 

Variation 
2Q16/1Q16

 

1st Half 
2016

 

1st Half 
2015

 

Variation 
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before financial income (expenses) and taxes(1)

 

429

 

558

 

-23.1

%

201

 

113.4

%

630

 

1,043

 

-39.6

%

Financial Result

 

(23

)

(207

)

-88.9

%

39

 

—

 

16

 

(1,105

)

—

 

Financial income

 

45

 

95

 

-52.6

%

76

 

-40.8

%

121

 

204

 

-40.7

%

Financial expenses

 

(484

)

(394

)

22.8

%

(525

)

-7.8

%

(1,009

)

(766

)

31.7

%

Exchange variation, net

 

433

 

94

 

360.6

%

510

 

-15.1

%

943

 

(557

)

—

 

Exchange variation on net investment hedge

 

364

 

111

 

227.9

%

362

 

0.6

%

726

 

(464

)

—

 

Exchange variation - other lines

 

69

 

(17

)

—

 

148

 

-53.4

%

217

 

(93

)

—

 

Gains (losses) on financial instruments, net

 

(17

)

(2

)

750.0

%

(22

)

-22.7

%

(39

)

14

 

—

 

Income before taxes(1)

 

406

 

351

 

15.7

%

240

 

69.2

%

646

 

(62

)

—

 

Income and social contribution taxes

 

(327

)

(86

)

280.2

%

(226

)

44.7

%

(553

)

594

 

—

 

On net investment hedge

 

(364

)

(111

)

227.9

%

(362

)

0.6

%

(726

)

464

 

—

 

Other lines

 

37

 

25

 

48.0

%

136

 

-72.8

%

173

 

130

 

33.1

%

Consolidated Net Income(1)

 

79

 

265

 

-70.2

%

14

 

464.3

%

93

 

532

 

-82.5

%

Extraordinary events

 

105

 

—

 

—

 

—

 

—

 

105

 

—

 

—

 

Result in operations with jointly controlled entities

 

105

 

—

 

—

 

—

 

—

 

105

 

—

 

—

 

Consolidated Adjusted Net Income(2)

 

184

 

265

 

-30.6

%

14

 

1214.3

%

198

 

532

 

-62.8

%

 

(1) - Accounting measurement disclosed in the income statement of the Company.

(2) - Non accounting measurement made by the Company to demonstrate the net income adjusted by the extraordinary events that impacted the result, but without cash effect.

 

·      In 2Q16 compared to 2Q15, the variation in the financial result was basically due to the positive exchange variation on liabilities contracted in U.S. dollar (appreciation in the end-of-period price of the Brazilian real against the U.S. dollar of 3.3% in 2Q15 and 9.8% in 2Q16), even though financial expenses increased due to the negative effect from exchange variation (depreciation in the average price of the Brazilian real against the U.S. dollar of 14.1% in 2Q16 compared to 2Q15).

 

·      The variation in the financial result in 2Q16 compared to 1Q16 is mainly explained by the higher positive exchange variation in 1Q16, even though financial expenses decreased in the comparison period.

 

·      Note that, in accordance with IFRS, the Company designated the bulk of its debt in foreign currency contracted by companies in Brazil as hedge for a portion of the investments in subsidiaries located abroad. As a result, only the exchange variation on the portion of debt not linked to investment hedge is recognized in the financial result, with this effect neutralized by the line “Income and Social Contribution taxes on net investment hedge.”

 

·      The reduction in consolidated net income in 2Q16 compared to 2Q15 is explained mainly by the lower operating income and higher financial expenses in the period. Compared to adjusted net income in 2Q15, the reduction in 2Q16 is mainly due to the higher financial expenses in the comparison period, which also were affected by exchange variation. Comparing net income of 1Q16, the adjusted net income in 2Q16 was higher due to operating result increase, partially offset by higher negative financial result and income tax.

 

Dividends

 

·      Gerdau S.A., based on the results in 2Q16, approved the dividends payment of R$ 51.5 million (R$ 0.03 per share), as prepayment of the minimum mandatory dividend according bylaws.

 

Payment date: September 2, 2016

Record date: close of trading on August 22, 2016

Ex-dividend date: August 23, 2016

 

Investments

 

·      In 2Q16, CAPEX amounted to R$ 326.2 million. Of the amount invested in the quarter, 53.7% was allocated to the Brazil BD, 22.1% to the South America BD, 13.4% to the North America BD and 10.8% to the Special Steel BD. In the first six months of 2016, CAPEX amounted to R$ 811.5 million.

 

·      Based on the investments scheduled for 2016, Gerdau plans to invest R$ 1.5 billion, considering the investments in capturing productivity gains and maintenance, which is 35% below the amount in 2015.

 

4


 

Working Capital and Cash Conversion Cycle

 

 

·      In June 2016, the cash conversion cycle (working capital divided by daily net sales in the quarter) decreased significantly in relation to March 2016, reflecting the 13.5% decrease in working capital and 1.6% increase in net sales. The decrease in working capital is explained by the effects from exchange variation on the operations located abroad, by the divestment of the units in Spain and by the working capital management in all business divisions.

 

Financial liabilities

 

Debt composition
(R$ million)

 

06.30.2016

 

03.31.2016

 

12.31.2015

 

 

 

 

 

 

 

 

 

Short Term

 

1,959

 

2,464

 

2,387

 

Long Term

 

18,715

 

21,220

 

24,074

 

Gross Debt

 

20,674

 

23,684

 

26,461

 

Cash, cash equivalents and short-term investments

 

4,877

 

5,525

 

6,919

 

Net Debt

 

15,797

 

18,159

 

19,542

 

 

·      On June 30, 2016, gross debt was 9.5% short term and 90.5% long term. Gross debt was denominated 16.4% in Brazilian real, 79.2% in U.S. dollar and 4.4% in other currencies. The R$ 3.0 billion decrease in gross debt between March 2016 and June 2016 is mainly explained by the effects from exchange variation in the period (appreciation in the end-of-period price of the Brazilian real against the U.S. dollar of 9.8% in 2Q16), by the amortizations made in 2Q16 and by the elimination of the debt in Spain due to the operation’s divestment.

 

·      On June 30, 2016, 70.1% of cash was held by Gerdau companies abroad and denominated mainly in U.S. dollar.

 

·      The decrease in net debt on June 30, 2016 compared to March 31, 2016 is due to the variations in gross debt.

 

·      On June 30, 2016, the nominal weighted average cost of gross debt was 7.4%, or 11.7% for the portion denominated in Brazilian real, 6.0% plus exchange variation for the portion denominated in U.S. dollar contracted by companies in Brazil and 7.5% for the portion contracted by subsidiaries abroad. On June 30, 2016, the average gross debt term was 6.1 years, with more than 70% maturing only as of 2018. Note that, with regard to the R$ 3.1 billion in maturities scheduled for 2017, the Company’s cash and credit facilities are more than sufficient to meet these commitments, most of which mature only in October of that year. Furthermore, the Company has the option of refinancing a portion of these liabilities.

 

5


 

·      On June 30, 2016, the payment schedule for long-term gross debt was as follows:

 

Long Term

 

R$ million

 

2017

 

3,126

 

2018

 

1,162

 

2019

 

877

 

2020

 

3,262

 

2021

 

3,487

 

2022

 

222

 

2023

 

2,108

 

2024

 

2,963

 

2025 and after

 

1,508

 

Total

 

18,715

 

 

·      The Company’s main debt indicators are shown below:

 

Indicators

 

06.30.2016

 

03.31.2016

 

12.31.2015

 

Gross debt / Total capitalization (1)

 

42

%

43

%

45

%

Net debt(2) (R$) / EBITDA (3) (R$)

 

3.6

x

4.1

x

4.2

x

Net debt(2) (US$) / EBITDA (3) (US$)

 

4.1

x

4.0

x

3.6

x

 

(1) - Total capitalization = shareholders’ equity + gross debt- interest on debt

(2) - Net debt = gross debt - interest on debt - cash, cash equivalents and short-term investments

(3) -  Adjusted EBITDAin the last 12 months.

 

·      The reduction in net debt combined with the stability in EBITDA led the Net Debt/EBITDA ratio to decline to 3.6 times.

 

Indebtedness

(R$ billion)

 

 

6


 

Free Cash Flow (FCF)

 

·      In 2Q16, EBITDA was more than sufficient to honor the commitments regarding CAPEX, income tax and debt interest. In addition to this higher cash generation, the Company’s efforts to reduce working capital allowed it to generate positive free cash flow of R$ 807 million. In the first six months of 2016, free cash flow amounted to R$ 818 million.

 

Free Cash Flow 2Q16

(R$ million)

 

 

Free Cash Flow Bridge 1Q16 to 2Q16

(R$ million)

 

 

7


 

Business Divisions (BD)

 

The information in this report is divided into four Business Divisions (BD), in accordance with Gerdau’s corporate governance, as follows:

 

·      Brazil BD (Brazil Business Division) — includes the steel operations in Brazil (except special steel), the metallurgical and coking coal operation in Colombia and the iron ore operation in Brazil;

·      North America BD (North America Business Division) — includes all North American operations (Canada, United States and Mexico), except special steel;

·      South America BD (South America Business Division) — includes all operations in South America (Argentina, Chile, Colombia, Peru, Uruguay and Venezuela), except the operations in Brazil, the metallurgical and coking coal operation in Colombia and the iron ore operation in Brazil;

·      Special Steel BD (Special Steel Business Division) — includes the special steel operations in Brazil, United States, India and Spain (the latter until May 2016).

 

Net sales

 

 

EBITDA and EBITDA Margin

 

 

8


 

Brazil BD

 

Production and shipments

 

Brazil BD
(1,000 tonnes)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production of crude steel

 

1,655

 

1,660

 

-0.3

%

1,544

 

7.2

%

3,199

 

3,188

 

0.3

%

Shipments of steel

 

1,629

 

1,568

 

3.9

%

1,422

 

14.6

%

3,051

 

3,125

 

-2.4

%

Domestic Market

 

1,007

 

1,091

 

-7.7

%

896

 

12.4

%

1,903

 

2,342

 

-18.7

%

Exports

 

622

 

477

 

30.4

%

526

 

18.3

%

1,148

 

783

 

46.6

%

 

·      Crude steel production remained relatively stable in 2Q16 compared to 2Q15. Compared to 1Q16, crude steel production increased due to the higher shipments in the period, though at a slower pace than the growth in shipments.

 

·      Shipments in the domestic market decreased in 2Q16 compared to 2Q15, reflecting the weaker growth in the construction and manufacturing industries due to economic uncertainties. As a result of the weaker demand in the domestic market and the opportunities in the international market, a portion of shipments was redirected to the export market. Compared to 1Q16, shipments in the domestic market increased due to seasonality. Exports increased in 2Q16 compared to 1Q16, especially of finished products, reflecting the improvement in international steel prices in early 2016.

 

·      In 2Q16, 1,275,000 tonnes of iron ore were shipped to the Ouro Branco Mill in Minas Gerais and 1,104,000 tonnes were sold to third parties.

 

Operating result

 

Brazil BD
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales(1)

 

3,047

 

3,261

 

-6.6

%

2,694

 

13.1

%

5,741

 

6,576

 

-12.7

%

Domestic Market

 

2,270

 

2,573

 

-11.8

%

2,011

 

12.9

%

4,281

 

5,356

 

-20.1

%

Exports

 

777

 

688

 

12.9

%

683

 

13.8

%

1,460

 

1,220

 

19.7

%

Cost of Goods Sold

 

(2,703

)

(2,809

)

-3.8

%

(2,472

)

9.3

%

(5,175

)

(5,614

)

-7.8

%

Gross profit

 

344

 

452

 

-23.9

%

222

 

55.0

%

566

 

962

 

-41.2

%

Gross margin (%)

 

11.3

%

13.9

%

 

 

8.2

%

 

 

9.9

%

14.6

%

 

 

EBITDA

 

402

 

479

 

-16.1

%

248

 

62.1

%

650

 

1,000

 

-35.0

%

EBITDA margin (%)

 

13.2

%

14.7

%

 

 

9.2

%

 

 

11.3

%

15.2

%

 

 

 

(1) - Includes iron ore, coking coal and coke net sales.

 

·      The decrease in net sales in 2Q16 compared to 2Q15 was mainly due to the lower shipments in the domestic market. Specifically compared to 1Q16, the growth in net sales was due to higher shipments.

 

·      Cost of goods sold decreased in 2Q16 compared to 2Q15, basically due to the lower costs with scrap, despite the higher shipments in the period. Compared to 1Q16, cost of goods sold increased due to higher shipments. On the other hand, the higher shipments in the period supported the higher dilution of fixed costs. Gross margin contracted in 2Q16 in relation to 2Q15, due to the less favorable market mix. Compared to 1Q16, the increase in gross margin in 2Q16 was mainly due to the higher shipments and resulting higher dilution of fixed costs.

 

·      EBITDA and EBITDA margin performance in 2Q16 were in line with gross profit and gross margin in the comparisons with both 2Q15 and 1Q16, and additionally supported by the decrease in selling, general and administrative expenses.

 

9


 

EBITDA (R$ million) and EBITDA Margin (%)

 

 

10


 

North America BD

 

Production and shipments

 

North America BD
(1,000 tonnes)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production of crude steel

 

1,690

 

1,693

 

-0.2

%

1,555

 

8.7

%

3,245

 

3,343

 

-2.9

%

Shipments of steel

 

1,644

 

1,649

 

-0.3

%

1,522

 

8.0

%

3,166

 

3,135

 

1.0

%

 

·      Crude steel production was relatively stable in 2Q16 compared to 2Q15, accompanying shipments in the period. Compared to 1Q16, production increased due to higher shipments.

 

·      Compared to 1Q16, shipments in 2Q16 increased due to seasonality.

 

Operating result

 

North America BD
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

4,291

 

4,332

 

-0.9

%

4,297

 

-0.1

%

8,588

 

8,168

 

5.1

%

Cost of Goods Sold

 

(3,942

)

(3,891

)

1.3

%

(3,995

)

-1.3

%

(7,938

)

(7,492

)

6.0

%

Gross profit

 

349

 

441

 

-20.9

%

302

 

15.6

%

650

 

676

 

-3.8

%

Gross margin (%)

 

8.1

%

10.2

%

 

 

7.0

%

 

 

7.6

%

8.3

%

 

 

EBITDA

 

408

 

450

 

-9.3

%

355

 

14.9

%

763

 

704

 

8.4

%

EBITDA margin (%)

 

9.5

%

10.4

%

 

 

8.3

%

 

 

8.9

%

8.6

%

 

 

 

·      Net sales decrease slightly in 2Q16 compared to 2Q15, due to the reduction in net sales per tonne sold in U.S. dollar, which was partially offset by the effect from exchange variation (depreciation in the average price of the Brazilian real against the U.S. dollar of 14.1% in 2Q16 compared to 2Q15). Compared to 1Q16, net sales remained stabled, with the higher shipments and increase in net sales per tonne sold in U.S. dollar offset by the effects from exchange variation (appreciation in the average price of the Brazilian real against the U.S. dollar of 10.1% in 2Q16 compared to 1Q16).

 

·      Cost of goods sold increased in 2Q16 compared to 2Q15, due to the effects from exchange variation, which offset the lower cost per tonne sold in U.S. dollar. The reduction in gross margin is explained by the decrease in net sales per tonne sold exceeding the decrease in costs per tonne in U.S. dollar. Compared to 1Q16, the slight decrease in cost of goods sold is mainly due to the effects from exchange variation in the comparison period, despite the higher shipments. The higher dilution of fixed costs, combined with the stability in net sales, led gross margin to increase in 2Q16 compared to 1Q16.

 

·      EBITDA and EBITDA margin in 2Q16 in relation to 2Q15 decreased slower than gross profit and gross margin, reflecting the increase in proportional EBITDA of associated companies and jointly controlled entities in 2Q16. Compared to 1Q16, EBITDA and EBITDA margin increased, following the performance of gross profit and gross margin.

 

EBITDA (R$ million) and EBITDA Margin (%)

 

 

11


 

South America BD

 

Production and shipments

 

South America BD
(1,000 tonnes)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production of crude steel

 

297

 

310

 

-4.2

%

320

 

-7.2

%

616

 

613

 

0.5

%

Shipments of steel

 

532

 

549

 

-3.1

%

505

 

5.3

%

1,038

 

1,089

 

-4.7

%

 

·      Shipments in 2Q16 decreased compared to 2Q15 and increased compared to 1Q16, with performances varying in the countries where Gerdau operates.

 

Operating result

 

South America BD
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

1,210

 

1,243

 

-2.7

%

1,236

 

-2.1

%

2,446

 

2,562

 

-4.5

%

Cost of Goods Sold

 

(1,025

)

(1,116

)

-8.2

%

(1,031

)

-0.6

%

(2,057

)

(2,279

)

-9.7

%

Gross profit

 

185

 

127

 

45.7

%

205

 

-9.8

%

389

 

283

 

37.5

%

Gross margin (%)

 

15.3

%

10.2

%

 

 

16.6

%

 

 

15.9

%

11.0

%

 

 

EBITDA

 

187

 

94

 

98.9

%

183

 

2.2

%

371

 

221

 

67.9

%

EBITDA margin (%)

 

15.5

%

7.6

%

 

 

14.8

%

 

 

15.2

%

8.6

%

 

 

 

·      Net sales decreased in 2Q16 compared to 2Q15 due to lower shipments. Cost of goods sold decreased faster than net sales due to the efforts to optimize costs made in recent quarters and to the lower scrap costs.

 

·      Compared to 1Q16, the decrease in net sales and cost of goods sold is mainly explained by the effects from exchange variation resulting from the appreciation in the average price of the Brazilian real against the currencies of the countries where Gerdau operates even with higher shipments.

 

·      Gross margin increased in 2Q16 compared to 2Q15, due to the efforts to reduce costs in this business division and to lower scrap costs.

 

·      EBITDA and EBITDA margin increased in 2Q16 compared to 2Q15, accompanying the performance of gross profit and gross margin and supported by the decline in operating expenses, which demonstrates a new profitability level in this operation. Compared to 1Q16, despite the reduction in gross profit and gross margin, EBITDA and EBITDA margin increased due to lower operating expenses.

 

EBITDA (R$ million) and EBITDA Margin (%)

 

 

12


 

Special Steel BD

 

·      On June 23, 2016, the Company concluded the sale of its company producing special steel in Spain. The economic value of the transaction was € 155 million (equivalent to R$ 621 million) and the sale agreement also established the possibility of receiving an additional of € 45 million (equivalent to R$ 180 million) after five years, based on the future performance of the business. As a result of the transaction, the Company recognized an expense of R$ 105 million in the line Results in Subsidiaries Operation on its Income Statement. The divestment of this operation is in line with Gerdau’s goal of focusing on its most profitable assets.

 

·      As a result of the divestment, the 2Q16 figures do not include any results from Spain for the month of June 2016, influencing comparisons.

 

Production and shipments

 

Special Steel BD
(1,000 tonnes)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production of crude steel

 

662

 

768

 

-13.8

%

736

 

-10.1

%

1,398

 

1,627

 

-14.1

%

Shipments of steel

 

595

 

700

 

-15.0

%

632

 

-5.9

%

1,226

 

1,396

 

-12.2

%

 

·      Crude steel production decreased in 2Q16 compared to 2Q15 and 1Q16, mainly due to the divestiture of the units in Spain, in addition to the optimization of inventories in Brazil compared to 2Q15.

 

·      Shipments decreased in 2Q16 compared to 2Q15 and 1Q16, mainly due to the divestiture of the units in Spain and the optimization of inventories. Compared to 1Q16 specifically, the decline in shipments was partially neutralized by the seasonal improvement in shipments in Brazil.

 

Operating result

 

Special Steel BD
(R$ million)

 

2nd Quarter
2016

 

2nd Quarter
2015

 

Variation
2Q16/2Q15

 

1st Quarter
2016

 

Variation
2Q16/1Q16

 

1st Half
2016

 

1st Half
2015

 

Variation
1H16/1H15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

1,963

 

2,257

 

-13.0

%

2,170

 

-9.5

%

4,133

 

4,503

 

-8.2

%

Cost of Goods Sold

 

(1,753

)

(2,102

)

-16.6

%

(2,084

)

-15.9

%

(3,837

)

(4,137

)

-7.3

%

Gross profit

 

210

 

155

 

35.5

%

86

 

144.2

%

296

 

366

 

-19.1

%

Gross margin (%)

 

10.7

%

6.9

%

 

 

4.0

%

 

 

7.2

%

8.1

%

 

 

EBITDA

 

267

 

215

 

24.2

%

174

 

53.4

%

441

 

475

 

-7.2

%

EBITDA margin (%)

 

13.6

%

9.5

%

 

 

8.0

%

 

 

10.7

%

10.5

%

 

 

 

·      Net sales decreased in 2Q16 compared to 2Q15, mainly due to lower shipments, with this impact partially mitigated by the effects from exchange variation on shipments at units located abroad and by the increase in net sales per tonne sold in Brazil. Compared to 1Q16, net sales decreased, basically due to lower shipments and the effects from exchange variation on shipments at units located abroad.

 

·      Cost of goods sold decreased in 2Q16 compared to 2Q15, mainly due to lower shipments and to the reduction in cost per tonne sold at units located abroad, with these factors partially neutralized by the effects from exchange variation. Compared to 1Q16, cost of goods sold decreased due to lower shipments and the effects from exchange variation on shipments at the special steel units located abroad. Gross margin increased in 2Q16 compared to both 2Q15 and 1Q16 due to the higher profitability of all special steel units. Specifically in relation to 1Q16, a highlight was the more favorable geographic mix of shipments.

 

·      EBITDA and EBITDA margin increased in 2Q16 compared to both 2Q15 and 1Q16, accompanying the performance of gross profit and gross margin.

 

EBITDA (R$ million) and EBITDA Margin (%)

 

 

13


 

THE MANAGEMENT

 

This document contains forward-looking statements. These statements are based on estimates, information or methods that may be incorrect or inaccurate and that may not occur. These estimates are also subject to risks, uncertainties, and assumptions that include, among other factors: general economic, political, and commercial conditions in Brazil and in the markets where we operate, as well as existing and future government regulations. Potential investors are cautioned that these forward-looking statements do not constitute guarantees of future performance, given that they involve risks and uncertainties. Gerdau does not undertake and expressly waives any obligation to update any of these forward-looking statements, which are valid only on the date on which they were made.

 

14


 

GERDAU S.A.

CONSOLIDATED BALANCE SHEETS

In thousands of Brazilian reais (R$)

 

 

 

June 30, 2016

 

December 31, 2015

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

 

3,809,424

 

5,648,080

 

Short-term investments

 

 

 

 

 

Held for Trading

 

1,067,515

 

1,270,760

 

Trade accounts receivable - net

 

4,043,430

 

4,587,426

 

Inventories

 

6,763,727

 

8,781,113

 

Tax credits

 

604,459

 

673,155

 

Income and social contribution taxes recoverable

 

516,906

 

724,843

 

Unrealized gains on financial instruments

 

—

 

37,981

 

Other current assets

 

491,710

 

454,140

 

 

 

17,297,171

 

22,177,498

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

Tax credits

 

73,861

 

77,990

 

Deferred income taxes

 

3,436,425

 

4,307,462

 

Unrealized gains on financial instruments

 

9,984

 

5,620

 

Related parties

 

60,714

 

54,402

 

Judicial deposits

 

1,811,812

 

1,703,367

 

Other non-current assets

 

547,669

 

490,583

 

Prepaid pension cost

 

105,703

 

140,388

 

Investments in associates and jointly-controlled entities

 

1,107,969

 

1,392,882

 

Goodwill

 

12,165,473

 

15,124,430

 

Other Intangibles

 

1,452,093

 

1,835,761

 

Property, plant and equipment, net

 

20,164,831

 

22,784,326

 

 

 

40,936,534

 

47,917,211

 

 

 

 

 

 

 

TOTAL ASSETS

 

58,233,705

 

70,094,709

 

 

15


 

GERDAU S.A.

CONSOLIDATED BALANCE SHEETS

In thousands of  Brazilian reais (R$)

 

 

 

June 30, 2016

 

December 31, 2015

 

CURRENT LIABILITIES

 

 

 

 

 

Trade accounts payable

 

2,756,793

 

3,629,788

 

Short-term debt

 

1,959,362

 

2,387,237

 

Taxes payable

 

332,977

 

349,674

 

Income and social contribution taxes payable

 

65,868

 

140,449

 

Payroll and related liabilities

 

492,757

 

480,430

 

Employee benefits

 

457

 

18,535

 

Environmental liabilities

 

23,972

 

27,736

 

Unrealized losses on financial instruments

 

12,317

 

—

 

Other current liabilities

 

435,150

 

829,182

 

 

 

6,079,653

 

7,863,031

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

Long-term debt

 

18,496,870

 

23,826,758

 

Debentures

 

217,817

 

246,862

 

Related parties

 

—

 

896

 

Deferred income taxes

 

724,559

 

914,475

 

Provision for tax, civil and labor liabilities

 

2,039,263

 

1,904,730

 

Environmental liabilities

 

112,026

 

136,070

 

Employee benefits

 

1,441,365

 

1,687,486

 

Obligations with FIDC

 

931,724

 

853,252

 

Other non-current liabilities

 

429,430

 

690,766

 

 

 

24,393,054

 

30,261,295

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Capital

 

19,249,181

 

19,249,181

 

Treasury stocks

 

(6,893

)

(383,363

)

Capital reserves

 

11,597

 

11,597

 

Retained earnings

 

6,821,987

 

6,908,059

 

Operations with non-controlling interests

 

(2,873,335

)

(2,877,488

)

Other reserves

 

4,301,076

 

8,777,815

 

EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT

 

27,503,613

 

31,685,801

 

 

 

 

 

 

 

NON-CONTROLLING INTERESTS

 

257,385

 

284,582

 

 

 

 

 

 

 

EQUITY

 

27,760,998

 

31,970,383

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

58,233,705

 

70,094,709

 

 

16


 

GERDAU S.A.

CONSOLIDATED STATEMENTS OF INCOME

In thousands of Brazilian reais (R$)

 

 

 

For the three-month period ended

 

For the six-month period ended

 

 

 

June 30, 2016

 

June 30, 2015

 

June 30, 2016

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

10,248,778

 

10,759,391

 

20,333,289

 

21,206,767

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

(9,165,474

)

(9,577,977

)

(18,437,307

)

(18,913,500

)

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

1,083,304

 

1,181,414

 

1,895,982

 

2,293,267

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

(175,609

)

(184,878

)

(389,941

)

(364,397

)

General and administrative expenses

 

(401,965

)

(452,181

)

(831,519

)

(932,623

)

Other operating income

 

54,833

 

43,528

 

102,057

 

100,379

 

Other operating expenses

 

(26,519

)

(37,199

)

(33,928

)

(67,237

)

Results in subsidiaries operation

 

(105,048

)

—

 

(105,048

)

—

 

Equity in earnings of unconsolidated companies

 

(109

)

7,267

 

(7,690

)

13,802

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE FINANCIAL INCOME AND TAXES

 

428,887

 

557,951

 

629,913

 

1,043,191

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

45,022

 

94,512

 

120,812

 

203,628

 

Financial expenses

 

(484,200

)

(393,883

)

(1,009,302

)

(765,947

)

Exchange variations, net

 

433,186

 

94,392

 

942,616

 

(556,862

)

Gain and losses on financial instruments, net

 

(16,700

)

(1,903

)

(38,220

)

13,734

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE TAXES

 

406,195

 

351,069

 

645,819

 

(62,256

)

 

 

 

 

 

 

 

 

 

 

Current

 

(47,146

)

(244,403

)

(80,454

)

(289,788

)

Deferred

 

(279,840

)

157,808

 

(471,970

)

883,879

 

Income and social contribution taxes

 

(326,986

)

(86,595

)

(552,424

)

594,091

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

79,209

 

264,474

 

93,395

 

531,835

 

 

 

 

 

 

 

 

 

 

 

(+) Results in subsidiaries operation

 

105,048

 

—

 

105,048

 

—

 

 

 

 

 

 

 

 

 

 

 

ADJUSTED NET INCOME*

 

184,257

 

264,474

 

198,443

 

531,835

 

 

* Adjusted net income is a non-accounting indicator prepared by the Company, reconciled with the financial statements and consists of net income adjusted for extraordinary events that influenced the net income, without cash effect.

 

 

 

 

 

 

 

 

 

 

ADJUSTED NET INCOME*

 

184,257

 

264,474

 

198,443

 

531,835

 

(-) Results in subsidiaries operation

 

(105,048

)

—

 

(105,048

)

—

 

NET INCOME

 

79,209

 

264,474

 

93,395

 

531,835

 

 

 

 

 

 

 

 

 

 

 

ATTRIBUTABLE TO:

 

 

 

 

 

 

 

 

 

Owners of the parent

 

73,078

 

255,628

 

81,773

 

548,690

 

Non-controlling interests

 

6,131

 

8,846

 

11,622

 

(16,855

)

 

 

79,209

 

264,474

 

93,395

 

531,835

 

 

17


 

GERDAU S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands of Brazilian reais (R$)

 

 

 

For the six-month period ended

 

 

 

June 30, 2016

 

June 30, 2015

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net income for the period

 

93,395

 

531,835

 

Adjustments to reconcile net income for the period to net cash provided by operating activities

 

 

 

 

 

Depreciation and amortization

 

1,298,492

 

1,229,583

 

Equity in earnings of unconsolidated companies

 

7,690

 

(13,802

)

Exchange variation, net

 

(942,616

)

556,862

 

Losses (Gains) on financial instruments, net

 

38,220

 

(13,734

)

Post-employment benefits

 

111,614

 

122,141

 

Stock based remuneration

 

20,786

 

28,424

 

Income and social contribution taxes

 

552,424

 

(594,091

)

Gains on disposal of property, plant and equipment, net

 

(2,085

)

(3,057

)

Results in subsidiaries operation

 

105,048

 

—

 

Allowance for doubtful accounts

 

51,656

 

38,983

 

Provision for tax, labor and civil claims

 

147,538

 

162,928

 

Interest income on trading securities

 

(40,635

)

(95,502

)

Interest expense on loans

 

771,580

 

689,562

 

Interest on loans with related parties

 

2,532

 

(1,752

)

(Reversal) Provision for net realizable value adjustment in inventory, net

 

(48,380

)

(18,368

)

 

 

2,167,259

 

2,620,012

 

Changes in assets and liabilities

 

 

 

 

 

Increase in trade accounts receivable

 

(384,706

)

(37,619

)

Decrease in inventories

 

398,820

 

38,494

 

Increase (Decrease) in trade accounts payable

 

176,439

 

(57,405

)

Increase in other receivables

 

(93,070

)

(383,295

)

Decrease in other payables

 

(226,895

)

(230,614

)

Dividends from associates and jointly-controlled entities

 

36,839

 

30,706

 

Purchases of trading securities

 

(367,631

)

(580,350

)

Proceeds from maturities and sales of trading securities

 

458,425

 

1,657,601

 

Cash provided by operating activities

 

2,165,480

 

3,057,530

 

 

 

 

 

 

 

Interest paid on loans and financing

 

(600,642

)

(446,675

)

Income and social contribution taxes paid

 

(92,006

)

(385,022

)

Net cash provided by operating activities

 

1,472,832

 

2,225,833

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Additions to property, plant and equipment

 

(811,496

)

(1,260,537

)

Proceeds from sales of property, plant and equipment, investments and other intangibles

 

2,969

 

6,906

 

Additions to other intangibles

 

(41,730

)

(33,507

)

Payment for business acquisitions, net of cash of acquired entities

 

—

 

(20,929

)

Capital increase in jointly-controlled entity

 

—

 

(40,524

)

Net cash used in investing activities

 

(850,257

)

(1,348,591

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Purchase of treasury shares

 

—

 

(189,071

)

Dividends and interest on capital paid

 

—

 

(208,829

)

Proceeds from loans and financing

 

1,032,953

 

1,324,900

 

Repayment of loans and financing

 

(2,798,441

)

(1,243,682

)

Intercompany loans, net

 

6,271

 

20,503

 

Net cash used in financing activities

 

(1,759,217

)

(296,179

)

 

 

 

 

 

 

Exchange variation on cash and cash equivalents

 

(702,014

)

159,486

 

 

 

 

 

 

 

(Decrease) Increase in cash and cash equivalents

 

(1,838,656

)

740,549

 

Cash and cash equivalents at beginning of period

 

5,648,080

 

3,049,971

 

Cash and cash equivalents at end of period

 

3,809,424

 

3,790,520

 

 

18