Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2017shares | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | GERDAU S.A. |
Entity Central Index Key | 1,073,404 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 573,627,483 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS | ||
Cash and cash equivalents | R$ 2555338 | R$ 5063383 |
Short-term investments | ||
Held for Trading | 821,518 | 1,024,411 |
Trade account receivable - net | 2,798,420 | 3,576,699 |
Inventories | 6,701,404 | 6,332,730 |
Tax credits | 402,429 | 504,429 |
Income and social contribution taxes recoverable | 487,633 | 623,636 |
Unrealized gains on financial instruments | 2,557 | |
Assets held for sale | 3,745,634 | |
Other current assets | 469,737 | 668,895 |
TOTAL CURRENT ASSETS | 17,982,113 | 17,796,740 |
NON-CURRENT ASSETS | ||
Tax credits | 30,841 | 56,703 |
Deferred income taxes | 3,054,393 | 3,407,230 |
Unrealized gains on financial instruments | 10,394 | |
Related parties | 51,839 | 57,541 |
Judicial deposits | 2,051,181 | 1,861,784 |
Other non-current assets | 542,973 | 447,260 |
Prepaid pension cost | 1,149 | 56,797 |
Investments in associates and jointly-controlled entities | 1,280,299 | 798,844 |
Goodwill | 7,891,142 | 9,470,016 |
Other Intangibles | 972,089 | 1,319,941 |
Property, plant and equipment, net | 16,443,742 | 19,351,891 |
TOTAL NON-CURRENT ASSETS | 32,319,648 | 36,838,401 |
TOTAL ASSETS | 50,301,761 | 54,635,141 |
CURRENT LIABILITIES | ||
Trade accounts payable | 3,179,954 | 2,743,818 |
Short-term debt | 2,004,341 | 4,458,220 |
Taxes payable | 284,101 | 341,190 |
Income and social contribution taxes payable | 70,242 | 74,458 |
Payroll and related liabilities | 443,859 | 464,494 |
Employee benefits | 253 | 409 |
Environmental liabilities | 21,928 | 17,737 |
Unrealized losses on financial instruments | 6,584 | |
Liabilities held for sale | 1,084,032 | |
Other current liabilities | 625,410 | 514,599 |
TOTAL CURRENT LIABILITIES | 7,714,120 | 8,621,509 |
NON-CURRENT LIABILITIES | ||
Long-term debt | 14,457,315 | 15,959,590 |
Debentures | 47,928 | 165,423 |
Deferred income taxes | 82,686 | 395,436 |
Unrealized losses on financial instruments | 1,267 | |
Provision for tax, civil, and labor liabilities | 827,883 | 2,239,226 |
Environmental liabilities | 63,263 | 66,069 |
Employee benefits | 1,424,611 | 1,504,394 |
Obligations with FIDC | 1,135,077 | 1,007,259 |
Other non-current liabilities | 653,670 | 401,582 |
TOTAL NON-CURRENT LIABILITIES | 18,693,700 | 21,738,979 |
EQUITY | ||
Capital | 19,249,181 | 19,249,181 |
Treasury stocks | (76,085) | (98,746) |
Capital reserves | 11,597 | 11,597 |
Retained earnings | 3,315,374 | 3,763,207 |
Operations with non-controlling interests | (2,870,831) | (2,873,335) |
Other reserves | 4,015,965 | 3,976,232 |
EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT | 23,645,201 | 24,028,136 |
NON-CONTROLLING INTERESTS | 248,740 | 246,517 |
EQUITY | 23,893,941 | 24,274,653 |
TOTAL LIABILITIES AND EQUITY | R$ 50301761 | R$ 54635141 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CONSOLIDATED STATEMENTS OF INCOME | |||
NET SALES | R$ 36917619 | R$ 37651667 | R$ 43581241 |
Cost of sales | (33,312,995) | (34,187,941) | (39,290,526) |
GROSS PROFIT | 3,604,624 | 3,463,726 | 4,290,715 |
Selling expenses | (524,965) | (710,766) | (785,002) |
General and administrative expenses | (1,129,943) | (1,528,262) | (1,797,483) |
Other operating income | 260,618 | 242,077 | 213,431 |
Other operating expenses | (168,887) | (114,230) | (116,431) |
Impairment of assets | (1,114,807) | (2,917,911) | (4,996,240) |
Gains and losses on assets held for sale and sales of interest in subsidiaries and associates | (721,682) | (58,223) | |
Reversal of contingent liabilities, net | 929,711 | ||
Equity in earnings of unconsolidated companies | (34,597) | (12,771) | (24,502) |
INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES | 1,100,072 | (1,636,360) | (3,215,512) |
Financial income | 226,615 | 252,045 | 378,402 |
Financial expenses | (1,726,284) | (2,010,005) | (1,780,366) |
Exchange variations, net | (4,057) | 851,635 | (1,564,017) |
Reversal of monetary update of contingent liabilities, net | 369,819 | ||
Gains and losses on financial instruments, net | (9,441) | (38,930) | 87,085 |
INCOME (LOSS) BEFORE TAXES | (43,276) | (2,581,615) | (6,094,408) |
Income and social contribution taxes | |||
Current | (313,758) | (110,511) | (158,450) |
Deferred | 18,367 | (193,803) | 1,656,872 |
Income and social contribution taxes | (295,391) | (304,314) | 1,498,422 |
NET INCOME (LOSS) | (338,667) | (2,885,929) | (4,595,986) |
ATTRIBUTABLE TO: | |||
Owners of the parent | (359,360) | (2,890,811) | (4,551,438) |
Non-controlling interests | 20,693 | 4,882 | (44,548) |
NET INCOME (LOSS) | R$ 338667 | R$ 2885929 | R$ 4595986 |
EARNINGS PER SHARE | |||
Basic earnings (loss) per share - preferred and common | R$ 0.21 | R$ 1.70 | R$ 2.69 |
Diluted earnings (loss) per share - preferred and common | R$ 0.21 | R$ 1.70 | R$ 2.69 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) | |||
Net income (loss) for the year | R$ 338667 | R$ 2885929 | R$ 4595986 |
Items that may be reclassified subsequently to profit or loss | |||
Other comprehensive income from associates and jointly-controlled entities | (16,745) | (251,195) | 417,961 |
Cumulative translation adjustment | 409,280 | (5,036,586) | 8,835,306 |
Recycling of cumulative translation adjustment to net income | (76,430) | (1,237,175) | |
Unrealized (Losses) Gains on net investment hedge | (148,560) | 1,679,312 | (3,613,178) |
Cash flow hedges | |||
Unrealized (Losses) Gains | (11,364) | 212 | 17,283 |
Total items that may be reclassified subsequently to profit or loss | 156,181 | (4,845,432) | 5,657,372 |
Items that will not be reclassified subsequently to profit or loss | |||
Remeasurement on defined benefit pension plan | (115,880) | (42,181) | 32,962 |
Total items that will not be reclassified subsequently to profit or loss | (115,880) | (42,181) | 32,962 |
Other comprehensive income (loss), net of tax | 40,301 | (4,887,613) | 5,690,334 |
Total comprehensive income (loss) for the year, net of tax | (298,366) | (7,773,542) | 1,094,348 |
Total comprehensive income/(loss) attributable to: | |||
Owners of the parent | (325,260) | (7,743,624) | 1,035,164 |
Non-controlling interests | 26,894 | (29,918) | 59,184 |
Total comprehensive income (loss) for the year, net of tax | R$ 298366 | R$ 7773542 | R$ 1094348 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - BRL (R$) R$ in Thousands | Total Parent company's interest | Capital | Treasury Stocks | Capital Reserve | Legal reserve | Tax Incentives Reserve | Investments and working capital reserve | Retained earnings | Operations with noncontrolling interests | Gains and losses on net investment hedge | Gains and losses on financial instruments | Cumulative translation adjustment | Pension Plan | Stock Options | Non-controlling interests | Total |
Equity at beginning of period at Dec. 31, 2014 | R$ 32200819 | R$ 19249181 | R$ 233142 | R$ 11597 | R$ 628228 | R$ 611531 | R$ 10475045 | R$ 1732962 | R$ 2472853 | R$ 923 | R$ 5874714 | R$ 347847 | R$ 138250 | R$ 1053715 | R$ 33254534 | |
Net income (loss) | (4,551,438) | R$ 4551438 | (44,548) | (4,595,986) | ||||||||||||
Other comprehensive income (loss) recognized in the year | 5,586,602 | (3,610,435) | 17,007 | 9,147,164 | 32,866 | 103,732 | 5,690,334 | |||||||||
Total comprehensive income (loss) for the year, net of tax | 1,035,164 | (4,551,438) | (3,610,435) | 17,007 | 9,147,164 | 32,866 | 59,184 | 1,094,348 | ||||||||
Supplementary dividend | 944 | 944 | 944 | |||||||||||||
Stock option expenses recognized in the year | (128) | (128) | (409) | (537) | ||||||||||||
Treasury stocks | (186,033) | (186,033) | (3,038) | (189,071) | ||||||||||||
Stock option exercised during the year | 32,537 | 35,812 | (3,275) | 3,365 | 35,902 | |||||||||||
Effect of interest changes in subsidiaries | (1,144,526) | (1,144,526) | (824,711) | (1,969,237) | ||||||||||||
Absorption of net loss proposed to the shareholders | (4,551,438) | 4,551,438 | ||||||||||||||
Dividends/interest on capital | (252,976) | (252,976) | (3,524) | (256,500) | ||||||||||||
Equity at end of period at Dec. 31, 2015 | 31,685,801 | 19,249,181 | (383,363) | 11,597 | 628,228 | 611,531 | 5,668,300 | (2,877,488) | (6,083,288) | 16,084 | 15,021,878 | (314,981) | 138,122 | 284,582 | 31,970,383 | |
Net income (loss) | (2,890,811) | (2,890,811) | 4,882 | (2,885,929) | ||||||||||||
Other comprehensive income (loss) recognized in the year | (4,852,813) | 1,678,852 | 239 | (6,489,813) | (42,091) | (34,800) | (4,887,613) | |||||||||
Total comprehensive income (loss) for the year, net of tax | (7,743,624) | (2,890,811) | 1,678,852 | 239 | (6,489,813) | (42,091) | (29,918) | (7,773,542) | ||||||||
Stock option expenses recognized in the year | 51,230 | 51,230 | 184 | 51,414 | ||||||||||||
Treasury stocks | (95,343) | (95,343) | (27) | (95,370) | ||||||||||||
Stock option exercised during the year | 5,496 | 10,461 | (4,965) | 64 | 5,560 | |||||||||||
Assignment of preferred shares | 205,800 | 369,499 | (163,699) | 205,800 | ||||||||||||
Effect of interest changes in subsidiaries | 4,153 | 4,153 | (6,405) | (2,252) | ||||||||||||
Absorption of net loss proposed to the shareholders | (2,890,811) | 2,890,811 | ||||||||||||||
Dividends/interest on capital | (85,377) | (85,377) | (1,963) | (87,340) | ||||||||||||
Equity at end of period at Dec. 31, 2016 | 24,028,136 | 19,249,181 | (98,746) | 11,597 | 628,228 | 611,531 | 2,523,448 | (2,873,335) | (4,404,436) | 16,323 | 8,532,065 | (357,072) | 189,352 | 246,517 | 24,274,653 | |
Net income (loss) | (359,360) | (359,360) | 20,693 | (338,667) | ||||||||||||
Other comprehensive income (loss) recognized in the year | 34,100 | (148,548) | (11,351) | 309,385 | (115,386) | 6,201 | 40,301 | |||||||||
Total comprehensive income (loss) for the year, net of tax | (325,260) | (359,360) | (148,548) | (11,351) | 309,385 | (115,386) | 26,894 | (298,366) | ||||||||
Stock option expenses recognized in the year | 5,633 | 5,633 | 15 | 5,648 | ||||||||||||
Stock option exercised during the year | 19,650 | 22,661 | (3,011) | 32 | 19,682 | |||||||||||
Effect of interest changes in subsidiaries | 2,504 | 2,504 | (21,698) | (19,194) | ||||||||||||
Absorption of net loss proposed to the shareholders | (359,360) | R$ 359360 | ||||||||||||||
Dividends/interest on capital | (85,462) | (85,462) | (3,020) | (88,482) | ||||||||||||
Equity at end of period at Dec. 31, 2017 | R$ 23645201 | R$ 19249181 | R$ 76085 | R$ 11597 | R$ 628228 | R$ 611531 | R$ 2075615 | R$ 2870831 | R$ 4552984 | R$ 4972 | R$ 8841450 | R$ 472458 | R$ 194985 | R$ 248740 | R$ 23893941 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities | |||
Net income (loss) for the year | R$ 338667 | R$ 2885929 | R$ 4595986 |
Adjustments to reconcile net income for the year to net cash provided by operating activities | |||
Depreciation and amortization | 2,092,551 | 2,535,955 | 2,607,909 |
Impairment of Assets | 1,114,807 | 2,917,911 | 4,996,240 |
Equity in earnings of unconsolidated companies | 34,597 | 12,771 | 24,502 |
Exchange variation, net | 4,057 | (851,635) | 1,564,017 |
Losses (Gains) on financial instruments, net | 9,441 | 38,930 | (87,085) |
Post-employment benefits | 192,724 | 229,767 | 233,287 |
Stock based remuneration | 35,576 | 46,683 | 48,589 |
Income tax | 295,391 | 304,314 | (1,498,422) |
Gains on disposal of property, plant and equipment | (69,510) | (43,340) | (3,971) |
Gains and losses on assets held for sale and sales of interest in subsidiaries and associates | 721,682 | 58,223 | |
Allowance for doubtful accounts | 18,342 | 68,781 | 127,701 |
Provision for tax, labor and civil claims | (110,281) | 347,882 | 323,314 |
Reversal of contingent liabilities, net | (929,711) | ||
Interest income on investments | (75,387) | (107,980) | (153,631) |
Interest expense on loans | 1,323,448 | 1,540,797 | 1,471,526 |
Reversal of monetary update of contingent liabilities, net | (369,819) | ||
Interest on loans with related parties | (95) | 2,457 | (2,712) |
(Reversal) Provision for net realisable value adjustment in inventory | (20,195) | (31,492) | 17,536 |
Cash flows from operations before changes in working capital | 3,928,951 | 4,184,095 | 5,072,814 |
Changes in assets and liabilities | |||
(Increase) Decrease in trade accounts receivable | (54,690) | 64,805 | 1,219,605 |
(Increase) Decrease in inventories | (1,269,455) | 794,591 | 1,977,361 |
Increase (Decrease) in trade accounts payable | 800,164 | 110,466 | (768,627) |
Increase in other receivables | (371,745) | (275,938) | (270,391) |
Decrease in other payables | (56,909) | (287,487) | (509,227) |
Dividends from joint ventures | 40,644 | 124,495 | 52,769 |
Purchases of trading securities | (2,390,104) | (880,436) | (1,958,522) |
Proceeds from maturities and sales of trading securities | 2,905,411 | 1,089,972 | 3,929,971 |
Cash provided by operating activities | 3,532,267 | 4,924,563 | 8,745,753 |
Interest paid on loans and financing | (1,330,116) | (1,240,165) | (946,041) |
Income and social contributions taxes paid | (126,023) | (168,032) | (637,394) |
Net cash provided by operating activities | 2,076,128 | 3,516,366 | 7,162,318 |
Cash flows from investing activities | |||
Purchases of property, plant and equipment | (873,329) | (1,323,891) | (2,324,718) |
Proceeds from sales of property, plant and equipment, investments and other intangibles | 554,457 | 308,694 | 90,942 |
Purchases of other intangibles | (37,939) | (54,044) | (126,428) |
Payment for business acquisitions, net of cash of acquired entities | (20,929) | ||
Capital increase in jointly-controlled entity | (178,670) | (40,524) | |
Net cash used in investing activities | (535,481) | (1,069,241) | (2,421,657) |
Cash flows from financing activities | |||
Purchase of treasury shares | (95,343) | (189,071) | |
Dividends and interest on capital paid | (86,386) | (85,962) | (358,226) |
Proceeds from loans and financing | 3,265,860 | 2,455,371 | 3,042,783 |
Repayment of loans and financing | (7,241,401) | (4,605,406) | (5,028,386) |
Intercompany loans, net | 5,797 | (6,492) | 30,126 |
Increase in controlling interests in subsidiaries | (339,068) | ||
Net cash used in financing activities | (4,056,130) | (2,337,832) | (2,841,842) |
Exchange variation on cash and cash equivalents | 7,438 | (693,990) | 699,290 |
(Decrease) Increase in cash and cash equivalents | (2,508,045) | (584,697) | 2,598,109 |
Cash and cash equivalents at beginning of year | 5,063,383 | 5,648,080 | 3,049,971 |
Cash and cash equivalents at end of year | R$ 2555338 | R$ 5063383 | R$ 5648080 |
GENERAL INFORMATION
GENERAL INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
GENERAL INFORMATION | |
GENERAL INFORMATION | NOTE 1 - GENERAL INFORMATION Gerdau S.A. is a publicly traded corporation (sociedade anônima) with its corporate domicile in the city of Rio de Janeiro, Brazil. Gerdau S.A and subsidiaries (collectively referred to as the “Company”) is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world. In Brazil, the Company also produces flat steel and iron ore, activities which expanded the product mix and made its operations even more competitive. The Company believes it is the largest recycler in Latin America and around the world it transforms each year millions of tons of scrap into steel, reinforcing its commitment to sustainable development of the regions where it operates. Gerdau is listed on the São Paulo, New York and Madrid stock exchanges. The Consolidated Financial Statements of Gerdau S.A and subsidiaries were approved by the Board of Directors on April 2, 2018. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | |
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES 2.1 - Basis of Presentation The Company’s Consolidated Financial Statements have been prepared in accordance and are in compliance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB). The preparation of the Consolidated Financial Statements in accordance with IFRS requires Management to make accounting estimates. The areas that involve judgment or use of estimates relevant to the Consolidated Financial Statements are stated in Note 2.17. The Consolidated Financial Statements have been prepared using historical cost as its basis, except for the valuation of certain financial instruments, which are measured at fair value. The Company adopted all applicable standards and revisions of standards and interpretations issued by the IASB or the IFRS Interpretations Committee that are effective for December 31, 2017. a) Investments in Subsidiaries The Company’s consolidated financial statements include the financial statements of Gerdau S.A. and all its subsidiaries. The Company controls an entity when it is exposed or has the right to variable returns arising from their involvement with the entity and has the ability to affect those returns due to the power exercised over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Third parties’ interests in equity and net income of subsidiaries are reported separately in the consolidated balance sheet and in the consolidated statement of income, respectively, under the account “Non-controlling interests”. For business combinations, the assets, liabilities, and contingent liabilities of a subsidiary are reported at their respective fair value on the date of acquisition. Any excess of the acquisition cost over the fair value of the identifiable net assets acquired is recorded as goodwill. When the acquisition cost is less than the fair value of the net assets identified, the difference is recorded as a gain in the statement of income for the year in which the acquisition took place. The non-controlling interests are presented based on the proportion of the fair value of the identified assets and liabilities acquired. Intercompany transactions and balances are eliminated in the consolidation process. Gains or losses resulting from transactions among consolidated entities of the Company are also eliminated. b) Investments in Joint ventures and Associate companies Joint ventures are those in which the control is held jointly by the Company and one or more partners. An associate company is one in which the Company exercises significant influence, but over which it does not have control. Investments in joint ventures and associate companies are recorded under the equity method of accounting. c) Equity Method According to this method, investments are recognized in the consolidated balance sheet at acquisition cost and are adjusted subsequently based on the Company’s share in the earnings and in other changes in the net assets of the investees. The balances of the investments can also be reduced due to impairment losses. Furthermore, dividends received from these companies are recorded as reductions in the value of the investments. 2.2 —Foreign Currency Translation a) Functional and Reporting Currency The functional currency of an entity is the currency of the primary economic environment where it operates. The Consolidated Financial Statements are presented in Reais (R$), which is the functional and reporting currency of the Company. b) Transactions and Balances For purposes of the Consolidated Financial Statements, the balances of each subsidiary of the Company are translated into Brazilian reais, which is the functional currency of the Company and the reporting currency of its Consolidated Financial Statements. c) Group Companies Income and loss from operations and financial position of all subsidiaries included in the Consolidated Financial Statements, along with equity method of accounting, which have functional currencies different from the Company’s reporting currency are translated into the reporting currency as follows: i) Asset and liability balances are translated at the exchange rate in effect at the balance sheet date; ii) Income and expenses are translated using the average monthly exchange rates for the year; and iii) Translation gains and losses resulting from the above methodology are recognized in Equity, in the Statement of Comprehensive Income, in the account named “Other reserves - Cumulative translation adjustment”; and iv) The amounts presented in the cash flow are derived from the changes in assets, liabilities and income and expenses translated, as detailed above. d) Hyperinflation in Venezuela Venezuela is considered a hyperinflationary economy and, for this reason, the financial statements of the Company’s subsidiary located in this country have been adjusted so that the amounts are stated at the measurement currency unit at the end of the year, which considers the effects measured by the IPC - Índice de Preços ao Consumidor (Consumer Price Index) of Venezuela. The exchange rate used to translate the Venezuela subsidiary financial statements from local currency (Bolívar Forte) to Real considers the local exchange rate known as SIMADI ( Sistema Marginal de Divisas ), which is used in conversions from Bolívar Forte to American Dollar as a reference to local currency translation into Real. This rate is equivalent to 1,011.19 Bolívar Forte to each 1 Real as of December 31, 2017 (206.61 Bolivar Forte to each 1 Real as of December 31, 2016). 2.3 - Financial Assets The Company measures its derivative financial instruments based on their fair value on the balance sheet date, being the most relevant evidence of fair value the quotations obtained from market participants. The fair value recognized in its Consolidated Financial Statements may not necessarily represent the amount of cash that the Company would receive or pay, as applicable, if the Company would have settled the transactions on the balance sheet date. The Company classifies its financial assets, upon initial recognition, in the following categories: financial assets at fair value through profit or loss, loans and receivables and available for sale (when applicable). The classification depends on the objective for which the financial assets where acquired, as detailed in Note 15. a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading and include Bank Deposit Certificates and marketable securities. Financial assets at fair value through profit or loss are initially recognized at fair value and the transaction costs are expensed immediately in the income statement. b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Company’s loans and receivables comprise “Accounts receivable and other receivables”, “Cash and cash equivalents” and “Judicial deposits”. They are presented as current assets, except for those with maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets. c) Derivative financial instruments and hedging activities Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are, subsequently, remeasured to their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated or not as a hedging instrument and for which hedge accounting has been adopted. If this is the case, the method also depends on the nature of the item being hedged as well as the effectiveness of the hedging relationship. As described in note 15, the Company applies hedge accounting. d) Derivatives at fair value through profit or loss Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of these derivative instruments are recognized immediately in the income statement under “Gains and losses on financial instruments, net”. e) Cash and Cash Equivalents Cash and cash equivalents include cash, bank accounts and highly liquid investments with original maturities of 90 days or less with insignificant risk of changes in fair value and are stated at cost plus accrued interest, when applicable. f) Short-term Investments Held for trading securities are stated at fair value and recognized through profit and loss (held for trading), since the purpose of the investment is to earn short-term gains. Interest, monetary corrections, and exchange variation, when applicable, as well as changes in fair value are recognized in the income statement when incurred. g) Trade Accounts Receivable Trade accounts receivable are stated at amortized cost and accounts receivable from foreign customers are translated based on the exchange rates in effect at the balance sheet date. The allowance for doubtful accounts is determined based on a risk assessment, which considers historical losses, the individual situation of each customer and the situation of the economic group to which they belong, available collateral and guarantees and the opinion of legal counsel. The allowance is considered sufficient to cover any losses incurred on uncollectible receivables. Information on the breakdown of current and past-due trade accounts receivable and the related allowance for doubtful accounts is provided in note 5. The Company’s maximum exposure to credit risk is its balance of trade accounts receivable, net of allowance for doubtful accounts. The credit quality of the current trade accounts receivable is considered proper and the amount of the effective risk of eventual losses in trade accounts receivable is presented as allowance for doubtful accounts. h) Impairment of Financial Assets Financial assets are assessed at each balance sheet date for evidence of impairment. They are considered impaired when there is evidence that one or more events have occurred after the initial recognition of the financial asset and such event or events had a negative impact on the estimated future cash flows of the investment. The criteria used to determine whether there is evidence of an impairment loss include, among other factors: (i) significant financial difficulty of the issuer or debtor, and (ii) domestic or local economic conditions that correlate with defaults on the assets in portfolio. 2.4 — Inventories Inventories are measured at the lower of historical average cost of acquisition or production and net realizable value. The acquisition and production costs include transportation, storage and non-recoverable taxes. Net realizable value is the estimated sale price in the ordinary course of business less the estimated costs of completion and selling expenses directly related. Information regarding the allowance for adjustments to net realizable value is presented in note 6. 2.5 - Property, Plant and Equipment Property, plant and equipment are stated at historical cost, monetarily adjusted when applicable in accordance with IAS 29, less depreciation, except for land, which is not depreciated. The Company monthly capitalizes the construction costs of qualified assets, which are assets that, necessarily, require a substantial period of time to be finished for its intended use, the borrowing costs as part of the acquisition cost of the property, plant and equipment under construction based on the following capitalization criteria: (a) the capitalization period begins when the property, plant and equipment item is under construction in process and the capitalization of borrowing costs ceases when the asset is available for use; (b) borrowing costs are capitalized considering the weighted average rate of loans existing on the capitalization date or a specific rate, in the case of loans for the acquisition of property, plant and equipment; (c) borrowing costs capitalized do not exceed the interest expenses during the capitalization period; and (d) capitalized borrowing costs are depreciated considering the same criteria and useful life determined for the property, plant and equipment item to which it was capitalized. Depreciation is calculated under the straight-line method at rates that take into consideration the estimated useful life of the asset, its level of utilization and the estimated residual value of the asset at the end of its useful life. The estimated residual value and useful life of the assets are reviewed and adjusted, if necessary, at each year-end. Subsequent costs are added to the carrying amount of property, plant and equipment or recognized as a specific item, as appropriate, only if the economic benefits associated to these items are probable and the amounts can be reliably measured. The carrying amount of replaced items is written-off. Other repairs and maintenance are recognized directly in income when incurred. Mining exploration rights are classified as Land and Buildings in the Property, plant and equipment account. Exploration expenditures are recognized as expenses until the feasibility of mining activity is established and thereafter subsequent costs are capitalized. Costs for the development of new iron ore reserves or to expand the capacity of operating mines are capitalized and amortized based on the amount of iron ore extracted. Stripping costs (costs associated with removal of waste and other residual materials) incurred during the development phase of a mine, before production phase, are registered as part of the depreciable cost of asset. Subsequently, these costs are depreciated over the useful life of the mine. Spending on waste removal, after the start of production of the mine, are treated as production costs. Depletion of mines is calculated based on the amount of ore extracted. The net book value of property, plant and equipment items is immediately impaired to its recoverable amount when the residual balance exceeds the recoverable amount. 2.6 — Goodwill Goodwill represents the excess of the acquisition cost over the fair value of the net assets acquired, liabilities assumed and identifiable contingent liabilities of a subsidiary, joint venture, or associate company, at the respective acquisition date. Goodwill is recorded as an asset and recorded under “Goodwill” account. Goodwill is not amortized and is subject to impairment tests annually or whenever there are indications of potential impairment. Any impairment loss is recorded as an expense in the income statement and cannot be reversed. Goodwill is allocated to the operating segments, which represents the lowest level at which goodwill is monitored by management. Goodwill that forms part of the carrying amount of an investment in an associate or a joint venture is not separately recognized. The entire carrying amount of the investment in associate or joint venture is tested for impairment as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever evidence is available that the investment may be impaired. When a subsidiary, joint venture or associate is sold, goodwill is included in the determination of gains and losses on disposal. 2.7 — Other Intangible Assets Other intangible assets are stated at acquisition cost, less accumulated amortization and impairment losses, when applicable. Intangible assets consist mainly of assets which represent the capacity to generate economic benefits from companies acquired based on relationships with customers and suppliers, software and others. Intangible assets with definite useful lives are amortized taking into consideration their actual use or a method that reflects their consumption of economic benefits. The net book value of intangible assets is impaired immediately to its recoverable value when the residual balance exceeds the recoverable amount (note 2.8). Intangible assets acquired in a business combination are recorded at fair value, less accumulated amortization and impairment losses, when applicable. Intangible assets that have a defined useful life are amortized over their useful lives using an amortization method that reflects the economic benefit of the intangible asset and is recorded in the cost of sales account. The intangible relationship with customers and suppliers is amortized based on an accelerated method that considers the expected future economic benefit provided over time by these new acquired customers and suppliers. The Company reviews the amortization period and amortization method for its intangible assets with definite useful lives at the end of each year. 2.8 — Provision for Impairment of Assets and Reversal of Impairment At each balance sheet date, the Company performs an assessment to determine whether there is evidence that the carrying amount of long-lived assets might be impaired. If such evidence is identified, the recoverable amount of the assets is estimated by the Company. The recoverable amount of an asset is determined as the higher of: (a) its fair value less estimated costs to selling and (b) its value in use. The value in use is measured based on discounted cash flows (before taxes) derived from the continuous use of the asset until the end of its estimated useful life. Regardless of whether or not there is any indication that the carrying amount of the asset may be impaired, the balances of goodwill arising from business combinations and intangible assets with indefinite useful lives are tested for impairment at least once a year in December. When the carrying amount of the asset exceeds its recoverable amount, the Company recognizes a reduction in the book value of the asset (Impairment). The reduction to the recoverable amount of the asset is recorded as an expense. Except for an impairment of goodwill, a reversal of a previously recorded impairment loss is required. Reversal in these circumstances is limited to the amount of the depreciated balance of the asset at the time of the reversal, determined as if the impairment had not been recorded, as discussed in note 28.1. The Company believes that there is no likelihood that may occur a material change in the estimates or assumptions used to calculate long-lived asset impairment losses. However, if actual results are not consistent with estimates and assumptions used in estimating future cash flows and asset fair values, the Company may be exposed to losses that could be material. 2.9 — Financial Liabilities and Equity Instruments a) Classification as Debt or Equity Debt or equity instruments are classified based on the substance of the contractual terms of the instruments. b) Short and Long-Term Debt They are stated net of transaction costs, and are subsequently measured at the amortized cost using the effective interest method. c) Equity Instruments An equity instrument is based on a contract that evidences a residual interest in the assets of an entity after deducting its liabilities. d) Derivative Instruments and hedging The Company enters into derivative financial instruments mainly to manage its exposure to fluctuation in interest rates and exchange rates. The Company measures its derivative financial instruments, based on quotations obtained from market participants, at fair value at the balance sheet date. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge or a net investment hedge are recorded in the statement of comprehensive income. The Company assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When a cash flow hedge instrument is sold, terminated, expires or is exercised, the hedge is discontinued prospectively, however the cumulative unrealized gains and losses remains registered in comprehensive income when the hedged item is registered in the statement of income. When a transaction is no longer expected to occur, the cumulative gains and losses are immediately reclassified to the income statement. In the net investment hedge the amount registered is reclassified to the income statement when the hedged investment is disposed of. Additionally, changes in the fair value of financial instruments not designated for hedge are registered as Gain and losses on financial instruments, net, in the income statement. 2.10 — Current and Deferred Income and Social Contribution Taxes Current income and social contribution tax expense is calculated in conformity with enacted tax rate in effect at the balance sheet date in the countries where the Company’s subsidiaries, associates and joint venture operate and generate taxable income. Management periodically evaluates positions taken in relation to tax matters which are subject to interpretation and recognizes a provision when there is an expectation of payment of income tax and social contribution in accordance with the tax bases. The expense for income tax and social contribution taxes comprises current and deferred taxes. Current tax and deferred tax are recognized in income unless they are recognized for a business combination, or for items directly recognized in equity through other comprehensive income. Current tax is the estimated tax payable or receivable on the taxable income or loss for the year, at the tax rates effective at the balance sheet date. Deferred income tax and social contribution are recognized in full on the differences generated between assets and liabilities recognized for tax purposes and corresponding to amounts recognized in the Financial Statements. However, deferred income and social contribution taxes are not recognized arising from the initial recognition of assets and liabilities in a transaction other than a business combination and that do not affect the tax basis. Income and social contribution taxes are determined based on tax rates (and laws) effective at the balance sheet date and applicable when the respective income and social contribution taxes are paid. Deferred income and social contribution tax assets are recognized only to the extent that it is probable that there will be taxable income for which the temporary differences can be used and tax losses can be compensated. Deferred tax assets recorded for tax loss carryforwards are supported by projections of taxable income based on technical feasibility studies submitted annually to the Board of Directors of the Company and its subsidiaries, when applicable. These studies consider historical profitability of the Company and its subsidiaries, expectations of continuous profitability and estimates of the recovery of deferred tax assets over future years. Other deferred tax assets arising from temporary differences, mainly tax contingencies, and provision for losses, are recognized according to their estimate of realization. Deferred income tax and social contribution assets are reviewed at each reporting date and will be reduced to the extent that their realization is not more likely than not based on future taxable income. The Company only recognizes a provision on tax issues if a past event leads to a present obligation. The Company determines whether a present obligation exists at the reporting date by taking into consideration all available evidence, including, for example, the opinion of legal advisors. The Company also considers whether it is probable that there will be an outflow of assets and a reliable estimate can be made of the amount of the obligation. 2.11 — Employee Benefits The Company has several employee benefit plans including pension and retirement plans, health care benefits, profit sharing, bonus, and share-based payment, as well as other retirement and termination benefits. The main benefit plans granted to the Company’s employees are described at notes 19 and 25. The actuarial obligations related to the pension and retirement benefits and the actuarial obligations related to the health care plans are recorded based on actuarial calculations performed every year by independent actuaries and reviewed by management, using the projected unit credit method, net of the plan assets, when applicable, and the related costs are recognized over the employees’ service period. Any employee benefit plan surpluses are also recognized up to the probable amount of reduction in future contributions by the Company. Actuarial remeasurement arising from adjustments and changes in actuarial assumptions of the pension and retirement benefit plans and actuarial obligations related to the health care plan are recognized directly in the Statement of Comprehensive Income as described in Note 19. In accounting for pension and post-retirement benefits, several statistical and other factors that attempt to anticipate future events are used to calculate plan expenses and liabilities. These factors include discount rate assumptions, return on plan assets, future increases in health care costs, and rate of future compensation increases. In addition, actuarial calculations consider other factors whose measurement involves judgment are used such as withdrawal, turnover, and mortality rates. The actuarial assumptions used by the Company may differ materially from actual results in future periods due to changing market and economic conditions, regulatory events, judicial rulings, higher or lower withdrawal rates, or longer or shorter participant life spans. 2.12 - Other Current and Non-current Assets and Liabilities Other current and non-current assets and liabilities are recorded at their realizable amounts (assets) and at their known or estimated amounts plus accrued charges and monetary adjustments (liabilities), when applicable. 2.13 — Related-Party Transactions Loan agreements between the entities in Brazil and abroad are adjusted by contractual financial charges plus foreign exchange variation, when applicable. These contracts have an expiration date, with the possibility of extension of time by agreement between the parties. Sales and purchases of raw materials and products are made under terms and conditions contractually established between the parties. 2.14 — Dividends and Interest on equity Dividend payments are recognized as liabilities at the time dividends are approved by the shareholders of Gerdau S.A. The bylaws of Gerdau S.A. requires dividends of not less than 30% of the annual net income; therefore, Gerdau S.A. records a liability at year-end for the minimum dividend amount that has not yet been paid during the year up to the limit of the mandatory minimum dividend described above. 2.15 — Revenue Recognition Net sales are presented net of taxes and discounts. Taxes on sales are recognized when sales are invoiced and discounts on sales are estimated and recognized upon sale. Revenues from sales of products are recognized when the sales amount can be reliably measured, the Company no longer has control over the goods sold or any other responsibility attributable to its ownership, the costs incurred or that will be incurred related to the transaction can be reliably measured, it is more likely than not that the economic benefits will be received by the Company, and the risks and benefits of the products have been fully transferred to the buyer. The related costs of freight are included in cost of sales. 2.16 - Investments in Environmental Protection and Environmental liabilities Environmental costs that relate to current operations are expensed or capitalized as appropriate. Environmental costs that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation or cost reduction are recorded as expense. Liabilities are recorded when environmental assessments or remedial efforts are probable and the cost can be reasonably estimated based on discussions with the environmental authorities and other assumptions relevant to the nature and extent of the remediation that may be required. The ultimate cost to the Company is dependent upon factors beyond its control such as the scope and methodology of the remedial action requirements to be established by environmental and public health authorities, new laws or government regulations, rapidly changing technology and the outcome of any potential related litigation. Environmental liabilities are adjusted to present value when the aggregate amount of the obligation and the amount and timing of cash disbursements are established or can be reliably estimated. 2.17 - Use of Estimates In the preparation of the Consolidated Financial Statements estimates are required to record certain assets, liabilities and other transactions. To make these estimates, Management uses the best information available on the date of preparation of the Consolidated Financial Statements and the experience of past and/or current events, also considering assumptions related to future events. As such, the Consolidated Financial Statements include estimates with respect to the recoverable amount of long-lived assets (note 28), with respect to the need and the amount of provisions for tax, civil and labor liabilities (note 17), recoverable amount of deferred income taxes (note 8), estimates in selecting interest rates, return on assets, mortality tables and expectations for salary increases (note 19), and long-term incentive plans through the selection of the valuation model and rates (note 25). Actual results could differ from those estimates. 2.18 - Business Combinations for the Financial Statements a) Step-acquisitions in which control is obtained When a business combination is achieved in stages, the interest previously held by the Company in the acquired entity is remeasured at fair value at acquisition date (i.e. the date when the Company acquires the control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts related to the Company’s interest in the acquired company before the acquisition date, which also includes previous amounts recognized in “Other comprehensive income,” are reclassified to profit or loss, which considers same treatment as if that interest were disposed of. b) Acquisitions in which control is obtained initially Acquisitions of businesses are accounted for under the acquisition method. The cost of the acquisition is measured at the fair values (at the date of the transaction) of the assets transferred, liabilities incurred or assumed and equity instruments issued by the Company in exchange for control of the acquired business entity. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at their fair values at the acquisition date. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders’ proportion of the net fair value of the assets, liabilities and contingent liabilities recognized. Expenses related to the acquisition are recognized in the income statement when incurred. c) Increases/decreases in non-controlling interests Subsequent purchases, after the Company has obtained control, are treated as acquisitions of shares from non-controlling shareholders: the identifiable assets and liabilities of the acquired entity are not subject to a further revaluation and the positive or negative difference between the cost of such subsequent acquisitions and the net value of the additional proportion of the company is accounted for within equity. d) Loss of control of a subsidiary When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the Company derecognizes all assets, liabilities and non-controlling interests at their carrying amount. Any retained interest in the former subsidiary is recognized at its fair value at the date that control is lost. This fair value is reflected in the calculation of the gain or loss on disposal attributable to the parent, and becomes the initial carrying amount for subsequent accounting for the retained interest under IAS 28 or IAS 39. 2.19 — Segment Information The bodies responsible for making operational decisions, allocating resources and evaluating performance include the Board of Executive Officers and the Board of Directors. The information presented to the senior management with the respective performance of each segment is derived from the records kept in accordance with accounting practic |
CONSOLIDATED FINANCIAL STATEMEN
CONSOLIDATED FINANCIAL STATEMENTS | 12 Months Ended |
Dec. 31, 2017 | |
CONSOLIDATED FINANCIAL STATEMENTS | |
CONSOLIDATED FINANCIAL STATEMENTS | NOTE 3 - CONSOLIDATED FINANCIAL STATEMENTS 3.1 - Subsidiaries Listed below are the significant consolidated subsidiaries, as follows: Equity Interests Total capital (*) Consolidated company Country 2017 2016 2015 Gerdau GTL Spain S.L. Spain Gerdau Internacional Empreendimentos Ltda. - Grupo Gerdau Brazil Gerdau Ameristeel Corporation and subsidiaries (1) USA/Canada Gerdau Açominas S.A. Brazil Gerdau Aços Longos S.A. and subsidiary (2) Brazil Gerdau Steel Inc. Canada Gerdau Holdings Inc. and subsidiary (3) USA Paraopeba - Fixed-income investment fund (4) (**) Brazil Gerdau Holdings Europa S.A. and subsidiaries Spain — — Gerdau América Latina Participações S.A. Brazil — Gerdau Chile Inversiones Ltda. and subsidiaries (5) Chile Gerdau Aços Especiais S.A. Brazil — Gerdau Hungria Holdings Limited Liability Company and subsidiaries (6) Hungary GTL Equity Investments Corp. British Virgin Islands Empresa Siderúrgica del Perú S.A.A. - Siderperú Peru Diaco S.A. and subsidiary (note 3.4) Colombia — Gerdau GTL México, S.A. de C.V. and subsidiaries (7) Mexico Seiva S.A. - Florestas e Indústrias Brazil Itaguaí Com. Imp. e Exp. Ltda. Brazil — Gerdau Laisa S.A. Uruguai Sipar Gerdau Inversiones S.A. Argentina Sipar Aceros S.A. and subsidiary (8) Argentina Cleary Holdings Corp. Colombia — — Sizuca - Siderúrgica Zuliana, C. A. Venezuela GTL Trade Finance Inc. British Virgin Islands Gerdau Trade Inc. British Virgin Islands Gerdau Steel India Ltd. India (*) The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly in the subsidiary. (**) The percentage of participation including interest of the parent company Metalurgica Gerdau S.A. in the investment fund is 51.11% in 2017, 91.58% in 2016 and 82.64% in 2015. (1) Subsidiaries: Gerdau Ameristeel US Inc., Gerdau Reinforcing Steel, Gerdau Ameristeel Sayreville Inc., TAMCO Steel, Chaparral Steel Company. (2) Subsidiary: Gerdau Açominas Overseas Ltd. (3) Subsidiary: Gerdau MacSteel Inc. (4) Fixed-income investment fund managed by Banco JP Morgan S.A.. (5) Subsidiaries: Aza Participaciones S.A., Gerdau Aza S.A., Armacero Matco S.A., Aceros Cox Comercial S.A., Salomon Sack S.A.. (6) Subsidiaries: Gerdau Hungria y Cia SRC, Bogey Holding Company Spain S.L. (7) Subsidiaries: Sidertul S.A. de C.V. and GTL Servicios Administrativos México, S.A. de C.V.. (8) Subsidiary: Siderco S.A. 3.2 — Joint ventures Listed below are the interests in joint ventures: Equity Interests Total capital(*) Joint ventures Country 2017 2016 2015 Bradley Steel Processors Canada MRM Guide Rail Canada Gerdau Corsa S.A.P.I. de CV Mexico Gerdau Metaldom Corp. Dominican Rep. Gerdau Summit Aços Fundidos e Forjados S.A. Brazil — — Diaco S.A. Colombia — — (*)The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly held in the joint venture. On January 5, 2017, Gerdau S.A. subscribed capital stock in Gerdau Summit Aços Fundidos e Forjados S.A. through the contribution of some of its assests and liabilities, which were valued by specialized independent valuation firm. On January 31, 2017, the Extraordinary General Meeting of Gerdau Summit Aços Fundidos e Forjados S.A. was held, where Sumitomo Corporation and The Japan Steel Works, Ltd. subscribed capital stock in this company, and a joint control agreement was signed among the partners. Accordingly, Gerdau Summit Aços Fundidos e Forjados S.A. will have accounting treatment of a joint venture in the Financial Statements of Gerdau S.A., with a 58.73% interest and will not have a significant impact on the Company’s total Assets. On June 30, 2017, the Company concluded the operation to create a joint venture, based on the sale of 50% interest in Diaco S.A., in Colombia, to Putney Capital Management, which is already partner in its operation in the Dominican Republic. The new company’s assets are Gerdau’s long-steel industrial units in Colombia, with an annual installed steel capacity of 674 thousand tons. The transaction attributed an economic value to the joint venture of US$ 165 million (equivalent to R$ 546 million). The transaction is aligned with the process to optimize Company’s assets with focus on profitability and deleveraging and allowed the Company to reduce its indebtedness and working capital levels in the amounts of R$ 226 million and R$ 175 million, respectively. Due to this transaction, Diaco started to have accounting treatment of joint venture in Consolidated Financial Statements with a 49.87% interest. The summarized financial information of the joint venture, accounted for under the equity method, is shown as follows: Joint ventures 2017 2016 Net income ) ) Total comprehensive income ) ) 3.3 — Associate companies Listed below are the interests in associate companies: Equity interests Total capital (*) Associate companies Country 2017 2016 2015 Dona Francisca Energética S.A. Brazil Corsa Controladora, S.A. de C.V. and subsidiaries Mexico Corporación Centroamericana del Acero S.A. and subsidiaries Guatemala — — (*)The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly. Although the Company owns more than 50% of Dona Francisca Energética S.A., it does not consolidate the financial statements of this associate because of the veto rights granted to minority shareholders that prevent the Company from controlling the decisions in conducting the associate’s business. The summarized financial information of the associate companies, accounted for under the equity method, is shown as follows: Associate Companies 2017 2016 Net income Total comprehensive income 3.4 — Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company I) Subsidiaries, Associate company and Joint ventures In 2017, as a result of the operation described in note 3.2, the Company received US$ 44.7 million in cash (equivalent to R$ 147.9 million) and recognized an expense of R$ 72.5 million in the line Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company in its Statement of Income, mainly due to the adjustment to fair value of the remaining interest in accordance to IFRS. In the second quarter of 2016, the Company completed the sale of its special steel producer Gerdau Holdings Europa S.A. in Spain to Clerbil SL, an investment group with international experience formed by local executives of the Company. The enterprise value of the transaction was € 155 million (equivalent to R$ 621 million) and the sale agreement provides the possibility of receiving an additional up to € 45 million (equivalent to R$ 180 million) in the end of five years, depending on the future performance of the business. As a result of the transaction, the Company have receivables amounting to € 28.9 million and € 32.5 million (equivalent to R$ 121 million and R$ 112 million) as of December 31, 2017 and 2016, respectively and registered an expense of R$ 105 million in the Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company in its Consolidated Statements of Income. In the fourth quarter of 2016, the Company sold its interest in the associate company Corporación Centroamericana del Acero S.A. in Guatemala to the current controlling shareholders of this company for US$ 70 million (equivalent to R$ 222.7 million at the sale date) and its subsidiary Cleary Holdings Corp. coke producer and coking coal reserves holder in Colombia to Trinity Capital S.A.S. jointly with local executives, for US$ 30.2 million (equivalent to R$ 102.6 million at the selling date). As a result of these transactions, the Company have receivables amounting to US$ 16 million and US$ 79 million (equivalent to R$ 52 million and R$ 257 million) as of December 31, 2017 and 2016, respectively and registered a gain of R$ 47 million in the Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company in its Consolidated Statements of Income. The sale of these operations in Spain, Guatemala and Colombia is aligned with Gerdau’s objective of focusing on its most profitable assets and allowed the Company to reduce its debt and working capital levels in 2016 in the amount of R$ 291 million and R$ 438 million, respectively. II) Assets and liabilities held for sale On October 10, 2017, the Company signed a contract for the sale of 100% of its operation in Chile to the Chilean family groups Matco e Ingeniería e Inversiones. The assets included in the sale are long steel industrial units with annual installed steel capacity of 520 thousand tons, presented within the South America segment. The economic value of the transaction corresponds to US$ 154 million (equivalent to R$ 509 million ). The closing of the transaction still depends on the approval of the Chilean competition authority, which is expected to occur in 2018. This movement is aligned with the Company’s asset optimization process, focusing on profitability and reducing its financial leverage. The Company started to present assets and liabilities of these units separately from other operations, in specific lines of the balance sheet of assets held for sale and liabilities held for sale. On December 29, 2017, the Company entered into a definitive agreement to sell some of the rebar-producing mills, as well as steel cutting and bending units and distribution centers in the United States to Commercial Metals for US$ 600 million (equivalent to R$ 1,985 million), subject to usual adjustments to the acquisition value. The agreement includes the Jacksonville (Florida) , Knoxville (Tennessee), Rancho Cucamonga (California) and Sayreville (New Jersey), with a combined production capacity of 2.5 million short tons per year, as well as rebar processing and distribution units in the United States, presented within the North America segment. The transaction is subject to regulatory approvals and the usual closing conditions, which should occur before the end of 2018. This transaction represents a milestone in the Company’s strategy to reduce its indebtedness and focus on opportunities with greater returns in the markets in which it operates. The Company started to present the assets and liabilities of these units separately from other operations, in specific lines of the balance sheet of assets held for sale and liabilities held for sale. Additionally, as a result of the measurement of the net assets classified as held for sale by the lower of their book value and their fair value less costs to sell, the Company recognized an expense net of tax in the amount of R$ 649.2 million in the line of Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company in its Consolidated Statements of Income. 3.5 — Total cash paid for business combinations Companies / interest acquired 2017 2016 2015 Business Combination Armacero Industrial y Comercial S.A. — — — — Interest increase in subsidiaries Gerdau Aços Longos S.A., Gerdau Açominas S.A., Gerdau Aços Especiais S.A. and Gerdau América Latina Participações S.A. — — — — |
CASH AND CASH EQUIVALENTS, AND
CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS | 12 Months Ended |
Dec. 31, 2017 | |
CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS | |
CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS | NOTE 4 — CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS 2017 2016 Cash Banks and immediately available investments Cash and cash equivalents 2017 2016 Held for trading Short-term investments Immediately available investments include investments with maturity up to 90 days, immediate liquidity and low risk of fair value variation. Held for trading securities include Bank Deposit Certificates and marketable securities, which are stated at their fair value. Income generated by these investments is recorded as financial income. |
TRADE ACCOUNTS RECEIVABLE
TRADE ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2017 | |
TRADE ACCOUNTS RECEIVABLE | |
TRADE ACCOUNTS RECEIVABLE | NOTE 5 — TRADE ACCOUNTS RECEIVABLE 2017 2016 Trade accounts receivable - in Brazil Trade accounts receivable - exports from Brazil Trade accounts receivable - foreign subsidiaries (-) Allowance for doubtful accounts ) ) Accounts receivable by aging are as follows: 2017 2016 Current Past-due: Up to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days Above 360 days (-) Allowance for doubtful accounts ) ) The changes in the allowance for doubtful accounts are as follows: Balance as of January 1, 2015 ) Provisions for bad debt during the year ) Recoveries in the year Write-offs Exchange variation ) Balance as of December 31, 2015 ) Provisions for bad debt during the year ) Recoveries in the year Write-offs Loss of control by selling of subsidiary (note 3.4) Exchange variation ) Balance as of December 31, 2016 ) Provisions for bad debt during the year ) Recoveries in the year Write-offs Loss of control by joint venture creation (note 3.4) Assets held for sale (note 3.4) Exchange variation ) Balance as of December 31, 2017 ) |
INVENTORIES
INVENTORIES | 12 Months Ended |
Dec. 31, 2017 | |
INVENTORIES | |
INVENTORIES | NOTE 6 - INVENTORIES 2017 2016 Finished products Work in progress Raw materials Storeroom supplies Imports in transit (-) Allowance for adjustments to net realizable value ) ) The allowance for adjustment to net realizable value of inventories, on which the provision and write-offs are registered with impact on cost of sales, is as follows: Balance as of January 1, 2015 ) Provision for the year ) Reversal of adjustments to net realizable value Exchange rate variation ) Balance as of December 31, 2015 ) Provision for the year ) Reversal of adjustments to net realizable value Loss of contro by selling of subsidiary Exchange rate variation Balance as of December 31, 2016 ) Provision for the year ) Reversal of adjustments to net realizable value Loss of control by joint venture creation (note 3.4) Assets held for sale (note 3.4) Exchange rate variation Balance as of December 31, 2017 ) |
TAX CREDITS
TAX CREDITS | 12 Months Ended |
Dec. 31, 2017 | |
TAX CREDITS | |
TAX CREDITS | NOTE 7 — TAX CREDITS 2017 2016 Current ICMS (state VAT) Social security financing Financing of social integration program IPI (federal VAT) IVA (value-added tax) Others Non-current ICMS (state VAT) Social security financing Financing of social integration program and Others The estimates of realization of non-current tax credits are as follows: 2017 2016 2018 — 2019 2020 2021 on — |
INCOME AND SOCIAL CONTRIBUTION
INCOME AND SOCIAL CONTRIBUTION TAXES | 12 Months Ended |
Dec. 31, 2017 | |
INCOME AND SOCIAL CONTRIBUTION TAXES | |
INCOME AND SOCIAL CONTRIBUTION TAXES | NOTE 8 - INCOME AND SOCIAL CONTRIBUTION TAXES In Brazil, income taxes include federal income tax (IR) and social contribution (CS), which represents an additional federal income tax. The statutory rates for income tax and social contribution are 25% and 9%, respectively, and are applicable for the years ended December 31, 2017, 2016 and 2015. The foreign subsidiaries of the Company are subject to taxation at rates ranging between 22.6% and 35.0%, without considering there are subsidiaries abroad with zero tax rate, which have mainly financial activities. The differences between the Brazilian tax rates and the rates of other countries are presented under “Difference in tax rates in foreign companies” in the reconciliation of income tax and social contribution below. a) Reconciliations of income and social contribution taxes at statutory rates to amounts presented in the Statement of Income are as follows: 2017 2016 2015 Income (loss) before income taxes ) ) ) Statutory tax rates % % % Income and social contribution taxes at statutory rates Tax adjustment with respect to: - Difference in tax rates in foreign companies ) ) ) - Equity in earnings of unconsolidated companies ) ) ) - Interest on equity* ) - Tax credits and incentives - Tax deductible goodwill recorded in statutory books — - No recognition of deferred tax assets — ) ) - Capital Gain** ) — — - Write-down of deferred tax asset*** — — ) - Other permanent differences, net ) ) Income and social contribution taxes ) ) Current ) ) ) Deferred ) (*) Brazilian Law 9,249/95 provides that a company may, at its sole discretion, consider dividends distributions to shareholders to be considered as interest on own capital — subject to specific limitations - which has the effect of a taxable deduction in the determination of income tax and social contribution. The limitation is the greater of (i) shareholders’ equity multiplied by the TJLP (Long Term Interest Rate) rate or (ii) 50% of the net income in the fiscal year. This expense is not recognized for financial reporting purposes and thus it does not impact accounting profit. (**) The merger of Gerdau Aços Especiais S.A. and Gerdau América Latina Part. S.A. at Gerdau S.A., generated a taxable capital gain. (***) The Company assessed the recoverability of certain deferred income tax assets and, due to the lack of expected utilization of these assets because of the adjustment of the long-term investment plan in one of its foreign subsidiaries and registered a write-down of R$ 284,014 in 2015. b) Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates: Balance as of Recognized in Comprehensive Income Balance as of Tax loss carryforward ) Social contribution tax losses — Provision for tax, civil and labor liabilities Benefits granted to employees ) Other temporary differences ) Deferred exchange variance* ) Provision for losses Difference between book value and tax base of assets acquired in business combinations ) ) ) Non-current assets Non-current liabilities ) ) * Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis Balance as of Recognized Effect of selling Comprehensive Balance as of Tax loss carryforward ) ) Social contribution tax losses — — Provision for tax, civil and labor liabilities ) ) Benefits granted to employees ) ) Other temporary differences ) ) Deferred exchange variance* ) — Provision for losses ) ) ) Difference between book value and tax base of assets acquired in business combinations ) ) ) ) Non-current assets Non-current liabilities ) ) * Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis Balance as of Recognized Effect of selling Comprehensive Balance as of Tax loss carryforward ) ) Social contribution tax losses ) — Provision for tax, civil and labor liabilities ) — Benefits granted to employees ) ) ) Other temporary differences ) Deferred exchange variance* ) — Provision for losses ) — — Difference between book value and tax base of assets acquired in business combinations ) ) ) ) Non-current assets Non-current liabilities ) ) * Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis The recoverability analysis of deferred tax balances related to tax loss carryforwards and social contribution tax losses performed by the Company are based on its business plans and aligned with other projections and analysis performed by the Company as, for example, the impairment of assets tests. c) Estimated recovery and reversal of income and social contribution tax assets and liabilities are as follows: Assets 2017 2016 2017 — 2018 2019 2020 2021 2022 on Liabilities 2017 2016 2017 — ) 2018 ) ) 2019 ) ) 2020 ) ) 2021 ) ) 2022 on ) ) ) ) d) Tax Assets not booked: Due to the lack of opportunity to use tax losses and negative basis of social contribution in some companies in Brazil, the Company has not recorded a portion of tax assets of R$ 312,741 (R$ 317,889 as of December 31, 2016), which do not have an expiration date. The subsidiaries abroad had R$ 360,152 (R$ 349,072 as of December 31, 2016) of tax credits on capital losses for which deferred tax assets have not been booked and which expire between 2029 and 2035 and also several tax losses of state credits in the amount of R$ 1,137,548 (R$ 857,215 as of December 31, 2016), which expire at various dates between 2018 and 2037. |
INVESTMENTS
INVESTMENTS | 12 Months Ended |
Dec. 31, 2017 | |
INVESTMENTS | |
INVESTMENTS | NOTE 9 — INVESTMENTS Joint ventures Associate companies Joint ventures Gerdau Corsa Gerdau Metaldom Gerdau Summit Diaco S.A. Dona Francisca Armacero Corsa Corporación Others Total Balance as of January 1, 2015 — — Equity in earnings ) — — ) ) — ) Cumulative Translation Adjustment — — — Capital increase — — — — — — — — — Impairment of assets — — — — — — — — ) — ) Control acquisition — — — — — — ) — — — ) Dividends/Interest on equity ) — — — — ) — — ) — ) Balance as of December 31, 2015 — — — Equity in earnings ) — — — — ) Cumulative Translation Adjustment ) ) ) — — — — ) ) ) ) Effect of selling of subsidiary (note 3.4) — — — — — — — — ) ) ) Dividends/Interest on equity ) — ) — — ) — — — — ) Balance as of December 31, 2016 ) — — — — — Equity in earnings ) — ) — — ) Cumulative Translation Adjustment ) — — — — — ) Capital increase — — — — — — — — Joint venture creation (note 3.2) — — — — — — — — — Contingent price complement — — — — — — — — — Dividends/Interest on equity ) — — — — ) — — — — ) Balance as of December 31, 2017 — — — |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 10 — PROPERTY, PLANT AND EQUIPMENT a) Summary of changes in property, plant and equipment: Land and buildings Machines, equipment, Data electronic Property, plant and Other Total Cost of the property, plant, and equipment Balances as of January 1, 2015 Additions Capitalized interest — — — — Business Combination Transfers ) — Disposals ) ) ) ) ) ) Impairment ) ) — ) — ) Foreign exchange effect Balances as of December 31, 2015 Additions Capitalized interest — — — — Transfers ) ) — Disposals ) ) ) ) ) ) Effect of selling of subsidiary ) ) ) ) ) ) Impairment (note 28) ) ) ) — ) ) Foreign exchange effect ) ) ) ) ) ) Balances as of December 31, 2016 Additions Capitalized interest — — — — Transfers ) — Disposals ) ) ) ) ) ) Loss of control by selling of subsidiary (note 3.4) ) ) ) ) ) ) Impairment (note 28) ) ) — — ) ) Assets held for sale (note 3.4) ) ) ) ) ) ) Foreign exchange effect Balances as of December 31, 2017 Land and buildings Machines, equipment, Data electronic Property, plant and Other Total Accumulated depreciation Balances as of January 1, 2015 ) ) ) — ) ) Depreciation, amortization and depletion ) ) ) — ) ) Transfers ) — ) — Disposals — Foreign exchange effect ) ) ) — ) ) Balances as of December 31, 2015 ) ) ) — ) ) Depreciation, amortization and depletion ) ) ) — ) ) Transfers ) ) — — Disposals — Loss of control by selling of subsidiary (note 3.4) — Foreign exchange effect — Balances as of December 31, 2016 ) ) ) — ) ) Depreciation, amortization and depletion ) ) ) — ) ) Transfers ) ) — — Disposals — Loss of control by selling of subsidiary (note 3.4) — Assets held for sale (note 3.4) — Foreign exchange effect ) ) ) — ) ) Balances as of December 31, 2017 ) ) ) — ) ) Net property, plant and equipment Balances as of December 31, 2015 Balances as of December 31, 2016 Balances as of December 31, 2017 The average rate of capitalized interest in 2017 was 6.6% (6.6% in 2016 and 6.4% in 2015). The following useful lives are used to calculate depreciation, amortization, and depletion: Useful lives of property, Buildings 20 to 33 years Machines, equipment, and installations 10 to 20 years Furniture and fixture 5 to 10 years Vehicles 3 to 5 years Data electronic equipment 2.5 to 6 years b) Guarantees — property, plant and equipment have been pledged as collateral for loans and financing in the amount of R$ 609,116 as of December 31, 2017 (R$ 632,376 and R$ 823,650 as of December 31, 2016 and 2015, respectively). c) Impairment of property, plant and equipment — At December 31, 2017, the carrying amount of items of property, plant and equipment for which an impairment loss has been recognized up to current year is R$ 118,348 for land, buildings and construction (R$ 112,438 as of December 31, 2016), R$ 783,183 for machines, equipment and installations (R$ 642,592 as of December 31, 2016), R$ 543,726 for Property, plant and equipment under construction (R$ 543,726 as of December 31, 2016). The loss of control of Diaco S.A. has been reflected in the results above (see Note 3.4). |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL | |
GOODWILL | NOTE 11 — GOODWILL The changes in goodwill are as follows: Goodwill Accumulated Goodwill after Balance as of January 1, 2015 ) (+/-) Foreign exchange effect ) (-) Impairment (note 28) — ) ) Balance as of December 31, 2015 ) (+/-) Foreign exchange effect ) ) (-) Impairment (note 28) — ) ) (-) Effect of selling of subsidiary ) — ) Balance as of December 31, 2016 ) (+/-) Foreign exchange effect ) (-) Impairment (note 28) — ) ) (-) Assets held for sale (note 3.4) ) — ) Balance as of December 31, 2017 ) The amounts of goodwill by segment are as follows: 2017 2016 2015 Brazil Special Steel North America |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 12 — INTANGIBLE ASSETS Intangible assets consist mainly of relationships recognized upon business combinations and software development, with application in the management of the business: Supplier Software Customer Others Total Balance as of January 1, 2015 Foreign exchange effect — Acquisition — — Disposal — ) — ) ) Amortization ) ) ) ) ) Balance as of December 31, 2015 Foreign exchange effect — ) ) ) ) Acquisition — — Disposal — ) — ) ) Amortization ) ) ) ) ) (-) Effect of selling of subsidiary — — — ) ) Balance as of December 31, 2016 Foreign exchange effect — Acquisition — — — Disposal — — ) — ) Amortization ) ) ) ) ) (-) Assets held for sale (note 3.4) — ) ) ) ) Balance as of December 31, 2017 Estimated useful lives 5 to 20 years 7 years 5 to 20 years 5 years The composition of other intangible assets by segment is as follows: 2017 2016 2015 Brazil Special Steel South America North America |
LOANS AND FINANCING
LOANS AND FINANCING | 12 Months Ended |
Dec. 31, 2017 | |
LOANS AND FINANCING | |
LOANS AND FINANCING | NOTE 13 — LOANS AND FINANCING Loans and financing are as follows: Annual charges (*) 2017 2016 Working capital % Financing of property, plant and equipment and others % Ten/Thirty Year Bonds % Total Loans and Financing Current Non-current Principal amount of loans and Financing Interest accrued of loans and Financing Total Loans and Financing (*) Weighted average effective interest costs on December 31, 2017. Loans and financing denominated in Brazilian reais are indexed to the TJLP (long-term interest rate), CDI (Interbank Deposit Certificate), or by the IGP-M (general market price index) and IPCA (Amplified Consumer Price). Summary of loans and financing by currency: 2017 2016 Brazilian Real (BRL) U.S. Dollar (USD) Other currencies The amortization schedules of long term loans and financing are as follows: 2017 2016 2018 — 2019 2020 2021 2022 2023 on a) Main funding in 2017 In October 2017, Gerdau SA, through its subsidiary Gerdau Trade Inc., completed the issuance of a 10-year Bond in the amount of US$ 650 million with a coupon of 4.875% per annum. The proceeds were used to repurchase the Bonds maturing in 2021 and 2020, issued by Gerdau Trade Inc. and Gerdau Holdings Inc., respectively. b) Monitoring Index Only operations with BNDES contemplate monitoring of the Company’s indebtedness indexes established in the agreement. In a possible breakdown of the indicator in the annual measurement, the Company would enter into a healing period and a subsequent renegotiation of guarantees, therefore, not being configured as the possibility of a default event. The Company is in a compliance with contractual obligations and no default events occurred at December 31, 2017, 2016 and 2015. c) Guarantees All loans contracted under the FINAME/BNDES program, totaling R$ 110.4 million on December 31, 2017, are guaranteed by the assets being financed. d) Credit Lines In June 2009, the Company and some of its subsidiaries in Brazil, obtained a pre-approved credit line with BNDES in the total amount of R$ 1.5 billion to be used for the revamp and modernization of several areas, an increase in the production capacity of certain product lines, investment in logistics and energy generation, and also environmental and sustainability projects. The funds are made available at the time each subsidiary starts its specific investment and presents to BNDES the evidence of the investment made. The interest rate for this credit line is determined at the time of each disbursement, and is composed by indexes linked to of TJLP + 2.16% p.a. As of December 31, 2017, the outstanding balance of this credit facility was R$ 402.5 million. In October 2017, the Company completed the renewal and reduction of the volume of the Senior Unsecured Global Working Capital Credit Agreement, a US$ 800 million (R$ 2,646.4 million as of December 31, 2017) revolving credit line to provide liquidity to its subsidiaries. The line is divided into two tranches, of which US$ 200 million (R$ 661.6 million as of December 31, 2017) is allocated to North American subsidiaries and US$ 600 million (R$ 2,028.0 million as of December 31, 2017) to subsidiaries in Latin America, including Brazil. The companies Gerdau SA, Gerdau Açominas SA and Gerdau Aços Longos SA provide a guarantee and the operation expires in October 2020. As of December 31, 2017, the amount disbursed in this line was US$ 54 million (R$ 178.6 million as of December, 31, 2017). |
DEBENTURES
DEBENTURES | 12 Months Ended |
Dec. 31, 2017 | |
DEBENTURES | |
DEBENTURES | NOTE 14 — DEBENTURES General Quantity as of December 31, 2017 Issuance Meeting Issued Held in treasury Maturity 2017 2016 3rd- A and B May 27,1982 06/01/2021 7th July 14, 1982 07/01/2022 8th November 11, 1982 05/02/2023 9th June 10, 1983 09/01/2024 11th - A and B June 29, 1990 06/01/2020 14th August 26, 2014 08/30/2024 — — Total Consolidated Non-current The amortization schedules of long term are as follows: 2017 2016 2020 2021 2022 2023 on Debentures are denominated in Brazilian reais, they are not convertible into shares and have variable interest at a percentage of the CDI (Interbank Deposit Rate). The nominal annual interest rate was 9.93% and 14.00% as of December 31, 2017 and December 31, 2016, respectively. The Company has guarantees provided by parent entity for debentures of the 7ª, 8ª, 9ª and 11ª issuances. |
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2017 | |
FINANCIAL INSTRUMENTS | |
FINANCIAL INSTRUMENTS | NOTE 15 - FINANCIAL INSTRUMENTS a) General considerations - Gerdau S.A. and its subsidiaries enter into transactions with financial instruments whose risks are managed by means of strategies and exposure limit controls. All financial instruments are recorded in the accounting books and presented as cash and cash equivalents, short-term investments, trade accounts receivable, trade accounts payable, Loans and financing, debentures, related-party transactions, unrealized gains on derivatives, unrealized losses on derivatives, Judicial deposits, Obligations with FIDC, other current assets, other non-current assets, other current liabilities and other non-current liabilities. The Company has derivatives and non-derivative instruments, such as the hedge for some operations under hedge accounting. These operations are non-speculative in nature and are intended to protect the company against exchange rate fluctuations on foreign currency loans and against interest rate fluctuations. b) Fair value — the fair value of the aforementioned financial instruments is as follows: 2017 2016 Book Fair Book Fair value value value value Assets Cash and cash equivalents Short-term investments Trade accounts receivable Related parties Unrealized gains on derivatives — — Judicial deposits Other current assets Other non-current assets Liabilities Trade accounts payable Loans and Financing Debentures Unrealized losses on financial instruments FIDC Obligation Other current liabilities Other non-current liabilities The fair values of Loans and Financing are based on market assumptions, which may take into consideration discounted cash flows using equivalent market rates and credit rating. All other financial instruments, which are recognized in the Consolidated Financial Statements at their carrying amount, are substantially similar to those that would be obtained if they were traded in the market. However, because there is no active market for these instruments, differences could exist if they were settled in advance. The fair value hierarchy of the financial instruments above are presented in Note 15.g. c) Risk factors that could affect the Company’s and its subsidiaries’ businesses: Price risk of commodities: this risk is related to the possibility of changes in prices of the products sold by the Company or in prices of raw materials and other inputs used in the productive process. Since the Company operates in a commodity market, net sales and cost of sales may be affected by changes in the international prices of their products or materials. In order to minimize this risk, the Company constantly monitors the price variations in the domestic and international markets. Interest rate risk: this risk arises from the possibility of losses (or gains) due to fluctuations in interest rates applied to the Company’s financial liabilities or assets and future cash flows and income. The Company evaluates its exposure to these risks: (i) comparing financial assets and liabilities denominated at fixed and floating interest rates and (ii) monitoring the variations of interest rates like Libor and CDI. Accordingly, the Company may enter into interest rate swaps in order to reduce this risk. Exchange rate risk: this risk is related to the possibility of fluctuations in exchange rates affecting the amounts of financial assets or liabilities or of future cash flows and income. The Company assesses its exposure to the exchange rate by measuring the difference between the amount of its assets and liabilities in foreign currency. The Company understands that the accounts receivables originated from exports, its cash and cash equivalents denominated in foreign currencies and its investments abroad are more than equivalent to its liabilities denominated in foreign currency. Since the management of these exposures occurs at each operation level, if there is a mismatch between assets and liabilities denominated in foreign currency, the Company may enter into derivative financial instruments to mitigate the effect of exchange rate fluctuations. Credit risk: this risk arises from the possibility of the company not receiving amounts arising from sales to customers or investments made with financial institutions. In order to minimize this risk, the company adopt the procedure of analyzing in details the financial position of customers, establishing a credit limit and constantly monitoring their balances. Regarding cash investments, the Company invests solely in financial institutions with low credit risk, as assessed by rating agencies. In addition, each financial institution has a maximum limit for investment, determined by the Company’s Credit Committee. If customers are classified by an independent agency, these ratings are used. If an independent assessment is not available, the Company’s credit area provides a credit rating assessment, taking into consideration its financial position, past experience and other factors. Capital management risk: this risk comes from the Company’s choice in adopting a financing structure for its operations. The Company manages its capital structure, which consists of a ratio between the financial debts and its own capital (Equity) based on internal policies and benchmarks. The KPIs (Key Performance Indicators) related to the objective “Capital Structure Management” are: WACC (Weighted Average Cost of Capital), Net Debt/ EBITDA, Net Financial Expenses Coverage Ratio, and Indebtedness/Equity Ratio. The Net Debt is composed of the outstanding principal of the debt, less cash, cash equivalents and short-term investments (notes 4, 13 and 14). The total capitalization is formed by Total Debt (composed by the outstanding principal of the debt) and equity (note 22). The Company may change its capital structure, based on economic and financial conditions, aiming to optimize its financial leverage and its debt management. At the same time, the Company seeks to improve its ROCE (Return on Capital Employed) by implementing a working capital management and an efficient program of capital expenditures. In the long-term, the Company seeks to remain between the parameters below, admitting specific short-term variations: WACC between 10% to 13% a year Net debt/EBITDA less than or equal to 2.5 times Net Financial Expenses Coverage Ratio greater than 5.5 times Debt/Equity Ratio less than or equal to 60% These key indicators are used to monitor objectives described above and may not necessarily be used as indicators for other purposes, such as impairment tests. Liquidity risk: the Company’s management policy of indebtedness and cash on hand is based on using the committed lines and the currently available credit lines with or without a guarantee in export receivables for maintaining adequate levels of short, medium, and long-term liquidity. The maturity of long-term loans and financing, and debentures are presented in Notes 13 and 14, respectively. 2017 Contractual obligations Total Less than 1 year 1-3 years 4-5 years More than 5 years Trade accounts payable — — — Loans and financings Debentures — Unrealized losses on financial instruments — — — Obligations with FIDC — — — Other current liabilities — — — Other non-current liabilities — — 2016 Contractual obligations Total Less than 1 year 1-3 years 4-5 years More than 5 years Trade accounts payable — — — Loans and financings Debentures — — Unrealized losses on financial instruments — — — Obligations with FIDC — — — Other current liabilities — — — Other non-current liabilities — — Sensitivity analysis: The Company performed a sensitivity analysis, which can be summarized as follows: Impacts on Statements of Income Impacts on Statements of Income Assumptions Percentage of change 2017 2016 Foreign currency sensitivity analysis Interest rate sensitivity analysis 10 bps Sensitivity analysis of changes in prices of products sold Sensitivity analysis of changes in raw material and commodity prices Sensitivity analysis of interest rate and foreign currency swaps 10 bps/5% Sensitivity analysis of NDF (Non Deliverable Forwards) Foreign currency sensitivity analysis: As of December 31, 2017, the Company is mainly exposed to variations between the Real and the Dollar. The sensitivity analysis carried out by the Company considers the effects of a 5% increase or reduction between the Real and the Dollar in its non-hedged debt. In this analysis, if the Real appreciates against the Dollar, this would represent a gain of R$ 129,209 and R$ 79,088 after the effects arising from the changes in the net investment hedge described in note 15.f - (R$ 253,294 and R$ 177,711 as of December 31, 2016, respectively). If the Real depreciates against the Dollar this would represent an expense of the same value. Due to the investment hedge, the variations are minimized when the exchange variation accounts and income tax are analyzed. The net amounts of trade accounts receivable and trade accounts payable denominated in foreign currency do not represent any relevant risk in the case of any fluctuation of exchange rates. Interest rate sensitivity analysis: The interest rate sensitivity analysis made by the Company considers the effects of an increase or reduction of 10 basis point (bps) on the average interest rate applicable to the floating part of its debt. The calculated impact, considering this variation in the interest rate totals R$ 54,908 as of December 31, 2017 (R$ 63,416 as of December 31, 2016) and would impact the Financial expenses account in the Consolidated Statements of Income. The specific interest rates to which the Company is exposed are related to the loans, financing, and debentures presented in Notes 13 and 14, and are mainly comprised by Libor and CDI — Interbank Deposit Certificate. Sensitivity analysis of changes in sales price of products and price of raw materials and other inputs used in production: the Company is exposed to changes in the price of its products. This exposure is associated with the fluctuation of the sales price of the Company’s products and the price of raw materials and other inputs used in the production process, mainly for operating in a commodity market. The sensitivity analysis made by the Company considers the effects of an increase or of a reduction of 1% on both prices. The impact measured considering this variation in the price of products sold, considering the revenues and costs of the year ended on December 31, 2017, totals R$ 369,176 (R$ 376,517 as of December 31, 2016) and the variation in the price of raw materials and other inputs totals R$ 234,239 as of December 31, 2017 (R$ 228,637 as of December 31, 2016). The impact in the price of products sold and raw materials would be recorded in the accounts Net Sales and Cost of Sales, respectively, in the Consolidated Statements of Income. The Company does not expect to be more vulnerable to a change in one or more specific product or raw material. Sensitivity analysis of interest rate and foreign currency swaps: the Company has exposure to interest rate swaps for some of its loans and financing. The sensitivity analysis calculated by the Company considers the effects of either an increase or a decrease of 10 bps in the interest curve and of 5% in the exchange rate, and its impacts in the fair value of swaps. These variations represent an income or expense of R$ 6,479 (R$ 9,870 as of December 31, 2016). These effects would be recognized in the statement of comprehensive income. The interest rate swaps to which the Company is exposed to are presented in note 15.e. Sensitivity analysis of forward contracts in US Dollar: the Company has exposure to forward contracts for some of its assets and liabilities. The sensitivity analysis carried out by the Company considers the effects of a 5% increase or reduction of the US Dollar against the Chilean Peso, and its effects on the fair value of these derivatives. A 5% increase in the US Dollar against the Chilean Peso represents an income of R$ 1,480 (R$ 15,816 as of December 31, 2016), and a 5% reduction of the US Dollar against the Chilean Peso represents an expense of the same amount. The US Dollar / Chilean Peso forward contracts had the objective of hedging the liability position in US Dollar and the fair value effects of these contracts were recorded in the Consolidated Income Statement. The forward contracts in US Dollars that the Company is exposed are presented in Note 15.e. d) Financial Instruments per Category Summary of the financial instruments per category: 2017 Loans and receivables Assets at fair value with Total Cash and cash equivalents — Short-term investments — Trade accounts receivable — Related parties — Judicial deposits — Other current assets — Other non-current assets Total Financial income Liabilities Liabilities at fair value Other financial Total Trade accounts payable — Loans and financings — Debentures — FIDC Obligation — Other current liabilities — Other non-current liabilities — Unrealized losses on financial instruments — Total Financial income (expenses) ) ) ) 2016 Loans and receivables Assets at fair value with Assets at fair value Total Cash and cash equivalents — — Short-term investments — — Unrealized gains on financial instruments — — Trade accounts receivable — — Related parties — — Judicial deposits — — Other current assets — — Other non-current assets — Total Financial income — Liabilities Liabilities at fair value Other financial Total Trade accounts payable — Loans and financings — Debentures — FIDC Obligation — Other current liabilities — Other non-current liabilities — Unrealized losses on financial instruments — Total Financial income (expenses) ) ) ) As of December 31, 2017, the Company has derivative financial instruments such as interest rate swaps and forward contracts in US Dollar. Part of these instruments is classified as cash flow hedges and their effectiveness can be measured, having their unrealized losses and /or gains classified directly in Other Comprehensive Income. The other derivative financial instruments have their realized and unrealized losses and/or gains presented in the account “Gains and losses on derivatives, net” in the Consolidated Statement of Income. e) Operations with derivative financial instruments Risk management objectives and strategies: In order to execute its strategy of sustainable growth, the Company implements risk management strategies in order to mitigate market risks. The objective of derivative transactions is always related to mitigating market risks as stated in our policies and guidelines. The monitoring of the effects of these transactions is performed monthly by the Financial Risk Management Committee, which validates the fair value of these transactions. All derivative financial instruments are recognized at fair value in the Consolidated Financial Statements of the Company. Policy for use of derivatives: The Company is exposed to various market risks, including changes in exchange rates, commodities prices and interest rates. The Company uses derivatives and other financial instruments to reduce the impact of such risks on the fair value of its assets and liabilities or in future cash flows and income. The Company has established policies to evaluate the market risks and to approve the use of derivative transactions related to these risks. The Company enters into derivative financial instruments solely to manage the market risks mentioned above and never for speculative purposes. Derivative financial instruments are used only when they have a related position (asset or liability exposure) resulting from business operations, investments and financing. Policy for determining fair value: the fair value of derivative financial instruments is determined using models and other valuation techniques, including future prices and market curves. The derivative transactions may include: interest rate swaps, cross currency swaps and currency forward contracts. Forward Contracts in US Dollar The Company has entered into NDFs (Non Deliverable Forward) in order to mitigate the exchange variance risk on liabilities denominated in foreign currencies, mainly US dollar. The counterparties of these transactions are financial institutions with a low credit risk. Swap Contracts The Company entered into cross currency swaps, designated as a cash flow hedge, in which it receives a variable interest rate based on LIBOR in US dollars and pays a fixed interest rate based on local currency. The counterparties to these transactions are financial institutions with low credit risk. The derivatives instruments can be summarized and categorized as follows: Notional value Amount receivable Amount payable Contracts Position 2017 2016 2017 2016 2017 2016 Forward Maturity at 2017 purchase in US$ — US$ 84.8 million — — ) Maturity at 2017 sell in US$ — US$ 15.0 million — — — Cross currency swap Maturity in 2017 receivable under the swap Libor 6M + 2.25% payable under the swap INR 11.02% — US$ 25.0 million — — — Maturity in 2019 receivable under the swap Libor 6M +2% payable under the swap INR 10.17% US$ 40.0 million US$ 40.0 million — ) — Total fair value of financial instruments — ) ) Prospective and retrospective tests demonstrated the effectiveness of these instruments. 2017 2016 Unrealized gains on financial instruments Current assets — Non-current assets — — Unrealized losses on financial instruments Current liabilities — ) Non-current liabilities ) — ) ) 2017 2016 Net Income Gains on financial instruments Losses on financial instruments ) ) ) ) Other comprehensive income (Losses) Gains on financial instruments ) ) f) Net investment hedge The Company designated as hedge of part of its net investments in subsidiaries abroad the operations of Ten/Thirty Years Bonds. As a consequence, the effect of exchange rate changes on these debts has been recognized in the Statement of Comprehensive Income. The exchange variation generated on the operations of Ten/Thirty Years Bonds in the amount of US$ 2.2 billion (designated as hedges) is recognized in the Statement of Comprehensive Income, while the exchange rate on the portion of US$ 0.4 billion (not designated as hedges) is recognized in income. Additionally, the Company opted to designate as hedge of the net investment financing operations held by the subsidiary Gerdau Açominas SA, in the amount of US$ 0.1 billion, which were made in order to provide part of the funds to purchase these investments abroad. Based on the standards related to this subject, the Company demonstrated effectiveness of the hedge as of its designation dates and demonstrated the high effectiveness of the hedge from the contracting of each debt for the acquisition of these companies abroad, whose effects were measured and recognized directly in the Statement of Comprehensive Income as an unrealized loss, net of taxes, in the amount R$ 148,560 for the year ended on December 31, 2017 (gain of R$ 1,679,312 on December 31, 2016). The objective of the hedge is to protect, during the existence of the debt, the amount of part of the Company’s investment in the subsidiaries abroad mentioned above against positive and negative oscillations in the exchange rate. This objective is consistent with the Company’s risk management strategy. Prospective and retrospective tests need demonstrate the effectiveness of these instruments. g) Measurement of fair value: IFRS defines fair value as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The standard also establishes a three level hierarchy for the fair value, which prioritizes information when measuring the fair value by the company, to maximize the use of observable information and minimize the use of non-observable information. IFRS describes the three levels of information to be used to measure fair value: Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 - Inputs other than quoted prices included in Level 1 available, where (unadjusted) quoted prices are for similar assets and liabilities in non-active markets, or other data that is available or may be corroborated by market data for substantially all the terms of the asset or liability. Level 3 - Inputs for the asset or liability that are not based on observable market data, because market activity is insignificant or does not exist. As of December 31, 2017, the Company had some assets for which the fair value measurement is required on a recurring basis. These assets include investments in private securities and derivative instruments. Financial assets and liabilities of the Company, measured at fair value on a recurring basis and subject to disclosure requirements of IFRS 7 as of December 31, 2017, are as follows: Fair Value Measurements at Reporting Date Using Quoted Prices Active Markets for Quoted Prices in Non-Active 2017 2016 2017 2016 2017 2016 Current assets Cash and cash equivalents — — Short-term investments - Held for Trading Trade Accounts receivable — — Unrealized gains on financial instruments — — — — Other current assets — — Non-current assets Related parties — — Unrealized gains on financial instruments — — — — Judicial deposits — — Other non-current assets — — Current liabilities Trade accounts payable — — Short-term debt — — Unrealized losses on financial instruments — — — — Other current liabilities — — Non-current liabilities Long-term debt — — Debentures — — Unrealized losses on financial instruments — — — — Obligations with FIDC — — Other non-current liabilities — — — — h) Changes in liabilities from Cash flow from financing activities: As required by IAS 7, the Company demonstrates below the changes in the liabilities of cash flow from financing activities, from its Statement of Cash Flows: Balances as of January Cash transactions Non cash transactions Proceeds/(Repayment) Interest paid Interest expense on Exchange variation, Balances as of Related parties, net ) — ) — ) Debt, Debentures and Losses/Gains on financial instruments, net ) ) Balances as of Cash transactions Non cash transactions Proceeds/(Repayment) Interest paid Interest expense on Exchange variation, Balances as of Related parties, net ) ) — — ) Debt, Debentures and Losses/Gains on financial instruments, net ) ) ) Balances as of Cash transactions Non cash transactions Proceeds/(Repayment) Interest paid Interest expense on Exchange variation, Balances as of Related parties, net ) — ) — ) Debt, Debentures and Losses/Gains on financial instruments, net ) ) ) |
TAXES PAYABLE
TAXES PAYABLE | 12 Months Ended |
Dec. 31, 2017 | |
TAXES PAYABLE | |
TAXES PAYABLE | NOTE 16 — TAXES PAYABLE 2017 2016 Payroll charges ICMS (state VAT) COFINS (tax on revenue) IPI (federal VAT) IVA (value-added tax) and others |
TAX, CIVIL AND LABOR CLAIMS AND
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS | |
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS | NOTE 17 — TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS The Company and its subsidiaries are party in judicial and administrative proceedings involving labor, civil and tax matters. Based on the opinion of its legal advisors, Management believes that the provisions recorded for these judicial and administrative proceedings are sufficient to cover probable and reasonably estimable losses from unfavorable court decisions, and that the final decisions will not have significant effects on the financial position, operational results and liquidity of the Company and its subsidiaries. For claims whose expected loss is considered probable, the provisions have been recorded considering the judgment of the Management of the Company with the assistance of its legal advisors and the provisions are considered sufficient to cover expected probable losses. The balances of the provisions are as follows: I) Provisions 2017 2016 a) Tax provisions ICMS (state VAT) Corporate Income Tax and Social Contribution Tax Emergency Capacity Charge and Extraordinary Rate Adjustment Financing of social integration program and Social security financing Other tax provisions and Social security contributions b) Labor provisions c) Civil provisions As the net result of the reversal of the accounting provision described below (tax provisions), related to the discussion of the exclusion of the ICMS (“Imposto sobre a circulação de Mercadorias e Serviços” — ICMS — State VAT) from the tax base for contributions to PIS (“Contribuição ao Programa de Integração Social”- PIS) and COFINS (“Contribuição para o Financiamento da Seguridade Social” - COFINS), and the recognition of other accounting provisions for the year ended on December 31, 2017, the Company recorded the amounts of R$ 929,711 on the item “Reversal of contingent liabilities, net” (Operating Result), and R$ 369,819, on the item “Reversal of monetary update of contingent liabilities, net” (Financial Income), in its Consolidated Statements of Income. a) Tax Provisions The Company and its subsidiaries are parties to lawsuits related to the exclusion of the ICMS from the tax base for contributions to PIS and COFINS, with respect to which the Company made judicial deposits and accounting provisions, which in turn were updated in accordance with the SELIC rate. The balances recorded as of December 31, 2016 were referred to the unpaid amounts of PIS and COFINS since 2009, because the collection of which was fully suspended, due to the mentioned judicial deposits. On March 15, 2017, the Brazilian Federal Supreme Court (STF — Supremo Tribunal Federal) ruled on a claim related to this matter, and by 6 votes to 4, concluded: “The ICMS does not comprise the tax base for PIS and COFINS assessment purposes”. The STF decision, in principle, affects all of the judicial proceedings in progress, due to its general repercussion. However, after the publication of the decision on October 02, 2017, the Attorney of the National Treasury filed an appeal, claiming that the decision of the Supreme Court was silent on certain points, and requested a modulation of the decision effects, which may limit its effects to the taxpayers. Pursuant to paragraph 14 of IAS 37 - Provisions, Contingent Liabilities and Contingent Assets, a provision is recognized only when “it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation”, among other requirements. On March 31, 2017 the Company, based on (i) the conclusion of this judgment by the STF (sitting en banc ) in Extraordinary Appeal No. 574,706/RG with general repercussion, which ruled that the inclusion of the ICMS in the PIS and COFINS calculation tax base was unconstitutional, and (ii) the accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS), reversed the aforementioned accounting provision. The Company’s decision is supported by the position of its legal advisors who, when reassessing the likelihood of loss in the ongoing lawsuits related to the matter, concluded that the probability of loss, as to the merits of these lawsuits, became remote as of the date of the enactment of this decision. The Company emphasizes, however, that in view of the possibility that the STF may understand that the modulation mechanism necessarily applies to its decision, and that the application of such a mechanism could limit the effects of the same, a revaluation of the risk of loss associated with the aforementioned lawsuits may be required, pursuant to paragraph 59 of IAS 37. Accordingly, depending on the terms of the modulation, as defined by the STF, such revaluation may result in the need to record new provisions in connection with this matter in the future. The balance of judicial deposits as of December 31, 2017, in the amount of R$ 1,691,596, referring to the same discussion on the inclusion of the ICMS in the tax base of PIS and COFINS, awaits termination of the relevant lawsuits before the Brazilian courts in order to be returned to the Company. During the year ended on December 31, 2017, the Company adhered to the installment program of the state of Minas Gerais, including amounts already provisioned regarding ICMS. The other tax provisions refer substantially to the discussions regarding the offset of PIS credits and the incidence of PIS and COFINS on other revenues. b) Labor Provisions The Company and its subsidiaries are party to labor claims. None of these claims involve individually significant amounts and corresponds mainly to overtime pay, health hazard premium, and hazardous duty premium, among others. c) Civil Provisions The Company and its subsidiaries are also a party to civil lawsuits arising in the normal course of its business, which totaled as of December 31, 2017 the amount shown as provision liabilities. The changes in the tax, labor and civil provisions are shown below: 2017 2016 Balance at the beginning of the year (+) Additions (+) Monetary correction ) (-) Reversal of accrued amounts ) ) (+) Foreign exchange effect on provisions in foreign currency ) ) (-) Effect of selling of subsidiary — ) (-) Loss of control by joint venture creation (note 3.4) ) — Balance at the end of the year II) Contingent liabilities for which provisions were not recorded Considering the opinion of legal advisors and management’s assessment, contingencies listed below have chance of loss considered as possible (but not likely) and due to this classification accruals have not been made in accordance with IFRS. a) Tax contingencies a.1) The Company and its subsidiary Gerdau Aços Longos S.A. and Gerdau Açominas S.A., have other lawsuits related to the ICMS (state VAT) which are mostly related to credit rights and rate differences, whose demands totaled R$ 443,137. a.2) The Company and certain of its subsidiaries in Brazil are parties to claims related to: (i) Imposto sobre Produtos Industrializados - IPI, substantially related to IPI credit on inputs, whose demands total the updated amount of R$ 309,581; (ii) PIS and COFINS, substantially related to non-approval of compensation of credits on inputs totaling R$ 438,843, (iii) social security contributions in the total of R$ 76,866 and (iv) other taxes , whose updated total amount is currently R$ 370,175. a.3) Subsidiary Gerdau Aços Longos S.A. is a party to an administrative proceeding relating to Withholding Income Tax, in the amount of R$ 122,029, assessed on the remittance abroad of interest charged on export financings under Export Prepayment or Export Advance Agreements. The Company submitted an administrative claim challenging the tax assessment on January 13, 2017, which was rejected by the Brazilian Federal Revenue Judgment Office (Delegacia de Julgamento da Receita Federal do Brasil), on June 5, 2017, reason for which the Company submitted a voluntary appeal, on July 4, 2017, which is currently pending on the Brazilian Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais — “CARF”, administrative body of the Ministry of Finance of Brazil). a.4) The Company (as successor of Gerdau Aços Especiais S.A.) and its subsidiary Gerdau Internacional Empreendimentos Ltda., are parties to administrative and judicial proceedings relating to IRPJ — Corporate Income Tax and CSLL — Social Contribution Tax, in the current amount of R$ 1,488,989. Such proceedings relate to profits generated abroad, of which (i) R$ 1,317,381 correspond to two proceedings involving Gerdau Internacional Empreendimentos Ltda., of which (i.a.) R$ 951,736 relate to a proceeding that is no longer subject to appeal in CARF and was referred for judicial collection, which collection is being challenged in the competent judicial lower court; and (i.b) R$ 365,645 relate to a voluntary appeal which was partially granted in the lower tribunal of the Brazilian Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais — “CARF”, administrative body of the Ministry of Finance of Brazil), and was subject to special appeal which was partially granted in CARF’s superior tribunal with the publication of the judgment on May 25, 2017, and is currently awaiting due diligence by the Internal Revenue Service, as determined by the CARF decision, and new appeals may be filed after the conclusion of such procedure; and (ii) R$ 171,608 correspond to a proceeding involving the Company, whose voluntary appeal in CARF’s lower tribunal was dismissed, for which a special appeal was filed, and currently awaits judgment in CARF’s superior tribunal. a.5) The Company (as successor of Gerdau Aços Especiais S.A.) and its subsidiaries Gerdau Aços Longos S.A. and Gerdau Açominas S.A. are parties to administrative proceedings relating to the disallowance of the deductibility of goodwill generated in accordance with Article 7 and 8 of Law 9,532/97 — as a result of a corporate restructuring carried out in 2004/2005 — from the tax base of the Corporate Income tax - IRPJ and Social Contribution on Net Income - CSLL. The total updated amount of the proceedings is R$ 6,217,810, of which (i) R$ 4,963,398 correspond to four proceedings involving the Company and its subsidiaries Gerdau Aços Longos S.A. and Gerdau Açominas S.A., for which administrative discussions already ended and are currently in the administrative collection stage; and the Companies obtained injunctive relief to permit it to offer a judicial guarantee using a liability insurance policy, for judicial discussions on Embargoes to Execution by the subsidiary Gerdau Aços Longos S.A. were initiated, in their respective proceedings, which total the amount of R$ 3,195,379, and also by the Company, in its respective lawsuit, which amounts to R$ 364,370; (ii) R$ 600,101 correspond to two proceedings involving Gerdau Aços Longos S.A., whose voluntary appeal is currently pending in CARF’s lower tribunal; (iii) R$ 531,138 correspond to two proceeding involving the subsidiary Gerdau Aços Longos S.A., whose voluntary appeal was dismissed in CARF’s lower tribunal and having been presented Embargo de Declaration against those decisions, which are pending of judgment; and (iv) R$ 123,172 correspond to one proceeding involving the Company (as successor of Gerdau Aços Especiais S.A.), which had its Declarations of Appeal, filed against a decision that dismissed its Voluntary Appeal, rejected on December 7, 2017, whose decision the Company became aware on December 19, 2017, to oppose the appropriate appeal. Some of the decisions obtained at the CARF related to those proceedings along with other matters involving the Company included in the scope of the so-called Operation Zelotes (“Operation”) are being investigated by Brazilian federal authorities including the Judiciary Branch, with the purpose of verifying the occurrence or not of alleged illegal acts. Considering the involvement of Gerdau’s name in press reports concerning the Operation, the Board of Directors decided to engage outside counsel, which report to a Special Committee of the Board, to conduct an investigation to determine, among other things: (i) whether, in light of current knowledge, proper protocol was followed in the relationship of the Company with governmental authorities, including CARF, and in the hiring of firms representing the Company in cases in CARF; (ii) whether such firms have remained within the scope of their work/hiring; (iii) whether the engagement terms for such firms included clauses intended to prevent activity that violates ethical codes or laws currently in force; (iv) whether the engagement terms for such firms included the establishment of sanctions for any violations (whether contractual breaches or otherwise); and (v) if there is any evidence of fraud, deceit, bad faith, or any expression of an intent to commit an illegal act on the part of directors and/or officers of the Company in the relationship of the Company with governmental authorities, including CARF, in the negotiation, signing or carrying out of the aforementioned contracts (“Internal Investigation”). The Internal Investigation is ongoing, and as of the date of the approval of these financial statements, the Company believes it is not possible to predict either the duration or the outcome of the Operation or of the Internal Investigation. Additionally, the Company believes that currently there is not enough information to determine whether a provision for losses is required or disclose any contingency. The Company’s legal advisors confirm that the procedures adopted by the Company with respect to the tax treatment of profits abroad and the deductibility of goodwill were strictly legal, and, therefore, the likelihood of loss with respect to said proceedings is possible (but not likely). b) Civil contingencies b.1) A lawsuit arising from the request by two civil construction unions in the state of São Paulo alleging that Gerdau S.A. and other long steel producers in Brazil share customers, thus, violating the antitrust legislation. After investigations carried out by the Economic Law Department (SDE — Secretaria de Direito Econômico), the final opinion was that a cartel exists. The lawsuit was therefore forwarded to the Administrative Council for Economic Defense (CADE) for judgment, which resulted in a fine to the Company and other long steel producers, on September 23, 2005, an amount equivalent to 7% of gross revenues in the year before the Administrative Proceeding was commenced, excluding taxes (fine of R$ 245,070, updated by the judicial accountant on August 01, 2013 to R$ 417,820) Two lawsuits challenge the investigation conducted by the Competition Defense System and its merits judgment, whose grounds are procedural irregularities, especially the production of evidence, based on an economic study, to prove the inexistence of a cartel. The Court, upon offer of bank guarantee letter, granted the suspension of the effects of CADE’s decision. Sentences were handed down for the dismissal of the actions and both are found in appeal phase. The Company denies having been engaged in any type of anti-competitive conduct and believes based on information available, including the opinion of its legal counsel, that it is possible that the decision will be reverted. b.2) The Company and its subsidiaries are parties to other demands of a civil nature that collectively have a discussion amount of approximately R$ 191,112. For these demands, no accounting provision was recorded, since they were considered as possible losses, based on the opinion of its legal advisors. b.3) On May 26, 2016, a securities class action was filed in the United States District Court for the Southern District of New York against Gerdau and certain executives and former executives of the Company by purchasers of American Depositary Receipts (ADRs) of the Company that trade on the New York Stock Exchange. On August 9, 2016, the court appointed the Policemen’s Annuity and Benefit Fund of Chicago as lead plaintiff. On October 31, 2016, lead plaintiff filed an amended under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a purported class of purchasers of Gerdau ADRs between April 23, 2012 and May 16, 2016. Among other things, the amended complaint alleged that the Company and certain executives had engaged in a bribery scheme involving members of the Brazilian Board of Tax Appeals (CARF), which had purportedly resulted in the nonpayment of approximately US$ 429 million in taxes and resulted in defendants’ statements in Gerdau’s securities filings about Gerdau’s business, operations, and prospects being false and misleading and/or lacking a reasonable basis. The amended complaint did not specify an amount of alleged damages, and it also included claims pertaining to the transaction relating to the acquisition of equity interests described in note (c) below. On January 17, 2017, the Company filed a motion to dismiss, but before its review by the Court, the parties asked for a stay of the proceedings, so that they could engage in a mediation process. As a result of the mediation process. On July 5, 2017 lead plaintiff and the defendants reached a settlement, in the amount of US$ 15 million, which was approved by the Court on October 20, 2017. As a result, the action was dismissed, with prejudice, as against lead plaintiff and the class of purchasers of Gerdau ADRs. The amount of the settlement was substantially covered by insurance. The settlement does not acknowledge any liability by the defendants and, in the opinion of the Company and its legal advisors, was the best alternative to eliminate the uncertainties, burdens and costs to be incurred if the dispute were to continue. c) Administrative proceeding — Brazilian Securities Comission (CVM) On July 14, 2015, the Company acquired non-controlling interests in the following companies: Gerdau Aços Longos S.A. (4.77%), Gerdau Açominas S.A. (3.50%), Gerdau Aços Especiais S.A. (2.39%) and Gerdau América Latina Participações S.A. (4.90%), having as counterparties Itaú Unibanco S.A. and ArcelorMittal Netherlands BV. This transaction was approved by the Board of Directors of Gerdau S.A. by unanimous vote of the directors on July 13, 2015, based on the market opportunity and the analysis that the prices were appropriate considering: economic evaluations conducted by independent report, the financial instruments used, the payment terms, capturing value through a more concentrated cash flow and long-term vision for the Company. The Company, in compliance with CVM requests for the clarification on the acquisition, disclosed that the decision to its acquisition had exclusively business purpose and was duly considered and unanimously approved by the Board of Directors. The terms and conditions for the acquisition considered long-term market prospects. On October 21, 2016, Metalúrgica Gerdau S.A. and certain directors and former directors of Gerdau S.A. filed a defense for the administrative proceeding brought by CVM on the acquisition of non-controlling interests in the subsidiaries, in the sense that the operation was businesslike justified, as above stated. There is no estimate for a final decision of the matter. Metalúrgica Gerdau S.A. believes that, currently, there is not enough information to disclose or determine if a provision for losses is required. III) Judicial deposits The Company has judicial deposits related to tax, labor and civil lawsuits as listed below: 2017 2016 Tax Labor Civil IV) Contingent Asset - Eletrobrás Compulsory Loan — Centrais Elétricas Brasileiras S.A. (Eletrobrás) The Compulsory Loan, instituted by the Brazilian government in order to expand and improve the energy sector of the country was charged and collected from industrial consumers with monthly consumption equal or superior to 2000kwh through the “electricity bills” issued by the electric power distribution companies, was converted into credits to the taxpayers based on the annual value of these contributions made between 1977 and 1993. The legislation sets a maximum 20 years period to return the compulsory loan to the taxpayers, providing Eletrobrás the possibility of anticipating this return through the conversion of those loans in shares of its own issuance. Prior to the conversion of the credits into shares, those credits were monetary corrected through an indexer and quantifier, called Standard Unit (SU). However, the compulsory loan was charged to the companies in their monthly electricity bills, consolidated during the year, and only indexed by the SU in January of the following year, resulting in a lack of monthly monetary correction during the years of collection, as well as interest. This procedure imputed to taxpayers considerable financial losses, particularly during the periods when the monthly inflation rates stood at high levels. In order to claim the appropriate interest and monetary correction subtracted by the methodology applied by Eletrobrás, the Company (understood to be legally entities existing at the time and that later became part of Gerdau S.A.) filed lawsuits claiming credits resulting from differences on the monetary correction of principal, interest, moratory and other accessory amounts owed by Eletrobrás due to the compulsory loans, totaling approximately R$ 1,260 million. Recently, particularly in 2015, processes involving representative amounts were definitively judged by the Superior Court of Justice - STJ favorable to the Company so that no further appeals against such decisions apply (“final judgment”). For claims with a final judgment, it yet remains the enforcement of ruling (or execution phase) where the actual amounts to be settled will finally be calculated. Obtaining favorable decisions represented by the final judgment mentioned above, suggests that an inflow of economic benefits may occur in the future. However, there are still substantial uncertainties on the timing, the way and the amount to be realized so that it is not yet practicable to reasonably determine that the realization of the gain arising from these decisions has reached a level of virtually certain and that the Company has control over such assets, which implies that such gains are not recorded until such conditions are demonstrably present. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 18 - RELATED-PARTY TRANSACTIONS a) Intercompany loans 2017 2016 Assets Joint venture Gerdau Corsa SAPI de C.V. Others Fundação Gerdau 2017 2016 2015 Net financial income ) b) Operations with related parties During the years ended December 31, 2017 and 2016, the Company, through its subsidiaries, entered into commercial operations with some of its associate companies and joint ventures including sales of R$ 630,190 as of December 31, 2017 (R$ 421,415 as of December 31, 2016) and purchases in the amount of R$ 121,618 as of December 31, 2017 (R$ 141,275 as of December 31, 2016). The net amount totals R$ 508,572 as of December 31, 2017 (R$ 280,140 as of December 31, 2016). During the years ended December 31, 2017 and 2016, the Company and its subsidiaries made transactions with controlling shareholders, directly or indirectly, mainly guarantees provided by the controlling in guarantees of debentures, on which the Company pays a fee of 0.95 % p.a. on the amount guaranteed. The effect of these transactions was an expense of R$ 689 (R$ 4,732 as of December 31, 2016). Additionally, the Company recorded income of R$ 801 (R$ 1,001 as of December 31, 2016), derived from rental agreement. Guarantees granted Related Party Relationship Object Original Maturity 2017 2016 GTL Trade Finance Inc. Subsidiary 10-year Bond Oct/17 — GTL Trade Finance Inc. Subsidiary 30-year Bond Apr/44 Diaco S.A. Joint-venture Financing Agreements Aug/18 Armacero-Matco S.A., Salomon Sack S.A. Subsidiary Financing Agreements Dec/18 — Gerdau Holding Inc. Subsidiary 10-year Bond Jan/20 Gerdau Trade Inc. Subsidiary 10-year Bond Jan/21 Gerdau Corsa S.A.P.I. de C.V. Joint-venture Financing Agreements Jul/18 - Dec/21 Gerdau Summit Aços Fundidos e Forjados S.A. Joint-venture Financing Agreements Aug/25 — GTL Trade Finance Inc., Gerdau Holdings Inc. Subsidiary 10-year Bond Apr/24 Sipar Aceros S.A. Subsidiary Financing Agreements Sep/18 - Sep/21 Gerdau Trade Inc. Subsidiary 10-year Bond Apr/23 Gerdau Steel India Ltd. Subsidiary Financing Agreements Sep/18 - Feb/19 Gerdau Steel India Ltd. Subsidiary Financing Agreements — Indetermined — Comercial Gerdau Bolivia Subsidiary Financing Agreements — nov/17 — Gerdau Açominas S.A. Subsidiary Financing Agreements Jan/20 - Feb/21 Gerdau Ameristeel US. Inc. Subsidiary Bond 25 yers Oct/37 Gerdau Ameristeel US. Inc. Subsidiary Bond 30 yers May/37 Gerdau Aços Longos S.A. Subsidiary Financing Agreements Oct/24 - Dec/30 Gerdau Aços Longos S.A. Subsidiary Financing Agreements Dec/18 Siderurgica Zuliana, C.A. Subsidiary Financing Agreements Dec/18 Gerdau Ameristeel Corporation; Gerdau Ameristeel US Inc.; Gerdau Macsteel Inc.; Comercial Gerdau Bolivia S.A.; Gerdau Aza S.A.; Gerdau Metaldom S.A.; Sipar Aceros S.A.; Gerdau Hungria Holdings LLC; Aceros Corsa S.A. de C.V.; Gerdau Corsa S.A.P.I de C.V.; Gerdau GTL México S.A. de C.V.; Sidertul S.A. de C.V.; Steelchem Trading Corporation; Empresa Siderúrgica Del Perú S.A.A.; Gerdau Hungria Y CIA, S.R.C and Gerdau Laisa S.A. Subsidiary and Joint-venture Financing Agreements — Oct/20 Gerdau Aços Especiais S.A. Subsidiary Financing Agreements feb/20 — c) Debentures Debentures are held by direct or indirect shareholders in the amount of R$ 348 as of December 31, 2017 (R$ 33,438 as of December 31, 2016), which corresponds to 63 debentures (5,964 as of December 31, 2016). d) Price and interest Loan agreements between Brazilian companies carry interest based on the CDI (Interbank Deposit Certificate) and Libor rate plus exchange variance, when applicable. Sales of products and purchases of inputs are made under terms and conditions agreed between the parties. e) Key Management compensation The cost of the key management salaries, variable compensation and benefits was R$ 33,942 during 2017 (R$ 33,686 in 2016). In 2017, contributions to management’s defined contribution pension plans totaled R$ 1,327 (R$ 1,359 in 2016). Stock options granted to management are as follows: 2017 Number of Weighted R$ Balance as of January 1, 2015 Options Forfeited ) Others — Balance as of December 31, 2015 Options Forfeited ) Balance as of December 31, 2016 Options Forfeited ) Balance as of December 31, 2017 At the end of the year, the Restricted Shares resulting from the conversion process within the key management were: 2017 2016 Available at beginning of the year Granted Exercised ) ) Forfeited — Available at the end of the year Additional information on the long-term incentive plan are presented in Note 25. The cost of long-term incentive plans recognized in income and attributable to key management (members of Board of Directors and executive officers) totaled R$ 14,609 during 2017 (R$ 14,095 and R$ 10,999 during 2016 and 2015, respectively). Additionally, for the year ended December 31, 2017, the compensation for the members of the Advisory Board was R$ 0 (R$ 1,958 in 2016 and R$ 1,129 in 2015, being the amount of 2015 the compensation of the Advisory Board as from its creation in May/15). |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 12 Months Ended |
Dec. 31, 2017 | |
EMPLOYEE BENEFITS | |
EMPLOYEE BENEFITS | NOTE 19 — EMPLOYEE BENEFITS Total assets and liabilities of all types of employee benefits granted by the Company and its subsidiaries as of December 31, 2017 are as follows: 2017 2016 Plan assets - Defined contribution pension plan Plan assets - Defined benefit pension plan — Total assets Actuarial liabilities - Defined benefit pension plan Acturial liabilities - Post-employment health care benefit Retirement and termination benefit liabilities Total liabilities Current Non-current a) Post-employment defined benefit pension plan The Company’s Canadian and US subsidiaries sponsor defined benefit plans (Canadian Plan and American Plan), collectively referred to as the North-American Plans, that cover substantially all their employees and provide supplemental benefits to employees during retirement. Additionally, the Company and its subsidiaries in Brazil sponsored a defined benefit pension plan (Brazilian plans), which are managed through Gerdau - Sociedade de Previdência Privada, a closed supplementary pension entity. In 2010, it was approved the settlement of a defined benefit plan, in which the participants had the rights for the benefit settled. All participants of those plans, which are now settled, were able to: (i) choose to adhere to a new defined contribution plan, when it was authorized to transfer the amount related to the individual mathematical reserve from the settled plan for the new plan and add amounts to this reserve through future contributions and sponsors, plus the resources profitability; or (ii) do not transfer the reserve and maintain the benefit settled in the defined benefit plan, adjusted by the INPC (National Index of Consumer Prices). The assumptions adopted for pension plans can have a significant effect on the amounts disclosed and recorded for these plans. Due to the migration process and the closing of the Brazilian pension plans in 2010, the Company is not calculating the potential effects of changes in discount rates and expected return rate on assets for these plans. The potential effects of changes to the North-American Plans on the Consolidated Statement of Income are presented below: 1% Increase 1% Decrease Discount rate ) The accumulated amount recognized in other Comprehensive Income for employee benefits is R$ (1,227,722) as of December 31, 2017 (R$ (1,111,842) as of December 31, 2016). Defined Benefit Pension Plan The current expenses of the defined benefit pension plans are as follows: 2017 2016 2015 Cost of current service Interest expense Return on plan assets ) ) ) Past service cost ) Curtailment — — ) Settlement ) — Interest cost on unrecoverable surplus Net pension cost ) The reconciliations of assets and liabilities of the plans are as follows: 2017 2016 Present value of defined benefit obligation ) ) Fair value of plan assets Asset ceiling restrictions on recognition of net funded assets ) ) Net ) ) Plan assets — Defined benefit obligation ) ) Changes in plan assets and actuarial liabilities were as follows: 2017 2016 2015 Variation of the plan obligations Obligation at the begining of the year Cost of service Interest expense Payments of the benefits ) ) ) Past service cost ) Curtailment — — ) Settlement ) — Acturial remeasurements ) Liabilities held for sale (note 3.4) ) — — Exchange Variance ) Obligation at the end of the year 2017 2016 2015 Variation of the plan assets Fair value of the plan assets at the begining of the year Return of the plan assets Contributions from sponsors ) ) Curtailment — — ) Settlement ) ) — Payments of benefits ) ) ) Remeasurement ) Assets held for sale (note 3.4) ) — — Exchange Variance ) Fair value of plan assets at the end of the year The fair value of plan assets include shares of the Company in the amount of R$ 3,558 as of December 31, 2017 (R$ 1,895 as of December 31, 2016). Amounts recognized as actuarial gains and losses in the Statement of Comprehensive Income are as follows: 2017 2016 2015 Remeasurements ) ) Actuarial Remeasurements ) Restriction recognized in Other Comprehensive Income ) ) Remeasurements recognized in Other Comprehensive Income ) The historical actuarial remeasurements are as follows: 2017 2016 2015 2014 2013 Present value of defined benefit obligation ) ) ) ) ) Fair value of the plan assets Surplus (Deficit) ) ) ) ) ) Experience adjustments on plan liabilities (Gain) ) ) Experience adjustments on plan assets (Gain) ) ) ) Actuarial remeasurements are recognized in the period in which they occur and are recorded directly in comprehensive income. The allocations for plan assets are presented below: 2017 Brazilian Plans American Plans Fixed income % % Variable income — % Others % % Total % % 2016 Brazilian Plans American Plans Fixed income % % Variable income — % Others % % Total % % The investment strategy for the Brazilian Plan is based on a long-term macroeconomic scenario. This scenario assumes a reduction in Brazil’s sovereign risk, moderate economic growth, stable levels of inflation, exchange rates and moderate interest rates. The Canadian and American subsidiaries have an Investment Committee that defines the investment policy for the defined benefit plans. The primary investment objective is to ensure the security of benefits that were accrued under the plans, providing an adequately funded asset pool which is separated and independent of the Company. To reach this objective, the fund must invest in a manner that adheres to safeguards and diversification to which a prudent investor of pension funds would normally adhere. These subsidiaries retain specialized consultants that advice and support Investment Committee decisions and recommendations. The asset mix policy considers the principles of diversification and long-term investment goals, as well as liquidity requirements. To do this, the target allocation ranges between 50% in shares, 40% in debt securities and 10% in alternative securities. The tables below show a summary of the assumptions used to calculate the defined benefit plans in 2017 and 2016, respectively: 2017 Brazilian Plan North America Plan Average discount rate 3.25% - 4.25% Rate of increase in compensation Not applicable Mortality table AT-2000 per sex RP-2006 and MP-2017 Mortality table of disabled AT-2000 per sex RP-2006 and MP-2017 Rate of rotation Based on service and salary level/null Based on age and/or the service 2016 Brazilian Plan North America Plan Average discount rate 3.75% - 4.25% Rate of increase in compensation Not applicable Mortality table RP-2000 CPM-2014 and RP-2014 Mortality table of disabled AT-2000 per sex Rates by age Rate of rotation Based on service and salary level/null Based on age and/or the service b) Post-employment defined contribution pension plan The Company and its subsidiaries in Brazil, in the United States and in Canada maintain a defined contribution plan to which contributions are made by the sponsor in proportion to the contributions made by its participating employees. The total cost of these plans was R$ 132,399 in 2017 (R$ 143,561 in 2016). c) Post-employment health care benefit plan The North American plans include, in addition to pension benefits, specific health care benefits for employees who retire after a certain age and with a certain number of years of service. The Americans and Canadian subsidiaries have the right to change or eliminate these benefits, and the contributions are actuarially calculated. The net periodic costs of post-employment health care benefits are as follows: 2017 2016 2015 Current service cost Interests expense Past service cost ) — Net cost pension benefit ) The funded status of the post-employment health benefits plans is as follows: 2017 2016 Present value of obligations ) ) Total net liabilities ) ) Changes in plan assets and actuarial liabilities were as follows: 2017 2016 2015 Change in benefit obligation Benefit obligation at beginning of the year Cost of service Interest expense Past service cost ) — Contributions from participants Payment of benefits ) ) ) Remeasurements ) ) ) Exchange variations ) Benefit obligation at the end of the year 2017 2016 2015 Change in plan assets Contributions from sponsors Contributions from participants Payments of benefits ) ) ) Fair value of plan assets at end of the year — — — The historical actuarial gains and losses of the plans are as follows: 2017 2016 2015 2014 2013 Present value of defined benefit obligation ) ) ) ) ) Deficit ) ) ) ) ) Experience adjustments on plan liabilities ) ) ) ) The amounts recognized as actuarial gains and losses in other comprehensive income are as follows: 2017 2016 2015 Losses on actuarial obligation ) ) Actuarial losses recognized in Equity ) ) The accounting assumptions adopted for post-employment health benefits are as follows: 2017 2016 Average discount rate 3.25% - 3.50% 3.75% - 4.25% Health treatment - rate assumed next year 6.88% - 7.60% 6.40% - 6.80% Health treatment - Assumed rate of decline in the cost to achieve in the years of 2026 to 2041 4.00% - 4.50% 4.00% - 4.50% The assumptions adopted for post-employment health benefits have a significant effect on the amounts disclosed and recorded for post-employment health benefits plans. The change of one point percentage on discount rates would have the following effects: 1% Increase 1% Decrease Effect over total service costs and interest costs ) Effect over benefit plan obligations ) d) Other retirement and termination benefits The benefits of this plan provide a compensation supplement up to retirement date, cost of living allowance, and other benefits as a result of termination and retirement of the employees. The Company estimates that the total obligation for these benefits was R$ 23,876 as of December 31, 2017 (R$ 55,276 as of December 31, 2016). |
ENVIRONMENTAL LIABILITIES
ENVIRONMENTAL LIABILITIES | 12 Months Ended |
Dec. 31, 2017 | |
ENVIRONMENTAL LIABILITIES | |
ENVIRONMENTAL LIABILITIES | NOTE 20 — ENVIRONMENTAL LIABILITIES The steel industry uses and generates substances that may damage the environment. The Company and its subsidiaries believe they are compliant with all the applicable environmental regulations in the countries where they operate. The Company’s management performs frequent analysis with the purpose of identifying potentially impacted areas and a liability is recorded based on the best estimate of costs for investigation, treatment and cleaning of potentially affected sites. The Company uses estimates and assumptions to determine the amounts involved, which may change in the future, as a result of the final investigations and the determination of the actual environmental impact. The balances of the provisions are as follows: 2017 2016 Provision for environmental liabilities Current Non-current |
OBLIGATIONS WITH FIDC - INVESTM
OBLIGATIONS WITH FIDC - INVESTMENT FUND IN CREDIT RIGHTS | 12 Months Ended |
Dec. 31, 2017 | |
OBLIGATIONS WITH FIDC - INVESTMENT FUND IN CREDIT RIGHTS | |
OBLIGATIONS WITH FIDC - INVESTMENT FUND IN CREDIT RIGHTS | NOTE 21 - OBLIGATIONS WITH FIDC - INVESTMENT FUND IN CREDIT RIGHTS Part of the assets resulting from the favorable judgments of credits with Eletrobras mentioned in Note 17 iv, were used to set up a Non Standardized Credit Right Investment Fund (“FIDC”), constituted and duly authorized to operate by the Securities and Exchange Commission of Brazil (“FIDC NP Barzel”), whose fair value at the FIDC Inception date was R$ 800 million. On July 14, 2015, the single quota of that FIDC was sold in connection with the acquisition of minority interests transaction in subsidiaries of Gerdau S.A. The Company assures the FIDC, through the transfer agreement price adjustments clause, minimum return on the transferred amount of the credits rights on the lawsuits. However, where the amounts received in the lawsuits exceed the transferred amount, monetarily adjusted, the Company will be entitled to a percentage of that gain. Additionally, the Company has the right of first offer to repurchase those receivables in the event of sale by the Fund, in accordance to the contract subscribed, and has the amount of R$ 1,135,077 as of December 31, 2017 (R$ 1,007,259 on December 31, 2016) recognized in the account “Obligations with FIDC”. |
EQUITY
EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
EQUITY | |
EQUITY | NOTE 22 — EQUITY a) Capital The Board of Directors may, without need to change the bylaws, issue new shares (authorized capital), including the capitalization of profits and reserves up to the authorized limit of 1,500,000,000 common shares and 3,000,000,000 preferred shares, all without nominal value. In the case of capital increase through subscription of new shares, the right of preference shall be exercised in up to 30 days, except in the case of a public offering, when the limit is not less than 10 days. Reconciliations of common and preferred outstanding shares are presented below: 2017 2016 2015 Common shares Preferred shares Common shares Preferred shares Common shares Preferred shares Balance at beginning of the year Acquisition of Treasury shares — — — ) — ) Exercise of stock options — — — Transfer of shares — — — — — Balance at the end of the year At December 31, 2017, 573,627,483 common shares and 1,146,031,245 preferred shares are subscribed and paid up, with a total capital of R$ 19,249,181 (net of share issuance costs). Ownership of the shares is presented below: Shareholders 2017 Shareholders Common % Pref. % Total % Metalúrgica Gerdau S.A.* Brazilian institutional investors Foreign institutional investors Other shareholders Treasury stock Shareholders 2016 Shareholders Common % Pref. % Total % Metalúrgica Gerdau S.A.* Brazilian institutional investors Foreign institutional investors Other shareholders Treasury stock Shareholders 2015 Shareholders Common % Pref. % Total % Metalúrgica Gerdau S.A.* Brazilian institutional investors Foreign institutional investors Other shareholders Treasury stock * Metalurgica Gerdau S.A. is the controlling shareholder and Stichting Gerdau Johanpeter is the ultimate controlling shareholder of the Company. Preferred shares do not have voting rights and cannot be redeemed but have the same rights as common shares in the distribution of dividends and also priority in the capital distribution in case of liquidation of the Company. b) Treasury stocks Changes in treasury stocks are as follows: 2017 Common shares R$ Preferred shares R$ Opening balance Exercise of stock options — — ) ) Closing balance 2016 Common shares R$ Preferred shares R$ Opening balance Repurchases — — Exercise of stock options — — ) ) Transfer of shares — — ) ) Closing balance 2015 Common shares R$ Preferred shares R$ Opening balance Repurchases — — Exercise of stock options — — ) ) Closing balance These shares are held in treasury for subsequent cancellation, selling in the market or to be granted under the long-term incentive plan of the Company. The average acquisition cost of these shares was R$ 8.68 during 2017 (R$ 10.89 and R$ 12.24 during the years ended on December 31, 2016 and 2015, respectively). c) Capital reserves — consists of premium on issuance of shares. d) Retained earnings I) Legal reserves - under Brazilian Corporate Law, the Company must transfer 5% of the annual net income determined on its statutory books in accordance with Brazilian accounting practices to the legal reserve until this reserve equals 20% of the paid-in capital. The legal reserve can be utilized to increase capital or to absorb losses, but cannot be used for dividend distribution purposes. II) Tax incentives reserve — under Brazilian Corporate Law, the Company may transfer to this account part of net income resulting from government grants which can be excluded from the basis for dividend calculation. III) Investments and working capital reserve - consists of earnings not distributed to shareholders and includes the reserves required by the Company’s by-laws. The Board of Directors may propose to the shareholders the transfer of at least 5% of the profit for each year determined in its statutory books in accordance with accounting practices adopted in Brazil to this reserve. Amount can be allocated to the reserve only after the minimum dividend requirements have been met and its balance cannot exceed the amount of paid-in capital. The reserve can be used to absorb losses, if necessary, for capitalization, for payment of dividends or for the repurchase of shares. e) Operations with non-controlling interests — Corresponds to amounts recognized in equity from changes in non-controlling interests. The effects of changes in percentage of ownership in subsidiaries for the years presented are composed of: December 31, 2017 Attributed to parent Non-controlling Total (ii) Other changes — ) ) Effects of interest changes in subsidiaries — ) ) December 31, 2016 Attributed to parent Non-controlling Total (ii) Other changes — ) ) Effects of interest changes in subsidiaries — ) ) December 31, 2015 Attributed to parent Non-controlling Total (i) Acquisition of non-controlling interests — ) ) (ii) Other changes — Effects of interest changes in subsidiaries — ) ) (i) Acquisition of non-controlling interests in some Brazilian subsidiaries; (ii) Other changes in subsidiaries without losing control, which may include among others, capital increases, other acquisitions of interests and dilutions of any nature. f) Other reserves - Include: gains and losses on available for sale securities, gains and losses on net investment hedge, gains and losses on derivatives accounted as cash flow hedge, cumulative translation adjustments and expenses recorded for stock option plans. g) Dividends and interest on capital - the shareholders have a right to receive a minimum annual mandatory dividend equal to 30% of adjusted net income as determined in its corporate records prepared in accordance with the accounting practices adopted in Brazil. The Company calculated interest on shareholders´ capital for the year ended on December 31, 2015, in accordance with the terms established by Law 9249/95. The corresponding amount was recorded as a financial expense for tax purposes. For presentation purposes, this amount was recorded as dividends and did not affect net income. The related tax benefit from the reduction in income tax and social contribution on net income was R$ 63,074 in 2015. The dividends credited during the year totaled R$ 85,462, distributed on profits obtained in the first nine months of 2017. As a result of the net loss in 2017, management will propose to the Annual Shareholders’ Meeting that this amount be considered as distributed using the balance of the Investments and Working Capital Reserve, as shown below: 2017 2016 2015 Net loss ) ) ) Absorption of net loss by investments and working capital reserve Dividends and interest on capital in the years Outstanding shares Period Nature R$ /share (thousands) Credit Payment 2017 2016 2015 1 st quarter Interest — — — — — — 2 nd quarter Dividends 8/21/2017 9/1/2017 — 2 nd quarter Interest — — — — — — 3 rd quarter Interest — — — — — — — 3 rd quarter Dividends 11/21/2017 12/1/2017 4 th quarter Dividends — — — — — — — Interest and Dividends Credit per share (R$) |
EARNINGS PER SHARE (EPS)
EARNINGS PER SHARE (EPS) | 12 Months Ended |
Dec. 31, 2017 | |
EARNINGS PER SHARE (EPS) | |
EARNINGS PER SHARE (EPS) | NOTE 23 — EARNINGS PER SHARE (EPS) In accordance with IAS 33, Earnings per Share, the following tables reconcile net income to the amounts used to calculate basic and diluted earnings per share. Basic 2017 Common Preferred Total (in thousands, except share and per share data) Basic numerator Allocated net income (loss) available to common and preferred shareholders ) ) ) Basic denominator Weighted-average outstanding shares, after deducting the average tresuary shares Earnings per share (in R$) — Basic ) ) 2016 Common Preferred Total (in thousands, except share and per share data) Basic numerator Allocated net income (loss) available to common and preferred shareholders ) ) ) Basic denominator Weighted-average outstanding shares, after deducting the average tresuary shares Earnings per share (in R$) — Basic ) ) 2015 Common Preferred Total (in thousands, except share and per share data) Basic numerator Allocated net income (loss) available to common and preferred shareholders ) ) ) Basic denominator Weighted-average outstanding shares, after deducting the average tresuary shares Earnings per share (in R$) — Basic ) ) Due to the net loss in the years of 2017, 2016 and 2015, the Company is considering for these years the same basic and diluted loss, without considering the effects on the diluted calculation of the potential increase in preferred shares as a result of the long-term incentive plans. |
NET SALES REVENUE
NET SALES REVENUE | 12 Months Ended |
Dec. 31, 2017 | |
NET SALES REVENUE | |
NET SALES REVENUE | NOTE 24 — NET SALES REVENUE The net sales revenues for the year are composed of: 2017 2016 2015 Gross sales Taxes on sales ) ) ) Discounts ) ) ) Net sales |
LONG-TERM INCENTIVE PLANS
LONG-TERM INCENTIVE PLANS | 12 Months Ended |
Dec. 31, 2017 | |
LONG-TERM INCENTIVE PLANS | |
LONG-TERM INCENTIVE PLANS | NOTE 25 - LONG-TERM INCENTIVE PLANS a) Restricted Shares and Performance Shares Summary: Balance on January 1, 2015 Granted Forfeited ) Exercised ) Balance on December 31, 2015 Granted Forfeited ) Exercised ) Balance on December 31, 2016 Granted Forfeited ) Exercised ) Balance on December 31, 2017 In 2017, the Company approved changes to the long-term incentive plan allowing the use of multiple forms of share-based compensation and changing the grace period of each grant to three years. In 2017 Restricted Shares and Performance Shares were granted. b) Stock Options Plan: 2017 2016 2015 Number of shares Average exercise Number of shares Average exercise Number of shares Average exercise R$ R$ R$ Available at beginning of the year Options Exercised — — — — ) Options Forfeited ) ) ) Available at the end of the year The average market price of the share in the year ended December 31, 2017 was R$ 11.19 (R$ 7.68 and R$ 7.70 in the years ended on December 31, 2016 and 2015, respectively). As of December 31, 2017 the Company has a total of 8,704,061 preferred shares in treasury. These shares may be used for serving this plan. The exercise of the options before the grace period end was due to retirement or death. Exercise price Quantity Average period of Average Number R$ R$ 14.39 R$ 10.58 to R$ 29.12 *The total of options vested that are exercisable on December 31, 2017 is 57,668 (57,678 and 127,899 on December 31, 2016 and 2015). During the years ended December 31, 2017, 2016 and 2015, the long-term incentive plans costs recognized in income for all equity settled awards were R$ 25,403, R$ 38,023 and R$ 39,657, respectively. The Company recognizes costs of employee compensation based on the fair value of the options granted, considering their fair value on the date of granting. The Company uses the Black-Scholes model for determining the fair value of the options. There were no options granted for this plan in 2017. c) Other Plans — North America In February 2010, the Board of Directors approved, to the North American subsidiary, the adoption of the Equity Incentive Plan (the “EIP”). Awards under the EIP may take the form of stock options, SARs, deferred share units (“DSUs”), restricted share units (“RSUs”), performance share units (“PSUs”), and/or other share-based awards. Except for stock options, which must be settled in common shares, awards may be settled in cash or common shares as determined by the Company at the time of grant. For the portion of any award which is payable in options or SARs, the exercise price of the options or SARs will be no less than the fair market value of a common share on the date of the award. The vesting period for all awards (including RSUs, DSUs and PSUs) is determined by the Company at the time of grant. Options and SARs have a maximum term of 10 years. In 2016, a grant of approximately US$ 9.9 million (R$ 34.5 million) was granted to EIP participants. The Company issued 2,846,835 RSUs and 3,820,894 PSUs, which will be accrued through the vesting period of 5 years. In 2015, an award of approximately US$ 13.9 million (R$ 46.4 million) was granted to participants under the EIP. The Company issued 3,833,542 RSUs, and 1,792,456 PSUs under this plan. This award has being accrued over the vesting period of 5 years. In connection with the adoption of the EIP, the Company terminated the existing long-term incentive plan (“LTIP”), and no further awards will be granted under the LTIP. All outstanding awards under the LTIP will remain outstanding until either exercised, forfeited or they expire. On December 31, 2017, there were 535,543 SARs and 40,873 stock options outstanding under the LTIP. These awards have been accrued over the vesting period of 4 years. As of December 31, 2017 and December 31, 2016, the outstanding liability for share-based payment transactions included in other non-current liabilities of the subsidiaries in North America was US$ 9 thousand (R$ 29.8) and US$ 10 thousand (R$ 32.6), respectively. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2017 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | NOTE 26 — SEGMENT REPORTING Business Segments 2017 Brazil Operation North America South America Special Steels Eliminations and Consolidated Net sales ) Cost of sales ) ) ) ) ) Gross profit ) Selling, general and administrative expenses ) ) ) ) ) ) Other operating income (expenses) ) Impairment of assets ) ) — — — ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company — — — — ) ) Reversal of contingent liabilities, net — — — — Equity in earnings of unconsolidated companies — ) ) Operational (Loss) income before financial income (expenses) and taxes ) Financial result, net ) ) ) ) ) ) Income (Loss) before taxes ) ) ) Income and social contribution taxes ) ) ) ) ) Net income (Loss) ) ) ) Supplemental information: Net sales between segments — Depreciation/amortization — Investments in associates and jointly-controlled entities — Total assets Total liabilities Business Segments 2016 Brazil Operation North America South America Special Steels Eliminations and Consolidated Net sales ) Cost of sales ) ) ) ) ) Gross profit ) Selling, general and administrative expenses ) ) ) ) ) ) Other operating income (expenses) Impairment of assets — ) ) — — ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company — — — — ) ) Equity in earnings of unconsolidated companies — ) — ) Operational (Loss) income before financial income (expenses) and taxes ) ) ) Financial result, net ) ) ) ) ) ) Income (Loss) before taxes ) ) ) ) Income and social contribution taxes ) ) ) ) Net income (Loss) ) ) ) ) Supplemental information: Net sales between segments — Depreciation/amortization — Investments in associates and jointly-controlled entities — — Total assets Total liabilities Business Segments 2015 Brazil Operation North America South America Special Steels Eliminations and Consolidated Net sales ) Cost of sales ) ) ) ) ) Gross profit Selling, general and administrative expenses ) ) ) ) ) ) Other operating income (expenses) Impairment of assets ) ) ) ) — ) Equity in earnings of unconsolidated companies — ) — ) Operational (Loss) income before financial income (expenses) and taxes ) ) ) ) ) Financial result, net ) ) ) ) ) ) Income (Loss) before taxes ) ) ) ) ) ) Income and social contribution taxes ) ) Net income (Loss) ) ) ) ) ) ) Supplemental information: Net sales between segments — Depreciation/amortization — Investments in associates and jointly-controlled entities — Total assets ) Total liabilities The main products sold in each segment are: Brazil Operations: rebar, bars, shapes, drawn products, billets, blooms, slabs, wire rod, structural shapes and iron ore. North America Operations: rebar, bars, wire rod, light and heavy structural shapes. South America Operations: rebar, bars and drawn products. Special Steel Operations: stainless steel, round, square and flat bars, wire rod. The column of eliminations and adjustments includes the elimination of sales between segments, corporate expenses, gains and losses on assets held for sale and sales of interest in subsidiaries and associate company, reversal of contingent liabilities, net, reversal of monetary update of contingent liabilities, net in the context of the Consolidated Financial Statements. The Company’s geographic information with revenues classified according to the geographical region where the products were shipped is as follows: Geographic Area Brazil Latin America (1) North America (2) Europe/Asia Consolidated 2017 2017 2017 2017 2017 Net sales Total assets Brazil Latin America (1) North America (2) Europe/Asia Consolidated 2016 2016 2016 2016 2016 Net sales Total assets Brazil Latin America (1) North America (2) Europe/Asia Consolidated 2015 2015 2015 2015 2015 Net sales Total assets (1) Does not include operations of Brazil (2) Does not include operations of Mexico IFRS requires the Company to disclose revenue per product unless the information is not available and the cost to obtain it would be excessive. Management does not consider this information useful for its decision making process, because it would aggregate sales in different markets and in different currencies, subject to the effects of changes in exchange rates. Furthermore, the trends of steel consumption and the price dynamics of each product or group of products in different countries and different markets within these countries are poorly correlated and, as a result, the information would not be useful and would not serve to conclude about historical trends. Considering this scenario and considering that the information of revenue by product is not maintained by the Company on a consolidated basis and the cost to obtain the revenue per product information would be excessive compared to the benefits of the information, the Company does not present revenue by product. |
INSURANCE
INSURANCE | 12 Months Ended |
Dec. 31, 2017 | |
INSURANCE | |
INSURANCE | NOTE 27 — INSURANCE The subsidiaries have insurance coverage determined by management with the assistance of specialists’ advice, taking into consideration the nature and the level of risk, in amounts that cover significant losses on their assets and/or liabilities. The main types of insurance are as follows: Type Scope 2017 2016 Equity Inventories and property, plant and equipment items are insured against fire, electrical damage, explosion, machine breakage and overflow (leakage of material in fusion state). Business Interruption Net income plus fixed expenses Civil Liability Industrial operations |
IMPAIRMENT OF ASSETS
IMPAIRMENT OF ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
IMPAIRMENT OF ASSETS | |
IMPAIRMENT OF ASSETS | NOTE 28 — IMPAIRMENT OF ASSETS The Company performs tests for impairment of assets, notably goodwill and other long-lived assets, based on projections of discounted cash flows, which take into account assumptions such as: cost of capital, growth rate and adjustments applied to flows in perpetuity, methodology for working capital determination, investment plans, and long-term economic-financial forecasts. The impairment test of these assets are assessed based on the analysis of facts or circumstances that may indicate the need to perform the impairment test and are performed annually in December, or being anticipated whenever changes in events or circumstances indicate that the goodwill and other long-lived assets may be impaired. To determine the recoverable amount of each business segment, the Company uses the discounted cash flow method, using as basis, financial and economic projections for each segment. The projections are prepared by taking into consideration observed changes in the economic scenario in the market where the Company operates, as well as assumptions with respect to future results and the historical profitability of each segment. The Company maintains its monitoring of the steel market in order to identify any deterioration, significant drop in demand from steel consuming sectors (notably automotive and construction), stoppage of industrial plants or relevant changes in the economy or financial market that result in increased perception of risk or reduction of liquidity and refinancing capacity. During the fourth quarter of 2017, the Company identified an increase in the pre-tax discount rate at a higher intensity than that contemplated in the quarterly monitoring conducted during the year in the North America segment, where the increase in the pre-tax discount rate was 0.5% compared to 2016. The Company performed the impairment test for goodwill and other long-lived assets, in which impairment losses were recognized in the amount of R$ 1,114,807 (R$ 2,917,911 in 2016), of which R$ 265,369 (R$ 239,329 in 2016) as a result of the impairment test of other long-lived assets (note 28.1) and R$ 849,438 (R$ 2,678,582 in 2016) as a result of the goodwill impairment test (note 28.2). 28.1 Other assets Impairment test In the fourth quarter of 2017, due to the lack of expectation of future use of some assets in some industrial plants, tests performed on other long-lived assets identified impairment losses in property, plant and equipment in the amount of R$ 265,369, of which R$ 45,279 in the Brazil segment and R$ 220,090 in the North America segment, resulting from a recoverable amount below the book value. These losses were determined based on the difference between the book value and the recoverable amount of these assets, which represents their value in use (higher between the fair value net of disposal expenses and their value in use). In 2016, due to the interruption of certain activities as result of significant changes in the economy of the region where these units are located and the lack of expectation of future use of some assets of these industrial plants, tests performed on other long-lived assets identified impairment losses on property, plant and equipment in the amount of R$ 239,329, of which R$ 138,765 in the South America segment and R$ 100,564 in the North America segment, resulting from a recoverable amount below the book value. These losses were determined based on the difference between the book value and the recoverable amount of these assets in the amount of R$ 138,543, which represents their value in use (higher between the fair value net of disposal expenses and their value in use). The pre-tax discount rates used for this test are the same as presented in note 28.2 of the goodwill impairment test. 28.2 Goodwill impairment test The Company has four operating segments, which represents the lowest level in which goodwill is monitored by the Company. In the fourth quarter of 2017, the Company evaluated the recoverability of the goodwill of its segments. Based on the aforementioned events, notably the increment in the pre tax discount rate in the North America segment, the analyzes carried out identified a loss due to non-recoverability of goodwill in the amount of R$ 849,438 for the North America segment. In 2016, the tests identified an impairment loss of goodwill in the amount of R$ 2,678,582 for the North American segment caused by the deterioration of the economic conditions reflected by the decrease of the EBITDA margin at that time. The period for projecting the cash flows for the goodwill impairment test was five years. The assumptions used to determine the value in use based on the discounted cash flow method include analysis prepared in dollars, such as: projected cash flows based on management estimates for future cash flows, exchange rates, discount rates and growth rates on perpetuity. The cash flow projections already reflect a more challenging competitive scenario than projected in previous years, resulting from a deterioration in the steel consuming markets and overcapacity in the industry, as well as macroeconomic challenges in some geographies in which the Company operates. The perpetuity was calculated considering stable operating margins, levels of working capital and investments. The perpetuity growth rates considered in the 2017 test were: a) North America: 3% (3% in December 2016); b) Special Steel: 3% (3% in December 2016); c) South America: 3% (3% in December 2016); and d) Brazil: 3% (3% in December 2016). The pre-tax discount rates used were determined taking into consideration market information available on the date of performing the impairment test. The Company adopted distinct rates for each business segment tested with the purpose of reflecting the differences among the markets in which each segment operates, as well as the risks associated to each of them. The pre-tax discount rates used were: a) North America: 13.6% (13.1% in December 2016); b) Special Steel: 13.1% (14.0% in December 2016); c) South America: 14.7% (14.6% in December 2016); and d) Brazil 15.2%: (14.9% in December 2016). Discounted cash flows are compared to the book value of each segment and result in the recoverable amount as shown below: a) North America: below the book value of R$ 849 million (below the book value of R$ 2,679 million in 2016); b) South America: exceeded the book value by R$ 437 million (exceeded the book value by R$ 724 million in 2016); c) Special Steel: exceeded the book value by R$ 3,989 million (exceeded the book value by R$ 1,601 million in 2016); and d) Brazil: exceeded the book value by R$ 1,747 million (exceeded the book value by R$ 1,225 million in 2016). The Company performed a sensitivity analysis in the assumptions of discount rate and perpetuity growth rate, due to the potential impact in the discounted cash flows. An increase of 0.5 percentage points in the discount rate of each segment’s cash flow would result in a recoverable amount below the book value and / or that exceeded the book value as shown below: a) North America: below book value of R$ 506 million (below the book value by R$ 872 million in 2016); b) Special Steel: exceeded book value by R$ 3,422 million (exceeded the book value by R$ 1,170 million in 2016); c) South America: exceeded book value by R$ 265 million (exceeded the book value by R$ 486 million in 2016); and d) Brazil: exceeded the book value by R$ 999 million (exceeded the book value by R$ 425 million in 2016). On the other hand, a decrease of 0.5 percentage points in the perpetuity growth rate of the cash flow of each business segment would result in a recoverable amount below the book value and / or that exceeded the book value as shown below: a) North America: below the book value by R$ 310 million (below the book value by R$ 661 million in 2016); b) Special Steel: exceeded the book value by R$ 3,596 million (exceeded the book value by R$ 1,301 million in 2016); c) South America: exceeded the book value by R$ 318 million (exceeded the book value by R$ 561 million in 2016); and d) Brazil: exceeded the book value by R$ 1,254 million (exceeded the book value by R$ 673 million in 2016). The Company will maintain over the next year its constant monitoring of the steel market in order to identify any deterioration, significant drop in demand from steel consuming sectors (notably automotive and construction), stoppage of industrial plants or activities relevant changes in the economy or financial market that result in increased perception of risk or reduction of liquidity and refinancing capacity. Although the projections made by the Company provide a more challenging scenario than that in recent years, the events mentioned above, if manifested in a greater intensity than that anticipated in the assumptions made by management, may lead the Company to revise its projections of value in use and eventually result in impairment losses. |
EXPENSES BY NATURE
EXPENSES BY NATURE | 12 Months Ended |
Dec. 31, 2017 | |
EXPENSES BY NATURE | |
EXPENSES BY NATURE | NOTE 29 — EXPENSES BY NATURE The Company opted to present its Consolidated Income Statement by function. The expenses classified by nature is as follows: 2017 2016 2015 Depreciation and amortization ) ) ) Labor expenses ) ) ) Raw material and consumption material ) ) ) Freight ) ) ) Impairment of assets ) ) ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company ) ) — Reversal of contingent liabilities, net — — Other expenses/income, net ) ) ) ) ) ) Classified as: Cost of sales ) ) ) Selling expenses ) ) ) General and administrative expenses ) ) ) Other operating income Other operating expenses ) ) ) Impairment of assets ) ) ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company ) ) — Reversal of contingent liabilities, net — — ) ) ) |
FINANCIAL INCOME
FINANCIAL INCOME | 12 Months Ended |
Dec. 31, 2017 | |
FINANCIAL INCOME | |
FINANCIAL INCOME | NOTE 30 — FINANCIAL INCOME 2017 2016 2015 Income from short-term investments Interest income and other financial income Financial Income Interest on debt ) ) ) Monetary variation and other financial expenses ) ) ) Financial Expenses ) ) ) Exchange Variation, net ) ) Reversal of monetary update of contingent liabilities, net — — Gains and losses on financial instruments, net ) ) Financial result, net ) ) ) |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 31 — SUBSEQUENT EVENTS I) On January 8, 2018, the Company’s Board of Directors authorized the Company to acquire shares of its own issuance, within a period of up to 3 months from the date of the authorization, of up to 10,000,000 preferred shares (GGBR4 ) or American Depositary Receipts (ADRs). This authorization has the purpose to support the Long-Term Incentive Plan of the Company and its subsidiaries, keeping in Treasury, cancelling or further selling in the market. The acquisition will be supported by retained earnings, being the Board responsible for defining the number of shares and the opportunity of each operation. On January 17, 2018 the share repurchase program was completed. II) On January 31, 2018, the Company announced a definitive sale agreement for its wire rod mill located in Beaumont, Texas, as well as two processing units for Optimus Steel LLC for US$ 92.5 million (equivalent to R$ 292.5 million), subject to usual adjustments in the acquisition value. The agreement includes the Company’s Beaumont, Texas-based mill and Beaumont Wire Products and Carrollton Wire Products. The mill has a melt shop with the capacity to produce approximately 700,000 short tons of steel per year and is capable of rolling wire rod and rebar in roll. On April 2, 2018 the Company informed, through a notice to the market, that this sale was completed. III) On February 14, 2018, the Company announced the sale of its two hydroelectric plants in Goiás for R$ 835 million to Kinross Brasil Mineração, a wholly owned subsidiary of Kinross Gold Corporation. The Caçu and Barra dos Coqueiros plants, inaugurated in 2010, have a total installed capacity of 155 MW. The transaction is subject to regulatory approvals and the usual closing conditions. IV) On February 26, 2018, the Company proposed payment of dividend on account of pre-existing profit reserves, which will be calculated and credited to the positions held by the shareholders on March 3, 2018, in the amount of R$ 51,0 million (R$ 0.03 per common and preferred share), with payment expected for March 21, 2018, which was submitted and approved by the Board of Directors on February 27, 2018. |
SUMMARY OF SIGNIFICANT ACCOUN38
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | |
Basis of Presentation | 2.1 - Basis of Presentation The Company’s Consolidated Financial Statements have been prepared in accordance and are in compliance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB). The preparation of the Consolidated Financial Statements in accordance with IFRS requires Management to make accounting estimates. The areas that involve judgment or use of estimates relevant to the Consolidated Financial Statements are stated in Note 2.17. The Consolidated Financial Statements have been prepared using historical cost as its basis, except for the valuation of certain financial instruments, which are measured at fair value. The Company adopted all applicable standards and revisions of standards and interpretations issued by the IASB or the IFRS Interpretations Committee that are effective for December 31, 2017. a) Investments in Subsidiaries The Company’s consolidated financial statements include the financial statements of Gerdau S.A. and all its subsidiaries. The Company controls an entity when it is exposed or has the right to variable returns arising from their involvement with the entity and has the ability to affect those returns due to the power exercised over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Third parties’ interests in equity and net income of subsidiaries are reported separately in the consolidated balance sheet and in the consolidated statement of income, respectively, under the account “Non-controlling interests”. For business combinations, the assets, liabilities, and contingent liabilities of a subsidiary are reported at their respective fair value on the date of acquisition. Any excess of the acquisition cost over the fair value of the identifiable net assets acquired is recorded as goodwill. When the acquisition cost is less than the fair value of the net assets identified, the difference is recorded as a gain in the statement of income for the year in which the acquisition took place. The non-controlling interests are presented based on the proportion of the fair value of the identified assets and liabilities acquired. Intercompany transactions and balances are eliminated in the consolidation process. Gains or losses resulting from transactions among consolidated entities of the Company are also eliminated. b) Investments in Joint ventures and Associate companies Joint ventures are those in which the control is held jointly by the Company and one or more partners. An associate company is one in which the Company exercises significant influence, but over which it does not have control. Investments in joint ventures and associate companies are recorded under the equity method of accounting. c) Equity Method According to this method, investments are recognized in the consolidated balance sheet at acquisition cost and are adjusted subsequently based on the Company’s share in the earnings and in other changes in the net assets of the investees. The balances of the investments can also be reduced due to impairment losses. Furthermore, dividends received from these companies are recorded as reductions in the value of the investments. |
Foreign Currency Translation | 2.2 —Foreign Currency Translation a) Functional and Reporting Currency The functional currency of an entity is the currency of the primary economic environment where it operates. The Consolidated Financial Statements are presented in Reais (R$), which is the functional and reporting currency of the Company. b) Transactions and Balances For purposes of the Consolidated Financial Statements, the balances of each subsidiary of the Company are translated into Brazilian reais, which is the functional currency of the Company and the reporting currency of its Consolidated Financial Statements. c) Group Companies Income and loss from operations and financial position of all subsidiaries included in the Consolidated Financial Statements, along with equity method of accounting, which have functional currencies different from the Company’s reporting currency are translated into the reporting currency as follows: i) Asset and liability balances are translated at the exchange rate in effect at the balance sheet date; ii) Income and expenses are translated using the average monthly exchange rates for the year; and iii) Translation gains and losses resulting from the above methodology are recognized in Equity, in the Statement of Comprehensive Income, in the account named “Other reserves - Cumulative translation adjustment”; and iv) The amounts presented in the cash flow are derived from the changes in assets, liabilities and income and expenses translated, as detailed above. d) Hyperinflation in Venezuela Venezuela is considered a hyperinflationary economy and, for this reason, the financial statements of the Company’s subsidiary located in this country have been adjusted so that the amounts are stated at the measurement currency unit at the end of the year, which considers the effects measured by the IPC - Índice de Preços ao Consumidor (Consumer Price Index) of Venezuela. The exchange rate used to translate the Venezuela subsidiary financial statements from local currency (Bolívar Forte) to Real considers the local exchange rate known as SIMADI ( Sistema Marginal de Divisas ), which is used in conversions from Bolívar Forte to American Dollar as a reference to local currency translation into Real. This rate is equivalent to 1,011.19 Bolívar Forte to each 1 Real as of December 31, 2017 (206.61 Bolivar Forte to each 1 Real as of December 31, 2016). |
Financial Assets | 2.3 - Financial Assets The Company measures its derivative financial instruments based on their fair value on the balance sheet date, being the most relevant evidence of fair value the quotations obtained from market participants. The fair value recognized in its Consolidated Financial Statements may not necessarily represent the amount of cash that the Company would receive or pay, as applicable, if the Company would have settled the transactions on the balance sheet date. The Company classifies its financial assets, upon initial recognition, in the following categories: financial assets at fair value through profit or loss, loans and receivables and available for sale (when applicable). The classification depends on the objective for which the financial assets where acquired, as detailed in Note 15. a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading and include Bank Deposit Certificates and marketable securities. Financial assets at fair value through profit or loss are initially recognized at fair value and the transaction costs are expensed immediately in the income statement. b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Company’s loans and receivables comprise “Accounts receivable and other receivables”, “Cash and cash equivalents” and “Judicial deposits”. They are presented as current assets, except for those with maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets. c) Derivative financial instruments and hedging activities Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are, subsequently, remeasured to their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated or not as a hedging instrument and for which hedge accounting has been adopted. If this is the case, the method also depends on the nature of the item being hedged as well as the effectiveness of the hedging relationship. As described in note 15, the Company applies hedge accounting. d) Derivatives at fair value through profit or loss Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of these derivative instruments are recognized immediately in the income statement under “Gains and losses on financial instruments, net”. e) Cash and Cash Equivalents Cash and cash equivalents include cash, bank accounts and highly liquid investments with original maturities of 90 days or less with insignificant risk of changes in fair value and are stated at cost plus accrued interest, when applicable. f) Short-term Investments Held for trading securities are stated at fair value and recognized through profit and loss (held for trading), since the purpose of the investment is to earn short-term gains. Interest, monetary corrections, and exchange variation, when applicable, as well as changes in fair value are recognized in the income statement when incurred. g) Trade Accounts Receivable Trade accounts receivable are stated at amortized cost and accounts receivable from foreign customers are translated based on the exchange rates in effect at the balance sheet date. The allowance for doubtful accounts is determined based on a risk assessment, which considers historical losses, the individual situation of each customer and the situation of the economic group to which they belong, available collateral and guarantees and the opinion of legal counsel. The allowance is considered sufficient to cover any losses incurred on uncollectible receivables. Information on the breakdown of current and past-due trade accounts receivable and the related allowance for doubtful accounts is provided in note 5. The Company’s maximum exposure to credit risk is its balance of trade accounts receivable, net of allowance for doubtful accounts. The credit quality of the current trade accounts receivable is considered proper and the amount of the effective risk of eventual losses in trade accounts receivable is presented as allowance for doubtful accounts. h) Impairment of Financial Assets Financial assets are assessed at each balance sheet date for evidence of impairment. They are considered impaired when there is evidence that one or more events have occurred after the initial recognition of the financial asset and such event or events had a negative impact on the estimated future cash flows of the investment. The criteria used to determine whether there is evidence of an impairment loss include, among other factors: (i) significant financial difficulty of the issuer or debtor, and (ii) domestic or local economic conditions that correlate with defaults on the assets in portfolio. |
Inventories | 2.4 — Inventories Inventories are measured at the lower of historical average cost of acquisition or production and net realizable value. The acquisition and production costs include transportation, storage and non-recoverable taxes. Net realizable value is the estimated sale price in the ordinary course of business less the estimated costs of completion and selling expenses directly related. Information regarding the allowance for adjustments to net realizable value is presented in note 6. |
Property, Plant and Equipment | 2.5 - Property, Plant and Equipment Property, plant and equipment are stated at historical cost, monetarily adjusted when applicable in accordance with IAS 29, less depreciation, except for land, which is not depreciated. The Company monthly capitalizes the construction costs of qualified assets, which are assets that, necessarily, require a substantial period of time to be finished for its intended use, the borrowing costs as part of the acquisition cost of the property, plant and equipment under construction based on the following capitalization criteria: (a) the capitalization period begins when the property, plant and equipment item is under construction in process and the capitalization of borrowing costs ceases when the asset is available for use; (b) borrowing costs are capitalized considering the weighted average rate of loans existing on the capitalization date or a specific rate, in the case of loans for the acquisition of property, plant and equipment; (c) borrowing costs capitalized do not exceed the interest expenses during the capitalization period; and (d) capitalized borrowing costs are depreciated considering the same criteria and useful life determined for the property, plant and equipment item to which it was capitalized. Depreciation is calculated under the straight-line method at rates that take into consideration the estimated useful life of the asset, its level of utilization and the estimated residual value of the asset at the end of its useful life. The estimated residual value and useful life of the assets are reviewed and adjusted, if necessary, at each year-end. Subsequent costs are added to the carrying amount of property, plant and equipment or recognized as a specific item, as appropriate, only if the economic benefits associated to these items are probable and the amounts can be reliably measured. The carrying amount of replaced items is written-off. Other repairs and maintenance are recognized directly in income when incurred. Mining exploration rights are classified as Land and Buildings in the Property, plant and equipment account. Exploration expenditures are recognized as expenses until the feasibility of mining activity is established and thereafter subsequent costs are capitalized. Costs for the development of new iron ore reserves or to expand the capacity of operating mines are capitalized and amortized based on the amount of iron ore extracted. Stripping costs (costs associated with removal of waste and other residual materials) incurred during the development phase of a mine, before production phase, are registered as part of the depreciable cost of asset. Subsequently, these costs are depreciated over the useful life of the mine. Spending on waste removal, after the start of production of the mine, are treated as production costs. Depletion of mines is calculated based on the amount of ore extracted. The net book value of property, plant and equipment items is immediately impaired to its recoverable amount when the residual balance exceeds the recoverable amount. |
Goodwill | 2.6 — Goodwill Goodwill represents the excess of the acquisition cost over the fair value of the net assets acquired, liabilities assumed and identifiable contingent liabilities of a subsidiary, joint venture, or associate company, at the respective acquisition date. Goodwill is recorded as an asset and recorded under “Goodwill” account. Goodwill is not amortized and is subject to impairment tests annually or whenever there are indications of potential impairment. Any impairment loss is recorded as an expense in the income statement and cannot be reversed. Goodwill is allocated to the operating segments, which represents the lowest level at which goodwill is monitored by management. Goodwill that forms part of the carrying amount of an investment in an associate or a joint venture is not separately recognized. The entire carrying amount of the investment in associate or joint venture is tested for impairment as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever evidence is available that the investment may be impaired. When a subsidiary, joint venture or associate is sold, goodwill is included in the determination of gains and losses on disposal. |
Other Intangible Assets | 2.7 — Other Intangible Assets Other intangible assets are stated at acquisition cost, less accumulated amortization and impairment losses, when applicable. Intangible assets consist mainly of assets which represent the capacity to generate economic benefits from companies acquired based on relationships with customers and suppliers, software and others. Intangible assets with definite useful lives are amortized taking into consideration their actual use or a method that reflects their consumption of economic benefits. The net book value of intangible assets is impaired immediately to its recoverable value when the residual balance exceeds the recoverable amount (note 2.8). Intangible assets acquired in a business combination are recorded at fair value, less accumulated amortization and impairment losses, when applicable. Intangible assets that have a defined useful life are amortized over their useful lives using an amortization method that reflects the economic benefit of the intangible asset and is recorded in the cost of sales account. The intangible relationship with customers and suppliers is amortized based on an accelerated method that considers the expected future economic benefit provided over time by these new acquired customers and suppliers. The Company reviews the amortization period and amortization method for its intangible assets with definite useful lives at the end of each year. |
Provision for Impairment of Assets and Reversal of Impairment | 2.8 — Provision for Impairment of Assets and Reversal of Impairment At each balance sheet date, the Company performs an assessment to determine whether there is evidence that the carrying amount of long-lived assets might be impaired. If such evidence is identified, the recoverable amount of the assets is estimated by the Company. The recoverable amount of an asset is determined as the higher of: (a) its fair value less estimated costs to selling and (b) its value in use. The value in use is measured based on discounted cash flows (before taxes) derived from the continuous use of the asset until the end of its estimated useful life. Regardless of whether or not there is any indication that the carrying amount of the asset may be impaired, the balances of goodwill arising from business combinations and intangible assets with indefinite useful lives are tested for impairment at least once a year in December. When the carrying amount of the asset exceeds its recoverable amount, the Company recognizes a reduction in the book value of the asset (Impairment). The reduction to the recoverable amount of the asset is recorded as an expense. Except for an impairment of goodwill, a reversal of a previously recorded impairment loss is required. Reversal in these circumstances is limited to the amount of the depreciated balance of the asset at the time of the reversal, determined as if the impairment had not been recorded, as discussed in note 28.1. The Company believes that there is a no likelihood that may occur a material change in the estimates or assumptions used to calculate long-lived asset impairment losses. However, if actual results are not consistent with estimates and assumptions used in estimating future cash flows and asset fair values, the Company may be exposed to losses that could be material. |
Financial Liabilities and Equity Instruments | 2.9 — Financial Liabilities and Equity Instruments a) Classification as Debt or Equity Debt or equity instruments are classified based on the substance of the contractual terms of the instruments. b) Short and Long-Term Debt They are stated net of transaction costs, and are subsequently measured at the amortized cost using the effective interest method. c) Equity Instruments An equity instrument is based on a contract that evidences a residual interest in the assets of an entity after deducting its liabilities. d) Derivative Instruments and hedging The Company enters into derivative financial instruments mainly to manage its exposure to fluctuation in interest rates and exchange rates. The Company measures its derivative financial instruments, based on quotations obtained from market participants, at fair value at the balance sheet date. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge or a net investment hedge are recorded in the statement of comprehensive income. The Company assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When a cash flow hedge instrument is sold, terminated, expires or is exercised, the hedge is discontinued prospectively, however the cumulative unrealized gains and losses remains registered in comprehensive income when the hedged item is registered in the statement of income. When a transaction is no longer expected to occur, the cumulative gains and losses are immediately reclassified to the income statement. In the net investment hedge the amount registered is reclassified to the income statement when the hedged investment is disposed of. Additionally, changes in the fair value of financial instruments not designated for hedge are registered as Gain and losses on financial instruments, net, in the income statement. |
Current and Deferred Income and Social Contribution Taxes | 2.10 — Current and Deferred Income and Social Contribution Taxes Current income and social contribution tax expense is calculated in conformity with enacted tax rate in effect at the balance sheet date in the countries where the Company’s subsidiaries, associates and joint venture operate and generate taxable income. Management periodically evaluates positions taken in relation to tax matters which are subject to interpretation and recognizes a provision when there is an expectation of payment of income tax and social contribution in accordance with the tax bases. The expense for income tax and social contribution taxes comprises current and deferred taxes. Current tax and deferred tax are recognized in income unless they are recognized for a business combination, or for items directly recognized in equity through other comprehensive income. Current tax is the estimated tax payable or receivable on the taxable income or loss for the year, at the tax rates effective at the balance sheet date. Deferred income tax and social contribution are recognized in full on the differences generated between assets and liabilities recognized for tax purposes and corresponding to amounts recognized in the Financial Statements. However, deferred income and social contribution taxes are not recognized arising from the initial recognition of assets and liabilities in a transaction other than a business combination and that do not affect the tax basis. Income and social contribution taxes are determined based on tax rates (and laws) effective at the balance sheet date and applicable when the respective income and social contribution taxes are paid. Deferred income and social contribution tax assets are recognized only to the extent that it is probable that there will be taxable income for which the temporary differences can be used and tax losses can be compensated. Deferred tax assets recorded for tax loss carryforwards are supported by projections of taxable income based on technical feasibility studies submitted annually to the Board of Directors of the Company and its subsidiaries, when applicable. These studies consider historical profitability of the Company and its subsidiaries, expectations of continuous profitability and estimates of the recovery of deferred tax assets over future years. Other deferred tax assets arising from temporary differences, mainly tax contingencies, and provision for losses, are recognized according to their estimate of realization. Deferred income tax and social contribution assets are reviewed at each reporting date and will be reduced to the extent that their realization is not more likely than not based on future taxable income. The Company only recognizes a provision on tax issues if a past event leads to a present obligation. The Company determines whether a present obligation exists at the reporting date by taking into consideration all available evidence, including, for example, the opinion of legal advisors. The Company also considers whether it is probable that there will be an outflow of assets and a reliable estimate can be made of the amount of the obligation. |
Employee Benefits | 2.11 — Employee Benefits The Company has several employee benefit plans including pension and retirement plans, health care benefits, profit sharing, bonus, and share-based payment, as well as other retirement and termination benefits. The main benefit plans granted to the Company’s employees are described at notes 19 and 25. The actuarial obligations related to the pension and retirement benefits and the actuarial obligations related to the health care plans are recorded based on actuarial calculations performed every year by independent actuaries and reviewed by management, using the projected unit credit method, net of the plan assets, when applicable, and the related costs are recognized over the employees’ service period. Any employee benefit plan surpluses are also recognized up to the probable amount of reduction in future contributions by the Company. Actuarial remeasurement arising from adjustments and changes in actuarial assumptions of the pension and retirement benefit plans and actuarial obligations related to the health care plan are recognized directly in the Statement of Comprehensive Income as described in Note 19. In accounting for pension and post-retirement benefits, several statistical and other factors that attempt to anticipate future events are used to calculate plan expenses and liabilities. These factors include discount rate assumptions, return on plan assets, future increases in health care costs, and rate of future compensation increases. In addition, actuarial calculations consider other factors whose measurement involves judgment are used such as withdrawal, turnover, and mortality rates. The actuarial assumptions used by the Company may differ materially from actual results in future periods due to changing market and economic conditions, regulatory events, judicial rulings, higher or lower withdrawal rates, or longer or shorter participant life spans. |
Other Current and Non-current Assets and Liabilities | 2.12 - Other Current and Non-current Assets and Liabilities Other current and non-current assets and liabilities are recorded at their realizable amounts (assets) and at their known or estimated amounts plus accrued charges and monetary adjustments (liabilities), when applicable. |
Related -Party Transactions | 2.13 — Related-Party Transactions Loan agreements between the entities in Brazil and abroad are adjusted by contractual financial charges plus foreign exchange variation, when applicable. These contracts have an expiration date, with the possibility of extension of time by agreement between the parties. Sales and purchases of raw materials and products are made under terms and conditions contractually established between the parties. |
Dividends and Interest on equity | 2.14 — Dividends and Interest on equity Dividend payments are recognized as liabilities at the time dividends are approved by the shareholders of Gerdau S.A. The bylaws of Gerdau S.A. requires dividends of not less than 30% of the annual net income; therefore, Gerdau S.A. records a liability at year-end for the minimum dividend amount that has not yet been paid during the year up to the limit of the mandatory minimum dividend described above. |
Revenue Recognition | 2.15 — Revenue Recognition Net sales are presented net of taxes and discounts. Taxes on sales are recognized when sales are invoiced and discounts on sales are estimated and recognized upon sale. Revenues from sales of products are recognized when the sales amount can be reliably measured, the Company no longer has control over the goods sold or any other responsibility attributable to its ownership, the costs incurred or that will be incurred related to the transaction can be reliably measured, it is more likely than not that the economic benefits will be received by the Company, and the risks and benefits of the products have been fully transferred to the buyer. The related costs of freight are included in cost of sales. |
Investments in Environmental Protection and Environmental liabilities | 2.16 - Investments in Environmental Protection and Environmental liabilities Environmental costs that relate to current operations are expensed or capitalized as appropriate. Environmental costs that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation or cost reduction are recorded as expense. Liabilities are recorded when environmental assessments or remedial efforts are probable and the cost can be reasonably estimated based on discussions with the environmental authorities and other assumptions relevant to the nature and extent of the remediation that may be required. The ultimate cost to the Company is dependent upon factors beyond its control such as the scope and methodology of the remedial action requirements to be established by environmental and public health authorities, new laws or government regulations, rapidly changing technology and the outcome of any potential related litigation. Environmental liabilities are adjusted to present value when the aggregate amount of the obligation and the amount and timing of cash disbursements are established or can be reliably estimated. |
Use of Estimates | 2.17 - Use of Estimates In the preparation of the Consolidated Financial Statements estimates are required to record certain assets, liabilities and other transactions. To make these estimates, Management uses the best information available on the date of preparation of the Consolidated Financial Statements and the experience of past and/or current events, also considering assumptions related to future events. As such, the Consolidated Financial Statements include estimates with respect to the recoverable amount of long-lived assets (note 28), with respect to the need and the amount of provisions for tax, civil and labor liabilities (note 17), recoverable amount of deferred income taxes (note 8), estimates in selecting interest rates, return on assets, mortality tables and expectations for salary increases (note 19), and long-term incentive plans through the selection of the valuation model and rates (note 25). Actual results could differ from those estimates. |
Business Combinations for the Financial Statements | 2.18 - Business Combinations for the Financial Statements a) Step-acquisitions in which control is obtained When a business combination is achieved in stages, the interest previously held by the Company in the acquired entity is remeasured at fair value at acquisition date (i.e. the date when the Company acquires the control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts related to the Company’s interest in the acquired company before the acquisition date, which also includes previous amounts recognized in “Other comprehensive income,” are reclassified to profit or loss, which considers same treatment as if that interest were disposed of. b) Acquisitions in which control is obtained initially Acquisitions of businesses are accounted for under the acquisition method. The cost of the acquisition is measured at the fair values (at the date of the transaction) of the assets transferred, liabilities incurred or assumed and equity instruments issued by the Company in exchange for control of the acquired business entity. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at their fair values at the acquisition date. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders’ proportion of the net fair value of the assets, liabilities and contingent liabilities recognized. Expenses related to the acquisition are recognized in the income statement when incurred. c) Increases/decreases in non-controlling interests Subsequent purchases, after the Company has obtained control, are treated as acquisitions of shares from non-controlling shareholders: the identifiable assets and liabilities of the acquired entity are not subject to a further revaluation and the positive or negative difference between the cost of such subsequent acquisitions and the net value of the additional proportion of the company is accounted for within equity. d) Loss of control of a subsidiary When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the Company derecognizes all assets, liabilities and non-controlling interests at their carrying amount. Any retained interest in the former subsidiary is recognized at its fair value at the date that control is lost. This fair value is reflected in the calculation of the gain or loss on disposal attributable to the parent, and becomes the initial carrying amount for subsequent accounting for the retained interest under IAS 28 or IAS 39. |
Segment Information | 2.19 — Segment Information The bodies responsible for making operational decisions, allocating resources and evaluating performance include the Board of Executive Officers and the Board of Directors. The information presented to the senior management with the respective performance of each segment is derived from the records kept in accordance with accounting practices, with some reallocations between the segments. The Company’s segments are as follows: Brazil Operations (includes operations of steel and iron ore in Brazil, except Special Steel), North America Operations (includes all operations in North America, including the joint venture in Mexico and associate company in Mexico, with the exception of Special Steel), South America Operations (includes all operations in South America, except Brazil and includes the Joint venture in Dominican Republic and Colombia) and Special Steel Operations (including special steel operations in Brazil, United States and India). |
Earnings per Share | 2.20 — Earnings per Share The tables presented in note 23 reconcile net income to the amounts used to calculate basic and diluted earnings per share. The Company has no instruments considered antidilutive that should be excluded from the calculation of diluted EPS. The calculation of diluted earnings per share has been based on weighted average number of shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. Instruments with dilutive potential effects are represented by the share-based payments discussed in Note 25. |
Long-term incentive plans | 2.21 — Long-term incentive plans The Company settles the stock options plans by delivering its own shares, which are held in treasury until the exercise of the options by the employees. Additionally, the Company has also granted the following long-term incentive plans: Stock Options, Restricted Shares, Share Appreciation Rights and Performance Shares, as presented in note 25. |
Assets and liabilities held for sale | 2.22 — Assets and liabilities held for sale The Company presents assets and liabilities of entities held for sale in specific lines of the Balance Sheet, denominated Assets held for sale and Liabilities held for sale, respectively, until the closing of the sale operation, which is expected to be completed in up to one year from the date of classification as held for sale. The Company measures the net assets classified as held for sale at the lower of their carrying amount and fair value less costs to sell. The reclassification of assets and liabilities to assets held for sale and liabilities held for sale is a non-cash transaction and it does not affect the Consolidated Statements of Cash Flows. |
New IFRS and Interpretations of IFRIC | 2.23 - New IFRS and Interpretations of the IFRIC (International Financial Reporting Interpretations Committee) Some new IASB accounting standards and IFRIC interpretations were issued and/or reviewed and have their mandatory adoption for the year 2018 and/or after. IFRS 9 - Financial Instruments. It replaces IAS 39 and it is effective for years beginning on or after January 1, 2018. IFRS 9 contains a new approach to the classification and measurement of financial assets that should reflect the business model and expectation of cash flow used by the Company in the management of its financial assets. Financial assets will be classified into three categories, which are: (i) measured at amortized cost; (ii) fair value through other comprehensive income; and (iii) fair value through profit or loss. The standard eliminates the categories in IAS 39: “held to maturity”, “loans and receivables” and “available for sale”. IFRS 9 replaces the “losses incurred” model with a prospective “expected credit loss” model. This change will require a judgment on how the change or expectation of change in economic factors affects the expected credit losses, which will be determined on the basis of weighted probabilities. The Company’s financial assets represented by cash and cash equivalents, trade accounts receivable and other assets have not presented an increase in credit risk and there is also no expectation of an increase in credit risk as of December 31, 2017 and no significant increase in the provision for expected losses in relation to Provision for credit risk. The impacts arising from IFRS 9 on the Company’s equity at January 1, 2018 are immaterial, and any differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 will be recognized in retained earnings at January 1, 2018. IFRS 15 - Revenue from Contracts with Customers and subsequently the issuance of document for clarification on this standard. IFRS 15 provides a comprehensive framework for determining whether, when and by what amount a revenue should be recorded. This pronouncement replaces IAS 18 - Revenues and IAS 11 - Construction Contracts and will be effective for fiscal years beginning on or after January 1, 2018. IFRS 15 provides more detail for revenue recognition, stating that it should be recorded when the performance obligation is met, ie when the “control” of the goods or services of a particular transaction is transferred to the customer and establishing, also, more detail in the disclosures. Revenues are currently recognized when the products are delivered to the customer, and the performance obligation is fulfilled at that time. Revenue is recognized at this time as long as revenue and costs can be measured reliably, receipt of the consideration is probable and there is no continuous involvement of management with the products. In accordance with IFRS 15, revenue must be recognized when the customer obtains control of the products. Based on this, the Company does not expect a significant impact on its Financial Statements by the adoption of IFRS 15. Additionally, based on the Company’s assessment, the fair value and sales prices and conditions agreed with the clients (such as discounts and shipping costs) are broadly similar, the Company does not expect the application of IFRS 15 to result in material differences in recognition and measurement of revenue. For the purposes of the transition requirements the Company intends to apply the retrospectively method with the cumulative effect of initially applying this standard recognized as an adjustment to the opening balance of retained earnings at January 1, 2018. No adjustment is expected at the transition date. IFRS 16 - Lease. Establishes aspects of recognition, measurement and disclosure of leases. This standard is effective for fiscal years beginning on or after January 1, 2019. The Company is in initial evaluation process of impacts on its financial statements of the adoption of the standard, however, no material impacts are expected considering the relevance of current lease contracts. Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions. It addresses changes in some paragraphs to better clarify the application of the standard. This change in the standard is effective for years beginning on or after January 1, 2018 and it will not have material impact in the Company’s Financial Statements. IFRIC 23 — Uncertainty over Income Tax Treatments. Establishes aspects of recognition and measurement of the IAS 12 when there are uncertainties about the treatment of income tax related to tax assets or liabilities and current or deferred taxes, based on taxable income, tax losses, taxable bases, unused tax losses, unused tax credits and tax rates. This interpretation is effective for fiscal years beginning on or after January 1, 2019. The Company is evaluating the impacts on its Financial Statements, however, no material impact is expected in the Company’s Financial Statements. |
CONSOLIDATED FINANCIAL STATEM39
CONSOLIDATED FINANCIAL STATEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
CONSOLIDATED FINANCIAL STATEMENTS | |
Schedule of significant consolidated subsidiaries | Equity Interests Total capital (*) Consolidated company Country 2017 2016 2015 Gerdau GTL Spain S.L. Spain Gerdau Internacional Empreendimentos Ltda. - Grupo Gerdau Brazil Gerdau Ameristeel Corporation and subsidiaries (1) USA/Canada Gerdau Açominas S.A. Brazil Gerdau Aços Longos S.A. and subsidiary (2) Brazil Gerdau Steel Inc. Canada Gerdau Holdings Inc. and subsidiary (3) USA Paraopeba - Fixed-income investment fund (4) (**) Brazil Gerdau Holdings Europa S.A. and subsidiaries Spain — — Gerdau América Latina Participações S.A. Brazil — Gerdau Chile Inversiones Ltda. and subsidiaries (5) Chile Gerdau Aços Especiais S.A. Brazil — Gerdau Hungria Holdings Limited Liability Company and subsidiaries (6) Hungary GTL Equity Investments Corp. British Virgin Islands Empresa Siderúrgica del Perú S.A.A. - Siderperú Peru Diaco S.A. and subsidiary (note 3.4) Colombia — Gerdau GTL México, S.A. de C.V. and subsidiaries (7) Mexico Seiva S.A. - Florestas e Indústrias Brazil Itaguaí Com. Imp. e Exp. Ltda. Brazil — Gerdau Laisa S.A. Uruguai Sipar Gerdau Inversiones S.A. Argentina Sipar Aceros S.A. and subsidiary (8) Argentina Cleary Holdings Corp. Colombia — — Sizuca - Siderúrgica Zuliana, C. A. Venezuela GTL Trade Finance Inc. British Virgin Islands Gerdau Trade Inc. British Virgin Islands Gerdau Steel India Ltd. India (*) The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly in the subsidiary. (**) The percentage of participation including interest of the parent company Metalurgica Gerdau S.A. in the investment fund is 51.11% in 2017, 91.58% in 2016 and 82.64% in 2015. (1) Subsidiaries: Gerdau Ameristeel US Inc., Gerdau Reinforcing Steel, Gerdau Ameristeel Sayreville Inc., TAMCO Steel, Chaparral Steel Company. (2) Subsidiary: Gerdau Açominas Overseas Ltd. (3) Subsidiary: Gerdau MacSteel Inc. (4) Fixed-income investment fund managed by Banco JP Morgan S.A.. (5) Subsidiaries: Aza Participaciones S.A., Gerdau Aza S.A., Armacero Matco S.A., Aceros Cox Comercial S.A., Salomon Sack S.A.. (6) Subsidiaries: Gerdau Hungria y Cia SRC, Bogey Holding Company Spain S.L. (7) Subsidiaries: Sidertul S.A. de C.V. and GTL Servicios Administrativos México, S.A. de C.V.. (8) Subsidiary: Siderco S.A. |
Schedule of interests in joint ventures | Equity Interests Total capital(*) Joint ventures Country 2017 2016 2015 Bradley Steel Processors Canada MRM Guide Rail Canada Gerdau Corsa S.A.P.I. de CV Mexico Gerdau Metaldom Corp. Dominican Rep. Gerdau Summit Aços Fundidos e Forjados S.A. Brazil — — Diaco S.A. Colombia — — (*)The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly held in the joint venture. |
Schedule of summarized financial information of the joint ventures | Joint ventures 2017 2016 Net income ) ) Total comprehensive income ) ) |
Schedule of interests in associate companies | Equity interests Total capital (*) Associate companies Country 2017 2016 2015 Dona Francisca Energética S.A. Brazil Corsa Controladora, S.A. de C.V. and subsidiaries Mexico Corporación Centroamericana del Acero S.A. and subsidiaries Guatemala — — (*)The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly. |
Schedule of summarized financial information of the associate companies | Associate Companies 2017 2016 Net income Total comprehensive income |
Schedule of cash paid for business combination | Companies / interest acquired 2017 2016 2015 Business Combination Armacero Industrial y Comercial S.A. — — — — Interest increase in subsidiaries Gerdau Aços Longos S.A., Gerdau Açominas S.A., Gerdau Aços Especiais S.A. and Gerdau América Latina Participações S.A. — — — — |
CASH AND CASH EQUIVALENTS, AN40
CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS | |
Schedule of cash and cash equivalents and investments | 2017 2016 Cash Banks and immediately available investments Cash and cash equivalents 2017 2016 Held for trading Short-term investments |
TRADE ACCOUNTS RECEIVABLE (Tabl
TRADE ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
TRADE ACCOUNTS RECEIVABLE | |
Schedule of trade accounts receivable | 2017 2016 Trade accounts receivable - in Brazil Trade accounts receivable - exports from Brazil Trade accounts receivable - foreign subsidiaries (-) Allowance for doubtful accounts ) ) |
Schedule of accounts receivable by aging | 2017 2016 Current Past-due: Up to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days Above 360 days (-) Allowance for doubtful accounts ) ) |
Schedule of the changes in the allowance for doubtful accounts | Balance as of January 1, 2015 ) Provisions for bad debt during the year ) Recoveries in the year Write-offs Exchange variation ) Balance as of December 31, 2015 ) Provisions for bad debt during the year ) Recoveries in the year Write-offs Loss of control by selling of subsidiary (note 3.4) Exchange variation ) Balance as of December 31, 2016 ) Provisions for bad debt during the year ) Recoveries in the year Write-offs Loss of control by joint venture creation (note 3.4) Assets held for sale (note 3.4) Exchange variation ) Balance as of December 31, 2017 ) |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INVENTORIES | |
Schedule of inventories | 2017 2016 Finished products Work in progress Raw materials Storeroom supplies Imports in transit (-) Allowance for adjustments to net realizable value ) ) |
Schedule of the changes in the allowance for inventories adjustment to net realizable value | Balance as of January 1, 2015 ) Provision for the year ) Reversal of adjustments to net realizable value Exchange rate variation ) Balance as of December 31, 2015 ) Provision for the year ) Reversal of adjustments to net realizable value Loss of contro by selling of subsidiary Exchange rate variation Balance as of December 31, 2016 ) Provision for the year ) Reversal of adjustments to net realizable value Loss of control by joint venture creation (note 3.4) Assets held for sale (note 3.4) Exchange rate variation Balance as of December 31, 2017 ) |
TAX CREDITS (Tables)
TAX CREDITS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
TAX CREDITS | |
Schedule of current and non-current tax credits | 2017 2016 Current ICMS (state VAT) Social security financing Financing of social integration program IPI (federal VAT) IVA (value-added tax) Others Non-current ICMS (state VAT) Social security financing Financing of social integration program and Others |
Schedule of estimates of realization of non-current tax credits | 2017 2016 Current ICMS (state VAT) Social security financing Financing of social integration program IPI (federal VAT) IVA (value-added tax) Others Non-current ICMS (state VAT) Social security financing Financing of social integration program and Others 2017 2016 2018 — 2019 2020 2021 on — |
INCOME AND SOCIAL CONTRIBUTIO44
INCOME AND SOCIAL CONTRIBUTION TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INCOME AND SOCIAL CONTRIBUTION TAXES | |
Schedule of reconciliations of income and social contribution taxes at statutory rates to amounts presented in the Statement Of Income | 2017 2016 2015 Income (loss) before income taxes ) ) ) Statutory tax rates % % % Income and social contribution taxes at statutory rates Tax adjustment with respect to: - Difference in tax rates in foreign companies ) ) ) - Equity in earnings of unconsolidated companies ) ) ) - Interest on equity* ) - Tax credits and incentives - Tax deductible goodwill recorded in statutory books — - No recognition of deferred tax assets — ) ) - Capital Gain** ) — — - Write-down of deferred tax asset*** — — ) - Other permanent differences, net ) ) Income and social contribution taxes ) ) Current ) ) ) Deferred ) (*) Brazilian Law 9,249/95 provides that a company may, at its sole discretion, consider dividends distributions to shareholders to be considered as interest on own capital — subject to specific limitations - which has the effect of a taxable deduction in the determination of income tax and social contribution. The limitation is the greater of (i) shareholders’ equity multiplied by the TJLP (Long Term Interest Rate) rate or (ii) 50% of the net income in the fiscal year. This expense is not recognized for financial reporting purposes and thus it does not impact accounting profit. (**) The merger of Gerdau Aços Especiais S.A. and Gerdau América Latina Part. S.A. at Gerdau S.A., generated a taxable capital gain. (***) The Company assessed the recoverability of certain deferred income tax assets and, due to the lack of expected utilization of these assets because of the adjustment of the long-term investment plan in one of its foreign subsidiaries and registered a write-down of R$ 284,014 in 2015. |
Schedule of breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | Balance as of Recognized in Comprehensive Income Balance as of Tax loss carryforward ) Social contribution tax losses — Provision for tax, civil and labor liabilities Benefits granted to employees ) Other temporary differences ) Deferred exchange variance* ) Provision for losses Difference between book value and tax base of assets acquired in business combinations ) ) ) Non-current assets Non-current liabilities ) ) * Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis Balance as of Recognized Effect of selling Comprehensive Balance as of Tax loss carryforward ) ) Social contribution tax losses — — Provision for tax, civil and labor liabilities ) ) Benefits granted to employees ) ) Other temporary differences ) ) Deferred exchange variance* ) — Provision for losses ) ) ) Difference between book value and tax base of assets acquired in business combinations ) ) ) ) Non-current assets Non-current liabilities ) ) * Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis Balance as of Recognized Effect of selling Comprehensive Balance as of Tax loss carryforward ) ) Social contribution tax losses ) — Provision for tax, civil and labor liabilities ) — Benefits granted to employees ) ) ) Other temporary differences ) Deferred exchange variance* ) — Provision for losses ) — — Difference between book value and tax base of assets acquired in business combinations ) ) ) ) Non-current assets Non-current liabilities ) ) * Corresponds to deferred taxes over foreign exchange gains and loss which certain subsidiaries elected to tax on a cash basis |
Schedule of estimated recovery and reversal of income and social contributions tax assets and liabilities | Assets 2017 2016 2017 — 2018 2019 2020 2021 2022 on Liabilities 2017 2016 2017 — ) 2018 ) ) 2019 ) ) 2020 ) ) 2021 ) ) 2022 on ) ) ) ) |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INVESTMENTS | |
Summary of investments | Joint ventures Associate companies Joint ventures Gerdau Corsa Gerdau Metaldom Gerdau Summit Diaco S.A. Dona Francisca Armacero Corsa Corporación Others Total Balance as of January 1, 2015 — — Equity in earnings ) — — ) ) — ) Cumulative Translation Adjustment — — — Capital increase — — — — — — — — — Impairment of assets — — — — — — — — ) — ) Control acquisition — — — — — — ) — — — ) Dividends/Interest on equity ) — — — — ) — — ) — ) Balance as of December 31, 2015 — — — Equity in earnings ) — — — — ) Cumulative Translation Adjustment ) ) ) — — — — ) ) ) ) Effect of selling of subsidiary (note 3.4) — — — — — — — — ) ) ) Dividends/Interest on equity ) — ) — — ) — — — — ) Balance as of December 31, 2016 ) — — — — — Equity in earnings ) — ) — — ) Cumulative Translation Adjustment ) — — — — — ) Capital increase — — — — — — — — Joint venture creation (note 3.2) — — — — — — — — — Contingent price complement — — — — — — — — — Dividends/Interest on equity ) — — — — ) — — — — ) Balance as of December 31, 2017 — — — |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | |
Summary of changes in property, plant and equipment | Land and buildings Machines, equipment, Data electronic Property, plant and Other Total Cost of the property, plant, and equipment Balances as of January 1, 2015 Additions Capitalized interest — — — — Business Combination Transfers ) — Disposals ) ) ) ) ) ) Impairment ) ) — ) — ) Foreign exchange effect Balances as of December 31, 2015 Additions Capitalized interest — — — — Transfers ) ) — Disposals ) ) ) ) ) ) Effect of selling of subsidiary ) ) ) ) ) ) Impairment (note 28) ) ) ) — ) ) Foreign exchange effect ) ) ) ) ) ) Balances as of December 31, 2016 Additions Capitalized interest — — — — Transfers ) — Disposals ) ) ) ) ) ) Loss of control by selling of subsidiary (note 3.4) ) ) ) ) ) ) Impairment (note 28) ) ) — — ) ) Assets held for sale (note 3.4) ) ) ) ) ) ) Foreign exchange effect Balances as of December 31, 2017 Land and buildings Machines, equipment, Data electronic Property, plant and Other Total Accumulated depreciation Balances as of January 1, 2015 ) ) ) — ) ) Depreciation, amortization and depletion ) ) ) — ) ) Transfers ) — ) — Disposals — Foreign exchange effect ) ) ) — ) ) Balances as of December 31, 2015 ) ) ) — ) ) Depreciation, amortization and depletion ) ) ) — ) ) Transfers ) ) — — Disposals — Loss of control by selling of subsidiary (note 3.4) — Foreign exchange effect — Balances as of December 31, 2016 ) ) ) — ) ) Depreciation, amortization and depletion ) ) ) — ) ) Transfers ) ) — — Disposals — Loss of control by selling of subsidiary (note 3.4) — Assets held for sale (note 3.4) — Foreign exchange effect ) ) ) — ) ) Balances as of December 31, 2017 ) ) ) — ) ) Net property, plant and equipment Balances as of December 31, 2015 Balances as of December 31, 2016 Balances as of December 31, 2017 |
Summary of useful lives of property, plant and equipment | Useful lives of property, Buildings 20 to 33 years Machines, equipment, and installations 10 to 20 years Furniture and fixture 5 to 10 years Vehicles 3 to 5 years Data electronic equipment 2.5 to 6 years |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL | |
Summary of changes in goodwill | Goodwill Accumulated Goodwill after Balance as of January 1, 2015 ) (+/-) Foreign exchange effect ) (-) Impairment (note 28) — ) ) Balance as of December 31, 2015 ) (+/-) Foreign exchange effect ) ) (-) Impairment (note 28) — ) ) (-) Effect of selling of subsidiary ) — ) Balance as of December 31, 2016 ) (+/-) Foreign exchange effect ) (-) Impairment (note 28) — ) ) (-) Assets held for sale (note 3.4) ) — ) Balance as of December 31, 2017 ) |
Summary of goodwill by segment | 2017 2016 2015 Brazil Special Steel North America |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS | |
Summary of intangible assets | Supplier Software Customer Others Total Balance as of January 1, 2015 Foreign exchange effect — Acquisition — — Disposal — ) — ) ) Amortization ) ) ) ) ) Balance as of December 31, 2015 Foreign exchange effect — ) ) ) ) Acquisition — — Disposal — ) — ) ) Amortization ) ) ) ) ) (-) Effect of selling of subsidiary — — — ) ) Balance as of December 31, 2016 Foreign exchange effect — Acquisition — — — Disposal — — ) — ) Amortization ) ) ) ) ) (-) Assets held for sale (note 3.4) — ) ) ) ) Balance as of December 31, 2017 Estimated useful lives 5 to 20 years 7 years 5 to 20 years 5 years |
Summary of intangible assets by segment | 2017 2016 2015 Brazil Special Steel South America North America |
LOANS AND FINANCING (Table)
LOANS AND FINANCING (Table) | 12 Months Ended |
Dec. 31, 2017 | |
LOANS AND FINANCING | |
Schedule of loans and financing | Annual charges (*) 2017 2016 Working capital % Financing of property, plant and equipment and others % Ten/Thirty Year Bonds % Total Loans and Financing Current Non-current Principal amount of loans and Financing Interest accrued of loans and Financing Total Loans and Financing (*) Weighted average effective interest costs on December 31, 2017. |
Schedule of loans and financing by currency | 2017 2016 Brazilian Real (BRL) U.S. Dollar (USD) Other currencies |
Schedule of amortization of long term loans and financing | 2017 2016 2018 — 2019 2020 2021 2022 2023 on |
DEBENTURES (Tables)
DEBENTURES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
DEBENTURES | |
Schedule of debentures | General Quantity as of December 31, 2017 Issuance Meeting Issued Held in treasury Maturity 2017 2016 3rd- A and B May 27,1982 06/01/2021 7th July 14, 1982 07/01/2022 8th November 11, 1982 05/02/2023 9th June 10, 1983 09/01/2024 11th - A and B June 29, 1990 06/01/2020 14th August 26, 2014 08/30/2024 — — Total Consolidated Non-current |
Schedule of amortization of long term debentures | 2017 2016 2020 2021 2022 2023 on |
FINANCIAL INSTRUMENTS (Tables)
FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
FINANCIAL INSTRUMENTS | |
Schedule of market value of financial instruments | 2017 2016 Book Fair Book Fair value value value value Assets Cash and cash equivalents Short-term investments Trade accounts receivable Related parties Unrealized gains on derivatives — — Judicial deposits Other current assets Other non-current assets Liabilities Trade accounts payable Loans and Financing Debentures Unrealized losses on financial instruments FIDC Obligation Other current liabilities Other non-current liabilities |
Schedule of capital management risk | WACC between 10% to 13% a year Net debt/EBITDA less than or equal to 2.5 times Net Financial Expenses Coverage Ratio greater than 5.5 times Debt/Equity Ratio less than or equal to 60% |
Schedule of maturity of contractual obligations for liquidity risk | 2017 Contractual obligations Total Less than 1 year 1-3 years 4-5 years More than 5 years Trade accounts payable — — — Loans and financings Debentures — Unrealized losses on financial instruments — — — Obligations with FIDC — — — Other current liabilities — — — Other non-current liabilities — — 2016 Contractual obligations Total Less than 1 year 1-3 years 4-5 years More than 5 years Trade accounts payable — — — Loans and financings Debentures — — Unrealized losses on financial instruments — — — Obligations with FIDC — — — Other current liabilities — — — Other non-current liabilities — — |
Schedule of sensitivity analysis | Assumptions Percentage of change 2017 2016 Foreign currency sensitivity analysis Interest rate sensitivity analysis 10 bps Sensitivity analysis of changes in prices of products sold Sensitivity analysis of changes in raw material and commodity prices Sensitivity analysis of interest rate and foreign currency swaps 10 bps/5% Sensitivity analysis of NDF (Non Deliverable Forwards) |
Schedule of financial instruments per category | 2017 Loans and receivables Assets at fair value with Total Cash and cash equivalents — Short-term investments — Trade accounts receivable — Related parties — Judicial deposits — Other current assets — Other non-current assets Total Financial income Liabilities Liabilities at fair value Other financial Total Trade accounts payable — Loans and financings — Debentures — FIDC Obligation — Other current liabilities — Other non-current liabilities — Unrealized losses on financial instruments — Total Financial income (expenses) ) ) ) 2016 Loans and receivables Assets at fair value with Assets at fair value Total Cash and cash equivalents — — Short-term investments — — Unrealized gains on financial instruments — — Trade accounts receivable — — Related parties — — Judicial deposits — — Other current assets — — Other non-current assets — Total Financial income — Liabilities Liabilities at fair value Other financial Total Trade accounts payable — Loans and financings — Debentures — FIDC Obligation — Other current liabilities — Other non-current liabilities — Unrealized losses on financial instruments — Total Financial income (expenses) ) ) ) |
Summary of derivative instruments | Notional value Amount receivable Amount payable Contracts Position 2017 2016 2017 2016 2017 2016 Forward Maturity at 2017 purchase in US$ — US$ 84.8 million — — ) Maturity at 2017 sell in US$ — US$ 15.0 million — — — Cross currency swap Maturity in 2017 receivable under the swap Libor 6M + 2.25% payable under the swap INR 11.02% — US$ 25.0 million — — — Maturity in 2019 receivable under the swap Libor 6M +2% payable under the swap INR 10.17% US$ 40.0 million US$ 40.0 million — ) — Total fair value of financial instruments — ) ) |
Summary of prospective and retrospective tests of derivative financial instruments | 2017 2016 Unrealized gains on financial instruments Current assets — Non-current assets — — Unrealized losses on financial instruments Current liabilities — ) Non-current liabilities ) — ) ) 2017 2016 Net Income Gains on financial instruments Losses on financial instruments ) ) ) ) Other comprehensive income (Losses) Gains on financial instruments ) ) |
Schedule of financial assets and liabilities measures at fair value on recurring basis | Financial assets and liabilities of the Company, measured at fair value on a recurring basis and subject to disclosure requirements of IFRS 7 as of December 31, 2017, are as follows: Fair Value Measurements at Reporting Date Using Quoted Prices Active Markets for Quoted Prices in Non-Active 2017 2016 2017 2016 2017 2016 Current assets Cash and cash equivalents — — Short-term investments - Held for Trading Trade Accounts receivable — — Unrealized gains on financial instruments — — — — Other current assets — — Non-current assets Related parties — — Unrealized gains on financial instruments — — — — Judicial deposits — — Other non-current assets — — Current liabilities Trade accounts payable — — Short-term debt — — Unrealized losses on financial instruments — — — — Other current liabilities — — Non-current liabilities Long-term debt — — Debentures — — Unrealized losses on financial instruments — — — — Obligations with FIDC — — Other non-current liabilities — — — — |
Summary of changes in liabilities of cash flow from financing activities | Balances as of January Cash transactions Non cash transactions Proceeds/(Repayment) Interest paid Interest expense on Exchange variation, Balances as of Related parties, net ) — ) — ) Debt, Debentures and Losses/Gains on financial instruments, net ) ) Balances as of Cash transactions Non cash transactions Proceeds/(Repayment) Interest paid Interest expense on Exchange variation, Balances as of Related parties, net ) ) — — ) Debt, Debentures and Losses/Gains on financial instruments, net ) ) ) Balances as of Cash transactions Non cash transactions Proceeds/(Repayment) Interest paid Interest expense on Exchange variation, Balances as of Related parties, net ) — ) — ) Debt, Debentures and Losses/Gains on financial instruments, net ) ) ) |
TAXES PAYABLE (Tables)
TAXES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
TAXES PAYABLE | |
Schedule of taxes payable | 2017 2016 Payroll charges ICMS (state VAT) COFINS (tax on revenue) IPI (federal VAT) IVA (value-added tax) and others |
TAX, CIVIL AND LABOR CLAIMS A53
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS | |
Schedule of provisions for tax, civil and labor claims | 2017 2016 a) Tax provisions ICMS (state VAT) Corporate Income Tax and Social Contribution Tax Emergency Capacity Charge and Extraordinary Rate Adjustment Financing of social integration program and Social security financing Other tax provisions and Social security contributions b) Labor provisions c) Civil provisions |
Schedule of changes in the tax, labor and civil provisions | 2017 2016 Balance at the beginning of the year (+) Additions (+) Monetary correction ) (-) Reversal of accrued amounts ) ) (+) Foreign exchange effect on provisions in foreign currency ) ) (-) Effect of selling of subsidiary — ) (-) Loss of control by joint venture creation (note 3.4) ) — Balance at the end of the year |
Schedule of judicial deposits related to tax, labor and civil lawsuits | 2017 2016 Tax Labor Civil |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTY TRANSACTIONS | |
Schedule of intercompany loans | 2017 2016 Assets Joint venture Gerdau Corsa SAPI de C.V. Others Fundação Gerdau 2017 2016 2015 Net financial income ) |
Summary of guarantees granted | Related Party Relationship Object Original Maturity 2017 2016 GTL Trade Finance Inc. Subsidiary 10-year Bond Oct/17 — GTL Trade Finance Inc. Subsidiary 30-year Bond Apr/44 Diaco S.A. Joint-venture Financing Agreements Aug/18 Armacero-Matco S.A., Salomon Sack S.A. Subsidiary Financing Agreements Dec/18 — Gerdau Holding Inc. Subsidiary 10-year Bond Jan/20 Gerdau Trade Inc. Subsidiary 10-year Bond Jan/21 Gerdau Corsa S.A.P.I. de C.V. Joint-venture Financing Agreements Jul/18 - Dec/21 Gerdau Summit Aços Fundidos e Forjados S.A. Joint-venture Financing Agreements Aug/25 — GTL Trade Finance Inc., Gerdau Holdings Inc. Subsidiary 10-year Bond Apr/24 Sipar Aceros S.A. Subsidiary Financing Agreements Sep/18 - Sep/21 Gerdau Trade Inc. Subsidiary 10-year Bond Apr/23 Gerdau Steel India Ltd. Subsidiary Financing Agreements Sep/18 - Feb/19 Gerdau Steel India Ltd. Subsidiary Financing Agreements — Indetermined — Comercial Gerdau Bolivia Subsidiary Financing Agreements — nov/17 — Gerdau Açominas S.A. Subsidiary Financing Agreements Jan/20 - Feb/21 Gerdau Ameristeel US. Inc. Subsidiary Bond 25 yers Oct/37 Gerdau Ameristeel US. Inc. Subsidiary Bond 30 yers May/37 Gerdau Aços Longos S.A. Subsidiary Financing Agreements Oct/24 - Dec/30 Gerdau Aços Longos S.A. Subsidiary Financing Agreements Dec/18 Siderurgica Zuliana, C.A. Subsidiary Financing Agreements Dec/18 Gerdau Ameristeel Corporation; Gerdau Ameristeel US Inc.; Gerdau Macsteel Inc.; Comercial Gerdau Bolivia S.A.; Gerdau Aza S.A.; Gerdau Metaldom S.A.; Sipar Aceros S.A.; Gerdau Hungria Holdings LLC; Aceros Corsa S.A. de C.V.; Gerdau Corsa S.A.P.I de C.V.; Gerdau GTL México S.A. de C.V.; Sidertul S.A. de C.V.; Steelchem Trading Corporation; Empresa Siderúrgica Del Perú S.A.A.; Gerdau Hungria Y CIA, S.R.C and Gerdau Laisa S.A. Subsidiary and Joint-venture Financing Agreements — Oct/20 Gerdau Aços Especiais S.A. Subsidiary Financing Agreements feb/20 — |
Schedule of key management compensation | 2017 Number of Weighted R$ Balance as of January 1, 2015 Options Forfeited ) Others — Balance as of December 31, 2015 Options Forfeited ) Balance as of December 31, 2016 Options Forfeited ) Balance as of December 31, 2017 2017 2016 Available at beginning of the year Granted Exercised ) ) Forfeited — Available at the end of the year |
EMPLOYEE BENEFITS (Tables)
EMPLOYEE BENEFITS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of net defined benefit liability (asset) [line items] | |
Schedule of total assets and liabilities of all types of employee benefits granted | 2017 2016 Plan assets - Defined contribution pension plan Plan assets - Defined benefit pension plan — Total assets Actuarial liabilities - Defined benefit pension plan Acturial liabilities - Post-employment health care benefit Retirement and termination benefit liabilities Total liabilities Current Non-current |
Post-employment defined benefit pension plans | |
Disclosure of net defined benefit liability (asset) [line items] | |
Summary of sensitivity analysis | 1% Increase 1% Decrease Discount rate ) |
Defined benefit pension plan | |
Disclosure of net defined benefit liability (asset) [line items] | |
Schedule of current expenses of benefit plans | 2017 2016 2015 Cost of current service Interest expense Return on plan assets ) ) ) Past service cost ) Curtailment — — ) Settlement ) — Interest cost on unrecoverable surplus Net pension cost ) |
Schedule of reconciliations of assets and liabilities of benefit plans | 2017 2016 Present value of defined benefit obligation ) ) Fair value of plan assets Asset ceiling restrictions on recognition of net funded assets ) ) Net ) ) Plan assets — Defined benefit obligation ) ) |
Schedule of variation of plan obligations and assets | 2017 2016 2015 Variation of the plan obligations Obligation at the begining of the year Cost of service Interest expense Payments of the benefits ) ) ) Past service cost ) Curtailment — — ) Settlement ) — Acturial remeasurements ) Liabilities held for sale (note 3.4) ) — — Exchange Variance ) Obligation at the end of the year 2017 2016 2015 Variation of the plan assets Fair value of the plan assets at the begining of the year Return of the plan assets Contributions from sponsors ) ) Curtailment — — ) Settlement ) ) — Payments of benefits ) ) ) Remeasurement ) Assets held for sale (note 3.4) ) — — Exchange Variance ) Fair value of plan assets at the end of the year |
Summary of actuarial gains and losses recognized in other comprehensive income | 2017 2016 2015 Remeasurements ) ) Actuarial Remeasurements ) Restriction recognized in Other Comprehensive Income ) ) Remeasurements recognized in Other Comprehensive Income ) |
Summary of historical actuarial remeasurements | 2017 2016 2015 2014 2013 Present value of defined benefit obligation ) ) ) ) ) Fair value of the plan assets Surplus (Deficit) ) ) ) ) ) Experience adjustments on plan liabilities (Gain) ) ) Experience adjustments on plan assets (Gain) ) ) ) |
Summary of allocation for plan assets | 2017 Brazilian Plans American Plans Fixed income % % Variable income — % Others % % Total % % 2016 Brazilian Plans American Plans Fixed income % % Variable income — % Others % % Total % % |
Summary of assumptions | 2017 Brazilian Plan North America Plan Average discount rate 3.25% - 4.25% Rate of increase in compensation Not applicable Mortality table AT-2000 per sex RP-2006 and MP-2017 Mortality table of disabled AT-2000 per sex RP-2006 and MP-2017 Rate of rotation Based on service and salary level/null Based on age and/or the service 2016 Brazilian Plan North America Plan Average discount rate 3.75% - 4.25% Rate of increase in compensation Not applicable Mortality table RP-2000 CPM-2014 and RP-2014 Mortality table of disabled AT-2000 per sex Rates by age Rate of rotation Based on service and salary level/null Based on age and/or the service |
Post-employment health care benefit | |
Disclosure of net defined benefit liability (asset) [line items] | |
Summary of sensitivity analysis | 1% Increase 1% Decrease Effect over total service costs and interest costs ) Effect over benefit plan obligations ) |
Schedule of current expenses of benefit plans | 2017 2016 2015 Current service cost Interests expense Past service cost ) — Net cost pension benefit ) |
Schedule of reconciliations of assets and liabilities of benefit plans | 2017 2016 Present value of obligations ) ) Total net liabilities ) ) |
Schedule of variation of plan obligations and assets | 2017 2016 2015 Change in benefit obligation Benefit obligation at beginning of the year Cost of service Interest expense Past service cost ) — Contributions from participants Payment of benefits ) ) ) Remeasurements ) ) ) Exchange variations ) Benefit obligation at the end of the year 2017 2016 2015 Change in plan assets Contributions from sponsors Contributions from participants Payments of benefits ) ) ) Fair value of plan assets at end of the year — — — |
Summary of actuarial gains and losses recognized in other comprehensive income | 2017 2016 2015 Losses on actuarial obligation ) ) Actuarial losses recognized in Equity ) ) |
Summary of historical actuarial remeasurements | 2017 2016 2015 2014 2013 Present value of defined benefit obligation ) ) ) ) ) Deficit ) ) ) ) ) Experience adjustments on plan liabilities ) ) ) ) |
Summary of assumptions | 2017 2016 Average discount rate 3.25% - 3.50% 3.75% - 4.25% Health treatment - rate assumed next year 6.88% - 7.60% 6.40% - 6.80% Health treatment - Assumed rate of decline in the cost to achieve in the years of 2026 to 2041 4.00% - 4.50% 4.00% - 4.50% |
ENVIRONMENTAL LIABILITIES (Tabl
ENVIRONMENTAL LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ENVIRONMENTAL LIABILITIES | |
Schedule of provision for environmental liabilities | 2017 2016 Provision for environmental liabilities Current Non-current |
EQUITY (Tables)
EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
EQUITY | |
Schedule of reconciliations of common and preferred outstanding shares | 2017 2016 2015 Common shares Preferred shares Common shares Preferred shares Common shares Preferred shares Balance at beginning of the year Acquisition of Treasury shares — — — ) — ) Exercise of stock options — — — Transfer of shares — — — — — Balance at the end of the year |
Schedule of ownership of shares | Shareholders 2017 Shareholders Common % Pref. % Total % Metalúrgica Gerdau S.A.* Brazilian institutional investors Foreign institutional investors Other shareholders Treasury stock Shareholders 2016 Shareholders Common % Pref. % Total % Metalúrgica Gerdau S.A.* Brazilian institutional investors Foreign institutional investors Other shareholders Treasury stock Shareholders 2015 Shareholders Common % Pref. % Total % Metalúrgica Gerdau S.A.* Brazilian institutional investors Foreign institutional investors Other shareholders Treasury stock * Metalurgica Gerdau S.A. is the controlling shareholder and Stichting Gerdau Johanpeter is the ultimate controlling shareholder of the Company. |
Schedule of changes in treasury stocks | 2017 Common shares R$ Preferred shares R$ Opening balance Exercise of stock options — — ) ) Closing balance 2016 Common shares R$ Preferred shares R$ Opening balance Repurchases — — Exercise of stock options — — ) ) Transfer of shares — — ) ) Closing balance 2015 Common shares R$ Preferred shares R$ Opening balance Repurchases — — Exercise of stock options — — ) ) Closing balance |
Schedule of effects of interest changes in subsidiaries | December 31, 2017 Attributed to parent Non-controlling Total (ii) Other changes — ) ) Effects of interest changes in subsidiaries — ) ) December 31, 2016 Attributed to parent Non-controlling Total (ii) Other changes — ) ) Effects of interest changes in subsidiaries — ) ) December 31, 2015 Attributed to parent Non-controlling Total (i) Acquisition of non-controlling interests — ) ) (ii) Other changes — Effects of interest changes in subsidiaries — ) ) (i) Acquisition of non-controlling interests in some Brazilian subsidiaries; (ii) Other changes in subsidiaries without losing control, which may include among others, capital increases, other acquisitions of interests and dilutions of any nature. |
Schedule of dividend amounts considered as distributed using the balance of the Investments and Working Capital Reserve | 2017 2016 2015 Net loss ) ) ) Absorption of net loss by investments and working capital reserve |
Schedule of dividends and interest on capital | Outstanding shares Period Nature R$ /share (thousands) Credit Payment 2017 2016 2015 1 st quarter Interest — — — — — — 2 nd quarter Dividends 8/21/2017 9/1/2017 — 2 nd quarter Interest — — — — — — 3 rd quarter Interest — — — — — — — 3 rd quarter Dividends 11/21/2017 12/1/2017 4 th quarter Dividends — — — — — — — Interest and Dividends Credit per share (R$) |
EARNINGS PER SHARE (EPS) (Table
EARNINGS PER SHARE (EPS) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
EARNINGS PER SHARE (EPS) | |
Schedule of earnings per share | 2017 Common Preferred Total (in thousands, except share and per share data) Basic numerator Allocated net income (loss) available to common and preferred shareholders ) ) ) Basic denominator Weighted-average outstanding shares, after deducting the average tresuary shares Earnings per share (in R$) — Basic ) ) 2016 Common Preferred Total (in thousands, except share and per share data) Basic numerator Allocated net income (loss) available to common and preferred shareholders ) ) ) Basic denominator Weighted-average outstanding shares, after deducting the average tresuary shares Earnings per share (in R$) — Basic ) ) 2015 Common Preferred Total (in thousands, except share and per share data) Basic numerator Allocated net income (loss) available to common and preferred shareholders ) ) ) Basic denominator Weighted-average outstanding shares, after deducting the average tresuary shares Earnings per share (in R$) — Basic ) ) |
NET SALES REVENUE (Tables)
NET SALES REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
NET SALES REVENUE | |
Schedule of net sales revenues | 2017 2016 2015 Gross sales Taxes on sales ) ) ) Discounts ) ) ) Net sales |
LONG-TERM INCENTIVE PLANS (Tabl
LONG-TERM INCENTIVE PLANS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
LONG-TERM INCENTIVE PLANS | |
Summary of changes in restricted and performance shares | Balance on January 1, 2015 Granted Forfeited ) Exercised ) Balance on December 31, 2015 Granted Forfeited ) Exercised ) Balance on December 31, 2016 Granted Forfeited ) Exercised ) Balance on December 31, 2017 |
Schedule of stock option activity | 2017 2016 2015 Number of shares Average exercise Number of shares Average exercise Number of shares Average exercise R$ R$ R$ Available at beginning of the year Options Exercised — — — — ) Options Forfeited ) ) ) Available at the end of the year |
Summary of stock options by exercise price | Exercise price Quantity Average period of Average Number R$ R$ 14.39 R$ 10.58 to R$ 29.12 *The total of options vested that are exercisable on December 31, 2017 is 57,668 (57,678 and 127,899 on December 31, 2016 and 2015). |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SEGMENT REPORTING | |
Schedule of company's segment information classified according to the business segments | Business Segments 2017 Brazil Operation North America South America Special Steels Eliminations and Consolidated Net sales ) Cost of sales ) ) ) ) ) Gross profit ) Selling, general and administrative expenses ) ) ) ) ) ) Other operating income (expenses) ) Impairment of assets ) ) — — — ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company — — — — ) ) Reversal of contingent liabilities, net — — — — Equity in earnings of unconsolidated companies — ) ) Operational (Loss) income before financial income (expenses) and taxes ) Financial result, net ) ) ) ) ) ) Income (Loss) before taxes ) ) ) Income and social contribution taxes ) ) ) ) ) Net income (Loss) ) ) ) Supplemental information: Net sales between segments — Depreciation/amortization — Investments in associates and jointly-controlled entities — Total assets Total liabilities Business Segments 2016 Brazil Operation North America South America Special Steels Eliminations and Consolidated Net sales ) Cost of sales ) ) ) ) ) Gross profit ) Selling, general and administrative expenses ) ) ) ) ) ) Other operating income (expenses) Impairment of assets — ) ) — — ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company — — — — ) ) Equity in earnings of unconsolidated companies — ) — ) Operational (Loss) income before financial income (expenses) and taxes ) ) ) Financial result, net ) ) ) ) ) ) Income (Loss) before taxes ) ) ) ) Income and social contribution taxes ) ) ) ) Net income (Loss) ) ) ) ) Supplemental information: Net sales between segments — Depreciation/amortization — Investments in associates and jointly-controlled entities — — Total assets Total liabilities Business Segments 2015 Brazil Operation North America South America Special Steels Eliminations and Consolidated Net sales ) Cost of sales ) ) ) ) ) Gross profit Selling, general and administrative expenses ) ) ) ) ) ) Other operating income (expenses) Impairment of assets ) ) ) ) — ) Equity in earnings of unconsolidated companies — ) — ) Operational (Loss) income before financial income (expenses) and taxes ) ) ) ) ) Financial result, net ) ) ) ) ) ) Income (Loss) before taxes ) ) ) ) ) ) Income and social contribution taxes ) ) Net income (Loss) ) ) ) ) ) ) Supplemental information: Net sales between segments — Depreciation/amortization — Investments in associates and jointly-controlled entities — Total assets ) Total liabilities |
Schedule of company's geographic information classified according to the geographical region | Geographic Area Brazil Latin America (1) North America (2) Europe/Asia Consolidated 2017 2017 2017 2017 2017 Net sales Total assets Brazil Latin America (1) North America (2) Europe/Asia Consolidated 2016 2016 2016 2016 2016 Net sales Total assets Brazil Latin America (1) North America (2) Europe/Asia Consolidated 2015 2015 2015 2015 2015 Net sales Total assets (1) Does not include operations of Brazil (2) Does not include operations of Mexico |
INSURANCE (Tables)
INSURANCE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INSURANCE | |
Schedule of types of insurance | Type Scope 2017 2016 Equity Inventories and property, plant and equipment items are insured against fire, electrical damage, explosion, machine breakage and overflow (leakage of material in fusion state). Business Interruption Net income plus fixed expenses Civil Liability Industrial operations |
EXPENSES BY NATURE (Tables)
EXPENSES BY NATURE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
EXPENSES BY NATURE | |
Schedule of expenses classified by nature | 2017 2016 2015 Depreciation and amortization ) ) ) Labor expenses ) ) ) Raw material and consumption material ) ) ) Freight ) ) ) Impairment of assets ) ) ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company ) ) — Reversal of contingent liabilities, net — — Other expenses/income, net ) ) ) ) ) ) Classified as: Cost of sales ) ) ) Selling expenses ) ) ) General and administrative expenses ) ) ) Other operating income Other operating expenses ) ) ) Impairment of assets ) ) ) Gains and losses on assets held for sale and sales of interest in subsidiaries and associate company ) ) — Reversal of contingent liabilities, net — — ) ) ) |
FINANCIAL INCOME (Tables)
FINANCIAL INCOME (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
FINANCIAL INCOME | |
Schedule of financial income | 2017 2016 2015 Income from short-term investments Interest income and other financial income Financial Income Interest on debt ) ) ) Monetary variation and other financial expenses ) ) ) Financial Expenses ) ) ) Exchange Variation, net ) ) Reversal of monetary update of contingent liabilities, net — — Gains and losses on financial instruments, net ) ) Financial result, net ) ) ) |
SUMMARY OF SIGNIFICANT ACCOUN65
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Details) | 12 Months Ended | |
Dec. 31, 2017shares | Dec. 31, 2016 | |
Dividends | ||
Mandatory Minimum Annual Dividend, Percentage | 30.00% | |
Dilutive effect of instruments on EPS | ||
Antidilutive shares excluded from calculation of diluted EPS | 0 | |
Venezuelan bolivar fuerte | ||
Hyperinflation | ||
Foreign Currency Hyperinflation Exchange Rate, Bolivar Forte to Real | 1,011.19 | 206.61 |
CONSOLIDATED FINANCIAL STATEM66
CONSOLIDATED FINANCIAL STATEMENTS - Subsidiaries (Details) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Gerdau GTL Spain S.L. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Gerdau Internacional Empreendimentos Ltda. - Grupo Gerdau | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Gerdau Ameristeel Corporation and subsidiaries | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Gerdau Acominas S.A. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.36% | 99.35% | 99.35% |
Gerdau Aos Longos S.A. and subsidiary | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.12% | 99.11% | 99.11% |
Gerdau Steel Inc. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Gerdau Holdings Inc. and subsidiary | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Paraopeba - Fixed-income investment fund | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 10.69% | 70.93% | 65.75% |
Percent of participation in investment fund | 51.11% | 91.58% | 82.64% |
Gerdau Holdings Europa S.A. and subsidiaries | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | ||
Gerdau America Latina Participacoes S.A. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.12% | 99.12% | |
Gerdau Chile Inversiones Ltda. and subsidiaries | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.00% | 99.00% | 99.99% |
Gerdau Acos Especiais S.A. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.55% | 99.56% | |
Gerdau Hungria Holdings Limited Liability Company and subsidiaries | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
GTL Equity Investments Corp. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Empresa Siderurgica del Peru S.A.A. - Siderperu | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 90.03% | 90.03% | 90.03% |
Diaco S.A. and subsidiary | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.68% | 99.68% | |
Gerdau Gtl Mexico S.A. de C.V. and subsidiaries | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Seiva S.A. Florestas e Industrias | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 97.73% | 97.73% | 97.73% |
Itagua Com. Imp. e Exp. Ltda | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | |
Gerdau Laisa S.A. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Sipar Gerdau Inversiones S.A. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.99% | 99.99% | 99.99% |
Sipar Aceros S.A. and subsidiary | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 99.98% | 99.96% | 99.96% |
Cleary Holdings Corp. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | ||
Sizuca - Siderurgica Zuliana C.A. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
GTL Trade Finance Inc. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Gerdau Trade Inc. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 100.00% | 100.00% | 100.00% |
Gerdau Steel India Ltd. | |||
Significant consolidated subsidiaries | |||
Equity interest in significant consolidated subsidiaries (as a percent) | 98.90% | 98.90% | 98.90% |
CONSOLIDATED FINANCIAL STATEM67
CONSOLIDATED FINANCIAL STATEMENTS - Joint ventures (Details) T in Thousands, R$ in Thousands, $ in Millions | Jun. 30, 2017BRL (R$) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | Jun. 30, 2017USD ($)T | Jun. 30, 2017BRL (R$)T |
Joint ventures | ||||||
Net income (loss) | R$ 338667 | R$ 2885929 | R$ 4595986 | |||
Total comprehensive income | (298,366) | (7,773,542) | R$ 1094348 | |||
Joint ventures | ||||||
Joint ventures | ||||||
Net income (loss) | (91,553) | (126,723) | ||||
Total comprehensive income | R$ 91553 | R$ 126723 | ||||
Bradley Steel Processors | ||||||
Joint ventures | ||||||
Equity interest in joint venture | 50.00% | 50.00% | 50.00% | |||
MRM Guide Rail | ||||||
Joint ventures | ||||||
Equity interest in joint venture | 50.00% | 50.00% | 50.00% | |||
Gerdau Corsa S.A.P.I de C.V. | ||||||
Joint ventures | ||||||
Equity interest in joint venture | 50.00% | 50.00% | 50.00% | |||
Gerdau Metaldom Corp. | ||||||
Joint ventures | ||||||
Equity interest in joint venture | 45.00% | 45.00% | 45.00% | |||
Gerdau Summit Aos Fundidos e Forjados S.A. | ||||||
Joint ventures | ||||||
Equity interest in joint venture | 58.73% | |||||
Diaco S.A. | ||||||
Joint ventures | ||||||
Equity interest in joint venture | 50.00% | 49.87% | ||||
Economic value of transaction | $ 165 | R$ 546000 | ||||
Decrease in indebtedness | R$ 226000 | |||||
Decrease in working capital | R$ 175000 | |||||
Diaco S.A. | Steel | ||||||
Joint ventures | ||||||
Production capacity (in tons) | T | 674 | 674 |
CONSOLIDATED FINANCIAL STATEM68
CONSOLIDATED FINANCIAL STATEMENTS - Associate companies (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Interest in Associate companies | |||
Net income (loss) | R$ 338667 | R$ 2885929 | R$ 4595986 |
Total comprehensive income | (298,366) | (7,773,542) | R$ 1094348 |
Associate companies | |||
Interest in Associate companies | |||
Net income (loss) | 26,099 | 141,023 | |
Total comprehensive income | R$ 26099 | R$ 141023 | |
Dona Francisca Energtica S.A. | |||
Interest in Associate companies | |||
Equity interest in associate companies (as a percent) | 51.82% | 51.82% | 51.82% |
Corsa Controladora, S.A. de C.V. and subsidiaries | |||
Interest in Associate companies | |||
Equity interest in associate companies (as a percent) | 49.00% | 49.00% | 49.00% |
Corporacin Centro Americana del Acero S.A. and subsidiaries | |||
Interest in Associate companies | |||
Equity interest in associate companies (as a percent) | 30.00% |
CONSOLIDATED FINANCIAL STATEM69
CONSOLIDATED FINANCIAL STATEMENTS - Gains and losses on assets held for sale and sale of interest in subsidiaries and associate company (Details) T in Thousands, € in Millions, R$ in Millions, $ in Millions | Dec. 29, 2017BRL (R$) | Jun. 30, 2016EUR (€) | Dec. 31, 2017USD ($) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | Dec. 31, 2017EUR (€) | Dec. 31, 2017USD ($) | Dec. 31, 2017BRL (R$) | Dec. 29, 2017USD ($)T | Dec. 29, 2017BRL (R$)T | Oct. 10, 2017USD ($)T | Oct. 10, 2017BRL (R$)T | Dec. 31, 2016EUR (€) | Dec. 31, 2016USD ($) | Dec. 31, 2016BRL (R$) | Jun. 30, 2016BRL (R$) |
Chilean operations | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Percent of operations contracted for sale | 100.00% | 100.00% | ||||||||||||||
Economic value of transaction | $ 154 | R$ 509.0 | ||||||||||||||
Chilean operations | Steel | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Production capacity (in tons) | T | 520 | 520 | ||||||||||||||
Certain operations in the U.S. | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Income (expense) recognized as a result of operations with subsidiaries, associates and joint entities | R$ 649.2 | |||||||||||||||
Consideration agreement amount | $ 600 | R$ 1985.0 | ||||||||||||||
Certain operations in the U.S. | Steel | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Production capacity (in tons) | T | 2,500 | 2,500 | ||||||||||||||
Discontinued operations | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Decrease in indebtedness | R$ 291.0 | |||||||||||||||
Decrease in working capital | (438) | |||||||||||||||
Gerdau Holdings Europa S.A. and subsidiaries | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Enterprise value of the transaction | € 155 | R$ 621.0 | ||||||||||||||
Maximum additional contingent consideration receivable | € 45 | R$ 180.0 | ||||||||||||||
Period of time over which contingent consideration may be received | 5 years | |||||||||||||||
Receivable amount in sale of business | € 28.9 | R$ 121.0 | € 32.5 | R$ 112.0 | ||||||||||||
Income (expense) recognized as a result of operations with subsidiaries, associates and joint entities | (105) | |||||||||||||||
Corporacin Centroamericana del Acero S.A. and subsidiaries and Cleary Holdings Corp. | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Receivable amount in sale of business | $ 16 | R$ 52.0 | $ 79 | 257 | ||||||||||||
Income (expense) recognized as a result of operations with subsidiaries, associates and joint entities | R$ 47.0 | |||||||||||||||
Corporacin Centro Americana del Acero S.A. and subsidiaries | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Enterprise value of the transaction | 70 | 222.7 | ||||||||||||||
Cleary Holdings Corp. | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Enterprise value of the transaction | $ 30.2 | R$ 102.6 | ||||||||||||||
Gerdau Summit Aos Fundidos e Forjados S.A. | ||||||||||||||||
Results in operations with subsidiaries and associate company | ||||||||||||||||
Cash received | $ 44.7 | R$ 147.9 | ||||||||||||||
Fair value adjustment | R$ 72.5 |
CONSOLIDATED FINANCIAL STATEM70
CONSOLIDATED FINANCIAL STATEMENTS - Total cash paid for business combinations (Details) R$ in Thousands | 12 Months Ended |
Dec. 31, 2015BRL (R$) | |
Business Combinations | |
Companies / interest acquired | R$ 20929 |
Interest increase in subsidiaries | 339,068 |
Armacero Industrial y Comercial S.A. | |
Business Combinations | |
Companies / interest acquired | 20,929 |
Gerdau Acos Longos S.A., Gerdau Acominas S.A., Gerdau Acos Especiais S.A., Gerdau America Latina Participacoes S.A. | |
Business Combinations | |
Interest increase in subsidiaries | R$ 339068 |
CASH AND CASH EQUIVALENTS, AN71
CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
CASH AND CASH EQUIVALENTS, AND SHORT AND LONG-TERM INVESTMENTS | ||||
Cash | R$ 10439 | R$ 9412 | ||
Banks and immediately available investments | 2,544,899 | 5,053,971 | ||
Total cash and cash equivalents | 2,555,338 | 5,063,383 | R$ 5648080 | R$ 3049971 |
Held for Trading | 821,518 | 1,024,411 | ||
Short-term investments | R$ 821518 | R$ 1024411 |
TRADE ACCOUNTS RECEIVABLE - Sum
TRADE ACCOUNTS RECEIVABLE - Summary (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | R$ 2798420 | R$ 3576699 |
Gross | Trade accounts receivable - in Brazil | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 1,265,431 | 1,251,739 |
Gross | Trade accounts receivable - exports from Brazil | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 139,162 | 265,252 |
Gross | Trade accounts receivable - foreign subsidiaries | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 1,525,466 | 2,259,014 |
Allowance for doubtful accounts | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | R$ 131639 | R$ 199306 |
TRADE ACCOUNTS RECEIVABLE - Acc
TRADE ACCOUNTS RECEIVABLE - Accounts receivable by aging (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | R$ 2798420 | R$ 3576699 |
Allowance for doubtful accounts | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | (131,639) | (199,306) |
Current | Gross | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 2,234,723 | 2,917,073 |
Past due: Up to 30 days | Gross | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 467,901 | 506,780 |
Past due: From 31 to 60 days | Gross | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 96,852 | 128,715 |
Past due: From 61 to 90 days | Gross | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 17,636 | 37,559 |
Past due: From 91 to 180 days | Gross | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 27,841 | 53,460 |
Past due: From 181 to 360 days | Gross | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | 22,985 | 66,444 |
Past due: Above 360 days | Gross | ||
TRADE ACCOUNTS RECEIVABLE | ||
Trade account receivable - net | R$ 62121 | R$ 65974 |
TRADE ACCOUNTS RECEIVABLE - Cha
TRADE ACCOUNTS RECEIVABLE - Changes in allowance (Details) - Trade accounts receivable - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Changes in the allowance | |||
Allowance at beginning of period | R$ 199306 | R$ 185261 | R$ 98814 |
Provisions for bad debt during the year | (98,476) | (85,661) | (133,868) |
Recoveries in the year | 80,134 | 16,880 | 6,167 |
Write-offs | 73,591 | 37,679 | 41,392 |
Loss of control by selling of subsidiary | 17,594 | ||
Loss of control by joint venture creation | 1,487 | ||
Assets held for sale | 11,207 | ||
Exchange variation | (276) | (537) | (138) |
Allowance at end of period | R$ 131639 | R$ 199306 | R$ 185261 |
INVENTORIES - Components of inv
INVENTORIES - Components of inventory at net realizable value (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
INVENTORIES | ||
Finished products | R$ 3026556 | R$ 2987785 |
Work in progress | 1,302,152 | 1,201,327 |
Raw materials | 1,703,013 | 1,487,971 |
Storeroom supplies | 298,100 | 430,731 |
Imports in transit | 375,139 | 253,729 |
Allowance for adjustments to net realizable value | (3,556) | (28,813) |
Total current inventories | R$ 6701404 | R$ 6332730 |
INVENTORIES - Changes in net re
INVENTORIES - Changes in net realizable value of inventories (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Allowance for adjustment to net realizable value of inventories | |||
Balance at the beginning of the year | R$ 28813 | ||
Balance at the end of the year | (3,556) | R$ 28813 | |
Inventories | |||
Allowance for adjustment to net realizable value of inventories | |||
Balance at the beginning of the year | (28,813) | (101,121) | R$ 66363 |
Provision for the year | (26,545) | (62,899) | (54,987) |
Reversal of adjustment to net realizable value | 46,740 | 94,391 | 37,451 |
Loss of control by selling of subsidiary | 30,105 | ||
Loss of control by joint venture creation | 392 | ||
Assets held for sale | 881 | ||
Exchange rate variation | 3,789 | 10,711 | (17,222) |
Balance at the end of the year | R$ 3556 | R$ 28813 | R$ 101121 |
TAX CREDITS - Current and Non-c
TAX CREDITS - Current and Non-current (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Disclosure of Tax credits | ||
Tax credits - current | R$ 402429 | R$ 504429 |
Tax credits - non-current | 30,841 | 56,703 |
Tax credits | ||
Disclosure of Tax credits | ||
Tax credits - current | 402,429 | 504,429 |
Tax credits - non-current | 30,841 | 56,703 |
Tax credits - current and non-current | 433,270 | 561,132 |
ICMS (state VAT) | ||
Disclosure of Tax credits | ||
Tax credits - current | 155,096 | 130,718 |
Tax credits - non-current | 26,135 | 50,757 |
Social security financing | ||
Disclosure of Tax credits | ||
Tax credits - current | 91,229 | 173,453 |
Tax credits - non-current | 360 | 2,294 |
Financing of social integration program | ||
Disclosure of Tax credits | ||
Tax credits - current | 20,242 | 35,135 |
IPI (Federal VAT) | ||
Disclosure of Tax credits | ||
Tax credits - current | 59,982 | 48,751 |
IVA (Value added tax) | ||
Disclosure of Tax credits | ||
Tax credits - current | 48,139 | 85,674 |
Others | ||
Disclosure of Tax credits | ||
Tax credits - current | 27,741 | 30,698 |
Financing of social integration program and others | ||
Disclosure of Tax credits | ||
Tax credits - non-current | R$ 4346 | R$ 3652 |
TAX CREDITS - Realization of no
TAX CREDITS - Realization of non-current tax credits (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Tax credits - non-current | R$ 30841 | R$ 56703 |
Tax credits | ||
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Tax credits - non-current | 30,841 | 56,703 |
Tax credits | Year Two | ||
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Tax credits - non-current | 18,017 | 33,840 |
Tax credits | Year Three | ||
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Tax credits - non-current | 7,062 | 14,334 |
Tax credits | After Year Three | ||
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Tax credits - non-current | R$ 5762 | |
Tax credits | Year Four | ||
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Tax credits - non-current | R$ 8529 |
INCOME AND SOCIAL CONTRIBUTIO79
INCOME AND SOCIAL CONTRIBUTION TAXES - Reconciliations of income and social contribution taxes at statutory rates to amounts presented in the Statement of Income (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
INCOME AND SOCIAL CONTRIBUTION TAXES | |||
Applicable tax rate | 25.00% | 25.00% | 25.00% |
Social contribution tax | 9.00% | 9.00% | 9.00% |
Tax rates for foreign subsidiaries mainly in financial activities | 0.00% | 0.00% | 0.00% |
Reconciliations of taxes at statutory rates to amounts presented in the Statement of Income | |||
Income (loss) before income taxes | R$ 43276 | R$ 2581615 | R$ 6094408 |
Statutory tax rates | 34.00% | 34.00% | 34.00% |
Income and social contribution taxes at statutory rates | R$ 14714 | R$ 877749 | R$ 2072099 |
Tax adjustment with respect to: | |||
Difference in tax rates in foreign companies | (183,787) | (1,162,174) | (222,553) |
Equity in earnings of unconsolidated companies | (11,763) | (4,342) | (8,331) |
Interest on equity | 113 | (162) | 63,407 |
Tax credits and incentives | 23,185 | 18,494 | 19,459 |
Tax deductible goodwill recorded in statutory books | 36,469 | 233,029 | |
No recognition of deferred tax assets | (40,279) | (387,668) | |
Capital Gain | (98,290) | ||
Write-down of deferred tax asset | (284,014) | ||
Other permanent differences, net | (39,563) | (30,069) | 12,994 |
Income and social contribution taxes | (295,391) | (304,314) | 1,498,422 |
Current | (313,758) | (110,511) | (158,450) |
Deferred | R$ 18367 | R$ 193803 | R$ 1656872 |
Minimum | |||
INCOME AND SOCIAL CONTRIBUTION TAXES | |||
Tax rate for foreign subsidiaries | 22.60% | 22.60% | 22.60% |
Maximum | |||
INCOME AND SOCIAL CONTRIBUTION TAXES | |||
Tax rate for foreign subsidiaries | 35.00% | 35.00% | 35.00% |
INCOME AND SOCIAL CONTRIBUTIO80
INCOME AND SOCIAL CONTRIBUTION TAXES - Changes in net deferred asset (liability) (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | R$ 3011794 | R$ 3392987 | R$ 1622643 |
Recognized in income | 18,367 | (193,803) | 1,656,872 |
Effect of selling of subsidiary and others | 2,056 | (211,897) | |
Comprehensive Income | (60,510) | 24,507 | 113,472 |
Balance as of end of period | 2,971,707 | 3,011,794 | 3,392,987 |
Tax loss carryforward | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | 874,357 | 887,980 | 1,003,441 |
Recognized in income | 157,402 | 327,743 | (259,976) |
Effect of selling of subsidiary and others | (22,362) | (263,297) | |
Comprehensive Income | (35,759) | (78,069) | 144,515 |
Balance as of end of period | 973,638 | 874,357 | 887,980 |
Social contribution tax losses | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | 311,892 | 191,638 | 148,827 |
Recognized in income | 58,963 | 120,254 | 42,811 |
Effect of selling of subsidiary and others | (15,073) | ||
Balance as of end of period | 355,782 | 311,892 | 191,638 |
Provision for tax, civil and labor liabilities | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | 755,198 | 639,566 | 527,731 |
Recognized in income | (479,836) | 118,526 | 110,318 |
Effect of selling of subsidiary and others | 101 | (2,671) | |
Comprehensive Income | (223) | 1,517 | |
Balance as of end of period | 275,463 | 755,198 | 639,566 |
Benefits granted to employees | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | 432,537 | 549,865 | 431,328 |
Recognized in income | (48,466) | (67,133) | (25,694) |
Effect of selling of subsidiary and others | (9,363) | 34,982 | |
Comprehensive Income | (91,905) | (85,177) | 144,231 |
Balance as of end of period | 282,803 | 432,537 | 549,865 |
Other temporary differences | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | 350,762 | 381,991 | 210,609 |
Recognized in income | (81,627) | (21,985) | 247,458 |
Effect of selling of subsidiary and others | 92,174 | 20,776 | |
Comprehensive Income | 48,991 | (30,020) | (76,076) |
Balance as of end of period | 410,300 | 350,762 | 381,991 |
Deferred exchange variance | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | 1,251,542 | 2,158,149 | 874,742 |
Recognized in income | (199,200) | (907,690) | 1,292,709 |
Effect of selling of subsidiary and others | 8,185 | ||
Comprehensive Income | 1,083 | (9,302) | |
Balance as of end of period | 1,060,527 | 1,251,542 | 2,158,149 |
Provision for losses | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | 112,936 | 151,678 | 54,938 |
Recognized in income | (2,208) | (34,059) | 95,596 |
Effect of selling of subsidiary and others | (4,671) | ||
Comprehensive Income | (12) | 1,144 | |
Balance as of end of period | 110,728 | 112,936 | 151,678 |
Difference between book value and tax base of assets acquired in business combinations | |||
Breakdown and changes in deferred income and social contribution tax assets and liabilities at statutory tax rates | |||
Balance as of beginning of period | (1,077,430) | (1,567,880) | (1,628,973) |
Recognized in income | 613,339 | 270,541 | 153,650 |
Effect of selling of subsidiary and others | (51,606) | 2,984 | |
Comprehensive Income | 18,163 | 216,925 | (92,557) |
Balance as of end of period | R$ 497534 | R$ 1077430 | R$ 1567880 |
INCOME AND SOCIAL CONTRIBUTIO81
INCOME AND SOCIAL CONTRIBUTION TAXES - Classification of net deferred asset (liability) (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
INCOME AND SOCIAL CONTRIBUTION TAXES | ||||
Total | R$ 2971707 | R$ 3011794 | R$ 3392987 | R$ 1622643 |
Non-current assets | 3,054,393 | 3,407,230 | 4,307,462 | 2,567,189 |
Non-current liabilities | R$ 82686 | R$ 395436 | R$ 914475 | R$ 944546 |
INCOME AND SOCIAL CONTRIBUTIO82
INCOME AND SOCIAL CONTRIBUTION TAXES - Estimated recovery and reversal of income and social contributions tax assets and liabilities (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | R$ 3054393 | R$ 3407230 | R$ 4307462 | R$ 2567189 |
Non-current liabilities | (82,686) | (395,436) | R$ 914475 | R$ 944546 |
Next 12 months | ||||
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | 326,356 | 512,422 | ||
Non-current liabilities | (2,680) | (2,283) | ||
Year Two | ||||
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | 198,590 | 391,384 | ||
Non-current liabilities | (6,116) | (89,052) | ||
Year Three | ||||
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | 400,597 | 364,030 | ||
Non-current liabilities | (6,498) | (56,006) | ||
Year Four | ||||
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | 369,857 | 535,937 | ||
Non-current liabilities | (4,745) | (154,664) | ||
After Year Four | ||||
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | 1,758,993 | |||
Non-current liabilities | R$ 62647 | |||
Year Five | ||||
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | 499,984 | |||
Non-current liabilities | (14,496) | |||
After year 5 | ||||
Deferred income and social contribution tax assets and liabilities at statutory tax rates | ||||
Non-current assets | 1,103,473 | |||
Non-current liabilities | R$ 78935 |
INCOME AND SOCIAL CONTRIBUTIO83
INCOME AND SOCIAL CONTRIBUTION TAXES - Tax Asset Not Booked (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Domestic | ||
INCOME AND SOCIAL CONTRIBUTION TAXES | ||
Unused tax losses for which no deferred tax asset recognised | R$ 312741 | R$ 317889 |
Foreign | ||
INCOME AND SOCIAL CONTRIBUTION TAXES | ||
Unused tax losses for which no deferred tax asset recognised | 1,137,548 | 857,215 |
Unused tax credits for which no deferred tax asset recognised | R$ 360152 | R$ 349072 |
INVESTMENTS (Details)
INVESTMENTS (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
INVESTMENTS | |||
Balance at beginning of period | R$ 798844 | R$ 1392882 | R$ 1394383 |
Equity in earnings | (34,597) | (12,771) | (24,502) |
Cumulative translation adjustment | (16,745) | (251,195) | 417,961 |
Capital increase | 362,857 | 40,524 | |
Joint venture creation | 145,084 | ||
Contingent price complement | 65,500 | ||
Impairment of assets | (361,786) | ||
Control acquisition | (20,929) | ||
Effect of selling of subsidiary | (205,577) | ||
Dividends/Interest on equity | (40,644) | (124,495) | (52,769) |
Balance at end of period | 1,280,299 | 798,844 | 1,392,882 |
Dona Francisca Energtica S.A. | |||
INVESTMENTS | |||
Balance at beginning of period | 90,796 | 89,595 | 124,211 |
Equity in earnings | 19,971 | 17,780 | 11,725 |
Contingent price complement | 65,500 | ||
Dividends/Interest on equity | (26,594) | (16,579) | (46,341) |
Balance at end of period | 149,673 | 90,796 | 89,595 |
Armacero Industrial y Comercial S.A. | |||
INVESTMENTS | |||
Balance at beginning of period | 20,251 | ||
Equity in earnings | (1,933) | ||
Cumulative translation adjustment | 2,611 | ||
Control acquisition | (20,929) | ||
Corsa Controladora, S.A. de C.V. and subsidiaries | |||
INVESTMENTS | |||
Balance at beginning of period | 266,303 | 359,568 | 298,409 |
Equity in earnings | (6,533) | 12,155 | (7,574) |
Cumulative translation adjustment | 17,512 | (105,420) | 68,733 |
Balance at end of period | 277,282 | 266,303 | 359,568 |
Corporacin Centro Americana del Acero S.A. and subsidiaries | |||
INVESTMENTS | |||
Balance at beginning of period | 216,272 | 435,568 | |
Equity in earnings | 23,705 | 9,053 | |
Cumulative translation adjustment | (36,134) | 134,749 | |
Impairment of assets | (361,786) | ||
Effect of selling of subsidiary | (203,843) | ||
Dividends/Interest on equity | (1,312) | ||
Balance at end of period | 216,272 | ||
Other Associate companies | |||
INVESTMENTS | |||
Balance at beginning of period | 2,084 | 1,581 | |
Cumulative translation adjustment | (350) | 503 | |
Effect of selling of subsidiary | (1,734) | ||
Balance at end of period | 2,084 | ||
Joint Ventures, North America | |||
INVESTMENTS | |||
Balance at beginning of period | 56,492 | 60,733 | 40,152 |
Equity in earnings | 5,725 | 13,533 | 14,432 |
Cumulative translation adjustment | 5,081 | (9,492) | 11,265 |
Dividends/Interest on equity | (14,050) | (8,282) | (5,116) |
Balance at end of period | 53,248 | 56,492 | 60,733 |
Gerdau Corsa S.A.P.I de C.V. | |||
INVESTMENTS | |||
Balance at beginning of period | (19,269) | 88,785 | 109,930 |
Equity in earnings | (110,773) | (96,306) | (88,690) |
Cumulative translation adjustment | (33,078) | (11,748) | 27,021 |
Capital increase | 178,670 | 40,524 | |
Balance at end of period | 15,550 | (19,269) | 88,785 |
Gerdau Metaldom Corp. | |||
INVESTMENTS | |||
Balance at beginning of period | 404,522 | 575,845 | 364,281 |
Equity in earnings | 33,505 | 16,362 | 38,485 |
Cumulative translation adjustment | (7,606) | (88,051) | 173,079 |
Dividends/Interest on equity | (99,634) | ||
Balance at end of period | 430,421 | R$ 404522 | R$ 575845 |
Gerdau Summit Aos Fundidos e Forjados S.A. | |||
INVESTMENTS | |||
Equity in earnings | 15,460 | ||
Capital increase | 184,187 | ||
Balance at end of period | 199,647 | ||
Diaco S.A. | |||
INVESTMENTS | |||
Equity in earnings | 8,048 | ||
Cumulative translation adjustment | 1,346 | ||
Joint venture creation | 145,084 | ||
Balance at end of period | R$ 154478 |
PROPERTY, PLANT AND EQUIPMENT -
PROPERTY, PLANT AND EQUIPMENT - Cost (Details) - BRL (R$) R$ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | R$ 19351891 | R$ 22784326 | |||
Impairment | R$ 265369 | R$ 239329 | (265,369) | (239,329) | |
Balance, end of period | 16,443,742 | 19,351,891 | 16,443,742 | 19,351,891 | R$ 22784326 |
Gross | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 44,001,599 | 49,938,129 | 43,635,534 | ||
Additions | 873,329 | 1,323,891 | 2,324,718 | ||
Capitalized interest | 44,260 | 187,375 | 213,476 | ||
Business Combination | 54,600 | ||||
Disposals | (513,472) | (461,340) | (366,607) | ||
Loss of control by selling of subsidiary | (1,091,705) | (2,956,162) | |||
Impairment | (265,369) | (239,329) | (2,105,971) | ||
Assets held for sale | (4,080,785) | ||||
Foreign exchange effect | 972,460 | (3,790,965) | 6,182,379 | ||
Balance, end of period | 39,940,317 | 44,001,599 | 39,940,317 | 44,001,599 | 49,938,129 |
Land and buildings | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 5,585,082 | 6,455,083 | |||
Balance, end of period | 5,170,675 | 5,585,082 | 5,170,675 | 5,585,082 | 6,455,083 |
Land and buildings | Gross | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 9,483,753 | 10,842,802 | 9,083,765 | ||
Additions | 2,028 | 35,238 | 2,150 | ||
Business Combination | 30,693 | ||||
Transfers | 700,318 | 584,575 | 462,812 | ||
Disposals | (157,625) | (81,256) | (69,777) | ||
Loss of control by selling of subsidiary | (119,928) | (1,011,492) | |||
Impairment | (10,063) | (52,071) | (60,952) | ||
Assets held for sale | (1,013,466) | ||||
Foreign exchange effect | 200,681 | (834,043) | 1,394,111 | ||
Balance, end of period | 9,085,698 | 9,483,753 | 9,085,698 | 9,483,753 | 10,842,802 |
Machines, equipment, and installations | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 11,029,301 | 11,201,682 | |||
Balance, end of period | 9,439,768 | 11,029,301 | 9,439,768 | 11,029,301 | 11,201,682 |
Machines, equipment, and installations | Gross | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 30,633,880 | 32,616,700 | 28,434,074 | ||
Additions | 124,136 | 93,290 | 238,060 | ||
Business Combination | 10,767 | ||||
Transfers | 716,685 | 2,665,898 | 1,475,130 | ||
Disposals | (232,771) | (271,104) | (142,936) | ||
Loss of control by selling of subsidiary | (900,840) | (1,726,440) | |||
Impairment | (255,293) | (183,788) | (1,501,293) | ||
Assets held for sale | (2,734,923) | ||||
Foreign exchange effect | 665,730 | (2,560,676) | 4,102,898 | ||
Balance, end of period | 28,016,604 | 30,633,880 | 28,016,604 | 30,633,880 | 32,616,700 |
Data electronic equipment | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 112,432 | 111,646 | |||
Balance, end of period | 89,404 | 112,432 | 89,404 | 112,432 | 111,646 |
Data electronic equipment | Gross | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 762,074 | 939,266 | 755,455 | ||
Additions | 1,770 | 2,126 | 8,194 | ||
Business Combination | 503 | ||||
Transfers | 19,340 | 74,804 | 40,512 | ||
Disposals | (12,963) | (60,542) | (20,166) | ||
Loss of control by selling of subsidiary | (16,426) | (112,319) | |||
Impairment | (228) | ||||
Assets held for sale | (53,315) | ||||
Foreign exchange effect | 11,158 | (81,033) | 154,768 | ||
Balance, end of period | 711,638 | 762,074 | 711,638 | 762,074 | 939,266 |
Property, plant and equipment under construction | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 1,762,648 | 4,068,876 | |||
Balance, end of period | 950,680 | 1,762,648 | 950,680 | 1,762,648 | 4,068,876 |
Property, plant and equipment under construction | Gross | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 1,762,648 | 4,068,876 | 4,065,627 | ||
Additions | 687,019 | 1,117,317 | 2,000,515 | ||
Capitalized interest | 44,260 | 187,375 | 213,476 | ||
Business Combination | 1,784 | ||||
Transfers | (1,440,183) | (3,314,746) | (1,999,840) | ||
Disposals | (60,151) | (1,550) | (103,959) | ||
Loss of control by selling of subsidiary | (1,382) | (53,630) | |||
Impairment | (543,726) | ||||
Assets held for sale | (107,677) | ||||
Foreign exchange effect | 66,146 | (240,994) | 434,999 | ||
Balance, end of period | 950,680 | 1,762,648 | 950,680 | 1,762,648 | 4,068,876 |
Other | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 862,428 | 947,039 | |||
Balance, end of period | 793,215 | 862,428 | 793,215 | 862,428 | 947,039 |
Other | Gross | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Balance, beginning of period | 1,359,244 | 1,470,485 | 1,296,613 | ||
Additions | 58,376 | 75,920 | 75,799 | ||
Business Combination | 10,853 | ||||
Transfers | 3,840 | (10,531) | 21,386 | ||
Disposals | (49,962) | (46,888) | (29,769) | ||
Loss of control by selling of subsidiary | (53,129) | (52,281) | |||
Impairment | (13) | (3,242) | |||
Assets held for sale | (171,404) | ||||
Foreign exchange effect | 28,745 | (74,219) | 95,603 | ||
Balance, end of period | R$ 1175697 | R$ 1359244 | R$ 1175697 | R$ 1359244 | R$ 1470485 |
PROPERTY, PLANT AND EQUIPMENT86
PROPERTY, PLANT AND EQUIPMENT - Accumulated Depreciation (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | R$ 19351891 | R$ 22784326 | |
Balance, end of period | 16,443,742 | 19,351,891 | R$ 22784326 |
Accumulated depreciation | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | (24,649,708) | (27,153,803) | (21,503,745) |
Depreciation, amortization and depletion | (1,807,355) | (2,217,820) | (2,310,568) |
Disposals | 342,045 | 346,180 | 246,607 |
Loss of control by selling of subsidiary | 672,386 | 2,173,869 | |
Assets held for sale | 2,510,269 | ||
Foreign exchange effect | (564,212) | 2,201,866 | (3,586,097) |
Balance, end of period | (23,496,575) | (24,649,708) | (27,153,803) |
Land and buildings | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | 5,585,082 | 6,455,083 | |
Balance, end of period | 5,170,675 | 5,585,082 | 6,455,083 |
Land and buildings | Accumulated depreciation | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | (3,898,671) | (4,387,719) | (3,618,197) |
Depreciation, amortization and depletion | (343,373) | (334,365) | (323,824) |
Transfers | (38,467) | (12,015) | 8,815 |
Disposals | 67,598 | 14,696 | 26,846 |
Loss of control by selling of subsidiary | 28,691 | 524,209 | |
Assets held for sale | 370,727 | ||
Foreign exchange effect | (101,528) | 296,523 | (481,359) |
Balance, end of period | (3,915,023) | (3,898,671) | (4,387,719) |
Machines, equipment, and installations | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | 11,029,301 | 11,201,682 | |
Balance, end of period | 9,439,768 | 11,029,301 | 11,201,682 |
Machines, equipment, and installations | Accumulated depreciation | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | (19,604,579) | (21,415,018) | (16,825,332) |
Depreciation, amortization and depletion | (1,361,561) | (1,738,759) | (1,842,158) |
Transfers | 25,886 | (2,368) | (9,071) |
Disposals | 218,590 | 243,429 | 175,405 |
Loss of control by selling of subsidiary | 589,951 | 1,515,886 | |
Assets held for sale | 1,989,917 | ||
Foreign exchange effect | (435,040) | 1,792,251 | (2,913,862) |
Balance, end of period | (18,576,836) | (19,604,579) | (21,415,018) |
Data electronic equipment | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | 112,432 | 111,646 | |
Balance, end of period | 89,404 | 112,432 | 111,646 |
Data electronic equipment | Accumulated depreciation | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | (649,642) | (827,620) | (664,783) |
Depreciation, amortization and depletion | (40,915) | (44,437) | (48,195) |
Transfers | (400) | 968 | 360 |
Disposals | 12,790 | 56,466 | 15,512 |
Loss of control by selling of subsidiary | 12,627 | 95,809 | |
Assets held for sale | 54,275 | ||
Foreign exchange effect | (10,969) | 69,172 | (130,514) |
Balance, end of period | (622,234) | (649,642) | (827,620) |
Property, plant and equipment under construction | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | 1,762,648 | 4,068,876 | |
Balance, end of period | 950,680 | 1,762,648 | 4,068,876 |
Other | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | 862,428 | 947,039 | |
Balance, end of period | 793,215 | 862,428 | 947,039 |
Other | Accumulated depreciation | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Balance, beginning of period | (496,816) | (523,446) | (395,433) |
Depreciation, amortization and depletion | (61,506) | (100,259) | (96,391) |
Transfers | 12,981 | 13,415 | (104) |
Disposals | 43,067 | 31,589 | 28,844 |
Loss of control by selling of subsidiary | 41,117 | 37,965 | |
Assets held for sale | 95,350 | ||
Foreign exchange effect | (16,675) | 43,920 | (60,362) |
Balance, end of period | R$ 382482 | R$ 496816 | R$ 523446 |
PROPERTY, PLANT AND EQUIPMENT87
PROPERTY, PLANT AND EQUIPMENT - Useful Lives (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
PROPERTY, PLANT AND EQUIPMENT | |||
Average rate of capitalized interest | 6.60% | 6.60% | 6.40% |
Amount of property, plant and equipment pledged as collateral for loans and financing | R$ 609116 | R$ 632376 | R$ 823650 |
Buildings | Minimum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 20 years | ||
Buildings | Maximum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 33 years | ||
Machines, equipment, and installations | Minimum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 10 years | ||
Machines, equipment, and installations | Maximum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 20 years | ||
Furniture and fixture | Minimum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 5 years | ||
Furniture and fixture | Maximum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 10 years | ||
Vehicles | Minimum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 3 years | ||
Vehicles | Maximum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 5 years | ||
Data electronic equipment | Minimum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 2 years 6 months | ||
Data electronic equipment | Maximum | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Useful lives of property, plant, and equipment | 6 years |
PROPERTY, PLANT AND EQUIPMENT88
PROPERTY, PLANT AND EQUIPMENT - Impairment (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Land, buildings and construction | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Carrying value of impaired assets | R$ 118348 | R$ 112438 |
Machines, equipment, and installations | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Carrying value of impaired assets | 783,183 | 642,592 |
Property, plant and equipment under construction | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Carrying value of impaired assets | R$ 543726 | R$ 543726 |
GOODWILL - Changes in Goodwill
GOODWILL - Changes in Goodwill (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Changes in goodwill | |||
Goodwill at beginning of period | R$ 9470016 | R$ 15124430 | R$ 12556404 |
Foreign exchange effect | 72,531 | (2,581,852) | 5,096,509 |
Impairment | (849,438) | (2,678,582) | (2,528,483) |
Effect of selling of subsidiary | (393,980) | ||
Assets held for sale | (801,967) | ||
Goodwill at end of period | 7,891,142 | 9,470,016 | 15,124,430 |
Gross | |||
Changes in goodwill | |||
Goodwill at beginning of period | 15,059,838 | 18,099,186 | 12,834,998 |
Foreign exchange effect | 242,510 | (2,645,368) | 5,264,188 |
Effect of selling of subsidiary | (393,980) | ||
Assets held for sale | (801,967) | ||
Goodwill at end of period | 14,500,381 | 15,059,838 | 18,099,186 |
Accumulated impairment | |||
Changes in goodwill | |||
Goodwill at beginning of period | (5,589,822) | (2,974,756) | (278,594) |
Foreign exchange effect | (169,979) | 63,516 | (167,679) |
Impairment | (849,438) | (2,678,582) | (2,528,483) |
Goodwill at end of period | R$ 6609239 | R$ 5589822 | R$ 2974756 |
GOODWILL - Goodwill by segment
GOODWILL - Goodwill by segment (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Goodwill by segment | ||||
Goodwill | R$ 7891142 | R$ 9470016 | R$ 15124430 | R$ 12556404 |
Brazil | ||||
Goodwill by segment | ||||
Goodwill | 373,135 | 380,644 | 519,327 | |
Special Steel | ||||
Goodwill by segment | ||||
Goodwill | 2,487,364 | 2,508,056 | 3,409,429 | |
North America | ||||
Goodwill by segment | ||||
Goodwill | R$ 5030643 | R$ 6581316 | R$ 11195674 |
INTANGIBLE ASSETS - Changes in
INTANGIBLE ASSETS - Changes in intangible assets by type (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
INTANGIBLE ASSETS | |||
Other intangible assets at beginning of period | R$ 1319941 | R$ 1835761 | R$ 1547098 |
Foreign exchange effect | 7,666 | (208,785) | 464,966 |
Acquisition | 37,939 | 54,044 | 126,428 |
Disposal | (27,652) | (15,195) | (5,390) |
Amortization | (285,197) | (318,135) | (297,341) |
Effect of selling of subsidiary | (27,749) | ||
Assets held for sale | (80,608) | ||
Other intangible assets at end of period | 972,089 | 1,319,941 | 1,835,761 |
Supplier relationships | |||
INTANGIBLE ASSETS | |||
Other intangible assets at beginning of period | 39,726 | 47,571 | 56,654 |
Amortization | (6,940) | (7,845) | (9,083) |
Other intangible assets at end of period | 32,786 | 39,726 | 47,571 |
Software development | |||
INTANGIBLE ASSETS | |||
Other intangible assets at beginning of period | 636,605 | 808,482 | 688,061 |
Foreign exchange effect | 2,947 | (60,464) | 123,167 |
Acquisition | 37,939 | 40,643 | 118,933 |
Disposal | (2,145) | (1,182) | |
Amortization | (149,150) | (149,911) | (120,497) |
Assets held for sale | (37,512) | ||
Other intangible assets at end of period | R$ 490829 | 636,605 | 808,482 |
Estimated useful lives | 7 years | ||
Customers contracts and relationships | |||
INTANGIBLE ASSETS | |||
Other intangible assets at beginning of period | R$ 615608 | 911,483 | 749,027 |
Foreign exchange effect | 3,835 | (140,812) | 327,424 |
Disposal | (27,652) | ||
Amortization | (125,621) | (155,063) | (164,968) |
Assets held for sale | (25,396) | ||
Other intangible assets at end of period | 440,774 | 615,608 | 911,483 |
Others | |||
INTANGIBLE ASSETS | |||
Other intangible assets at beginning of period | 28,002 | 68,225 | 53,356 |
Foreign exchange effect | 884 | (7,509) | 14,375 |
Acquisition | 13,401 | 7,495 | |
Disposal | (13,050) | (4,208) | |
Amortization | (3,486) | (5,316) | (2,793) |
Effect of selling of subsidiary | (27,749) | ||
Assets held for sale | (17,700) | ||
Other intangible assets at end of period | R$ 7700 | R$ 28002 | R$ 68225 |
Estimated useful lives | 5 years | ||
Minimum | Supplier relationships | |||
INTANGIBLE ASSETS | |||
Estimated useful lives | 5 years | ||
Minimum | Customers contracts and relationships | |||
INTANGIBLE ASSETS | |||
Estimated useful lives | 5 years | ||
Maximum | Supplier relationships | |||
INTANGIBLE ASSETS | |||
Estimated useful lives | 20 years | ||
Maximum | Customers contracts and relationships | |||
INTANGIBLE ASSETS | |||
Estimated useful lives | 20 years |
INTANGIBLE ASSETS - Intangible
INTANGIBLE ASSETS - Intangible assets by segment (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Composition of other intangible assets by segment | ||||
Other Intangibles | R$ 972089 | R$ 1319941 | R$ 1835761 | R$ 1547098 |
Brazil | ||||
Composition of other intangible assets by segment | ||||
Other Intangibles | 351,578 | 412,134 | 459,383 | |
Special Steel | ||||
Composition of other intangible assets by segment | ||||
Other Intangibles | 152,640 | 219,878 | 357,435 | |
South America | ||||
Composition of other intangible assets by segment | ||||
Other Intangibles | 1,863 | 7,606 | 13,507 | |
North America | ||||
Composition of other intangible assets by segment | ||||
Other Intangibles | R$ 466008 | R$ 680323 | R$ 1005436 |
LOANS AND FINANCING - Summary (
LOANS AND FINANCING - Summary (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
LOANS AND FINANCING | ||
Total Loans and Financing | R$ 16461656 | R$ 20417810 |
Current | 2,004,341 | 4,458,220 |
Non-current | 14,457,315 | 15,959,590 |
Working capital | ||
LOANS AND FINANCING | ||
Total Loans and Financing | R$ 2739258 | 3,468,490 |
Annual charges (as a percent) | 7.36% | |
Financing of property, plant and equipment and others | ||
LOANS AND FINANCING | ||
Total Loans and Financing | R$ 2108216 | 2,855,860 |
Annual charges (as a percent) | 8.58% | |
Ten/Thirty Year Bonds | ||
LOANS AND FINANCING | ||
Total Loans and Financing | R$ 11614182 | R$ 14093460 |
Annual charges (as a percent) | 5.84% |
LOANS AND FINANCING - Principal
LOANS AND FINANCING - Principal and Interest (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
LOANS AND FINANCING | ||
Principal amount of loans and Financing | R$ 16207120 | R$ 20049854 |
Interest accrued of loans and Financing | 254,536 | 367,956 |
Total Loans and Financing | R$ 16461656 | R$ 20417810 |
LOANS AND FINANCING - By Curren
LOANS AND FINANCING - By Currency (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
LOANS AND FINANCING | ||
Total Loans and Financing | R$ 16461656 | R$ 20417810 |
Brazilian Real (BRL) | ||
LOANS AND FINANCING | ||
Total Loans and Financing | 2,710,308 | 3,228,759 |
U.S. Dollar (USD) | ||
LOANS AND FINANCING | ||
Total Loans and Financing | 13,333,669 | 16,487,116 |
Other currencies | ||
LOANS AND FINANCING | ||
Total Loans and Financing | R$ 417679 | R$ 701935 |
LOANS AND FINANCING - Amortizat
LOANS AND FINANCING - Amortization Schedule (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Amortization schedules of long term loans and financing | ||
Long-term debt | R$ 14457315 | R$ 15959590 |
Year Two | ||
Amortization schedules of long term loans and financing | ||
Long-term debt | 873,274 | 1,679,416 |
Year Three | ||
Amortization schedules of long term loans and financing | ||
Long-term debt | 3,158,211 | 875,319 |
Year Four | ||
Amortization schedules of long term loans and financing | ||
Long-term debt | 1,730,177 | 3,261,435 |
Year Five | ||
Amortization schedules of long term loans and financing | ||
Long-term debt | 147,715 | 3,500,937 |
After year 5 | ||
Amortization schedules of long term loans and financing | ||
Long-term debt | R$ 8547938 | |
Year Six | ||
Amortization schedules of long term loans and financing | ||
Long-term debt | 150,916 | |
After Year Six | ||
Amortization schedules of long term loans and financing | ||
Long-term debt | R$ 6491567 |
LOANS AND FINANCING - Additiona
LOANS AND FINANCING - Additional Disclosures (Details) R$ in Thousands, $ in Millions | 1 Months Ended | 12 Months Ended | |||
Oct. 31, 2017BRL (R$) | Dec. 31, 2017USD ($)tranche | Dec. 31, 2017BRL (R$)tranche | Dec. 31, 2016BRL (R$) | Jun. 30, 2009BRL (R$) | |
LOANS AND FINANCING | |||||
Notional value | R$ 16207120 | R$ 20049854 | |||
Loans and financing | 16,461,656 | R$ 20417810 | |||
Ten Year Bonds | Gerdau Trade Inc. | |||||
LOANS AND FINANCING | |||||
Notional value | R$ 650000 | ||||
Debt instrument term | 10 years | ||||
Coupon rate | 4.875% | ||||
FINAME/BNDES program | |||||
LOANS AND FINANCING | |||||
Loan amount guaranteed by asset being financed | R$ 110400 | ||||
Credit line with BNDES | |||||
LOANS AND FINANCING | |||||
Maximum borrowing capacity | R$ 1500000 | ||||
Interest rate basis | TJLP | ||||
Adjustment to interest rate basis (as a percent) | 2.16% | 2.16% | |||
Loans and financing | R$ 402500 | ||||
Senior Unsecured Global Working Capital Credit Agreement | |||||
LOANS AND FINANCING | |||||
Maximum borrowing capacity | $ 800 | R$ 2646400 | |||
Number of tranches | tranche | 2 | 2 | |||
Loans and financing | $ 54 | R$ 178600 | |||
Senior Unsecured Global Working Capital Credit Agreement | Gerdau's North American subsidiaries | |||||
LOANS AND FINANCING | |||||
Maximum borrowing capacity | 200 | 661,600 | |||
Senior Unsecured Global Working Capital Credit Agreement | Gerdau's Latin American subsidiaries | |||||
LOANS AND FINANCING | |||||
Maximum borrowing capacity | $ 600 | R$ 2028000 |
DEBENTURES - Summary (Details)
DEBENTURES - Summary (Details) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017BRL (R$)instrument | Dec. 31, 2016BRL (R$) | |
DEBENTURES | ||
Total Debentures | R$ | R$ 47928 | R$ 165423 |
Non-current debentures | R$ | R$ 47928 | 165,423 |
3rd- A and B | ||
DEBENTURES | ||
Quantity Issued | 144,000 | |
Quantity Held in treasury | 136,259 | |
Total Debentures | R$ | R$ 21377 | 44,292 |
7th | ||
DEBENTURES | ||
Quantity Issued | 68,400 | |
Quantity Held in treasury | 63,587 | |
Total Debentures | R$ | R$ 1333 | 35,942 |
8th | ||
DEBENTURES | ||
Quantity Issued | 179,964 | |
Quantity Held in treasury | 168,242 | |
Total Debentures | R$ | R$ 14557 | 57,191 |
9th | ||
DEBENTURES | ||
Quantity Issued | 125,640 | |
Quantity Held in treasury | 124,203 | |
Total Debentures | R$ | R$ 4900 | 10,731 |
11th - A and B | ||
DEBENTURES | ||
Quantity Issued | 150,000 | |
Quantity Held in treasury | 147,561 | |
Total Debentures | R$ | R$ 5761 | R$ 17267 |
14th | ||
DEBENTURES | ||
Quantity Issued | 20,000 | |
Quantity Held in treasury | 10,174 |
DEBENTURES - Amortization sched
DEBENTURES - Amortization schedules (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
DEBENTURES | ||
Debentures | R$ 47928 | R$ 165423 |
Debentures | ||
DEBENTURES | ||
Nominal annual interest rate (as a percent) | 9.93% | 14.00% |
Year Three | ||
DEBENTURES | ||
Debentures | R$ 5761 | |
Year Four | ||
DEBENTURES | ||
Debentures | 21,377 | R$ 17267 |
Year Five | ||
DEBENTURES | ||
Debentures | 14,557 | 44,292 |
Year Six | ||
DEBENTURES | ||
Debentures | 57,191 | |
After year 5 | ||
DEBENTURES | ||
Debentures | R$ 6233 | |
After Year Six | ||
DEBENTURES | ||
Debentures | R$ 46673 |
FINANCIAL INSTRUMENTS - Fair va
FINANCIAL INSTRUMENTS - Fair value of financial instruments (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
FINANCIAL INSTRUMENTS | ||
Financial assets | R$ 9291006 | R$ 12712924 |
Financial liabilities | 22,104,962 | 25,257,075 |
Trade accounts payable | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 3,179,954 | 2,743,818 |
Financial liabilities, at fair value | 3,179,954 | 2,743,818 |
Loans and Financing | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 16,461,656 | 20,417,810 |
Financial liabilities, at fair value | 17,102,512 | 20,716,266 |
Debentures | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 47,928 | 165,423 |
Financial liabilities, at fair value | 47,928 | 165,423 |
Unrealized losses on financial instruments | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 1,267 | 6,584 |
Financial liabilities, at fair value | 1,267 | 6,584 |
FIDC Obligation | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 1,135,077 | 1,007,259 |
Financial liabilities, at fair value | 1,135,077 | 1,007,259 |
Other current liabilities | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 625,410 | 514,599 |
Financial liabilities, at fair value | 625,410 | 514,599 |
Other non-current liabilities | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 653,670 | 401,582 |
Financial liabilities, at fair value | 653,670 | 401,582 |
Cash and cash equivalents | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,555,338 | 5,063,383 |
Financial assets, at fair value | 2,555,338 | 5,063,383 |
Short-term investments | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 821,518 | 1,024,411 |
Financial assets, at fair value | 821,518 | 1,024,411 |
Trade accounts receivable | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,798,420 | 3,576,699 |
Financial assets, at fair value | 2,798,420 | 3,576,699 |
Related parties | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 51,839 | 57,541 |
Financial assets, at fair value | 51,839 | 57,541 |
Unrealized gains on financial instruments | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 12,951 | |
Financial assets, at fair value | 12,951 | |
Judicial deposits | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,051,181 | 1,861,784 |
Financial assets, at fair value | 2,051,181 | 1,861,784 |
Other current assets | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 469,737 | 668,895 |
Financial assets, at fair value | 469,737 | 668,895 |
Other non-current assets | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 542,973 | 447,260 |
Financial assets, at fair value | R$ 542973 | R$ 447260 |
FINANCIAL INSTRUMENTS - Capital
FINANCIAL INSTRUMENTS - Capital management risk (Details) - Capital management risk | 12 Months Ended |
Dec. 31, 2017 | |
Minimum | |
Disclosure of objectives, policies and processes for managing capital [line items] | |
WACC (as a percent) | 10.00% |
Net Financial Expenses Coverage Ratio | 5.5 |
Maximum | |
Disclosure of objectives, policies and processes for managing capital [line items] | |
WACC (as a percent) | 13.00% |
Net debt/EBITDA | 2.5 |
Debt/Equity Ratio (as a percent) | 60.00% |
FINANCIAL INSTRUMENTS - Liquidi
FINANCIAL INSTRUMENTS - Liquidity risk (Details) - Liquidity risk - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | R$ 30125256 | R$ 34209751 |
Next 12 months | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 6,998,424 | 9,205,223 |
1-3 years | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 6,079,924 | 4,829,403 |
4-5 years | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 3,208,433 | 8,536,568 |
After year 5 | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 13,838,475 | 11,638,557 |
Trade accounts payable | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 3,179,954 | 2,743,818 |
Trade accounts payable | Next 12 months | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 3,179,954 | 2,743,818 |
Loans and Financing | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 24,470,750 | 29,258,030 |
Loans and Financing | Next 12 months | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 3,191,793 | 5,940,222 |
Loans and Financing | 1-3 years | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 6,060,186 | 4,818,322 |
Loans and Financing | 4-5 years | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 3,168,144 | 8,443,080 |
Loans and Financing | After year 5 | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 12,050,627 | 10,056,406 |
Debentures | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 59,128 | 277,879 |
Debentures | 1-3 years | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 6,528 | |
Debentures | 4-5 years | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 40,289 | 93,488 |
Debentures | After year 5 | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 12,311 | 184,391 |
Unrealized losses on financial instruments | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 1,267 | 6,584 |
Unrealized losses on financial instruments | Next 12 months | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 1,267 | 6,584 |
FIDC Obligation | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 1,135,077 | 1,007,259 |
FIDC Obligation | After year 5 | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 1,135,077 | 1,007,259 |
Other current liabilities | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 625,410 | 514,599 |
Other current liabilities | Next 12 months | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 625,410 | 514,599 |
Other non-current liabilities | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 653,670 | 401,582 |
Other non-current liabilities | 1-3 years | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | 13,209 | 11,081 |
Other non-current liabilities | After year 5 | ||
Disclosure of maturity analysis for financial liabilities held for managing liquidity risk | ||
Contractual obligations | R$ 640461 | R$ 390501 |
FINANCIAL INSTRUMENTS - Sensiti
FINANCIAL INSTRUMENTS - Sensitivity analysis (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Foreign currency risk | ||
Sensitivity analysis | ||
Percentage of change | 5.00% | 5.00% |
Impact on income statement based on change in assumption | R$ 129209 | R$ 253294 |
Impact on income statement based on change in assumption, after effects of changes in net investment hedge | R$ 79088 | R$ 177711 |
Interest rate risk | ||
Sensitivity analysis | ||
Interest rate change (as a percent) | 0.10% | 0.10% |
Impact on income statement based on change in assumption | R$ 54908 | R$ 63416 |
Products sold price risk | ||
Sensitivity analysis | ||
Percentage of change | 1.00% | 1.00% |
Impact on income statement based on change in assumption | R$ 369176 | R$ 376517 |
Raw materials and commodity price risk | ||
Sensitivity analysis | ||
Percentage of change | 1.00% | 1.00% |
Impact on income statement based on change in assumption | R$ 234239 | R$ 228637 |
Interest rate and foreign currency swaps risk | ||
Sensitivity analysis | ||
Percentage of change | 5.00% | 5.00% |
Interest rate change (as a percent) | 0.10% | 0.10% |
Impact on income statement based on change in assumption | R$ 6479 | R$ 9870 |
Non deliverable forwards risk | ||
Sensitivity analysis | ||
Percentage of change | 5.00% | 5.00% |
Impact on income statement based on change in assumption | R$ 1480 | R$ 15816 |
FINANCIAL INSTRUMENTS - Financi
FINANCIAL INSTRUMENTS - Financial instruments per category (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
FINANCIAL INSTRUMENTS | ||
Financial assets | R$ 9291006 | R$ 12712924 |
Financial liabilities | 22,104,962 | 25,257,075 |
Financial income from assets | 264,708 | 400,273 |
Financial income (expenses) from liabilities | (1,408,056) | (1,345,528) |
Liabilities at fair value with gains and losses recognized in income | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 1,267 | 6,584 |
Financial income (expenses) from liabilities | (12,503) | (58,068) |
Other financial liabilities at amortized cost | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 22,103,695 | 25,250,491 |
Financial income (expenses) from liabilities | (1,395,553) | (1,287,460) |
Loans and receivables | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 8,389,250 | 11,608,513 |
Financial income from assets | 177,466 | 100,150 |
Assets at fair value with gains and losses recognized in income | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 901,756 | 1,091,460 |
Financial income from assets | 87,242 | 300,123 |
Assets at fair value with gains and losses recognized in shareholder's equity | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 12,951 | |
Trade accounts payable | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 3,179,954 | 2,743,818 |
Trade accounts payable | Other financial liabilities at amortized cost | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 3,179,954 | 2,743,818 |
Loans and Financing | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 16,461,656 | 20,417,810 |
Loans and Financing | Other financial liabilities at amortized cost | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 16,461,656 | 20,417,810 |
Debentures | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 47,928 | 165,423 |
Debentures | Other financial liabilities at amortized cost | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 47,928 | 165,423 |
FIDC Obligation | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 1,135,077 | 1,007,259 |
FIDC Obligation | Other financial liabilities at amortized cost | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 1,135,077 | 1,007,259 |
Other current liabilities | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 625,410 | 514,599 |
Other current liabilities | Other financial liabilities at amortized cost | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 625,410 | 514,599 |
Other non-current liabilities | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 653,670 | 401,582 |
Other non-current liabilities | Other financial liabilities at amortized cost | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 653,670 | 401,582 |
Unrealized losses on financial instruments | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 1,267 | 6,584 |
Unrealized losses on financial instruments | Liabilities at fair value with gains and losses recognized in income | ||
FINANCIAL INSTRUMENTS | ||
Financial liabilities | 1,267 | 6,584 |
Cash and cash equivalents | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,555,338 | 5,063,383 |
Cash and cash equivalents | Loans and receivables | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,555,338 | 5,063,383 |
Short-term investments | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 821,518 | 1,024,411 |
Short-term investments | Assets at fair value with gains and losses recognized in income | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 821,518 | 1,024,411 |
Unrealized gains on financial instruments | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 12,951 | |
Unrealized gains on financial instruments | Assets at fair value with gains and losses recognized in shareholder's equity | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 12,951 | |
Trade accounts receivable | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,798,420 | 3,576,699 |
Trade accounts receivable | Loans and receivables | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,798,420 | 3,576,699 |
Related parties | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 51,839 | 57,541 |
Related parties | Loans and receivables | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 51,839 | 57,541 |
Judicial deposits | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,051,181 | 1,861,784 |
Judicial deposits | Loans and receivables | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 2,051,181 | 1,861,784 |
Other current assets | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 469,737 | 668,895 |
Other current assets | Loans and receivables | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 469,737 | 668,895 |
Other non-current assets | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 542,973 | 447,260 |
Other non-current assets | Loans and receivables | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | 462,735 | 380,211 |
Other non-current assets | Assets at fair value with gains and losses recognized in income | ||
FINANCIAL INSTRUMENTS | ||
Financial assets | R$ 80238 | R$ 67049 |
FINANCIAL INSTRUMENTS - Swap Co
FINANCIAL INSTRUMENTS - Swap Contracts (Details) R$ in Thousands, $ in Millions | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | |
Swap Contracts | ||||
Notional value | R$ 16207120 | R$ 20049854 | ||
Financial assets at fair value | ||||
Swap Contracts | ||||
Amount receivable | 12,951 | |||
Amount payable | R$ 1267 | (6,584) | ||
Forward contract | Forward contracts Maturity at 2017, purchase | ||||
Swap Contracts | ||||
Notional value | $ | $ 84.8 | |||
Amount receivable | 734 | |||
Amount payable | (6,584) | |||
Forward contract | Forward contracts Maturity at 2017, sell | ||||
Swap Contracts | ||||
Notional value | $ | $ 15 | |||
Amount receivable | R$ 1823 | |||
Cross currency swap | Currency Swap Maturing In 2017, receivable | LIBOR | ||||
Swap Contracts | ||||
Interest Rate Basis | Libor 6M | |||
Derivative basis spread | 2.25% | 2.25% | ||
Amount receivable | R$ 5684 | |||
Cross currency swap | Currency Swap Maturing In 2017, payable | ||||
Swap Contracts | ||||
Fixed interest rate (as a percent) | 11.02% | 11.02% | ||
Notional value | $ | $ 25 | |||
Cross currency swap | Currency Swap Maturing In 2018, receivable | LIBOR | ||||
Swap Contracts | ||||
Interest Rate Basis | Libor 6M | Libor 6M | ||
Derivative basis spread | 2.00% | 2.00% | 2.00% | 2.00% |
Amount receivable | R$ 4710 | |||
Amount payable | R$ 1267 | |||
Cross currency swap | Currency Swap Maturing In 2018, payable | ||||
Swap Contracts | ||||
Fixed interest rate (as a percent) | 10.17% | 10.17% | 10.17% | 10.17% |
Notional value | $ | $ 40 | $ 40 |
FINANCIAL INSTRUMENTS - Prospec
FINANCIAL INSTRUMENTS - Prospective and retrospective tests (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Unrealized gains on financial instruments | |||
Current assets | R$ 2557 | ||
Non-current assets | 10,394 | ||
Unrealized losses on financial instruments | |||
Current liabilities | (6,584) | ||
Non-current liabilities | R$ 1267 | ||
Net Income | |||
Gains on financial instruments | 9,666 | 33,753 | |
Losses on financial instruments | (19,107) | (72,683) | |
Gains (losses) on financial instruments recognized in Net Income | (9,441) | (38,930) | R$ 87085 |
Other comprehensive income | |||
Gains on financial instruments | (11,364) | 212 | R$ 17283 |
Gains on financial instruments recognized in other comprehensive income | (11,364) | 212 | |
Unrealized gains on financial instruments | |||
Unrealized gains on financial instruments | |||
Current assets | 2,557 | ||
Non-current assets | 10,394 | ||
Unrealized gains on financial instruments | 12,951 | ||
Unrealized losses on financial instruments | |||
Unrealized losses on financial instruments | |||
Current liabilities | (6,584) | ||
Non-current liabilities | (1,267) | ||
Unrealized losses on financial instruments | R$ 1267 | R$ 6584 |
FINANCIAL INSTRUMENTS - Net inv
FINANCIAL INSTRUMENTS - Net investment hedge (Details) R$ in Thousands, $ in Billions | 12 Months Ended | |||
Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | Dec. 31, 2017USD ($) | |
Net investment hedge | ||||
Unrealized gain (loss) on net investment hedge, net of tax | R$ | R$ 148560 | R$ 1679312 | R$ 3613178 | |
Ten/Thirty Years Bonds | ||||
Net investment hedge | ||||
Liabilities (not designated as hedges) at fair value through income statement | $ 0.4 | |||
Ten/Thirty Years Bonds | Hedges of net investment in foreign operations | ||||
Net investment hedge | ||||
Hedging instrument, liabilities | 2.2 | |||
Unrealized gain (loss) on net investment hedge, net of tax | R$ | R$ 148560 | R$ 1679312 | ||
Ten/Thirty Years Bonds | Gerdau Acominas S.A. | Hedges of net investment in foreign operations | ||||
Net investment hedge | ||||
Hedging instrument, liabilities | $ 0.1 |
FINANCIAL INSTRUMENTS - Measure
FINANCIAL INSTRUMENTS - Measurement of fair value (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
FINANCIAL INSTRUMENTS | ||
Total financial assets | R$ 9291006 | R$ 12712924 |
Total financial liabilities | 22,104,962 | 25,257,075 |
Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 9,291,006 | 12,712,924 |
Total financial liabilities | 22,104,962 | 25,257,075 |
Trade accounts payable | ||
FINANCIAL INSTRUMENTS | ||
Total financial liabilities | 3,179,954 | 2,743,818 |
Trade accounts payable | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 3,179,954 | 2,743,818 |
Short-term debts | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 2,004,341 | 4,458,220 |
Unrealized losses on financial instruments | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 1,267 | |
Total financial liabilities | 1,267 | 6,584 |
Unrealized losses on financial instruments | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 6,584 | |
Other current liabilities | ||
FINANCIAL INSTRUMENTS | ||
Total financial liabilities | 625,410 | 514,599 |
Other current liabilities | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 625,410 | 514,599 |
Long-term debt | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 14,457,315 | 15,959,590 |
Debentures | ||
FINANCIAL INSTRUMENTS | ||
Total financial liabilities | 47,928 | 165,423 |
Debentures | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 47,928 | 165,423 |
FIDC Obligation | ||
FINANCIAL INSTRUMENTS | ||
Total financial liabilities | 1,135,077 | 1,007,259 |
FIDC Obligation | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 1,135,077 | 1,007,259 |
Other non-current liabilities | ||
FINANCIAL INSTRUMENTS | ||
Total financial liabilities | 653,670 | 401,582 |
Other non-current liabilities | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 653,670 | 401,582 |
Cash and cash equivalents | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 2,555,338 | 5,063,383 |
Cash and cash equivalents | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 2,555,338 | 5,063,383 |
Short-term investments | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 821,518 | 1,024,411 |
Short-term investments | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 821,518 | 1,024,411 |
Trade accounts receivable | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 2,798,420 | 3,576,699 |
Trade accounts receivable | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 2,798,420 | 3,576,699 |
Unrealized gains on financial instruments | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 12,951 | |
Unrealized gains on financial instruments | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 2,557 | |
Other current assets | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 469,737 | 668,895 |
Other current assets | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 469,737 | 668,895 |
Related parties | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 51,839 | 57,541 |
Related parties | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | 51,839 | 57,541 |
Unrealized gains on financial instruments, noncurrent | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | 10,394 | |
Judicial deposits | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 2,051,181 | 1,861,784 |
Judicial deposits | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | 2,051,181 | 1,861,784 |
Other non-current assets | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 542,973 | 447,260 |
Other non-current assets | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | 542,973 | 447,260 |
Quoted Prices Active Markets for Identical Assets (Level 1) | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 238,008 | 458,639 |
Quoted Prices Active Markets for Identical Assets (Level 1) | Short-term investments | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 238,008 | 458,639 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Total financial assets | 9,052,998 | 12,254,285 |
Total financial liabilities | 22,104,962 | 25,257,075 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Trade accounts payable | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 3,179,954 | 2,743,818 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Short-term debts | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 2,004,341 | 4,458,220 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Unrealized losses on financial instruments | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 1,267 | |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Unrealized losses on financial instruments | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 6,584 | |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Other current liabilities | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial liabilities | 625,410 | 514,599 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Long-term debt | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 14,457,315 | 15,959,590 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Debentures | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 47,928 | 165,423 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | FIDC Obligation | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 1,135,077 | 1,007,259 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Other non-current liabilities | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial liabilities | 653,670 | 401,582 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Cash and cash equivalents | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 2,555,338 | 5,063,383 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Short-term investments | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 583,510 | 565,772 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Trade accounts receivable | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 2,798,420 | 3,576,699 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Unrealized gains on financial instruments | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 2,557 | |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Other current assets | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Current financial assets | 469,737 | 668,895 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Related parties | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | 51,839 | 57,541 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Unrealized gains on financial instruments, noncurrent | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | 10,394 | |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Judicial deposits | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | 2,051,181 | 1,861,784 |
Quoted Prices in Non-Active Markets for Similar Assets (Level 2) | Other non-current assets | Measured at Fair Value on a Recurring Basis | ||
FINANCIAL INSTRUMENTS | ||
Non-current financial assets | R$ 542973 | R$ 447260 |
FINANCIAL INSTRUMENTS - Changes
FINANCIAL INSTRUMENTS - Changes in liabilities from Cash Flow from financing activities (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Related parties, net | |||
Changes in liabilities from Cash flow from financing activities | |||
Beginning of year | R$ 57541 | R$ 53506 | R$ 80920 |
Cash transactions | |||
Proceeds/(Repayment) from financing activities | 5,797 | (6,492) | 30,126 |
Non cash transactions | |||
Interest expense on loans and Interest on loans with related parties | (95) | 2,457 | (2,712) |
End of year | (51,839) | (57,541) | (53,506) |
Debt, Debentures And Losses/Gains On Financial Instruments, Net | |||
Changes in liabilities from Cash flow from financing activities | |||
Beginning of year | 20,576,866 | 26,417,256 | 19,488,733 |
Cash transactions | |||
Proceeds/(Repayment) from financing activities | (3,975,541) | (2,150,035) | (1,985,603) |
Interest paid on loans and financing | (1,330,116) | (1,240,165) | (946,041) |
Non cash transactions | |||
Interest expense on loans and Interest on loans with related parties | 1,323,448 | 1,540,797 | 1,471,526 |
Exchange variation, operations with subsidiaries and associate company and others | (83,806) | (3,990,987) | 8,388,641 |
End of year | R$ 16510851 | R$ 20576866 | R$ 26417256 |
TAXES PAYABLE (Details)
TAXES PAYABLE (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
TAXES PAYABLE | ||
Payroll charges | R$ 75752 | R$ 89763 |
ICMS (state VAT) | 37,444 | 43,915 |
COFINS (tax on revenue) | 5,411 | 8,470 |
IPI (federal VAT) | 17,305 | 13,864 |
IVA (value-added tax) and others | 148,189 | 185,178 |
Taxes payable | R$ 284101 | R$ 341190 |
TAX, CIVIL AND LABOR CLAIMS 111
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS - Provisions (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | R$ 827883 | R$ 2239226 | |
Reversal of contingent liabilities, net | 929,711 | ||
Reversal of monetary update of contingent liabilities, net | 369,819 | ||
Judicial deposits, ICMS legal proceeding | 1,691,596 | ||
Tax, labor and civil provisions | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | 827,883 | 2,239,226 | R$ 1904730 |
ICMS (state VAT) | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | 2,821 | 67,942 | |
Corporate Income Tax and Social Contribution Tax | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | 39,256 | 37,376 | |
Emergency Capacity Charge and Extraordinary Rate Adjustment | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | 9,278 | 8,852 | |
Financing of social integration program and Social security financing | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | 163,981 | 1,678,778 | |
Other tax provisions and Social security contributions | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | 42,285 | 36,823 | |
Labor provisions | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | 517,329 | 358,901 | |
Civil provisions | |||
Other provisions disclosures | |||
Provision for tax, civil, and labor liabilities | R$ 52933 | R$ 50554 |
TAX, CIVIL AND LABOR CLAIMS 112
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS - Changes in Provisions (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Changes in the tax, labor and civil provisions : | ||
Balance at the beginning of the year | R$ 2239226 | |
Balance at the end of the year | 827,883 | R$ 2239226 |
Tax, labor and civil provisions | ||
Changes in the tax, labor and civil provisions : | ||
Balance at the beginning of the year | 2,239,226 | 1,904,730 |
Additions | 527,543 | 313,246 |
Monetary correction | (419,567) | 178,661 |
Reversal of accrued amounts | (1,517,787) | (144,025) |
Foreign exchange effect on provisions in foreign currency | (201) | (3,235) |
Effect of selling of subsidiary | (10,151) | |
Loss of control by joint venture creation | (1,331) | |
Balance at the end of the year | R$ 827883 | R$ 2239226 |
TAX, CIVIL AND LABOR CLAIMS 113
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS - Tax contingencies (Details) - 12 months ended Dec. 31, 2017 - Tax contingencies R$ in Thousands | BRL (R$)claim | item | BRL (R$) |
IPI credit on inputs | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | R$ 309581 | ||
Non-approval of compensation of credits on inputs | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 438,843 | ||
Social security contributions | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 76,866 | ||
Other Taxes | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 370,175 | ||
Goodwill Deductibility | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 364,370 | ||
Gerdau Acos Longos S.A. and Gerdau Acominas S.A. | Credit rights and rate differences | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 443,137 | ||
Gerdau Acos Longos S.A. and Gerdau Acominas S.A. | Goodwill Deductibility | Administrative collection | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 4,963,398 | ||
Number of proceedings | claim | 4 | ||
Gerdau Acos Longos S.A. | Withholding Income Tax | Pending | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 122,029 | ||
Gerdau Acos Longos S.A. | Goodwill Deductibility | |||
Contingencies | |||
Amount of liability insurance policy permitted to be used as judicial guarantee | R$ 3195379 | ||
Gerdau Acos Longos S.A. | Goodwill Deductibility | Pending | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 600,101 | ||
Number of proceedings | claim | 2 | ||
Gerdau Acos Longos S.A. | Goodwill Deductibility | Voluntary Appeal Dismissed | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 123,172 | ||
Number of proceedings | 1 | 2 | |
Gerdau Internacional Empreendimentos Ltda. and Gerdau Acos Especiais S.A | Corporate Income Tax and Social Contribution Tax | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 1,488,989 | ||
Gerdau Internacional Empreendimentos Ltda. and Gerdau Acos Especiais S.A | Corporate Income Tax and Social Contribution Tax | Special appeal filed | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 171,608 | ||
Gerdau Internacional Empreendimentos Ltda | Corporate Income Tax and Social Contribution Tax | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 1,317,381 | ||
Number of proceedings | claim | 2 | ||
Gerdau Internacional Empreendimentos Ltda | Corporate Income Tax and Social Contribution Tax | Voluntary Appeal Partially Granted | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 365,645 | ||
Gerdau Internacional Empreendimentos Ltda | Corporate Income Tax and Social Contribution Tax | Voluntary Appeal Referred For Judicial Collections | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 951,736 | ||
Gerdau Acominas S.A., Gerdau Acos Longos S.A., and Gerdau Acos Especiais S.A. | Goodwill Deductibility | Administrative collection | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | 6,217,810 | ||
Gerdau Acos Especiais S.A. | Goodwill Deductibility | Voluntary Appeal Dismissed | |||
Contingencies | |||
Estimated financial effect of contingent liabilities | R$ 531138 |
TAX, CIVIL AND LABOR CLAIMS 114
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS - Civil Contingencies and Administrative proceedings (Details) R$ in Thousands, $ in Millions | Oct. 31, 2016USD ($) | Aug. 01, 2013BRL (R$) | Sep. 23, 2005BRL (R$)item | Dec. 31, 2017BRL (R$)item | Jul. 05, 2017BRL (R$) | Jul. 14, 2015 |
Civil contingencies | Antitrust Legislation | ||||||
Contingencies | ||||||
Number of civil construction unions | item | 2 | |||||
Fine for existence of cartel on gross revenues (in percentage) | 7.00% | |||||
Fine for existence of cartel | R$ 245070 | |||||
Fine for existence of cartel updated by judicial accounting | R$ 417820 | |||||
Number of lawsuits that challenged the investigation | item | 2 | |||||
Civil contingencies | Other Demands Of a Civil Nature | ||||||
Contingencies | ||||||
Estimated financial effect of contingent liabilities | R$ 191112 | |||||
Civil contingencies | Securities Class Action | ||||||
Contingencies | ||||||
Alleged amount of nonpayment of taxes | $ | $ 429 | |||||
Settlement amount | R$ 15 | |||||
Gerdau Acos Longos S.A. | Administrative proceedings contingencies | ||||||
Administrative proceedings disclosures | ||||||
Percentage of voting equity interests acquired | 4.77% | |||||
Gerdau Acominas S.A. | Administrative proceedings contingencies | ||||||
Administrative proceedings disclosures | ||||||
Percentage of voting equity interests acquired | 3.50% | |||||
Gerdau Acos Especiais S.A. | Administrative proceedings contingencies | ||||||
Administrative proceedings disclosures | ||||||
Percentage of voting equity interests acquired | 2.39% | |||||
Gerdau America Latina Participacoes S.A. | Administrative proceedings contingencies | ||||||
Administrative proceedings disclosures | ||||||
Percentage of voting equity interests acquired | 4.90% |
TAX, CIVIL AND LABOR CLAIMS 115
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS - Judicial Deposits (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS | ||
Tax | R$ 1883562 | R$ 1716996 |
Labor | 128,849 | 107,191 |
Civil | 38,770 | 37,597 |
Judicial deposits | R$ 2051181 | R$ 1861784 |
TAX, CIVIL AND LABOR CLAIMS 116
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS - Contingent Assets (Details) R$ in Millions | 12 Months Ended |
Dec. 31, 2017BRL (R$)kW | |
TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS | |
Industrial consumers monthly electricity consumption limit (in Kilo watt hour) | kW | 2,000 |
Maximum period to return the compulsory loan to taxpayers | 20 years |
Claims receivable from monetary correction of principal, interest, moratory and others due to compulsory loans | R$ | R$ 1260 |
RELATED PARTY TRANSACTIONS - In
RELATED PARTY TRANSACTIONS - Intercompany loans (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
RELATED PARTY TRANSACTIONS | |||
Assets | R$ 51839 | R$ 57541 | |
Net financial income | 95 | (2,457) | R$ 2712 |
Gerdau Corsa S.A.P.I de C.V. | |||
RELATED PARTY TRANSACTIONS | |||
Assets | 7 | 48 | |
Fundacao Gerdau | |||
RELATED PARTY TRANSACTIONS | |||
Assets | R$ 51832 | R$ 57493 |
RELATED PARTY TRANSACTIONS - Op
RELATED PARTY TRANSACTIONS - Operations with related parties (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Controlling shareholders | ||
RELATED PARTY TRANSACTIONS | ||
Guarantee fee percentage | 0.95% | 0.95% |
Debenture guarantee fees | R$ 689 | R$ 4732 |
Revenue from rental agreement | 801 | 1,001 |
Investments | ||
RELATED PARTY TRANSACTIONS | ||
Sales to Related parties | 630,190 | 421,415 |
Purchases from related parties | 121,618 | 141,275 |
Net amount, related party transactions | R$ 508572 | R$ 280140 |
RELATED PARTY TRANSACTIONS -119
RELATED PARTY TRANSACTIONS - Operations with related parties, guarantees granted (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Subsidiary | GTL Trade Finance Inc. | 10-year Bond | ||
Guarantees granted | ||
Original Amount | R$ 1744000 | |
Carrying Amount | R$ 2577296 | |
Debt instrument term | 10 years | |
Subsidiary | GTL Trade Finance Inc. | 30-year Bond | ||
Guarantees granted | ||
Original Amount | 1,118,000 | |
Carrying Amount | R$ 1654000 | R$ 1629550 |
Debt instrument term | 30 years | 30 years |
Subsidiary | Armacero-Matco S.A., Salomon Sack S.A. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | R$ 214793 | |
Carrying Amount | 226,700 | |
Subsidiary | Gerdau Holding Inc. | 10-year Bond | ||
Guarantees granted | ||
Original Amount | 2,188,125 | |
Carrying Amount | R$ 1711649 | R$ 1801389 |
Debt instrument term | 10 years | 10 years |
Subsidiary | Gerdau Trade Inc. | 10-year Bond, Maturing Jan/21 | ||
Guarantees granted | ||
Original Amount | R$ 2117750 | |
Carrying Amount | R$ 1570546 | R$ 3345222 |
Debt instrument term | 10 years | 10 years |
Subsidiary | Gerdau Trade Inc. | 10-year Bond, Maturing Apr/23 | ||
Guarantees granted | ||
Original Amount | R$ 1501275 | |
Carrying Amount | R$ 1792291 | R$ 1832625 |
Debt instrument term | 10 years | 10 years |
Subsidiary | GTL Trade Finance Inc., Gerdau Holdings Inc. | 10-year Bond | ||
Guarantees granted | ||
Original Amount | R$ 2606346 | |
Carrying Amount | R$ 3031974 | R$ 2987154 |
Debt instrument term | 10 years | 10 years |
Subsidiary | Sipar Aceros S.A. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | R$ 436959 | |
Carrying Amount | 85,920 | R$ 434706 |
Subsidiary | Gerdau Steel India Ltd. | Financing Agreements, Maturity Sep/18 - Feb/19 | ||
Guarantees granted | ||
Original Amount | 98,359 | |
Carrying Amount | 287,690 | 354,585 |
Subsidiary | Gerdau Steel India Ltd. | Financing Agreements, Undetermined Maturity | ||
Guarantees granted | ||
Carrying Amount | 55,130 | |
Subsidiary | Comercial Gerdau Bolivia | Financing Agreements | ||
Guarantees granted | ||
Carrying Amount | 13,036 | |
Subsidiary | Gerdau Acominas S.A. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | 2,960,203 | |
Carrying Amount | 2,158,271 | 2,627,205 |
Subsidiary | Gerdau Ameristeel US. Inc. | 25-year Bond | ||
Guarantees granted | ||
Original Amount | 103,596 | |
Carrying Amount | R$ 168708 | R$ 166214 |
Debt instrument term | 25 years | 25 years |
Subsidiary | Gerdau Ameristeel US. Inc. | 30-year Bond | ||
Guarantees granted | ||
Original Amount | R$ 46460 | |
Carrying Amount | R$ 76084 | R$ 74959 |
Debt instrument term | 30 years | 30 years |
Subsidiary | Gerdau Acos Longos S.A. | Financing Agreements, Maturity Oct/24 - Dec/30 | ||
Guarantees granted | ||
Original Amount | R$ 556247 | |
Carrying Amount | 282,534 | R$ 318784 |
Subsidiary | Gerdau Acos Longos S.A. | Financing Agreements, Maturity Dec/18 | ||
Guarantees granted | ||
Original Amount | 7,007 | |
Carrying Amount | 7,007 | 304,194 |
Subsidiary | Siderurgica Zuliana C.A. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | 50,010 | |
Carrying Amount | 33,080 | 65,182 |
Subsidiary | Gerdau Acos Especiais S.A. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | 70,000 | |
Carrying Amount | 63,000 | |
Joint-venture | Diaco S.A. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | 137,700 | |
Carrying Amount | 128,019 | 397,238 |
Joint-venture | Gerdau Corsa S.A.P.I de C.V. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | 1,973,313 | |
Carrying Amount | 1,797,856 | 2,061,260 |
Joint-venture | Gerdau Summit Aos Fundidos e Forjados S.A. | Financing Agreements | ||
Guarantees granted | ||
Original Amount | 130,164 | |
Carrying Amount | 6,550 | |
Subsidiary and Joint-venture | Financing Agreements | ||
Guarantees granted | ||
Carrying Amount | R$ 178200 | R$ 635525 |
RELATED PARTY TRANSACTIONS - De
RELATED PARTY TRANSACTIONS - Debentures (Details) - Direct or indirect shareholders R$ in Thousands | Dec. 31, 2017BRL (R$)instrument | Dec. 31, 2016BRL (R$)instrument |
RELATED PARTY TRANSACTIONS | ||
Debentures held | R$ | R$ 348 | R$ 33438 |
Number of debentures held | instrument | 63 | 5,964 |
RELATED PARTY TRANSACTIONS - Ke
RELATED PARTY TRANSACTIONS - Key Management compensation (Details) | 12 Months Ended | ||
Dec. 31, 2017BRL (R$)EquityInstrumentsOptions | Dec. 31, 2016BRL (R$)EquityInstrumentsOptions | Dec. 31, 2015BRL (R$)EquityInstrumentsOptions | |
Key management personnel | |||
RELATED PARTY TRANSACTIONS | |||
Key management salaries, variable compensation and benefits | R$ 33942000 | R$ 33686000 | |
Contributions to defined contribution pension plans | 1,327,000 | 1,359,000 | |
Long term incentive plan attributable to key management | 14,609,000 | 14,095,000 | R$ 10999000 |
Members of the Advisory Board | |||
RELATED PARTY TRANSACTIONS | |||
Key management salaries, variable compensation and benefits | R$ 0 | R$ 1958000 | R$ 1129000 |
Stock options | |||
Number of shares | |||
Balance, beginning of year | Options | 569,115 | 1,074,246 | 2,448,973 |
Options Forfeited | Options | (276,724) | (505,131) | (1,349,517) |
Balance, end of year | Options | 292,391 | 569,115 | 1,074,246 |
Weighted exercise price | |||
Beginning of year | R$ 16.64 | R$ 18.36 | R$ 19.53 |
Options Forfeited | 15.11 | 20.49 | 20.98 |
End of year | R$ 17.91 | R$ 16.64 | R$ 18.36 |
Stock options | Key management personnel | |||
Number of shares | |||
Balance, beginning of year | Options | 398,179 | 546,670 | 1,564,341 |
Options Forfeited | Options | (217,819) | (148,491) | (1,130,091) |
Options, Others | Options | 112,420 | ||
Balance, end of year | Options | 180,360 | 398,179 | 546,670 |
Weighted exercise price | |||
Beginning of year | R$ 16.64 | R$ 18.36 | R$ 19.53 |
Options Forfeited | 15.11 | 20.49 | 19.56 |
End of year | R$ 17.91 | R$ 16.64 | R$ 18.36 |
Restricted shares | Key management personnel | |||
Restricted shares granted to Management | |||
Balance, beginning of year | EquityInstruments | 4,831,999 | 1,669,557 | |
Granted | EquityInstruments | 1,353,930 | 3,399,729 | |
Exercised | EquityInstruments | (240,619) | (237,287) | |
Balance, end of year | EquityInstruments | 5,945,310 | 4,831,999 | 1,669,557 |
EMPLOYEE BENEFITS - Summary (De
EMPLOYEE BENEFITS - Summary (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
EMPLOYEE BENEFITS | ||
Plan assets | R$ 1149 | R$ 56797 |
Total liabilities | 1,424,864 | 1,504,803 |
Current | 253 | 409 |
Non-current | 1,424,611 | 1,504,394 |
Defined contribution pension plan | ||
EMPLOYEE BENEFITS | ||
Plan assets | 1,149 | 1,490 |
Defined benefit pension plan | ||
EMPLOYEE BENEFITS | ||
Plan assets | 55,307 | |
Total liabilities | 1,084,758 | 1,144,080 |
Post-employment health care benefit | ||
EMPLOYEE BENEFITS | ||
Total liabilities | 316,230 | 305,447 |
Retirement and termination benefits | ||
EMPLOYEE BENEFITS | ||
Total liabilities | R$ 23876 | R$ 55276 |
EMPLOYEE BENEFITS - Post-employ
EMPLOYEE BENEFITS - Post-employment defined benefit pension plan (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Post-employment defined benefit pension plans | ||
EMPLOYEE BENEFITS | ||
Accumulated other comprehensive income | R$ 1227722 | R$ 1111842 |
North-American post-employment defined benefit pension plan | Discount rate | ||
EMPLOYEE BENEFITS | ||
Increase in actuarial assumption (as a percent) | 1.00% | |
Decrease in actuarial assumption (as a percent) | 1.00% | |
Increase (decrease) in defined benefit obligation due to increase in actuarial assumption | R$ 19286 | |
Increase (decrease) in defined benefit obligation due to decrease in actuarial assumption | R$ 15457 |
EMPLOYEE BENEFITS - Defined ben
EMPLOYEE BENEFITS - Defined benefit pension plan - Current expenses (Details) - Defined benefit pension plan - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Current expenses of the defined benefit pension plans | |||
Cost of current service | R$ 60595 | R$ 57619 | R$ 121962 |
Interest expense | 90,381 | 199,389 | 226,406 |
Return on plan assets | (64,128) | (186,856) | (216,005) |
Past service cost | 1,082 | 2,788 | (151,685) |
Curtailment | (4,510) | ||
Settlement | (566) | 609 | |
Interest cost on unrecoverable surplus | 21,211 | 22,916 | 23,515 |
Net pension cost (benefit) | R$ 108575 | R$ 96465 | R$ 317 |
EMPLOYEE BENEFITS - Defined 125
EMPLOYEE BENEFITS - Defined benefit pension plan - Reconciliation of plan assets and liabilities (Details) - Defined benefit pension plan - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Reconciliations of assets and liabilities of the plans | ||||
Net | R$ 1084758 | R$ 1088773 | ||
Plan assets | 55,307 | |||
Defined benefit obligation | (1,084,758) | (1,144,080) | ||
Present value of the defined benefit obligations | ||||
Reconciliations of assets and liabilities of the plans | ||||
Net | (4,314,592) | (4,174,653) | R$ 4739299 | R$ 3791670 |
Fair value of plan assets | ||||
Reconciliations of assets and liabilities of the plans | ||||
Net | 3,456,613 | 3,292,890 | R$ 3865411 | R$ 3319133 |
Asset ceiling restrictions on recognition of net funded assets | ||||
Reconciliations of assets and liabilities of the plans | ||||
Net | R$ 226779 | R$ 207010 |
EMPLOYEE BENEFITS - Defined 126
EMPLOYEE BENEFITS - Defined benefit pension plan - Variation of the plan obligations (Details) - Defined benefit pension plan - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EMPLOYEE BENEFITS | |||
Obligation at the beginning of the year | R$ 1088773 | ||
Cost of service | 60,595 | R$ 57619 | R$ 121962 |
Interest expense | 90,381 | 199,389 | 226,406 |
Past service cost | 1,082 | 2,788 | (151,685) |
Curtailment | (4,510) | ||
Obligation at the end of the year | 1,084,758 | 1,088,773 | |
Present value of the defined benefit obligations | |||
EMPLOYEE BENEFITS | |||
Obligation at the beginning of the year | 4,174,653 | 4,739,299 | 3,791,670 |
Cost of service | 60,595 | 57,619 | 121,962 |
Interest expense | 195,557 | 199,389 | 226,406 |
Payment of benefits | (335,471) | (317,505) | (398,778) |
Past service cost | 1,082 | 2,788 | (114,899) |
Curtailment | (41,296) | ||
Settlement | (52,035) | 609 | |
Gain (loss) on remeasurement | 235,549 | 186,905 | (202,749) |
Liabilities held for sale | (101,794) | ||
Exchange Variance | 136,456 | (694,451) | 1,356,983 |
Obligation at the end of the year | R$ 4314592 | R$ 4174653 | R$ 4739299 |
EMPLOYEE BENEFITS - Defined 127
EMPLOYEE BENEFITS - Defined benefit pension plan - Variation of the plan assets (Details) - Defined benefit pension plan - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EMPLOYEE BENEFITS | |||
Fair value of the plan assets at the beginning of the year | R$ 1088773 | ||
Return of the plan assets | 64,128 | R$ 186856 | R$ 216005 |
Curtailment | (4,510) | ||
Fair value of plan assets at the end of the year | (1,084,758) | (1,088,773) | |
Fair value of plan assets | |||
EMPLOYEE BENEFITS | |||
Fair value of the plan assets at the beginning of the year | 3,292,890 | 3,865,411 | 3,319,133 |
Return of the plan assets | 169,304 | 186,857 | 216,005 |
Contributions from sponsors | 111,450 | (47,574) | (14,986) |
Curtailment | (5,248) | ||
Settlement | (51,469) | (6,710) | |
Payment of benefits | (335,471) | (317,505) | (398,778) |
Remeasurements | 232,214 | 109,153 | (235,275) |
Assets held for sale | (73,127) | ||
Exchange Variance | 110,822 | (496,742) | 984,560 |
Fair value of plan assets at the end of the year | 3,456,613 | 3,292,890 | R$ 3865411 |
Value of shares included in fair value of plan assets | R$ 3558 | R$ 1895 |
EMPLOYEE BENEFITS - Defined 128
EMPLOYEE BENEFITS - Defined benefit pension plan - Actuarial gains and losses (Details) - Defined benefit pension plan - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Amounts recognized as actuarial gains and losses in the statement of comprehensive income | |||
Restriction recognized in Other Comprehensive Income | R$ 1696 | R$ 3065 | R$ 44453 |
Remeasurements recognized in Other Comprehensive Income | 1,639 | 80,817 | (11,927) |
Fair value of plan assets | |||
Amounts recognized as actuarial gains and losses in the statement of comprehensive income | |||
Gain (loss) on remeasurement | (232,214) | (109,153) | 235,275 |
Present value of the defined benefit obligations | |||
Amounts recognized as actuarial gains and losses in the statement of comprehensive income | |||
Gain (loss) on remeasurement | R$ 235549 | R$ 186905 | R$ 202749 |
EMPLOYEE BENEFITS - Defined 129
EMPLOYEE BENEFITS - Defined benefit pension plan - Historical actuarial remeasurements (Details) - Defined benefit pension plan - BRL (R$) R$ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Historical actuarial remeasurements | |||||
Present value of defined benefit obligation | R$ 4314592 | R$ 4174653 | R$ 4739299 | R$ 3791670 | R$ 3113818 |
Fair value of plan assets | 3,456,613 | 3,292,890 | 3,865,411 | 3,319,133 | 3,081,582 |
Surplus (Deficit) | (857,979) | (881,763) | (873,888) | (472,537) | (32,236) |
Present value of the defined benefit obligations | |||||
Historical actuarial remeasurements | |||||
Experience adjustments on plan liabilities | 235,549 | 186,905 | (202,749) | 466,829 | (272,767) |
Fair value of plan assets | |||||
Historical actuarial remeasurements | |||||
Experience adjustments on plan assets | R$ 232214 | R$ 109153 | R$ 235275 | R$ 69748 | R$ 33417 |
EMPLOYEE BENEFITS - Defined 130
EMPLOYEE BENEFITS - Defined benefit pension plan - Allocation of plan assets (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Defined benefit pension plan | ||
Allocation for plan assets | ||
Target allocation of shares (as a percent) | 50.00% | 50.00% |
Target allocation of debt securities (as a percent) | 40.00% | 40.00% |
Target allocation of alternative securities (as a percent) | 10.00% | 10.00% |
Brazilian Plans | ||
Allocation for plan assets | ||
Fixed income | 98.00% | 97.00% |
Others | 2.00% | 3.00% |
Total | 100.00% | 100.00% |
North American Plans | ||
Allocation for plan assets | ||
Fixed income | 48.30% | 45.80% |
Variable income | 45.00% | 48.50% |
Others | 6.70% | 5.70% |
Total | 100.00% | 100.00% |
EMPLOYEE BENEFITS - Defined 131
EMPLOYEE BENEFITS - Defined benefit pension plan - Assumptions used to calculate defined benefit plans (Details) | Dec. 31, 2017 | Dec. 31, 2016 |
Brazilian Plans | ||
Summary of assumptions used to calculate the defined benefit plans | ||
Average discount rate | 9.84% | 10.87% |
North American Plans | ||
Summary of assumptions used to calculate the defined benefit plans | ||
Rate of increase in compensation | 3.00% | 3.25% |
North American Plans | Minimum | ||
Summary of assumptions used to calculate the defined benefit plans | ||
Average discount rate | 3.25% | 3.75% |
North American Plans | Maximum | ||
Summary of assumptions used to calculate the defined benefit plans | ||
Average discount rate | 4.25% | 4.25% |
EMPLOYEE BENEFITS - Post-emp132
EMPLOYEE BENEFITS - Post-employment defined contribution pension plan (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Defined contribution pension plan | ||
EMPLOYEE BENEFITS | ||
Total cost | R$ 132399 | R$ 143561 |
EMPLOYEE BENEFITS - Post-emp133
EMPLOYEE BENEFITS - Post-employment health care benefit plan - Net periodic costs (Details) - Post-employment health care benefit - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Net periodic costs of post-employment health care benefits | |||
Cost of current service | R$ 4441 | R$ 4481 | R$ 5935 |
Interests expense | 12,162 | 15,494 | 18,981 |
Past service cost | 5,769 | (75,787) | |
Net pension cost (benefit) | R$ 22372 | R$ 55812 | R$ 24916 |
EMPLOYEE BENEFITS - Post-emp134
EMPLOYEE BENEFITS - Post-employment health care benefit plan - Funded status (Details) - Post-employment health care benefit - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Funded status of the post-employment health benefits plans | ||
Total net liabilities | R$ 316364 | R$ 305447 |
Present value of the defined benefit obligations | ||
Funded status of the post-employment health benefits plans | ||
Total net liabilities | R$ 316364 | R$ 305447 |
EMPLOYEE BENEFITS - Post-emp135
EMPLOYEE BENEFITS - Post-employment health care benefit plan - Change in obligation (Details) - Post-employment health care benefit - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EMPLOYEE BENEFITS | |||
Cost of service | R$ 4441 | R$ 4481 | R$ 5935 |
Interest expense | 12,162 | 15,494 | 18,981 |
Present value of the defined benefit obligations | |||
EMPLOYEE BENEFITS | |||
Obligation at the beginning of the year | 305,447 | 446,842 | 351,538 |
Cost of service | 4,441 | 4,481 | 5,935 |
Interest expense | 12,162 | 15,494 | 18,981 |
Past service cost | 5,769 | (75,787) | |
Contributions from participants | 1,556 | 2,212 | 2,206 |
Payment of benefits | (14,230) | (14,799) | (17,245) |
Gain (loss) on remeasurement | (14,452) | (3,673) | (45,884) |
Exchange variations | 15,671 | (69,323) | 131,311 |
Obligation at the end of the year | R$ 316364 | R$ 305447 | R$ 446842 |
EMPLOYEE BENEFITS - Post-emp136
EMPLOYEE BENEFITS - Post-employment health care benefit plan - Change in plan assets (Details) - Post-employment health care benefit - Fair value of plan assets - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EMPLOYEE BENEFITS | |||
Fair value of the plan assets at the beginning of the year | R$ 0 | R$ 0 | |
Contributions from sponsors | 12,572 | 12,463 | R$ 14733 |
Contributions from participants | 1,556 | 2,212 | 2,206 |
Payment of benefits | (14,128) | (14,675) | (16,939) |
Fair value of plan assets at the end of the year | R$ 0 | R$ 0 | R$ 0 |
EMPLOYEE BENEFITS - Post-emp137
EMPLOYEE BENEFITS - Post-employment health care benefit plan - Gains and losses (Details) - Post-employment health care benefit - BRL (R$) R$ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Historical actuarial remeasurements | |||||
Present value of defined benefit obligation | R$ 316364 | R$ 305488 | R$ 446843 | R$ 351538 | R$ 369086 |
Surplus (Deficit) | (316,364) | (305,488) | (446,843) | (351,538) | (369,086) |
Experience adjustments on plan liabilities | (14,452) | (3,673) | (45,884) | R$ 42345 | R$ 20980 |
Amounts recognized as actuarial gains and losses in the statement of comprehensive income | |||||
Losses on actuarial obligation | 14,452 | (3,673) | (45,884) | ||
Pension Plan | |||||
Amounts recognized as actuarial gains and losses in the statement of comprehensive income | |||||
Actuarial losses recognized in Equity | R$ 14452 | R$ 3673 | R$ 45884 |
EMPLOYEE BENEFITS - Post-emp138
EMPLOYEE BENEFITS - Post-employment health care benefit plan - Assumptions (Details) - Post-employment health care benefit | Dec. 31, 2017 | Dec. 31, 2016 |
Minimum | ||
Summary of assumptions used to calculate the defined benefit plans | ||
Average discount rate | 3.25% | 3.75% |
Health treatment - rate assumed next year | 6.88% | 6.40% |
Health treatment - Assumed rate of decline in the cost to achieve in the years of 2026 to 2041 | 4.00% | 4.00% |
Maximum | ||
Summary of assumptions used to calculate the defined benefit plans | ||
Average discount rate | 3.50% | 4.25% |
Health treatment - rate assumed next year | 7.60% | 6.80% |
Health treatment - Assumed rate of decline in the cost to achieve in the years of 2026 to 2041 | 4.50% | 4.50% |
EMPLOYEE BENEFITS - Post-emp139
EMPLOYEE BENEFITS - Post-employment health care benefit plan - Sensitivity Analysis (Details) - Post-employment health care benefit - Discount rate R$ in Thousands | Dec. 31, 2017BRL (R$) |
Sensitivity analysis | |
Increase in actuarial assumption (as a percent) | 1.00% |
Decrease in actuarial assumption (as a percent) | 1.00% |
Total service costs and interest costs | |
Sensitivity analysis | |
Increase (decrease) in defined benefit obligation due to increase in actuarial assumption | R$ 92 |
Increase (decrease) in defined benefit obligation due to decrease in actuarial assumption | (765) |
Present value of the defined benefit obligations | |
Sensitivity analysis | |
Increase (decrease) in defined benefit obligation due to increase in actuarial assumption | 37,871 |
Increase (decrease) in defined benefit obligation due to decrease in actuarial assumption | R$ 47434 |
EMPLOYEE BENEFITS - Other retir
EMPLOYEE BENEFITS - Other retirement and termination benefits (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Retirement and termination benefits | ||
EMPLOYEE BENEFITS | ||
Total obligation | R$ 23876 | R$ 55276 |
ENVIRONMENTAL LIABILITIES (Deta
ENVIRONMENTAL LIABILITIES (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
ENVIRONMENTAL LIABILITIES | ||
Total provision for decommissioning, restoration and rehabilitation costs | R$ 85191 | R$ 83806 |
Environmental liabilities | 21,928 | 17,737 |
Environmental liabilities | R$ 63263 | R$ 66069 |
OBLIGATIONS WITH FIDC - INVE142
OBLIGATIONS WITH FIDC - INVESTMENT FUND IN CREDIT RIGHTS (Details) - BRL (R$) R$ in Thousands | Jul. 14, 2015 | Dec. 31, 2017 | Dec. 31, 2016 |
OBLIGATIONS WITH FIDC - INVESTMENT FUND IN CREDIT RIGHTS | |||
Non standardized credit right investment, fair value at inception date | R$ 800000 | ||
Obligations with FIDC | R$ 1135077 | R$ 1007259 |
EQUITY - Common and preferred s
EQUITY - Common and preferred shares outstanding (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Capital | |||
Shares exercise period when not a public offering | 30 days | ||
Shares exercise period for public offering | 10 days | ||
Total capital | R$ 19249181 | R$ 19249181 | |
Common shares | |||
Capital | |||
Authorized capital | 1,500,000,000 | ||
Shares subscribed and paid up | 573,627,483 | ||
Reconciliations of common and preferred outstanding shares | |||
Number of shares outstanding at beginning of the year | 571,929,945 | 571,929,945 | 571,929,945 |
Acquisition of Treasury shares | 0 | 0 | 0 |
Exercise of stock options | 0 | 0 | 0 |
Transfer of shares | 0 | 0 | 0 |
Number of shares outstanding at end of period | 571,929,945 | 571,929,945 | 571,929,945 |
Preferred shares | |||
Capital | |||
Authorized capital | 3,000,000,000 | ||
Shares subscribed and paid up | 1,146,031,245 | ||
Reconciliations of common and preferred outstanding shares | |||
Number of shares outstanding at beginning of the year | 1,137,018,570 | 1,114,744,538 | 1,132,613,562 |
Acquisition of Treasury shares | (10,000,000) | (19,923,200) | |
Exercise of stock options | 308,614 | 2,274,032 | 2,054,176 |
Transfer of shares | 30,000,000 | ||
Number of shares outstanding at end of period | 1,137,327,184 | 1,137,018,570 | 1,114,744,538 |
EQUITY - Ownership of shares (D
EQUITY - Ownership of shares (Details) - shares | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Capital | |||
Number of shares held | 1,719,658,728 | 1,719,658,728 | 1,719,658,728 |
Shares Issued, Percentage | 100.00% | 100.00% | 100.00% |
Metalurgica Gerdau S.A. | |||
Capital | |||
Number of shares held | 653,370,032 | 652,519,280 | 702,554,138 |
Shares Issued, Percentage | 38.00% | 37.90% | 40.90% |
Brazilian institutional investors | |||
Capital | |||
Number of shares held | 155,482,209 | 134,604,327 | 123,530,670 |
Shares Issued, Percentage | 9.00% | 7.80% | 7.20% |
Foreign institutional investors | |||
Capital | |||
Number of shares held | 715,363,943 | 716,775,213 | 646,598,657 |
Shares Issued, Percentage | 41.60% | 41.80% | 37.60% |
Other shareholders | |||
Capital | |||
Number of shares held | 185,040,945 | 205,049,695 | 213,991,018 |
Shares Issued, Percentage | 10.80% | 11.90% | 12.40% |
Common shares | |||
Capital | |||
Number of shares held | 573,627,483 | 573,627,483 | 573,627,483 |
Shares Issued, Percentage | 100.00% | 100.00% | 100.00% |
Common shares | Metalurgica Gerdau S.A. | |||
Capital | |||
Number of shares held | 557,898,901 | 449,712,654 | 449,712,654 |
Shares Issued, Percentage | 97.30% | 78.40% | 78.40% |
Common shares | Brazilian institutional investors | |||
Capital | |||
Number of shares held | 254,785 | 41,883,032 | 49,834,446 |
Shares Issued, Percentage | 0.00% | 7.30% | 8.70% |
Common shares | Foreign institutional investors | |||
Capital | |||
Number of shares held | 7,254,556 | 11,122,498 | 13,881,226 |
Shares Issued, Percentage | 1.30% | 1.90% | 2.40% |
Common shares | Other shareholders | |||
Capital | |||
Number of shares held | 6,521,703 | 69,211,761 | 58,501,619 |
Shares Issued, Percentage | 1.10% | 12.10% | 10.20% |
Preferred shares | |||
Capital | |||
Number of shares held | 1,146,031,245 | 1,146,031,245 | 1,146,031,245 |
Shares Issued, Percentage | 100.00% | 100.00% | 100.00% |
Preferred shares | Metalurgica Gerdau S.A. | |||
Capital | |||
Number of shares held | 95,471,131 | 202,806,626 | 252,841,484 |
Shares Issued, Percentage | 8.30% | 17.70% | 22.10% |
Preferred shares | Brazilian institutional investors | |||
Capital | |||
Number of shares held | 155,227,424 | 92,721,295 | 73,686,224 |
Shares Issued, Percentage | 13.50% | 8.10% | 6.40% |
Preferred shares | Foreign institutional investors | |||
Capital | |||
Number of shares held | 708,109,387 | 705,652,715 | 632,717,431 |
Shares Issued, Percentage | 61.80% | 61.50% | 55.20% |
Preferred shares | Other shareholders | |||
Capital | |||
Number of shares held | 178,519,242 | 135,837,934 | 155,489,399 |
Shares Issued, Percentage | 15.60% | 11.90% | 13.60% |
Treasury Stocks | |||
Capital | |||
Number of shares held | 10,401,599 | 10,710,213 | 32,984,245 |
Shares Issued, Percentage | 0.60% | 0.60% | 1.90% |
Treasury Stocks | Common shares | |||
Capital | |||
Number of shares held | 1,697,538 | 1,697,538 | 1,697,538 |
Shares Issued, Percentage | 0.30% | 0.30% | 0.30% |
Treasury Stocks | Preferred shares | |||
Capital | |||
Number of shares held | 8,704,061 | 9,012,675 | 31,286,707 |
Shares Issued, Percentage | 0.80% | 0.80% | 2.70% |
EQUITY - Treasury stocks (Detai
EQUITY - Treasury stocks (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Capital | |||
Equity at beginning of period | R$ 24274653 | R$ 31970383 | R$ 33254534 |
Repurchases | 95,370 | 189,071 | |
Exercise of stock options | 19,682 | 5,560 | 35,902 |
Transfer of shares | 205,800 | ||
Equity at end of period | R$ 23893941 | R$ 24274653 | R$ 31970383 |
Investments and working capital reserve | |||
Investments and working capital reserve, annual percentage | 5.00% | ||
Common shares | |||
Capital | |||
Number of shares outstanding at beginning of the year | 571,929,945 | 571,929,945 | 571,929,945 |
Repurchases | 0 | 0 | 0 |
Exercise of stock options | 0 | 0 | 0 |
Transfer of shares | 0 | 0 | 0 |
Number of shares outstanding at end of period | 571,929,945 | 571,929,945 | 571,929,945 |
Preferred shares | |||
Capital | |||
Number of shares outstanding at beginning of the year | 1,137,018,570 | 1,114,744,538 | 1,132,613,562 |
Repurchases | 10,000,000 | 19,923,200 | |
Exercise of stock options | 308,614 | 2,274,032 | 2,054,176 |
Transfer of shares | 30,000,000 | ||
Number of shares outstanding at end of period | 1,137,327,184 | 1,137,018,570 | 1,114,744,538 |
Treasury Stocks | |||
Capital | |||
Equity at beginning of period | R$ 98746 | R$ 383363 | R$ 233142 |
Repurchases | 95,343 | 186,033 | |
Exercise of stock options | 22,661 | 10,461 | 35,812 |
Transfer of shares | 369,499 | ||
Equity at end of period | R$ 76085 | R$ 98746 | R$ 383363 |
Average acquisition cost | R$ 8.68 | R$ 10.89 | R$ 12.24 |
Treasury Stocks | Common shares | |||
Capital | |||
Number of shares outstanding at beginning of the year | 1,697,538 | 1,697,538 | 1,697,538 |
Repurchases | 0 | 0 | |
Exercise of stock options | 0 | 0 | 0 |
Transfer of shares | 0 | ||
Number of shares outstanding at end of period | 1,697,538 | 1,697,538 | 1,697,538 |
Equity at beginning of period | R$ 557 | R$ 557 | R$ 557 |
Repurchases | 0 | 0 | |
Exercise of stock options | 0 | 0 | 0 |
Transfer of shares | 0 | ||
Equity at end of period | R$ 557 | R$ 557 | R$ 557 |
Treasury Stocks | Preferred shares | |||
Capital | |||
Number of shares outstanding at beginning of the year | 9,012,675 | 31,286,707 | 13,417,683 |
Repurchases | 10,000,000 | 19,923,200 | |
Exercise of stock options | (308,614) | (2,274,032) | (2,054,176) |
Transfer of shares | (30,000,000) | ||
Number of shares outstanding at end of period | 8,704,061 | 9,012,675 | 31,286,707 |
Equity at beginning of period | R$ 98189 | R$ 382806 | R$ 232585 |
Repurchases | 95,343 | 186,033 | |
Exercise of stock options | (22,661) | (10,461) | (35,812) |
Transfer of shares | (369,499) | ||
Equity at end of period | R$ 75528 | R$ 98189 | R$ 382806 |
EQUITY - Operations with non-co
EQUITY - Operations with non-controlling interests (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Capital | |||
Effect of interest changes in subsidiaries | R$ 19194 | R$ 2252 | R$ 1969237 |
Total Parent company's interest | |||
Capital | |||
Effect of interest changes in subsidiaries | 2,504 | 4,153 | (1,144,526) |
Non-controlling interests | |||
Capital | |||
Acquisition of non-controlling interests | (837,437) | ||
Changes in the Paraopeba- Fixed Income Investment Fund | (21,698) | (6,405) | 12,726 |
Effect of interest changes in subsidiaries | R$ 21698 | R$ 6405 | R$ 824711 |
EQUITY - Dividends and interest
EQUITY - Dividends and interest on capital (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Dividends and interest on capital | ||||||||||
Minimum annual mandatory dividend (as a percent) | 30.00% | |||||||||
Related tax benefit arising from the recording of interest on shareholders' capital as financial expense for tax purposes | R$ 63074 | |||||||||
Amounts to be considered for distribution as dividends | ||||||||||
Net income (loss) | R$ 359360 | R$ 2890811 | (4,551,438) | |||||||
Schedule of dividends and interest on capital | ||||||||||
Dividend/share | R$ 0.03 | R$ 0.02 | ||||||||
Outstanding shares | 1,709,267 | 1,709,205 | ||||||||
Dividends and interest on capital | 88,482 | 87,340 | 256,500 | |||||||
Total Parent company's interest | ||||||||||
Amounts to be considered for distribution as dividends | ||||||||||
Net income (loss) | (359,360) | (2,890,811) | (4,551,438) | |||||||
Schedule of dividends and interest on capital | ||||||||||
Interest | R$ 84318 | R$ 101200 | ||||||||
Dividends | R$ 51278 | R$ 34184 | R$ 34152 | R$ 51225 | R$ 67458 | 85,462 | ||||
Dividends and interest on capital | R$ 85462 | R$ 85377 | R$ 252976 | |||||||
Credit per share (R$) | R$ 0.05 | R$ 0.05 | R$ 0.15 | |||||||
Investments and working capital reserve | ||||||||||
Amounts to be considered for distribution as dividends | ||||||||||
Absorption of net loss by investments and working capital reserve | R$ 359360 | R$ 2890811 | R$ 4551438 | |||||||
Schedule of dividends and interest on capital | ||||||||||
Dividends and interest on capital | R$ 85462 | R$ 85377 | R$ 252976 |
EARNINGS PER SHARE (EPS) - Basi
EARNINGS PER SHARE (EPS) - Basic (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Basic numerator | |||
Allocated net income (loss) available to common shareholders | R$ 120267 | R$ 969954 | R$ 1541242 |
Allocated net income (loss) available to preferred shareholders | (239,093) | (1,920,857) | (3,010,196) |
Allocated net income (loss) available to common and preferred shareholders | R$ 359360 | R$ 2890811 | R$ 4551438 |
Basic denominator | |||
Weighted-average outstanding shares, after deducting the average treasury shares for common share holders | 571,929,945 | 571,929,945 | 571,929,945 |
Weighted-average outstanding shares, after deducting the average treasury shares for Preferred share holders | 1,137,012,265 | 1,132,626,373 | 1,117,034,926 |
Earnings per share for common share (in R$) - Basic | R$ 0.21 | R$ 1.70 | R$ 2.69 |
Earnings per share for preferred share (in R$) - Basic | R$ 0.21 | R$ 1.70 | R$ 2.69 |
NET SALES REVENUE (Details)
NET SALES REVENUE (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
NET SALES REVENUE | |||
Gross sales | R$ 42156553 | R$ 42935022 | R$ 48701895 |
Taxes on sales | (2,956,896) | (2,765,957) | (3,184,879) |
Discounts | (2,282,038) | (2,517,398) | (1,935,775) |
Net sales | R$ 36917619 | R$ 37651667 | R$ 43581241 |
LONG-TERM INCENTIVE PLANS - Res
LONG-TERM INCENTIVE PLANS - Restricted Shares and Performance Shares (Details) - Restricted Shares and Performance Shares - EquityInstruments | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
LONG-TERM INCENTIVE PLANS | |||
Balance, beginning of year | 20,433,491 | 12,525,256 | 10,086,234 |
Granted | 3,170,952 | 13,357,922 | 9,098,389 |
Forfeited | (1,901,782) | (3,046,593) | (2,717,724) |
Exercised | (2,727,577) | (2,403,094) | (3,941,643) |
Balance, end of year | 18,975,084 | 20,433,491 | 12,525,256 |
Grace period | 3 years |
LONG-TERM INCENTIVE PLANS - Sto
LONG-TERM INCENTIVE PLANS - Stock option activity (Details) | 12 Months Ended | ||
Dec. 31, 2017BRL (R$)Optionsshares | Dec. 31, 2016BRL (R$)Options | Dec. 31, 2015BRL (R$)Options | |
Preferred shares | |||
Average exercise price in the year | |||
Treasury shares | shares | 8,704,061 | ||
Stock options | |||
Number of shares | |||
Balance, beginning of year | Options | 569,115 | 1,074,246 | 2,448,973 |
Options Exercised | Options | (25,210) | ||
Options Forfeited | Options | (276,724) | (505,131) | (1,349,517) |
Balance, end of year | Options | 292,391 | 569,115 | 1,074,246 |
Average exercise price in the year | |||
Beginning of year | R$ 16.64 | R$ 18.36 | R$ 19.53 |
Options Exercised | 19.56 | ||
Options Forfeited | 15.11 | 20.49 | 20.98 |
End of year | 17.91 | 16.64 | 18.36 |
Average market price of the share | R$ 11.19 | R$ 7.68 | R$ 7.70 |
LONG-TERM INCENTIVE PLANS - Exe
LONG-TERM INCENTIVE PLANS - Exercise of stock options (Details) - Stock options | 12 Months Ended | |||
Dec. 31, 2017BRL (R$)Optionsitem | Dec. 31, 2016BRL (R$)Options | Dec. 31, 2015BRL (R$)Options | Dec. 31, 2014BRL (R$)Options | |
Exercise price of options | ||||
Quantity (in shares) | Options | 292,391 | 569,115 | 1,074,246 | 2,448,973 |
Average exercise price | R$ 17.91 | R$ 16.64 | R$ 18.36 | R$ 19.53 |
Number exercisable at end of the period (in shares) | Options | 57,668 | 57,678 | 127,899 | |
Expense from equity-settled long-term incentive plan - recognized directly in equity | R$ 25403000 | R$ 38023000 | R$ 39657000 | |
Options granted (in shares) | item | 0 | |||
R$ 14.39 | ||||
Exercise price of options | ||||
Exercise price | R$ 14.39 | |||
Quantity (in shares) | Options | 40,873 | |||
Average period of grace (in years) | item | 1.2 | |||
Average exercise price | R$ 13.89 | |||
Number exercisable at end of the period (in shares) | Options | 40,873 | |||
R$ 10.58 to R$ 29.12 | ||||
Exercise price of options | ||||
Quantity (in shares) | Options | 251,518 | |||
Average period of grace (in years) | item | 5 | |||
Average exercise price | R$ 18.56 | |||
Number exercisable at end of the period (in shares) | Options | 16,795 | |||
R$ 10.58 to R$ 29.12 | Minimum | ||||
Exercise price of options | ||||
Exercise price | R$ 10.58 | |||
R$ 10.58 to R$ 29.12 | Maximum | ||||
Exercise price of options | ||||
Exercise price | R$ 29.12 |
LONG-TERM INCENTIVE PLANS - Oth
LONG-TERM INCENTIVE PLANS - Other plans (Details) $ in Thousands | 12 Months Ended | |||||||
Dec. 31, 2017USD ($)EquityInstrumentsOptions | Dec. 31, 2016USD ($)EquityInstrumentsOptions | Dec. 31, 2016BRL (R$)EquityInstruments | Dec. 31, 2015USD ($)EquityInstrumentsOptions | Dec. 31, 2015BRL (R$)EquityInstrumentsOptions | Dec. 31, 2017BRL (R$)EquityInstrumentsOptions | Dec. 31, 2016BRL (R$)Options | Dec. 31, 2014Options | |
Stock options | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Outstanding shares (in shares) | Options | 292,391 | 569,115 | 1,074,246 | 1,074,246 | 292,391 | 569,115 | 2,448,973 | |
North American subsidiary | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Outstanding liability for share-based payment transactions | $ 9 | $ 10 | R$ 29800 | R$ 32600 | ||||
EIP | North American subsidiary | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Amount of shares granted under plan | $ 9,900 | R$ 34500000 | $ 13,900 | R$ 46400000 | ||||
Vesting period (in years) | 5 years | 5 years | 5 years | 5 years | ||||
EIP | North American subsidiary | Stock options | Maximum | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Term of grant (in years) | 10 years | |||||||
EIP | North American subsidiary | SARs | Maximum | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Term of grant (in years) | 10 years | |||||||
EIP | North American subsidiary | RSUs | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Shares issued under plan (in shares) | 2,846,835 | 2,846,835 | 3,833,542 | 3,833,542 | ||||
EIP | North American subsidiary | PSUs | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Shares issued under plan (in shares) | 3,820,894 | 3,820,894 | 1,792,456 | 1,792,456 | ||||
LTIP | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Vesting period (in years) | 4 years | |||||||
LTIP | Stock options | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Outstanding shares (in shares) | Options | 40,873 | 40,873 | ||||||
LTIP | SARs | ||||||||
LONG-TERM INCENTIVE PLANS | ||||||||
Outstanding shares (in shares) | 535,543 | 535,543 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Segment reporting as per business segments | ||||
Net sales | R$ 36917619 | R$ 37651667 | R$ 43581241 | |
Cost of sales | (33,312,995) | (34,187,941) | (39,290,526) | |
GROSS PROFIT | 3,604,624 | 3,463,726 | 4,290,715 | |
Selling, general and administrative expenses | (1,654,908) | (2,239,028) | (2,582,485) | |
Other operating income (expenses) | 91,731 | 127,847 | 97,000 | |
Impairment of assets | (1,114,807) | (2,917,911) | (4,996,240) | |
Gains and losses on assets held for sale and sales of interest in subsidiaries and associates | (721,682) | (58,223) | ||
Reversal of contingent liabilities, net | 929,711 | |||
Equity in earnings of unconsolidated companies | (34,597) | (12,771) | (24,502) | |
INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES | 1,100,072 | (1,636,360) | (3,215,512) | |
Financial result, net | (1,143,348) | (945,255) | (2,878,896) | |
INCOME (LOSS) BEFORE TAXES | (43,276) | (2,581,615) | (6,094,408) | |
Income and social contribution taxes | (295,391) | (304,314) | 1,498,422 | |
Net income (loss) | (338,667) | (2,885,929) | (4,595,986) | |
Depreciation/amortization | 2,092,551 | 2,535,955 | 2,607,909 | |
Investments in associates and jointly-controlled entities | 1,280,299 | 798,844 | 1,392,882 | R$ 1394383 |
Total assets | 50,301,761 | 54,635,141 | 70,094,709 | |
Total liabilities | 26,407,820 | 30,360,488 | 38,124,326 | |
Operating Segments | Brazil Operation | ||||
Segment reporting as per business segments | ||||
Net sales | 12,562,727 | 11,634,862 | 12,977,327 | |
Cost of sales | (10,996,383) | (10,405,078) | (11,433,115) | |
GROSS PROFIT | 1,566,344 | 1,229,784 | 1,544,212 | |
Selling, general and administrative expenses | (539,613) | (678,369) | (821,152) | |
Other operating income (expenses) | (11,513) | 2,111 | 3,638 | |
Impairment of assets | (45,279) | (834,665) | ||
INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES | 969,939 | 553,526 | (107,967) | |
Financial result, net | (564,397) | (603,373) | (624,526) | |
INCOME (LOSS) BEFORE TAXES | 405,542 | (49,847) | (732,493) | |
Income and social contribution taxes | (103,263) | 13,140 | 60,804 | |
Net income (loss) | 302,279 | (36,707) | (671,689) | |
Depreciation/amortization | 909,333 | 952,848 | 928,861 | |
Total assets | 17,051,262 | 18,672,770 | 20,791,119 | |
Total liabilities | 9,592,948 | 10,761,705 | 12,831,815 | |
Operating Segments | North America Operation | ||||
Segment reporting as per business segments | ||||
Net sales | 15,433,380 | 15,430,814 | 17,312,166 | |
Cost of sales | (14,823,590) | (14,514,789) | (15,800,270) | |
GROSS PROFIT | 609,790 | 916,025 | 1,511,896 | |
Selling, general and administrative expenses | (569,696) | (778,218) | (814,393) | |
Other operating income (expenses) | 29,113 | 26,223 | 18,379 | |
Impairment of assets | (1,069,528) | (2,779,146) | (1,882,239) | |
Equity in earnings of unconsolidated companies | (111,581) | (46,917) | (72,774) | |
INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES | (1,111,902) | (2,662,033) | (1,239,131) | |
Financial result, net | (46,184) | (63,654) | (234,183) | |
INCOME (LOSS) BEFORE TAXES | (1,158,086) | (2,725,687) | (1,473,314) | |
Income and social contribution taxes | 201,807 | 133,818 | 5,196 | |
Net income (loss) | (956,279) | (2,591,869) | (1,468,118) | |
Depreciation/amortization | 684,121 | 874,299 | 836,660 | |
Investments in associates and jointly-controlled entities | 346,080 | 303,526 | 725,356 | |
Total assets | 14,872,755 | 16,459,784 | 27,324,285 | |
Total liabilities | 3,315,546 | 3,407,444 | 7,214,899 | |
Operating Segments | South America Operation | ||||
Segment reporting as per business segments | ||||
Net sales | 4,025,736 | 4,775,598 | 5,477,228 | |
Cost of sales | (3,523,394) | (4,103,231) | (4,800,063) | |
GROSS PROFIT | 502,342 | 672,367 | 677,165 | |
Selling, general and administrative expenses | (202,862) | (253,177) | (313,521) | |
Other operating income (expenses) | 11,260 | 41,396 | 2,985 | |
Impairment of assets | (138,765) | (354,468) | ||
Equity in earnings of unconsolidated companies | 41,554 | 16,366 | 36,550 | |
INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES | 352,294 | 338,187 | 48,711 | |
Financial result, net | (74,301) | (96,822) | (98,557) | |
INCOME (LOSS) BEFORE TAXES | 277,993 | 241,365 | (49,846) | |
Income and social contribution taxes | (123,552) | (107,124) | (104,308) | |
Net income (loss) | 154,441 | 134,241 | (154,154) | |
Depreciation/amortization | 155,038 | 182,672 | 192,014 | |
Investments in associates and jointly-controlled entities | 584,898 | 404,522 | 575,845 | |
Total assets | 5,208,265 | 5,582,926 | 7,046,438 | |
Total liabilities | 1,711,963 | 1,651,590 | 2,451,835 | |
Operating Segments | Special Steels Operation | ||||
Segment reporting as per business segments | ||||
Net sales | 6,228,543 | 6,884,733 | 8,882,071 | |
Cost of sales | (5,301,172) | (6,238,749) | (8,333,189) | |
GROSS PROFIT | 927,371 | 645,984 | 548,882 | |
Selling, general and administrative expenses | (166,656) | (284,962) | (371,481) | |
Other operating income (expenses) | 14,989 | 14,166 | 21,791 | |
Impairment of assets | (1,924,868) | |||
Equity in earnings of unconsolidated companies | 15,460 | |||
INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES | 791,164 | 375,188 | (1,725,676) | |
Financial result, net | (122,837) | (148,313) | (288,021) | |
INCOME (LOSS) BEFORE TAXES | 668,327 | 226,875 | (2,013,697) | |
Income and social contribution taxes | (192,902) | (64,348) | (283,633) | |
Net income (loss) | 475,425 | 162,527 | (2,297,330) | |
Depreciation/amortization | 344,059 | 526,136 | 650,374 | |
Investments in associates and jointly-controlled entities | 199,647 | 2,082 | ||
Total assets | 8,834,041 | 11,970,202 | 17,077,208 | |
Total liabilities | 2,753,091 | 6,519,255 | 9,369,552 | |
Eliminations and Adjustments | ||||
Segment reporting as per business segments | ||||
Net sales | (1,332,767) | (1,074,340) | (1,067,551) | |
Cost of sales | 1,331,544 | 1,073,906 | 1,076,111 | |
GROSS PROFIT | (1,223) | (434) | 8,560 | |
Selling, general and administrative expenses | (176,081) | (244,302) | (261,938) | |
Other operating income (expenses) | 47,882 | 43,951 | 50,207 | |
Gains and losses on assets held for sale and sales of interest in subsidiaries and associates | (721,682) | (58,223) | ||
Reversal of contingent liabilities, net | 929,711 | |||
Equity in earnings of unconsolidated companies | 19,970 | 17,780 | 11,722 | |
INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES | 98,577 | (241,228) | (191,449) | |
Financial result, net | (335,629) | (33,093) | (1,633,609) | |
INCOME (LOSS) BEFORE TAXES | (237,052) | (274,321) | (1,825,058) | |
Income and social contribution taxes | (77,481) | (279,800) | 1,820,363 | |
Net income (loss) | (314,533) | (554,121) | (4,695) | |
Investments in associates and jointly-controlled entities | 149,674 | 90,796 | 89,599 | |
Total assets | 4,335,438 | 1,949,459 | (2,144,341) | |
Total liabilities | 9,034,272 | 8,020,494 | 6,256,225 | |
Eliminations and Adjustments | Brazil Operation | ||||
Segment reporting as per business segments | ||||
Net sales | (1,216,526) | (885,050) | (817,494) | |
Eliminations and Adjustments | North America Operation | ||||
Segment reporting as per business segments | ||||
Net sales | (59,478) | (90,267) | (121,292) | |
Eliminations and Adjustments | South America Operation | ||||
Segment reporting as per business segments | ||||
Net sales | (6,490) | (6,386) | (685) | |
Eliminations and Adjustments | Special Steels Operation | ||||
Segment reporting as per business segments | ||||
Net sales | R$ 50273 | R$ 92637 | R$ 128080 |
SEGMENT REPORTING - Geographic
SEGMENT REPORTING - Geographic information(Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Segment reporting as per geographical areas | |||
Net sales | R$ 36917619 | R$ 37651667 | R$ 43581241 |
Total assets | 50,301,761 | 54,635,141 | 70,094,709 |
Brazil | |||
Segment reporting as per geographical areas | |||
Net sales | 13,450,378 | 12,229,582 | 14,033,792 |
Total assets | 23,872,075 | 24,266,983 | 22,803,505 |
Latin America | |||
Segment reporting as per geographical areas | |||
Net sales | 4,769,526 | 5,828,564 | 6,653,980 |
Total assets | 6,009,394 | 6,159,387 | 9,327,457 |
North America | |||
Segment reporting as per geographical areas | |||
Net sales | 18,142,218 | 17,917,485 | 19,813,519 |
Total assets | 19,629,950 | 23,463,447 | 36,048,019 |
Europe/Asia | |||
Segment reporting as per geographical areas | |||
Net sales | 555,497 | 1,676,036 | 3,079,950 |
Total assets | R$ 790342 | R$ 745324 | R$ 1915728 |
INSURANCE (Details)
INSURANCE (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Equity | ||
Disclosure of types of insurance contracts [line items] | ||
Amount of assets or liabilities covered under insurance contracts | R$ 57062113 | R$ 60924807 |
Business Interruption | ||
Disclosure of types of insurance contracts [line items] | ||
Amount of assets or liabilities covered under insurance contracts | 6,464,512 | 8,354,147 |
Civil Liability | ||
Disclosure of types of insurance contracts [line items] | ||
Amount of assets or liabilities covered under insurance contracts | R$ 535896 | R$ 527974 |
IMPAIRMENT OF ASSETS (Details)
IMPAIRMENT OF ASSETS (Details) R$ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | Dec. 31, 2017BRL (R$)segment | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | |
Impairment of assets | |||||
Increase in discount rate | 0.50% | ||||
Impairment of assets | R$ 1114807 | R$ 2917911 | R$ 4996240 | ||
Impairment of property, plant and equipment | R$ 265369 | R$ 239329 | 265,369 | 239,329 | |
Impairment of goodwill | R$ 849438 | R$ 2678582 | R$ 2528483 | ||
Number of operating segments | segment | 4 | ||||
Period for projecting the cash flows for the goodwill impairment test | P5Y | ||||
Discount rate | |||||
Impairment of assets | |||||
Sensitivity analysis, percent of increase | 0.50% | 0.50% | 0.50% | 0.50% | |
Perpetuity growth rate | |||||
Impairment of assets | |||||
Sensitivity analysis, percent of decrease | 0.50% | 0.50% | 0.50% | 0.50% | |
Property, plant and equipment | |||||
Impairment of assets | |||||
Recoverable amount | R$ 138543 | R$ 138543 | |||
North America | |||||
Impairment of assets | |||||
Impairment of property, plant and equipment | R$ 220090 | 100,564 | |||
Impairment of goodwill | 849,438 | 2,678,582 | |||
Recoverable amount | R$ 849 | R$ 2679000 | R$ 849 | R$ 2679000 | |
Perpetuity growth rate | 3.00% | 3.00% | 3.00% | 3.00% | |
Pre-tax discount rate | 13.60% | 13.10% | 13.60% | 13.10% | |
North America | Discount rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | R$ 506000 | R$ 872000 | R$ 506000 | R$ 872000 | |
North America | Perpetuity growth rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | (310,000) | (661,000) | (310,000) | (661,000) | |
South America | |||||
Impairment of assets | |||||
Impairment of property, plant and equipment | 138,765 | ||||
Recoverable amount | R$ 437000 | R$ 724000 | R$ 437000 | R$ 724000 | |
Perpetuity growth rate | 3.00% | 3.00% | 3.00% | 3.00% | |
Pre-tax discount rate | 14.70% | 14.60% | 14.70% | 14.60% | |
South America | Discount rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | R$ 265000 | R$ 486000 | R$ 265000 | R$ 486000 | |
South America | Perpetuity growth rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | 318,000 | 561,000 | 318,000 | 561,000 | |
Brazil | |||||
Impairment of assets | |||||
Impairment of property, plant and equipment | 45,279 | ||||
Recoverable amount | R$ 1747000 | R$ 1225000 | R$ 1747000 | R$ 1225000 | |
Perpetuity growth rate | 3.00% | 3.00% | 3.00% | 3.00% | |
Pre-tax discount rate | 15.20% | 14.90% | 15.20% | 14.90% | |
Brazil | Discount rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | R$ 999000 | R$ 425000 | R$ 999000 | R$ 425000 | |
Brazil | Perpetuity growth rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | 1,254,000 | 673,000 | 1,254,000 | 673,000 | |
Special Steel | |||||
Impairment of assets | |||||
Recoverable amount | R$ 3989000 | R$ 1601000 | R$ 3989000 | R$ 1601000 | |
Perpetuity growth rate | 3.00% | 3.00% | 3.00% | 3.00% | |
Pre-tax discount rate | 13.10% | 14.00% | 13.10% | 14.00% | |
Special Steel | Discount rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | R$ 3422000 | R$ 1170000 | R$ 3422000 | R$ 1170000 | |
Special Steel | Perpetuity growth rate | |||||
Impairment of assets | |||||
Sensitivity analysis, amount above (below) book value | R$ 3596000 | R$ 1301000 | R$ 3596000 | R$ 1301000 |
EXPENSES BY NATURE (Details)
EXPENSES BY NATURE (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EXPENSES BY NATURE | |||
Depreciation and amortisation | R$ 2092551 | R$ 2535955 | R$ 2607909 |
Labor expenses | (5,514,721) | (6,508,834) | (7,018,129) |
Raw material and consumption material | (23,423,950) | (22,863,693) | (27,126,417) |
Freight | (2,281,773) | (2,279,459) | (2,538,071) |
Impairment of assets | (1,114,807) | (2,917,911) | (4,996,240) |
Gains and losses on assets held for sale and sales of interest in subsidiaries and associates | (721,682) | (58,223) | |
Reversal of contingent liabilities, net | 929,711 | ||
Other expenses/income, net | (1,563,177) | (2,111,181) | (2,485,485) |
Total Expenses | R$ 35782950 | R$ 39275256 | R$ 46772251 |
EXPENSES BY NATURE - Classified
EXPENSES BY NATURE - Classified by function (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
EXPENSES BY NATURE | |||
Cost of sales | R$ 33312995 | R$ 34187941 | R$ 39290526 |
Selling expenses | (524,965) | (710,766) | (785,002) |
General and administrative expenses | (1,129,943) | (1,528,262) | (1,797,483) |
Other operating income | 260,618 | 242,077 | 213,431 |
Other operating expenses | (168,887) | (114,230) | (116,431) |
Impairment of assets | (1,114,807) | (2,917,911) | (4,996,240) |
Gains and losses on assets held for sale and sales of interest in subsidiaries and associates | (721,682) | (58,223) | |
Reversal of contingent liabilities, net | 929,711 | ||
Total Expenses | R$ 35782950 | R$ 39275256 | R$ 46772251 |
FINANCIAL INCOME (Details)
FINANCIAL INCOME (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
FINANCIAL INCOME | |||
Income from short-term investments | R$ 85153 | R$ 142965 | R$ 270742 |
Interest income and other financial income | 141,462 | 109,080 | 107,660 |
Financial Income | 226,615 | 252,045 | 378,402 |
Interest on debt | (1,323,448) | (1,540,797) | (1,471,526) |
Monetary variation and other financial expenses | (402,836) | (469,208) | (308,840) |
Financial expenses | (1,726,284) | (2,010,005) | (1,780,366) |
Exchange Variation, net | (4,057) | 851,635 | (1,564,017) |
Reversal of monetary update of contingent liabilities, net | 369,819 | ||
Gains and losses on financial instruments, net | (9,441) | (38,930) | 87,085 |
Financial result, net | R$ 1143348 | R$ 945255 | R$ 2878896 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) R$ / shares in Units, R$ in Millions, $ in Millions | Feb. 26, 2018BRL (R$)R$ / shares | Feb. 14, 2018BRL (R$)item | Jan. 08, 2018shares | Jan. 31, 2018USD ($)itemT | Jan. 31, 2018BRL (R$)itemT |
Repurchase of shares | |||||
SUBSEQUENT EVENTS | |||||
Authorization period | 3 months | ||||
Repurchase of shares | Preferred shares (GGBR4 ) or American Depositary Receipts (ADRs) | |||||
SUBSEQUENT EVENTS | |||||
Shares authorized for repurchase | shares | 10,000,000 | ||||
Definitive sale agreement | |||||
SUBSEQUENT EVENTS | |||||
Number of processing units to be sold | 2 | 2 | |||
Definitive sale agreement, total consideration | $ 92.5 | R$ 292.5 | |||
Definitive sale agreement | Steel | |||||
SUBSEQUENT EVENTS | |||||
Production capacity (in tons) | T | 700,000 | 700,000 | |||
Sale of hydroelectric plants | |||||
SUBSEQUENT EVENTS | |||||
Number of hydroelectric plants held for sale | 2 | ||||
Proceeds from sale of hydroelectric plants | R$ | R$ 835.0 | ||||
Installed capacity (in MW) | 155 | ||||
Dividends declared | |||||
SUBSEQUENT EVENTS | |||||
Dividends declared | R$ | R$ 510.0 | ||||
Dividends declared | Common shares | |||||
SUBSEQUENT EVENTS | |||||
Dividends declared (in R$ per share) | R$ / shares | R$ 0.03 | ||||
Dividends declared | Preferred shares | |||||
SUBSEQUENT EVENTS | |||||
Dividends declared (in R$ per share) | R$ / shares | R$ 0.03 |