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Tariffs increase US operations, but Gerdau's adjusted profits fall by nearly 9%.

The Brazilian steelmaker Gerdau reported a 8.6% drop in its adjusted net profit for the second quarter of 2018, compared to last year. This was slightly lower than analysts' expectations, despite a stronger performance by North American operations because of U.S. Tariffs.

Gerdau, the largest Brazilian steelmaker in terms of market capitalization with mills throughout the Americas reported a net profit of 864 million reais (154.26 millions dollars) for the three-month period ending June 30. LSEG polled analysts who expected 847 million reais.

Gerdau stated in its earnings report that the decline in profits was primarily due to the results of the company's operations outside Brazil and South America, which were partially offset by the currency effects.

Gerdau's adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was 2.56 billion reals, down 2.4%, and in line with analyst expectations of 2.57 billion reals.

Gerdau has reported an improvement in its North American operations compared to first quarter. It attributes this to a decrease in imports in the U.S. as a result of higher tariffs, and the supply rebalancing that follows.

More than half of the steelmaker's net income comes from North America. Analysts believe that the steel tariffs set by U.S. president Trump will benefit the Brazilian steelmaking industry.

Gerdau's net revenue total rose by 5.5% on an annual basis to 17.5 billion reals, while steel sales increased by 4.1%. Analysts estimated a 17.7 bn reais net income.

Analysts at JPMorgan, including Rodolfo Anglee, said that the results were mostly neutral. In a note to clients, they said that North America's continued strength in 2Q25 was more than compensating the challenges in Brazil and South America. ($1 = 5,6008 reais). (Reporting and editing by Brendan O'Boyle, Chris Reese and Andre Romani)

(source: Reuters)