On this post I had estimated Gerdau free cash flow. But I hadn't deducted investments in work capital. I'll try to do that now.
Since 2005, Gerdau work capital has been around 20% of net revenue for the period of 2005-2007 and 25% for 2008-2010. So I'll take 25% of net revenue as a measure of Gerdau needs for work capital.
If I supose a growth of 5% then work capital needs would be 30.000 x 5% x 25% = 375 millions per year. So, in fact, Gerdau FCF would be around 1.6 bi per year, 7.2% of GGBR3 market value.
Not bad for a company that is investing to grow. And the FCF was calculated in 2009/2010, definitely not good years.
3 comments:
Since 2008, the working capital has causing the following impacts on CFO:
2008: -3.802.047
2009: 3.579.822
2010: 1.634.864
2011 (anualized): -952.632
Average (4 years): -702.430
Average: (las 3 years): -330.775
I think the best number is the last 3 years average.
I also think that, due to the sudden changes in working capital from one year to the other, your method of calculationg the average WK/revenue and projecting the WK increase required for a given rate growth is better to determine the CFO.
One thing that must be considered is the difference beetween the WK/revenue and the profit/revenue. If the first is higher than the second, it's hard to see an increase in the CFO during the growth fase.
Valor: Gerdau começa a buscar interessados em ativos de mineração
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