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CONSOLIDATED FINANCIAL STATEMENTS | 12 Months Ended
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Dec. 31, 2019
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 |  | 2019 |  | 2018 |  | 2017
Gerdau GTL Spain S.L. |  | Spain |  | 100.00 |  | 100.00 |  | 100.00
Gerdau Internacional Empreendimentos Ltda. - Grupo Gerdau |  | Brazil |  | 100.00 |  | 100.00 |  | 100.00
Gerdau Ameristeel Corporation and subsidiaries (1) |  | USA/Canada |  | 100.00 |  | 100.00 |  | 100.00
Gerdau Açominas S.A. and subsidiary |  | Brazil |  | 99.83 |  | 99.83 |  | 99.36
Gerdau Aços Longos S.A. and subsidiary (2) |  | Brazil |  | 99.82 |  | 99.78 |  | 99.12
Gerdau Steel Inc. |  | Canada |  | 100.00 |  | 100.00 |  | 100.00
Gerdau Holdings Inc. and subsidiary (3) |  | USA |  | 100.00 |  | 100.00 |  | 100.00
Paraopeba - Fixed-income investment fund (4) (**) |  | Brazil |  | 96.96 |  | 91.40 |  | 10.69
Aza Participaciones S.A. |  | Chile |  | — |  | — |  | 100.00
Gerdau Hungria Holdings Limited Liability Company |  | Hungary |  | 100.00 |  | 100.00 |  | 100.00
GTL Equity Investments Corp. |  | British Virgin Islands |  | 100.00 |  | 100.00 |  | 100.00
Empresa Siderúrgica del Perú S.A.A. - Siderperú |  | Peru |  | 90.03 |  | 90.03 |  | 90.03
Gerdau GTL México, S.A. de C.V. and subsidiaries (5) |  | Mexico |  | 100.00 |  | 100.00 |  | 100.00
Seiva S.A. - Florestas e Indústrias |  | Brazil |  | 97.73 |  | 97.73 |  | 97.73
Gerdau Laisa S.A. |  | Uruguai |  | 100.00 |  | 100.00 |  | 100.00
Sipar Gerdau Inversiones S.A. |  | Argentina |  | 99.99 |  | 99.99 |  | 99.99
Sipar Aceros S.A. and subsidiary (6) |  | Argentina |  | 99.98 |  | 99.98 |  | 99.98
Sizuca - Siderúrgica Zuliana, C. A. |  | Venezuela |  | 100.00 |  | 100.00 |  | 100.00
GTL Trade Finance Inc. |  | British Virgin Islands |  | 100.00 |  | 100.00 |  | 100.00
Gerdau Trade Inc. |  | British Virgin Islands |  | 100.00 |  | 100.00 |  | 100.00
Gerdau Steel India Ltd. |  | India |  | — |  | — |  | 98.90
(*)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 Metalúrgica Gerdau S.A. in the investment fund is 98.07% in 2019, 98.60% in 2018 and 51.11% in 2017.
| (1) |  | Subsidiaries: Gerdau Ameristeel US Inc., Chaparral Steel Company, GUSAP III LP.
| (2) |  | Subsidiary: Gerdau Açominas Overseas Ltd., G2L Logistica Ltda.
| (3) |  | Subsidiary: Gerdau MacSteel Inc.
| (4) |  | Fixed-income investment fund managed by Bank JP Morgan S.A.
| (5) |  | Subsidiary: Sidertul S.A. de C.V. and GTL Servicios Administrativos México, S.A. de C.V..
| (6) |  | Subsidiary: Siderco S.A.
3.2 — Joint ventures Listed below are the interests in joint ventures:
|  |  |  | Equity Interests
|  |  |  | Total capital(*)
Joint ventures |  | Country |  | 2019 |  | 2018 |  | 2017
Bradley Steel Processors |  | Canada |  | 50.00 |  | 50.00 |  | 50.00
MRM Guide Rail |  | Canada |  | 50.00 |  | 50.00 |  | 50.00
Gerdau Corsa S.A.P.I. de CV |  | Mexico |  | 70.00 |  | 50.00 |  | 50.00
Gerdau Metaldom Corp. |  | Dominican Rep. |  | 50.00 |  | 50.00 |  | 45.00
Gerdau Summit Aços Fundidos e Forjados S.A. |  | Brazil |  | 58.73 |  | 58.73 |  | 58.73
Diaco S.A. |  | Colombia |  | 49.87 |  | 49.87 |  | 49.87
Juntos Somos Mais Fidelização S.A. |  | Brazil |  | 27.50 |  | 27.50 |  | —
(*) 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. The summarized financial information of these joint ventures, accounted for under the equity method, is shown on a combined basis as follows:
|  | Joint ventures
|  | 2019 |  | 2018 |  | 2017
Net income (loss) |  | (21,548) |  | (16,403) |  | (91,553)
Total comprehensive income (loss) |  | (21,548) |  | (16,403) |  | (91,553)
During the year of 2019, the Company made a capital increase in the company Gerdau Corsa S.A.P.I. of C.V. in the amount of R$ 463,990, which resulted in the change of the participation held by the Company in this company to 70.00%, remaining as a joint venture, according to the shareholders' agreement. 3.3 — Associate companies Listed below are the interests in associate companies:
|  |  |  | Equity interests
|  |  |  | Total capital (*)
Associate companies |  | Country |  | 2019 |  | 2018 |  | 2017
Dona Francisca Energética S.A. |  | Brazil |  | 51.82 |  | 51.82 |  | 51.82
Corsa Controladora, S.A. de C.V. |  | Mexico |  | — |  | 49.00 |  | 49.00
(*) 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 on a combined basis as follows:
|  | Associate Companies
|  | 2019 |  | 2018 |  | 2017
Net income |  | 31,249 |  | 31,806 |  | 26,099
Total comprehensive income |  | 31,249 |  | 31,806 |  | 26,099
During the year of 2019 the associate company Corsa Controladora, S.A. de C.V. was merged into the joint venture Gerdau Corsa S.A.P.I. de C.V. 3.4 — Acquisition of entity On November 26, 2019, the Company, through its subsidiary Gerdau Aços Longos SA, entered into a definitive agreement with Hierros Añón, SA and Gallega de Mallas, SL to acquire 96.35% of the shares issued by Siderúrgica Latino-Americana SA (“SILAT”), located in Caucaia, in the metropolitan region of Fortaleza, State of Ceará, for an transaction value of US$ 110.8 million (equivalent to R$ 446.6 million on December 31, 2019), subject to customary adjustments to the purchase price. This acquisition is part of Gerdau's strategy to better serve its customers in the Brazilian market. The conclusion of the transaction is subject to the approval of the Administrative Council for Economic Defense - CADE, as well as the verification of other usual suspensive conditions for the closing of the operation. 3.5 — Gains and losses on assets held for sale and sales of interest in subsidiaries On March 30, 2018, the Company completed the sale of its wire rod mill located in Beaumont, Texas, and the Beaumont Wire Products and Carrollton Wire Products processing units for Optimus Steel LLC for US$ 99.5 million (equivalent to R$ 330.7 million). The mill has a melt shop capable of rolling wire rod and rebar in roll. On June 29, 2018, the Company concluded the sale of 100% of the shares of Aza Participações SpA and its subsidiaries, Gerdau AZA SA; Aceros Cox SA; Armacero - Matco SA; and Salomon Sack S.A., for the group of Chilean investors formed by Ingeniería e Inversiones Limitada; Inversiones Reyosan SpA; Los Andes SA de Inversiones and Matco Cables SpA. This sale includes three production plants of long recycled steel per year and its distribution network in Chile, which were presented until the conclusion of the sale within the South American segment. The transaction value attributed corresponds to US$ 154.1 million (equivalent to R$594.2 million on the date of the conclusion of the sale). On July 31, 2018, the Company concluded the sale of its two hydroelectric plants in Goiás for R$ 835 million to Kinross Brasil Mineração, a wholly owned subsidiary of Kinross Gold Corporation. The Caçu and Barra dos Coqueiros plants were inaugurated in 2010. On October 31, 2018, the Company concluded the sale of its participation interest in Gerdau Hungria KFT Y CIA Sociedad Regular Colectiva, a subsidiary of the Company located in Spain and owner of 98.89% of Gerdau Steel India Ltd. shares, to Blue Coral Investment Holdings Pte. Ltd and Mountainpeak Investment Holdings Ltd.. The transaction perimeter involves 100% of the operations and assets in India, including the special steels industrial unit located in Tadipatri. The enterprise value of the transaction corresponds to US$ 120 million (equivalent to R$ 490.2 million on the signing date of the agreement). The transaction will enable Gerdau to focus more on managing its strategic assets in the Americas, where its key markets, Brazil and the United States, are located. On November 5, 2018, the Company concluded the sale of its four rebar-producing mills, as well as steel cutting and bending units and distribution centers in the United States to Commercial Metals. The agreement includes the Jacksonville (Florida), Knoxville (Tennessee), Rancho Cucamonga (California) and Sayreville (New Jersey), as well as all of Gerdau’s U.S. rebar fabrication facilities, presented within the North America segment up to the conclusion of the sale. The enterprise value of the transaction is US$ 600 million (equivalent to R$ 2,222.9 million) as well as working capital adjustments. 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. The transaction value attributed to the joint venture was US$ 165 million (equivalent to R$ 546 million). Due to this transaction, Diaco started to have accounting treatment of joint venture in Consolidated Financial Statements with a 49.86% interest. As a result of the transactions above, the Company recognized an expense of R$ 414.5 million in 2018 and an expense of R$ 721.7 million in 2017 in the line of Gains and losses on assets held for sale and sales of interest in subsidiaries in its Income Statement.

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