Brazilian Steelmaker Gerdau Shakes Up Top Ranks, Names New CEO -- Update

SÃO PAULO -- Gerdau SA, one of the largest steelmakers in the Americas, said Thursday its founding family will exit from the group's executive management after more than a century at its helm, as the company fights allegations of tax fraud.

The head of Brazil's operations, Gustavo Werneck, will take over as chief executive next January, succeeding André Gerdau Johannpeter, who will remain on the steelmaker's board of directors, Gerdau said in a statement Thursday.

The company said it had been planning the management shake-up for the past year, describing it as "an important step in the evolution of its corporate governance." Mr. Gerdau Johannpeter denied that it was motivated by probes into alleged wrongdoing by the company.

Executive Vice-Presidents Claudio Johannpeter and Guilherme Gerdau Johannpeter, fellow family members, will also step down from their management roles but remain as board members.

Brazil's largest family-run companies are being forced to review their management structures in the wake of massive investigations into corruption and tax fraud across the country.

Odebrecht, Latin America's largest construction group, told The Wall Street Journal in June that its billionaire founding family would no longer occupy top executive roles at the company. Odebrecht admitted last year to paying almost $800 million in bribes as part of the Car Wash corruption scheme, signing in December what was at the time the biggest anticorruption settlement in history.

Gerdau is under investigation in a separate investigation into corruption at Brazil's tax auditing court -- a probe known as Operation Zealots. Prosecutors believe dozens of companies bribed officials at the court to rule in their favor over tax disputes as a way to avoid paying billions of dollars in taxes. Gerdau has denied wrongdoing.

André Gerdau Johannpeter said earlier Thursday that the management changes would allow the family to focus on the company's longer-term strategy. "Our role as representatives of the controlling company has more strategic value," he said, explaining the move.

Gerdau's new CEO, Mr. Werneck, is a 44-year-old Harvard-trained executive who has been at the company since 2004. He will take over on Jan. 1.

André Gerdau Johannpeter praised his successor Thursday, highlighting Mr. Werneck's ability to overcome "important challenges" as well as his "contagious energy."

Gerdau ranks as the largest producer in the Americas of long steel products, commonly used in construction, and the fourth-largest steelmaker overall in North America. Over recent years, it has also battled to expand its production of flat steel -- used by the automotive industry.

Thursday's announcement represents the biggest management shake-up for the company since it was founded by André Gerdau Johannpeter's forefather João Gerdau in 1901 in Brazil's southern cowboy state of Rio Grande do Sul.

"I see it as positive for the company," said Celson Plácido, chief strategist at São Paulo investment firm XP Investimentos, adding that it was inevitable that Brazil's family-run companies would seek to professionalize their management.

"Even if the family has competent people, the market will always question the motive behind putting someone in a particular role," said Mr. Plácido.

Gerdau's shares were up 0.3% in midday trading in São Paulo on Thursday.

As Brazil's other steelmakers have suffered deeply in the country's recent recession, Gerdau's exposure to infrastructure projects and its strategy to become self-sufficient in iron ore have helped shield it from the worst of the industry's crisis.

Earlier this month, Gerdau reported net profit of about $24 million for the second quarter, down from $25 million a year earlier.

Write to Luciana Magalhães at and Samantha Pearson at

(END) Dow Jones Newswires

August 24, 2017 15:07 ET (19:07 GMT)