UPDATE 2-Gerdau 2nd-qtr profit soars 85 pct on strong sales

(Adds comments, details on exports, investment plans, byline)

By Todd Benson

SAO PAULO, Aug 6 (Reuters) - Brazilian steelmaker Gerdau (GGBR4.SA) said on Wednesday its net profit soared 85 percent in the second quarter, lifted by red-hot demand for steel products around the globe and a big increase in output.

Net income surged to 2.12 billion reais ($1.35 billion) from 1.15 billion reais in the second quarter of 2007 and 1.09 billion reais in the first quarter of this year, Grupo Gerdau (GGB.N) said in a filing with Brazil's securities regulator.

Gerdau, which has operations throughout the Americas and Europe, said strong demand for steel in all the countries where it operates helped propel sales sharply higher.

The company's shares gained on the strong earnings report, climbing almost 2 percent to 32.30 reais in afternoon trading in Sao Paulo, outpacing a 1.44 percent gain in the benchmark Bovespa index .BVSP.

Net revenue rose 47 percent in the quarter to 11.1 billion reais, led by a 59 percent jump in sales in North America, where demand for steel remains robust despite the economic slowdown in the United States.

"The U.S. financial crisis has had little impact on our performance," Chief Executive Andre Gerdau Johannpeter said on a conference call. "We're monitoring the economy closely, but we're optimistic about the rest of the year."

A weak U.S. dollar allowed Gerdau's mills in the United States to increase exports significantly, mostly to Central America, the Caribbean, Asia and even South America.

As a result, the company expects to ship as much as 500 million tonnes of steel from the United States this year, Johannpeter said.

In Brazil, Gerdau's second-biggest market after North America, net revenue increased 47.5 percent, driven by robust demand from the construction and automobile industries. The company cut back on exports from its Brazilian operations to funnel more steel to the booming domestic market.

Gerdau also significantly increased production last quarter thanks to a slew of recent acquisitions and the inauguration of a new blast furnace at its Gerdau Acominas unit in Brazil.

Output of raw steel products like steel plates rose 26.2 percent to 5.64 million tonnes, led by a 39.1 percent increase in North America, where Gerdau completed its takeover of Chaparral Steel. In Brazil, output climbed 15.8 percent.

PLANS TO INCREASE CAPACITY

With Brazil's economy growing at its fastest pace in decades, Johannpeter said Gerdau is looking to increase production further to keep up with demand.

Gerdau's board recently approved plans to invest $277 million to further expand capacity at its Acominas unit to 5 million tonnes annually in 2010 from 4.5 million tonnes currently, he said.

The company is also conducting feasibility studies for an all-new mill in the northeastern state of Pernambuco. Initially, the plant would require $400 million in investments and would start off producing 500,000 tonnes a year.

"The Brazilian economy is in a new phase of growth and this project fits into that outlook," Johannpeter said.

Earnings before interest, taxes, depreciation and amortization, a measure of cash flow known as EBITDA, jumped 72 percent to 2.747 billion reais in the second quarter, helped by a smaller increase in operational costs.

Besides Brazil, Gerdau also has affiliates in the United States, Canada, Argentina, Chile, Colombia, the Dominican Republic, Guatemala, Mexico, Peru, Spain, Uruguay and Venezuela. ($1=1.575 reais) (Reporting by Todd Benson, editing by Dave Zimmerman and Gerald E. McCormick)