* Gerdau's 1st-quarter net profit sinks 97 pct
* Output down 50 pct from a year ago on weak demand
* Shares tumble more than 5 pct (Recasts, adds details throughout, share drop)
SAO PAULO, May 7 (Reuters) - Brazilian steelmaker Gerdau (GGBR4.SA)(GGB.N) said on Thursday its net profit sank 97 percent in the first quarter, hit by a severe slump in demand for steel products because of the global economic crisis.
The company reported net income of 35 million reais ($16.6 million) for the quarter, down sharply from earnings of 1.09 billion reais in the year-earlier period and well short of market forecasts.
Gerdau, Brazil's leading producer of long-rolled steel, was expected to post a first-quarter net profit of 108.2 million reais, according to the average estimate of five analysts polled by Reuters.
The company's shares fell sharply after the earnings report was released, tumbling more than 5 percent to 17.88 reais in early trading in Sao Paulo. The benchmark Bovespa index .BVSP was down 0.9 percent.
Like steelmakers around the world, Gerdau has been scrambling to scale back output in line with dwindling demand and sales. It produced just 2.54 million tonnes of raw steel in the quarter, down 50 percent from the year-earlier period and 22 percent from the previous quarter.
Sales also slumped in the quarter, sliding 38.6 percent from a year ago and 12.7 percent from the fourth quarter, to 3.06 million tonnes.
The drop in sales, coupled with lower world steel prices, pushed net revenues down to 6.97 billion reais, a 22 percent fall from a year earlier.
Earnings before interest, taxes, depreciation and amortization, a measure of cash flow known as EBITDA, slumped to 599 million reais from 1.99 billion reais in the first quarter of 2008.
$1=2.11 reais Reporting by Alberto Alerigi Jr and Todd Benson, Editing by Gerald E. McCormick, Dave Zimmerman