Gerdau (GGBR4) Q2 2024 earnings summary

Executive summary

• Achieved a historically low accident frequency rate of 0.67 in Q2 2024, reflecting a strong safety culture.

• Provided over BRL 26 million in support for Rio Grande do Sul after severe rains, including emergency housing and water treatment initiatives.

• Steel shipments remained stable at 2.7 Mt in Q2 2024, supported by geographic diversification and a balanced product portfolio.

• Became the first steel company in North America to achieve B Corporation certification for sustainability.

• Maintained solid financial results and transparent strategy, with a focus on cost management, asset competitiveness, and shareholder returns.

Financial highlights

• Q2 2024 Adjusted EBITDA was BRL 2.624 billion, with a margin of 15.8%, down 1.6 p.p. from Q1, mainly due to lower North America prices and one-off hibernation costs in Brazil.

• Free cash flow was BRL 780 million in Q2, with positive cash generation despite significant CapEx and tax outflows.

• Gross debt at quarter-end was BRL 12.6 billion, with leverage at 0.53x and average maturity of 7.2 years.

• Robust liquidity position of BRL 11.5 billion, including BRL 6.6 billion in cash and an undrawn $875 million revolver.

• Dividends of BRL 252 million (BRL 0.12/share) approved for August 2024.

Outlook and guidance

• Cost reduction initiatives target a BRL 1.5 billion lower cost base by early 2025 compared to 2023.

• Expect domestic steel market in Brazil to benefit from new trade remedies and import quota system in H2 2024.

• North America division remains resilient, with stable demand and backlog, supported by U.S. government infrastructure programs.

• IMF projects Brazil's 2024 GDP growth at 2.1%, with 2025 revised up to 2.4% due to reconstruction efforts.

• Optimistic for sequential improvement in results from Q3, with cost savings and margin recovery expected.