Gerdau (GGBR4) Q2 2024 earnings summary

Executive summary

• Achieved a historically low accident frequency rate of 0.67 in Q2 2024, highlighting 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.

• Adjusted EBITDA reached R$2.6 billion, with R$1.4 billion in CAPEX and R$252 million in dividends declared.

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

Financial highlights

• Q2 2024 Adjusted EBITDA was R$2.6 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 R$89 million in Q2, despite significant CapEx and tax outflows.

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

• Net debt/Adjusted EBITDA at 0.53x, well below the 1.5x policy limit.

• Dividend of R$0.12/share (R$252 million) to be paid in August 2024.

Outlook and guidance

• Cost reduction initiatives target a R$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.

• Management maintains a cautious outlook, monitoring economic and market conditions, especially in automotive and construction sectors.