Gerdau (GGBR4) Q3 2024 earnings summary

Executive summary

• Adjusted EBITDA reached R$3.0 billion in Q3 2024, up 14.9% over Q2, driven by cost-cutting, asset optimization, and operational efficiency, especially in Brazil.

• Steel shipments totaled 2.8 million tonnes, up quarter-over-quarter and year-over-year, despite oversupply and a challenging macroenvironment.

• Net income was R$1.432 billion in Q3, up over 50% sequentially, with EPS at R$0.64, up 56% year-over-year.

• Free cash flow reached R$3.0 billion, including a R$1.8 billion judicial deposit withdrawal; excluding this, free cash flow was R$1.2 billion.

• Moody’s and S&P upgraded global ratings to Baa2 and BBB, both with stable outlook.

Financial highlights

• Net sales in Q3 2024 were R$17.4 billion, up 4.6% over Q2 and 1.8% over Q3 2023.

• Adjusted net income was R$1.4 billion, up 51.5% over Q2, but down 10% year-over-year.

• Leverage dropped to 0.32x net debt/EBITDA, the lowest in 12 months and well below the 1.5x ceiling.

• Dividend and buyback payout reached 55% of net income YTD, with R$619.4 million in dividends and R$729.4 million in buybacks.

• CapEx guidance for 2024 is R$6.0 billion, with R$3.8 billion invested in the first nine months.

Outlook and guidance

• Confident in achieving R$1.5 billion in cost savings by early 2025 versus 2023.

• Positive outlook for Brazilian steel demand, especially from construction, with GDP for the sector expected to grow 4.8% in 2024.

• North America expected to see temporary shipment and price pressure due to economic slowdown and elections, with recovery anticipated in H1 2025.

• Company remains focused on competitiveness, efficiency, and capital discipline, with ongoing trade defense discussions in Brazil.

• No significant margin expansion expected in Brazil in Q4 due to seasonality, but profitability should improve in 2025.