Gerdau (GGBR4) Q3 2024 earnings summary

Executive summary

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

• Net income was BRL 1.432 billion, up over 50% sequentially and 52% year-over-year, with EPS at BRL 0.64, up 56%.

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

• Steel shipments totaled 2.8 million tonnes, up 4.3% over Q2 and year-over-year, despite oversupply and challenging macroenvironment.

• Achieved record-low injury and accident frequency rates, reflecting a strong safety culture.

Financial highlights

• Net sales reached BRL 17.4 billion in Q3 2024, up 4.6% over Q2 and 1.8% over Q3 2023.

• 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 57% of the buyback program executed and over BRL 700 million invested.

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

• Moody’s and S&P upgraded ratings to stable outlook.

Outlook and guidance

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

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

• North America and Brazil expected to face margin pressure in Q4 due to seasonality, maintenance, and imports, but 2025 outlook is positive for construction and government stimulus.

• Ongoing discussions with the Brazilian government for further trade defense measures.

• Continued discipline in capital allocation through strategic capex and share buybacks.