Metalurgica Gerdau (GOAU4) Q3 2024 earnings summary

Executive summary

• Adjusted EBITDA reached R$3.0 billion in 3Q24, up 14.9% over 2Q24, driven by cost-cutting and operational efficiency in Brazil.

• Net income for the quarter was R$1.432 billion, up over 50% sequentially, with EPS of R$0.64; for the nine months ended September 2024, consolidated net income was R$4.29 billion, down from R$6.98 billion year-over-year.

• Free cash flow totaled R$3.0 billion in 3Q24, benefiting from a R$1.8 billion judicial deposit release; excluding this, free cash flow was R$1.2 billion.

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

• Major asset transactions included the sale of Diaco S.A. and Gerdau Metaldom Corp (gain of R$808.4 million) and the acquisition of Dales Recycling in North America for R$340 million/US$60 million.

Financial highlights

• Adjusted EBITDA: R$3.0 billion in 3Q24, up 14.9% sequentially; nine-month EBITDA was R$7.18 billion, down from R$9.70 billion year-over-year.

• Net income: R$1.432 billion in 3Q24, up more than 50% from Q2 2024; nine-month EPS was R$1.39, down from R$2.28 in 2023.

• Free cash flow: R$3.0 billion in 3Q24 (R$1.2 billion excluding judicial deposit event); cash flow from operations for nine months was R$8.89 billion.

• Leverage: Net debt/EBITDA improved to 0.30x in 3Q24, lowest in 12 months.

• Dividend and buyback payout: 55% of net income, above policy; R$131.9 million in dividends approved for December 2024.

Outlook and guidance

• Confident in meeting guidance to start 2025 with R$1.5 billion in cost reductions versus 2023.

• Expect positive demand in Brazil, especially in construction, with 2024 construction GDP forecast to grow 4.8%.

• North America volumes and prices to be temporarily impacted by economic slowdown and imports, with recovery expected in H1 2025.

• Company remains focused on competitiveness and efficiency, especially in Brazil and North America.

• No material impact identified from the Rio Grande do Sul climate event on asset recoverability or provisions.