Metalurgica Gerdau (GOAU4) Q3 2024 earnings summary

Executive summary

• Consolidated net income for the nine months ended September 30, 2024, was R$4.29 billion, down from R$6.98 billion year-over-year, reflecting a challenging market environment and non-recurring items.

• Net revenue for the period reached R$50.2 billion, a decrease from R$54.2 billion in the same period of 2023, mainly due to lower sales volumes and prices.

• The company completed the sale of its stakes in Diaco S.A. and Gerdau Metaldom Corp, recognizing a gain of R$808.4 million, and acquired Dales Recycling Partnership in the US for US$60 million to strengthen its scrap supply chain.

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

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

Financial highlights

• EBITDA for the nine months was R$7.18 billion, compared to R$9.70 billion in the prior year.

• Net Sales were R$17.4 billion in 3Q24, up 4.6% over 2Q24 and 1.8% over 3Q23.

• Adjusted EBITDA margin was 17.3% in 3Q24, up 1.6 p.p. over 2Q24 but down 2.3 p.p. year-over-year.

• Earnings per share (basic and diluted) for the nine months were R$1.39 for both ON and PN shares, compared to R$2.28 in 2023.

• Cash flow from operations reached R$8.89 billion, up from R$7.56 billion in the prior year, supported by working capital improvements.

Outlook and guidance

• Management continues to monitor the steel market for signs of further deterioration, especially in automotive and construction sectors, and remains focused on operational efficiency and capital discipline.

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

• Ongoing discussions with the Brazilian government for further trade defense measures to counter high steel imports.

• Market fundamentals in North America expected to remain solid despite current volatility.

• CAPEX plan for 2024 totals R$6.0 billion, with R$3.8 billion invested in the first nine months.