Brazilian steelmaker Gerdau isn’t ruling out resuming plans to build a $600 million special steel project in Mexico depending on how US trade talks evolve https://t.co/CDMeoRrZiW ...

Group 1 - The investment thesis of Brazilian steelmaker Gerdau (NYSE: GGB) highlights two significant high-risk factors: the cyclical nature of the steel market and its exposure to the Brazilian market, which constitutes one-third of its EBITDA [1] Group 2 - The analyst focuses on undercovered stocks primarily in Brazil and Latin America, occasionally covering global large caps, indicating a niche investment strategy [2] - The analyst's work is featured on platforms like TipRanks and TheStreet, suggesting a broad reach in investment analysis [2] Group 3 - There is no disclosed stock or derivative position in any mentioned companies, indicating an unbiased perspective in the analysis [3] - The article expresses personal opinions and is not influenced by compensation from companies mentioned, reinforcing the independence of the analysis [3]

Financial Performance and Key Metrics - The company's adjusted EBITDA for the quarter was BRL 2.6 billion, a 6.6% increase compared to the previous year, with North America being the standout segment [6] - Net income reached BRL 864 million, or BRL 0.43 per share, reflecting a 14% increase year-over-year [6] - The company's leverage ratio, defined as net debt over EBITDA, ended the period at 0.85 times, significantly below the established debt policy level [7] Business Line Performance - North American operations contributed 61% of consolidated EBITDA, marking the highest share in the company's history [4] - Brazilian operations faced challenges due to excessive steel imports, with an import penetration rate of 23.4% in the first half of the year, prompting a reduction in investments in Brazil [5][6] Market Data and Key Indicators - The North American market is experiencing high steel demand, particularly from the non-residential construction sector, with order backlogs above historical levels [10][11] - In Brazil, despite good demand for steel, the market is adversely affected by high levels of imports, leading to concerns about future import records if trade defense mechanisms are not improved [12] Company Strategy and Industry Competition - The company is focusing on internationalization and geographic diversification, operating autonomously in seven countries across the Americas [4] - A strategic decision has been made to reduce future investments in Brazil while maintaining investments in North America, where the outlook is more favorable [20][23] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over the lack of effective trade defense measures in Brazil, which has led to a competitive imbalance [38] - The company anticipates a resilient civil construction market in the coming months, while closely monitoring the automotive and agricultural sectors affected by high interest rates [12] Other Important Information - The company approved a dividend distribution of BRL 239 million, equating to BRL 0.12 per share, and continues its share buyback program, which has reached 68% completion [9] - The Miguel Bernier sustainable mining project is 72% complete and is expected to generate BRL 1.1 billion in annual EBITDA once fully operational [8][26] Q&A Session Summary Question: CapEx expectations and mining project details - Management indicated that an annual CapEx of BRL 5 billion to BRL 6 billion is sustainable, with a shift towards competitiveness and cost reduction projects rather than solely increasing production capacity [17][18] - The mining project is expected to generate significant incremental EBITDA, with a ramp-up planned for 2026 [26] Question: Concerns about increasing net debt and cash flow - Management acknowledged the increase in net debt but emphasized that a significant portion was allocated to shareholder returns through dividends and buybacks [35] - The company expects to generate positive cash flow in the second half of the year, which should help reduce leverage [46] Question: Strategy regarding rebar pricing and market share - Management confirmed that they are not willing to lose market share in rebar and are monitoring the competitive landscape closely [59][62] - The company believes there is room for price recovery in rebar, despite current challenges [42] Question: Future investments and structural measures in Brazil - Management is considering long-term adjustments in Brazil due to the current competitive environment and is focused on maintaining production capacity [56][58] - The company is committed to ongoing maintenance investments to ensure competitiveness [66]

Financial Performance - The adjusted EBITDA for the second quarter was BRL 2.6 billion, a 6.6% increase compared to the previous year, with North America being the standout segment [6] - Net income reached BRL 864 million, or BRL 0.43 per share, reflecting a 14% increase year-over-year [6] - The company's leverage ratio, net debt over EBITDA, ended at 0.85 times, significantly below the established debt policy level [8] Business Segment Performance - North American operations contributed 61% of consolidated EBITDA, marking the highest share in the company's history [4] - Brazilian operations faced challenges due to excessive steel imports, with an import penetration rate of 23.4% in the first half of the year [5] - The company plans to reduce investments in Brazil due to the unfavorable market conditions and high import levels [5][20] Market Dynamics - The North American market is experiencing high steel demand, particularly from the non-residential construction sector, with order backlogs above historical levels [10][11] - In Brazil, despite good demand for steel, the market is negatively impacted by high levels of imports, leading to concerns about future import records if trade defense mechanisms are not improved [12] - The company is closely monitoring the automotive and agricultural sectors, which are being affected by high interest rates [12] Strategic Direction - The company is committed to sustainability, achieving the lowest GHD emissions in its history at 0.85 tons of CO2 per ton of steel produced [3] - Future capital expenditures (CapEx) will be reduced, particularly in Brazil, while maintaining investments in North America to capitalize on favorable market conditions [20][22] - The company aims to balance supply and demand in North America without overextending capacity, focusing on high-value products [23][24] Management Commentary - Management expressed disappointment with the lack of effective trade defense measures in Brazil, which has led to a challenging competitive landscape [41] - The company anticipates positive cash generation in the second half of the year, with expectations for improved free cash flow [49] - Management emphasized the importance of maintaining a robust balance sheet during the current investment cycle, despite increased leverage [39] Other Important Information - The company has approved a dividend distribution of BRL 239 million, reflecting a payout ratio of 90% for the second quarter [9] - CapEx for the quarter was BRL 1.6 billion, primarily allocated to the Miguel Bernier sustainable mining project, which is 72% complete [8] - The company is executing a share buyback program, having completed 68% of the planned buybacks for the year [9] Q&A Session Summary Question: CapEx expectations and mining project details - Management discussed the sustainable mining project and its expected incremental EBITDA contribution of BRL 1.1 billion once operational [16][28] - Future CapEx levels will be reduced, particularly in Brazil, due to the lack of competitive returns in the current market [20][22] Question: Concerns about increasing net debt and cash flow - Management acknowledged the increase in net debt but emphasized that a significant portion was used for shareholder returns through dividends and buybacks [31][39] - The company expects to generate positive cash flow in the second half of the year, which should help reduce leverage [49][57] Question: Strategy for rebar market and competition - Management confirmed that Gerdau is not losing market share in the rebar segment and is focused on maintaining its competitive position despite high import levels [64][68] - The company is cautious about pricing strategies in the rebar market, given the current competitive dynamics [46][70] Question: Future investments and structural measures in Brazil - Management indicated that while investments in Brazil will be reduced, maintenance CapEx will continue to ensure competitiveness [72] - The company is exploring long-term adjustments to adapt to the current market conditions in Brazil [62][60]

Financial Performance - Gerdau's adjusted EBITDA reached R$26 billion, with North America's improved results offsetting performance in Brazil and South America[16] - Net income was R$864 million, with earnings per share at R$043, a 14% increase compared to 1Q25[16][17] - Gerdau S A issued US$650 million in bonds and R$14 billion in debentures to bolster cash and lengthen the company's debt profile[17] - Gerdau S A executed 68% of its share buyback program, investing approximately R$686 million, representing 22% of outstanding shares[17] Regional Performance - North America achieved its highest all-time share in consolidated EBITDA at 61%, compared to 48% in 1Q25[10] - North America's net sales increased by 42% to R$9139 million, with EBITDA increasing by 365% to R$1635 million[36] - Brazil's shipment volume decreased by 52% from 1Q25[33] - South America's shipments increased by 218% to 288000 tonnes[45] Market Dynamics - The import penetration rate in Brazil reached a critical 26%, a 39 percentage point increase compared to 2Q24[12][33] - Steel imports continue at a record pace despite trade defense measures in place[14] Strategic Investments - Approximately 50% of the total estimated CAPEX for the year, amounting to R$16 billion, has already been invested[16] - The Sustainable Miguel Burnier Mining project is 72% complete and is under pre-operational planning for start-up in 4Q25[16]

Financial Performance - For the three-month period ended June 30, 2025, net sales reached R$17,525,750, up from R$16,615,817 in the same period of 2024, representing a growth of 5.5%[4]. - The gross profit for the six-month period ended June 30, 2025, was R$3,977,100, a decrease of 13.6% compared to R$4,606,615 in the prior year[4]. - Net income for the three-month period ended June 30, 2025, was R$864,497, slightly down from R$866,981 in the same period of 2024[5]. - Net income for the six-month period ended June 30, 2025, was R$1,622,301 thousand, a decrease from R$2,919,853 thousand in the same period of 2024, representing a decline of approximately 44.4%[7]. - Total comprehensive income for the three-month period ended June 30, 2025, was a loss of R$379,892, contrasting with a gain of R$3,791,277 in the same period of 2024[5]. - Total comprehensive income for the period recognized was R$1,605,779 thousand, with other comprehensive losses of R$3,463,772 thousand, resulting in a total comprehensive loss of R$1,857,993 thousand[7]. - The company reported a significant increase in depreciation and amortization expenses, rising to R$1,810,379 thousand in 2025 from R$1,497,105 thousand in 2024, an increase of approximately 21%[7]. - The company’s income before income taxes for the six-month period ended June 30, 2025, was R$2,228,616, down from R$3,299,354 for the same period in 2024, a decrease of 32.4%[42]. Assets and Liabilities - As of June 30, 2025, Gerdau S.A. reported total assets of R$86,854,070, a slight increase from R$86,814,493 as of December 31, 2024[2][3]. - Current liabilities increased to R$11,521,998 as of June 30, 2025, from R$10,851,391 at the end of 2024, reflecting a rise of 6.2%[3]. - Long-term debt rose to R$11,174,675 as of June 30, 2025, compared to R$9,110,972 at the end of 2024, indicating an increase of 22.7%[3]. - The company’s total liabilities amounted to R$31,729,864 as of June 30, 2025, compared to R$28,640,707 at the end of 2024, indicating an increase of 10.8%[165]. - The company’s total non-current liabilities in joint ventures decreased to R$9.67 billion as of June 30, 2025, from R$11.44 billion at the end of 2024[26]. Cash Flow and Investments - Cash provided by operating activities for the six-month period ended June 30, 2025, was R$3,303,460 thousand, down from R$4,539,070 thousand in 2024, indicating a decrease of about 27.3%[7]. - Cash and cash equivalents at the end of the period increased to R$8,500,933 thousand from R$4,889,466 thousand, reflecting a growth of about 74%[7]. - The company made significant investments in property, plant, and equipment, totaling R$3,498,150 thousand for the six-month period ended June 30, 2025, compared to R$2,253,652 thousand in 2024, an increase of approximately 55%[7]. - Gerdau S.A. reported a net cash used in investing activities of R$4,304,544 thousand for the six-month period ended June 30, 2025, compared to R$894,865 thousand in 2024, indicating a substantial increase in investment outflows[7]. Shareholder Information - The company reported a basic earnings per share of R$0.43 for preferred and common shares for the three-month period ended June 30, 2025, compared to R$0.41 in the same period of 2024[4]. - The total allocated net income available to common and preferred shareholders for the six-month period ended June 30, 2025, was R$1,605,779, compared to R$2,902,892 in 2024[148]. - The company credited dividends of R$0.12 per share for the first quarter of 2025, totaling R$241,085[146]. - The Board of Directors proposed an advance payment of the mandatory minimum dividend for the current fiscal year amounting to R$239.5 million[172]. - The new share buyback program approved on January 20, 2025, aims to acquire up to 63,000,000 preferred shares and 1,500,000 common shares over a maximum term of 12 months[137]. Acquisitions and Strategic Initiatives - The Company acquired 100% of Gerdau Summit Aços Fundidos e Forjados S.A. for approximately US$32.6 million (R$188.6 million), resulting in a bargain purchase gain of R$37.7 million[30]. - The acquisition of Rio do Sangue Energia S.A. was completed for R$244.5 million, aimed at increasing self-production of renewable energy for steel production[32]. - The Company acquired 100% of Kloeckner Metals Brasil Ltda. for R$42.9 million, realizing a bargain purchase gain of R$3.6 million[33]. - The acquisition of Paranatinga Energia S.A. was completed for approximately R$197.2 million, supporting the strategy of increasing self-production of clean energy[34]. - Gerdau S.A. has expanded its operations in North America, reflecting a strategic focus on regional market dynamics and local currency operations[14]. Market and Economic Conditions - The company will continue to monitor the steel market throughout 2025 to identify any significant changes in demand or economic conditions that could impact projections[170]. - The company is assessing the impact of new IFRS standards effective in 2026 and beyond, which may influence future financial reporting and disclosures[16]. Tax and Legal Matters - The company has ongoing tax contingencies totaling R$653,845 million related to ICMS, which increased from R$625,877 million as of December 31, 2024[113]. - The company is involved in lawsuits related to Corporate Income Tax totaling R$1,482,170 million, slightly decreasing from R$1,486,615 million at the end of 2024[118]. - Judicial deposits related to tax, labor, and civil lawsuits total R$343,639 as of June 30, 2025[123]. Financial Ratios and Sensitivities - The company has a gross debt limit set at R$12 billion and aims to maintain a Net Debt/EBITDA ratio of less than or equal to 1.5 times[78]. - The interest rate sensitivity analysis indicates that a 10 basis point increase in the average interest rate would impact financial expenses by R$53,968 as of June 30, 2025, compared to R$34,471 as of June 30, 2024[82]. - A 1% change in the sales price of products would affect revenues by R$24,631 as of June 30, 2025, down from R$166,158 as of June 30, 2024[83].

Core Viewpoint - Gerdau S.A. has completed its offer to purchase outstanding 4.875% notes due 2027, with all validly tendered notes accepted for purchase [1][3]. Offer Details - The offer was made for cash to purchase all outstanding 4.875% notes due 2027, guaranteed by Gerdau and its subsidiaries [1]. - The offer expired on June 9, 2025, at 5:00 p.m. New York City time [3]. - A total principal amount of US$418,244,000 was outstanding, with US$237,646,000 tendered [2]. - The consideration for the notes accepted was US$1,007.83 per US$1,000 principal amount [2]. Settlement Information - Settlement of the offer is expected to occur within three business days following the expiration date, specifically on June 12, 2025 [4]. Additional Information - Gerdau Trade has engaged several financial institutions, including BofA Securities, Goldman Sachs, J.P. Morgan, and Morgan Stanley, to act as dealer managers for the offer [6]. - Further details regarding the offer can be found in the Offer Documents available through the designated tender agent [5].

Core Viewpoint - Gerdau S.A. is making an offer to purchase any and all outstanding 4.875% notes due 2027 issued by Gerdau Trade Inc. for cash, which is fully guaranteed by Gerdau and its subsidiaries [1][2] Offer Details - The offer is made pursuant to the terms set forth in the offer to purchase dated June 3, 2025, and includes a notice of guaranteed delivery [2] - The total principal amount of the outstanding notes is US$418,244,000 [4] - The consideration payable for each US$1,000 principal amount of notes validly tendered is US$1,007.83, based on a yield of 4.020% [4][5] Expiration and Settlement - The offer will expire at 5:00 p.m. New York City time on June 9, 2025, unless extended or terminated earlier by Gerdau Trade [6] - Settlement of the offer is expected to occur within three business days following the expiration date, anticipated to be June 12, 2025 [10] Conditions of the Offer - Gerdau Trade's obligation to accept the notes is conditioned upon the satisfaction or waiver of several conditions described in the offer to purchase [11] - Gerdau Trade reserves the right to delay acceptance, extend the expiration date, or terminate the offer if conditions are not met [11] Additional Information - Holders of the notes accepted for purchase will receive accrued and unpaid interest from the last interest payment date to the settlement date [7] - The offer is being managed by BofA Securities, Goldman Sachs, J.P. Morgan, and Morgan Stanley [13]

Core Viewpoint - The recommendation for Gerdau S.A. (NYSE: GGB) shares has been raised from hold to buy, indicating a positive outlook for the company's stock performance [1]. Company Summary - Gerdau S.A. is being analyzed based on over 5 years of experience in equity analysis in Latin America, suggesting a strong foundation for the investment recommendation [1].

Core Viewpoint - Gerdau S.A. has initiated a cash offer to purchase all outstanding 4.875% notes due 2027, totaling approximately US$418.24 million, which are guaranteed by its subsidiaries [1][3]. Offer Details - The offer is set to expire on June 9, 2025, at 5:00 p.m. New York City time, unless extended or terminated earlier by Gerdau Trade [3]. - Holders of the notes who validly tender their notes by the expiration date will be eligible to receive the consideration, which will be determined based on a fixed spread plus the yield of a reference U.S. Treasury security [4][5]. - Settlement of the offer is expected to occur within three business days following the expiration date, anticipated to be June 12, 2025 [6]. Conditions and Rights - The acceptance of the notes is contingent upon the successful pricing of a debt offering by Gerdau Trade, generating sufficient net proceeds to cover the consideration and accrued coupon payments [8]. - Gerdau Trade reserves the right to delay acceptance, extend the expiration date, or terminate the offer if conditions are not met [9][10]. - The offer is not conditioned on a minimum amount of notes being tendered, and if terminated, no payments will be made to holders of the notes [10]. Subsequent Actions - After the expiration date, Gerdau Trade may acquire any remaining notes through various means, including open market purchases or redemptions [11].