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Steel Production and Market Dynamics - In 2023, steel imports in Brazil reached 5 million tonnes, a 50% increase compared to 2022, marking the highest level since 2010, which negatively impacted Gerdau's results[43]. - The Ouro Branco mill accounted for 61.7% of the total crude steel output in the Brazil Business Segment in 2023, highlighting its significance in production capacity[49]. - In 2022, Brazil produced 34.1 million tonnes of crude steel, holding a 1.8% share of the global market and 77.4% of South America's total steel production[139]. - In 2023, Brazilian steel product sales reached 31 million tonnes, with flat steel products accounting for 69.5% of total sales[140]. - The Brazilian GDP increased by 2.9% in 2023, while steel consumption surged by 18.5%[142]. - Brazilian steel exports totaled 11.7 million tonnes in 2023, representing 37.2% of total sales[144]. - The apparent consumption of hot-rolled steel products globally saw a slight increase of 0.7% year-on-year, with a 1.7% increase excluding China[190]. - Gerdau's exports to South America accounted for 44% of total exports in 2023, while Central America represented 43%[191]. - The Brazilian steel market has seen a 25% import penetration rate as of December 2023, significantly higher than the average of the last ten years, impacting local competitiveness[221]. Financial Performance and Challenges - Gerdau's total consolidated net sales for 2023 were R$ 68.9 billion, a decrease of 16.3% from R$ 82.4 billion in 2022[172]. - The company produced 11.6 million tonnes of crude steel in 2023, down 8.8% from 12.7 million tonnes in 2022[175]. - Shipments totaled 11.3 million tonnes in 2023, a decline of 4.9% compared to 11.9 million tonnes in 2022[171]. - In 2023, Gerdau's net sales in Brazil decreased to R$26,830.7 million from R$32,971.1 million in 2022, representing a decline of approximately 18.5%[200]. - Gerdau's net income in Brazil was R$904.5 million, a significant decrease from R$3,325.3 million in 2022, reflecting a drop of 72.8%[200]. Operational Risks and Regulatory Environment - Increased competition from heavily subsidized steel imports, particularly from China, poses a significant threat to Gerdau's competitiveness and financial condition[46]. - The company faces risks from rising prices of raw materials, such as iron ore and coking coal, which could increase production costs and reduce profit margins[48]. - Global economic instability, including the impact of the Russian invasion of Ukraine, could adversely affect steel demand and prices, impacting Gerdau's operations[36]. - The company is vulnerable to inflationary cost pressures, particularly in relation to energy prices, which have been exacerbated by geopolitical events[52]. - Future compliance with stricter environmental regulations may increase operational costs, adversely affecting financial performance[104]. - The company may face increased costs and operational challenges due to future GHG emissions regulations and the need for new technologies in the production chain[60]. - Regulatory measures on steel trade may increase product prices or limit export capabilities, affecting financial results[102]. - The company is involved in various legal disputes that could result in significant monetary claims, impacting cash flows and financial condition[99]. Market Competition and Strategic Positioning - Gerdau is the largest Brazilian producer of steel, with 71% of its production derived from scrap, transforming 11 million tonnes of scrap into various steel products annually[132]. - Gerdau faces intense competition from local companies like Simec and CSN in the rebar market, as well as from imports, particularly from China[220][221]. - Key competitors in the North American market include Commercial Metals Company, Nucor Corporation, Steel Dynamics Inc., and Cleveland-Cliffs[223]. - The company’s South American operations are heavily reliant on shipments from Argentina and Peru, with over 80% of shipments originating from these countries[224]. - Gerdau's competitive edge is attributed to product diversification and decentralized operations, although it faces challenges from heavily subsidized imports[220]. Investment and Capacity Expansion - The company invested in expanding the production capacity of its iron ore mines in Minas Gerais to mitigate exposure to price volatility[50]. - Gerdau holds certified reserves of 476 million metric tonnes of iron ore as of 2023[178]. - Gerdau's production capacity includes 1.1 million tonnes of crude steel and 1.1 million tonnes of rolled steel products annually[187]. - Gerdau operates 29 steel producing facilities globally, with a significant presence in North and South America[161]. - The company operates 26 mini mills worldwide, which are designed to produce steel products with lower capital costs and operational risks[202]. Economic and Political Influences - The deterioration of Brazilian and global economic conditions could negatively affect global demand for steel and the company's sales and cash flows[82]. - Brazil's political instability continues to influence economic performance and investor confidence, potentially leading to economic deceleration[113]. - High inflation in Brazil could reduce demand for the company's products and increase costs, adversely affecting profit margins and net income[115]. - The company is subject to information technology risks, including potential cyberattacks that could disrupt operations and result in financial losses[75]. Management and Governance - Gerdau's controlling shareholder has significant powers, including electing a majority of directors and approving major corporate actions, which may conflict with non-controlling shareholders' interests[119]. - Gerdau's management continuity is crucial for its competitive position, as the loss of senior executives could adversely impact its strategy and operations[120]. - The company is subject to different disclosure requirements as a foreign issuer, which may affect the information available to U.S. investors[121].

Financial Performance & Shareholder Returns - Gerdau's 2023 CAPEX reached R$2.6 billion[2,30] - The company's dividend distribution in 4Q23 was R$175 million, equivalent to R$0.10 per share[2,55] - Gerdau's free cash flow in 2023 was R$7.0 billion[55] Business Division Performance - North America BD's shipments decreased by 4.5% from 4,090 thousand tonnes in 2022 to 3,907 thousand tonnes in 2023[45] - Brazil BD experienced a 37.6% yearly decrease in heavy vehicle production[48,49] - South America BD's shipments decreased by 7.2% from 1,212 thousand tonnes in 2022 to 1,125 thousand tonnes in 2023[85] Market Dynamics & Steel Imports - Brazil's economic activity is impacted by high interest rates at 11.25% in January 2024[33] - Steel imports reached a penetration rate of 25.2% in Brazil in December, with an increase of around 50% in 2023 compared to 2022[66] - Chinese steel production and exports are noted as key factors influencing the global steel market[29] Strategic Investments & Sustainability - Strategic CAPEX for 2021-2026 includes investments in growth and competitiveness, with approximately R$380 million spent in 4Q23[8] - Gerdau is developing a new sustainable mining platform with a capacity of 5.5 million tonnes per year, utilizing 100% dry stacking[7] - Gerdau achieved an A- Leadership score in the CDP Climate Change assessment, surpassing the global average for the metals and metallurgy sector[17,41]

G E R D A U S.A. Condensed cons o l i d a t e d i n t e r i m fi n a n c i a l s t a t e m e n t s a s o f S e p t e m b e r 3 0, 2 0 2 3 E x h i b i t 9 9.1 GERDAU S.A. CONSOLIDATED BALANCE SHEETS In thousands of Brazilian reais (R$) (Unaudited) | | Note | September 30, 2023 | December 31, 2022 | | --- | --- | --- | --- | | CURRENT ASSETS | | | | | Cash and cash equivalents | 4 | 2,914,529 | 2,475,863 | | Short-term investments | 4 | 3,088,139 | 2,959,135 | | Trade accounts receivable | 5 | 5,738,421 | 4,9 ...

Financial Performance - Adjusted EBITDA达R$38亿，为历史最佳水平之一[37, 167] - 2Q23年钢铁销量为290万吨，与1Q23持平[134, 192] - 资本支出为R$12亿[156, 179] - 巴西钢铁公司2Q23的EBITDA为R$9.92亿，EBITDA利润率为13.7%[1] - 巴西房地产市场新楼盘增长30.5%[1] - 公司分配了R$7.521亿（每股R$0.43）的股息，Metalúrgica Gerdau分配了R$2.685亿（每股R$0.26）[51, 134] Market Overview - 巴西国内钢材需求受到高利率和工业、零售等行业放缓的影响[1, 69] - 对巴西进口钢材增加的担忧，包括机械设备的进口[1, 69] - 实际升值和国际钢价下跌给出口竞争力带来压力[1, 69] - 美国自年初以来良好的经济活动水平推迟了短期内经济衰退的预期，预计2023年GDP为1.6%[39, 143] Strategic Initiatives - 投资R$32亿在米纳斯吉拉斯州建设可持续矿业平台，采用干式堆积法处理100%的矿山尾矿[37, 99, 167] - Whitby工厂（加拿大）新冶炼车间投产，Midlothian（美国）太阳能发电厂开始生产可再生能源[66, 169]

Financial Data and Key Metrics Changes - The company reported an adjusted EBITDA of R$3.8 billion for Q2 2023, reflecting a consistent financial performance despite a challenging macro environment [54][60] - The net debt to EBITDA ratio improved to 0.37x, with gross debt reduced by R$1.6 billion, marking the lowest debt level since September 2007 [61] - Free cash flow for the quarter was R$784 million, indicating positive cash generation [91] Business Line Data and Key Metrics Changes - The North America business operation achieved an adjusted EBITDA of R$1.8 billion, supported by stable order backlogs influenced by non-residential construction activities [43] - The special steel segment in Brazil faced lower demand due to uncertainties in credit access and high interest rates, impacting vehicle demand [56] - The company plans to invest R$3.2 billion in a new sustainable mining platform from 2023 to 2026, enhancing operational competitiveness [63][64] Market Data and Key Metrics Changes - Brazil's steel exports increased by over 43% year-on-year in the first half of 2023, totaling 2.2 million tonnes, with Chinese products dominating the market [45] - The construction sector in Brazil showed a 30% increase in real estate launches in Q2 2023 compared to the previous quarter, indicating a recovery in demand [45] - Political tensions and climate issues in Peru are being monitored, with expectations of economic recovery stimulating steel demand [46] Company Strategy and Development Direction - The company is focused on sustainable growth, with investments aimed at reducing greenhouse gas emissions and improving operational efficiency [65] - The strategic emphasis is on geographic diversification and flexible production routes to navigate the challenging global steel market [53] - The company aims to maintain a conservative approach to capital expenditures while ensuring a balanced debt profile [84] Management's Comments on Operating Environment and Future Outlook - Management highlighted concerns over excess steel production in China and its impact on global markets, particularly in Brazil [35] - There is optimism regarding public and private investments in infrastructure, which are expected to drive growth in the coming years [36] - The company anticipates stable demand levels in the domestic market, with no significant changes expected in the third quarter [83] Other Important Information - The company has initiated a solar farm project in Texas, expected to reduce carbon emissions by 65,000 tonnes annually [38] - The accident frequency rate improved to 0.66, below the previous year's rate, reflecting enhanced safety measures [41] - The company is committed to a sustainable mining initiative that eliminates the need for dams and improves logistics [51][64] Q&A Session Summary Question: Insights on North America margins and future profitability - Management expects flat margins in North America for the next quarter, with a solid backlog supporting stability [99][102] Question: Dividend payout strategy amidst market conditions - The company plans to maintain a conservative dividend payout policy, aligning with its net debt management strategy [104] Question: CapEx outlook for 2024 - Future CapEx is expected to increase significantly in 2024, primarily due to investments in the sustainable mining platform [105]

Financial Performance - Net sales for Q2 2023 were R$18,265,370, a decrease of 20% compared to R$22,968,442 in Q2 2022[4] - Gross profit for the six-month period ended June 30, 2023, was R$6,907,016, down 38% from R$11,084,933 in the same period of 2022[4] - Net income for Q2 2023 was R$2,142,723, a decline of 50% from R$4,298,499 in Q2 2022[5] - Net income for the six-month period ended June 30, 2023, was R$5,358,122, a decrease of 26% compared to R$7,238,884 for the same period in 2022[7] - Total comprehensive income for the period recognized was R$4,039,680, compared to R$6,419,476 in the previous year[6] - The company reported a basic earnings per share of R$1.22 for Q2 2023, down from R$2.39 in Q2 2022[4] - The diluted EPS for the six-month period ended June 30, 2023, was R$3.04, down from R$4.00 in the previous year[164] - For the three-month period ended June 30, 2023, the allocated net income available to common and preferred shareholders was R$2,135,909, a decrease from R$4,282,123 in the same period of 2022[160] Assets and Liabilities - Total assets as of June 30, 2023, were R$73,795,457, slightly down from R$73,798,652 at the end of 2022[3] - Current liabilities decreased to R$10,310,529 from R$13,462,581 at the end of 2022, a reduction of approximately 23.9%[3] - Total loans and financing decreased to R$9,879,470 as of June 30, 2023, from R$11,179,617 as of December 31, 2022, a decline of 11.6%[50] - Total financial liabilities reached R$18,664,200, with R$18,655,528 at amortized cost and R$8,672 at fair value through profit or loss[78] - The balance of leasing payable increased to R$1,210,878 as of June 30, 2023, from R$963,793 at the end of 2022, reflecting a rise of 25.69%[93] Cash Flow and Investments - Cash provided by operating activities for the six-month period ended June 30, 2023, was R$5,180,523, down from R$6,177,675 in the same period of 2022[7] - The company experienced a net cash used in investing activities of R$2,285,504 for the six-month period ended June 30, 2023, compared to R$1,591,000 in 2022[7] - The company’s investments in associates and joint ventures increased to R$4,721,456 from R$3,896,518, a growth of 21.2%[2] - Acquisitions of property, plant, and equipment for the six-month period ended June 30, 2023, amounted to R$2,183,061, an increase of 40.6% compared to R$1,551,839 in the same period of 2022[41] Market and Economic Conditions - The Company will continue to monitor the steel market throughout 2023 to identify any significant changes in demand or economic conditions that may impact projections[183] - The company does not expect material impacts on its Financial Statements from the new IFRS standards effective in 2024[14] Provisions and Contingencies - The total balance of provisions as of June 30, 2023, was R$2,134,724, up 5.36% from R$2,026,003 at the end of 2022[99] - The company has contingent liabilities related to tax matters totaling R$9,021,297, primarily concerning goodwill amortization disputes[106] - The company believes that provisions for judicial and administrative proceedings are sufficient to cover probable losses, indicating a stable outlook on financial position and liquidity[94] Shareholder Information - The Company approved a capital increase of R$966,162 through the issuance of 83,669,860 new shares, increasing total capital to R$20,215,343[152] - The Company acquired 44,564,000 preferred shares under its share buyback program, totaling R$1,073,124 as of June 30, 2023[150] - The Company credited interest on equity to shareholders amounting to R$892,056 for the first quarter of 2023[158] Legal Matters - The company is awaiting the outcome of ongoing investigations by Brazilian authorities regarding tax appeals and political contributions, with no ongoing criminal investigations against its executives[108][109] - Gerdau S.A. has a lawsuit pending for the recognition of R$683 million in credits related to undue payments, which is still awaiting a final decision[121]

Exhibit 99.1 GERDAU S.A. Condensed consolidated interim financial statements as of March 31, 2023 GERDAU S.A. CONSOLIDATED BALANCE SHEETS In thousands of Brazilian reais (R$) (Unaudited) | | Note | March 31, 2023 | December 31, 2022 | | --- | --- | --- | --- | | CURRENT ASSETS | | | | | Cash and cash equivalents | 4 | 2,581,882 | 2,475,863 | | Short-term investments | 4 | 3,243,455 | 2,959,135 | | Trade accounts receivable | 5 | 5,999,188 | 4,999,004 | | Inventories | 6 | 17,184,069 | 17,817,585 | | Tax cre ...

PART I [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section details Gerdau's significant business, operational, mining, financial, regulatory, and country-specific risks, including steel industry cyclicality, competition, raw material volatility, and financial exposures [Risks Relating to Business and the Steel Industry](index=6&type=section&id=Risks%20Relating%20to%20our%20Business%20and%20the%20Steel%20Industry) Gerdau's performance is highly susceptible to the cyclical nature of steel demand and prices, intense competition, and volatile raw material costs - The steel industry is highly cyclical, exposing the company to significant fluctuations in demand and prices for its products, which can be adversely affected by global economic slowdowns and crises[26](index=26&type=chunk)[27](index=27&type=chunk) - Gerdau faces intense competition from both domestic and foreign steel producers, with China's large production capacity and export levels being a major factor that can depress international steel prices[31](index=31&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The company's profitability is vulnerable to price increases or supply shortages of key raw materials, including steel scrap for its mini mills and iron ore and coking coal for its integrated facilities[35](index=35&type=chunk)[36](index=36&type=chunk)[39](index=39&type=chunk) [Risks Relating to Operations](index=9&type=section&id=Risks%20Relating%20to%20our%20Operations) Operational risks include capital project delays, equipment failures, energy shortages, labor disputes, cybersecurity breaches, and health epidemics impacting business continuity and costs - Capital investment projects are subject to risks such as delays, cost overruns, and failure to obtain necessary permits, which could adversely affect growth and profitability[42](index=42&type=chunk) - Unexpected equipment failures, fires, or severe weather can cause material plant shutdowns, leading to increased costs, reduced shipments, and lower earnings[43](index=43&type=chunk) - The company is exposed to cybersecurity risks, including data breaches and system interruptions, which could result in operational disruptions, financial losses, and reputational damage[59](index=59&type=chunk)[60](index=60&type=chunk) - The COVID-19 pandemic continues to pose risks, with potential for production interruptions, reduced demand, and supply chain disruptions that could adversely impact future results[63](index=63&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) [Risks Relating to Mining Operations](index=14&type=section&id=Risks%20Relating%20to%20our%20Mining%20Operations) Mining operations face risks from uncertain mineral resource estimates, lack of proven reserves, and potential structural failure of the tailings dam - Estimates of mineral resources are inherently uncertain and may differ from the quantities that can actually be extracted, as the company has not established any proven or probable mineral reserves under SEC definitions[70](index=70&type=chunk)[72](index=72&type=chunk) - The company operates one mining dam for tailings disposal, the Alemães Dam. An accident affecting its structural integrity could lead to severe consequences, including shutdowns, high expenditures, fines, and environmental impacts[76](index=76&type=chunk)[78](index=78&type=chunk) [Financial Risks](index=16&type=section&id=Financial%20Risks) Financial risks include credit rating downgrades, high indebtedness, foreign exchange rate fluctuations, and adverse outcomes from significant litigation - The company holds an investment-grade rating from S&P and Fitch, and was upgraded by Moody's to Baa3. A loss of these ratings could increase the cost of capital and impair access to financing[80](index=80&type=chunk)[81](index=81&type=chunk) - As of December 31, 2022, debt denominated in foreign currency, mainly U.S. dollars, amounted to **R$ 9.6 billion**, representing **76% of consolidated gross debt**. A significant depreciation of the Brazilian real could adversely affect the company's ability to service this debt[87](index=87&type=chunk) - The company is involved in several significant tax disputes for which no provision has been established, including claims related to ICMS, IPI, PIS/COFINS, and goodwill amortization, with potential liabilities totaling **billions of reais**[89](index=89&type=chunk)[90](index=90&type=chunk) [Regulatory Risks](index=19&type=section&id=Regulatory%20Risks) Regulatory risks encompass trade protectionism, stricter environmental laws, anti-corruption and antitrust compliance, and ongoing Brazilian investigations - The business is exposed to trade protectionism, such as quotas and tariffs, which can increase product costs and reduce export competitiveness[93](index=93&type=chunk) - Increasingly strict environmental laws, especially those targeting greenhouse gas emissions, could lead to higher capital expenditures and operating costs[94](index=94&type=chunk)[96](index=96&type=chunk) - The company is subject to investigations by Brazilian authorities regarding Administrative Board of Tax Appeals (CARF) proceedings and political contributions, the outcome of which is currently unpredictable. The U.S. SEC has closed its inquiry into these matters[101](index=101&type=chunk) [Risks Relating to Brazil](index=20&type=section&id=Risks%20Relating%20to%20Brazil) Brazilian risks include sovereign credit rating downgrades, political instability, and high inflation impacting economic growth and debt servicing costs - Brazil's sovereign credit rating is below investment grade, and any further downgrades could heighten investor risk perception and adversely affect the company's share price[103](index=103&type=chunk)[104](index=104&type=chunk) - Political instability in Brazil has historically affected investor confidence and can lead to economic deceleration and increased volatility in securities[105](index=105&type=chunk) - High inflation in Brazil could slow economic growth, reduce demand for the company's products, and increase the servicing costs of its debt denominated in Brazilian reais[107](index=107&type=chunk) [Risks Related to Corporate Structure and Shares](index=21&type=section&id=Risks%20Related%20to%20our%20Corporate%20Structure%20and%20Shares) Risks include controlling shareholder influence, less stringent foreign issuer disclosure, NYSE governance exemptions, and complexities for ADS holders - The controlling shareholder has the power to elect a majority of the board and establish administrative policy, which may lead to decisions that conflict with the interests of other shareholders[111](index=111&type=chunk) - As a foreign issuer, the company is exempt from certain NYSE corporate governance standards, including the requirement for a majority of independent directors on its board[115](index=115&type=chunk) - U.S. holders of ADSs may be unable to exercise preemptive rights unless a registration statement under the Securities Act is effective, which the company is not obligated to file[116](index=116&type=chunk) [Company Information](index=23&type=section&id=ITEM%204.%20COMPANY%20INFORMATION) This section provides a comprehensive overview of Gerdau's history, global and regional steel industry presence, operational segments, product mix, production processes, and environmental strategies [History and Development](index=23&type=section&id=History%20and%20Development%20of%20the%20Company) Gerdau S.A., incorporated in 1961 and controlled by the Gerdau family, is Brazil's largest steel producer and Latin America's largest recycler - Gerdau is Brazil's largest steel producer, a leading producer of long steel in the Americas, and one of the world's leading suppliers of special steel[123](index=123&type=chunk) - The company is the largest recycler in Latin America, with **73%** of its steel produced from scrap, transforming **11 million tonnes** of scrap into steel products each year[123](index=123&type=chunk) [Business Overview](index=23&type=section&id=Business%20Overview) This section details Gerdau's operational landscape, including its global steel industry position, segment-wise performance, product range, production processes, and key inputs - Gerdau was classified as the world's **30th largest steel producer** in 2021, with a total consolidated installed annual capacity of approximately **16.7 million tonnes** of crude steel as of December 31, 2022[149](index=149&type=chunk)[151](index=151&type=chunk) Consolidated Shipments by Business Segment (in 1,000 tonnes) | Business Segment | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **TOTAL** | **11,902** | **12,722** | **11,461** | | Brazil | 5,394 | 5,755 | 5,129 | | North America | 4,090 | 4,451 | 4,334 | | South America | 1,212 | 1,255 | 962 | | Special Steel | 1,657 | 1,654 | 1,252 | Consolidated Net Sales by Business Segment (in R$ million) | Business Segment | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **TOTAL** | **82,412** | **78,345** | **43,814** | | Brazil | 32,971 | 34,758 | 17,753 | | North America | 31,099 | 27,838 | 17,458 | | South America | 7,180 | 6,857 | 3,831 | | Special Steel | 13,626 | 10,980 | 6,096 | Annual Production (in million tonnes) | Production Type | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Crude Steel | 12.67 | 13.29 | 12.19 | | Rolled Steel | 11.43 | 12.40 | 10.93 | | Iron Ore | 6.42 | 3.86 | 6.67 | [Organizational Structure](index=47&type=section&id=Organizational%20Structure) Gerdau S.A. operates through consolidated subsidiaries and equity-accounted joint ventures across the Americas, including key entities in Brazil, North America, and other regions - The company's operational structure consists of numerous subsidiaries and joint ventures across Brazil, the USA, Canada, Peru, Mexico, Argentina, and other countries[280](index=280&type=chunk)[281](index=281&type=chunk) - Key operating companies that are fully consolidated include Gerdau Aços Longos S.A. and Gerdau Açominas S.A. in Brazil, and Gerdau Ameristeel Corporation in North America[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk) - Significant investments accounted for using the equity method include joint ventures like Gerdau Metaldom Corp. (Dominican Republic), Gerdau Corsa S.A. (Mexico), and Diaco S.A. (Colombia)[283](index=283&type=chunk)[284](index=284&type=chunk) [Property, Plant and Equipment](index=51&type=section&id=Property%20Plant%20and%20Equipment) This section details Gerdau's production facilities, mining assets, investment programs, environmental regulations, and decarbonization strategy, including capital expenditures and eco-efficiency investments - As of December 31, 2022, Gerdau's total installed capacity was approximately **16.0 million tonnes** of crude steel and **15.4 million tonnes** of rolled products across its global operations[296](index=296&type=chunk) - The company announced a new investment plan of **R$ 5.0 billion** for 2023, focusing on maintenance, expansion, technological updating, and ESG practices. This follows a **R$ 4.3 billion** capex disbursement in 2022[303](index=303&type=chunk)[304](index=304&type=chunk) - Gerdau has a decarbonization goal to reduce scope 1 and 2 greenhouse gas emissions from **0.93 t of CO₂e per ton of steel** (2020 baseline) to **0.83 t of CO₂e per ton of steel** by 2031, aiming for carbon neutrality by 2050[329](index=329&type=chunk)[332](index=332&type=chunk) - In 2022, the company invested **R$ 639.31 million** in eco-efficiency practices and environmental protection technologies. Provisions for environmental liabilities totaled **R$ 484.7 million** as of December 31, 2022[308](index=308&type=chunk)[311](index=311&type=chunk) [Operating and Financial Review and Prospects](index=59&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes Gerdau's financial performance, liquidity, capital resources, and critical accounting estimates, highlighting net sales growth, net income decline, and debt position [Results of Operations (2022 vs. 2021)](index=63&type=section&id=Results%20of%20Operations) In 2022, net sales increased by 5.2% to R$ 82.4 billion, while net income decreased by 26.2% to R$ 11.5 billion due to higher costs and financial expenses Consolidated Income Statement Highlights (in R$ thousands) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | **NET SALES** | **82,412,210** | **78,345,081** | **5.2%** | | Cost of sales | (63,661,156) | (57,527,721) | 10.7% | | **GROSS PROFIT** | **18,751,054** | **20,817,360** | **(9.9)%** | | INCOME BEFORE TAXES | 15,859,027 | 20,272,568 | (21.8)% | | **NET INCOME** | **11,479,552** | **15,558,938** | **(26.2)%** | - The **5.2% increase in net sales** was primarily due to a global upcycle in commodity prices, resulting in higher net sales per tonne, which offset a **4.7% decrease in sales volume**[374](index=374&type=chunk) - Cost of goods sold increased by **10.7%** to **R$ 63.7 billion**, driven by rising costs of key raw materials, including a **9% increase in iron ore prices** and a **32% increase in scrap prices**[380](index=380&type=chunk) - Net financial expenses increased significantly, mainly due to an **R$ 866 million** increase in expenses from exchange rate variations compared to 2021[386](index=386&type=chunk) [Liquidity and Capital Resources](index=68&type=section&id=Liquidity%20and%20Capital%20Resources) In 2022, operating cash flow decreased, investing activities increased, and financing activities decreased, while total debt declined and net debt remained stable Consolidated Cash Flow Summary (in R$ thousands) | Cash Flow Activity | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 11,150,338 | 12,516,933 | (10.9)% | | Net cash used in investing activities | (4,459,684) | (2,996,103) | 48.8% | | Net cash used in financing activities | (8,256,287) | (9,982,642) | (17.3)% | Debt Profile (in R$ thousands) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | TOTAL DEBT | 12,607,390 | 14,039,693 | | Total cash and short-term investments | 5,434,998 | 6,786,866 | | **NET DEBT** | **7,172,392** | **7,252,827** | - Capital expenditures in 2022 totaled **R$ 4.3 billion**, with **60%** allocated to the Brazil Segment and the remainder to other operations[410](index=410&type=chunk) [Critical Accounting Estimates](index=74&type=section&id=Critical%20Accounting%20Estimates) This section details critical accounting estimates, including goodwill impairment, provisions for legal claims, and deferred tax asset recoverability, all requiring complex management judgments - The annual goodwill impairment test, conducted in December 2022, concluded that the recoverable amount exceeded the book value for all segments, resulting in no impairment charge[434](index=434&type=chunk)[442](index=442&type=chunk) Provisions for Claims (in R$ thousands) | Provision Type | 2022 | 2021 | | :--- | :--- | :--- | | Tax provisions | 1,530,040 | 1,270,473 | | Labor provisions | 463,452 | 435,803 | | Civil provisions | 32,511 | 34,750 | | **Total** | **2,026,003** | **1,741,026** | - The company did not recognize deferred tax assets of **R$ 240 million** in Brazil and **R$ 1.1 billion** abroad due to a lack of expectation for their use[451](index=451&type=chunk) [Directors, Senior Management and Employees](index=81&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section outlines Gerdau's Board of Directors and Executive Officers, compensation philosophy, corporate governance structure, and employee workforce statistics - The Board of Directors is chaired by Guilherme Chagas Gerdau Johannpeter, and the Chief Executive Officer is Gustavo Werneck da Cunha[458](index=458&type=chunk)[459](index=459&type=chunk) - Total compensation for management (directors and officers) in 2022 was **R$ 84.3 million**, including salaries, variable pay, benefits, and social charges[497](index=497&type=chunk) - The company has a Board of Auditors (Conselho Fiscal) that is adapted to comply with Sarbanes-Oxley Act requirements, serving in a capacity similar to a U.S. audit committee, with Bolívar Charneski identified as the 'audit committee financial expert'[522](index=522&type=chunk)[524](index=524&type=chunk)[527](index=527&type=chunk) Employee Workforce | Year | Brazil | Other Countries | Total | | :--- | :--- | :--- | :--- | | 2022 | 18,372 | 9,825 | 28,197 | | 2021 | 18,102 | 9,637 | 27,739 | | 2020 | 15,313 | 9,300 | 24,613 | [Major Shareholders and Related-Party Transactions](index=95&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED-PARTY%20TRANSACTIONS) This section identifies Gerdau's major shareholders, including the controlling entity Metalúrgica Gerdau S.A., and details related-party transactions conducted at market conditions Major Shareholders as of December 31, 2022 | Shareholder | Common Shares % | Preferred Shares % | | :--- | :--- | :--- | | Metalúrgica Gerdau S.A | 97.26% | — | | JP Morgan Chase Bank | — | 19.9% | | Capital International Investors | — | 10.4% | - Metalúrgica Gerdau S.A. is the controlling shareholder, holding **97.26%** of the voting capital stock of Gerdau S.A[553](index=553&type=chunk) - Related-party transactions include loans, commercial sales and purchases, and property transactions, which are carried out under market conditions[555](index=555&type=chunk)[556](index=556&type=chunk)[557](index=557&type=chunk) [Financial Information](index=98&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section details Gerdau's legal proceedings, including provisions for probable losses and significant contingent liabilities, alongside its dividend distribution policy Provisions for Contingencies (in R$ thousands) | Contingency Type | 2022 | 2021 | | :--- | :--- | :--- | | Tax | 1,530,040 | 1,270,473 | | Labor | 463,452 | 435,803 | | Civil | 32,511 | 34,750 | - The company has significant contingent liabilities classified as 'possible' losses for which no provisions have been made, including tax claims related to goodwill amortization totaling **R$ 8.7 billion**[994](index=994&type=chunk) - The company's bylaws require a minimum dividend distribution of **30%** of adjusted net income for each fiscal year[577](index=577&type=chunk) [The Offer and Listing](index=101&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) This section details Gerdau's securities listings on the B3, NYSE (as ADSs), and Latibex, along with relevant trading mechanisms and regulatory oversight - Gerdau's shares are listed on the São Paulo Stock Exchange (B3) in the Level 1 Differentiated Corporate Governance segment, the New York Stock Exchange (NYSE) as ADSs (GGB), and the Madrid Stock Exchange (Latibex) as DRs (XGGB)[593](index=593&type=chunk)[606](index=606&type=chunk)[607](index=607&type=chunk) - In 2022, **3.5 billion ADSs** were traded on the NYSE, representing a trading volume of **US$ 19.74 billion**[606](index=606&type=chunk) [Additional Information](index=103&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers Gerdau's material financial contracts, Brazilian exchange controls, and a comprehensive summary of Brazilian and U.S. federal income tax implications for non-resident shareholders - As of December 31, 2022, the company had outstanding bonds totaling **US$ 1.59 billion** (**R$ 8.3 billion**) and debentures totaling **R$ 1.4 billion**[399](index=399&type=chunk)[400](index=400&type=chunk)[612](index=612&type=chunk)[613](index=613&type=chunk) - Under Brazilian tax law, dividends paid to non-resident holders are currently exempt from income tax, while payments of interest on shareholders' equity are subject to a **15% withholding tax** (or **25%** for residents of tax-favorable jurisdictions)[636](index=636&type=chunk)[640](index=640&type=chunk) - For U.S. holders, distributions are generally treated as dividends for U.S. federal income tax purposes. These dividends may be considered 'qualified dividends' subject to a preferential tax rate, provided certain conditions are met and the company is not classified as a Passive Foreign Investment Company (PFIC)[673](index=673&type=chunk)[675](index=675&type=chunk) [Quantitative and Qualitative Disclosures Regarding Market Risk](index=115&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20REGARDING%20MARKET%20RISK) This section details Gerdau's exposure to market risks, including exchange rate, interest rate, and commodity price fluctuations, and its strategies for risk mitigation and capital management - The company is exposed to exchange rate risk, with a sensitivity analysis indicating a **5% appreciation** of the Real/Argentinian Peso against the US Dollar would result in a gain of **R$ 113.8 million** as of Dec 31, 2022[695](index=695&type=chunk)[696](index=696&type=chunk) - Interest rate risk sensitivity analysis shows that a **10 basis point change** in floating interest rates would impact financial expenses by **R$ 32.4 million**[699](index=699&type=chunk) - The company manages capital structure risk by monitoring key performance indicators, aiming for a Net Debt/EBITDA ratio of less than or equal to **1.5 times** and an average debt maturity of more than **6 years**[958](index=958&type=chunk) [Description of Securities Other Than Equity Securities](index=117&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section describes Gerdau's Level II ADSs traded on the NYSE, including their representation of preferred shares and associated depositary fees and reimbursements - Gerdau's Level II ADSs trade on the NYSE under the symbol GGB, with each ADS representing one preferred share[710](index=710&type=chunk) - In 2022, the depositary (J.P. Morgan Chase Bank) reimbursed the company **US$ 1.2 million** for expenses related to the maintenance of the ADS program[711](index=711&type=chunk) PART II [Controls and Procedures](index=118&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[717](index=717&type=chunk) - Management concluded that the company maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO framework[722](index=722&type=chunk) [Other Information](index=119&type=section&id=ITEM%2016.%20OTHER%20INFORMATION) This section covers governance topics including the audit committee financial expert, code of ethics, principal accountant fees, and differences between Brazilian and NYSE corporate governance practices - The Board of Auditors has determined that member Bolívar Charneski is an 'audit committee financial expert' as defined by SEC rules[725](index=725&type=chunk) Principal Accountant Fees (in R$ thousands) | Fee Type | 2022 (PwC) | 2021 (KPMG) | | :--- | :--- | :--- | | Audit fees | 9,612 | 9,443 | | Audit-related fees | 166 | 170 | | **Total** | **9,778** | **9,613** | - The company changed its certifying accountant from KPMG Auditores Independentes to PricewaterhouseCoopers Auditores Independentes for the fiscal year ending December 31, 2022[743](index=743&type=chunk) - As a foreign private issuer, Gerdau follows Brazilian corporate governance practices, which differ from NYSE standards for domestic companies, particularly regarding the requirement for a majority of independent directors on the board and its committees[747](index=747&type=chunk)[749](index=749&type=chunk) PART III [Financial Statements](index=123&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents Gerdau's audited consolidated financial statements for 2022, prepared under IFRS, including the independent auditor's report from PricewaterhouseCoopers - The consolidated financial statements were prepared in accordance with IFRS as issued by the IASB[771](index=771&type=chunk)[807](index=807&type=chunk) - The independent auditor's report for the 2022 fiscal year was issued by PricewaterhouseCoopers Auditores Independentes Ltda., which opined that the financial statements present fairly, in all material respects, the financial position of the company and that the company maintained effective internal control over financial reporting[773](index=773&type=chunk)[774](index=774&type=chunk)

Financial Performance and Key Metrics - Gerdau reported the highest net sales in its history, totaling BRL 82.4 billion, and the second-best adjusted EBITDA of BRL 21.5 billion with an EBITDA margin of 26.1% [3][36] - The company ended 2022 with a record cash flow of BRL 10.5 billion, which is nearly 50% of EBITDA for the period [37] - Gerdau's net debt over EBITDA ratio stood at a healthy 0.33x, with a slight increase in net debt due to record dividends paid [51] Business Line Performance - The North America business operation achieved an adjusted EBITDA of BRL 10 billion with a historical EBITDA margin of 32% [11] - The Special Steel operation saw a 40% increase in adjusted EBITDA compared to the previous year, driven by high profitability levels [29] - The Brazilian operation experienced a drop in demand due to seasonal factors and external events, but the construction sector is expected to grow, positively impacting steel demand [23][32] Market Insights - Steel shipments in North America reached the highest levels since 2015, with a strong order backlog of around 60 days [13] - The infrastructure investment package in the U.S. is expected to generate additional steel demand, with significant government funding announced for projects [14] - In Brazil, the construction sector is projected to grow by 2.5% in GDP, supported by reforms in housing programs aimed at low-income segments [32] Company Strategy and Industry Competition - Gerdau is focusing on digital transformation and innovation through initiatives like Gerdau Next, which includes partnerships in high technology and renewable energy [4][54] - The company is committed to maintaining a disciplined capital allocation strategy, with planned CapEx of BRL 5 billion for 2023, split between maintenance and expansion projects [40][41] - Gerdau's operations are characterized by geographic diversification and a focus on specialty steels, which are competitive in the global market [21][22] Management Commentary on Operating Environment and Future Outlook - Management highlighted resilience against macroeconomic challenges, including geopolitical tensions and inflationary pressures, while maintaining a positive outlook for 2023 [8][20] - The company anticipates a recovery in demand for steel in Brazil, aligning with the levels seen in 2022, despite concerns about inventory levels and new launches [31] - Management emphasized the importance of adapting to market conditions and leveraging investments in technology to enhance competitiveness [10][27] Other Important Information - Gerdau achieved its lowest accident frequency rate of 0.76, underscoring its commitment to safety [73] - The company received B Corp certification for its operations, recognizing its sustainability practices [74] - Gerdau is investing in renewable energy projects to reduce greenhouse gas emissions and improve production cost competitiveness [54] Q&A Session Summary Question: What are the expectations regarding long steel prices in Brazil? - Management noted that profitability for long steel is recovering, with demand returning to normal levels after a seasonal drop [79] Question: How will infrastructure investments impact long steel demand in the U.S.? - The outlook for the U.S. market is positive, with significant infrastructure investments expected to drive steel demand [81] Question: What is the magnitude of CapEx for the renovation of the blast furnace in Ouro Branco? - Management indicated that the CapEx for maintenance and upgrades is planned and will not surprise the market, with investments already underway [89][104] Question: Can we expect a higher level of CapEx in the coming years? - The current level of CapEx is expected to remain stable, focusing on maintenance and competitiveness without major surprises [104][140]