Mixed Performance Across Key Markets ShapesQuarter
Gerdau closed the first quarter of 2025 with adjustedEBITDA (earnings before interest, taxes, depreciation, and amortization) ofR$2.4 billion ($480 million), maintaining an adjusted EBITDA margin of 13.8%.The company's adjusted net income reached R$758 million ($151.6 million)between January and March, while net sales totaled R$17.4 billion ($3.48billion). Physical steel shipments for the quarter amounted to 2.9 millionmetric tons, reflecting the company's resilience amid challenging market conditions.The quarter demonstrated Gerdau's ability to leverage its diverse geographicfootprint, with strong North American operations helping to counterbalanceheadwinds in its domestic Brazilian market.
North American Operations Shine While BrazilianMarket Faces Import Pressure
Gustavo Werneck, Gerdau's CEO, emphasized the contrastingmarket dynamics affecting the company's performance: "Throughout the firstquarter of 2025, we recorded higher volumes delivered in North America,accompanied by an upturn of the order backlog to 70 days, above the historicallevel." This positive development in North America provided crucialsupport to the company's overall results. However, Werneck noted that "theBrazilian market continued to be impacted by long and flat steel imports, whichsurged 30% in the period." This significant increase in imports hascreated challenging competitive conditions for domestic steel producers inBrazil, putting pressure on prices and market share in what has traditionallybeen Gerdau's home market stronghold.
Strategic Capital Investments Target EnhancedCompetitiveness
In the first quarter of 2025, Gerdau invested R$1.4 billion($280 million) in capital expenditures, allocating 40% to maintenance and 60%to expansion projects and technological upgrades. The company has set anambitious investment plan of R$6.0 billion ($1.2 billion) for the full year2025, demonstrating its commitment to long-term growth despite near-term marketchallenges. Rafael Japur, Gerdau's CFO, highlighted a significant milestone inthe company's strategic investments: "I would like to highlight theinvestment made to expand the hot-rolled coil capacity in Ouro Branco,inaugurated in March, which aims at enhancing our competitiveness and willenable us to achieve a potential gain in annual EBITDA of nearly R$400 million($80 million), given the isonomic conditions of competition."
Adaptive Strategy Leverages 124-Year History ofResilience
Werneck emphasized the company's historical perspective asa source of strength in navigating current market volatility: "I emphasizethat Gerdau, with its 124 years of history, is prepared to adapt to volatilemacroeconomic scenarios, such as the one we have faced in the globalmarket." This adaptive approach has been a hallmark of Gerdau's longevityin an industry known for its cyclicality. The CEO reaffirmed the company'scommitment to "ensuring the value creation for our stakeholders,"signaling a balanced focus on both short-term performance and long-termstrategic positioning. This perspective reflects Gerdau's evolution from aregional steel producer to a multinational corporation with operations acrossthe Americas.
Capital Allocation Strategy Includes ShareRepurchases
Beyond operational investments, Gerdau has been activelymanaging its capital structure to enhance shareholder returns. CFO Rafael Japurnoted that "we have been advancing our share buyback program with a viewto maximizing shareholder value and optimizing the capital structure."This approach demonstrates management's confidence in the company's intrinsicvalue and represents a strategic use of capital during a period when theBrazilian steel market faces external pressures. The share repurchase programcomplements Gerdau's dividend policy as part of a comprehensive approach tocapital allocation that balances growth investments, balance sheet strength,and returns to shareholders.
Ouro Branco Expansion Represents StrategicPivot to Higher-Value Products
The recently inaugurated expansion of hot-rolled coilcapacity at the Ouro Branco facility represents a strategic pivot towardhigher-value flat steel products. This investment positions Gerdau to bettercompete in industrial and automotive supply chains while diversifying beyondits traditional strength in long steel products for construction applications.The expected annual EBITDA contribution of R$400 million ($80 million) fromthis project highlights its significance to Gerdau's future profitability. Theexpansion also reflects the company's confidence in the long-term fundamentalsof the Brazilian industrial sector, despite current challenges from imports.
Global Market Dynamics Create ChallengingOperating Environment
The surge in steel imports to Brazil by 30% during thequarter reflects broader global market dynamics affecting the steel industry.Overcapacity in certain regions, particularly Asia, has led to increased exportvolumes seeking markets worldwide. This situation has created challenges forproducers in many regions, with Brazil's relatively open market and currencydynamics making it an attractive destination for steel exports. Gerdau'semphasis on competitiveness improvements and technological upgrades representsa strategic response to these structural challenges in the global steel market,focusing on factors within management's control while navigating externalpressures.
Industry Consolidation and TechnologicalLeadership Shape Future Strategy
As Gerdau implements its R$6.0 billion ($1.2 billion)investment plan for 2025, the company appears positioned to potentially benefitfrom industry consolidation and technological leadership. The significantallocation to expansion projects and technological upgrades (60% of Q1 capitalexpenditures) signals Gerdau's intention to emerge from the current challengingperiod with enhanced capabilities and competitive positioning. Thisforward-looking approach, combined with the company's geographic diversificationacross the Americas, provides multiple pathways for growth as market conditionsevolve. The balance between maintaining existing assets and investing in futurecapabilities demonstrates management's dual focus on current performance andlong-term value creation.
Key Takeaways:
• Gerdau reported Q1 2025 adjusted EBITDA of R$2.4 billion($480 million) with a 13.8% margin, shipping 2.9 million metric tons of steelamid contrasting performance between strong North American operations and achallenging Brazilian market facing a 30% surge in imports
• The company is investing R$6.0 billion ($1.2 billion) in2025, including the recently completed expansion of hot-rolled coil capacity atOuro Branco, expected to contribute R$400 million ($80 million) in annualEBITDA
• Management is pursuing a balanced capital allocationstrategy that includes operational investments, share repurchases, andmaintaining financial flexibility to navigate volatile market conditions whileleveraging the company's 124-year history of adaptability
