Research Update: Gerdau Outlook Revised To Positive From Stable On Low Leverage And Conservative Financial Policy, 'BBB-' Rating Affirmed

Brazilian steelmaker Gerdau S.A. has been posting very low leverage mostly due to industry tailwinds that have boosted annual EBITDA to record-high historical level of more than R$20 billion. We expect Gerdau to continue to generate strong FOCF in excess of R$6 billion, even despite a significant increase in capex compared to previous years. On July 19, 2022, S&P Global Ratings revised the outlook on Gerdau and Gerdau Ameristeel Corp. to positive from stable, and affirmed the global scale 'BBB-' issuer credit ratings on both companies. We also affirmed our 'brAAA' Brazil national scale rating on Gerdau, and the outlook on this rating remains stable. At the same time, we affirmed all of our 'BBB-' and 'brAAA' issue-level ratings on

...- Brazilian steelmaker Gerdau S.A. has been posting very low leverage mostly due to industry tailwinds that have boosted annual EBITDA to record-high historical level of more than R$20 billion. - We expect Gerdau to continue to generate strong FOCF in excess of R$6 billion, even despite a significant increase in capex compared to previous years. - On July 19, 2022, S&P Global Ratings revised the outlook on Gerdau and Gerdau Ameristeel Corp. to positive from stable, and affirmed the global scale '###-' issuer credit ratings on both companies. We also affirmed our 'brAAA' Brazil national scale rating on Gerdau, and the outlook on this rating remains stable. At the same time, we affirmed all of our '###-' and 'brAAA' issue-level ratings on Gerdau. - The positive outlook reflects that we can upgrade Gerdau in the next 12-18 months if it keeps a low leverage and structurally lower gross debt even when the commodity cycle turns, while it implements countercyclical measures related to capital...

Research Update