Research Update: Gerdau Outlook Revised To Positive On Significant Debt Reduction And Operating Improvement, 'BBB-' Ratings Affirmed

Brazil-based steel producer Gerdau was able to reduce leverage quickly despite deep recession in its main market. Debt reduction came from the sale of non-core assets, focus on raising margins, higher value-added products, cost controls, along with lower investments and a more efficient working capital management. On Jan. 31, 2019, S&P Global Ratings revised the outlook on Gerdau S.A. (Gerdau) and Gerdau Ameristeel Corp to positive from stable, and affirmed its global scale 'BBB-' issuer credit ratings. We also affirmed our 'brAAA' Brazil national scale rating on Gerdau, and the outlook on this rating remains stable. We have also affirmed all of our issue-level ratings at 'BBB-' on global scale and 'brAAA' on national scale. The positive outlook reflects a

...+ Brazil-based steel producer Gerdau was able to reduce leverage quickly despite deep recession in its main market. Debt reduction came from the sale of non-core assets, focus on raising margins, higher value-added products, cost controls, along with lower investments and a more efficient working capital management. + On Jan. 31, 2019, S&P Global Ratings revised the outlook on Gerdau S.A. (Gerdau) and Gerdau Ameristeel Corp to positive from stable, and affirmed its global scale '###-' issuer credit ratings. We also affirmed our 'brAAA' Brazil national scale rating on Gerdau, and the outlook on this rating remains stable. + We have also affirmed all of our issue-level ratings at '###-' on global scale and 'brAAA' on national scale. + The positive outlook reflects a potential upgrade if Gerdau maintains margins consistently above 14% and commits to maintain leverage below 2x, as well as funds from operations (FFO) to debt above 45%....

Research Update