Brazil-based steelmaker Gerdau is generating sufficient free operating cash flows to reduce its nominal debt despite economic and political risks in Brazil, one of the company's largest markets. We're affirming our 'BBB-' global scale and 'brAAA' national scale ratings on the company. The negative outlook still reflects the possibility of a downgrade if volume and margin pressures, weaker working capital management, and larger investments prevent Gerdau from generating free operating cash flow (FOCF), making it more difficult for the group from achieving debt to EBITDA consistently below 4x and funds from operations (FFO) to debt above 20% in the next few quarters. On Aug. 29, 2016, S&P Global Ratings affirmed its global scale ratings on Gerdau S.A. (Gerdau) and Gerdau
