The ratings on Brazil-based steelmaker Gerdau S.A. (Gerdau) reflect the company's exposure to the volatile and cyclical commodity long steel industry, which is peculiarly vulnerable to import competition in North America and to demand swings in Brazil; an acquisitive growth strategy that may cause some peaks of financial leverage in the future (despite the currently comfortable liquidity and debt profiles); and a heavy capital budget during the next three years to be invested in both brownfield and greenfield capacity expansions. These negatives are partly mitigated by Gerdau's adequate geographic diversification through the Americas, with very strong and growing market shares in Brazil and North America, respectively; an improving financial profile and the increasing profitability of its North American operation; and
