Tear Sheet: Gerdau S.A.

Steel producer Gerdau?s performance in Brazil has been hit by the appreciated Brazilian real, high interest rates, slower demand, and competition from Chinese imports, which reached about 20% of the country?s apparent consumption year-to-date. We expect volumes in Brazil will fall by high single digits in 2023, while prices face downward pressures from the imports competition, bringing margins below 15%. The specialty steel segment is also facing strains from still weak vehicle production in Brazil, but is performing somewhat better in the U.S. The company's U.S. business, on the other hand, benefits from healthy steel demand. Gerdau's U.S. and South American operations continue to post margins well above 20%. We estimate consolidated margins to normalize to slightly below 20% in

...Steel producer Gerdau's performance in Brazil has been hit by the appreciated Brazilian real, high interest rates, slower demand, and competition from Chinese imports, which reached about 20% of the country's apparent consumption year-to-date. We expect volumes in Brazil will fall by high single digits in 2023, while prices face downward pressures from the imports competition, bringing margins below 15%. The specialty steel segment is also facing strains from still weak vehicle production in Brazil, but is performing somewhat better in the U.S. The company's U.S. business, on the other hand, benefits from healthy steel demand. Gerdau's U.S. and South American operations continue to post margins well above 20%. We estimate consolidated margins to normalize to slightly below 20% in 2023 and to 17%-19% after that. The marginal growth in volumes and operating efficiency due to the company's investments should partly offset the expected cyclical drop in prices and in the metal spread in the...

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