Brazilian steelmaker Gerdau S.A. posted robust first-quarter 2026 financial results, reporting consolidated net income of BRL 1 billion, representing a 50% sequential increase from the previous quarter and a 34% rise compared to the same period in 2025. The company's consolidated EBITDA reached BRL 3 billion at an 18% margin, primarily driven by its North American operations, which accounted for 75% of the group's total EBITDA, according to remarks made by CEO Gustavo Werneck and CFO Rafael Japur during the Q1 2026 earnings call on April 28, 2026. Werneck described North American performance as the best-adjusted EBITDA for a first quarter since 2022 in that division, citing sustained steel demand in sectors including data centers, infrastructure, and solar power.
The CEO also highlighted the continued strength of the order backlog, which remains above historical averages, and pointed to Section 232 trade protection measures and the forthcoming formal review of the U.S.-Mexico-Canada Agreement (USMCA) as supportive factors for the region's competitive outlook. In Brazil, the operating environment remained under pressure from elevated import penetration. Steel imports rose 4.2% in Q1 2026 compared to the same period in 2025, reaching a market penetration rate of 22.7%, according to company disclosures.
Despite this headwind, Gerdau's Brazilian division achieved a higher EBITDA margin than in the prior quarter, which management attributed to cost discipline and internal efficiency measures. Apparent consumption of long steel products declined 6% year-over-year in Brazil, partly due to weak demand for heavy vehicles in January and February — a segment closely linked to special bar quality (SBQ) steel consumption — though March showed a rebound in heavy vehicle production per ANFAVEA data. Japur cited ongoing anti-dumping investigations as a key catalyst to watch.
Wire rod from China was found to carry a dumping margin of approximately BRL 550 per tonne, with Russian product carrying a margin of approximately BRL 100 per tonne, as verified by Brazil's Ministry of Industry and Trade. Management expressed confidence that conclusions on wire rod anti-dumping proceedings, expected in the second half of 2026, could have a broader positive spillover effect on the long steel market. On the balance sheet side, Gerdau ended March 2026 with a net debt-to-EBITDA leverage ratio of 0.74x, which management characterised as a sound financial position.
The company generated free cash flow of BRL 1.6 billion in Q1 2026, BRL 1.3 billion more than in the same period of 2025, reflecting both improved EBITDA and a reduction in capital expenditure compared to prior years. Regarding capital allocation, Gerdau S.A. will distribute BRL 0.18 per share in dividends for the quarter, while Metalurgica Gerdau will distribute BRL 0.08 per share. In addition, the company approved a new share buyback programme covering up to 10 million preferred shares of Metalurgica Gerdau, equivalent to approximately BRL 100 million at current market prices.
Three major strategic projects remain in progress for completion by the end of 2026. The Miguel Burnier mining expansion in Minas Gerais, the scrap processing centre in Pindamonhangaba, and the first phase of metallurgical expansion in Texas are together expected to add nearly BRL 1.5 billion to annual EBITDA once ramp-ups are complete, management stated. However, Japur acknowledged that the Miguel Burnier project has experienced delays related to productivity constraints in civil construction and electromechanical assembly, making it unlikely that the full BRL 400 million in EBITDA contribution originally anticipated for 2026 will be realised this year.
The mining project has a planned capacity of 5.5 million tonnes and is expected to generate approximately BRL 1.1 billion per year once fully operational. Werneck signalled a longer-term transformation of Gerdau's Brazilian industrial footprint, drawing comparisons to the restructuring carried out in North America, where less competitive mills were closed in favour of a concentrated, high-efficiency production hub. The CEO stated that the company does not intend to increase debt or significantly raise CapEx to fund this transformation, with resources expected to come in part from the rationalisation of non-core commercial and real estate assets.
The CFO indicated the company targets maintenance CapEx of approximately BRL 3 billion per year on average over a five-year horizon. Gerdau also announced the commercial launch of Gerdau NewEco, described as a low-carbon steel solution targeting customers in the automotive and construction sectors seeking to advance decarbonisation goals and align with the transition to a low-carbon economy.
Source: finance.yahoo.com