Gerdau S.A. reported a stronger third quarter of 2026, with profitability and cash generation improving sharply, driven mainly by its North American operations, according to the earnings call transcript published by Investing.com on October 27, 2026. Management reported adjusted net income of BRL 1.5 billion, EBITDA of BRL 3.8 billion with a margin of 20.2%, the highest since the second quarter of 2023, and free cash flow of BRL 1.4 billion, compared with BRL 233 million in the previous quarter. Adjusted earnings per share rose from $0.74 to $0.79, according to the company.
North America was again the main contributor. The region posted an EBITDA margin of 27.7%, the highest in four years. Management attributed this to mills running near capacity and a healthy order backlog linked to data centers, renewable energy projects, power transmission, naval work and nuclear-related demand.
The company described the market for merchant bars and beams as large and resilient. Brazil remained the weaker part of the business. Management said the domestic market continues to face excessive steel imports and oversupply, while construction demand remains weak.
Light vehicle activity is constrained by imported kits that use less special steel, although heavy vehicle production is improving. The CFO said the heavy vehicle production gap, which had been running at declines of roughly 18% to 20% earlier in the year, was expected to narrow considerably by year-end. To address the situation, Gerdau said it is pursuing productivity improvements, has started operations at a recycling center in Pindamonhangaba, in the state of Sao Paulo, and is completing final integrated tests for the Miguel Burnier iron ore expansion in Ouro Preto, Minas Gerais.
The company said the Miguel Burnier project could add about BRL 400 million in annual EBITDA at full run-rate. Management said the ramp-up is slower than initially planned because of the rainy season in the south of the country, so most of the benefit is expected in 2027. The balance sheet and shareholder returns also featured prominently.
Management reported year-to-date free cash flow of BRL 1.7 billion, compared with negative BRL 1 billion in the same period of 2025, and a net debt to EBITDA ratio of 0.58x. Shareholder returns through dividends and buybacks in 2026 exceeded BRL 1.85 billion, according to the company. The dividend declared for the quarter is $0.34 per share for Gerdau S.A. and $0.16 per share for Metalurgica Gerdau.
The company also renewed its global revolving credit facility for five years, with available capacity increased by 29% to $1.125 billion. S&P Global Ratings revised the outlook to positive on October 22, and the company now holds a triple-B rating with a positive outlook. Fitch also reviewed the rating earlier in the quarter, according to management.
On capital spending, management said 2026 CapEx is now tracking closer to BRL 4 billion, compared with the previous range of BRL 4.5 billion to BRL 4.7 billion. The company attributed the reduction to more selective project approvals and lower maintenance spending at some idled units. The CFO indicated that a level close to 4.5 billion in the coming years would be reasonable, although no formal guidance has been issued.
Gerdau will hold an investor day on December 4, where it plans to present a broader strategic plan for Brazil covering personnel, capacity and capital spending, with a focus on profitability in the domestic market. In the question and answer session, management rejected the idea of a spin-off of its U.S. business and said it has no plans for major acquisitions or greenfield projects in North America. On trade, management said it expects a continuation of the dialogue on trade defense measures with the current government, and it pointed to the technical rigor of the analysis carried out by the Ministry of Development, Industry, Trade and Services (MDIC).
Asked about possible anti-dumping measures on billets and wire rod, management did not confirm specific measures. On North American trade, the CFO said a trilateral USMCA agreement appears unlikely and that bilateral arrangements are more probable. He said a U.S.-Mexico agreement could be negative for Gerdau's margins because of the expected entry of Deacero, while a U.S.-Canada agreement would be positive.
Deacero's ramp-up is expected to be slow, given the product complexity. For the fourth quarter, management said it expects North American margins to remain stable, but it noted seasonally lower volumes, a planned stoppage at Midlothian and idle capacity costs that will be reflected in Q4 results. Gerdau shares fell 2.79% to $10.11 in recent trading, compared with a previous close of $10.40.
The stock remains below its 52-week high of $10.78 but well above its low of $7.37. The Brazilian-listed shares (GOAU3) closed down 4.04% at BRL 9.92, according to quote data shown on the same Investing.com page.
Source: investing.com