By Brazil Stock Guide – Brazilian steelmaker Gerdau SA (B3: GGBR3, GGBR4; NYSE: GGB) reported a nearly 70% increase in second-quarter profit as stronger prices and volumes in North America lifted margins. The region generated 74% of adjusted Ebitda, while the company approved R$451.3 million in dividends.
Adjusted net income reached R$1.47 billion in the three months through June, up 69.7% from a year earlier and 44.7% from the first quarter, according to Gerdau’s earnings release published Tuesday (Aug. 4). Earnings per share rose 71.3% year over year to R$0.74.
Net revenue increased 2% from the same period of 2025 to R$17.87 billion, exceeding the first-quarter figure by 6.9%. Steel sales climbed 3% from a year earlier to 2.91 million metric tons, while crude steel production advanced 5.8% to 3.23 million tons.
The improvement in prices, product mix and operating efficiency drove adjusted Ebitda to R$3.43 billion, a 33.9% annual increase. The adjusted Ebitda margin expanded 4.6 percentage points to 19.2%.
Gross profit rose 39.3% from a year earlier to R$2.83 billion, with gross margin widening to 15.8% from 11.6%. Selling, general and administrative expenses declined 7.1% to R$517 million, reflecting cost discipline and the weaker US dollar against the Brazilian real.
North America accounts for bulk of earnings
North America remained Gerdau’s main earnings engine. The division generated net revenue of R$10.13 billion, up 10.8% year over year, and adjusted Ebitda of R$2.6 billion, a 59% increase.
The unit’s adjusted Ebitda margin reached 25.7%, compared with 17.9% a year earlier. While North America and Brazil contributed similar shares of consolidated steel volumes, the northern business accounted for about 56% of revenue and 74% of adjusted Ebitda.
Demand remained supported by renewable-energy projects, data centers and manufacturing investments. Gerdau also benefited from higher realized prices, increased sales and a larger share of value-added products.
Steel sales in North America advanced 7.3% from the second quarter of 2025 to 1.35 million tons. The order book for common long steel products remained above 100 days, the highest level since 2021, helping the company record its strongest quarterly volume under the unit’s current industrial configuration.
The supply environment for specialty steel also improved as imports declined and consolidation reduced available capacity. Gerdau said sales volumes in the segment reached their highest level since the second quarter of 2019, although demand from non-automotive industries remained below historical levels.
Higher tariffs under Section 232 also continued to support US steelmakers. Production in the region was broadly stable from a year earlier, even with scheduled maintenance shutdowns during the quarter.
Brazil improves sequentially but trails 2025
Gerdau’s Brazilian operations showed signs of a gradual recovery from the first quarter, although results remained below year-earlier levels.
Adjusted Ebitda in Brazil rose 22% sequentially to R$705 million, supported by a greater share of domestic sales, selective price increases and operating gains. Compared with the second quarter of 2025, however, Ebitda fell 19.6%, while the margin narrowed to 10.5% from 12%.
Revenue from the Brazilian business reached R$6.69 billion, up 6.6% from the previous quarter but down 8.6% year over year. Total sales rose 2.1% sequentially to 1.35 million tons and were virtually unchanged from a year earlier.
Domestic volumes increased as flat-steel demand recovered, aided by fewer imports and a gradual improvement in orders from the wind-power and shipbuilding industries. Specialty-steel sales also increased, while common long-steel products continued to face intense local competition.
According to data cited by Gerdau from Instituto Aço Brasil, steel imports declined by more than 30% both sequentially and year over year during the quarter, the first contraction since 2022. Even after the decline, imported products represented an average 22.5% of the Brazilian market during the first half.
Brazil renewed its tariff-quota system for steel products in June, including a 30% reduction in annual quotas for certain categories such as wire rod and hot- and cold-rolled coils. The measures cover products representing about 30% of Gerdau’s sales volumes in Brazil.
Demand remained moderate. Construction activity was relatively stable, while several industrial markets stayed under pressure. Heavy-vehicle production, an important source of specialty-steel demand, declined 11% in the first half from the same period of 2025, according to industry data cited in the earnings report.
South American margins advance
The South American division, comprising operations in Argentina, Peru and Uruguay, posted adjusted Ebitda of R$205 million, up 37.4% year over year and 10.4% from the first quarter.
Its adjusted Ebitda margin widened to 16% from 11.2% a year earlier, supported by higher capacity utilization, productivity gains in Peru and a more favorable domestic sales mix in Argentina.
Revenue declined 3.9% to R$1.28 billion, partly because of currency movements and weaker sales volumes. Steel shipments fell 2.2% to 282,000 tons, reflecting softer demand in Argentina and Uruguay and the normalization of Peruvian orders after customers brought forward purchases during the first quarter.
Cash flow turns positive
Free cash flow totaled R$237 million, reversing a R$772 million outflow recorded a year earlier. The improvement reflected higher Ebitda and lower capital expenditure, partially offset by increased working-capital requirements and interest payments.
Gerdau ended June with R$5.44 billion in cash and financial investments. Net debt declined 11% from a year earlier to R$8.12 billion, while the net debt-to-adjusted Ebitda ratio fell to 0.69 times from 0.85 times.
Gross debt stood at R$13.56 billion, down 25.1% year over year. The company’s average debt maturity was 7.6 years, and a US$875 million revolving credit facility remained fully available.
For the first half, adjusted net income increased 52.8% to R$2.48 billion. Adjusted Ebitda rose 28.7% to R$6.39 billion, even as revenue slipped 0.9% to R$34.59 billion.
Gerdau approves dividend payment
Gerdau’s board approved dividends of R$0.23 per share, equivalent to R$451.3 million. Payment is scheduled for Sept. 11, based on the shareholder position as of Aug. 19. The shares will trade ex-dividend from Aug. 20.
The steelmaker has also spent R$334 million under its 2026 share buyback program, acquiring about 17.4 million common and preferred shares through July 17. That represents approximately 31% of the maximum number authorized.
The board also approved the cancellation of 163,100 common shares and 6.98 million preferred shares held in treasury. Gerdau reported a 40.3% payout ratio for the second quarter when declared dividends and repurchases through June are considered.
Investments focus on Brazil
Capital expenditure totaled about R$1 billion in the quarter, with 80% directed to Brazilian operations. Maintenance accounted for 44% of investment, while projects aimed at competitiveness and cost reduction received 56%.
First-half investments reached 45% of Gerdau’s R$4.7 billion capital-expenditure guidance for 2026.
The company is completing integrated tests at its sustainable mining platform in Miguel Burnier, which is expected to begin operating in the third quarter. A scrap-processing project in Pindamonhangaba was 90% complete at the end of June and is also scheduled to start operations during the quarter.
In North America, the expansion of the Midlothian, Texas, plant reached 80% completion. The first phase will add 150,000 tons of annual crude-steel capacity and is expected to begin operating in the second half.
Gerdau also advanced agreements that could give it full ownership of Dona Francisca Energética. The transaction could increase internally generated electricity to more than 50% of the company’s total energy consumption in Brazil.
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