Full Transcript: Gerdau Q2 2026 Earnings Call

Gerdau (NYSE: GGB ) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

The full earnings call is available at Summary Gerdau reported a 7% increase in shipments in North America and a 15% rise in adjusted EBITDA for the region in Q2 2026, attributed to resilient demand in key sectors. In Brazil, the company saw slight improvements in operations with ongoing challenges from high import levels and is awaiting anti-dumping investigation results. Gerdau increased its ownership in Dona Francisca Energética, boosting self-generated energy to over 50% in Brazil, aligning with decarbonization strategies. 5 billion, leading to dividends of 23 cents per share for Gerdau SA.

69 and positive free cash flow of BRL 237 million, despite seasonal variations. Strategic investments include the nearing completion of the Miguel Burnier mining expansion and the opening of a new recycling center in Pindamonhangaba. S. market due to potential cost increases despite strong demand, and anticipates potential benefits from ongoing projects.

Guidance for future capex suggests a potential reduction, focusing on competitiveness and operational efficiency improvements in Brazil and North America. Management is optimistic about sustained demand in North America, notably from sectors like renewable energy and data centers, but remains vigilant about market dynamics. Full Transcript Mariana Pereira, Investor Relations Specialist Good morning and welcome to Gerdau's second quarter 2026 results presentation. I am Mariana Pereira, Investor Relations Specialist, and joining us on this conference call are our CEO, Gustavo Werneck, and CFO, Rafael Japur.

Please note that this call is being simultaneously translated into English, and you can choose your preferred language by clicking on the Globe icon at the bottom of your screen. During the presentation, all participants will be on listen-only mode, and then we will begin the Q&A session. Analysts and investors can join the queue by clicking on the Raise Hand button. It is worth noting that the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available.

Forward-looking statements are not guarantees of future performance and are subject to circumstances that may or may not occur. I will now turn the floor to Gustavo to initiate the presentation. Gustavo Werneck, President & CEO Thank you, Adi. Good morning, and in fact good afternoon, all of you.

I hope you're doing well, and I really appreciate the opportunity to join you for another earnings release presentation. We will briefly discuss the highlights of the second quarter of 2026. I will also talk about the outlook for our operations, and then we will move on to the Q&A session. In the second quarter, we recorded growth in shipments both quarter over quarter and year over year, with a 7% increase in volumes in North America when compared to the same period last year.

Resilient demand in the key sectors where we operate led to a 15% increase in adjusted EBITDA in North America in the second quarter compared to the first three months of this year, 2026. The strong result also reflects solid operating performance from our plants in the region. Meanwhile, we posted a slight improvement in the results of our Brazilian operations in the second quarter, reflecting a series of initiatives focused on increasing the profitability and productivity of our operations in the country.

This gradual improvement in results occurred amid continued pressure from imports, which, despite having slowed down during the period, remain at high levels year to date. In this context, we await the outcome of the antidumping investigations into long and flat steel products, which are expected to be updated in the second half of the year. Finally, I would like to highlight the increase in our ownership stake in Dona Francisca Energética, which has raised our self-generated energy to more than 50% of Gerdau's consumption in Brazil. This move helps boost the competitiveness of our operations in Brazil and is in line with our previously announced decarbonization strategy.

I will now turn the floor over to Japur, who will detail the financial highlights and the impacts of the current environment on our results. And I will come back to you after that. Japur, over to you. Rafael Japur, CFO All right, thank you, Gustavo.

Good afternoon, everyone. And I'd like to extend a good morning to those of you who haven't yet had lunch. So, good day to everyone. Let's start talking about our operating result.

4 billion in this quarter, posting growth compared to both the previous quarter and the same period last year. And with this, we are getting to our very best consolidated EBITDA since Q3 2023. 5 billion, reinforcing the company's ability to translate operating gains of our business into returns for our shareholders. Therefore, based on these results, Gerdau SA will distribute dividends of 23 cents per share, while Metalúrgica Gerdau will distribute 11 cents per share.

We also continue to make progress on our share buyback program of Gerdau SA, which is now 31% complete at the closing of Q2. Now, speaking a little about our financial discipline, it is important to highlight and stress that our financial discipline remains a priority. 69 times in the last 12 months. This quarter we maintained a positive free cash flow of BRL 237 million.

You might claim that it was just too little, a timid generation, but we have to put this free cash flow generation into context considering the typical seasonality of our business. 3 billion in cash flow, and this was mainly driven by both the growth in EBITDA driven by the North American operation, as Gustavo mentioned earlier, and the reduction in our CAPEX investments, in accordance with the guidance that we released and communicated last year. Talking about CAPEX from a strategic perspective, we are nearing the start of operations for major projects that will enhance Gerdau's structural competitiveness, particularly in our Brazilian operation.

Regarding the mining expansion at Miguel Burnier, we continue to make progress in line with the updated schedule that we released in our last earnings call, with start of operations expected in the third quarter. We are running a lot of equipment tests and we should start producing ore. We remain confident that we will realize the projected operational and financial benefits of the project in the range of 1 billion and 100 million BRL per year when we are in full ramp-up. In addition to investments made in energy mentioned by Gustavo, we are about to open our new recycling center in Pindamonhangaba.

This will increase our competitiveness and reduce our exposure to the volatility of this raw material in the long term. With this, I would like to conclude by reaffirming our culture of always striving for operational and financial discipline while simultaneously strengthening our competitiveness and allocating capital to initiatives and projects that will shape our future. We understand that we continue to grow, creating value in a sustainable way to our shareholders. I will wrap up here and join you all and Gustavo for the Q&A session.

Gustavo Werneck, President & CEO Thank you, Japur. I would just like to say that in North America we continue to see steel demand at high levels, with a strong order backlog driven by solid consumption in segments such as renewable energy and data centers. , Canada, and Mexico. In Brazil, we are seeing signs of more moderate growth in some consumer sectors such as construction and manufacturing, while still facing an excessive influx of imported steel in the local market.

This unfair scenario of imports continues to affect the profitability of our operations in the country. And in this regard, we continue to invest in initiatives that strengthen the competitiveness and profitability of our assets. Well, I'll now turn the floor over to Mariana and Japur, and I will be available from now on to answer your questions. Mariana Pereira, Investor Relations Specialist Thank you, Gustavo and Japur.

We will now initiate the Q&A session. Our first question comes from Rafael Brastellos with Bradesco. Rafael Brastellos, Analyst at Bradesco Good morning, can you hear me? Well, thank you for this opportunity.

Thank you, Gustavo Werneck and Japur, for taking my questions. S. S. market.

S.? S. market? S.

is coming quite strong. I mean, that draws our attention towards being more stable. I just want to know whether there is something that is nonrecurring. I know that you had the maintenance shutdown in Midlothian; I just want to know how relevant that is or whether that can explain the more moderate outlook.

And if you allow me a second question, we are also looking at the Mexican market, and that market is very strong, especially in the last few months. I remember that in the past you mentioned a potential investment in the Mexican market. Could you please let us know whether it would make sense to revisit that plan or not? That would be great.

Thank you very much. Gustavo Werneck, President & CEO Well, Rafael, this is what I mean by, you know, cutting to the chase—going straight to the point. I mean, this is a discussion that Japur and I have had in the past few days. But let me give you a more qualitative view.

Japur, the guy that deals with the numbers, can probably add some additional information to what I'm about to say. When you look at all of the elements in a very practical way, Rafael, what we see going forward—the next quarter and also taking into account the latest price increases—we see a trend of margins going upward. There is no new element or any new risk that we could anticipate that is not well mapped out by you guys. I think that we are just being more conservative on the macro side.

I mean, is there really enough room to expand the margins? Will prices continue to escalate indefinitely? Or maybe we're being just more conservative or realistic, whatever name you want to give it. But there will be a time when this will hit a ceiling.

We can't just think about indefinite margin expansion. I think there should be a sustainable level. When you put everything on the table—you put price, you put our spread-cost equation, international scrap prices—if you look at the numbers, the raw numbers, you see that that leads to margin expansion. But we are being more conservative, more down to earth.

We will have a maintenance shutdown at the Midlothian plant, but it will be in the melt shop. We have a very good billet inventory, so when it comes to shipments delivered and dispatch and the way we serve the market, everything is according to plan. So we do not anticipate any drop in shipments. Before I turn the floor to Japur: the Mexican market and USMCA negotiations are moving forward more on the technical side, but nothing close to a final agreement.

Our teams, especially the team in Mexico, have been talking to the Ministry of Industry and the federal government in Mexico. Topics related to steel and automobiles are going on now. S. market via Mexico.

Therefore, when it comes to local steel production in Mexico and the assurance of automobile production in Mexico, all of these topics have led the discussion rounds. So there is nothing that would be a cause of concern. When I look at USMCA and the way forward, I don't see any additional risk coming our way. I think that the way things are going will lead us to see more positive news rather than negative.

But as you said yourself, earlier this morning we talked about that, and we’ve been talking a lot about it. Now I think I'll give the floor to Japur to elaborate further. Rafael Japur, CFO Okay, maybe I will repeat some of the points already mentioned by Gustavo, but I will do it like in bullet points. I think we will have to answer this question a lot more during this call.

First of all, when we think about the market, shipments, and price, we don't see any loss in volume due to the Midlothian stoppage. We will continue to serve our customers, so we are not anticipating any lack of supply to our current customers. Prices: I think we might have been a bit more conservative, because there have been some price increases—like on Friday and now Monday in North America. We still need to have some more visibility about prices being indeed put into force.

And half of our portfolio is earmarked to the distribution market, where price changes occur more rapidly. But there are other segments like industrial, manufacturing, and downstream; the speed of implementing prices is a bit different—the pace is different. Having said that, when we think about the Midlothian maintenance shutdown, there is an accounting figure; it doesn't have any impact in terms of cash generation. But when you have some equipment in downtime for a few days, there is some idleness in our lines, and then we have to allocate the fixed costs directly to COGS, because we were not producing semi-finished or crude steel during that period.

At the end, this impacts the margins a bit, but this does not hamper the unit economics or the order book perspectives going forward, and the stability we see with metallic spread that was expanding—and also it doesn't hurt scrap prices. This quarter there was an important downtime in our largest unit in North America. And I think we have to think about the glass half full rather than half empty, because we are making investments to generate higher volumes in our main plant, in our main market. So I think this should be the overall conclusion when we think about this expansion in Midlothian, rather than thinking about whether this would be 1% more or less.

Because at the end of the day, what matters is the long-term return from our investment in a market where we have the largest cash generation. Rafael Brastellos, Analyst at Bradesco Perfect. If you allow me, two other very quick follow-ups. So I understand that, when it comes to cost, it was not necessarily Midlothian that impacted the cost, but just natural inflation coming from energy costs that we see in the market in different industries.

So Midlothian is not so heavy in terms of cost. And then my second follow-up would be to Werneck. Therefore, I understand, in terms of cycle, the sustainability of the cycle is a different story. But when it comes to the peak, you probably see it getting close to the potential to increase metallic spread, and profitability is something else.

That—or sustainability—is something that in fact will happen. But this range is getting close to its potential. Gustavo Werneck, President & CEO But even if you go forward to 2027, the cycle can be defined the way we want it, and the main factors that have led us to see such a relevant backlog, in our point of view, will continue to be present. S.

when the debate started in Pennsylvania and New York, when they were talking about reducing or holding the licenses to build new data centers because this would impact energy demand and water supply—this was restricted. And there is no other robust initiative that could stop the construction of new data centers. This is a path of no return. So the backlog for this sector is quite strong.

, renewable energy. Even though there was a concern whether this would be reduced in the current administration, that was not the case. So we are still producing steel for renewable energy, and this has been quite strong. And then, looking ahead in the next quarters, it doesn't seem to us that there is any imminent risk that could lead to a drastic reduction in our backlog or our shipments.

I can even anticipate that. And I don't know whether Japur would have anything else to add. Rafael Japur, CFO Well, yes, Rafael, we do see a very one-off impact of that downtime in Midlothian in cost in the first quarter due to idleness. Since I have no production in the melt shop for that entire period, all of the electricity costs—take-or-pay, gas, and employees that work in the melt shop—I need to transfer that cost to our P&L.

And by doing so without having production per se, the cost, from the cost point of view, didn't change because it would be there anyway, but this puts a burden on the cost for that quarter.