Gerdau (NYSE:GGB) executives on the company’s fourth-quarter 2025 earnings call emphasized how geographic diversification and operating flexibility helped offset a challenging environment in Brazil, where rising imports pressured profitability. CEO Gustavo Werneck and CFO Rafael Japur said North America continued to provide resilient demand and strong operating performance, including record shipments in December 2025 despite typical year-end seasonality.
2025 performance and key financial items
Japur said the company finished 2025 with consolidated EBITDA of BRL 10.1 billion, down 7% versus 2024, driven mainly by “a still challenging environment in Brazil” and increased competition. He highlighted that North America gained relevance within the group, supported by demand resilience and operational execution.
Cash flow, balance sheet, and shareholder returns
On capital spending, Japur said 2025 CapEx totaled BRL 6.1 billion. For 2026, management reiterated guidance of BRL 4.7 billion, a reduction of BRL 1.4 billion that the CFO said should provide greater flexibility for free cash flow generation.
Even with “a very strong pace of investments” related to the Miguel Burnier mining project, Japur said Gerdau generated BRL 1.4 billion of free cash flow in the fourth quarter. On a full-year basis, the last-12-month cash flow measure turned positive and reached BRL 394 million in 2025.
The company used part of that cash generation to reduce debt, ending the year with leverage of 0.76x net debt/EBITDA, a level Japur described as “extremely sound.” He also noted that during 2025 Gerdau returned BRL 2.4 billion to shareholders through dividends and share buybacks.
Management said it completed a buyback program initiated in December 2025 and announced a new program for Gerdau S.A. covering approximately 2.9% of outstanding shares—equivalent to about BRL 1.2 billion based on recent prices, according to Japur.
Brazil: imports, trade defense measures, and margin outlook
Werneck said Brazil saw a new record for steel imports in 2025, with shipments up 7.5% year over year. He cited advances in trade defense measures, including the inclusion of new NCM codes under a 25% import tariff and anti-dumping duties on cold-rolled steel, but said the import environment still weighed on profitability.
Looking ahead, Werneck said the company expects moderate demand growth in Brazil in 2026, even as import pressure persists. He added that management is more optimistic about further progress on trade defense measures and referenced ongoing dialogue between the industry and government agencies.
In the Q&A, Japur explained why the company expected margin stability rather than a near-term step-up in Brazil. He pointed to fewer business days due to holidays and other events, heavier rainfall in Minas Gerais, weaker automotive production data in January, and softer domestic long and flat steel sales versus January 2025. He also noted cost pressure from coal, saying about 20% of Brazilian costs are linked to coal and that coal prices rose more than 20% from the fourth quarter into the first quarter, with a lag effect on results.
On the possibility of reaching a double-digit EBITDA margin in Brazil, management framed it as possible but dependent on execution and market conditions. Japur said margins around 7% were the baseline being discussed, and that a full-year double-digit margin was “not unthinkable” if the Miguel Burnier ramp-up is delivered and market dynamics do not deteriorate. He added that benefits from Miguel Burnier should begin to appear in the second half of 2026, although he declined to provide a specific EBITDA contribution estimate for the project during the call.
Asked about further shutdowns, Werneck said the 2026 plan does not include closing additional capacity, arguing that Gerdau’s product variety makes it difficult to remove capacity without affecting supply in certain segments.
North America strength and strategic positioning
Management repeatedly highlighted North America as a source of stability. Werneck said the region has seen strong steel consumption, reduced import levels, and high order backlogs. He cited positive demand outlooks tied to solar energy, data centers, and infrastructure.
In response to questions about sustainability of profitability, executives acknowledged different dynamics across Canada and U.S. product lines, noting that automotive-related special steel volumes were not recovering as strongly as desired. However, Werneck said he did not see signs of substantial near-term deterioration in North America profitability and referenced a strong order book approaching 90 days.
He also described steps taken over recent years, including improved operating performance versus competitors, increased use of obsolescence scrap, and commercial decisions to exit products more exposed to imports while emphasizing products such as structural beams that are difficult to import due to size and weight.
Other topics: impairments, South America, divestments, and growth
On the BRL 2 billion impairment, Japur said the write-down reflected Brazil conditions observed in annual asset tests, including assumptions tied to FX, profitability, and capacity utilization. He noted that utilization was below 60% and melt shop operation below 75%, indicating high idle capacity, and that some assets had been “hibernating” while still being depreciated.
South America was described as a fourth-quarter negative surprise due to Argentina exports undertaken to keep a unit’s utilization level, which increased logistics costs and reduced profitability. Management said it does not expect to maintain the same export level from Argentina in 2026 and anticipated a recovery in South America margins in the first half, with “mid-teens” margins described as more normal.
Executives also discussed potential monetization of non-core assets, particularly excess forest assets and farms in Brazil and a fragmented portfolio of real estate properties. Japur said there was no concrete plan or guidance and stressed that any divestments would be pursued only if they generate value, rather than out of necessity.
Regarding growth in the U.S., Werneck said the company does not have an ambition to significantly expand capacity “for the sake of growing,” favoring organic growth focused on higher value-added products and cost-reduction opportunities such as micro-mill configurations that could replace less efficient capacity. Management said it remains attentive to M&A opportunities but will stay disciplined. On Mexico, Werneck said the business case for a greenfield special steel mill would be reviewed in light of competitiveness trends and the upcoming USMCA debate expected to begin in June.
The company’s next earnings conference call is scheduled for April 28, management said.
About Gerdau (NYSE:GGB)
Gerdau SA is a Brazilian-based steel producer engaged in the manufacture and distribution of long steel products for the construction, industrial and agricultural sectors. Established in 1901, the company operates an integrated network of electric-arc furnaces and rolling mills, producing reinforcement bars, wire rod, merchant bars and structural shapes. Gerdau’s product portfolio also includes specialty long steel, high-yield reinforcement, rail, beams and steel coils, as well as value-added processing services such as cutting, bending and coating.
The company has expanded its footprint beyond Brazil, with significant operations in North America, South America and a presence in select European markets.
