Gerdau - Q1 2026 Earnings Analysis

Performance Highlights

Gerdau reported Q1 2026 Adjusted EBITDA of R$3.0 billion, up 24.6% sequentially and 23.2% year-over-year, its best first-quarter result since 2022, while net sales of R$16.7 billion came in 1.5% below Q4 2025 as Brazil volume weakness offset North American pricing gains. Adjusted net income of R$1.0 billion rose 51.2% quarter-over-quarter, with earnings per share of R$0.51 versus negative R$0.66 in Q4 2025, beating expectations on the profit line despite the modest revenue shortfall.

North America was the decisive operational driver, contributing R$2.25 billion of Adjusted EBITDA at a 24.1% margin — up 300 basis points sequentially — underpinned by an order backlog exceeding 90 days, volume recovery in non-residential construction and renewables, and disciplined cost management that kept per-tonne costs stable despite rising scrap and energy prices. Brazil EBITDA recovered 13.3% sequentially to R$578 million at a 9.2% margin, though it remained 47% below Q1 2025 levels as imported steel penetration hit 27% of the domestic market — on track to reach a new annual record in 2026 — while South America contributed R$186 million at a 13.3% margin, its best in seven quarters, led by Peru construction demand.

Management Outlook and Forward Catalysts

Management guided for slight margin recovery in Brazil in Q2 2026, supported by gradual demand improvement and selective price increases, while North America is expected to deliver further margin expansion on metal spread widening and continued operational efficiency gains, with Phase 1 of the Midlothian, TX capacity expansion and the Miguel Burnier mining project both on track to start up in the second half of 2026. The Barro Alto Solar Complex, inaugurated in March 2026 with 452 MWp of installed capacity, now covers 13% of Gerdau's Brazilian electricity consumption, advancing the company's self-generation target toward 42% and improving long-term cost predictability.

The central investor debate for Q2 and the remainder of 2026 centres on whether Brazil's domestic steel market can stage a meaningful recovery against structurally elevated import competition — with flat steel penetration reaching an all-time high of 34% in February — and how quickly pending anti-dumping decisions and tariff renewals translate into pricing relief. On the bull side, the 90-day-plus North American backlog, renewable energy and data centre demand tailwinds, and three high-return capital projects approaching start-up provide clear near-term catalysts; bears will watch Section 232 policy uncertainty, USMCA review in July 2026, and the pace of Brazilian construction demand given high interest rates.