Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 0 of last 7 quarters
The Buildout is a website built on agentic AI tools, currently in beta, and could have factual errors.
Gerdau's North American results reinforce the AI infrastructure buildout thesis, with management explicitly citing data centers and renewable energy as key demand drivers behind strong shipment growth and a robust order backlog. The company's investments in Midlothian expansion and downstream capabilities position it to capture continued demand from data center construction and electrical infrastructure, which could support sustained margins and cash flow. However, the company's conservative margin outlook and the one-off Midlothian downtime highlight near-term cost pressures that could temper sequential gains.
Gerdau reported a strong quarter with consolidated adjusted EBITDA of BRL 3.4 billion, the best since Q3 2023, and adjusted net income of BRL 1.5 billion, up 45% QoQ. North America drove results with 7% YoY shipment growth and a 15% QoQ increase in adjusted EBITDA, supported by resilient demand in data centers, renewable energy, and infrastructure. Brazil showed slight improvement despite continued import pressure, with management citing cost discipline and better sales mix. The company maintained low leverage at 0.69x and generated positive free cash flow of BRL 237 million, with first-half cash flow up BRL 2.3 billion versus the prior year. Management also highlighted progress on key projects: Miguel Burnier mining expansion starting in Q3, the new recycling center in Pindamonhangaba, and the Midlothian expansion, which together could add BRL 1.4-1.5 billion in annual EBITDA once fully ramped.
Management expects continued margin expansion in North America, though they are being deliberately conservative on the pace, citing potential ceilings on price increases and the one-off impact of the Midlothian maintenance shutdown (estimated BRL 100-150 million in idle costs). They see strong demand from data centers, renewable energy, and infrastructure, with a solid order backlog, and do not anticipate any shipment losses from the Midlothian downtime. In Brazil, they expect gradual margin improvement driven by cost initiatives, better sales mix, and the ramp-up of Miguel Burnier (adding BRL 1 billion to BRL 1.1 billion annually at full capacity) and the new scrap recycling center in Pindamonhangaba. They also flagged potential reductions in maintenance CapEx and total CapEx possibly moving toward BRL 4.5 billion, with any savings redirected to competitiveness projects. Management reiterated a cautious stance on leverage, preferring to stay below 1x net debt/EBITDA, and highlighted the potential for additional shareholder returns via dividends and buybacks.
“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.”
on North America demand
“But we are being more conservative, more down the earth. But I will allow Japur to come up with his own comments.”
on Margin outlook conservatism
“We are not focusing on price increases or market increase. We are working in-house to look for solutions to address this chronic problem we have in Brazil of low earnings.”
on Brazil competitiveness
On the U.S. outlook, why are you guiding to margin maintenance rather than expansion given recent price increases? Also, would you revisit a potential investment in Mexico?
Management said they are being conservative on margins, noting price increases may hit a ceiling and there is a one-off cost impact from the Midlothian maintenance shutdown (BRL 100-150 million). They see no shipment impact due to billet inventory. On Mexico, they are monitoring USMCA negotiations but see no additional risk; they are engaged with Mexican authorities on steel and automotive topics.
Are you not yet considering the two latest price increase announcements in your outlook? And how do you plan to releverage to your 1x net debt/EBITDA target?
CFO confirmed the two price increases (special steel and beams) are not fully captured in the outlook, representing an upside risk. On leverage, he clarified the 1x is a limit, not a target, and they are comfortable at current levels; they prefer to return cash to shareholders via dividends and buybacks rather than releverage.
What is your priority order for new projects and CapEx trend? How significant is the data center component and is demand becoming inelastic?
Management said CapEx will remain at healthy levels, with potential reductions in maintenance CapEx and total CapEx possibly toward BRL 4.5 billion. They see strong demand from data centers and related infrastructure, with lead times high, but they avoid calling it inelastic; they noted the speed of construction favors domestic steel over imports.