Gerdau Group Faces Decline in Financial Performance for 2024 Amid Steel Oversupply
The Brazilian steel giant Gerdau has reported a sharp decline in its 2024 financial results, with a consolidated net profit of BRL 4.600 billion ($807 million), down significantly from BRL 6.854 billion in 2023. This decline reflects the ongoing challenges in the steel industry, exacerbated by global oversupply and increased imports, particularly from China.
Despite the decline in profits, Gerdau remains one of the world’s leading steel producers, with a strong presence in Brazil, North America, South America, and the specialty steels market. The company’s net sales fell by 2.7%, totaling BRL 67.026 billion ($11.75 billion) for 2024. At the same time, its gross profit and EBITDA also saw notable declines, down by 18.8% to BRL 9.203 billion and down by 21.4% to BRL 10.164 billion, respectively.
The company’s steel product sales volume declined by 3.0%, reaching 10.984 million metric tons in 2024. This drop in sales is largely attributed to the oversupply of steel in global markets, with increasing imports competing with local production. Gerdau pointed out that steel imports, especially from China, have continued to flood the domestic market, making it harder for Brazilian producers to maintain competitive prices and profitability. The Brazilian government’s trade defense measures, designed to control imports, have not been effective in curbing this trend.
Regional Breakdown of Gerdau’s Performance in 2024
In terms of regional performance, Gerdau’s financial results were distributed across its various divisions as follows:
• Brazil: Contributed 38.7% of the group’s net sales and 41.2% of EBITDA.
• North America: Accounted for 36.2% of net sales and 30.9% of EBITDA.
• South America: Made up 10.0% of the net sales and 9.3% of EBITDA.
• Specialty Steels: Represented 15.2% of net sales and 18.6% of EBITDA.
Despite challenges in Brazil, the company’s North American division remained relatively strong, contributing nearly as much to the company’s net sales as Brazil.
Trade Challenges and the Steel Oversupply Crisis
In its statement, Rafael Japur, Gerdau’s CFO and IRO, acknowledged the company’s strategy of sustainable growth, which aims to ensure long-term value for shareholders. However, he noted the economic pressures caused by steel oversupply, especially from imports. The company expressed concern that despite the Brazilian government’s trade defense measures, imports of steel products under the quota tariff system actually increased in 2024, undermining the effectiveness of these protective measures.
The most pressing challenge remains the oversupply of steel, primarily driven by Chinese exports, which continue to flood the market, pushing prices down and squeezing profitability for domestic producers. Gerdau emphasized that the steel oversupply, combined with the increased import volumes, has remained a significant drag on the Brazilian steel industry. The company is pushing for stronger trade protections and measures to curb unfair competition from international markets, especially from low-cost producers like China.
Looking Ahead: Gerdau’s Strategy for Sustainable Growth
Despite the financial difficulties of 2024, Gerdau’s leadership remains focused on creating long-term value and executing its strategy for sustainable growth. The company is committed to enhancing its financial strength, reducing costs, and improving efficiency across its operations. As a major global player in the steel industry, Gerdau is also continuing to focus on expanding its footprint in key markets like North America and South America.
Rafael Japur also pointed out that maintaining a strong financial position will be crucial in navigating the challenges presented by the steel oversupply crisis and the volatile global market. The company will likely continue to adapt its strategy to overcome external pressures, including the trade challenges related to imports and increasing competition from Chinese steel producers.
Key Takeaways:
• Gerdau Group posted a net profit of BRL 4.600 billion ($807 million) in 2024, a decline of 32.8% from 2023.
• Net sales dropped by 2.7%, totaling BRL 67.026 billion ($11.75 billion).
• Gross profit decreased by 18.8%, while EBITDA fell by 21.4%.
• Steel product sales declined by 3.0%, reaching 10.984 million metric tons.
• In 2024, Brazil contributed 38.7% of Gerdau’s net sales and 41.2% of EBITDA, while North America represented 36.2% of net sales and 30.9% of EBITDA.
• South America and the specialty steels division made up smaller shares of Gerdau’s sales and EBITDA.
• Imports, particularly from China, continue to cause oversupply in the Brazilian steel market, despite Brazilian government trade measures.
• Gerdau emphasizes the need for stronger trade defenses to counter the influx of imported steel.
• Despite challenges, the company remains committed to sustainable growth and maintaining financial strength for long-term value creation.
This ongoing situation highlights the challenges faced by global steel producers, especially in the context of international trade pressures and market oversupply. Gerdau’s focus on financial stability and sustainable growth is key to navigating these difficult times.
