Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Bolsa de valores de Sao Paulo  >  Gerdau S.A.    GGBR4   BRGGBRACNPR8

GERDAU S.A.

(GGBR4)
  Report
End-of-day quote. End-of-day quote Bolsa de valores de Sao Paulo - 05/25
12.36 BRL   +6.55%
05/11GERDAU S A : 1Q20 Results Presentation
PU
05/07GERDAU : 1Q Earnings Snapshot
AQ
05/06GERDAU S A : 1Q20 Quartely Results
PU
SummaryChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsPress ReleasesOfficial PublicationsSector news

Gerdau S A : 4Q19 Earnings Release Results

share with twitter share with LinkedIn share with facebook
share via e-mail
02/19/2020 | 11:00am EDT

QUARTERLY

RESULTS

GERDAU S.A. 4Q19

4Q19 HIGHLIGHTS

'

São Paulo, February 19, 2020 - Gerdau S.A. (B3: GGBR4 / NYSE: GGB) announces its results for the fourth quarter of 2019. The consolidated financial statements of the Company are presented in Brazilian real (R$), in accordance with International Financial Reporting Standards (IFRS) and the accounting practices adopted in Brazil. The information in this report does not include the data of associates and jointly controlled entities, except where stated otherwise.

CONSOLIDATED HIGHLIGHTS

  • Free cash flow generation was R$ 2.3 billion in 4Q19, due to the robust release of working capital in the period.

Net debt of R$ 9.8 billion and net debt/EBITDA ratio of 1.67x in 4Q19, the best result since 2011.

Growth of 13% in shipments in the domestic market of the Brazil BD in 4Q19 compared to 4Q18, confirming the recovery in demand, especially in the construction industry.

Free Cash Flow (R$ million)

Net debt / EBITDA

2

CONSOLIDATED

  • INFORMATION

GERDAU'S PERFORMANCE IN 4Q19

Operating Results

CONSOLIDATED

4Q19

4Q18

3Q19

12M19

12M18

Volumes (1,000 tonnes)

Production of crude steel

2,952

3,221

-8.4%

2,733

8.0%

12,453

15,342

-18.8%

Shipments of steel

3,078

3,167

-2.8%

3,056

0.7%

12,090

14,561

-17.0%

Results (R$ million)

Net Sales

9,533

10,900

-12.5%

9,931

-4.0%

39,644

46,159

-14.1%

Cost of Goods Sold

(8,857)

(9,596)

-7.7%

(8,946)

-1.0%

(35,441)

(40,010)

-11.4%

Gross profit

676

1,304

-48.2%

985

-31.4%

4,203

6,149

-31.6%

Gross margin (%)

7.1%

12.0%

9.9%

10.6%

13.3%

SG&A

(353)

(400)

-11.8%

(372)

-5.1%

(1,430)

(1,652)

-13.4%

Selling expenses

(118)

(138)

-14.5%

(123)

-4.1%

(476)

(570)

-16.5%

General and administrative expenses

(235)

(262)

-10.3%

(249)

-5.6%

(954)

(1,082)

-11.8%

%SG&A/Net Sales

3.7%

3.7%

3.7%

3.6%

3.6%

Adjusted EBITDA

1,132

1,404

-19.4%

1,457

-22.3%

5,712

6,657

-14.2%

Adjusted EBITDA Margin

11.9%

12.9%

14.7%

14.4%

14.4%

Production and Shipments

In 4Q19, crude steel production decreased in relation to 4Q18, mainly due to the lower production volume at the Special Steel BD and to the divestment of the rebar operations in the North America BD. Compared to 3Q19, crude steel production increased, due to the resumption of operations at Blast Furnace 1 in Ouro Branco, Minas Gerais, even with the scheduled shutdown of the melt shops in Brazil.

Steel shipments decreased in 4Q19 compared to 4Q18, due to lower shipments in the Special Steel BD and to the divestment of rebar assets in the North America BD.

Operating result

The reduction in net sales and the lower consolidated costs of shipments in 4Q19 in relation to 4Q18 were mainly due to the decrease in net sales per tonne sold, which was affected by the lower prices in international markets and the decrease of the costs per tonne sold.

Consolidated gross profit and gross margin decreased, reflecting the lower shipments and lower international prices mentioned above.

Selling, general and administrative expenses decreased in 4Q19 in relation to 4Q18, given the ongoing operating efficiency gains and the digital innovation initiatives, as well as the divestments. Meanwhile, as a ratio of net sales, selling, general and administrative expenses remained stable at 3.7% in 4Q19.

In 2019, this ratio was 3.6%, in line with 2018.

3

'

Breakdown of Consolidated EBITDA

4Q19

4Q18

3Q19

12M19

12M18

(R$ million)

Net income

102

389

-73.8%

289

-64.7%

1,217

2,326

-47.7%

Net financial result

273

392

-30.4%

562

-51.4%

1,509

1,890

-20.2%

Provision for income and social contribution taxes

193

(149)

-

(150)

-

458

(169)

-

Depreciation and amortization

538

504

6.7%

502

7.2%

2,073

1,892

9.6%

EBITDA - Instruction CVM ¹

1,106

1,136

-2.6%

1,203

-8.1%

5,257

5,939

-11.5%

Gains and losses on assets held for sale and sales in subsidiaries

-

186

-

-

-

-

414

-

Equity in earnings of unconsolidated companies

2

29

-93%

(9)

-

16

(10)

-

Proportional EBITDA of associated companies and jointly controlled entities

86

53

62.3%

82

4.9%

320

314

1.9%

Impacts from refurbishment of Blast Furnace 1 at the Ouro Branco Mill

131

-

-

238

-45.0%

369

-

-

Tax reversals/provisions

(193)

-

-

(57)

238.6%

(250)

-

-

Adjusted EBITDA²

1,132

1,404

-19.4%

1,457

-22.3%

5,712

6,657

-14.2%

Adjusted EBITDA Margin

11.9%

12.9%

14.7%

14.4%

14.4%

CONCILIATION OF CONSOLIDATED EBITDA

4Q19

4Q18

3Q19

12M19

12M18

(R$ million)

EBITDA - Instruction CVM ¹

1,106

1,136

1,203

5,257

5,939

Depreciation and amortization

(538)

(504)

(502)

(2,073)

(1,892)

OPERATING INCOME BEFORE FINANCIAL RESULT AND TAXES³

568

632

701

3,184

4,047

1 - Non-accounting measure calculated in accordance with CVM Instruction 527.

2 - Non-accounting measure calculated by the Company. The Company presents Adjusted EBITDA to provide additional information on cash generation in the period. 3 - Accounting measure reported in the consolidated Income Statement.

Adjusted EBITDA and adjusted EBITDA margin declined in 4Q19 compared to 4Q18, mainly due to the performance of the Special Steel BD and the lower international prices.

EBITDA (R$ million) and EBITDA Margin (%)

4

'

Financial result and net income

CONSOLIDATED

4Q19

4Q18

3Q19

12M19

12M18

(R$ million)

Income before financial income expenses and taxes¹

568

632

-10.1%

701

-19.0%

3,184

4,047

-21.3%

Financial Result

(273)

(392)

-30.4%

(562)

-51.4%

(1,509)

(1,890)

-20.2%

Financial income

85

82

3.7%

49

73.5%

223

204

9.3%

Financial expenses

(404)

(425)

-4.9%

(368)

9.8%

(1,470)

(1,579)

-6.9%

Exchange variation, net (including net investment hedge)

94

181

-48.1%

(193)

-

(120)

(346)

-65.3%

Exchange variation (other currencies)

(49)

6

-

(41)

19.5%

(127)

23

-

Bonds repurchase expenses

-

(224)

-

-

-

-

(224)

-

Gains (losses) on financial instruments, net

1

(12)

-

(9)

-

(15)

32

-

Income before taxes¹

295

240

22.9%

139

112.2%

1,675

2,157

-22.3%

Income and social contribution taxes

(193)

149

-

150

-

(458)

169

-

Exchange variation including net investment hedge

(81)

(129)

-37.2%

211

-

(109)

358

-

Other lines

(91)

(209)

-56.5%

(61)

49.2%

(526)

(646)

-18.6%

Non-recurring items

(21)

487

-

-

-

(40)

457

-

Consolidated Net Income ¹

102

389

-73.8%

289

-64.7%

1,217

2,326

-47.7%

Non-recurring items

(41)

(77)

-46.8%

119

-

78

181

-56.9%

Gains and losses on assets held for sale and sales on interest in subsidiaries

-

186

-

-

-

-

414

-

Maintanence stoppage / Impacts from refurbishment of BF 1

131

-

-

238

-45.0%

369

-

-

Bonds repurchase expenses

-

224

-

-

-

-

224

-

Tax reversals/provisions

(193)

-

-

(57)

238.6%

(250)

-

-

Income and social contribution taxes - non-recurring items

21

(487)

-

(62)

-

(40)

(457)

-91.2%

Consolidated Adjusted Net Income²

61

312

-80.4%

408

-85.0%

1,295

2,507

-48.3%

1 - Accounting measure disclosed in the consolidated Income Statement.

2 - Non-accounting measure calculated by the Company to show net profit adjusted by non-recurring events that influenced the result.

In 4Q19 compared to 4Q18, the variation in the financial result was basically due to the effects from exchange variation on liabilities contracted in U.S. dollar and in other currencies, which were practically offset by the line "Income Tax/Social Contribution - effects from exchange variation that include net investment hedge." In addition, financial expenses decreased due to the ongoing efforts to reduce debt.

Adjusted net income in 4Q19 decreased in relation to 4Q18, in line with EBITDA in the period.

Dividends

Gerdau S.A. approved the payment of dividends in the amount of R$ 51 million (R$ 0.03 per share) in 4Q19, which was distributed as an advance on the minimum mandatory dividend stipulated in the Bylaws.

Payment date: March 11, 2020

Record date: shareholdings on February 28, 2020

Ex-dividend date: March 02, 2020

Working Capital and Cash Conversion Cycle

The cash conversion cycle (working capital divided by daily net revenue in the quarter) went from 78 days in September 2019 to 62 days in December 2019, due to the reduction in inventory.

5

'

Working Capital (R$ million) and Cash Conversion Cycle (days)

Financial Liabilities

Debt composition

12.31.2019

09.30.2019

12.31.2018

(R$ Million)

Short Term

1,562

2,262

1,825

Long Term

14,488

13,232

13,082

Gross Debt

16,050

15,494

14,907

Cash, cash equivalents and short-term investments

6,295

3,432

3,349

Net Debt

9,755

12,062

11,558

On December 31, 2019, gross debt was 9,7% short term and 90.3% long term. Broken down by currency, 18.4% of gross debt was denominated in Brazilian real, 81.2% in U.S. dollar and 0.4% in other currencies.

On December 31, 2019, 52% of cash was denominated in U.S. dollar.

The evolution in key debt indicators is shown below:

Indicators

12.31.2019

09.30.2019

12.31.2018

Gross debt / Total capitalization ¹

37%

36%

36%

Net debt² (R$) / EBITDA ³ (R$)

1.67x

1.96x

1.71x

1 - Total capitalization = shareholders' equity + gross debt - interest expenses

2 - Net debt = gross debt - interest on debt - cash, cash equivalents and financial investments. 3 - Adjusted EBITDA in the last 12 months.

The reduction in the net debt/EBITDA ratio from 1.96x on September 30, 2019 to 1.67x on December 31, 2019 is explained mainly by the free cash flow generation in the period.

6

'

Payment schedule of gross debt (non-current)

8.3

1.7

Others

2.0

Bond

2044

2.0

Bond

2030

1.8

1.2

1.6

1.5

Bond

2.6

2027

2021

2022

2023

2024 2025 and after

On December 31, 2019, the nominal weighted average cost of gross debt was 5.5%, considering 4.7% for the portion denominated in Brazilian real, 5.6% plus exchange variation for the portion denominated in U.S. dollar contracted by companies in Brazil and 6.1% for the portion contracted by subsidiaries abroad. On December 31, 2019, the average gross debt term was 7.4 years, with the debt maturity schedule well balanced and well distributed over the coming years.

Investments

Capital expenditure amounted to R$ 1.746 million in 2019, with R$ 797 million allocated to general maintenance, R$ 424 million to maintenance of the Ouro Branco Mill and R$ 525 million to technological expansion and modernization. Of the total amount invested in the quarter, 49% was allocated to the Brazil BD, 24% to the Special Steel BD, 23% to the North America BD and 4% to the South America BD.

The Company reaffirms its investment plan for 2020 of R$ 2.6 billion, which is part of the CAPEX program of R$ 7 billion for the three-year period (2019-2021).

The investments in technological expansion and modernization will be made as expectations for the market's recovery and for free cash flow generation in the period are confirmed.

7

'

Gerdau S.A. announced to its shareholders and the general market that, on November 26, 2019, its subsidiary Gerdau Aços Longos S.A. entered into a final agreement with Hierros Añón, S.A. and Gallega de Mallas, S.L. for the acquisition of 96.35% of the shares issued by Siderúrgica Latino-Americana S.A. ("SILAT"), a company located in Caucaia, in the metropolitan area of Fortaleza, State of Ceará, for economic value of US$ 110.8 million, subject to the typical adjustments to the acquisition price. The consummation of the transaction is subject to approval by Brazil's antitrust agency CADE (Conselho Administrativo de Defesa Econômica) and to the fulfillment of conditions precedent typical to transactions of this type. SILAT has annual installed production capacity of 600,000 tonnes of rolled products. The acquisition is part of Gerdau's strategy to improve service to its clients in the Brazilian market.

Free Cash Flow

Free cash flow generation increased significantly in 4Q19 compared to both 4Q18 and 3Q19, to R$ 2.3 billion, due to the robust release of working capital in the period, mainly due to the reduction in the inventories of raw materials and finished products given the shutdown of the melt shops in December.

Free Cash Flow (R$ million)

Free Cash Flow - Quarterly (R$ million)

8

'

PERFORMANCE BY BUSINESS DIVISION (BD)

The information in this report is divided into four Business Divisions (BD) in accordance with Gerdau's corporate governance, as follows:

  • Brazil BD (Brazil Business Division) - includes the operations in Brazil (except special steel) and the iron ore operation in Brazil;
  • North America BD (North America Business Division) - includes all operations in North America (Canada, United States and Mexico), except special steel, as well as the jointly controlled entities and associate company, both located in Mexico;
  • South America BD (South America Business Division) - includes all operations in South America (Argentina, Peru, Uruguay and Venezuela), except the operations in Brazil, and the jointly controlled entities in the Dominican Republic and Colombia;
  • Special Steel BD (Special Steel Business Division) - includes the special steel operations in Brazil and the United States.

NET SALES

Brazil BD

North

South

Special

America BD

Steel BD

America BD

36.0%

8.0%

16.5%

39.5%

3,946

4,198

4,057

4,335

3,627

3,375

1,989

1,621

1,397

908

819

771

4Q18

3Q19

4Q19

4Q18

3Q19

4Q19

4Q18

3Q19

4Q19

4Q18

3Q19

4Q19

Net Sales (R$ million)

Participation of Net Sales per BD (last 12 months)

EBITDA & EBITDA MARGIN

Brazil BD

North

South

Special

America BD

America BD

Steel BD

11.8%

14. 1%

46.5%

27.6%

16.4%

16.8%

13.4%

10.1%

10.5%

647

706

7.6%

543

437

380

257

4Q18

3Q19

4Q19

4Q18

3Q19

4Q19

EBITDA (R$ million)

EBITDA Margin (%)

14.4%

21.4%

20.0%

11.4%

12.8%

8.1%

128

165

182

226

207

113

4Q18

3Q19

4Q19

4Q18

3Q19

4Q19

Participation of Adjusted EBITDA per BD (last 12 months)

9

'

BRAZIL BD

BRAZIL BD

4Q19

4Q18

3Q19

12M19

12M18

Volumes (1,000 tonnes)

Production of crude steel

1,439

1,454

-1.0%

1,079

33.4%

5,563

5,845

-4.8%

Shipments of steel

1,493

1,311

13.9%

1,415

5.5%

5,609

5,535

1.3%

Domestic Market

1,004

887

13.2%

1,031

-2.6%

3,959

3,951

0.2%

Exports

490

424

15.6%

384

27.6%

1,650

1,585

4.1%

Shipments of long steel

1,059

921

14.9%

1,072

-1.2%

4,134

4,079

1.4%

Domestic Market

637

589

8.1%

698

-8.7%

2,633

2,683

-1.9%

Exports

423

332

27.4%

374

13.1%

1,500

1,396

7.5%

Shipments of flat steel

434

390

11.4%

343

26.5%

1,475

1,457

1.3%

Domestic Market

367

298

23.2%

333

10.2%

1,325

1,268

4.5%

Exports

67

92

-27.0%

10

570.0%

150

189

-20.6%

Results (R$ million)

Net Sales¹

4,057

3,946

2.8%

4,198

-3.4%

16,122

15,745

2.4%

Domestic Market

3,175

3,023

5.0%

3,446

-7.9%

12,912

12,320

4.8%

Exports

882

923

-4.5%

752

17.3%

3,210

3,425

-6.3%

Cost of Goods Sold

(3,782)

(3,374)

12.1%

(3,835)

-1.4%

(14,363)

(13,044)

10.1%

Gross profit

275

571

-51.9%

363

-24.2%

1,759

2,701

-34.9%

Gross margin (%)

6.8%

14.5%

8.6%

10.9%

17.2%

Adjusted EBITDA²

543

647

-16.0%

706

-23.1%

2,639

3,032

-12.9%

Adjusted EBITDA Margin (%)

13.4%

16.4%

16.8%

16.4%

19.3%

1 - Includes iron ore sales.

2 - Adjusted EBITDA due to the impacts from refurbishment of Blast Furnace 1 at the Ouro Branco Mill, net of tax reversals/provisions in 4Q19, 3Q19 and 12M19.

Production and shipments

In 4Q19, crude steel production was stable in relation to 4Q18, a period when the shutdown of the melt shops was neutralized by the higher production of Blast Furnace 1 at the Ouro Branco Mill. Compared to 3Q19, production increased, since during that period Blast Furnace 1 at Ouro Branco was undergoing maintenance.

Shipments in Brazil's domestic market increased in 4Q19 compared to 4Q18, confirming the stronger demand in the construction and manufacturing sectors. Note that shipments of reinforced concrete products (rebar and fabricated rebar) increased by 17%, while shipments of heavy plates increased by 36%. Export shipments grew in relation to both 4Q18 and 3Q19.

In 4Q19, 442,000 tonnes of iron ore were sold to third parties and 1,216,000 tonnes were consumed internally. In 4Q18, shipments to third parties amounted to 642,000 tonnes and 1,224,000 tonnes of iron ore were consumed internally. The lower iron ore shipments in the comparison period impacted the net sales of the Brazil BD.

Operating Result

Net sales increased in 4Q19 in relation to 4Q18, supported by the growth in shipments, which was influenced by the recovery in domestic demand. Compared to 3Q19, the decrease in net sales is explained by the worse mix of sales in the domestic and export markets (share of exports in total shipments increased from 27% to 33%), combined with the lower prices in international markets.

Cost of goods sold increased in 4Q19 in relation to 4Q18, due to the impacts of the refurbishment of Blast Furnace 1 at the Ouro Branco Mill and the shutdown of the melt shops.

The decreases in gross profit and gross margin in 4Q19 compared to 4Q18 and 3Q19 were due to the lower profitability of exports and to the impacts from the shutdowns of the melt shops, which resulted in a lower dilution of fixed costs.

In 4Q19, EBITDA and EBITDA margin decreased in relation to 4Q18 and 3Q19, accompanying the decrease in gross profit and gross margin, which was smoothed by excluding the effects from nonrecurring items

10

'

associated with the refurbishment of Blast Furnace 1 at the Ouro Branco Mill and the shutdowns of the melt shops (-R$ 131 million), net of tax reversals/provisions in 4Q19 (+R$ 193 million).

EBITDA (R$ million) and EBITDA Margin (%)

NORTH AMERICA BD

NORTH AMERICA BD

4Q19

4Q18

3Q19

12M19

12M18

Volumes (1,000 tonnes)

Production of crude steel

1,053

1,179

-10.7%

1,086

-3.0%

4,601

6,431

-28.5%

Shipments of steel

1,050

1,198

-12.4%

1,083

-3.0%

4,275

6,085

-29.7%

Results (R$ million)

Net Sales

3,375

4,335

-22.1%

3,627

-6.9%

14,656

19,927

-26.5%

Cost of Goods Sold

(3,201)

(3,915)

-18.2%

(3,310)

-3.3%

(13,351)

(18,165)

-26.5%

Gross profit

174

420

-58.6%

317

-45.1%

1,305

1,763

-26.0%

Gross margin (%)

5.2%

9.7%

8.7%

8.9%

8.8%

EBITDA

257

437

-41.2%

380

-32.4%

1,569

1,787

-12.2%

EBITDA margin (%)

7.6%

10.1%

10.5%

10.7%

9.0%

Production and shipments

Production and shipments decreased in 4Q19 in relation to 4Q18, due to the deconsolidation of the rebar units as from November 2018. Excluding the effects from divestments, shipments grew by 4%. In relation to 3Q19, a slight seasonal effect was observed in the reduction in sales, indicating that demand remains at healthy levels.

Operating Result

Net sales and cost of goods sold decreased in 4Q19 in relation to 4Q18, due to the aforementioned divestments, as well as to the lower prices in the period. In relation to 3Q19, the reduction in net sales is explained by the seasonal reduction in shipments and by the lower prices practiced in the period.

Cost of goods sold decreased in 4Q19 compared to 3Q19, due to lower volumes sold.

11

'

Gross profit and gross margin decreased in 4Q19 compared to 4Q18 and to 3Q19, mainly due to the narrowing of the metals spread. In 4Q19, the spread was at US$ 426/st, compared to US$ 470/st in 4Q18 and US$ 456/st in 3Q19.

The reduction in EBITDA and EBITDA margin in 4Q19 compared to 4Q18 lagged the reduction in gross profit and gross margin, mainly due to the decrease in selling, general and administrative expenses in the period. In relation to 3Q19, the decrease in EBITDA followed a path similar to that of gross profit in the period.

EBITDA (R$ million) and EBITDA Margin (%)

SOUTH AMERICA BD

SOUTH AMERICA BD

4Q19

4Q18

3Q19

12M19

12M18

Volumes (1,000 tonnes)

Production of crude steel

161

144

11.7%

153

5.2%

609

746

-18.3%

Shipments of steel

274

262

4.4%

279

-1.8%

1,059

1,307

-18.9%

Results (R$ million)

Net Sales

908

819

10.9%

771

17.8%

3,259

3,801

-14.3%

Cost of Goods Sold

(770)

(701)

9.8%

(643)

19.8%

(2,762)

(3,231)

-14.5%

Gross profit

138

118

17.2%

128

7.8%

497

570

-12.8%

Gross margin (%)

15.2%

14.4%

16.6%

15.3%

15.0%

EBITDA

182

128

42.1%

165

10.3%

673

679

-0.9%

EBITDA margin (%)

20.0%

15.6%

21.4%

20.7%

17.9%

Production and shipments

Steel production and shipments increased in 4Q19 in relation to 4Q18, supported by the higher shipments to Argentina and Peru, countries where the construction industry remains at healthy levels.

Operating Result

Net sales increased in 4Q19 compared to 4Q18, mainly due to the higher shipments.

The cost of goods sold increased in 4Q19 compared to 4Q18, reflecting the higher shipments.

12

'

Gross profit increased in 4Q19 compared to both 4Q18 and 3Q19.Gross margin expanded in 4Q19 compared to 4Q18, since the increase in net sales per tonne sold outpaced the increase in cost per tonne sold.

EBITDA and EBITDA margin increased in 4Q19 in relation to 4Q18, due to the growth in equity income, with the highlight the better performance of the joint venture in the Dominican Republic.

EBITDA (R$ million) and EBITDA Margin (%)

SPECIAL STEEL BD

SPECIAL STEEL BD

4Q19

4Q18

3Q19

12M19

12M18

Volumes (1,000 tonnes)

Production of crude steel

299

444

-32.6%

415

-28.0%

1,680

2,321

-27.6%

Shipments of steel

343

474

-27.6%

386

-11.1%

1,586

2,111

-24.9%

Results (R$ million)

Net Sales

1,397

1,989

-29.8%

1,621

-13.8%

6,702

8,159

-17.9%

Cost of Goods Sold

(1,373)

(1,814)

-24.3%

(1,476)

-7.0%

(6,168)

(7,065)

-12.7%

Gross profit

24

175

-86.3%

145

-83.4%

534

1,094

-51.2%

Gross margin (%)

1.7%

8.8%

8.9%

8.0%

13.4%

EBITDA

113

226

-50.1%

207

-45.4%

799

1,299

-38.5%

EBITDA margin (%)

8.1%

11.4%

12.8%

11.9%

15.9%

Production and shipments

In Brazil, crude steel production decreased in 4Q19 compared to 4Q18, influenced by the shutdown of the mill in Mogi das Cruzes, São Paulo. Shipments decreased in the same period, despite the higher vehicle sales, reflecting the destocking trend in the automotive chain and the weaker vehicle exports.

In the United States, the reductions in crude steel production and in shipments is explained by the weaker demand in the oil and gas sector and the lower vehicle production in the period.

Operating Result

The reductions in net sales and cost of goods sold in 4Q19 compared to both 4Q18 and 3Q19 is due to the lower shipments in Brazil and the United States.

Gross profit and gross margin decreased significantly in 4Q19 due to the lower capacity utilization rate in the period, which reduced the dilution of fixed costs.

The reduction in EBITDA in 4Q19 compared to 4Q18 accompanied the performance of gross profit and gross margin in the period.

13

'

EBITDA (R$ million) and EBITDA Margin (%)

THE MANAGEMENT

This document contains forward-looking statements. These statements are based on estimates, information or methods that may be incorrect or inaccurate and that may not occur. These estimates are also subject to risks, uncertainties and assumptions that include, among other factors: general economic, political and commercial conditions in Brazil and in the markets where we operate, as well as existing and future government regulations. Potential investors are cautioned that these forward-looking statements do not constitute guarantees of future performance, given that they involve risks and uncertainties. Gerdau does not undertake and expressly waives any obligation to update any of these forward-lookingstatements, which are valid only on the date on which they were made.

14

'

GERDAU S.A.

CONSOLIDATED BALANCESHEETS

In thousands of Brazilian reais (R$)

December 31, 2019

December 31, 2018

CURRENT ASSETS

Cash and cash equivalents

2,641,652

2,890,144

Short-term investments

3,652,949

459,470

Trade accounts receivable - net

2,672,370

3,201,656

Inventories

7,659,737

9,167,689

Tax credits

504,302

527,428

Income and social contribution taxes recoverable

483,088

445,561

Unrealized gains on financial instruments

2,846

30,711

Other current assets

618,769

780,423

18,235,713

17,503,082

NON-CURRENT ASSETS

Tax credits

465,549

32,065

Deferred income taxes

4,071,219

3,874,054

Unrealized gains on financial instruments

-

2,706

Related parties

95,445

27,939

Judicial deposits

1,991,715

2,135,414

Other non-current assets

464,169

449,592

Prepaid pension cost

45,381

17,952

Advance for future investment in equity interest

-

375,456

Investments in associates and jointly-controlled entities

1,812,399

1,367,802

Goodwill

9,469,311

9,112,390

Leasing

777,314

-

Other Intangibles

673,262

836,096

Property, plant and equipment, net

15,901,493

15,546,481

35,767,257

33,777,947

TOTAL ASSETS

54,002,970

51,281,029

15

'

GERDAU S.A.

CONSOLIDATED BALANCESHEETS

In thousands of Brazilian reais (R$)

December 31, 2019

December 31, 2018

CURRENT LIABILITIES

Trade accounts payable

3,762,768

4,335,054

Short-term debt

1,544,211

1,822,183

Debentures

18,015

2,755

Taxes payable

432,988

351,545

Income and social contribution taxes payable

205,092

395,682

Payroll and related liabilities

479,693

588,627

Dividends payable

50,968

169,616

Leasing payable

202,536

-

Employee benefits

495

157

Environmental liabilities

60,913

60,419

Unrealized losses on financial instruments

-

5,245

Other current liabilities

666,858

772,970

7,424,537

8,504,253

NON-CURRENT LIABILITIES

Long-term debt

11,594,612

11,545,658

Debentures

2,893,029

1,536,118

Related parties

-

1,350

Deferred income taxes

517,413

118,368

Provision for tax, civil and labor liabilities

809,299

770,305

Environmental liabilities

51,395

72,228

Employee benefits

1,469,949

1,356,560

Obligations with FIDC

1,018,501

938,526

Leasing payable

601,733

-

Other non-current liabilities

449,375

499,092

19,405,306

16,838,205

EQUITY

Capital

19,249,181

19,249,181

Treasury stocks

(242,542)

(280,426)

Capital reserves

11,597

11,597

Retained earnings

5,644,706

4,806,089

Operations with non-controlling interests

(2,870,825)

(2,870,825)

Other reserves

5,163,584

4,814,988

EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT

26,955,701

25,730,604

NON-CONTROLLING INTERESTS

217,426

207,967

EQUITY

27,173,127

25,938,571

TOTAL LIABILITIES AND EQUITY

54,002,970

51,281,029

16

'

GERDAU S.A.

CONSOLIDATED STATEMENTS OF INCOME

In thousands of Brazilian reais (R$)

For the three-month period ended on

For the year ended on

December 31, 2019

December 31, 2018

December 31, 2019

December 31, 2018

NET SALES

9,533,467

10,899,702

39,644,010

46,159,478

Cost of sales

(8,856,923)

(9,596,145)

(35,440,726)

(40,010,100)

GROSS PROFIT

676,544

1,303,557

4,203,284

6,149,378

Selling expenses

(117,788)

(138,493)

(476,339)

(570,431)

General and administrative expenses

(234,806)

(262,000)

(954,117)

(1,082,449)

Other operating income

329,286

82,041

636,847

235,421

Other operating expenses

(78,181)

(146,073)

(187,647)

(270,413)

Impairment of assets

-

-

-

-

Impairment loss on trade receivables

(5,349)

7,402

(21,044)

(9,914)

Results in operations with subsidiaries and associate company

-

(185,559)

-

(414,507)

Equity in earnings of unconsolidated companies

(2,376)

(28,796)

(17,050)

10,141

INCOME (LOSS) BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES

567,330

632,079

3,183,934

4,047,226

Financial income

85,566

81,580

223,213

204,000

Financial expenses

(403,836)

(424,802)

(1,469,754)

(1,579,341)

Bonds repurchases

-

(223,925)

-

(223,925)

Exchange variations, net

45,299

187,052

(247,555)

(322,621)

Gain and losses on financial instruments, net

1,153

(11,959)

(15,118)

32,092

INCOME (LOSS) BEFORE TAXES

295,512

240,025

1,674,720

2,157,431

Current

52,012

(210,567)

(240,400)

(629,209)

Deferred

(245,319)

359,707

(217,433)

798,160

Income and social contribution taxes

(193,307)

149,140

(457,833)

168,951

NET INCOME (LOSS)

102,205

389,165

1,216,887

2,326,382

(+) Maintenance Stoppage / Impacts of the Blast Furnace 1 reform of the Ouro Branco steel mill

131,110

-

368,813

-

(-) Tax reversal/provisions

(193,083)

-

(250,311)

-

(-) Results in operations with subsidiaries and associate company

-

185,559

-

414,507

(+) Bonds repurchases

-

223,925

-

223,925

(+) Income tax of extraordinary items

21,071

(486,647)

(40,291)

(457,400)

(=) Total of extraordinary items

(40,902)

(77,163)

78,211

181,032

ADJUSTED NET INCOME*

61,303

312,002

1,295,098

2,507,414

*Adjusted net income is a non-accounting indicator prepared by the Company, reconciled with the financial statements and consists of net income adjusted for extraordinary events that influenced the net income (loss), w

17

'

GERDAU S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS In thousands of Brazilian reais (R$)

For the three-month period ended on

December 31, 2019 December 31, 2018

For the year ended on

December 31, 2019 December 31, 2018

Cash flows from operating activities

Net income (loss) for the year

102,205

389,165

1,216,887

2,326,382

Depreciation and amortization

539,672

503,926

2,074,295

1,891,814

Equity in earnings of unconsolidated companies

2,376

28,796

17,050

(10,141)

Exchange variation, net

(45,299)

(187,052)

247,555

322,621

(Gains) Losses on financial instruments, net

(1,153)

11,959

15,118

(32,092)

Post-employment benefits

46,437

45,251

165,487

189,603

Stock based remuneration

9,469

6,734

43,895

41,186

Income tax

193,307

(149,140)

457,833

(168,951)

Losses (Gains) on disposal of property, plant and equipment

3,819

(13,236)

2,129

(41,109)

Results in operations with subsidiaries and associate company

-

185,559

-

414,507

Impairment loss on trade receivables

5,349

(7,402)

21,044

9,914

Provision for tax, labor and civil claims

43,692

(127,690)

38,417

(56,409)

Reversal of contingent liabilities, net

(280,133)

-

(402,499)

-

Interest income on investments

(28,438)

(15,173)

(72,784)

(49,745)

Interest expense on loans

181,893

296,861

938,120

1,177,686

Interest on loans with related parties

(2,110)

(351)

(4,767)

(545)

Reversal of net realisable value adjustment in inventory

(27,438)

1,637

24,665

8,228

743,648

969,844

4,782,445

6,022,949

Changes in assets and liabilities

Decrease (Increase) in trade accounts receivable

770,250

1,186,732

656,831

71,631

Decrease (Increase) in inventories

1,219,552

(40,994)

1,556,713

(2,427,473)

(Decrease) Increase in trade accounts payable

(42,071)

278,640

(642,699)

900,388

(Increase) Decrease in other receivables

(25,707)

4,997

146,825

(118,988)

Decrease in other payables

(20,936)

(449,415)

(462,906)

(1,160,626)

Present value adjustment portion on leases

(77,799)

-

(83,620)

-

Dividends from jointly-controlled entities

5,085

6,218

44,037

55,357

Purchases of trading securities

(2,506,136)

(448,737)

(3,676,744)

(1,512,123)

Proceeds from maturities and sales of trading securities

12,418

655,292

521,616

1,629,595

Cash provided by operating activities

78,304

2,162,577

2,842,498

3,460,710

Interest paid on loans and financing

(261,928)

(363,442)

(945,027)

(1,162,364)

Income and social contribution taxes paid

(33,750)

(81,840)

(254,679)

(298,663)

Net cash (used) provided by operating activities

(217,374)

1,717,295

1,642,792

1,999,683

Cash flows from investing activities

Purchases of property, plant and equipment

(485,960)

(360,100)

(1,746,600)

(1,194,934)

Proceeds from sales of property, plant and equipment, investments and other intangibles

1,498

2,244,925

21,805

4,021,251

Purchases of other intangibles

(35,872)

(25,241)

(100,313)

(67,388)

Advance for future investment in equity interest

-

(375,456)

(94,687)

(375,456)

Capital decrease in joint venture

20,344

-

20,344

-

Net cash (used) provided in investing activities

(499,990)

1,484,128

(1,899,451)

2,383,473

Cash flows from financing activities

Purchase of treasury shares

-

(93,685)

-

(243,396)

Dividends and interest on capital paid

(67,954)

(220,756)

(484,173)

(599,099)

Proceeds from loans and financing

2,112,754

1,596,573

5,585,573

2,560,789

Repayment of loans and financing

(1,014,210)

(4,294,202)

(4,885,083)

(6,000,433)

Leasing payment

(3,202)

-

(161,824)

-

Intercompany loans, net

52,466

13,794

(64,089)

25,755

Net cash provided (used) in financing activities

1,079,854

(2,998,276)

(9,596)

(4,256,384)

Exchange variation on cash and cash equivalents

(12,254)

(108,199)

17,763

208,034

Increase (Decrease) in cash and cash equivalents

350,236

94,948

(248,492)

334,806

Cash and cash equivalents at beginning of period

2,291,416

2,795,196

2,890,144

2,555,338

Cash and cash equivalents at end of period

2,641,652

2,890,144

2,641,652

2,890,144

18

'

APPENDIX I - PRO FORMA RESULTS

To present the results of the business divisions excluding the effects from the divestment program, the pro forma Business Division and Consolidated results for 2018 follow:

Brazil BD - Pro forma

1 Q 1 8

2Q 1 8

3Q 1 8

4Q 1 8

201 8

Volumes (1 ,000 tonnes)

Production of crude steel

1 ,532

1 ,381

1 ,479

1 ,454

5,846

Shipments of steel

1 ,438

1 ,364

1 ,422

1 ,31 1

5,535

Results (R$ million)

Net Sales

3,61 1

3,798

4,390

3,946

1 5,745

Cost of G oods Sold

(2,929)

(3,1 39)

(3,602)

(3,374)

(1 3,044)

G ross profit

682

659

788

571

2,700

G ross margin (%)

1 8.9%

1 7.4%

1 7.9%

1 4.5%

1 7.2%

Adjusted EBITDA

751

743

891

647

3,032

Adjusted EBITDA Margin

20.8%

1 9.6%

20.3%

1 6.4%

1 9.3%

North America BD - Pro forma

1 Q 1 8

2Q 1 8

3Q 1 8

4Q 1 8

201 8

Volumes (1 ,000 tonnes)

Production of crude steel

1 ,328

1 ,297

1 ,221

1 ,008

4,854

Shipments of steel

1 ,061

1 ,1 25

1 ,027

1 ,003

4,21 6

Results (R$ million)

Net Sales

2,933

3,81 8

4,030

3,705

1 4,486

Cost of G oods Sold

(2,693)

(3,376)

(3,51 6)

(3,325)

(1 2,91 0)

G ross profit

240

442

51 4

380

1 ,576

G ross margin (%)

8.2%

1 1 .6%

1 2.8%

1 0.3%

1 0.9%

Adjusted EBITDA

239

437

522

406

1 ,604

Adjusted EBITDA Margin

8.1 %

1 1 .4%

1 3.0%

1 1 .0%

1 1 .1 %

South America BD - Pro forma

1 Q 1 8

2Q 1 8

3Q 1 8

4Q 1 8

201 8

Volumes (1 ,000 tonnes)

Production of crude steel

1 46

1 69

1 42

1 44

601

Shipments of steel

262

275

284

262

1 ,083

Results (R$ million)

Net Sales

691

808

907

81 9

3,225

Cost of G oods Sold

(583)

(667)

(762)

(701 )

(2,71 3)

G ross profit

1 08

1 41

1 45

1 1 8

51 2

G ross margin (%)

1 5.6%

1 7.5%

1 6.0%

1 4.4%

1 5.9%

Adjusted EBITDA

1 54

1 74

1 85

1 28

641

Adjusted EBITDA Margin

22.3%

21 .5%

20.4%

1 5.6%

1 9.9%

Special Steel BD - Pro forma

1 Q 1 8

2Q 1 8

3Q 1 8

4Q 1 8

201 8

Volumes (1 ,000 tonnes)

Production of crude steel

522

568

578

444

2,1 1 2

Shipments of steel

445

502

494

474

1 ,91 5

Results (R $ million)

Net Sales

1 ,557

1 ,931

2,1 1 6

1 ,989

7,593

Cost of G oods Sold

(1 ,321 )

(1 ,633)

(1 ,81 9)

(1 ,81 4)

(6,587)

G ross profit

236

298

297

1 75

1 ,006

G ross margin (%)

1 5.2%

1 5.4%

1 4.0%

8.8%

1 3.2%

Adjusted EBITDA

283

351

342

226

1 ,202

Adjusted EBITDA Margin

1 8.2%

1 8.2%

1 6.2%

1 1 .4%

1 5.8%

19

'

Consolidated - Pro forma

1 Q 1 8

2Q 1 8

3Q 1 8

4Q 1 8

201 8

Volumes (1 ,000 tonnes)

Production of crude steel

3,527

3,41 2

3,421

3,051

1 3,41 1

Shipments of steel

3,060

3,1 1 7

3,1 24

2,971

1 2,272

Results (R$ million)

Net Sales

8,443

9,937

1 0,927

1 0,270

39,577

Cost of G oods Sold

(7,1 67)

(8,397)

(9,1 77)

(9,006)

(33,747)

G ross profit

1 ,276

1 ,540

1 ,750

1 ,264

5,830

G ross margin (%)

1 5.1 %

1 5.5%

1 6.0%

1 2.3%

1 4.7%

Adjusted EBITDA

1 ,41 0

1 ,657

1 ,899

1 ,373

6,339

Adjusted EBITDA Margin

1 6.7%

1 6.7%

1 7.4%

1 3.4%

1 6.0%

Divestments

Volumes (1 ,000 tonnes) Production of crude steel Shipments of steel Results (R$ million) Net Sales Cost of G oods Sold G ross profit G ross margin (%)

1 Q 1 8

2Q 1 8

3Q 1 8

4Q 1 8

201 8

638

575

548

1 70

1 ,931

81 1

71 8

564

1 96

2,289

1 ,946

2,097

1 ,909

630

6,582

(1 ,883)

(1 ,993)

(1 ,797)

(590)

(6,263)

63

1 04

1 1 2

40

31 9

Adjusted EBITDA

74

99

1 1 4

31

31 8

Adjusted EBITDA Margin

Consolidated

1 Q 1 8

2Q 1 8

3Q 1 8

4Q 1 8

201 8

Volumes (1 ,000 tonnes)

Production of crude steel

4,1 65

3,987

3,969

3,221

1 5,342

Shipments of steel

3,871

3,835

3,688

3,1 67

1 4,561

Results (R$ million)

Net Sales

1 0,389

1 2,034

1 2,836

1 0,900

46,1 59

Cost of G oods Sold

(9,050)

(1 0,390)

(1 0,974)

(9,596)

(40,01 0)

G ross profit

1 ,339

1 ,644

1 ,862

1 ,304

6,1 49

G ross margin (%)

1 2.9%

1 3.7%

1 4.5%

1 2.0%

1 3.3%

Adjusted EBITDA

1 ,484

1 ,756

2,01 3

1 ,404

6,657

Adjusted EBITDA Margin

1 4.3%

1 4.6%

1 5.7%

1 2.9%

1 4.4%

20

'

APPENDIX II - ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) FACTORS

ESG Scorecard

The meeting of the Board of Directors held on February 18, 2020 approved, in addition to the ESG scorecard, the materiality matrix, the sustainability policy, the adjustments to internal regulations to reflect the new duties related to ESG and the monitoring of the activities for adhering to the Carbon Disclosure Project (CDP) and to System B.

The ESG Scorecard will be assessed by the Board of Directors and Strategy & Sustainability and Disclosure committees at a predefined frequency.

Risk management

Gerdau, through its existing processes and instruments, works on mitigating corporate, compliance and operating risks. Corporate risks are those associated with the Company's strategy, its market and competition, the political and social environment, mergers and acquisitions and the availability of raw materials. Compliance risks are those related to compliance with the rules to which the Company and its employees are subject. Operating risks are related to internal processes, people or technology.

Risk factors include workplace safety, environmental, financial, tax, labor, operational, strategic, social, reputational, organizational climate, commercial and regulatory risks.

The Risk Management strategy is decentralized, capitalizes on and leverages the technical knowledge and profile of the professionals of each Business Division (Brazil BD, North America BD, South America BD and Special Steel BD). These divisions have controls in place to mitigate the risks identified and hold regular meetings to report results.

To act on material risks, the Company has established three lines of defense. The first line is the internal controls established in critical activities, procedures and guidelines with clear definitions of responsibilities, automated and manual controls and others.

The second line is related to management activities, including the monitoring, evaluation and improvement of processes and accountability. In addition to the work of the managers in the process to monitor their risks, the Internal Controls and Compliance areas support the Business in improving the control environment. The Compliance area is independent and reports to the Board of Directors. The Internal Controls area continuously assesses the control environment related to compliance with Sox Certification.

The third level is composed of the activities of the Internal Audit, which regularly conducts independent assessments of processes, supported by risk assessment, and reports periodically to the Audit Board and the Board of Directors.

The Internal Audit uses the annual plan to define the material risks and processes to be reviewed. Then it conducts a review to determine if the business areas comply with all laws and regulations, the Company's policies and best practices. It also periodically monitors the action plans to ensure that corrective actions are being implemented to mitigate risks.

The Company structured its committees to ensure a network for protecting and monitoring its relevant risks and processes. To advise the Board of Directors, the Corporate Governance Comittee, Strategy and Sustainability Comittee, Compensation Comittee and Finance Comittee were created. To support the executive line in mitigating risks, there are the Risk Comittee, Disclosure Committee and other committees in the business divisions.

The Company also has a code of ethicsfor employees and another document for third parties, in addition to a Risk Managementand CompliancePolicy in place.

All employees undergo training and comply with the code of ethics, and everyone involved in sales activities has been trained in competition practices. All of our executives have completed training in anti-corruption practices.

21

'

Moreover, the code of ethics for third parties was submitted to all active suppliers and clients through e-mail, declarations of acceptance, purchase orders and/or formal contracts.

Gerdau's ethics channel, which supports its risk management is a tool for complaints / ethical doubts and is available to employees and to external stakeholders on the internet, via e-mail, telephone or by contacting the Audit Board and intranet. The ethics channel also is promoted through regular campaigns and accountability via e-mails, posters, banners, intranet, is mentioned in various guidelines and is permanently included in presentations on Compliance and ethics.

The website https://ri.gerdau.com/en provides the market, regulatory agencies (CVM and SEC) and stock exchanges (B3, NYSE and Latibex), through the 20-F Form and Reference Form, all details on risk management and key factors to which the organization is exposed.

Overall compensation of management

The objectives of Gerdau's compensation policy are: to attract and retain high performance executives based on competitive compensation practices; to encourage the achievement and surpassing of challenging goals; and to leverage short- and long- term results consistently and sustainably.

The Reference Form (FR),in addition to such definition, provides on item 13.1.b.iii: "All elements of the compensation of the Directors and Officers, as well as the policies that determine them, are proposed and managed by the Human Resources area and are subject to approval by the Board of Directors with the support of the Compensation Committee. Meanwhile, the Human Resources area draws on support from a specialized compensation consulting firm with global operations to determine the relative value of the positions (evaluation of position) and to seek reference values in the market. The reference market is formed by Brazilian companies similar in scale to Gerdau that operate at in the local and international markets, by foreign companies also similar in scale to Gerdau operating in the steel or related industries and by companies that compete for the same professionals.

Item 13.1.e also determines that: "Compensation is structured in a way to balance the short-, medium- and long-term incentives. In the short team, the base compensation aligned with best market practices should be sufficient to retain talent. For performance to create value in the short and medium term, the Short-Term Incentive (ICP) is structured in a way to reflect the selected indicators in the determination of executive compensation levels (EBITDA and Net Income), seeking to align management performance with the Company's overall objectives and targets. In the long term, the objective is to promote alignment by structuring the granting of stock options and/or restricted shares and/or shares conditioned upon results and/or deferred shares and/or a combination thereof, which can be converted into long-term gains as the shares appreciate in the market, also considering that the exercise of part of the grants is dependent on the achievement of performance targets that currently are linked to Return on Capital Employed (ROCE)."

As described in item 12.1 of the FR, the Compensation Committee is responsible for defining the overall compensation amounts; revising the compensation and general salary adjustment practices;and examining and determining compensation plans and granting stock options, as well as benefits and retirement packages for officers and strategic executives. The Compensation Committee is responsible for participating in the establishment of evaluation criteria, as well as in the performance review of the Company's key executives.

In terms of the Compensation Committee, procedures are adopted to ensure its independence. As described in item 12.5/6 of the FR, the Compensation Committee is composed of five members, two of whom are independent directors and one of whom is the coordinator of such body.

To ensure the independence of decisions related to compensation, the Company maintains a flow of analyses and deliberations that includes the people area, the Compensation Committee and the Board of Directors. One of the mechanisms for ensuring no conflicts of interest is prohibiting the participation of members affected by conflicts of interest with the matter on the agenda. The compensation of the Board of Directors is submitted for analysis only by its independent members.

22

'

The Compensation Committee holds three meetings per year to present matters related to the compensation and benefits of all employees. All meetings have an agenda and the minutes containing its recommendations are reported to the Board of Directors.

Throughout its 118 years, Gerdau has carried out four successions of generations, demonstrating the solidity of its governance and management process. On January 1, 2018, the Company took yet another step in this governance process, in which the members of the Gerdau Johannpeter family began to dedicate themselves exclusively to the Board of Directors. To lead this new phase of the Company, the Board of Directors chose Gustavo Werneck as the new CEO.

The three members of the Gerdau Johannpeter family, through December 31, 2017, were members of the executive committee and also members of the Board of Directors, receiving wages only as statutory executive officers, as described in item 13.1.b.v of the FR: "We inform that the members that accumulate the function of statutory officers and members of the Board of Directors are compensated only as statutory officers." The same rule is currently applied to the CEO, which, as of April 2019, also was elected a member of the Board of Directors.

By dedicating themselves exclusively to the Board of Directors, their compensation was reduced in line with the new function.

In addition to the movement of the members of the Gerdau Johannpeter family, with the new governance, executive officers who previously were part of the Company's management bodies were elected statutory officers. With this, their compensation now reported to the Securities and Exchange Commission of Brazil (CVM). Note that because these officers already were part of the Company's executive team, there was no increase in costs.

The compensation of management, which follows market practices and is based on surveys conducted by various global compensation consulting firms, represents approximately 0.5% of EBITDA, which represents a ratio lower than that of most companies listed on the B3, according to issue no. 7 of the corporate governance yearbook published by Revista Capital Aberto.

Available at: https://capitalaberto.com.br/edicoes/especial/anuario-2019-2020/.

The Company also has performance review processes and the Statutory Officers are assessed by the Board of Directors. The Governance Committee is responsible for assessing the Board of Directors, using an individual questionnaire aligned with the best practices of the Brazilian Corporate Governance Institute (IBGC). The assessment also includes the adherence of each member and of the body as a whole with the business principles and purpose.

As described, Gerdau monitors market practices and trends in compensation. The Board of Directors, supported by the Compensation Committee, approved in October 2019 a new performance assessment and short-term incentive program valid as of 2020. The new model is aligned with the cultural transformation, focusing on collaboration, simplicity, value creation and meritocracy.

Moreover, starting in 2020, the maximum limit for variable compensation was reduced from 20% to 15% of Gerdau's overall net income. The decision, which aims to align the payment of variable compensation with the interests of shareholders, was based on Gerdau's historical data and on market references.

The long-term compensation plan (ILP) is the plan in which the executives, directors and officers are eligible to receive shares in the Company. As described in item 13.4.e of the FR: "The Plan aims to align the interests of the Company and its executives and shareholders over the medium and long term, especially by the granting of restricted shares and/or linked to the achievement of future results. Therefore, the gains for participants are heavily linked to the consistent delivery of results and to the appreciation in value of the Company over time. Furthermore, the possibility of becoming a shareholder attracts and retains the executives sought by the Company, making a positive contribution to the perpetuity of the business."

23

Disclaimer

Gerdau SA published this content on 19 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 February 2020 15:59:05 UTC

share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on GERDAU S.A.
05/11GERDAU S A : 1Q20 Results Presentation
PU
05/07GERDAU : 1Q Earnings Snapshot
AQ
05/06GERDAU S A : 1Q20 Quartely Results
PU
03/02GERDAU S.A. : Ex-dividend day for interim dividend
FA
02/19GERDAU S A : 4Q19 Earnings Release Presentation
PU
02/19GERDAU S A : 4Q19 Earnings Release Results
PU
02/19GERDAU S A : Notice to Shareholders - Dividend Payment
PU
02/14GERDAU S.A. : annual earnings release
2019Trump, citing U.S. farmers, slaps metal tariffs on Brazil, Argentina
RE
2019Brazil in touch with U.S. officials on surprise steel, aluminum tariffs - sou..
RE
More news
Financials (BRL)
Sales 2020 36 272 M
EBIT 2020 1 816 M
Net income 2020 95,5 M
Debt 2020 12 181 M
Yield 2020 0,43%
P/E ratio 2020 -426x
P/E ratio 2021 12,6x
EV / Sales2020 0,87x
EV / Sales2021 0,75x
Capitalization 19 270 M
Chart GERDAU S.A.
Duration : Period :
Gerdau S.A. Technical Analysis Chart | GGBR4 | BRGGBRACNPR8 | MarketScreener
Technical analysis trends GERDAU S.A.
Short TermMid-TermLong Term
TrendsNeutralBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 16
Average target price 15,37 BRL
Last Close Price 11,95 BRL
Spread / Highest target 105%
Spread / Average Target 28,6%
Spread / Lowest Target -16,3%
EPS Revisions
Managers
NameTitle
Gustavo Werneck da Cunha Chief Executive Officer & Director
Guilherme Chagas Gerdau Johannpeter Chairman
Harley Lorentz Scardoelli Chief Financial Officer & Vice President
André Bier Gerdau Johannpeter Vice Chairman
Claudio Gerdau Johannpeter Vice Chairman
Sector and Competitors
1st jan.Capitalization (M$)
GERDAU S.A.-38.20%3 636
NUCOR-29.85%11 889
POSCO-27.27%11 102
ARCELORMITTAL-46.94%9 886
NIPPON STEEL CORPORATION-43.24%8 026
MAGNITOGORSK IRON & STEEL WORKS-6.38%6 126