Gerdau outlook improved to stable on faster than expected recovery

Tuesday, 13 October 2020 00:49:54 (GMT+3)   |   Sao Paulo

Credit rating agency Standard and Poor’s (S&P) has upgraded the outlook of Brazilian integrated steelmaker Gerdau from negative to stable on a “faster than expected recovery,” S&P said.

S&P said long steel demand in Brazil is recovering “rapidly,” as domestic steelmakers are increasing steel prices to match international ones after a sharp domestic currency depreciation.

“The stable outlook reflects Gerdau's resilient operations and steady metrics, and our expectation of gradual deleveraging, as well as its strong liquidity position that provides a cushion during market downturns,” the agency said.

S&P labeled Brazil’s domestic long steel market recovery as “strong,” which is due to a strong local residential civil construction sector. That should “increase volumes in the domestic market, compared with our expectation of a meaningful drop after the pandemic started.”

“Healthy margins in (Gerdau’s) US operations and a recovery in its South American (excluding Brazil) operations also contribute to sound EBITDA, despite the still lagging specialty steel division,” the agency noted.

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