Gerdau’s preferred shares (GGBR4) stood out among the biggest falls on the Ibovespa this Friday (23). The paper closed with a fall of 3.88%, at R$ 28.70, while the benchmark of the Exchange advanced 2%. Other companies in the steel sector, for comparison purposes, fell, but not so much: the preferred series A of Usiminas (USIM5) retreated 1.14% (R$ 6.92) and CSN’s common shares (CSNA3), 2,25% (R$ 13,91).
Itaú BBA, in a report, explains that, according to conversations with investors, this decline may be mainly due to the probability that the fourth quarter of 2022 will be weaker than expected by market consensus so far, which leads to to a readjustment of expectations in the trading session.
“We project Ebitda [lucro antes de juros, impostos, depreciação e amortização, na sigla em inglês] of BRL 3.7 billion, down 31% in the quarter and 20% below Bloomberg’s consensus estimate of BRL 4.6 billion. Although we recognize that the weak results we expect for the fourth quarter imply a worsening of Gerdau’s pace in 2023, we observe that the last three months of the year are seasonally weaker”, explains the team of analysts, headed by Daniel Sasson.
According to the bank, it is expected that the result in the United States will suffer due to the lower prices realized in steel, of around 10% on an annual basis, with the Ebitda margin (Ebitda on net revenue) standing at 26% – compared to 33 % in the third quarter. In Brazil, the same rate should retreat 5.4 percentage points, to 13%.
Margins, in addition to the lower realized price, must also suffer due to lower volumes sold, which reduce cost dilution.
“We expect domestic volumes in Brazil to fall 13% in the quarter, with weaker seasonality, while exports should increase strongly, to 284 thousand tons”, they explain. “Results in North America are likely to remain solid despite a sequential decline in Ebitda. We project a 7% quarterly drop in dollar prices and a 5% quarterly drop in volumes.”
For the Brazilian arm of the steelmaker, BBA expects an Ebitda of R$ 1 billion. For the American Division, it is expected that Gerdau will bring an operating profit of R$ 1.8 billion.
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Finally, in the specialty steel segment, analysts see volumes flat but prices down 7% on a quarterly basis. The Ebitda margin, therefore, should remain at 14%, against 18% in the third quarter, and the Ebitda, at R$ 485 million. The same 7% decline in prices is expected for the South American division, which should see its margin falling from 29% to 245 and its Ebitda remaining at R$ 440 million.
Despite the negative outlook for Gerdau’s result, Itaú, however, maintains its recommendation outperform (performance above the market average, equivalent to the purchase), with a target price of BRL 37 (upside of 25% compared to the closing of the eve).
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