U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

Dated November 5, 2024

 

Commission File Number 1-14878

 

GERDAU S.A.

(Translation of Registrant’s Name into English)

 

Av. Dra. Ruth Cardoso, 8,501 – 8° andar

São Paulo, São Paulo - Brazil CEP 05425-070

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F  x      Form 40-F  ¨

 

 

 

 

 

 

Exhibit Index

 

Exhibit Description of Exhibit
   
99.1 GERDAU S.A. Condensed consolidated interim financial statements as of September 30, 2024

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: November 5, 2024

 

  GERDAU S.A.
     
  By: /s/ Rafael Dorneles Japur
  Name: Rafael Dorneles Japur
  Title: Executive Vice President Investor Relations Director

 

 

 

Exhibit 99.1

 

GERDAU S.A.

 

Condensed consolidated interim financial statements

 

as of September 30, 2024

 

 

 

GERDAU S.A.

CONSOLIDATED BALANCE SHEETS

In thousands of Brazilian reais (R$)

(Unaudited)

 

   Note   September 30, 2024   December 31, 2023 
CURRENT ASSETS               
Cash and cash equivalents   4    8,074,104    3,005,645 
Short-term investments   4    757,578    2,338,097 
Trade accounts receivable   5    5,673,760    4,875,394 
Inventories   6    15,914,442    15,227,778 
Tax credits        780,384    1,009,824 
Income and social contribution taxes recoverable        852,715    986,068 
Dividends receivable        -    1,036 
Fair value of derivatives   14    38,823    766 
Assets held for sale        -    1,210,041 
Other current assets        726,160    543,288 
         32,817,966    29,197,937 
                
NON-CURRENT ASSETS               
Tax credits        1,933,084    1,916,100 
Deferred income taxes        2,252,763    2,219,461 
Judicial deposits   15    356,864    2,064,070 
Other non-current assets        329,183    355,390 
Prepaid pension cost        2,463    11,695 
Fair value of derivatives   14    16,864    - 
Investments in associates and joint ventures   8    4,197,194    3,858,449 
Goodwill   10    12,132,215    10,825,148 
Leasing        1,182,528    1,182,654 
Other Intangibles        389,765    373,710 
Property, plant and equipment, net        26,240,428    22,880,530 
         49,033,351    45,687,207 
                
TOTAL ASSETS        81,851,317    74,885,144 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 

 

 

GERDAU S.A.

CONSOLIDATED BALANCE SHEETS

In thousands of Brazilian reais (R$)

(Unaudited)            

 

   Note   September 30, 2024   December 31, 2023 
CURRENT LIABILITIES               
Trade accounts payable - domestic market   11    4,043,996    4,120,701 
Trade accounts payable - debtor risk   11    454,421    584,320 
Trade accounts payable - imports   11    1,157,949    1,196,162 
Short-term debt   12    1,722,124    1,783,201 
Debentures   13    91,321    14,421 
Taxes payable        418,193    512,935 
Income and social contribution taxes payable        208,726    502,766 
Payroll and related liabilities        976,491    845,848 
Leasing payable        422,016    373,151 
Employee benefits        -    209 
Environmental liabilities        241,462    139,395 
Fair value of derivatives   14    9,601    19,042 
Other current liabilities        1,279,897    1,192,461 
         11,026,197    11,284,612 
                
NON-CURRENT LIABILITIES               
Long-term debt   12    8,424,710    8,296,474 
Debentures   13    2,294,744    799,212 
Related parties   16    -    24,992 
Deferred income taxes        30,449    204,151 
Provision for tax, civil and labor liabilities   15    2,307,058    2,185,825 
Environmental liabilities        311,860    378,274 
Employee benefits        516,435    706,767 
Fair value of derivatives   14    -    1,606 
Leasing payable        873,336    904,451 
Other non-current liabilities        550,591    859,917 
         15,309,183    14,361,669 
                
EQUITY   17           
Capital        24,273,225    20,215,343 
Capital reserves        11,597    11,597 
Treasury stocks        (437,998)   (150,182)
Retained earnings        25,089,943    25,914,830 
Transactions with non-controlling interests without change of control        (2,904,670)   (2,904,670)
Other reserves        9,262,902    5,972,041 
EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT        55,294,999    49,058,959 
                
NON-CONTROLLING INTERESTS        220,938    179,904 
                
EQUITY        55,515,937    49,238,863 
                
TOTAL LIABILITIES AND EQUITY        81,851,317    74,885,144 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 

 

 

GERDAU S.A.

CONSOLIDATED STATEMENTS OF INCOME

In thousands of Brazilian reais (R$)                    

(Unaudited)

 

       For the three-month period ended   For the nine-month period ended 
   Note   September 30, 2024   September 30, 2023   September 30, 2024   September 30, 2023 
NET SALES        17,378,032    17,063,258    50,204,112    54,200,931 
                          
Cost of sales   20    (14,801,417)   (14,270,585)   (43,020,882)   (44,501,242)
                          
GROSS PROFIT        2,576,615    2,792,673    7,183,230    9,699,689 
                          
Selling expenses   20    (194,076)   (184,064)   (563,275)   (532,434)
General and administrative expenses   20    (354,526)   (354,804)   (1,016,925)   (1,106,820)
Other operating income   20    55,828    37,602    255,730    951,425 
Other operating expenses   20    (156,280)   (85,253)   (431,260)   (214,928)
Recovery of Eletrobras Compulsory Loan   15    -    -    100,860    - 
Results in operations with joint ventures   3.4    -    -    808,367    - 
Impairment of financial assets   20    (5,016)   (4,084)   (29,374)   (5,065)
Impairment of assets   23    -    -    (199,627)   - 
Equity in earnings of unconsolidated companies   8    198,922    182,070    386,120    769,614 
                        
INCOME BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES        2,121,467    2,384,140    6,493,846    9,561,481 
                        
Financial income   21    168,501    241,133    528,460    700,792 
Financial expenses   21    (359,478)   (362,962)   (1,074,408)   (1,042,617)
Exchange variations, net   21    (154,815)   (359,558)   (853,239)   (849,191)
Tax credits monetary update   21    -    -    -    253,002 
Gains (Losses) on financial instruments, net   21    22,999    3,633    3,369    (12,570)
                        
INCOME BEFORE TAXES        1,798,674    1,906,386    5,098,028    8,610,897 
                         
Current   7    (259,991)   (406,628)   (899,534)   (1,541,982)
Deferred   7    (182,438)   92,307    77,604    (118,728)
Income and social contribution taxes        (442,429)   (314,321)   (821,930)   (1,660,710)
                          
NET INCOME        1,356,245    1,592,065    4,276,098    6,950,187 
                          
ATTRIBUTABLE TO:                         
Owners of the parent        1,347,402    1,581,791    4,250,294    6,923,619 
Non-controlling interests        8,843    10,274    25,804    26,568 
         1,356,245    1,592,065    4,276,098    6,950,187 
                          
Basic earnings per share - preferred - (R$)   18    0.64    0.75    2.02    3.30 
Basic earnings per share - common - (R$)   18    0.64    0.75    2.02    3.30 
                          
Diluted earnings per share - preferred - (R$)   18    0.64    0.74    2.01    3.28 
Diluted earnings per share - common - (R$)   18    0.64    0.74    2.01    3.28 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 

 

 

GERDAU S.A.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In thousands of Brazilian reais (R$)

(Unaudited)

 

   For the three-month period ended   For the nine-month period ended 
   September 30, 2024   September 30, 2023   September 30, 2024   September 30, 2023 
Net income for the period   1,356,245    1,592,065    4,276,098    6,950,187 
Items that may be reclassified subsequently to profit or loss                    
Other comprehensive income from associates and joint ventures   (168,671)   110,837    (3,355)   211,800 
Cumulative translation adjustment   (486,827)   818,363    3,957,028    (964,466)
Recycling of cumulative translation adjustment to net income   -    -    (407,560)   - 
Unrealized (Losses) Gains on net investment hedge   45,955    (167,306)   (249,910)   194,352 
Unrealized (Losses) Gains on financial instruments, net of tax   2,090    (983)   (2,309)   783 
    (607,453)   760,911    3,293,894    (557,531)
                     
Total comprehensive income for the period, net of tax   748,792    2,352,976    7,569,992    6,392,656 
                     
Total comprehensive income attributable to:                    
Owners of the parent   738,022    2,342,265    7,524,385    6,371,827 
Non-controlling interests   10,770    10,711    45,607    20,829 
    748,792    2,352,976    7,569,992    6,392,656 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 

 

 

GERDAU S.A.        
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY        
in thousands of Brazilian reais (R$)        
(Unaudited)        

 

       Attributed to parent company’s interest             
               Retained earnings       Other Reserves             
   Capital   Treasury
stocks
   Capital
Reserve
   Legal
reserve
   Tax
Incentives
Reserve
   Investments
and
working
capital
reserve
   Retained
earnings
   Operations
with
non-controlling
interests
   Gains and
losses on
net
investment
hedge
   Gains and
losses on
financial
instruments
   Cumulative
translation
adjustment
   Pension
plan
  

Long
term
incentive
plan

  

Total
parent
company’s
interest

   Non-controlling
interests
   Total
Shareholder's
Equity
 
Balance as of January 1, 2023  19,249,181   (179,995)  11,597   2,210,531   1,775,498   18,186,532   -   (2,904,670)  (9,079,070)  (12,734)  16,725,542   80,117   53,665   46,116,194   181,999   46,298,193 
2023 Changes in Equity                                                                
Net income  -       -   -   -   -   6,923,619   -   -   -   -   -   -   6,923,619   26,568   6,950,187 
Other comprehensive income (loss) recognized in the period  -       -   -   -   -   -   -   194,352   783   (746,927)  -   -   (551,792)  (5,739)  (557,531)
Total comprehensive income (loss) recognized in the period  -   -   -   -   -   -   6,923,619   -   194,352   783   (746,927)  -   -   6,371,827   20,829   6,392,656 
Increase in Capital through capitalization of Retained earnings  966,162   -   -   -   -   (966,162)  -   -   -   -   -   -   -   -   -   - 
Long term incentive plan cost recognized in the period  -   -   -   -   -   -   -   -   -   -   -   -   55,430   55,430   26   55,456 
Long term incentive plan exercised during the period  -   28,345   -   -   -   6,520   -   -   -   -   -   -   -   34,865   17   34,882 
Effects of interest changes in subsidiaries  -   -   -   -   -   -   -   -   -   -   -   -   -   -   (9,951)  (9,951)
Dividend in excess of the minimum estatutory undistributed in 2022  -   -   -   -   -   (333,151)  -   -   -   -   -   -   -   (333,151)  -   (333,151)
Dividends/interest on equity  -   -   -   -   -   -   (1,644,228)  -   -   -   -   -   -   (1,644,228)  (6,357)  (1,650,585)
Balance as of September 30, 2023 (Note 17)  20,215,343   (151,650)  11,597   2,210,531   1,775,498   16,893,739   5,279,391   (2,904,670)  (8,884,718)  (11,951)  15,978,615   80,117   109,095   50,600,937   186,563   50,787,500 
                                                                 
Balance as of January 1, 2024  20,215,343   (150,182)  11,597   2,528,673   2,914,226   20,471,931   -   (2,904,670)  (8,831,146)  (11,951)  14,504,471   176,612   134,055   49,058,959   179,904   49,238,863 
2024 Changes in Equity                                                                
Net income  -   -   -   -   -   -   4,250,294   -   -   -   -   -   -   4,250,294   25,804   4,276,098 
Other comprehensive income (loss) recognized in the period  -   -   -   -   -   -   -   -   (249,910)  (2,309)  3,526,310   -   -   3,274,091   19,803   3,293,894 
Total comprehensive income (loss) recognized in the period  -   -   -   -   -   -   4,250,294   -   (249,910)  (2,309)  3,526,310   -   -   7,524,385   45,607   7,569,992 
Effects of the share buyback program  -   (349,791)  -   -   -   -   -   -   -       -   -   -   (349,791)  -   (349,791)
Increase in Capital through capitalization of Retained earnings  4,057,882   -   -   -   -   (4,057,882)  -   -   -       -   -   -   -   -   - 
Long term incentive plan cost recognized in the period  -   -   -   -   -   -   -   -   -       -   -   16,770   16,770   33   16,803 
Long term incentive plan exercised during the period  -   61,975   -   -   -   (555)  -   -   -       -   -   -   61,420   15   61,435 
Effects of interest changes in subsidiaries  -   -   -   -   -   -   -   -   -       -   -   -   -   (4,119)  (4,119)
Dividend in excess of the minimum estatutory undistributed in 2023  -   -   -   -   -   (175,233)  -   -   -       -   -   -   (175,233)  -   (175,233)
Dividends/interest on equity  -   -   -   -   -   -   (841,511)  -   -       -   -   -   (841,511)  (502)  (842,013)
Balance as of September 30, 2024 (Note 17)  24,273,225   (437,998)  11,597   2,528,673   2,914,226   16,238,261   3,408,783   (2,904,670)  (9,081,056)  (14,260)  18,030,781   176,612   150,825   55,294,999   220,938   55,515,937 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 

 

 

 

GERDAU S.A.          
CONSOLIDATED STATEMENTS OF CASH FLOWS          
In thousands of Brazilian reais (R$)          
(Unaudited)          

 

       For the nine-month period ended 
   Note   September 30, 2024   September 30, 2023 
Cash flows from operating activities               
Net income for the period        4,276,098    6,950,187 
Adjustments to reconcile net income for the period to net cash provided by operating activities:               
Depreciation and amortization   20    2,293,381    2,256,376 
Impairment of assets   23    199,627    - 
Equity in earnings of unconsolidated companies   8    (386,120)   (769,614)
Exchange variation, net   21    853,239    849,191 
Gains and losses on derivative financial instruments, net   21    (3,369)   12,570 
Post-employment benefits        200,158    190,264 
Long-term incentive plans   19    114,544    122,801 
Income tax   7    821,930    1,660,710 
Losses on disposal of property, plant and equipment        37,890    26,210 
Results in operations with joint ventures   3.4    (808,367)   - 
Impairment of financial assets        29,374    5,065 
Provision of tax, civil, labor and environmental liabilities, net        121,092    140,549 
Tax credits recovery        (100,860)   (1,098,218)
Interest income on short-term investments        (205,553)   (426,093)
Interest expense on debt and debentures   21    577,111    630,927 
Interest expense on lease liabilities        103,006    78,632 
Reversal of net realizable value adjustment in inventory, net   6    (42,824)   (20,667)
         8,080,357    10,608,890 
Changes in assets and liabilities               
Increase in trade accounts receivable        (421,177)   (1,006,171)
Increase in inventories        208,075    1,158,473 
Decrease in trade accounts payable        (775,344)   (775,582)
Decrease (Increase) in other receivables        1,707,207    (100,429)
Decrease in other payables        (107,423)   (397,409)
Dividends from associates and joint ventures        68,501    77,661 
Purchases of short-term investments        (910,120)   (5,687,783)
Proceeds from maturities and sales of short-term investments        2,688,500    5,595,166 
Cash provided by operating activities        10,538,576    9,472,816 
                
Interest paid on loans and financing        (486,091)   (458,667)
Interest paid on lease liabilities        (103,006)   (78,632)
Income and social contribution taxes paid        (1,354,889)   (1,410,109)
Net cash provided by operating activities        8,594,590    7,525,408 
                
Cash flows from investing activities               
Purchases of property, plant and equipment   9    (3,911,266)   (3,668,775)
Proceeds from sales of property, plant and equipment, investments and other intangibles        1,525,745    10,336 
Additions in other intangibles        (123,634)   (91,008)
Repurchase of shares in joint ventures        -    47,006 
Capital increase in joint ventures   8    (101,069)   (96,653)
Net cash used in investing activities        (2,610,224)   (3,799,094)
                
Cash flows from financing activities               
Purchases of Treasury stocks        (349,791)   - 
Dividends and interest on capital paid        (1,013,050)   (1,855,072)
Proceeds from loans and financing        2,097,055    1,658,770 
Repayment of loans and financing        (1,650,139)   (2,692,611)
Leasing payment        (328,287)   (308,819)
Intercompany loans, net        (24,992)   398 
Net cash used in financing activities        (1,269,204)   (3,197,334)
                
Exchange variation on cash and cash equivalents        353,297    (90,314)
                
Increase in cash and cash equivalents        5,068,459    438,666 
Cash and cash equivalents at beginning of period        3,005,645    2,475,863 
Cash and cash equivalents at end of period        8,074,104    2,914,529 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

NOTE 1 - GENERAL INFORMATION

 

Gerdau S.A. is a publicly traded corporation (sociedade anônima) with its corporate domicile in the city of São Paulo, Brazil. Gerdau S.A and subsidiaries (collectively referred to as the “Company”) is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world. In Brazil, the Company also produces flat steel and iron ore, activities which expanded the product mix and made its operations even more competitive. The Company believes it is the largest recycler in Latin America and around the world it transforms each year millions of tons of scrap into steel, reinforcing its commitment to sustainable development of the regions where it operates. Gerdau is listed on the São Paulo and New York stock exchanges.

 

The Condensed Consolidated Interim Financial Statements of the Company were approved by the Management on November 05, 2024.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

 

2.1 - Basis of Presentation

 

The Company's Condensed Consolidated Interim Financial Statements for the three-month and nine-month periods ended on September 30, 2024 have been prepared in accordance with International Accounting Standard (IAS) Nº 34, which establishes the content of condensed interim financial statements. These Condensed Consolidated Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements of Gerdau S.A., as of December 31, 2023, which were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board - IASB.

 

The preparation of the Condensed Consolidated Interim Financial Statements in accordance with IAS 34 requires Management to make accounting estimates. The Condensed Consolidated Interim Financial Statements have been prepared using the historical cost as its basis, except for the valuation of certain financial instruments, which are measured at fair value.

 

The accounting policies applied in this Condensed Consolidated Interim Financial Statements are the same as those applied in the Consolidated Financial Statements for the year ended December 31, 2023.

 

2.2 – New accounting standards

 

The issued and/or reviewed IFRS standards made by the IASB that are effective for the year started in 2024 had no impact on the Company's Financial Statements. In addition, the IASB issued/reviewed some IFRS standards, which have mandatory adoption for the year 2025 and/or after, and the Company is assessing the adoption impact of these standards in its Consolidated Financial Statements.

 

- Amendment to IAS 21 – Lack of Exchangeability. It clarifies aspects related to accounting treatment and disclosure when a currency lacks exchangeability into another currency. This amendment to the standard is effective for fiscal years beginning on/or after January 1, 2025. The Company does not expect material impacts on its Financial Statements.

 

- On March 6, 2024, the SEC approved new rules that will require climate-related disclosures by public companies, including evaluation and disclosure of certain climate-related financial metrics in their audited financial statements. These rules are effective for fiscal years beginning on/or after January 1, 2025. On April 4, 2024, the SEC stayed its climate disclosure rules to facilitate the orderly judicial resolution of pending legal challenges. The Company is currently evaluating the impact of the rule changes.

 

- Issuance of IFRS 18 – Presentation and Disclosure in Financial Statements. Establishes the requirements for the presentation and disclosure of information in general purpose financial statements to help ensure they provide relevant information that faithfully represents an entity’s assets, liabilities, equity, income and expenses. This standard is effective for years beginning on/or after January 1, 2027. The Company is evaluating the impacts on its Financial Statements of adopting this standard.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

- Issuance of IFRS 19 – Subsidiaries without Public Accountability: Disclosures. Establishes simplified disclosures requirements for consolidated or individual financial statements of entities eligible for the application of this standard. These rules are effective for fiscal years beginning on/or after January 1, 2027. The Company does not expect material impacts on its Financial Statements.

 

- Amendment to IFRS 9 and IFRS 7 – Amendments to the classification and measurement of financial instruments. It clarifies aspects related to the classification and measurement of financial instruments. This amendment to the standards is effective for years beginning on/or after January 1, 2026. The Company is evaluating the impacts on its Financial Statements of adopting these standards.

 

- Annual improvements to IFRS Accounting Standards. It applies amendments to IFRS 1, addressing first-adoption aspects related to hedge accounting; IFRS 7, covering aspects of gain and loss on the reversal of a financial instrument, credit risk disclosures, and the difference between fair value and transaction price; IFRS 9, addressing aspects related to the reversal of leasing liabilities and transaction price; IFRS 10, addressing the determination of the “de facto agent” and IAS 7, addressing aspects related to the cost method. These amendments are effective for years beginning on/or after January 1, 2026. The Company does not expect material impacts on its Financial Statements.

 

NOTE 3 – CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

3.1 - Subsidiaries

 

The Company did not have material changes of interest in subsidiaries for the period ended on September 30, 2024, when compared to those existing on December 31, 2023.

 

3.2 - Joint Ventures

 

Listed below are the interests in joint ventures:

 

      Equity Interests 
    Total capital(*) 
Joint ventures  Country  September 30, 2024   December 31, 2023 
Bradley Steel Processors  Canada   50.00    50.00 
MRM Guide Rail  Canada   50.00    50.00 
Gerdau Corsa S.A.P.I. de CV  Mexico   75.00    75.00 
Gerdau Summit Aços Fundidos e Forjados S.A.  Brazil   58.73    58.73 
Juntos Somos Mais Fidelização S.A.  Brazil   27.47    27.16 
Addiante S.A  Brazil   50.00    50.00 
Brasil ao Cubo S.A.  Brazil   44.66    44.66 
MRS Logística S.A.  Brazil   1.32    1.32 
Ubiratã Tecnologia S.A  Brazil   -    50.00 
Gerdau Metaldom Corp. (Note 3.4)  Dominican Rep.   -    50.00 
Diaco S.A. (Note 3.4)  Colombia   -    49.85 

 

 

(*) The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly held in the joint venture.

 

Although the Company owns more than 50% of Gerdau Corsa S.A.P.I. de C.V. and Gerdau Summit Aços Fundidos e Forjados S.A., it does not consolidate the financial statements of these joint venture entities, due to joint control agreements with the other shareholders that prevent the Company from controlling the decisions in conducting the joint venture’s business. The Company owns 1.32% of MRS Logística S.A. and due to the existence of a shareholders' agreement, a joint venture business and the existence of significant influence provided for in the accounting standard for the application of the equity method is characterized.

 

In August 2024, the Company disposed its participation in Ubiratã Tecnologia S.A., where there were no material losses in relation to the equity value recorded in the financial statements.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

The Company presents the joint venture information in aggregate, since the investments in these entities are not individually material. The financial information of these joint ventures, accounted for under the equity method, is shown below:

 

   Joint ventures 
Joint ventures  September 30, 2024   December 31, 2023 
Cash and cash equivalents   2,986,050    4,946,614 
Total current assets   7,110,053    10,830,003 
Total non-current assets   19,882,887    19,799,735 
Short-term debt   971,314    1,387,985 
Total current liabilities   5,320,733    7,153,365 
Long-term debt   6,131,819    6,509,894 
Total non-current liabilities   8,872,240    9,547,371 

 

   Joint ventures 
   For the three-month period ended   For the nine-month period ended 
Joint ventures  September 30, 2024   September 30, 2023   September 30, 2024   September  30, 2023 
Net sales   3,741,778    5,025,651    10,742,229    15,031,598 
Cost of sales   (2,577,451)   (3,518,098)   (7,262,929)   (10,835,152)
Income before financial income (expenses) and taxes   888,522    1,248,007    2,680,872    3,499,623 
Financial income   273,144    161,308    855,907    329,379 
Financial expenses   (409,873)   (368,314)   (1,343,457)   (890,498)
Income and social contribution taxes   (200,334)   (255,547)   (677,342)   (719,235)
Net income   521,097    703,433    1,492,251    2,049,902 
Depreciation and amortization   332,398    312,503    961,634    918,276 
Total comprehensive income for the period, net of tax   521,097    703,433    1,492,251    2,049,902 

 

3.3 — Associate companies

 

Listed below is the interest in associate companies:

 

      Equity interests 
    Total capital (*) 
Associate companies  Country  September 30, 2024   December 31, 2023 
Dona Francisca Energética S.A.  Brazil   53.94    51.82 
Newave Energia S.A.  Brazil   33.33    33.33 

 

 

(*) The voting capital is substantially equal to the total capital. The interests reported represent the ownership percentage held directly and indirectly.

 

In July 2024, the Company acquired an additional interest of 2.12% in Dona Francisca Energética S.A. for R$7 million.

 

Although the Company owns more than 50% of Dona Francisca Energética S.A., it does not consolidate the financial statements of this associate because according to the associate by-laws it is necessary 65% of interest to control the company.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

The summarized financial information of the associate companies, accounted for under the equity method, is shown as follows:

 

Associate companies  September 30, 2024   December 31, 2023 
Cash and cash equivalents   70,946    138,389 
Total current assets   124,925    165,048 
Total non-current assets   910,924    424,053 
Total current liabilities   37,141    122,308 
Total non-current liabilities   48,695    7,965 

 

   For the three-month period ended   For the nine-month period ended 
Associate companies  September 30, 2024   September 30, 2023   September 30, 2024   September 30, 2023 
Net sales   61,899    16,677    92,593    49,488 
Cost of sales   (36,215)   (7,571)   (53,331)   (23,855)
Income before financial income (expenses) and taxes   13,747    8,693    10,286    23,020 
Financial income   1,425    422    7,097    819 
Financial expenses   (587)   (1,143)   (2,119)   (3,753)
Income and social contribution taxes   (5,789)   (707)   (5,828)   (1,888)
Net income   8,796    7,265    9,437    18,198 
Depreciation and amortization   2,963    2,176    8,404    7,387 
Total comprehensive income for the period, net of tax   8,796    7,265    9,437    18,198 

 

3.4 — Results in operations with joint ventures

 

On January 17, 2024, the Company signed an agreement for the sale of all its equity interests of 49.85% in the joint venture Diaco S.A. (and subsidiaries) and 50.00% in the joint venture Gerdau Metaldom Corp (and subsidiaries), whose acquirer is the INICIA Group, Gerdau’s partner in these companies, which were part of the Company’s South America Segment and were recorded by the equity method. The transaction took place at a base price corresponding to US$ 325 million (equivalent to R$ 1.5 billion on the date of the transaction) and it is in line with its capital allocation strategy, focusing on the growth and competitiveness of assets with greater potential for long-term value generation. Throughout the first quarter of 2024, after compliance with the corresponding conditions precedent, the transactions were concluded and, as a result of the sale of these interests, the Company recognized a gain of R$ 808.4 million in the line of Results in operations with joint ventures in the Statement of Income, which includes the amount of R$ 407.6 million reclassified from Cumulative translation adjustment, as presented in the Statement of Comprehensive Income, to the income.

 

3.5 — Events of the quarter

 

On September 17, 2024, Gerdau Ameristeel US Inc., subsidiary of Gerdau in North America, signed an agreement to acquire the entire ferrous and non-ferrous scrap processing and recycling business of Dales Recycling Partnership. The acquisition price of approximately US$ 60 million (equivalent to R$ 327 million on September 30, 2024) to be paid in cash, using available own resources, at the closing of the transaction, subject to customary price adjustments, including land, inventory, and fixed assets associated with Dales Recycling’s operations in Tennessee, Kentucky and Missouri, in the United States. Dales Recycling has an annual capacity to process approximately 160,000 tons of ferrous and non-ferrous scrap and reported an average annual EBITDA of approximately US$ 10 million over the past three years (equivalent to R$ 54 million on September 30, 2024). The acquisition aims to increase Gerdau’s captive ferrous scrap supply through proprietary channels, supplying raw material to its operations at a competitive cost. The Company also clarifies that this acquisition is aligned with its strategy of growth and competitiveness of operations through assets with greater potential for long-term value generation and expansion of its presence in more profitable markets for its business. The closing of the transaction occurred on November 1, 2024, the date from which Gerdau Ameristeel US Inc. will have control over the Dales Recycling business.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

NOTE 4 – CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS

 

Cash and cash equivalents

 

   September 30, 2024   December 31, 2023 
Cash   21,371    10,468 
Banks and immediately available investments   8,052,733    2,995,177 
Cash and cash equivalents   8,074,104    3,005,645 

 

Immediate liquidity investments include investments that are readily redeemable, that is, those that have immediate liquidity and low risk of fair value variation.

 

Short-term investments

 

   September 30, 2024   December 31, 2023 
Short-term investments   757,578    2,338,097 

 

Short-term investments include Bank Deposit Certificates and marketable securities, which are used in the Company's operations and cash management and stated at their fair value. Income generated by these investments is recorded as financial income.

 

NOTE 5 – ACCOUNTS RECEIVABLE

 

   September 30, 2024   December 31, 2023 
Trade accounts receivable - in Brazil   2,716,660    2,622,865 
Trade accounts receivable - exports from Brazil   544,049    617,577 
Trade accounts receivable - foreign subsidiaries   2,530,895    1,724,838 
(-) Impairment of financial assets   (117,844)   (89,886)
    5,673,760    4,875,394 

 

Accounts receivable by aging are as follows:

 

   September 30, 2024   December 31, 2023 
Current   5,084,151    4,294,446 
Past-due:          
Up to 30 days   531,270    513,384 
From 31 to 60 days   63,865    48,538 
From 61 to 90 days   11,705    24,027 
From 91 to 180 days   36,747    50,502 
From 181 to 360 days   34,148    13,251 
Above 360 days   29,718    21,132 
(-) Impairment on financial assets   (117,844)   (89,886)
    5,673,760    4,875,394 

 

NOTE 6 - INVENTORIES

 

   September 30, 2024   December 31, 2023 
Finished products   7,535,051    6,971,497 
Work in progress   3,544,093    3,336,780 
Raw materials   3,002,632    3,241,607 
Storeroom supplies   1,308,574    1,266,465 
Imports in transit   541,318    469,601 
(-) Allowance for adjustments to net realizable value   (17,226)   (58,172)
    15,914,442    15,227,778 

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

The allowance for adjustment to net realizable value of inventories, on which the provision and reversal of provision are registered with impact on cost of sales, is as follows:

 

Balance as of January 01, 2023   (47,497)
Provision for the year   (59,783)
Reversal of adjustments to net realizable value   47,747 
Exchange rate variation   1,361 
Balance as of December 31, 2023   (58,172)
Provision for the period   (20,504)
Reversal of adjustments to net realizable value   63,328 
Exchange rate variation   (1,878)
Balance as of September 30, 2024   (17,226)

 

NOTE 7 – INCOME AND SOCIAL CONTRIBUTION TAXES

 

In Brazil, income taxes include federal income tax (IR) and social contribution (CS), which represents an additional federal income tax. The statutory rates for income tax and social contribution are 25% and 9%, respectively, and are applicable for the periods ended on September 30, 2024 and 2023. The foreign subsidiaries of the Company are subject to taxation at rates ranging between 23% and 35%. The differences between the Brazilian tax rates and the rates of other countries are presented under “Difference in tax rates in foreign companies” in the reconciliation of income tax and social contribution below.

 

a) Reconciliations of income and social contribution taxes at statutory rates to amounts presented in the Statement of Income are as follows:

 

   For the three-month period ended 
   September 30, 2024   September 30, 2023 
Income before income taxes   1,798,674    1,906,386 
Statutory tax rates   34%   34%
Income and social contribution taxes at statutory rates   (611,550)   (648,171)
Tax adjustment with respect to:          
- Difference in tax rates in foreign companies   46,928    181,289 
- Equity in earnings of unconsolidated companies   67,634    61,904 
- Deferred tax assets not recognized   4,939    (4,548)
- Interests on tax lawsuits*   9,608    12,385 
- Interest on equity   (1,822)   (709)
- Tax credits and incentives   12,935    5,164 
- Other permanent differences, net   28,899    78,365 
Income and social contribution taxes   (442,429)   (314,321)
Current   (259,991)   (406,628)
Deferred   (182,438)   92,307 

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

   For the nine-month period ended 
   September 30, 2024   September 30, 2023 
Income before income taxes   5,098,028    8,610,897 
Statutory tax rates   34%   34%
Income and social contribution taxes at statutory rates   (1,733,330)   (2,927,705)
Tax adjustment with respect to:          
- Difference in tax rates in foreign companies   680,646    417,646 
- Equity in earnings of unconsolidated companies   131,281    261,669 
- Deferred tax assets not recognized   30,511    (15,548)
- Interests on tax lawsuits*   30,619    118,586 
- Interest on equity   (1,719)   302,450 
- Tax credits and incentives   12,991    14,215 
- Other permanent differences, net   27,071    167,977 
Income and social contribution taxes   (821,930)   (1,660,710)
Current   (899,534)   (1,541,982)
Deferred   77,604    (118,728)

 

* On September 24, 2021, the Federal Supreme Court finalized the judgment of Topic 962, deciding unanimously that the IR and CS levy was not due on the amounts related to interests (Selic rate) on tax lawsuits. Thus, the effects of such judgment were considered to the tax calculation applied to the interests recorded in the periods.

 

b) Tax Assets not booked:

 

The Company did not recognize a portion of tax assets regarding tax losses and negative social contribution from some operations in Brazil in the amount of R$ 277,204 (R$ 282,387 on December 31, 2023), which do not have an expiration date. The subsidiaries abroad had R$ 630,340 (R$ 569,714 as of December 31, 2023) of tax credits on capital losses for which deferred tax assets have not been booked and which expire between 2029 and 2035 and also several tax losses of state credits in the amount of R$ 297,820 (R$ 277,348 as of December 31, 2023), which expire at various dates between 2025 and 2038.

 

NOTE 8 – INVESTMENTS

  

   Balance as of
January 01, 2023
   Equity in
earnings
   Cumulative
Translation
Adjustment
   Capital increase   Conversion of
intercompany loan
into equity
interest
   Negative
goodwill in
acquisition of
equity interest
   Presentation as
Assets held for sale
   Shares
repurchase
   Dividends/ Interest
on equity
   Balance as of
December 31, 2023
 
Investments in North America  2,428,237   591,354   142,830   -   -   -   -   -   (396,015)  2,766,406 
Investments in South America  1,060,770   230,176   17,060   -   -   -   (1,210,041)  (47,006)  (50,959)  - 
Investments in Special Steel  256,813   10,582   1,127   -   -   -   -   -   -   268,522 
Others  150,698   (4,506)  15,197   524,185   141,070   11,195   -   -   (14,318)  823,521 
   3,896,518   827,606   176,214   524,185   141,070   11,195   (1,210,041)  (47,006)  (461,292)  3,858,449 

 

   Balance as of
December 31, 2023
   Equity in
earnings
   Cumulative
Translation
Adjustment
   Capital increase   Dividends/Interest
on equity
   Other movements   Balance as of
September 30, 2024
 
Investments in North America   2,766,406    280,626    (73,120)   -    (59,146)   -    2,914,766 
Investments in Special Steel   268,522    23,845    (1,945)   -    (5,526)   -    284,896 
Others   823,521    81,649    3,961    101,069    (3,829)   (8,839)   997,532 
    3,858,449    386,120    (71,104)   101,069    (68,501)   (8,839)   4,197,194 

  

NOTE 9 – PROPERTY, PLANT AND EQUIPMENT

 

a) Summary of changes in property, plant and equipment – during the three-month period ended on September 30, 2024, acquisitions amounted to R$ 1,509,478 (R$ 1,485,714 as of September 30, 2023), and disposals amounted to R$ 20,383 (R$ 11,928 as of September 30, 2023). During the nine-month period ended on September 30, 2024, acquisitions amounted to R$ 3,787,574 (R$ 3,668,775 as of September 30, 2023), and disposals amounted to R$ 46,696 (R$ 36,546 as of September 30, 2023).

 

 

 

  

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

  

The additions to property, plant and equipment in the nine-month period ended on September 30, 2024 include a non-cash effect amounted to R$ (123,692).

 

b) Capitalized borrowing costs – borrowing costs capitalized during the three-month period ended on September 30, 2024 amounted to R$ 28,729 (R$ 15,406 as of September 30, 2023). Borrowing costs capitalized during the nine-month period ended on September 30, 2024 amounted to R$ 93,876 (R$ 40,200 as of September 30, 2023).

 

c) Impairment of assets – In the second quarter of 2024, due to the lack of expectation of future use of some assets of its industrial plants, tests carried out on other long-lived assets identified losses due to non-recoverability in the amount of R$ 199,627 in the Brazil segment. These losses were determined based on the difference between the carrying amount of the assets and its recoverable amount. These losses were recorded as an expense, in the “Impairment of assets” line in the Consolidated Statements of Income, as detailed in Note 23.

 

d) Guarantees – no property, plant and equipment were pledged as collateral for loans and financing on September 30, 2024 and December 31, 2023.

 

NOTE 10 – GOODWILL

 

The changes in goodwill are as follows:

 

   Goodwill   Accumulated
impairment losses
   Goodwill after
Impairment losses
 
Balance as of January 1, 2023   21,745,547    (10,111,083)   11,634,464 
(+/-) Foreign exchange effect   (1,377,739)   568,423    (809,316)
Balance as of December 31, 2023   20,367,808    (9,542,660)   10,825,148 
(+/-) Foreign exchange effect   2,409,451    (1,102,384)   1,307,067 
Balance as of September 30, 2024   22,777,259    (10,645,044)   12,132,215 

 

The amounts of goodwill by segment are as follows:

 

   September 30, 2024   December 31, 2023 
Brazil   373,135    373,135 
Special Steels   4,014,069    3,566,989 
North America   7,745,011    6,885,024 
    12,132,215    10,825,148 

 

The Company concluded that there are no indications that demand the performance of the impairment test of goodwill and other long-lived assets for the period ended on September 30, 2024, as detailed in Note 23.

 

NOTE 11 – TRADE ACCOUNTS PAYABLE (domestic market, debtor risk and imports)

 

   September 30, 2024   December 31, 2023 
Trade accounts payable - domestic market   4,043,996    4,120,701 
Trade accounts payable - debtor risk   454,421    584,320 
Trade accounts payable - imports   1,157,949    1,196,162 
    5,656,366    5,901,183 

 

Under “Trade Accounts Payable - Domestic Market”, the Company presents balances payable arising from the acquisition of goods and services in the domestic markets of each of the countries where the Company and its subsidiaries operate.

 

The Company has contracts with financial institutions in order to allow its suppliers to anticipate their receivables through an operation called “Trade Accounts Payable – Debtor Risk”. In this operation, suppliers can transfer, at their discretion, the right to receive the securities to a financial institution, which, in turn, becomes the holder of the rights of the suppliers' receivables. The average discount rate on risk transactions carried out by our suppliers with financial institutions in Brazil and with subsidiaries in the United States was based on market conditions. The transfer of the right to receive the Company's securities, at the supplier's discretion, does not result in a relevant change in the payment term, nor does it imply the payment of interest by the Company, as the financial cost of such transfer is the responsibility of the supplier.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated) 

(Unaudited)

 

 

The balances presented as “Trade Accounts Payable - Imports” substantially refer to the purchase of coal and other raw materials abroad, where in commercial transactions the supplier may require the issuance of a letter of credit or similar risk mitigation instrument to ship the products. On September 30, 2024, contracts negotiated via letter of credit had a payment term of up to 180 days and rates that also varied, depending on market conditions.

 

The Company permanently monitors the composition of the portfolio and the conditions established with suppliers, which have not undergone significant changes in relation to what had been practiced historically.

 

NOTE 12 – LOANS AND FINANCING

 

Loans and financing are as follows:

 

   September 30, 2024   December 31, 2023 
Ten/Thirty Years Bonds   7,962,192    7,051,637 
Other financing   2,184,642    3,028,038 
Total financing   10,146,834    10,079,675 
Current   1,722,124    1,783,201 
Non-current   8,424,710    8,296,474 
           
Principal amount of the financing   9,854,818    9,903,534 
Interest amount of the financing   292,016    176,141 
Total financing   10,146,834    10,079,675 

 

As of September 30, 2024, the nominal weighted average cost of debts denominated in US dollars is 5.44% p.a. (5.68% p.a. on December 31, 2023), for debts denominated in Real of 106.6% of the CDI p.a. (104.9% of the CDI p.a. on December 31, 2023) and for other currencies 5.33% p.a. (6.49% p.a. on December 31, 2023).

 

Loans and financing, denominated in Reais, are substantially adjusted at a fixed rate or indexed to the CDI (Interbank Deposit Certificates).

 

Summary of loans and financing by currency:

 

   September 30, 2024   December 31, 2023 
Brazilian Real (R$)   1,742,448    2,667,065 
U.S. Dollar (US$)   8,128,718    7,169,183 
Other currencies   275,668    243,427 
    10,146,834    10,079,675 

 

The amortization schedules of long-term loans and financing are as follows:

 

   September 30, 2024   December 31, 2023 
2025 (*)   404,497    1,156,718 
2026   166,818    168,374 
2027   2,227,993    2,001,442 
2028   10,739    14,742 
2029 on   5,614,663    4,955,198 
    8,424,710    8,296,474 

 

(*) For the period as of September 30,2024, the amounts represents dates from October 1, 2025 to December 31, 2025.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

a) Credit Lines

 

In September 2022, the Company completed the renewal of the Global Credit Line in the total amount of US$ 875 million (equivalent to R$ 4,767 million as of September 30, 2024) with maturity in September 2027. The transaction aims to provide liquidity to operations in North America and Latin America, including Brazil. The companies Gerdau S.A., Gerdau Açominas S.A. and Gerdau Aços Longos S.A. provide guarantee for this transaction. As of September 30, 2024, no amount of this credit line was used.

 

The Company and its subsidiaries are not subject to default clauses (covenants) linked to financial ratios. Non-financial performance clauses have been complied with.

 

NOTE 13 – DEBENTURES

 

       Quantity as of September 30, 2024             
Issuance   General Meeting  Issued   Held in treasury   Maturity   September 30, 2024   December 31, 2023 
14th  August 26, 2014   20,000    20,000    August 30, 2034    -    - 
16th - B   April 25, 2019   800,000    -    May 6, 2026    835,349    813,633 
17th  May 29, 2024   1,500,000    -    May 29, 2029    1,550,716    - 
Total Consolidated                      2,386,065    813,633 
                              
Current                      91,321    14,421 
Non-current                      2,294,744    799,212 

 

Maturities of long-term amounts are as follows:

 

    September 30, 2024   December 31, 2023 
2026    799,456    799,212 
2029 on    1,495,288    - 
     2,294,744    799,212 

 

The debentures are denominated in Brazilian Reais, are nonconvertible, and pay variable interest as a percentage of the CDI – Interbank Deposit Certificate.

 

The average notional interest rate was 2.75% and 5.21% for the three and nine-month periods ended on September 30, 2024, respectively (3.41% and 10.20% for the three and nine-month periods ended on September 30, 2023, respectively).

 

In May 2024, the Company announced the 17th issuance of debentures where it issued 1,500,000 (one million and five hundred thousand) debentures with a nominal unit value of R$ 1, totaling R$ 1.5 billion.

 

NOTE 14 - FINANCIAL INSTRUMENTS

 

a) General considerations - Gerdau S.A. and its subsidiaries enter into transactions with financial instruments whose risks are managed through market strategies discussed and shared with senior management and in accordance with internal guidelines and control systems for exposure limits to them. All financial instruments are recorded in the accounting books and presented as short-term investments, trade accounts receivable, related parties (assets and liabilities), fair value of derivatives (assets and liabilities), other current assets, other non-current assets, trade accounts payable – domestic market, trade accounts payable – debtor risk, trade accounts payable - imports, loans and financing, debentures, other current liabilities and other non-current liabilities.

 

The Company has derivatives and non-derivative instruments, such as the hedge for some operations under hedge accounting. These operations are intended to protect the Company against exchange rate fluctuations on foreign currency loans, interest rate and commodity prices fluctuations. These transactions are carried out considering direct active or passive exposures, without leverage.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

b) Fair Value — the Fair Value of the financial instruments is as follows:

 

   September 30, 2024   December 31, 2023 
   Book   Fair   Book   Fair 
   value   value   value   value 
Assets                    
Short-term investments   757,578    757,578    2,338,097    2,338,097 
Trade accounts receivable - net   5,673,760    5,673,760    4,875,394    4,875,394 
Fair value of derivatives   55,687    55,687    766    766 
Other current assets   726,160    726,160    543,288    543,288 
Other non-current assets   329,183    329,183    355,390    355,390 
                     
Liabilities                    
Trade accounts payable - domestic market   4,043,996    4,043,996    4,120,701    4,120,701 
Trade accounts payable - debtor risk   454,421    454,421    584,320    584,320 
Trade accounts payable - imports   1,157,949    1,157,949    1,196,162    1,196,162 
Loans and Financing   10,146,834    10,461,402    10,079,675    10,161,103 
Debentures   2,386,065    2,384,979    813,633    812,413 
Related parties   -    -    24,992    24,992 
Fair value of derivatives   9,601    9,601    20,648    20,648 
Other current liabilities   1,279,897    1,279,897    1,192,461    1,192,461 
Other non-current liabilities   550,591    550,591    859,917    859,917 

 

The fair values of Loans and Financing and Debentures are based on market premises, which may take into consideration discounted cash flows using equivalent market rates and credit rating. All other financial instruments, which are recognized in the Consolidated Financial Statements at their carrying amount, are substantially similar to those that would be obtained if they were traded in the market. However, because there is no active market for these instruments, differences could exist if they were settled in advance. The fair value hierarchy of the financial instruments above are presented in Note 14.g.

 

c) Risk factors that could affect the Company’s and its subsidiaries’ businesses:

 

Price risk of commodities: this risk is related to the possibility of changes in prices of the products sold by the Company or in prices of raw materials and other inputs used in the productive process. Since the Company operates in a commodity market, net sales and cost of sales may be affected by changes in the international prices of their products or materials. In order to minimize this risk, the Company constantly monitors the price variations in the domestic and international markets. Furthermore, the Company may contract derivatives in order to reduce this risk.

 

Interest rate risk: this risk arises from the effects of fluctuations in interest rates applied to the Company’s financial liabilities or assets and future cash flows and income. The Company evaluates its exposure to these risks: (i) comparing financial assets and liabilities denominated at fixed and floating interest rates and (ii) monitoring the variations of interest rates like Secured Overnight Financing Rate (SOFR) and CDI. Accordingly, the Company may enter into interest rate swaps in order to reduce this risk.

 

Exchange rate risk: this risk is related to the possibility of fluctuations in exchange rates affecting the amounts of financial assets or liabilities or of future cash flows and income. The Company assesses its exposure to the exchange rate by measuring the difference between the amount of its assets and liabilities in foreign currency. The Company understands that the accounts receivables originated from exports, its cash and cash equivalents denominated in foreign currencies and its investments abroad are more than equivalent to its liabilities denominated in foreign currency. Since the management of these exposures occurs at each operation level, if there is a mismatch between assets and liabilities denominated in foreign currency, the Company may contract derivative financial instruments in order to mitigate the effect of exchange rate fluctuations.

 

Credit risk: this risk arises from the possibility of the Company not receiving amounts arising from sales to customers or investments made with financial institutions. In order to minimize this risk, the Company adopt the procedure of analyzing in details of the financial position of their customers, establishing a credit limit and constantly monitoring their balances. Regarding financial investments, the Company only carries out transactions with first-rate institutions and with low credit risk, as assessed by rating agencies and risk mitigation parameters defined in the Company’s internal guidelines.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

Capital management risk: this risk comes from the Company’s choice in adopting a financing structure for its operations. The Company manages its capital structure, which consists of a ratio between the financial debts and its own capital (Net Equity) based on internal policies and benchmarks. The Key Performance Indicators (KPI) related to the “Capital Structure Management” objective are: WACC (Weighted Average Cost of Capital), Net Debt/EBITDA (Earnings before interest, income tax, depreciation and amortization), Coverage Ratio of Net Financial Expenses (EBITDA/Net Financial Expenses) and Debt/Total Capitalization Ratio. Net Debt is formed by the principal of the debt reduced by cash, cash equivalents and short-term investments (notes 4, 12 and 13). Total Capitalization is formed by the Total Debt (composed of the principal of the debt) and the Net Equity (Note 17). The Company may change its capital structure, according to economic and financial conditions, in order to optimize its financial leverage and debt management. At the same time, the Company seeks to improve its ROCE (Return on Capital Employed) through the implementation of working capital management and an efficient program of investments in property, plant and equipment. In the long term, the Company seeks to remain within the parameters below, admitting occasional variations in the short term:

 

Net debt/EBITDA   Less or equal to 1.5 times
Gross debt limit   R$ 12 billion
Average maturity of debt   more than 6 years

 

These key indicators are used to monitor objectives described above and may not necessarily be used as indicators for other purposes, such as impairment tests.

 

Liquidity risk: The Company’s management policy of indebtedness and cash on hand is based on using the committed lines and the currently available credit lines with or without a guarantee in export receivables for maintaining adequate levels of short, medium, and long-term liquidity. The maturity of long-term loans and financing, and debentures are presented in Notes 12 and 13, respectively.

 

Sensitivity analysis:

 

The Company performed a sensitivity analysis, which can be summarized as follows:

 

Impacts on Statements of Income            
Assumptions  Percentage of change   September 30, 2024   September 30, 2023 
Foreign currency sensitivity analysis - Loans and financing   5%   5,110    1,558 
Foreign currency sensitivity analysis - Imports/Exports   5%   30,695    23,181 
Interest rate sensitivity analysis   10bps   35,749    29,601 
Sensitivity analysis of changes in prices of products sold   1%   173,780    170,633 
Sensitivity analysis of changes in raw material and commodity prices   1%   107,606    106,352 
Currency forward contracts   5%   77,541    14,583 
Commodity derivates   5%   1,555    1,067 
Swaps USD x DI   5%   8,583    104 
Swaps IPCA x DI   5%   -    1 

 

Foreign currency sensitivity analysis: As of September 30, 2024, the Company is mainly exposed to variations between the Real and the Dollar. The sensitivity analysis carried out by the Company considers the effects of a 5% increase or decrease between the Real and the Dollar in its non-hedged debts, trade accounts receivable - exports from Brazil and trade accounts payable – imports. Variations between the local currencies of other countries and the Dollar do not represent material exposures. In this analysis, if the Real appreciates against the Dollar, this would represent a gain of R$ 5.110 (gain of R$ 1,558 as of September 30, 2023). If the Real depreciates against the Dollar, this would represent an expense of the same amount. As for foreign currency variations in Imports/Exports, if the Real appreciates against the Dollar, this would represent an expense of R$ 30,695 (gain of R$ 23,181 as of September 30, 2023), if the Real depreciates against the Dollar, this would represent a gain of the same value.

 

The net values of other assets and other liabilities in foreign currencies do not present significant risks of impacts due to fluctuations in the exchange rate.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

Interest rate sensitivity analysis: The interest rate sensitivity analysis made by the Company considers the effects of an increase or reduction of 10 basis point (bps) on the average interest rate applicable to the floating part of its debt. The calculated impact, considering this variation in the interest rate totals R$ 35,750 as of September 30, 2024 (R$ 29,601 as of September 30, 2023) and would impact the Financial expenses account in the Consolidated Statements of Income. The specific interest rates to which the Company is exposed are related to the loans, financing, and debentures presented in Notes 12 and 13, and are mainly comprised by SOFR and CDI — Interbank Deposit Certificate.

 

Sensitivity analysis of changes in sales price of products and price of raw materials and other inputs used in production: The Company is exposed to changes in the price of its products. This exposure is associated with the fluctuation of the sales price of the Company’s products and the price of raw materials and other inputs used in the production process, mainly for operating in a commodity market. The sensitivity analysis made by the Company considers the effects of an increase or of a reduction of 1% on both prices. The impact measured considering this variation in the price of products sold, considering the revenues and costs for the period ended on September 30, 2024, totals R$ 173,780 (R$ 170,633 as of September 30, 2023) and the variation in the price of raw materials and other inputs totals R$ 107,606 as of September 30, 2024 (R$ 106,352 as of September 30, 2023). The impact in the price of products sold and raw materials would be recorded in the accounts Net Sales and Cost of Sales, respectively, in the Consolidated Statements of Income. The Company does not expect to be more vulnerable to a change in one or more specific product or raw material.

 

Sensitivity analysis of currency forward contracts: the Company has exposure to dollar forward contracts for some of its assets and liabilities. The sensitivity analysis carried out by the Company considers the effects of a 5% increase or decrease in the Dollar against the Argentinian Peso, and its effects on the mark to market of these derivatives. A 5% increase in the Dollar against the Argentinian Peso represents an expense of R$ 77,541 as of September 30, 2024 (expense of R$ 14,583 as of September 30, 2023) and a 5% decrease in the Dollar against the Argentinian Peso represents a gain in the same amount in September 30, 2024 and an expense in the same amount in September 30, 2023. Forward contracts in Dollar/Argentinian Peso were intended to cover asset and liability positions in Dollars and the effects of the mark to market of these contracts were recorded in the Consolidated Statement of Income. Dollar forward contracts to which the Company is exposed are presented in note 14.e.

 

Sensitivity analysis of commodity forward contracts: the Company has exposure to Commodity forward contracts (coal, nickel and energy) for some of its liabilities. The sensitivity analysis carried out by the Company considers the effects of a 5% increase or decrease in the price of the commodity, and its effects on the mark to market of these derivatives. A 5% increase in the price of the commodity represents an expense of R$ 1,555 as of September 30, 2024 (gain of R$ 1,067 as of September 30, 2023), and a 5% decrease in the price of the commodity represents an income in September 30, 2024 and an expense in September 30, 2023 in the same amount. The mark to market effects of these contracts were recorded in the Consolidated Statement of Income. Commodity forward contracts to which the Company is exposed are presented in Note 14.e.

 

Sensitivity analysis of USD x DI swaps: the Company has USD x DI swaps to protect some of its Loans and financing. The sensitivity analysis carried out by the Company considers the impact on the MTM of a 5% increase in the Dollar against Real for all vertices of the respective operations. This variation would represent an income of R$ 8,583 (expense of R$ 104 as of September 30, 2023). These effects would be recognized in the Consolidated Income Statement. The USD x DI swaps that the Company is exposed to are presented in Note 14.e.

 

Sensitivity analysis of IPCA x DI swaps: The Company contracts IPCA x DI swaps to hedge some of its Loans and financing. When swaps are contracted, the sensitivity analysis performed by the Company considers the impact on the MTM of a 50 bps increase in the DI x Pre interest rate curve for all vertices of the respective transactions. On September 30, 2024, the Company does not have IPCA x DI swaps (R$ 1 on September 30, 2023). These effects would be recognized in the Consolidated Statement of Income.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

d) Financial Instruments per Category

 

Summary of the financial instruments per category:

 

September 30, 2024
Assets
  Financial asset at amortized
cost
   Financial asset at fair value
through proft or loss
   Total 
Short-term investments   -    757,578    757,578 
Trade accounts receivable   5,673,760    -    5,673,760 
Fair value of derivatives   -    55,687    55,687 
Other current assets   710,490    15,670    726,160 
Other non-current assets   326,918    2,265    329,183 
Total   6,711,168    831,200    7,542,368 
Financial income (expenses) for the three-month period ended on September 30, 2024   40,880    108,355    149,235 
Financial income (expenses) for the nine-month period ended on September 30, 2024   420,779    359,106    779,885 

 

Liabilities  Financial liability at fair
value through profit or loss
   Financial liability at
amortized cost
   Total 
Trade accounts payable - domestic market   -    4,043,996    4,043,996 
Trade accounts payable - debtor risk   -    454,421    454,421 
Trade accounts payable - imports   -    1,157,949    1,157,949 
Loans and financing   -    10,146,834    10,146,834 
Debentures   -    2,386,065    2,386,065 
Related parties   -    -    - 
Fair value of derivatives   9,601    -    9,601 
Other current liabilities   -    1,279,897    1,279,897 
Other non-current liabilities   -    550,591    550,591 
Total   9,601    20,019,753    20,029,354 
Financial income (expenses) for the three-month period ended on September 30, 2024   (6,523)   (465,505)   (472,028)
Financial income (expenses) for the nine-month period ended on September 30, 2024   (89,750)   (2,085,953)   (2,175,703)

 

December 31, 2023
Assets
  Financial asset at amortized
cost
   Financial asset at fair value
through proft or loss
   Total 
Short-term investments   -    2,338,097    2,338,097 
Trade accounts receivable   4,875,394    -    4,875,394 
Fair value of derivatives   -    766    766 
Other current assets   529,629    13,659    543,288 
Other non-current assets   353,370    2,020    355,390 
Total   5,758,393    2,354,542    8,112,935 
Financial income (expenses) for the three-month period ended on September 30, 2023   199,802    178,463    378,265 
Financial income (expenses) for the nine-month period ended on September 30, 2023   473,396    473,509    946,905 

 

Liabilities  Financial liability at fair
value through profit or loss
   Financial liability at
amortized cost
   Total 
Trade accounts payable - domestic market   -    4,120,701    4,120,701 
Trade accounts payable - debtor risk   -    584,320    584,320 
Trade accounts payable - imports   -    1,196,162    1,196,162 
Loans and financing   -    10,079,675    10,079,675 
Debentures   -    813,633    813,633 
Related parties   -    24,992    24,992 
Fair value of derivatives   20,648    -    20,648 
Other current liabilities   -    1,192,461    1,192,461 
Other non-current liabilities   -    859,917    859,917 
Total   20,648    18,871,861    18,892,509 
Financial income (expenses) for the three-month period ended on September 30, 2023   (12,570)   (843,449)   (856,019)
Financial income (expenses) for the nine-month period ended on September 30, 2023   (28,591)   (1,868,898)   (1,897,489)

 

e) Operations with derivative financial instruments

 

Risk management objectives and strategies: In order to execute its strategy of sustainable growth, the Company implements risk management strategies in order to mitigate market risks.

 

The objective of derivative transactions is always related to mitigating market risks as stated in our policies and guidelines. All derivative instruments in force are monthly reviewed by the Financial Risk Committee, which validates the fair value of such instruments. All gains and losses on derivative instruments are recognized at their fair value in the Company’s consolidated financial statements in the line of Gains (Losses) on financial instruments, net.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

Policy for use of derivatives: The Company is exposed to various market risks, including changes in exchange rates, commodities prices and interest rates. The Company uses derivatives and other financial instruments to reduce the impact of such risks on the fair value of its assets and liabilities or in future cash flows and income. The Company has established policies to evaluate the market risks and to approve the use of derivative transactions related to these risks. The Company enters into derivative financial instruments solely to manage the market risks mentioned above and never for speculative purposes. Derivative financial instruments are used only when they have a related position (asset or liability exposure) resulting from business operations, investments and financing.

 

Policy for determining fair value: the fair value of derivative financial instruments is determined using models and other valuation techniques, including future prices and market curves.

 

Derivative transactions may include interest rate and/or currency swaps, currency futures contracts and currency options contracts.

 

Currency forward contracts: The Company may contract forward contract operations, through which it receives/pays a fixed dollar amount and receives/pays a fixed Real/Argentinian peso amount. Counterparties are always top - tier financial institutions with low credit risk.

 

Swap Contracts: The Company may contract a swap contract operation, through which it exchanges interest rate indices or local and/or foreign currency. Counterparties are always top - tier financial institutions with low credit risk.

 

The derivatives instruments can be summarized and categorized as follows:

 

       Notional value  Amount receivable   Amount payable  
Contracts  Position  September 30, 2024  December 31, 2023  September 30, 2024   December 31, 2023   September 30, 2024   December 31, 2023  
Currency forward contracts                               
Maturity in 2024  sold/buyed in US$  US$ 283,3 million   US$ 34.2 million   24,335    -    124   17,337  
                                
Commodity derivates                               
Maturity in 2024  buyed in US$   US$ 22,2 million   US$ 12.1 million   -    32    7,252   1,349  
Maturity in 2025  buyed in US$   US$ 3,6 million      -    -    2,225   -  
                                
Commodity contracts                               
Maturity in 2026  -  -  -   14,488    -    -   -  
                                
Swaps IPCA x DI                               
Maturity in 2025  -  -  R$ 450.0 million   -    734    -   356  
                                
Swaps USD x DI                               
Maturity in 2026  107,9% of CDI   US$ 30.6 milion  US$ 30.6 million   16,864    -    -   1,606  
                                
Total fair value of financial instruments             55,687    766    9,601   20,648  

 

   September 30, 2024   December 31, 2023 
Fair value of derivatives          
Current assets   38,823    766 
Other non-current assets   16,864    - 
    55,687    766 
Fair value of derivatives          
Current liabilities   9,601    19,042 
Non-current liabilities   -    1,606 
    9,601    20,648 

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

   For the nine-month period ended  
   September 30, 2024   September 30, 2023 
Net Income          
Gains on financial instruments   93,119    16,022 
Losses on financial instruments   (89,750)   (28,592)
    3,369    (12,570)
Other comprehensive income          
Gains on financial instruments   -    783 
Loss on financial instruments   (2,309)   - 
    (2,309)   783 

 

f) Net investment hedge

 

The Company designated as hedge of part of its net investments in subsidiaries abroad the operations of Ten Years Bonds. Consequently, the effect of exchange rate changes on these debts on the amount of US$ 0.4 billion (equivalent to R$ 2.4 billion on September 30, 2024) (designated as a hedge) has been recognized in the Statement of Comprehensive Income.

 

The Company demonstrated effectiveness of the hedge as of its designation dates and demonstrated the high effectiveness of the hedge from the contracting of each debt for the acquisition of these companies abroad, whose effects were measured and recognized directly in the Statement of Comprehensive Income as an unrealized gain, net of taxes, in the amount R$ 45,955 for the three-month period ended on September 30, 2024 (loss of R$ 167,306 for the three-month period ended on September 30, 2023) and as an unrealized loss, net of taxes, in the amount R$ 249,910 for the nine-month period ended on September 30, 2024 (gain of R$ 194,352 for nine-month period ended on September 30, 2023).

 

The objective of the hedge is to protect, during the existence of the debt, the amount of part of the Company’s investment in the subsidiaries abroad mentioned above against positive and negative changes in the exchange rate. This objective is consistent with the Company’s risk management strategy. Prospective and retrospective tests demonstrated the effectiveness of these instruments.

 

g) Measurement of fair value:

 

IFRS Accounting Standards defines fair value as the price that would be received for the sale of an asset or that would be paid for the transfer of a liability in an arm’s length transaction between market participants on the measurement date. The standard also establishes the classification by price quoted in an active market for an identical asset or liability or when it is based on a valuation technique that uses only observable market data.

 

As detailed in Note 14.d, on September 30, 2024 and December 31, 2023, the Company maintained certain assets classified as Financial asset at fair value through profit or loss and liabilities classified as Financial Liability at fair value through profit or loss, whose fair value measurement is required on a recurring basis.

 

The Company’s financial assets and liabilities, measured at fair value on a recurring basis, are measured by a valuation technique that uses only observable market data.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

h) Changes in liabilities from Cash flow from financing activities:

 

The Company has summarized below the changes in the liabilities of cash flow from financing activities, from its Statement of Cash Flows:

 

       Cash effects   Non-cash effects     
   January 01, 2023   Received/(Paid)
from financing
activities
   Interest Payment   Interest on loans,
financing and loans
with related parties
   Exchange
Variance and
others
   September 30, 2023 
Related Parties, net   24,890    398    -    -    -    25,288 
Leasing payable   1,030,643    (308,819)   (78,632)   78,632    644,264    1,366,088 
Loans and Financing, Debentures and Fair value of derivatives   12,623,174    (1,033,841)   (458,667)   630,927    (285,360)   11,476,233 

 

 

       Cash effects   Non-cash effects     
   December 31, 2023   Received/(Paid)
from financing
activities
   Interest Payment   Interest on loans,
financing and loans
with related parties
   Exchange
Variance and
others
   September 30, 2024 
Related Parties, net   24,992    (24,992)   -    -    -    - 
Leasing payable   1,277,602    (328,287)   (103,006)   103,006    346,037    1,295,352 
Loans and Financing, Debentures and Fair value of derivatives   10,913,190    446,916    (486,091)   577,111    1,035,687    12,486,813 

 

NOTE 15 – TAX, CIVIL AND LABOR CLAIMS AND CONTINGENT ASSETS

 

The Company and its subsidiaries are party in judicial and administrative proceedings involving tax, civil and labor matters. Based on the opinion of its legal advisors, Management believes that the provisions recorded for these judicial and administrative proceedings is sufficient to cover probable and reasonably estimable losses from unfavorable court decisions and that the final decisions will not have significant effects on the financial position, operational results and liquidity of the Company and its subsidiaries.

 

For claims whose expected loss is considered probable, the provisions have been recorded considering the judgment of the Management of the Company with the assistance of its legal advisors and the provisions are considered enough to cover expected probable losses. The provisions balances are as follows:

 

I) Provisions

 

   September 30, 2024   December 31, 2023 
a) Tax provisions   1,880,312    1,737,984 
b) Labor provisions   392,703    413,179 
c) Civil provisions   34,043    34,662 
    2,307,058    2,185,825 

 

a) Tax Provisions

 

Tax provisions refer mainly to discussions related to ICMS, IPI, Income tax and social contribution, social security contributions, offsetting of PIS and COFINS credits and incidence of PIS and COFINS on other revenues.

 

b) Labor Provisions

 

The Company is party to a group of individual and collective labor and/or administrative lawsuits involving various labor amounts and the provision arises from unfavorable decisions and/or the probability of loss in the ordinary course of proceedings with the expectation of outflow of financial resources by the Company.

 

c) Civil Provisions

 

The Company is party to a group of civil, arbitration and/or administrative lawsuits involving various claims and the provision arises from unfavorable decisions and/or probable losses in the ordinary course of proceedings with the expectation of outflow of financial resources for the Company.

 

 

 

 

GERDAU S.A.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

as of September 30, 2024

(In thousands of Brazilian Reais – R$, unless otherwise stated)

(Unaudited)

 

 

The changes in the tax, civil and labor provisions are shown below:

 

   September 30, 2024   December 31, 2023 
Balance at the beginning of the year   2,185,825    2,026,003 
(+) Additions   168,223    208,219 
(+) Monetary correction   115,822    157,227 
(-) Reversal of accrued amounts   (162,953)   (205,202)
(+) Foreign exchange effect on provisions in foreign currency   141    (422)
Balance at the end of period   2,307,058    2,185,825 

 

II) Contingent liabilities for which provisions were not recorded as of September 30, 2024

 

Considering the opinion of legal advisors and management’s assessment, contingencies listed below have the probability of loss considered as possible (but not likely) and due to this classification, accruals have not been made in accordance with IFRS Accounting Standards.

 

a) Tax contingencies

 

a.1) The Company and its subsidiaries Gerdau Aços Longos S.A. and Gerdau Açominas S.A. have lawsuits related to the ICMS (state VAT) which are mostly related to credit rights and rate differences, whose demands totaled R$ 719.840 (R$ 603,926 as of December 31, 2023).

 

a.2) The Company and certain of its subsidiaries in Brazil are parties to claims related to: (i) IPI – Tax on Industrialized Products, substantially related to IPI credit on inputs, whose demands total the updated amount of R$ 509,668 (R$ 465,843 as of December 31, 2023; (ii) PIS and COFINS, substantially related to disallowance of credits on inputs totaling R$ 2,006,859 (R$ 1,991,993 as of December 31, 2023), (iii) social security contributions in the total of R$ 153,468 (R$ 145,786 as of December 31, 2023) and (iv) other taxes, whose updated total amount is currently R$ 738,373 (R$ 641,405 as of December 31, 2023).

 

a.3) The Company and its subsidiary Gerdau Aços Longos S.A. are parties to administrative proceedings related to Withholding Income Tax, levied on interest remitted abroad, linked to export financing formalized through “Prepayment of Exports Agreements” (PPE) or “Advance Export Receipt” (RAE), in the updated amount of R$ 1,681,780 (R$ 1,533,806 as of December 31, 2023), of which: (i) R$ 866,713 (R$ 824,113 as of December 31, 2023) correspond to five lawsuits of the subsidiary Gerdau Aços Longos S.A. that are processed in the administrative sphere where, currently, one lawsuit is at the first instance of the Administrative Board of Tax Appeals (CARF) awaiting the judgment of the Voluntary Appeals filed by the Company, three lawsuits await the judgment of the declaratory appeals filed against the judgments that, by a casting vote, denied the Voluntary Appeals filed by the Company, and one lawsuit that is in the Superior Chamber of Tax Appeals (CSRF) of CARF, for judgment of the Special Appeal filed by the Company; and (ii) R$ 815,067 (R$ 709,693 as of December 31, 2023) correspond to three lawsuits involving Gerdau S.A., two of which had their discussion concluded in the administrative sphere, with the Company having started prep