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
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 | |
| 10 | bps | |
| 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