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Gerdau SA (GGB) reported 1Q EBITDA of R$1.008B, 8% short of the Street’s R$1.093B and below 4Q’s R$1.025B as abnormally high rainfall in Brazil limited the supply of raw materials, hurting production and shipments.
Guidance was qualitative and fairly limited with GGB saying that margins should improve in Brazil going forward as the rainfall issues have abated and lower international coal prices start to flow through the P&L.
Management raised caution on European SBQ hinting at production cuts, but remains optimistic about the US market, with the announcement of an additional project to expand SBQ capacity.
The company continues to actively seek a partner to help “monetize” and develop its 2.9 billion tonnes of iron ore resources. The list of potential partners is getting shorter, but management did not give a time frame for a decision.
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