Despite the weaker results, the company also announced a fresh dividend payout, which came as a surprise for some analysts and likely drove the firm's shares up more than 3% in early trading.
"Forget third quarter numbers, dividends drive stock prices," JPMorgan analysts said as Gerdau announced roughly 700 million reais ($135 million) in interest on capital and dividends of about 2.9 billion reais.
Gerdau's bottom line reached 3.02 billion reais in the quarter, down 33.7% from a year earlier but roughly in line with forecasts, as analysts polled by Refinitiv had expected net income of 2.97 billion reais in the period.
Peers such as Usiminas and Companhia Siderurgica Nacional had already reported weaker quarterly results, leading analysts to highlight how rising costs were set to pressure steelmakers' results in Brazil in the three months to September.
Gerdau said in a securities filing that its steel sales dropped 10% to 2.93 million tonnes in the period, while net revenues came in nearly stable year-on-year at 21.15 billion reais, also matching analyst forecasts.
Despite the ongoing cost pressures, Gerdau described the results as "solid," noting there was a tougher comparison base due to strong volumes seen a year ago.
It also mentioned that lower international prices weighed on its adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, which dropped 23.6% to 5.37 billion reais.
"Results were sequentially weaker across all regions but remained healthy overall," analysts at Itau BBA said. They highlighted a resilient free cash flow generation despite the EBITDA contraction while also praising the extra dividends.
($1 = 5.1745 reais)
(Reporting by Gabriel Araujo; Editing by Steven Grattan and Mark Potter)
