Gerdau S A : Quarterly Results 1Q21

Quarterly

GERDAU S.A. 1Q21

CONSOLIDATED INFORMATION

São Paulo, May 5, 2021 - Gerdau S.A. (B3: GGBR4 / NYSE: GGB) announces its results for the first quarter of 2021. The consolidated financial statements of the Company are presented in Brazilian real (R$), in accordance with International Financial Reporting Standards (IFRS) and the accounting practices adopted in Brazil. The information in this report does not include the data of associates and jointly controlled entities, except where stated otherwise.

GERDAU'S PERFORMANCE IN 1Q21

Operating Results

CONSOLIDATED	1Q21	1Q20	∆	4Q20	∆
Volumes (1,000 tonnes)
Production of crude steel	3,151	3,188	-1%	3,374	-7%
Shipments of steel	3,087	2,691	15%	3,217	-4%
Results (R$ million)
Net Sales	16,343	9,228	77%	13,620	20%
Cost of Goods Sold	(12,546)	(8,372)	50%	(10,960)	14%
Gross profit	3,797	855	344%	2,660	43%
Gross margin (%)	23.2%	9.3%	13.9 p.p	19.5%	3.7 p.p
SG&A	(469)	(370)	27%	(483)	-3%
Selling expenses	(155)	(120)	30%	(165)	-6%
General and administrative expenses	(314)	(250)	25%	(318)	-1%
%SG&A/Net Sales	2.9%	4.0%	-1.1 p.p	3.5%	-0.6 p.p
Adjusted EBITDA	4,318	1,177	267%	3,056	41%
Adjusted EBITDA Margin	26.4%	12.8%	13.7 p.p	22.4%	4.0 p.p

Production and Shipments

In 1Q21, crude steel production remained in line with the same quarter last year. Compared to 4Q20, the decline in production is mainly explained by the postpone of planned maintenance stoppages at the Brazil BD from 4Q20 to 1Q21.

Steel shipments in 1Q21 grew in relation to the prior-year quarter, accompanying the recovery in key consumer sectors in the countries where Gerdau has operations. Compared to 4Q20, shipments remained at high levels, reduced primarily by the lower exports from Brazil.

Net Sales

Net sales increased in 1Q21 in relation to both 4Q20 and 1Q20. Note that net sales were influenced by the 23% appreciation in the average U.S. dollar against the Brazilian real in the last 12 months, which had a positive effect on sales from Gerdau's operations in North America. Moreover, given the rise in raw material costs over recent months, the need arose to rebuild margins where the Company sought to maintain profitability levels. Compared specifically to 1Q20, net sales benefited from higher shipments as well as from the aforementioned factors.

Cost of Goods Sold

The growth in shipments combined with the higher costs for the main raw materials used by the Company led Costs of Goods Sold to increase by 50% between 1Q20 and 1Q21 and by 14% in relation to 4Q20. A highlight is the increase in two of the main elements composing costs: scrap consumed, which increased 77% on the prior year period and 34% sequentially (in Brazilian real), while iron ore rose 94% and 53%, respectively.

Gross Profit

2

Gross profit and gross margin expanded, explained by the 25% increase in net sales per ton sold and the 19% increase in cost per ton sold compared to 4Q20. This result was driven mainly by the strong performance of the U.S. and Brazilian construction industries. In addition, our operations benefited from the favorable moment in the commodity cycle, with global prices for steel and raw materials setting record highs.

Selling, General & Administrative Expenses

Selling, general and administrative expenses increased in relation to both comparison periods, but as a ratio of net sales decreased 0.6 p.p. from 4Q20, to 2.9%.

	EBITDA & EBITDA Margin
	BREAKDOWN OF CONSOLIDATED EBITDA			1Q21			1Q20			∆			4Q20			∆
	(R$ million)
Net income	2,471		221		1016%		1,057		134%
Net financial result	271		231		17%		834		-68%
Provision for income and social contribution taxes	817		21		3,827%		674		21%
Depreciation and amortization	649		557		17%		684		-5%
EBITDA - Instruction CVM ¹	4,207		1,030		308%		3,250		29%
Equity in earnings of unconsolidated companies	(149)		(10)		1322%		(75)		100%
Proportional EBITDA of associated companies and jointly	256		114		125%		171		49%
controlled entities
Impairment of financial assets	5		43		-88%		(8)		-
Non-recurring items	-		-		-		(282)		-
	Impairment of non-financial assets	-		-		-		412		-
	Credit recovery / Provisions	-		-		-		(694)		-
Adjusted EBITDA²	4,318		1,177		267%		3,056		41%
Adjusted EBITDA Margin	26.4%		12.8%			13.7 p.p	22.4%			4.0 p.p

	CONCILIATION OF CONSOLIDATED EBITDA			1Q21		1Q20		4Q20
	(R$ million)
EBITDA - Instruction CVM ¹	4,207	1,030	3,250
Depreciation and amortization	(649)	(557)	(684)
OPERATING INCOME BEFORE FINANCIAL RESULT AND TAXES³	3,558	473	2,566

1 - Non-accounting measure calculated in accordance with CVM Instruction 527.

2 - Non-accounting measure calculated by the Company. The Company presents Adjusted EBITDA to provide additional information on cash generation in the period. 3 - Accounting measure reported in the consolidated Income Statement.

Adjusted EBITDA in 1Q21 set an all-time high for the Company on a quarterly basis, while adjusted EBITDA margin was the highest since 2007. This result reflects the excellent scenario for the steel industry in all countries where Gerdau operates, combined with the efficiency of the teams in seizing the opportunities arising from this scenario.

3

EBITDA (R$ million) & EBITDA Margin (%)

								22.4%	26.4%
								4,318
					15.1%	17.5%
12.8%			3,056
	2,139
1,177	1,318
				1Q20	2Q20	3Q20		4Q20	1Q21
				EBITDA Adjusted				EBITDA Margin Adjusted
Financial Result & Net Income
	CONSOLIDATED					1Q21		1Q20			∆			4Q20		∆
	(R$ million)
Income before financial income expenses and taxes¹			3,558		473		652%		2,565	39%
Financial Result				(271)		(231)		17%		(834)	-68%
Financial income				56		46		21%		55	2%
Financial expenses				(314)		(325)		-4%		(379)	-17%
Exchange variation, net (including net investment hedge)			34		(56)		-		(142)	-
Exchange variation (other currencies)				(46)		103		-		(128)	-64%
Bonds repurchase expenses				-		-		-		(239)	-
Gains (losses) on financial instruments, net				(1)		1		-		(1)	0%
Income before taxes¹				3,287		242		1,258%		1,731	90%
Income and social contribution taxes				(817)		(21)		3827%		(674)	21%
	Exchange variation including net investment hedge			7		80		-91%		(3)	-333%
	Other lines				(824)		(101)		717%		(484)	70%
	Non recurring items				-		-		-		(187)	-100%
Consolidated Net Income ¹				2,471		221		1,016%		1,057	134%
Non recurring items				-		-		-		145	-
	Credit recovery / Provisions				-		-		-		(694)	-
	Income tax of extraordinary items				-		-		-		187	-
	Bonds repurchases				-		-		-		239	-
	Impairment of non-financial assets				-		-		-		412	-
Consolidated Adjusted Net Income²				2,471		221		1016%		1,202	106%

1 - Accounting measure disclosed in the consolidated Income Statement.

2 - Non-accounting measure calculated by the Company to show net profit adjusted by non-recurring events that influenced the result.

The financial result increased in 1Q21 compared to 1Q20 due to the effects from exchange variation on the Company's foreign-denominated liabilities. In relation to 4Q20, note that the Company, as part of its liability management, carried out a bond repurchase operation in late 2020 to reduce its currency exposure to the U.S. dollar and consequently smooth the effects from exchange rate fluctuations.

Adjusted net income in 1Q21 also set a new record for the Company on a quarterly basis, supported by the higher EBITDA.

4

Dividends

On May 4, 2021, the Board of Directors of Gerdau S.A. approved the distribution of dividends in the amount of R$ 682.1 million (R$ 0.40 per share), to be paid as an advance on the minimum mandatory dividend for 2021, as stipulated in the Bylaws.

This dividend approved in 1Q21 already corresponds to nearly all the dividends distributed in fiscal year 2020. Management reaffirms its understanding that the best way to increase absolute dividends is through strong cash generation, which it has been delivering, enabling maintenance of its policy to distribute 30% of adjusted net income.

Record date: close of trading on May 14, 2021

Ex-dividend date: May 17, 2021

Payment date: May 26, 2021

Working Capital & Cash Conversion Cycle

The cash conversion cycle (working capital divided by daily net revenue in the quarter) returned to more balanced levels, from 49 days in December 2020 to 57 days in March 2021, due to the increases of 37% in accounts receivable and of 30% in inventories. Note that these are natural adjustments given the stronger global steel demand.

Working Capital (R$ million) & Cash Conversion Cycle (days)

	9,2			10,4
8,6	8,5
	7,5
	95
83
		63		57
			49
mar/20	jun/20	set/20	dez/20	mar/21

Working Capital (R$ billion) Cash Conversion Cycle (days)

Financial Liabilities
		DEBT BREAKDOWN			31-Mar-21		31-Dec-20		31-Mar-20
		(R$ million)
		Short Term	452	1,432	3,659
		Long Term	17,313	16,084	16,370
		Gross Debt	17,766	17,516	20,029
		Cash, cash equivalents and short-term investments	7,003	7,658	5,979
		Net Debt	10,763	9,858	14,051

On March 31, 2021, gross debt was only 1% short term and 99% long term. The Company maintained its consolidated exposure denominated in U.S. dollar at the same level registered at the end of December 2020, at 77%, while consolidated exposure denominated in Brazilian real was 23% of total gross debt.

5