By Gabriel Araujo
SAO PAULO (Reuters) -Brazilian steelmaker Gerdau SA on Thursday reported first-quarter net profit roughly in line with market expectations as weaker results in Brazil were offset by an improvement in North America.
Gerdau's net income reached 2.94 billion reais ($597.96 million), down 17% from the previous three months but up 19% year on year.
The bottom line came in slightly below an expected 3.09 billion reais in an analyst poll by Refinitiv.
Shares of the steelmaker were down 3.1% at 26.56 reais in morning trading, but outperformed Brazil's Bovespa stock index, which was down 3.4%.
Gerdau said its domestic EBITDA margin fell 7.2 percentage points from the previous quarter to 24.3%, noting that sales were nearly flat at a high level but that the overall scenario posed challenges as interest rates rise.
"Prospects for 2022 are for revenue growth and volume drop in distribution and retail. In real estate development, we project stability for both launches and steel sales volume," Gerdau said in a securities filing.
The drop in Brazilian margins ended up offset by strong results in North America, which had been the highlight of Gerdau's fourth-quarter earnings. EBITDA margin in North America grew by 5.6 percentage points to 27.4%.
Analysts at BTG Pactual said this was a major highlight in Gerdau's results and that investors would now wonder if annual earnings before interest, taxes, depreciation and amortization (EBITDA) might exceed 20 billion reais.
"More importantly, there are no signs of softness in the U.S. so far into the second quarter, and results in Brazil are set to accelerate on price hikes," they added.
On a quarterly basis, adjusted EBITDA fell 3% to 5.83 billion reais but beat market consensus of 5.11 billion.
Gerdau's first-quarter total steel sales were 3.06 million tonnes, down 1% from a year earlier and 3% from the previous three months. Output rose 4% on a sequential basis to 3.4 million tonnes.
The steelmaker also announced on Thursday a new share buyback program to repurchase up to 55 million shares, which BTG analysts viewed as "unexpected."
($1 = 4.9167 reais)