Gerdau S.A. (NYSE:GGB; BVMF:GGBR4) saw its shares rise in both New York and São Paulo trading on Wednesday, following the disclosure of a strategic hydropower acquisition. The company's American Depositary Receipts (ADRs) closed at $4.77, up 2.7%, while its preferred shares on the Brazilian exchange ended at R$24.06, a gain of 2.4%. The moves came after regular trading hours had concluded in both markets.
The gains in Brazil closely tracked the broader Ibovespa index, which rose 2.44%, suggesting the move was not solely driven by company-specific factors. However, the acquisition itself provides a clearer metric for investors evaluating Gerdau's long-term cost management strategy.
According to a securities filing earlier this week, Gerdau acquired a 23.03% stake in DFESA, a private hydroelectric generator, for approximately R$154 million. The purchase was funded entirely with the company's available cash reserves. Prior to the transaction, Gerdau's energy portfolio averaged 35.6 megawatts (MWavg); with the addition, the company now oversees roughly 50 MWavg of firm energy capacity.
Analysts estimate that the incremental energy from the deal amounts to about 14.4 MWavg, implying a cost of roughly R$10.7 million per additional megawatt. The total expenditure represents 5.1% of Gerdau's adjusted EBITDA for the first quarter and is equivalent to 3.3% of the company's 2026 capital plan, which totals R$4.7 billion.
Gerdau stated that the agreement is expected to boost its renewable self-generation capacity and enhance cost competitiveness. The move is viewed primarily as a strategic cost hedge rather than a major capacity expansion. The company also holds a conditional pact to acquire an additional 23.03% interest in DFESA, which, if finalized, would bring its total stake to 100% and raise firm energy output to 65.94 MWavg.
The acquisition comes amid a challenging environment for steelmakers. Steel Dynamics Inc. (NASDAQ:STLD) reported second-quarter sales of $6.1 billion and net profit of $534 million, with CEO Mark D. Millett noting that “steel pricing continued to improve.” For Gerdau, North America contributed 75% of adjusted EBITDA in the first quarter, making U.S. steel price trends a critical factor for near-term profitability.
However, risks remain. Steel Dynamics highlighted that Asian imports have increased despite 50% U.S. tariffs, and Gerdau noted that Brazilian imports reached a 27% share in the first quarter. Additionally, hydroelectric generation is subject to rainfall variability and operational uncertainties.
Gerdau's ADR was still trading 0.6% below its July 15 close of $4.80. Wednesday's rise offset declines from the prior two sessions. Looking ahead, Nucor Corp. (NYSE:NUE) is scheduled to release its quarterly earnings after the close on Monday, July 27, with a conference call on July 28 that is expected to provide further insight into U.S. steel prices and margins. Gerdau will announce its own second-quarter results on August 4, followed by a results call the next day.
