Gerdau S.A. (GGB): ANSOFF MATRIX [Dec-2025 Updated]

You're digging into Gerdau S.A.'s 2025 playbook, and what you'll find is a clear, four-pronged attack plan that balances protecting the core with smart new bets. I've seen a lot of capital allocation plans, but this one is sharp: they're using R$6.0 billion in CapEx to defend margins against 25% import pressure in Brazil while maximizing their 65% North American EBITDA base. On the growth side, they are adding 150,000 tonnes capacity in Texas and bringing 250,000 tonnes of new flat steel online, plus they're setting up a potential R$1.1 billion EBITDA stream from iron ore. It's a dense map of near-term actions, so let's break down exactly where the money and focus are going below.

Gerdau S.A. (GGB) - Ansoff Matrix: Market Penetration

You're looking at how Gerdau S.A. plans to deepen its hold in existing markets, which is the essence of Market Penetration. This strategy is heavily focused on maximizing returns from current operations, especially in North America, while fighting margin erosion back home in Brazil.

The North American segment is the current engine, and the goal is to keep that momentum going to maximize its already significant financial impact. In the third quarter of 2025, this region hit a record, contributing exactly 65% of Gerdau S.A.'s consolidated EBITDA. To achieve this, utilization rates were strong: rolled steel utilization stood at 84%, with crude steel at 79% during that same period. This performance contrasts sharply with the domestic situation.

In Brazil, the focus is on driving operational efficiency to claw back margins squeezed by foreign competition. The utilization rate for rolled steel in Brazil was notably lower at 64% in Q3 2025, even as crude steel utilization remained high at 85%. This highlights the internal pressure to recover profitability. Gerdau S.A. already banked R$1.5 billion in cost savings during 2024, setting a baseline for continued efficiency drives in 2025.

The push for efficiency is directly tied to the planned capital deployment for the year. Gerdau S.A. set its 2025 Capital Expenditure guidance at R$6.0 billion. A key part of this spending is directed toward asset competitiveness; for instance, in Q3 2025, 60% of the R$1.7 billion invested was specifically allocated to enhancing asset competitiveness. This investment is meant to make existing assets more competitive against imports.

To support domestic sales, Gerdau S.A. is concentrating its sales efforts where demand is proving more resilient. You see this focus on sectors like Brazilian civil construction and agribusiness, which management noted still showed favorable indicators at the start of 2025. The company actively supports the civil construction sector, for example, through its Gerdau Design consulting service, which evaluated around 90 projects in 2024.

The primary external threat to market penetration in Brazil is the influx of foreign steel, which necessitates lobbying for stronger trade defenses. Import penetration in Brazil reached 25% of domestic demand in the first nine months of 2025. While the industry association, Aço Brasil, reported an even higher figure of 30% of domestic sales coming from imports by August 2025, the 25% figure reflects the nine-month average impacting operations. The company is pushing for measures against this level of penetration.

Here's a quick look at the regional performance contrast driving the Market Penetration focus:

To maintain this strategic balance, Gerdau S.A. is also managing its overall investment envelope. The 2025 CapEx guidance is set at R$6.0 billion, which is planned to be equally split between maintenance and competitiveness projects. This deployment is crucial for ensuring asset competitiveness, which is a core tenet of penetrating existing markets effectively.

The company is also leveraging specific sector resilience through sales focus:

• Indicators from the Brazilian civil construction sector remain favorable.
• The agribusiness sector is a key area of focus for resilient demand.
• The Ouro Branco unit completed a hot-rolled coil expansion in Q1 2025, adding 250,000 tonnes per year of flat steel capacity.
• Gerdau Design handled about 90 projects in 2024, supporting structural engineering clients.

Finance: draft 13-week cash view by Friday.

Gerdau S.A. (GGB) - Ansoff Matrix: Market Development

You're looking at how Gerdau S.A. is pushing its existing steel products into new geographic markets, primarily by capitalizing on policy shifts in North America while navigating a tough home market. This is classic Market Development in action.

The leverage from US Section 232 tariffs is clear in the Q3 2025 numbers. The US market is now the most robust part of the North American segment, which includes Canada and Mexico. The tariffs, which currently levy 50pc duties on imported steel and aluminum, directly benefit Gerdau's domestic production there. This protection, along with preliminary anti-dumping determinations on rebar, has helped reduce import volumes and stabilize local supply. Consequently, Gerdau's third-quarter revenue in North America rose by 11pc year-on-year, accounting for half of the group's total quarterly revenue of R18bn (equivalent to $3.2bn USD).

The focus on specific US demand drivers is paying off. Gerdau expects data center construction and renewable energy investments to support US steel demand through the fourth quarter of 2025 and into 2026. Nonresidential construction also shows renewed momentum. This is translating into better operational metrics:

• North American crude steel production increased by 11.6pc year-on-year to 1.35mn metric tonnes in Q3 2025.
• Sales volumes rose to 1.29mn t, up from 1.17mn t year-on-year.
• Downstream product sales, often tied to specialized applications, hit a record 76,000t, a 47pc year-over-year growth.
• The order backlog in North America sits at about 70 days, which is 10 days above the historical average of 60 days.

Regarding capacity expansion, the plan is to build on this US strength. Gerdau is prioritizing the expansion of its Midlothian plant in Texas, which is set to add 150,000 tons of annual capacity starting in 2026. This project had 51% physical progress and 59% financial progress as of the Q2 2025 update, with Phase 1 expected to start operations in the second half of 2025. This move is part of a broader shift, as the company suspended planned investments in Brazil worth R2.1 billion (or $400 million USD).

Conversely, the Mexico special steel plant decision has been definitively reversed. The planned $600 million facility, intended for 600,000 metric tons per year capacity to serve the US automotive sector, was officially scrapped due to the US tariff uncertainty. This decision effectively redirects potential capital toward the US expansion.

To offset the pressure from lower realized prices in the Brazilian export market, Gerdau has increased its overall sales volume. While domestic prices in Brazil faced pressure, Brazilian export activity surged. Consolidated steel shipments for the group rose 9.3% Quarter-over-Quarter (QoQ) to 3,087 kt in Q3 2025, supported by this higher export activity.

Here's a quick look at the contrasting regional performance in Q3 2025:

The export volume increase in Brazil was significant, with exports climbing to 330,000t, up 29.5pc from a year earlier in Q3 2025. Still, the average realized export price fell 29.7% QoQ to R$3,528/t in the same period. The company is counting on volume to compensate for the price realization squeeze in the export segment, while the US provides the margin expansion.

Gerdau S.A. (GGB) - Ansoff Matrix: Product Development

Gerdau S.A. is actively pursuing Product Development by enhancing existing product lines and introducing new, higher-value offerings, often underpinned by significant capital expenditure and technological integration.

The maximization of the new Ouro Branco Hot Rolled Coil (HRC) mill is a key component of this strategy, designed to add 250,000 tonnes of flat steel capacity, bringing the plant's total HRC capacity to 1.1 million tonnes annually, a milestone reached in 2025. This specific expansion required an investment estimated around R$1.5 billion or $260 million. Management projects this new capacity could yield a potential annual EBITDA gain of nearly R$400 million assuming isonomic competition conditions.

The focus isn't just on volume; Gerdau S.A. is pushing to develop higher value-added steel products, particularly for the Brazilian industrial sector, though strong growth is also seen in North America. Evidence of this shift is seen in the 47% year-over-year growth in downstream products, reaching record sales volumes of 76,000 tonnes in the third quarter of 2025.

Sustainability is being engineered directly into the product offering. Gerdau S.A. is commercializing low-carbon steel, leveraging an achieved emissions record of 0.85 tCO2e per tonne of steel. This performance is significantly better than the global industry average of 1.92 tCO2e per metric ton of steel as of 2023.

To support specialized production and efficiency, Gerdau S.A. is investing heavily in digitalization and Artificial Intelligence (AI). The company announced a new investment cycle of R$6 billion for execution in 2025, which explicitly includes the application of AI and digitalization of operations. In the first quarter of 2025 alone, the company invested R$1.4 billion, with 60% directed toward expansion and technological upgrades. The tangible results from AI integration include a reduction of $3 per ton of steel in alloy costs and the conservation of over half a million pounds of ferroalloys annually.

Furthermore, boosting scrap recovery at the Pindamonhangaba plant is a direct action for cost-efficient, green steel production. Gerdau S.A. is constructing a recycling center there to process scrap metal. The company is already Latin America's largest recycler, with 71% of its steel produced from scrap, transforming 11 million tonnes of scrap annually. This strategy was reinforced by the US$60 million purchase of Dale's Recycling in late 2024.

Here are some of the key figures supporting the Product Development thrust:

The Product Development strategy relies on these specific operational and financial metrics:

• Maximize Ouro Branco HRC capacity to 1.1 million tonnes by 2025.
• Achieve a long-term emissions target of 0.82 tCO2e per tonne by 2031.
• Invest R$6 billion in the 2025 cycle, including digitalization.
• Process 11 million tonnes of scrap metal annually across operations.
• Target R$400 million in potential annual EBITDA gain from the new HRC line.

Gerdau S.A. (GGB) - Ansoff Matrix: Diversification

You're looking at how Gerdau S.A. (GGB) is moving beyond its core steel markets, which is a smart way to manage the cyclical nature of the industry, especially with import pressures in Brazil.

The diversification strategy heavily involves securing raw material supply and shifting capital allocation geographically. Consider the Miguel Burnier project; this investment is key to internal supply and external sales. The project reached 90% physical completion as of the third quarter of 2025 (3Q25).

This mining platform is set to start integrated operations in early 2026, adding 5.5 million tonnes per year of high-grade iron ore capacity. A specific part of this strategy is to commercialize iron ore from Miguel Burnier for third-party sales, with plans to add 2 million mt/year for this purpose.

The financial upside here is significant. Management expects to capture a potential annual EBITDA gain of R$1.1 billion from the mining platform once it is fully ramped up. The initial year is projected to bring a benefit of roughly R$400 million from cost reductions and ore sales. This contrasts with the R$2.7 billion Adjusted EBITDA reported for the entire company in 3Q25.

Regarding the scrap processing business, Gerdau S.A. already operates as the largest recycling company in Latin America. Scrap metal is a primary raw material, with the company transforming 11 million tonnes every year, which accounts for 71% of its total steel production. A specific action point in Brazil is boosting scrap recovery at the Pindamonhangaba plant in São Paulo state.

To explore new materials or services adjacent to the core steel supply chain, Gerdau has a dedicated unit. The company has a new business division, Gerdau Next, which fosters entrepreneurship in segments adjacent to the steel industry.

The most pronounced element of diversification is capital reallocation outside Brazil, driven by market conditions. Gerdau suspended planned investments in Brazil totaling R$2.1 billion (approximately $400 million). The 2026 global capital expenditure (CAPEX) guidance is set at R$4.7 billion, a reduction from the R$6.0 billion estimated for 2025. This capital is being redirected, with a focus on expanding the Midlothian plant in Texas (USA) by 150,000 mt/year starting in 2026. This geographic pivot is supported by the fact that North American operations drove 65% of the consolidated Adjusted EBITDA in 3Q25.

Here is a snapshot of the financial context supporting these strategic moves:

The company's leverage reflects financial discipline alongside these growth plays. The Net Debt/EBITDA ratio improved to 0.81x by the end of 3Q25, well below the policy target of 1.5x.

You should review the specific capital deployment plan for the Midlothian expansion to see the exact dollar amount being reallocated toward this non-steel adjacent growth area outside Brazil. Finance: draft the Q4 2025 CAPEX variance analysis by next Tuesday.