Exhibit 99.1

São Paulo, October 28, 2020 – Gerdau S.A. (B3: GGBR4 / NYSE: GGB) announces its results for the third quarter of 2020. 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 3Q20

Operating Results

Production & Shipments

In 3Q20, crude steel production grew in relation to both 2Q20 and 3Q19 due to the recovery of economic activity in the various countries where the company operates. Note that 2Q20 was marked by shutdowns at certain industrial units due to the impacts from the covid-19 pandemic.

Steel shipments in 3Q20 grew in relation to 2Q20 and 3Q19, led by shipments to the domestic market in the Brazil BD supported by the robust recovery of the construction industry.

Operating Result

Net Sales

Net sales in 3Q20 accompanied the growth in shipments in relation to both 2Q20 and 3Q19. Note that net sales in the period were mainly influenced by the 36% Brazilian real depreciation against the U.S. dollar in the last 12 months, which had a positive effect on the translation of net sales from our operations in the North America BD.

Cost of Goods Sold

Similarly, cost of goods sold also reflected the higher shipments and currency translation effect on the North America operations, as well as on inputs imported by the Brazil BD, and increased in relation to both comparison periods. The prices of the main raw materials used by the company also rose, led by the price increases on the prior-year period in scrap (+27%) and iron ore (+28%).

Gross Profit

Consolidated gross profit and gross margin increased significantly, explained by the 18% increase in net sales per tonne sold in relation to 3Q19, while cost per tonne sold increased 13%.

Selling, General & Administrative Expenses

Selling, general and administrative expenses remained in line with 3Q19, corresponding to 3.0% of net sales, which is 70 bps lower than the ratio registered in 3Q19 and the best ratio ever reported by the company.

EBITDA & EBITDA MARGIN

 

Breakdown of Consolidated EBITDA (R$ million)			3Q20				3Q19				∆				2Q20				∆				9M20				9M19				∆
Net income			795				289				175	%			315				152	%			1,331				1,115				19	%
Net financial result			303				562				-46	%			330				-8	%			865				1,237				-30	%
Provision for income and social contribution taxes			282				(150	)			-				131				116	%			433				264				64	%
Depreciation and amortization			647				504				28	%			611				6	%			1,815				1,535				18	%
EBITDA - Instruction CVM ¹			2,027				1,205				68	%			1,387				46	%			4,444				4,151				7	%
Impairment of financial assets			3				8				-56	%			25				-87	%			72				16				360	%
Gains and losses on assets held for sale and sales in subsidiaries			-				-				0	%			-				0	%			-				-				0	%
Equity in earnings of unconsolidated companies			(71	)			(10	)			638	%			4				-				(78	)			15				-
Proportional EBITDA of associated companies and jointly controlled entities			180				81				122	%			91				99	%			384				234				64	%
Reversal of contingent liabilities, net			-				-				-				-				-				-				-				-
Maintanence stoppage / Impacts from refurbishment of BF 1			-				-				-				-				-				-				-				-
Fixed cost impacts of plants without production			-				238				-				119				-				119				238				-50	%
Credit recovery / Provisions			-				(57	)			-100	%			(308	)			-				(308	)			(57	)			440	%
Adjusted EBITDA²			2,139				1,465				46	%			1,318				62	%			4,634				4,596				1	%
Adjusted EBITDA Margin			17.5	%			14.8	%							15.1	%							15.3	%			15.3	%

 

CONCILIATION OF CONSOLIDATED EBITDA (R$ million)			3Q20				3Q19				2Q20				9M20				9M19
EBITDA -  Instruction CVM ¹			2,027				1,205				1,387				4,444				4,151
Depreciation and amortization			(647	)			(504	)			(611	)			(1,815	)			(1,535	)
OPERATING INCOME BEFORE FINANCIAL RESULT AND TAXES³			1,380				701				776				2,629				2,617

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.

In 3Q20, adjusted EBITDA and adjusted EBITDA margin increased in relation to both comparison periods, mainly due to higher shipments to the domestic market in the Brazil BD and the better results in the South America BD. Note that this is the best quarterly EBITDA registered by the company since 2008.

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

Financial Result & Net Income

In 3Q20 compared to 2Q20 and 3Q19, the variation in the financial result was basically due to the effects from exchange variation.

Net income in 3Q20 increased in relation to 2Q20 and 3Q19 supported by the growth in EBITDA.

Dividends

Gerdau’s Board of Directors approved the payment of dividends in the amount of R$204.1 million (R$ 0.12 per share), which was distributed as an advance on the minimum mandatory dividend for 2020, as stipulated in the Bylaws.

Payment date: November 18, 2020

Record date: shareholding position on November 6, 2020

Ex-dividend date: November 9, 2020

Working Capital & Cash Conversion Cycle

The cash conversion cycle (working capital divided by daily net sales in the quarter) decreased from 95 days in June 2020 to 63 days in September 2020, effectively optimizing working capital after the effects from the covid-19 pandemic, supported by a decrease in inventory days in the period combined with days payable increasing more than days receivable, reflecting the recovery in economic activity and the good conditions for payment terms.

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

Financial Liabilities

On September 30, 2020, gross debt was 11.1% short term and 88.9% long term. Broken down by currency, 15.5% of gross debt was denominated in Brazilian real and 84.5% in U.S. dollar.

On September 30, 2020, 41% of cash was denominated in U.S. dollar.

The evolution in key debt indicators is shown below:

The reduction in the net debt/EBITDA ratio from 2.78x on June 30, 2020 to 2.07x on September 30, 2020 was due to the amortizations and higher cash generation in the period.

Payment schedule of gross debt (non-current)

On September 30 2020, the nominal weighted average cost of gross debt was 4.9%, or 2% for the portion denominated in Brazilian real, 5.7% plus exchange variation for the portion denominated in U.S. dollar contracted by companies in Brazil and 4.6% for the portion contracted by subsidiaries abroad. On September 30, 2020, the average gross debt term was 7.7 years, with the debt maturity schedule well balanced and well distributed over the coming years.

Investments

Capital expenditure amounted to R$ 360 million in 3Q20, with R$ 201 million allocated to general maintenance, R$ 53 million to maintenance of the Ouro Branco Mill and R$ 105 million to technological expansion and modernization. Of the amount invested in the quarter, 45% was allocated to the Brazil BD, 30% to the Special Steel BD, 21% to the North America BD and 4% to the South America BD.

Estimated CAPEX for 2020 is approximately R$ 1.6 billion. The estimate for the 2019-21 period is R$ 6 billion.

On October 7, 2020, Brazil's antitrust agency (CADE) ratified the final and unappealable decision issued on September 23, 2020, when the majority of its board approving without restrictions the transaction involving the acquisition by Gerdau of Siderúrgica Latino-Americana S.A. (SILAT). SILAT is located in Caucaia, in the metropolitan area of Fortaleza, Ceará, and has annual installed capacity of 600,000 tonnes of rolled products. The acquisition is part of Gerdau’s strategy to improve service to its clients in the Brazilian market and was carried out for an economic value of US$ 110.8 million, subject to the typical adjustments to the acquisition amount, whose payment is pending.

The investments in technological expansion and modernization will be made as expectations for the market’s recovery and for free cash flow generation in the period are confirmed.

Free Cash Flow

Free cash flow in 3Q20 was positive by R$ 2.3 billion. This improvement in relation to 2Q20 is due to the combination of EBITDA growth on the prior quarter of 62% and a reduction in working capital supported by cash conversion cycle returning to levels below 70 days. Note that, in the last 12 months, the Company registered positive free cash flow of around R$ 4.4 billion, reinforcing its liquidity position.

Free Cash Flow (R$ million)

Free Cash Flow - Quarterly (R$ million)

CAPITAL MARKETS

In the period from July to September 2020, the Investor Relations team participated in over 20 conferences and websessions with the presence of more than 300 investors.

A list of these meetings in the period follows:

July 15: XP – ESG Websession

August 11: Itaú BBA – ESG Conference

August 17: Santander – 21^st Santander Annual Conference

September 15: Citi – Virtual GEMS Conference 2020

September 22: Itaú BBA – 12^th Commodities Conference

September 23: JP Morgan – Emerging Markets Credit Virtual Conference

The presentation used in these events is filed with the CVM and available on the investor relations website at https://ri.gerdau.com/en/notices-and-results/institutional-presentations/.

Note that, over the last five years, the Company’s stock has generated a return for shareholders of above 305%, as shown in the following chart:

Total Return for GGBR4 Shareholders (base 100 at Sep/2015)

Source: Economática | Methodology: variation in share price plus dividends.

ESG Factors

Corporate Governance

On July 20, 2020, the Company held its Annual General Meeting in a completely digital environment. Around 1,410 shareholders participated in the meeting via absentee ballot and virtually.

The meeting’s agenda included the election of the Board of Directors, which now has 9 members, of whom 5 are independent.

Safety in Operations

Gerdau has been making important progress in preventing accidents by always evaluating the potential of certain situations that could lead to fatal or severe accidents. The priority is on identifying and blocking the risk of dangerous situations before they cause severe and fatal accidents, rather than on just seeking ways to prevent more frequent but less severe accidents.

The Frequency Rate (FR) is the number of lost-time accidents that occur for every 1,000,000 hours worked. TF = 1 means that 1 lost-time accident occurred for every 1,000,000 hours worked.

Frequency Rate

In 2019, Gerdau reaped good results from the reformulation of its Occupational Safety policies that began three years ago. The accident severity rate in the year was the lowest ever registered by the company. To achieve the decline in this rate, which began in 2018, Gerdau changed its accident-prevention concepts and began to give more attention to the potential for certain situations to result in fatal or severe accidents.

The Accident Severity Rate is the number of days lost (not worked) due to lost-time accidents for every 1,000,000 hours worked. TG = 160 means that 160 days were lost due to occupational accidents for every 1,000,000 hours worked.

Accident Severity Rate

PERFORMANCE BY BUSINESS DIVISION (BD)

The information in this report is divided into four Business Divisions (BD) in accordance with Gerdau’s corporate governance, as follows:

NET SALES

EBITDA & EBITDA MARGIN

BRAZIL BD

1 – Includes iron ore sales.

2 – EBITDA adjusted for the elimination of non-recurring effects from the fixed costs of mills undergoing stoppages in the amount of R$ 65 million in 2Q20 and 9M20 and R$238 million in 3Q19 and 9M19.

Production & Shipments

In 3Q20 compared to 2Q20 and 3Q19, crude steel production increased due to higher shipments. Note once again that during 2Q20 shutdowns were carried out at certain industrial units due to the impacts from the covid-19 pandemic.

Total shipments increased in 3Q20 compared to 2Q20, driven by the robust recovery of the construction industry both in the retail segment and in sales directly to construction companies, and by the industry’s recovery in the domestic market. Note that this recovery was driven by the demand repressed during the most severe period of the covid-19 pandemic, as well by the inventory rebuilding trend. The effect can be observed in the comparison of the first nine months of 2020, which registered growth of 7% on the same period of 2019.

In 3Q20, 411,000 tonnes of iron ore were sold to third parties and 1,240 tonnes were consumed internally. In 9M20, 891,000 tonnes of iron ore were sold to third parties and 3,311 tonnes were consumed internally.

Operating Result

Net sales increased in 3Q20 compared to 2Q20 and 3Q19, reflecting the higher shipments to the domestic market due to the recovery in demand in the construction and industry sectors.

Cost of goods sold increased in 3Q20 compared to the comparison periods, due to the pressure from inputs, which was mitigated by optimizing fixed costs. The prices of scrap and iron ore increased 14% and 28%, respectively, compared to 3Q19.

Gross profit and gross margin increased in relation to the comparison periods, mainly due to the better market mix. Shipments to the domestic market as a percentage of total shipments increased from 73% in 3Q19 to 86% in 3Q20.

In 3Q20 compared to the periods analyzed, EBITDA and EBITDA margin increased, accompanying the variation in gross profit, as explained above.

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

NORTH AMERICA BD

Production & Shipments

Steel production in 3Q20 increased compared to both 2Q20 and 3Q19, due to the growth in shipments, with this result reflecting the greater resilience of the construction and industrial sectors.

Operating Result

The growth in net sales in 3Q20 compared to 3Q19 is mainly due to the 36% appreciation in the U.S. dollar against the Brazilian real in the period. In relation to 2Q20, net sales accompanied the growth in shipments.

Cost of goods sold increased in 3Q20 in relation to 3T19, due to the effect from exchange variation, as mentioned above. Compared to 2Q20, cost of goods sold was affected by the 4% increase in the scrap price and the higher shipments.

Gross profit and gross margin in 3Q20 increased in relation to 2Q20, given the efforts made to reduce fixed and variable costs, such as idling its mill in St. Paul, Minnesota, despite the higher scrap price in the period.

EBITDA in 3Q20 was higher in relation to the comparison periods, reflecting the resilience of shipments and the efforts to optimize costs. Note that margins remained above 10%, despite the increase in scrap prices observed recently.

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

SOUTH AMERICA BD

1 – EBITDA adjusted for the elimination of non-recurring effects from the fixed costs of mills undergoing shutdowns in the amount of R$ 26 million in 2Q20 and 9M20.

Production & Shipments

Steel production and shipments increased in 3Q20 compared to 3Q19, due to the recovery of the construction sector, mainly in Peru and Argentina.

Operating Result

Net sales and cost of goods sold increased in 3Q20 due to the growth in shipments and the effects from exchange variation.

Gross profit and gross margin increased in 3Q20 compared to 3Q19, since the increase in net sales per tonne sold surpassed the increase in costs per tonne sold in the period.

EBITDA and EBITDA margin in 3Q20 were influenced by the strong demand from the construction sector, especially in Peru and Argentina, after the decline in production in 2Q20, when certain operations were shut down due to the covid-19 pandemic. This was the highest EBITDA reported by the South America BD since 2008.

In relation to 2Q20, all indicators improved significantly, since the countries composing divisions were severely affected by the covid-19 pandemic, including the national emergency declared in Peru, where all activities were suspended.

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

SPECIAL STEEL BD

1 – EBITDA adjusted for the elimination of non-recurring effects from the fixed costs of mills undergoing stoppages in the amount of R$ 28 million in 2Q20 and 9M20.

Production & Shipments

Steel production and shipments decreased in 3Q20 compared to 3Q19, reflecting the weaker demand from the automotive industry both in Brazil and the United States. In addition, the effects continue persist from the oil price in the U.S. oil and gas industry and from the lower exports of vehicles from Brazil to Argentina.

Meanwhile, from July to September 2020, a significant recovery was identified in the automotive industry in relation to 2Q20, with better results in production and shipments both in Brazil and the United States.

Operating Result

The increases in net sales and in cost of goods sold in 3Q20 compared to 3Q19 is mainly due to effects from the 36% appreciation in the U.S. dollar against the Brazilian real on the translation of net sales from the U.S. operations.

Gross profit and gross margin decreased in the period due to lower dilution in fixed cost, which is explained by the lower shipments. The capacity utilization rate stood at 45% in 3Q20, compared to 58% in 3Q19.

The reduction in EBITDA and EBITDA margin in 3Q20 compared to 3Q19 accompanied the performance of gross profit and gross margin in the period.

In relation to 2Q20, EBITDA increased, reflecting the recovery in the automotive industry in Brazil and the United States and the efforts to optimize costs in these operations.

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

THE MANAGEMENT

This document contains forward-looking statements. These statements are based on estimates, information or methods that may be incorrect or inaccurate and that may not occur. These estimates are also subject to risk, uncertainties and assumptions that include, among other factors: general economic, political and commercial conditions in Brazil and in the markets where we operate, as well as existing and future government regulations. Potential investors are cautioned that these forward-looking statements do not constitute guarantees of future performance, given that they involve risks and uncertainties. Gerdau does not undertake and expressly waives any obligation to update any of these forward-looking statements, which are valid only on the date on which they were made.

* Adjusted net profit is a non-accounting measure calculated by the Company that is conciliated with its financial statements and consists of net profit (loss) adjusted by non-recurring events that influenced the result.