S&P stands by Brazilian steelmaker Gerdau's ratings

Ratings agency Standard & Poors has affirmed Brazilian steelmaker Gerdau's long-term global credit rating at 'BBB-' and the long-term national credit rating at 'brAAA' with a stable outlook.

S&P also confirmed its 'BBB-' rating on Gerdau's US subsidiary Gerdau Ameristeel.

"The ratings affirmation reflects Gerdau's geographic diversification, efficient operation, and its wide scope of products and end markets, which have resulted in resilient margins and cash flows despite weaker demand for steel products in Brazil and a more competitive environment in the US amid high supply and inventory levels," S&P said in a note.

In addition, S&P views Gerdau's strong liquidity position, smooth debt amortization profile, and a large operation outside Brazil as key factors for the company to potentially have a higher rating than the foreign currency rating of Brazil.

"The diversified products and markets, its partly integrated steel operation with iron ore and coking coal production, and competitive advantages in scrap sourcing and long-term relationship with clients underpin our assessment of Gerdau's business risk profile as 'satisfactory'," the agency said.

On the downside, S&P considers the weaker macro scenario and significant depreciation of the Brazilian real as taking a toll on Gerdau's leverage metrics as 75% of its unadjusted debt is dollar denominated.

Porto Alegre-based Gerdau is the largest Latin American steelmaker and the biggest long steel producer in the Americas.