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EQUITY

12 Months Ended

Dec. 31, 2023

NOTE 23 — EQUITY

a) Capital

The Board of Directors may, without need to change the bylaws, issue new shares (authorized capital), including the capitalization of profits and reserves up to the authorized limit of 1,500,000,000 common shares and 3,000,000,000 preferred shares, all without nominal value. In the case of capital increase through subscription of new shares, the right of preference shall be exercised in up to 30 days, except in the case of a public offering, when the limit is not less than 10 days.

Reconciliations of common and preferred outstanding shares are presented below:


	2023		2022		2021
	Common shares	Preferred shares	Common shares	Preferred shares	Common shares	Preferred shares
Balance at beginning of the year	571,929,945	1,091,630,395	571,929,945	1,133,816,901	571,929,945	1,129,231,487
Acquisition of Treasury shares	—	—	—	(44,564,000)	—	—
Share Bonus	28,596,497	54,691,436	—	—	—	—
Exercise of long-term incentive plan	—	2,674,136	—	2,377,494	—	4,585,414
Balance at the end of the year	600,526,442	1,148,995,967	571,929,945	1,091,630,395	571,929,945	1,133,816,901

As of December 31, 2023, 600,526,442 common shares and 1,156,540,608 preferred shares are subscribed and paid up, with a total capital of R$ 20,215,343 (net of share issuance costs). Ownership of the shares is presented below:


	Shareholders
	2023*
Shareholders	Common	%	Pref.	%	Total	%
Metalúrgica Gerdau S.A.^**	585,793,846	97.5	—	0.0	585,793,846	33.3
Brazilian institutional investors	2,442,108	0.4	117,790,196	10.2	120,232,304	6.8
Foreign institutional investors	1,425,937	0.2	546,220,396	47.2	547,646,333	31.2
Other shareholders	10,864,551	1.9	484,985,375	41.9	495,849,926	28.3
Treasury stock	—	0.0	7,544,641	0.7	7,544,641	0.4
	600,526,442	100.0	1,156,540,608	100.0	1,757,067,050	100.0

*As of December 31, 2023, the shareholders composition includes the share bonus


	Shareholders
	2022
Shareholders	Common	%	Pref.	%	Total	%
Metalúrgica Gerdau S.A.^**	557,898,901	97.5	—	0.0	557,898,901	33.3
Brazilian institutional investors	4,292,172	0.8	157,020,405	14.3	161,312,577	9.6
Foreign institutional investors	1,529,109	0.3	520,985,608	47.3	522,514,717	31.2
Other shareholders	8,209,763	1.4	413,624,382	37.6	421,834,145	25.2
Treasury stock	—	0.0	9,836,850	0.8	9,836,850	0.7
	571,929,945	100.0	1,101,467,245	100.0	1,673,397,190	100.0


	Shareholders
	2021
Shareholders	Common	%	Pref.	%	Total	%
Metalúrgica Gerdau S.A.^**	557,898,901	97.3	—	0.0	557,898,901	32.4
Brazilian institutional investors	4,363,438	0.8	232,421,779	20.3	236,785,217	13.8
Foreign institutional investors	1,895,038	0.3	490,810,572	42.8	492,705,610	28.7
Other shareholders	7,772,568	1.4	410,584,550	35.8	418,357,118	24.3
Treasury stock	1,697,538	0.2	12,214,344	1.1	13,911,882	0.8
	573,627,483	100.0	1,146,031,245	100.0	1,719,658,728	100.0

**Metalurgica Gerdau S.A. is the controlling shareholder and Indac – Ind. e Com. S.A. (holding of Gerdau’s family) is the utltimate controlling shareholder of the Company.

Preferred shares do not have voting rights and cannot be redeemed but have the same rights as common shares in the distribution of dividends and priority in the capital distribution in case of liquidation of the Company.

On February 28, 2023, the Company’s Board of Directors approved a capital increase of R$ 966,162 through the capitalization of part of the balance of the Retained earnings account - Investments and Working Capital reserve, with issuance, within the limit of the capital authorized by Art. 4, paragraph 1, of the Company’s Bylaws, of 83,669,860 new shares, of which 28,596,497 are common shares and 55,073,363 are preferred shares, all book-entry, with no par value, distributed to shareholders as a bonus, in the proportion of one new share for every twenty shares of the same type held on March 21, 2023; increasing the Company’s capital to R$ 20,215,343, divided into 1,757,067,050 shares, of which 600,526,442 are common shares and 1,156,540,608 are preferred shares, all book-entry and without par value.

b) Treasury stocks

Changes in treasury stocks are as follows:


	2023
	Common shares	R$	Preferred shares	R$
Opening balance	—	—	9,836,850	179,995
Exercise of long-term incentive plan	—	—	(2,674,136)	(29,813)
Capital increase with share bonus	—	—	381,927	—
Closing balance	—	—	7,544,641	150,182


	2022
	Common shares	R$	Preferred shares	R$
Opening balance	1,697,538	557	12,214,344	151,852
Share buyback program	—	—	44,564,000	1,073,124
Exercise of long-term incentive plan	—	—	(2,377,494)	(21,452)
Cancellation of treasury stocks	(1,697,538)	(557)	(44,564,000)	(1,023,529)
Closing balance	—	—	9,836,850	179,995


	2021
	Common shares	R$	Preferred shares	R$
Opening balance	1,697,538	557	16,799,758	228,752
Exercise of long-term incentive plan	—	—	(4,585,414)	(76,900)
Closing balance	1,697,538	557	12,214,344	151,852

These shares are held in treasury for subsequent cancellation, selling in the market or to be granted under the long-term incentive plan of the Company. The average acquisition cost of these shares was R$ 19.91 during 2022 (R$ 18.30 and R$ 12.43 during the years ended on December 31, 2022 and 2021, respectively).

On May 4, 2022, the Board of Directors of Gerdau S.A., in accordance with the statutory provisions and pursuant to CVM Resolution No. 77, of March 29, 2022, approved the Share Buyback Program issued by the Company, which aims to: (i) maximize the generation of long-term value for its shareholders through an efficient management of the capital structure and meet the long-term incentive plan of the Company and its subsidiaries; (ii) holding in treasury; (iii) cancellation; or (iv) subsequent sale in the market. The quantity of shares to be acquired will be up to 55,000,000 preferred shares, representing approximately 5% of the outstanding preferred shares (GGBR4) and/or ADSs backed by preferred shares (GGB). The acquisition started on May 6, 2022 and lasted 18 months. On November 3,2023, the Company informed the market that the Share Buyback Program of its own issuance was completed. During its validity period, 44,564,000 preferred shares (GGBR4) were acquired at an average price of R$ 24.08 per share, corresponding to 81.0% of the Share Buyback Program and representing the amount of R$ 1,073,124.

On November 8, 2022, the Company’s Board of Directors approved the cancellation of 1,697,538 common shares and 44,564,000 preferred shares, with no par value, issued by the Company, without reducing the value of the Capital. Due to the deliberate cancellation of shares, the Company’s capital is now divided into 571,929,945 common shares and 1,101,467,245 preferred shares, with no par value. Accordingly, Article 4 of the Company’s Bylaws, which deals with the Capital have been adjusted.

c) Capital reserves — consists of premium on issuance of shares.

d) Retained earnings

I) Legal reserves — under Brazilian Corporate Law, the Company must transfer 5% of the annual net income determined on its statutory books in accordance with Brazilian accounting practices to the legal reserve until this reserve equals 20% of the paid-in capital. The legal reserve can be utilized to increase capital or to absorb losses but cannot be used for dividend purposes.

II) Tax incentives reserve — under Brazilian Corporate Law, the Company may transfer to this account part of net income resulting from government benefits which can be excluded from the basis for dividend calculation. The tax incentives reserve recognized in Gerdau S.A. refers to incentives of state and federal nature, constituted in the subsidiaries Gerdau Açominas S.A. and Gerdau Aços Longos S.A.

III) Investments and working capital reserve — consists of earnings not distributed to shareholders and includes the reserves required by the Company’s by-laws. The Board of Directors may propose to the shareholders the transfer of at least 5% of the profit for each year determined in its statutory books in accordance with accounting practices adopted in Brazil to this reserve. Amount can be allocated to the reserve only after the minimum dividend requirements have been met and its balance cannot exceed the amount of paid-in capital. The reserve can be used to absorb losses, if necessary, for capitalization, for payment of dividends or for the repurchase of shares.

e) Operations with non-controlling interests — Corresponds to amounts recognized in equity from changes in non-controlling interests.

The effects of interest changes in subsidiaries for the years presented are composed of:


	December 31, 2023
	Attributed to parent	Non-controlling
	company’s interest	interests	Total
(i) Other changes	—	(9,590)	(9,590)
Effects of interest changes in subsidiaries	—	(9,590)	(9,590)


	December 31, 2022
	Attributed to parent	Non-controlling
	company’s interest	interests	Total
(i) Other changes	(33,845)	(19,761)	(53,606)
Effects of interest changes in subsidiaries	(33,845)	(19,761)	(53,606)


	December 31, 2021
	Attributed to parent	Non-controlling
	company’s interest	interests	Total
(i) Other changes	—	(18,962)	(18,962)
Effects of interest changes in subsidiaries	—	(18,962)	(18,962)

(i) Other changes in subsidiaries without losing control, which may include among others, capital increases, other acquisitions of interests and dilutions of any nature.

f) Other reserves - Include: gains and losses on available for sale securities, gains and losses on net investment hedge, gains and losses on derivatives accounted as cash flow hedge, cumulative translation adjustments and expenses recorded regarding the long term incentive plans.

g) Dividends and interest on capital - the shareholders have a right to receive a minimum annual mandatory dividend equal to 30% of adjusted net income as determined in its corporate records. The Company calculates interest on shareholders´ capital in accordance with the terms established by Law 9249/95. The corresponding amount was recorded as a financial expense for tax purposes. For presentation purposes, this amount was recorded as dividends and did not affect net income.


	2023	2022	2021
Net income	7,501,565	11,425,512	15,494,111
Constitution of legal reserve	(318,142)	(545,251)	(756,334)
Constitution of the tax incentives reserve	(1,138,728)	(520,478)	(367,430)
Net income before dividends and interest on capital	6,044,695	10,359,783	14,370,347
Dividends and interest on equity based on income of the year	(2,466,503)	(5,749,906)	(5,014,450)
Dividend - adjustment in excess of the minimum estatutory undistributed	(174,952)	(332,712)	(341,150)
Total dividends	(2,641,455)	(6,082,618)	(5,355,600)
Net income before constitution of investments and working capital reserve	3,403,240	4,277,165	9,014,747
Constitution of investments and working capital reserve	(3,403,240)	(4,277,165)	(9,014,747)

The excess of retained earnings in relation to the capital will be the subject of a proposal by the Company’s management for capitalization to be submitted for deliberation by the Shareholders’ Meeting.

Subsequent event

On March 14, 2024, the Company informed that the Board of Directors sent a proposal to the Extraordinary Shareholders’ Meeting, to be held on April 16, 2024, for a capital increase of R$ 4,057,882 through the capitalization of part of the balance of the Retained earnings account - Investments and Working Capital reserve, with issuance of 351,413,410 new shares, of which 120,105,288 will be common shares and 231,308,122 will be preferred shares, all book-entry, with no par value, and that will be distributed to the shareholders as a bonus, in the proportion of one new share for every five shares of the same type held on April 17, 2024. It is important to note that this proposal, if approved, will take place on April 16, 2024, and there are no impacts until this date.

The dividends for the years 2023, 2022 and 2021 are presented below:

Dividends and interest on capital in the years

Outstanding shares

Period

Nature

R$ /share

(thousands)

Credit

Payment

2023

1^st quarter

Interest

0.51

1,749,090

05/15/2023

05/29/2023

892,056

2^nd quarter

Dividends

0.43

1,749,522

08/18/2023

08/29/2023

752,172

3^rd quarter

Dividends

0.47

1,749,522

11/17/2023

12/13/2023

822,275

4^th quarter

Dividends

0.10

1,749,522

03/01/2024

03/12/2024

174,952

Proposed Interest and Dividends

2,641,455

Credit per share (R$)

1.51

Dividends and interest on capital in the years

Outstanding shares

Period

Nature

R$ /share

(thousands)

Credit

Payment

2022

1^st quarter

Interest

0.57

1,707,829

05/16/2022

05/25/2022

973,542

2^nd quarter

Dividends

0.71

1,693,994

08/15/2022

8/25/2022

1,199,713

3^rd quarter

Dividends

1.73

1,663,560

11/21/2022

12/14/2022

2,877,957

3^rd quarter

Interest

0.42

1,663,560

11/21/2022

12/14/2022

698,694

4^th quarter

Dividends

0.20

1,663,560

03/14/2023

3/23/2023

332,712

Proposed Interest and Dividends

6,082,618

Credit per share (R$)

3.63

Dividends and interest on capital in the years

Outstanding shares

Period

Nature

R$ /share

(thousands)

Credit

Payment

2021

1^st quarter

Dividends

0.40

1,705,338

5/14/2021

5/26/2021

682,199

2^nd quarter

Dividends

0.54

1,705,576

8/16/2021

8/26/2021

921,011

3^rdquarter

Interest

0.38

1,705,582

9/27/2021

11/16/2021

648,122

3^rdquarter

Interest

0.20

1,705,630

11/5/2021

11/16/2021

341,126

3^rdquarter

Dividends

1.42

1,705,628

11/5/2021

11/16/2021

2,421,992

4^th quarter

Dividends

0.20

1,705,747

3/7/2022

3/16/2022

341,150

Proposed Interest and Dividends

5,355,600

Credit per share (R$)

3.14