SAO PAULO: Brazilian steelmaker Gerdau SA on Thursday reported first-quarter net profit down 17% from the previous three months at 2.94 billion reais ($597.96 million) as weaker results in Brazil offset an improvement in North America.

The bottom line came in below an expected 3.09 billion reais in an analyst poll by Refinitiv.

Gerdau’s domestic EBITDA margin fell 7.2 percentage points from the previous quarter to 24.3%, the firm said, mentioning that sales were nearly flat at a high level but the overall scenario posed challenges as interest rates rise.

“Prospects for 2022 are for revenue growth and volume drop in distribution and retail. In real estate development, we project stability for both launches and steel sales volume,” Gerdau said in a securities filing.

The drop in Brazilian margins ended up offsetting strong results in North America, which had been the highlight of Gerdau’s fourth quarter earnings.

EBITDA margin in North America grew by 5.6 percentage points to 27.4%, it said.

Gerdau’s first-quarter total steel sales totaled 3.06 million tonnes, down 1% from a year earlier and 3% from the previous three months. Output rose 4% on a sequential basis to 3.4 million tonnes.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) fell 3% from the previous quarter to 5.83 billion reais.

Analysts at Bank of America had expected a decline in Gerdau EBITDA on a quarterly basis, which they said would be the latest of a series of mixed results from Brazilian steelmakers on persistent cost pressures, but added that Gerdau’s higher production flexibility and lower exposure to coal and iron ore could help it outperform peers.