Gerdau(US:GGB)2023-03-01 23:33Financial Performance and Key Metrics - Gerdau reported the highest net sales in its history, totaling BRL 82.4 billion, and the second-best adjusted EBITDA of BRL 21.5 billion with an EBITDA margin of 26.1% [3][36] - The company ended 2022 with a record cash flow of BRL 10.5 billion, which is nearly 50% of EBITDA for the period [37] - Gerdau's net debt over EBITDA ratio stood at a healthy 0.33x, with a slight increase in net debt due to record dividends paid [51] Business Line Performance - The North America business operation achieved an adjusted EBITDA of BRL 10 billion with a historical EBITDA margin of 32% [11] - The Special Steel operation saw a 40% increase in adjusted EBITDA compared to the previous year, driven by high profitability levels [29] - The Brazilian operation experienced a drop in demand due to seasonal factors and external events, but the construction sector is expected to grow, positively impacting steel demand [23][32] Market Insights - Steel shipments in North America reached the highest levels since 2015, with a strong order backlog of around 60 days [13] - The infrastructure investment package in the U.S. is expected to generate additional steel demand, with significant government funding announced for projects [14] - In Brazil, the construction sector is projected to grow by 2.5% in GDP, supported by reforms in housing programs aimed at low-income segments [32] Company Strategy and Industry Competition - Gerdau is focusing on digital transformation and innovation through initiatives like Gerdau Next, which includes partnerships in high technology and renewable energy [4][54] - The company is committed to maintaining a disciplined capital allocation strategy, with planned CapEx of BRL 5 billion for 2023, split between maintenance and expansion projects [40][41] - Gerdau's operations are characterized by geographic diversification and a focus on specialty steels, which are competitive in the global market [21][22] Management Commentary on Operating Environment and Future Outlook - Management highlighted resilience against macroeconomic challenges, including geopolitical tensions and inflationary pressures, while maintaining a positive outlook for 2023 [8][20] - The company anticipates a recovery in demand for steel in Brazil, aligning with the levels seen in 2022, despite concerns about inventory levels and new launches [31] - Management emphasized the importance of adapting to market conditions and leveraging investments in technology to enhance competitiveness [10][27] Other Important Information - Gerdau achieved its lowest accident frequency rate of 0.76, underscoring its commitment to safety [73] - The company received B Corp certification for its operations, recognizing its sustainability practices [74] - Gerdau is investing in renewable energy projects to reduce greenhouse gas emissions and improve production cost competitiveness [54] Q&A Session Summary Question: What are the expectations regarding long steel prices in Brazil? - Management noted that profitability for long steel is recovering, with demand returning to normal levels after a seasonal drop [79] Question: How will infrastructure investments impact long steel demand in the U.S.? - The outlook for the U.S. market is positive, with significant infrastructure investments expected to drive steel demand [81] Question: What is the magnitude of CapEx for the renovation of the blast furnace in Ouro Branco? - Management indicated that the CapEx for maintenance and upgrades is planned and will not surprise the market, with investments already underway [89][104] Question: Can we expect a higher level of CapEx in the coming years? - The current level of CapEx is expected to remain stable, focusing on maintenance and competitiveness without major surprises [104][140]