Gerdau(US:GGB)2022-11-09 22:20Financial Data and Key Metrics Changes - The adjusted EBITDA for Q3 2022 reached BRL 5.4 billion, marking the second-best EBITDA for a third quarter in the company's history [21][22] - The net debt over EBITDA ratio reached a historical low of 0.16 times, reflecting a successful deleveraging process [28] - The company closed the quarter with a robust cash position of BRL 8.6 billion, slightly up from the previous year [28] Business Line Data and Key Metrics Changes - North America reported an adjusted EBITDA of BRL 2.6 billion with a margin of 32.9%, both historical records for Q3 [2] - The special steel operations saw a 17% increase in adjusted EBITDA year-on-year, driven by current profitability levels [7] - The Brazilian long and flat steel operations experienced a 2% growth in shipments compared to Q2 2022, indicating stable demand [14] Market Data and Key Metrics Changes - In North America, the demand for steel remains strong, particularly from the construction sector, with non-residential construction spending reaching nearly $80 billion in August [4] - The Argentinian construction sector grew by 6.4% year-on-year, while Peru's steel demand increased by 6% in Q3 compared to the previous year [18][19] - The Brazilian Civil Construction Confidence Index reached its highest value in six years, indicating positive market sentiment [15] Company Strategy and Development Direction - The company is focusing on digital transformation and productivity improvements in North America to enhance competitiveness [5] - Investments are being made in the Whitby mill in Canada and the Jackson unit in Tennessee to expand product offerings [6] - The company aims to maintain a gross debt below BRL 12 billion while continuing to invest in share buybacks and dividends [29][31] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the demand for steel in North America, particularly from the construction sector, despite potential seasonal impacts [4][5] - The company anticipates a positive outlook for the fourth quarter, supported by a healthy order backlog [3] - Management highlighted the importance of labor shortages and inflation as ongoing challenges in the North American market [6] Other Important Information - The company announced a dividend payout of approximately BRL 3.6 billion, representing over 60% of the free cash flow generated in the first nine months of the year [31] - Gerdau Summit received certification as a B Corporation, reflecting its commitment to sustainability [39][40] - The company aims to achieve carbon neutrality by 2050 and has set new targets for reducing greenhouse gas emissions [41] Q&A Session Questions and Answers Question: Difference in dividend payout between Gerdau and Metalúrgica - Management clarified that the share buyback program at Metalúrgica is larger compared to Gerdau, which affects the dividend payout strategy [46][47] Question: Profitability trends in Brazil - Management indicated that demand remains solid, with profitability levels expected to remain adequate despite fluctuations in raw material prices [49][50] Question: Capital allocation and extraordinary dividends - The company emphasized that the extraordinary dividend was based on strong cash generation and not on advancing reserves [58][59] Question: Outlook for U.S. operations and margins - Management noted that while there were maintenance downtimes, demand remains strong, and they expect to operate at full capacity moving forward [62][63] Question: Cost evolution in Brazil - Management acknowledged stable costs for mini mills but highlighted potential volatility in coal prices as a key factor to monitor [84][85]