Gerdau(US:GGB)2022-05-05 22:17Financial Data and Key Metrics Changes - Gerdau reported an adjusted EBITDA of BRL5.8 billion for Q1 2022, with an adjusted EBITDA margin of 28.7%, both record highs for the first quarter [12][13] - Net income reached BRL2.9 billion, a 19% increase year-on-year, while net sales totaled BRL20,030 million, reflecting a 24% increase compared to the same period last year [13] - The company achieved shipments of 3.1 million tons during the quarter, indicating strong demand [13] Business Line Data and Key Metrics Changes - In North America, adjusted EBITDA tripled year-on-year to BRL2.7 billion, with a record adjusted EBITDA margin of 33% [15] - The special steel operation's EBITDA was higher than both the previous quarter and the same quarter last year, despite challenges in the light vehicle market due to chip shortages [24] - The long and flat steel segment in Brazil showed healthy demand levels, with expectations of up to 4% year-on-year growth in actual demand for 2022 [30] Market Data and Key Metrics Changes - The construction sector in Brazil is expected to have a strong year, with a normalized inventory level for real estate at approximately 11 months and a forecast for the second-best historical year in property launches [31] - In Argentina, the construction sector grew nearly 31% year-on-year in 2021, with a positive outlook for 2022 [36] - The U.S. construction sector saw significant investment, with BRL360 billion spent in the first quarter, indicating robust demand for steel [42] Company Strategy and Development Direction - Gerdau is focusing on digital transformation and improving productivity in North America, with an investment of BRL300 million for modernization in Canada [20][21] - The company is committed to enhancing its ESG agenda, including investments in renewable energy and reducing greenhouse gas emissions [51][52] - Gerdau plans to continue investing in its operations to improve profitability and productivity, particularly in the U.S. market [19][21] Management's Comments on Operating Environment and Future Outlook - Management noted that the conflict between Russia and Ukraine has led to increased raw material prices, impacting production costs, but Gerdau's operations remained unaffected due to safety stocks [8][9] - The outlook for North America remains positive, with a strong backlog of orders and high capacity utilization levels [16][17] - Management expressed confidence in maintaining high margins and strong operational performance despite challenges such as labor shortages and inflation [64][65] Other Important Information - Gerdau announced a share buyback program aimed at acquiring up to 55 million preferred shares, reflecting confidence in its cash generation capacity [48][49] - The company is also set to pay dividends totaling BRL964 million on May 26, 2022, and BRL314 million for Metalurgica Gerdau [47] Q&A Session Summary Question: What is the outlook for metal spread in the US considering the shortage of scrap? - Management indicated that while there is a shortage of prime scrap due to reduced automotive production, the outlook for metal spread remains positive, supported by a strong backlog and high demand [61][62] Question: Regarding the buyback program, will it continue as long as net debt over EBITDA is close to your goal? - Management stated that the buyback program is based on the belief that their stock is undervalued and will be reassessed based on leverage and cash generation capacity [71] Question: What about the infrastructure pipeline in the U.S.? - Management expects the infrastructure package to contribute to demand starting in November, with strong spending in the construction sector already observed [73][74] Question: Will the 33% margin in Q1 be maintained in the second quarter? - Management expressed confidence that margins will be maintained above Q1 levels due to strong operational performance and high metal spreads [85]