Gerdau(US:GGB)2022-02-24 04:00Financial Data and Key Metrics Changes - Gerdau achieved a historical EBITDA of BRL23 billion for the year 2021, with Q4 2021 EBITDA reaching BRL6 billion and an EBITDA margin of 27.8% [20][30] - The company reported a positive free cash flow of BRL3.4 billion in Q4 2021, marking the second-best quarterly cash flow result in its history [27] - The net debt at the end of 2021 was BRL7.3 billion, a reduction of BRL1.4 billion from the previous quarter, with a net debt to EBITDA ratio of 0.30 times [33][34] Business Line Data and Key Metrics Changes - Brazil BD reported an EBITDA of BRL2.8 billion in Q4 2021, with an EBITDA margin of 31% [21] - North American operations posted a record EBITDA of BRL2.2 billion in Q4 2021, with a margin of 27% [23] - Special steels operations reported an EBITDA of BRL540 million with an 18% margin in Q4 2021 [25] - South America achieved an EBITDA of BRL521 million with a margin of 23% in Q4 2021 [26] Market Data and Key Metrics Changes - The U.S. GDP grew by 5.7% in 2021, with a forecast of 4% growth for 2022 [46] - The Architectural Billing Index and the Institute For Supply Management Index remained above 50 points, indicating strong activity in the non-residential construction sector [47] - In Brazil, the construction sector's GDP is forecasted to advance by 3.2% in 2022, supported by high levels of active construction sites [59] Company Strategy and Development Direction - Gerdau aims to reduce greenhouse gas emissions to below 50% of the global average for the steel industry by 2031, with plans to invest in renewable energy and enhance energy efficiency [37][39] - The company is focusing on expanding its operations in North America and improving productivity, with significant investments planned for 2022 [48][66] - Gerdau is also evaluating opportunities in wind power and aims to diversify into complementary businesses [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, expecting it to be one of the best years in the company's history, driven by strong demand in North America [86][88] - Challenges such as labor shortages, inflation, and logistical issues were acknowledged, particularly in North America [49] - The company anticipates stable profitability levels in Brazil, despite some margin pressures due to costs [104] Other Important Information - Gerdau plans to distribute BRL0.20 per share in dividends for Q4 2021, totaling BRL5.4 billion in dividends for the year, the highest in the last decade [36] - The company reduced its gross debt by BRL3.1 billion in Q4 2021, primarily through bond repurchases and loan payments [31] Q&A Session Summary Question: Capital allocation and dividend expectations - Analysts inquired about the potential for excess free cash flow to be allocated to dividends, given the company's strong cash generation and net debt levels [70] - Management indicated that while dividends are a priority, they will remain cautious and ensure investments meet expected returns [72][81] Question: Cost evolution in Brazil BD - Questions were raised regarding the future evolution of costs, particularly related to charcoal, and the impact on margins [83] - Management acknowledged ongoing cost pressures but expressed confidence in maintaining historically high margins [104] Question: Margin sustainability in North America - Analysts asked about sustainable margin levels in North America post-COVID and the impact of construction cost inflation [111] - Management highlighted efforts to improve margins and maintain competitiveness, with expectations for strong performance in the coming quarters [114]