Gerdau(US:GGB)2021-08-05 14:20Financial Data and Key Metrics Changes - Gerdau reported a record EBITDA of BRL 5.9 billion in Q2 2021, up from BRL 4.3 billion in Q1 2021, marking a significant increase [8][25]. - The net debt decreased to BRL 10.2 billion, down by BRL 600 million from March 2021, reflecting effective debt management [20][22]. - The EBITDA to net debt ratio improved from 0.96x in Q1 to 0.65x in Q2, indicating strong financial leverage [25][26]. - The cash conversion cycle increased from 57 days in March to 60 days in June, primarily due to rising accounts receivable and inventory levels [19]. Business Line Data and Key Metrics Changes - North America operations achieved an EBITDA of BRL 1.4 billion, over three times higher than the previous year, with a margin of 20% [10]. - Brazil's operations posted an EBITDA of BRL 3.6 billion with a record margin of 40.7% [12]. - South America operations reported an EBITDA of BRL 494 million and a margin of 38% [14]. - Special Steel operations generated an EBITDA of BRL 495 million with a margin of 18.7% [15]. Market Data and Key Metrics Changes - North America saw steel capacity utilization exceed 90%, compared to less than 75% in the same quarter last year [11]. - Brazil's steel capacity utilization surpassed 80%, up from about 60% in Q2 2020 [13]. - The civil construction sector in Argentina grew 6.5% monthly and 31% year-on-year [57]. - In Peru, steel consumption remained strong, driven by public investments in construction, with a growth of 20.5% year-on-year [58]. Company Strategy and Development Direction - Gerdau is focusing on domestic market prioritization, with only 10% of shipments earmarked for exports, compared to 30%-40% in previous years [12]. - The company is investing in modernization and expansion of production capacity, with a total CapEx of BRL 3.5 billion estimated for 2021 [59][60]. - Gerdau is committed to sustainability, including a photovoltaic power station project to enhance energy self-sufficiency [33][34]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2021, anticipating strong market demand, particularly in construction [68][79]. - The company is well-prepared for potential energy risks due to its self-generation capabilities, which cover 80% of its energy needs [100][102]. - Management noted that while prices in Brazil are stabilizing, there is still room for margin improvement [80][81]. Other Important Information - Gerdau's dividend yield increased from 0.7% in 2017 to over 8% in the last 12 months [28]. - The company has made significant progress in diversity and inclusion, increasing the percentage of women in leadership positions from 17% in 2018 to 23% in 2021 [36][37]. Q&A Session Summary Question: Working capital strategy and preparation for the second half - Management indicated that the working capital strategy is aligned with preparing for a strong market in the second half, emphasizing the importance of maintaining adequate inventories [68][75]. Question: Business environment in Brazil regarding prices - Management acknowledged that price increases have stabilized but emphasized the need to pursue additional margins [67][80]. Question: Potential prepayment of extraordinary dividend payout - Management confirmed the intention to maintain a 30% dividend payout policy while monitoring the tax reform developments [85][87]. Question: Cash cost and scrap prices outlook - Management expects volatility in scrap prices but believes in maintaining profitability through effective cost management [91][93]. Question: Share of civil construction in Brazil operations - Management stated that civil construction accounts for approximately 60% of their business in Brazil, with a focus on serving end consumers [106]. Question: Energy crisis preparedness - Management highlighted their self-generation capacity and increased inventory levels to mitigate potential energy risks [100][102].