Gerdau(US:GGB)2021-02-25 02:30Financial Data and Key Metrics Changes - Positive free cash flow was BRL2.4 billion in Q4 2020, a 43% increase in EBITDA quarter-on-quarter [9][15] - Year-to-date free cash flow was BRL4.5 billion for the second consecutive year, with a cash conversion cycle reduced from 63 days in September 2020 to 49 days in December 2020 [11] - Net debt decreased to BRL9.9 billion, with a net debt to EBITDA ratio improving from 2.07x in Q3 2020 to 1.25x in Q4 2020 [12][14] Business Line Data and Key Metrics Changes - Consolidated EBITDA increased from BRL2.1 billion in Q3 to BRL3.1 billion in Q4 2020, marking the best EBITDA in Gerdau's history for Q4 [15] - Brazilian operations generated approximately BRL1.8 billion in EBITDA, driven by strong demand from civil construction and industry [16] - Special Steel operations showed improvement, with capacity utilization rising from 50% in Q3 2020 to 70% in Q4 2020 [22] Market Data and Key Metrics Changes - Shipments of longs and flats in Brazil increased by 22% year-on-year between October and December 2020 [26] - Civil construction confidence in Brazil rose from 65 points in April to 93 points by December 2020, indicating a positive outlook for the sector [18][33] - In North America, EBITDA margins remained above 10%, the best performance since 2007, despite seasonal impacts [19] Company Strategy and Development Direction - Gerdau aims to become a more agile, simpler, and digital company to capture opportunities in challenging environments [25] - The company is focusing on the Brazilian domestic market, reducing exports to ensure full supply to local demand [32] - Investments in infrastructure are expected to exceed BRL126 billion in 2021, providing opportunities for Gerdau [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the Brazilian market, anticipating further economic recovery and growth in civil construction [33] - The automotive sector is expected to see a 25% increase in vehicle production in 2021, positively impacting Special Steel operations [35] - The company is committed to maintaining a positive cash flow and a disciplined approach to capital allocation [67][69] Other Important Information - Gerdau celebrated its 120th anniversary, emphasizing its commitment to sustainability and customer-centric operations [55] - The company is actively engaging in digital initiatives and partnerships to enhance its logistics and renewable energy sectors [52][53] Q&A Session Summary Question: Landscape in Brazil and Demand Drivers - Management anticipates an 8% to 10% growth in shipments, driven by strong demand from civil construction and retail sectors [61][62] Question: Capital Allocation and Dividends - The company maintains a dividend policy of 30%, with dividends expected to increase as leverage improves [70] Question: Price Transfer and EBITDA Margin Sustainability - Management sees strong demand and balanced prices, with an EBITDA margin of 31% in Q4 2020, and anticipates stability in costs despite increases in raw material prices [74][80] Question: Heavy Plate Utilization and U.S. Market Impact - Heavy plate utilization is around 60%, with expectations for improvement as demand continues to recover [84] Question: Imports and Future Growth Phase - No signs of increased imports are expected, with capital allocation focused on efficiency and marginal production expansion [92][94]