Gerdau(GGB) - 2025 Q2 - Earnings Call Transcript

Financial Performance and Key Metrics - The company's adjusted EBITDA for the quarter was BRL 2.6 billion, a 6.6% increase compared to the previous year, with North America being the standout segment [6] - Net income reached BRL 864 million, or BRL 0.43 per share, reflecting a 14% increase year-over-year [6] - The company's leverage ratio, defined as net debt over EBITDA, ended the period at 0.85 times, significantly below the established debt policy level [7] Business Line Performance - North American operations contributed 61% of consolidated EBITDA, marking the highest share in the company's history [4] - Brazilian operations faced challenges due to excessive steel imports, with an import penetration rate of 23.4% in the first half of the year, prompting a reduction in investments in Brazil [5][6] Market Data and Key Indicators - The North American market is experiencing high steel demand, particularly from the non-residential construction sector, with order backlogs above historical levels [10][11] - In Brazil, despite good demand for steel, the market is adversely affected by high levels of imports, leading to concerns about future import records if trade defense mechanisms are not improved [12] Company Strategy and Industry Competition - The company is focusing on internationalization and geographic diversification, operating autonomously in seven countries across the Americas [4] - A strategic decision has been made to reduce future investments in Brazil while maintaining investments in North America, where the outlook is more favorable [20][23] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over the lack of effective trade defense measures in Brazil, which has led to a competitive imbalance [38] - The company anticipates a resilient civil construction market in the coming months, while closely monitoring the automotive and agricultural sectors affected by high interest rates [12] Other Important Information - The company approved a dividend distribution of BRL 239 million, equating to BRL 0.12 per share, and continues its share buyback program, which has reached 68% completion [9] - The Miguel Bernier sustainable mining project is 72% complete and is expected to generate BRL 1.1 billion in annual EBITDA once fully operational [8][26] Q&A Session Summary Question: CapEx expectations and mining project details - Management indicated that an annual CapEx of BRL 5 billion to BRL 6 billion is sustainable, with a shift towards competitiveness and cost reduction projects rather than solely increasing production capacity [17][18] - The mining project is expected to generate significant incremental EBITDA, with a ramp-up planned for 2026 [26] Question: Concerns about increasing net debt and cash flow - Management acknowledged the increase in net debt but emphasized that a significant portion was allocated to shareholder returns through dividends and buybacks [35] - The company expects to generate positive cash flow in the second half of the year, which should help reduce leverage [46] Question: Strategy regarding rebar pricing and market share - Management confirmed that they are not willing to lose market share in rebar and are monitoring the competitive landscape closely [59][62] - The company believes there is room for price recovery in rebar, despite current challenges [42] Question: Future investments and structural measures in Brazil - Management is considering long-term adjustments in Brazil due to the current competitive environment and is focused on maintaining production capacity [56][58] - The company is committed to ongoing maintenance investments to ensure competitiveness [66]