Gerdau(GGB) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gerdau ended 2025 with an EBITDA of BRL 10.1 billion, down 7% compared to 2024, primarily due to a challenging environment in Brazil marked by increased competition [4][5] - The adjusted net income for 2025 was BRL 3.4 billion, down 21% year-on-year, excluding non-recurring impairment losses of BRL 2 billion [5][6] - The company achieved a free cash flow generation of BRL 1.4 billion in Q4 2025, resulting in a positive annual cash flow of BRL 394 million for the last 12 months [6][7] - Gerdau's leverage ratio stood at 0.76 times net debt over EBITDA, indicating a sound financial position [7] Business Line Data and Key Metrics Changes - North American operations showed strong performance with record shipments in December 2025, benefiting from resilient demand and reduced import levels [3][4] - Brazilian operations faced challenges with a 7.5% increase in steel imports, impacting profitability despite trade defense measures [3][4] - The new sustainable mining platform in Miguel Burnier is expected to significantly reduce production costs at the Ouro Branco unit [4] Market Data and Key Metrics Changes - The North American market demonstrated strong steel consumption and order backlogs above historical averages, with positive outlooks for sectors like solar energy and infrastructure [9][10] - In Brazil, moderate growth in demand is expected for 2026, despite the influx of imported steel [9][10] Company Strategy and Development Direction - Gerdau's strategy focuses on geographic diversification and productivity flexibility to navigate varying market conditions [2][3] - The company plans to reduce CapEx to BRL 4.7 billion in 2026, allowing for greater flexibility in cash flow generation [6][7] - There is an emphasis on optimizing operations rather than closing down capacity, with no plans to shut down additional mills in 2026 [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding trade defense measures in Brazil, which could improve market conditions [39][42] - The outlook for North America remains strong, with no anticipated deterioration in profitability [28][31] - The company is cautious about capital allocation, focusing on investments that enhance competitiveness rather than merely expanding capacity [58][60] Other Important Information - Gerdau paid out BRL 2.4 billion in dividends and share buybacks throughout 2025, reflecting a commitment to returning value to shareholders [7][8] - The company is exploring the potential divestment of non-core assets, including forest and real estate holdings, to generate value [45][48] Q&A Session Summary Question: Outlook for Brazil business margins - Management expects stability in margins for Q1 2026, with potential for improvement in the second half due to the Miguel Burnier project [12][21] Question: Details on impairment losses - Impairment was driven by conservative cash flow projections and underutilization of assets in Brazil [13][19] Question: South America and U.S. market expectations - South America is expected to recover margins in 2026, while North America shows strong profitability with stable order books [26][28] Question: Growth avenues in the U.S. segment - Gerdau is focused on organic growth and exploring M&A opportunities, particularly in smaller players [58][60] Question: Impact of anti-dumping measures - Management is optimistic about the expansion of trade defense measures, which could enhance competitiveness in Brazil [36][39] Question: Non-core asset divestments - The company is evaluating non-core assets for potential divestment, focusing on generating value rather than simply selling off assets [45][48]