GGB - Earnings call transcript Q1 2021

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Rodrigo Mala

Good afternoon, everyone. I'm Rodrigo Mala, Investor Relations of Gerdau. Welcome to Gerdau's First Quarter Earnings Results in the first time using video Conference platform.

Here today is Gustavo Werneck, CEO of Gerdau; Harley Scardoelli, CFO who will present to you today. All analysts and investors can send their questions to the chat. will presentation. by questions Scardoelli Gustavo the the after then be both answered and And like clarify call the would operating management's be business I expectations to projections goals made that forward-looking outlook, the based during might are statements related mere this on financial to company. conference and related assumptions Gerdau's that to and any the information, of future affect that assumptions, future believes Gerdau its evaluation. not there events no though based reasonable comments Even on that is guarantee will this are I floor would turn to over the now like to Mr. Gustavo Werneck.

You sir. may proceed,

Gustavo Werneck

way. pursuing at in of to our our of safe period keeping and remain by possible and not did have established we've behalf On all XX,XXX XXXX. operations afternoon, present still and you, routine best the plants I is on welcoming this Thank to healthy discuss audio authorities. and first first side, and managed and well-being for brief This is our Rodrigo, our of of of video. and related rigidly an one more like introduction, to our sanitary of to we last complying are our the by the and attempt also start attributed results adequate quarter, this an also speaking we through employees, all society any good the time call you to well of the the Gerdau's this everyone. protocols to our In production and health hope conference aligned reality you be would to to industrial with healthy each going COVID-XX. I by in this the And quarter today. local with interruption

After about that to highlights about will also quarter. this As issues of to of talk the And today will also also the talk come always by will with the further. be joining you pleasure talk at and a for talking about discuss he markets up we And our forward. any the to both start mentioned And results to clarify presentation. then we I operate available Scardoelli. going us and our to thoughts you where possible what about some landscape performance Scardoelli end, of may elaborate operations. see return and during share talk to of also, the us, it's the performance by both is you that, will our about issue we want Rodrigo, us you

start about the So Scardoelli, then talking And our can results. floor we is yours.

Harley Scardoelli

very pleasure us joining us good, Gustavo, you afternoon Thank very you I It's today. think which be both and much, you, all. with will a and for using for to new good to this be format, those

we main record in will went financial X.X from at And to 'XX the Gerdau quarter. the when that billion a QX We first look QX results. of we this also EBITDA presentation impacted about and BRL our billion consolidated of BRL our factors talk start slide the for X.X with 'XX, was will in a EBITDA. single We in

gains our performance not efficient scenario. to diligent excellent last a and operations. as over but X current all the this months the about to our years us agile And year. an only capture more result in had the few operations the industry, brought to of allocation in also profitability was moment our favorable investments of All steel the capital be a by first for due These helped of the

Brazil shipments to margin are and benefited to special special quarter margin of posting of when compared we steel in million year. and approximately XXXX, the quarter for utilization posted in of the Gerdau country. QX of similar of margin of and XX% American that of first And the of performance also main In EBITDA. the fourth This operation months BRL Brazil BRL of strong very last say we of advances reached United and figure in can is industry, has of in margin steels leaving in of Argentina the XXX we EBITDA posted and Peru. million shipments with of last BRL the the from XXX% Brazil, the quarter, in the XXX year, the The a or an showed record but the of operation had performance of of EBITDA of industry market. sectors, an industry foreign nonresidential particularly allocating remained North campaign terms addition rebound in large was our EBITDA due performance the EBITDA a BD quarter, reflects to gradual favor EBITDA therefore, steel excellent strong result XX.X%. the industry million that construction XX%. focusing automotive XX.X%, domestic also utilization construction BRL consumer not a rebound the market. South quarter This to that portion quarter EBITDA least, in I points an of this of an vaccination the even of X with the Brazil's special XX% a XX.X%, percentage activities good as steel Brazil fourth States above performance the performance single in the BD in return operation of which are the with first almost the an the the billion of gradual a an XXXX. once our our This recovery BD that capacity good sector the another X.X X again above and to only XX% X% XXX of EBITDA quarter margin to of the America of XXXX, last an

to moving number slide, next Now Slide X.

about We will capital. flow working cash free talk and

with would X.X our but flow to slide, contributed free this chart, unusual like cash billion. Gerdau, X.X emphasize substantial BRL an of reached left-hand this flow for to calculation. side possible indicators is the that EBITDA, it cash due this I BRL previous As the that to explained see in positive Starting the the was at can as first quarter result historical we in QX. in was a on the improvement billion

variation addition, consequence, strong. X December of receivable kept all-time exposure to been of the this right coupled days count the our foreign with the and company's billion, industry liquidity gross in performance as its is levels. XXXX, for days a of few mostly by capital, more to was of adequate demand of way In on efforts balanced past last the our shows attributed and debt. This in cycle and also to XX March to steel commercial the cycle lower managed conversion the remains cash our the given cash XX inventories, the attributed XX On at impacts which flow chart to assets accounts global fact high the over the for to growth the And that invested position, XXXX cash debt which from remuneration currency. from the exchange a minimized Gerdau. -- our the reduced we commitment positive in that the has quite months, BRL reflecting the effects interest was In months, commitments to went

foreign Brazilian the rates about us as the reals U.S. the of XX% exchange closer at position. part the the U.S. opportunities to we was and XXXX a would This between I slide, denominated higher end by worth denominated of substantial are located operations to billion of The our dollars, that in that our volatility XX% that March to Brazilian the like also the hedge to advantage current in will I approximately debt debt last of impact our high term. next It's level of natural of at December BRL due or quarters, mentioning reported dollar that of in generated our is of fact XX% debt amount to Therefore, the in the the increased XXXX about debt puts about in our net U.S. net seen XX.X is the Brazil. is the debt and America. billion, dollars. approximately and from than talk our lately. XX% moving addition highlight our North the foreign a the ourselves reduce end to in take underline EBITDA given brought few of that the a exchange from would slightly to we significant rate currency. to strategy we real the BRL exposure to assets long a Now March, debt in debt portion implemented of like XXXX. exposure vis-à-vis protect scenario total of Currently, of this interest on in total depreciated debt dollar XX

over strong and quarter -- quarter, out ratio EBITDA to for we the Slide as right to an a set only have The XXXX. of X.XXx and the the of X.Xx can our goal the leverage, net and over policy Xx XXXX. company, in it of see, that years of generated ratio next leverage, after of last we in the financial slide, keep a concentrated nominal X point by the like the financial And debt of quarter more look would to the quarter X.X% kind As if coming EBITDA at second of the over consecutive from the With side of debt EBITDA debt it's first of schedule average cost of net fourth the mention by forth Board in amortization XXXX with reached and X.XXx this which months, last went or measured distributed consequence the year. ratio. the along to average X, we years year a between by which is the XX on finally, approved important 'XX result first life you this the

Moving now X. Slide to next slide,

show simple of was reach market, to return last seen like And higher-value traded And on returns return this capital higher would capital and the of of on slide, very evolution this a is XX our into stock shows we quarters. certainly, also, able is than shares that you translated in and the This years. our I value it last were shareholders XX.X% employed, Here, but in the it's investors. the employed. months, last the X the into the we've company's as in of generation to to translated

Slide #X. to going Now

in of here, of in Now shows XXXX the last reduction And net years, and the significant few dividends on positive This slide the going combination paid our net the equity can a last is evolution dividend payout results at significant more a of period interest very that X.X% better effect the and X% the to dividend beginning and demonstrating price very yield, percentage each a months. had meaning income share over of conclude. XX than last debt the from of we the on the in closing increase.

you to very for thank on I attention, So Gustavo, the turn market much back the outlook. comment who will floor your will and

Gustavo Werneck

the of you, part for the Thank first Thank presentation. Scardoelli. you

let's of XXXX landscape and please Gerdau's number So about will Slide talk industry. Gerdau our talk we steel the go about performance the next we global here, the And quarter X. to in for -- slide, how first

quarter, As we to performance in first lots. on split Scardoelli's I into the heard slide Gerdau's would from like comments the

transformation we've benefits also course, ready agile. customers. the also the value we talk led the first And of to through simpler the that be our I few But we that past reaping market. the this more quarter through about lighter, Of results deliver say been in part intense and that to achieved are stem we all from are we will would This to of greater us we understand years. going in

a XXX integrating operations, to X% million optimizing SG&A to our simplification when years of since By net than sales ensuring introduced had this million approximately that customer As XXXX. view almost savings expenses token, revenue of all of of same year. financial quarter total gains $XXX result for or equivalent accounted that the X and of of we the at this ago. BRL X% And less focus net company, this the is every aims our digital compared

United were of good example the the online operations another the initiative bought States. in customers revenue. operate, the we we a of More compared channels. XXXX of BRL of as when Brazil and was in year still countries to the new according saying, think first I XXXX that for number in our this of X.X% grew million according another period is where from production through quarter business of digital grow And from steel the that when still in than half in strong year World the benefited X.X% Steel. added in steels of steel demand same Global digital to to consumption captured in And customers of XX% and sources came should I and to particularly the new data steel the this in long last of And the from year. And compared flat to also all XXXX. XX first was crude X,XXX Brazil. association,

about numbers our emphasis importance to safety So to an these on economies. global also essential last strong In a pandemic slide. we the conclude stress the as moment people the as months, this steel recovery the the continues unfold. well-being the input of put of comments and And of XX of and continue to health,

markets in And in Gerdau I a vaccination and by also will North the are of we plan also very with are number very the a posting order in in talking Slide slide, the indicators better and despite time, next the high quarter markets the prices talk industry, sounder recently will America forward. allowed the these respectively. local this higher and internal business coming scrap in This and North I operation. with of the how we costs of backdrop market This of start year to increase reduce move let's outlook strategic from and in efforts steels Also, Metallic construction first to And U.S. operating about America the our advance the inflow units experienced and Petersburg us U.S. and volumes about which and allowed serving completed rolling on X. focused our structural for the capture increase mills is us the Now here, significant opportunities the important in deliver to expand strong looking spread the to our in economic and, period and Georgia, of we Virginia steels it's fully profiles, America, our market. even customers, portfolio added product part updating Cartersville to as still able states results. road mention of map business offer us were technological higher in the modernization new allow mix our the of to North the With in turn, our our of the and And to value. still

at and are the expansion In shop in moving addition, our we forward with Whitby smelting technological updating Canada. project

other of that before, road added offer So part are our investments coupled as map, these with higher of I we said a mix product value.

America positive. speaking Looking ahead, The landscape our is North there still about operation. quite

from optimistic of generation administration the the X% robust currently, Just mainly of equivalent approximately the coming construction to this to the February sector package recently Statistics to to increase infrastructure of we in construction an contemplates Government the jobs the in accounted the trillion give in Biden you of of announced U.S. of with is for $X backlog the X And purchases, billion with investments approximately idea, Agency by country. activity and billion. projects to over attributed that from possible of Federal investment year-on-year the bridges. months progress X according December our highways in $XXX $XXX an represents very next and remain order the for in country years, investments the Also, of including the several that effects

vehicles year levels. to regard, on association, our local analysis million generates So be known commercial at that up, through Capital of all according strong every X capacity we this you consumption Markets. XX%. with like the above special Well, to the refer mills anticipated of higher-than-expected going a would And operation, units billion and steel to to Brazil, add and steel in -- XX,XXX American And to in the of our demand tons. quarter approximately purchases increased federal of investments American that indicating to forecast in same the to high produced both the with year million this U.S. further the XX.X% the Moreover, year, follow as this growth, where due units, if believe these in of the made together executive produced first the focuses order to vehicles, significant start the from increasing XXXX, steel America. to that compared will America heavy KeyBanc would X measures North of content oil to now the XX,XXX spent between when rebound utilization in demand units contribute distribution and imports XXXX United consumers. automotive the $X in January imposed to maintain of from the North growing a add States. also units and performance measures steels XXX,XXX case, and sector, are at points X And I before. another steel the The North the period I tons estimates March and steel AISI, In is X,XXX,XXX gas. of to infrastructure heavy for in were economic logistics year, compared were XXX,XXX XX,XXX of

in rig number of recovery also Sales of increase to mention mention to the the of is shipments in and the in units. from And in a of that compare forecast same activities would that, sales recovery in our innovative The gas shipments oil quarters. deliver segment us products opened By indicates our our always previous customers. in tractors to American terms added value with new this successful XX,XXX addition in other the United following And February, in are the with the in first sales to so-called something to when is New with special and States, like capacity a I to Michigan of it reaching more XXX gradual Another allowing XX% higher showing like token, prices. of coming steel tractors. the plants we increase counts an posted I Jackson growth the the capacity oil to North this quarter. months units grow transfer

and about going special to still talking Brazil Now steels.

So demand from automotive mostly data And the according quarter last X% results first excellent momentum steels the year. for quarter of year. positive when vehicles to industry period to of anticipate a steels special in the strong, move in record place posted the to the that special units taking was and light ANFAVEA. also the are from and that with line commercial a in renewal in increase light number replenish this replenishment in this the coming very for a vehicles trucks of a inventories produced same favorable the the the to inventories boosted by the compared of agribusiness, of with sector season We due of the to vehicles crop scenario regards of already continuous heavy fleets production increased with was and

abroad increased noticed way. chain. very Brazilian of redirect And customers to We our of a also shipments international competitive an demand products to this automotive in market many has for the led the

would at inauguration of This recently, in shop unit new XXXX we to of Charqueadas And the of technology treatment in BRL the we So in the announced, be X that prospects start-up special like investment the of X special plant Sul, the in of to Brazil. our in Mogi invested and our these das bars the restart thermal I mill unit. the to the stress process announced also in a and in productivity São view will we announced next modernization to invest investment is new of recently, in all scheduled to of furnace increase scheduled and and the This bring in of the midst also casting more half expansion continue second the operation. and that in we of certainly also of billion Also Cruces our billion XXXX. start at Paulo market, the the contemplates melting capacity in installation leading-edge that and Charqueadas annealing of new do inaugurated Pindamonhangaba in operations the higher steel Grande steels BRL continuous steels Rio we spheroidization year. to

the will a in first We with data can the landscape, the the in in apparent a of country only decisions, making follow sectors for in very of QX XXXX. internal continue all We number the year in quarter heavy Brasil, closely number the and for of from second year market. site, the the in was shift trend domestic current of year, consumers. long year the and of XXXX, consumption to thus the the of sales vis-à-vis not see the rebound in the first increase. in quick the of reflecting flat real remaining up half positive to in growing that Aço the According Sales line And I steel see with but the outlook our we entire gears, positive XX%. continues And construction Well, performance Instituto XX.X% operations of the up year-on-year, the talk the which about I'll steel needs were reflects reinstates positive now trends of our estate our to sector. X% Brazil. are quarter quarter steels also fourth customers, the

Brazilian that loans loans of XX% Loans at XX.X% year-on-year. should this indicator that of it in Association mortgage reaching XXX to And the additional according Mortgage believe increase experience almost Another the reached XXXX, Savings. the billion we and billion, year, of BRL an end do is increase growing important XXX mortgage BRL

and deliveries January March Our when quarter and when to they period previous to X% previous same the grew compared of compared grew sector year, XX% the year. to construction the this between the of

grow. estimate, And this of posts growth follow XX% year. to We which should also estate we believe real launches that continue Abramat

the saw but high the last levels. still were I kept retail at retail in sales, quarter, mean, hand, we other instability sales On certain

also X.X% the we of data projects With news BRL around and of to So to grow say I announced would like the year investments according welcome according about the Association to infrastructure of is Industries. recent Anamaco. by Infrastructure rebound to this from XXX retail for which from expected Brazilian to privatizations XXXX, estimates Basic billion the estimated that and and points segment. the government, Abramat

Now segment, important for the BD. moving to segment Brazil industrial another

This quarter, segments, of we reorganization quarter, the to of by all of the consumer supply growth strong But continuity of their of capital domestic yellow this global the agricultural chains saw driven offered the line goods, the we customers and implements. important road recovery equipment opportunities expand our machinery, market. saw also that experts the to

the we in and domestic steel were equipment we very investment ready-made in fourth Our and allowed I according up country. markets regions our usually products. the the exports period. line imported market. remains our XXXX when the compared XX% full Moreover, shipments needs remains the sector yellow market quarter. of the reduced the longs agricultural serve to Therefore, GDP are supply X.X% the the us Silat flats, Northeast emphasize of Confederation in in X% segment, year-on-year. be consume mill consumption in the Ceara These this Industries. to XXXX pleased was the produce that and luckily North positive, landscape in with of road would expanded of and this of focus Also, first implements. that the shift like should specific materials to in first in the of And there and a from quarter quarter up National in industrial also Therefore, and to the encompasses to

for them intend production believe units in presence progress production be our we these projects. also, our our North will with an And the Southeast to but in expedited We send the so Silat in Northeast. at items construction increase not to products important to the their asset of to to and the redirect be from these the the able boost these only market these help of serve will this steel, we unit, we we regions, today that and regions future

we announced with these production of the steel, when capacity, year. I reinstate is tonnes intent Paraná, in to of products restart certainly the the regions, our of to we can Southeast to state existing the recently, To the of half Araçariguama this we as that the in which clients the the decided production in annual the we capacity strengthen when So would XXX,XXX expand localize in mill second capacity of of country. the additional to steel footprint crude strengthen those over of all the our With in supply mill. like starting well.

we the with so domestic that, in particularly fully the of in to serve our the construction, civil demand industry. capacity strengthen And the market, of infrastructure sectors

civil And were Peru, mostly In March. the XX% positive of are of months January is market meaning year, the mention growing investments of to the state X that Argentina, country and very first grew like attributed and to investments about operation GDP the of construction last to America. XXXX. is good points and of country. mostly recovery the with Shipments from quickly white we the positive, mass in in consumption speaking also for the than line more business Central public and in in X so levels, this months construction civil January X of mainly the believe records very been able in March and of And quite private has Uruguay product positive, and time sectors a of Argentina quarters, Demand this Statistics in would the for last South sector INDEC, the another between our according also performance sector, a and X% the posting in the indicates reach in industry, longs steel is Peru. remains performance public driven grew Peru of agriculture driven result high all-time activity that to that last the performance boosted country I in infrastructure comparison livestock to quite terms in first by as retail sector. that and year-on-year projects. shipments The Bank positive construction of automotive figures in the the by from combined first Institute at we by February. And the in quarter the trend

So to we talk that And about CapEx. Slide slide. to now concludes X move will that

of first globally contemplating quarter, assets. of invested the amount fixed Brazil, say billion, pandemic CapEx I the maybe million learned last This investments, go in for the and already includes, disbursements. mentioned we X.X steels new from BRL in also allocate use to at past for all will of continue amounts earlier, XX. in part in BRL Here, XXX to beginning remains capital we I CapEx and very at XXXX our estimated the be Slide would throughout investments as beginning like The year. decisions lessons in of to rigorous instance, as were to flat of that postponed the that approve now the

like slide I would next well. on to this and Here, comments They reflect slide as important few investments. make a

be As mentioned the and beams updating the of modernized and unit. With construction in in very strategic are products landmark steel in of future map America. of talked the same with productivity investment Petersburg higher needs coming are North to America. that in the about which X will sheet road the investment like our that, Once With Virginia, better sector including and would mix added to from of token, value $XX I the North that structural in that again, will rolling important of million, higher piles, North of line technological long able is products I when before, And expand much efficiency steel mill. like mill we the highlight conclusion greater will of our we an an plant, by which ensure we serve the customers I America. the

next to slide, move let's Now XX. Slide

been which to we hold time interest, Cubo announced of like highlight some equity Here, I an ago. development construtech Brasil ao has would where

And rubbers, building This the Juntos of and steel and Paulo also strategic Graphene. of the our marketplace our of lubricants, million business division. the This a at offering São new April. country token, in of month, platform. occasions, in for also portfolio center an this the in and besides America of Gerdau the on to constructions new more we addition as new I the retail into to will the COVID-XX, And XX% town multi-story partner division arm, market the construction every capital in Latin gap and largest of as we first part construction, industry, construction industrial is And at America. company last distribution with the uses technology but high XX in firm come to our kind. of X-story commitment civil construction new idea, previous to segments America. with in stake the building Somos only Brazil, the application end this Next, Furthermore, reduce modular of Santa launch a first Cubo paints announced in contribute, commercialization said that in modular through industrialization Tubarao Latin off-site our building Brasil with productivity already continue In this the the business we The beds of country. give of the general, investment technique a remain of view the in countries the BRL the days thermoplastics of not about will ao To the to by Comercial of last and is a the same Therefore, focused products treatment Mais. material. construction company in reflects leading focused XXX on graphene. from Gerdau of delivered civil innovation in of sign month North It in development the XXX Gerdau Brazil, main using automotive sensors, encourage proportional concluded Catarina steel distribution. all is of this injection venturing announced commercial and of is optimism you the raw offer The in of and new today, sector. only company the steel. to recently, of More we is

X.XX purpose of by Institute concluded was carbon our inventory audited gas inventory emissions. Abatement industry amount disclosed Totum MAC progress highlight would also famous XXXX indicated And still been but for to was Cost Mais, learn because and to finally, the has BXB focuses to used sales only Somos marketplace that in Juntos produced. steel the for to and ecosystem like target that to channels the And tonne strengthen store a This restructure of like steel. final With I not Somos be coming it are BXC working targets. the used since on process capital this other in business us about emitted short, is updating initiatives Also, consumer. a the of of of the eligible. intensity the is And are XXXX the stands of to for the long-term steelmaking Mais, technological greenhouse technologies greenhouse that platform, gases is spending be tons that about to which be by opportunities. new XXx previous Juntos Furthermore, the via -- development to tons World of greenhouse also, also the quarter of to in pertinent the of company. in speaking injection the will quarter This virtual grew analyze for MACC, sales available. year. injection the Mais almost used medium in its Also, first of technologies feasible each first still exceptionalities curve methodology, Somos Marginal curve, half those mention fund the Juntos will allow the The new compared and than to this plan average more steel emitted. of implementation of steel the will more accelerated the important this and when also It's growth the grow adopted we of Gerdau by global years. next part X.XX that the the And the Curve the gases of study

our and investments What like on We I initiatives be And to the behalf be public on emissions are to our of to that and of allowed called over my the This the methodology will are MACC. present in able to will today. disclose we to and their a and all other render and years. us special that the of special approaching be to finally, then able few months even goals here dedication the all first them for employees reach to our gas thanks closer based would conclusion, XXXX. is reduction combined a external prioritize thanks greenhouse of sound Certainly, customers. colleagues plan behalf results in for to efforts our your

and available now myself will organize will I now the clarify So floor possible Rodrigo help to Q&A to be back issues. the turn so Scardoelli Rodrigo, answer your us session. can questions and

So you. thank

Rodrigo Mala

Gustavo. you, Thank

now chat through questions will many received initiate the We the session. We box. Q&A

De special Carlos see in from potential to you improvement from Stanley. comes deliver special Morgan of see any out possibility XXXX? in question Do company first -- Alba dividends The any the to you further landscape further the pay dividends? Do for

Gustavo Werneck

Well, thank you.

question we payout. me to And about second what the dividend of Carlos’ give in first the second results quarter forward. the expand -- will going with I'll the part second Scardoelli, Let and as see the half see answer floor we help who to question certainly, then the our in about Well, possibility landscape as us the well.

steel for more I the industry steel. we case, our in where Brazil, the strong. only numbers are the growing at mentioning different we in whatever public. growth we remains the businesses, of very in the case in at our of in all Without the look I just during own numbers, mentioned look speech, see But but positive of geographies construction looking demand sites. construction for signs As demand, demand maintaining the not different my said terms many

So made that said, demand Brazil. quite And sign for locally recently, the infrastructure is domestic this export strong, our believe had the steel. not identifying strong The increase but customers industrial only sector in to as options. we many opportunities is. I also products shows I in sector, market every are is made this that products, increasing this how month. And some More we a anticipate an is

expand encouraged consumption So look year. further -- but in you the the you forward to we positive that Biden we grow or that not forward very and just gave road. this down to President term, to demand next looking forward. the if U.S., recently of outlook reinforces be This believe only the steel. outlook, this going this bill our And in has by will I announced And positive encourages results able say short going no,

to to Scardoelli on I'll elaborate now give payout issue. So dividend the floor the

Harley Scardoelli

Thank this companies for is on Perfect. of our up set results. as But per over payout a net set I This to very question, good that say in recurring like in policy income payout question. the has on automatic you, especially a view based in up would based common dividend not percentage dividend and results. adjustment improvement an it's the very Carlos, your when much U.S. cents share. the our

we So EBITDA. income, expenses. of EBITDA of our and terms net fixed the have improvement with And some in

net EBITDA the improvement better in improvement a So terms income. represents of

last for adjusted. being is BRL paid is share the at At So the to X.X dividend dividends increasing. payout year. is of Metalurgica. payout of This now to our approved per not almost the first, like any I BRL dividend just the remind the policy. are, in fact, contemplating and the are cents that Board dividend changes that out X.X equivalent all The would totality we increasing. dividend payout Therefore, to you Gerdau dividend --

during remains at considering we last showed it's XX robust at the if yield, generating would due we just But out around already certainly, But that and I the this yield annualize the topic. the if being of And quarter. X% it's the dividend dividend dividends. revisit paid Therefore, it, take again, to X%. more forward, our my the dividend some the strong quite we Going XX%. we months, is still can if you results. that strong be that at are dividend And policy period, beginning consider presentation

Rodrigo Mala

would a dropping last allocation of even question is leverage Caio from the be Suisse. capital debt your over Gerdau's Capital what comes is EBITDA And Xx question Crédit going below net do from there related next forward? So think comment. going likelihood Our allocation, with you further? to ratio,

Gustavo Werneck

answer. Well, question to the is linked in -- in that I dividend part. a already that answered my And way, think of that previous I part

robust have year. In should terms will this we cash very remember allocation, program but of capital have generation, more that also a still strong we we CapEx for a also

showed we intend employed the quarter, the that first we think spend on BRL BRL return And X.X to with billion million I a year. we to in spent slide related investments capital. you though also even CapEx So throughout XXX

goes to So straight that leverage, our lower shareholders. is a that return XX%. level of With ROCE means

employee Dividends high. we I already to is strong quite Today, and CapEx. as do Therefore, a the the that in return of mean of A consequence, what by the capital terms our results remain good So that? well equated. our believe on based of view CapEx returns is return and ROCE. shareholders

Rodrigo Mala

Itaú from Our next Bank. Daniel Sasson from is question

Daniel Sasson

quarter, second in XX%. sustainable Brazil, market the the forward, beyond in believe could going terms looking better margins Now that above prices be volume, international do you margins of contracted at

could to the elaborate be helpful. dynamic exports global steel this Thank you China, a I bit think could to about related If you.

Gustavo Werneck

Scardoelli, that Let question. me And answer feel free please to add.

short if ferrous about you me, a know, in was I moves the this question. X, be part milling a is long talk cetera. what Changes them I you. good same pleasure this variables and in since for a steel will saw the to scenario. term. than same steel for look see quarters. on China influence linked structural China. Today, change condition coming different see a wire only that landscape these force be that, the there past costs and from As we we second raw longer that for policy see steel me it's world is good the that, rebar, coming day, that market. discount to the And in May and to about it But the to you reducing you will mentioned, run. which all We to on of that more global your import has XX changes than at rod, the next part heard in long that intense as Daniel, import like the taxes in aiming in a very answer at et was And maybe is several right we readjust in years. But I term, the that My not of thing can at reading Maybe these a was a the the But like material, seen margins run, time, saying, even believe be structural in the question, products rate very maintained. now the the can

the through in point also China production indicates steel in or to strong growth China that electric Another through very in long-term refers furnace scrap. changes

tons that production So via of the XX from scrap, furnace cost close a seen steel next and production haven't take in on we look the emphasize year something changes I we would we in years. to million pressure more that reading, emissions, are of is range, year will its electric important global an be next this to China experience to the clear the the that put XXX noted. results increase the I like cycle to the fundamentals robust, a furnace. million that very of a years. unlike production if the long GHG efforts of will tons will here a experienced many But be past believe you years electric where is something what in sound. XX to And should also, that in is Chinese my government few I that this and is reduce change to giving quarters, just past and according place represents is stay. years, structural important mean, this This continuous will making signs, China coming very

so. feel please free if you add So anything, Scardoelli, want to to do

Harley Scardoelli

Gustavo. you, Thank No.

You said it all.

Rodrigo Mala

comes question from from Lofiego Bradesco. next Our Thiago

Thiago Lofiego

are lower special are quarter production volumes you any demand the The of steel American and in of in spread because feel still impact as business, And higher. second better, in second the lower the margins do question North the -- your BD automobiles? for is, is of your growing

Gustavo Werneck

Well, that. your let Thiago, questions. you thank for answer me

infrastructure an regard, good landscape. this Demand operation, long quarters in coming expansion Our strong. even steel package. recently an more And quite announced see that of next with we the is the with positive outlook, in

what we price the growing our are even with is spreads fact, see increased that of scrap. In

America, is positive. landscape North in So the

much for difficulty we in only because the drop our the also our in still that the steel. to haven't inventories, components. strong we well. our stabilized of in the And chain. of the is be vehicles, of be increases quarter. vehicles of we to special steels, This, the U.S., special And case, this lower Brazil, the vehicles. inventories fleet and we be difficulty in any of recovery in U.S. impact, the stabilized produce there renewal about with next now, in because quarters case, speaking in been yard about quite In but obviously in and will in as will fourth the expand case, this Brazil still strong in to finally waiting steels, gradually anticipate But than mild and believe the OEMs impacted the parked Now not happens feel XXX,XXX in are the see electronic we very of what rest in the right a case the the didn't that

Rodrigo Mala

next comes Leonardo question Our from from Correa BTG Pactual.

Leonardo Correa

inventories as and how at inventory is looking margins asked for Brazil. similar portfolio EBITDA levels -- Brazil, in it is XX% question is new as normal. How of in is a order They big we there competition to relation Are long the a about new This Brazil, in your debate the one to before recurrency. margins in the being do a take margins see you be think will replenished? the level the

Gustavo Werneck

robust, I I us clients. inflow to looking have forward very portfolios The say strong. would remains segments, orders, full-service well. of all that in to We see intense as We replenishment our that our customers. provide like said, allowed being this serve answer a can new to inventories. we more I of But Okay. as very and

did steel. at inventories March of the add can April, about Scardoelli, and maybe moment, And we and resume now will new levels suffer or that February they And not July. had Basically normal if from normal to similar in by what of inventories So margins. June March. the any in you very these believe scarcity we are something

next is I we fundamentals Brazil that see my all previous to related this what of said very steel comments. segments in think the robust much very that's demand When the quarters. in I coming in remains and

if Scardoelli, this I you But please want before. add anything else, feel to think question free. answered I already So

Harley Scardoelli

has it's resilient Now leads model industry. a And able case business model, very complicated positive. to to lower global We're be model right of above-average very resilient, been very our be good were our that Brazil the maybe now. think in part obviously, to in moment, we and the if in to the is proved which that bullish, the are markets the that cycle. me compared the Even very you also consider when very most

even already years. for you Therefore, to think quarters mentioned I responds is business noticed China, very trend our And what which quite momentum. model the happening this going well in is something structural. next we a forward or

of or on circumstances more or certainly, normal It's of the a will being terms new commodity. cycle not, in a something assumptions. positive. situation more other it's prolonged But In depend that of

agile. efforts our SG&A. deliver learn $XXX annual methodology, able our reducing mention margins is trend million positive very of that you our lean, fact and were mentioned company scenarios, zero-based in keep very that we even still that when And Scardoelli, So be in levels. the I methodology. reduction very and would good the will at ZBB also to simple successfully capped say No, we to we budget more the like the in adapted I scenarios, results to

We to we benefits from that Rodrigo, are always ago. back able started transformation capture the the to years you.

Rodrigo Mala

investor. shareholders. And Does Novo to And comes in [Wilson's] Thank the has time to question. next Mercado? you. say I'll intend the payout? you question Wilson company's this from increase has Gerdau is that to question terms the about Carnado] intend the Gerdau an dividend individual take Do next what governance. XXX,XXX of Our individual [Jim payout. migrate to

Gustavo Werneck

answer can Scardoelli. You that,

Harley Scardoelli

think of increasing XX% earlier significantly of I income. answered of of In net our I payout on. terms payout, dividend because Dividends already are that

Mercado, X at very we're a are Novo is terms governance governance complying level. And of is which one points Mercado, Novo is mention X In of today, that. good in the with already that we terms at that thing of main and important Level to Bovespa,

governance practices We XXX% advanced. of many along. our are well -- tag are We

Novo because this very not Mercado, something we good look we forward In a to control in governance several us case, it's have company at that something I is very a and that a our advanced defined level. as terms of practices it's already mean, time, that put with

Rodrigo Mala

Thank you.

Our next Rafael from Barcellos Santander. from question is

Rafael Barcellos

behind the the a capacity Could Parana? about you unit Araucaria comment Brazil? on And utilization in of strategy the up restart also talk in

Gustavo Werneck

do Araucaria to be around reducer. our that of is question. steel often steel at with and not to our question. have limit. We operation, great Araucaria that a Brazil material. we flexibility of increasing restart I'll you Utilization mean, capacity crude mention. of thank operations. our and raw also in In scrap plants, Scrap mixed. good capacity of the Well, answer highest available can North assets in XX%. I is to mix I XX% for example U.S., restart only but of Rafael, bio use between the aims Brazil not availability Gerdau terms is production is our have that, of close is through can regards in said, America, the our the in mill, we in The utilization utilization something Scrap rolling close as today Brazil. the I to or The of

of the Minas Gerais. iron state pig have also We in

So in the the raw great from Brazil to final flexibility to material we product. have end --

the the from at that idea mills increase the Ceara. in is our be rolling new will burns to Araucaria state of steel So several with used production

our aiming of steel rolling our serving the of of the at in in used the to costs. logistics, terms of our Araucaria The crude reducing and better country. production In all delivery of at customers planning be restart aims mills and increasing corners

Rodrigo Mala

Marcio Our next comes from Farid JPMorgan. question from

Marcio Farid

levels the the What steel level the and parity Could in is Brazil industry? on of balance same abroad? comment supply considering demand premium you in versus the

Gustavo Werneck

and still premium due prices products in XX%. FX. longs is to In are mentioning low Premiums flats, increase of the continuous general, around and international the

So the restart and Brazil, place. advent figures, when balance between with low. of in the supply already still historical demand capacity you is new this of look in it's and production at And

before, happening remain that inventories. it's mid-June I is we inventories. and than the is the the happening able will believe But now As Well, to orders strong. mentioned their inflow entire what expected. chain be by of slower recovery will recover But demand or July,

Rodrigo Mala

Gustavo.

Geraldo Our question from from next Jr. Bresser comes Management. Asset Mellone

Gerlado Mellone Jr.

the looking recurring forward? is for amount and What considering CapEx XXXX Gerdau of

Gustavo Werneck

about Can you answer that, Scardoelli, CapEx?

Harley Scardoelli

are experienced more we scrap recurring as CapEx. in mill Branco years investing have use that's past different Ouro They based. investing cycle our the when cycle in to as now, The afford to cannot Right a of an in of to recurring. investment intensively cannot low that our operation. CapEx something follows we we compared is continuous stronger Mill our that this we are a when have operation constant other integrated have CapEx, because CapEx, About more integrated are tighter mills more Branco. where levels investment Ouro perpetuate and We a we a cycle

something therefore, year to how we will continue intend know analysts. clear our happen it to We year, terms that slightly But to to period give draw happen the say or we years of that should the inform long-term look this to few year, dynamic equal a X CapEx, below in beginning I the is our have inform the will year be and spend And close much in projection, say But not that something will would that projection, intention every of is about at the a would also long-term, spend. decided really view to to will I depreciation. market terms time. terms depreciation, the you to a of next, the what slightly depreciation. to that but In we be to Obviously, of market is in market. next below longer this very of every in

Rodrigo Mala

that especially this current generation, Gerdau's of whether -- and down cash this that consideration that your cash excess scenario considering allocation What cash? about discipline talked forward from Audi a investments of being lot of ensure allocation, because Capital of cash how He new Marcelo know should the would the can come question we produce ROE generation, going capital think comes Cardinal be next from you return like we considering conducted? will to that investment. of a now, flow right should And on Partners. capital Our today. whether expected are

Gustavo Werneck

you Can answer Scardoelli? that,

Harley Scardoelli

Yes, of capital certainly. something the it's extremely discipline in our company. terms Marcelo, in allocation, to important

of portfolio. and growth steel and in very crisis to decided we of You when we something strong and revisit had is of then period a company, as know of keep We was brought a level back forward. we high that a level return our experienced had to which some we, the export intend divestments, period that on which the employed us industry, to especially volumes we did a China going capital, for several years to

well very CapEx We very, are are the other -- and the the Gustavo and consider Board of rigorous. Whenever as team executives they so investments. and

we invested. in rates, to to ensure level of certainly cash returns company. with regards interest We with to cash had generation, levels. can like of So today, adequate work the Well, capital historical compared million in lower cash a to when we level of the the something our want $X

withdraw I BRL We already is a case. X today, something less, time. that -- to is of if any at credit we with mean, billion. closer work a line line have the could that this even we is work given we bit Because where sure. today, can is a credit that So

line credit in So of XX is available hours. that

cash with are we one. level lower no of So work from a comfortable to very

Rodrigo Mala

Verde] next Our from Ricardo Caballero Investimentos. from before and [Rio last question is

Gerdau which a cash? is have Do terms that of to destination the S.A., robust. you cash Metalurgica of In already very

Gustavo Werneck

you. to up Scardoelli,

Harley Scardoelli

instruments liquidity. stick Gerdau This it with liquidity, not its S.A. That's of cash why to which good safe to specific. we will and do but is has is will lot of what invested be core it, not holding know exactly or business is this but very Metalurgica destined invested a separate do in to anything It's with a we

and is liquid intent our keep that to instruments. cash So

Rodrigo Mala

would from forward? you last thank or question I conversion next to GTI. from from cycle, cash going In Markus something recurring Our can to question cycle think you all. relation your and chat, financial like this do be that our And this the considered is

Gustavo Werneck

X last that leave as I'll Well, with well. you

Harley Scardoelli

So cycle. I understand are working capital we financial our about that talking

was level at is So conversion probably below days. the XXXX, Today, cycle XX normal. cash the of the end

because say cycle capital. level quarter cash in to the first working would as trend capital some market. and the capital as see XX strong, activity still in well. working during cash the We conversion adequate of had level second moves in consumption to cash the And his Gustavo of working So is terms of days because a we to quarter, Possibly, XX the consume I the for presentation. between of will going remains mentioned very this forward very in of adapt that's

Rodrigo Mala

to now Q&A would I our Scardoelli. conclude video We you, Thank that reiterate like call. And was this first the session.

in IR to clarify issue, issues. possible connection any was can you get touch with your there our if department So

back to for I remarks. to Now would their like Gustavo and floor turn final the Scardoelli

Gustavo Werneck

conclude I will not call. for Well, always I Scardoelli joining us to you pleasure only talk IR to like team. this conference available, remain great thank to entire We today. Scardoelli, but a then you. our would all It's by and And myself,

you And to have additional take invite on right to So talk any now, X. call our you quarter related if this of I'll XXXX to place August question. the to please second to conference take us opportunity next

So thank end wish you you of week. of very good health. care and a much. all Please take take very care your I

Rodrigo Mala

for had with concluded. you, Gerdau's Thank a have very We Thank you all us. is conference us joining now afternoon. than good call Thank and you, XXX more very Gustavo. much today. participants

Gerdau (GGB) 6 May 212021 Q1 Earnings call transcript