Gerdau S.A. Q2 FY2025 earnings call

Highlights include: Reinforcing workplace accident rates and sustainability with Gerdau's annual report showing lowest GHG emissions in steel production. North American operations strong, contributing significantly to EBITDA. Brazil market affected by imports, leading to reduced investments. Invested BRL 1.6 billion in the quarter, with most allocated to the Miguel Burnier sustainable mining project. Issued important debt to strengthen cash flow and extend debt maturity. Approved dividend distribution and continued share buyback program.

The North American operations in the second quarter posted the highest all-time share in the results, representing 61% of consolidated EBITDA. In Brazil, the domestic market was impacted by excessive imports of steel throughout the second quarter, with an import penetration rate of 23.4% in the first half of the year, leading to a reduction in investments in Brazil.

Decided to reduce global CapEx disbursement from 2026 and beyond, while maintaining investments in North America. Miguel Burnier mining project expected to start operation at the end of 2025 with ramp-up in 2027, potentially generating BRL 1.1 billion a year. Postponed Midlothian expansion project phase 1 in North America due to strong market conditions.

Brazil's domestic market heavily impacted by excessive steel imports, ineffectiveness of current quota system. Potential imposition of tariffs by the U.S. on Brazil affecting domestic industry. Challenges in maintaining profitability in Brazil due to high import penetration.

Q: Lucas Laghi asked about the mining project and capital allocation.

A: Gustavo and Japur discussed the CapEx plan, reduction in future investments in Brazil, maintaining in North America, and the Miguel Burnier project's progress.

Q: Leonardo Correa asked about debt position and rebar prices.

A: Japur and Gustavo talked about debt leverage, dividend payout, and rebar market dynamics.

Q: Daniel Sasson asked about debt policy and structural measures.

A: Gustavo discussed debt policy, structural adjustments in Brazil, and future investments.

Q: Rafael Barcellos asked about rebar strategy and CapEx minimum.

A: Japur and Gustavo talked about rebar market share, CapEx reduction in Brazil, and maintenance investments.

Q: Rodolfo asked about Brazil cost cuts and U.S. backlog.

A: Japur and Gustavo discussed cost cuts in Brazil, Ouro Branco production, and U.S. backlog strength.

Q: Gabriel Barra asked about capital allocation and project impacts.

A: Gustavo talked about share buybacks, project progress, and EBITDA potential.

Q: Carlos De Alba asked about working capital.

A: Gustavo discussed working capital improvement and cash conversion cycle.

Q: Caio Ribeiro asked about U.S. tariffs and special steels.

A: Gustavo and Japur talked about U.S. tariff impacts, special steels demand, and margins.