Gerdau S.A. Sponsored ADR Pfd Aktie

Good morning, and welcome to Gerdau's Third Quarter 2026 Results Presentation. I am Mariana Dutra, Head of Investor Relations. And joining us today are our CEO, Gustavo Werneck; and CFO, Rafael Japur.

[Operator Instructions]. It is worth noting that the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available. Forward-looking statements are no guarantee of future performance and are subject to circumstances that may and may not occur. I will now turn the floor to Gustavo to begin the presentation. You may proceed, Gustavo.

Hello, everyone. Good afternoon. I hope you are all doing well, and I do appreciate this opportunity to join you for another earnings release presentation. We will briefly discuss the highlights of the third quarter of 2026 and also the outlook for our operations. And then right after that, we will move to our Q&A session.

The third quarter once again posted strong results in North America. Resilient demand in the key markets where we operate and the very strong operating performance of our facilities in the region resulted in an EBITDA margin of 27.7%, the highest in 4 years. However, in Brazil, we continue to report a slight recovery in results despite ongoing pressure from imports and also an oversupply of steel in the local market. This performance stems from a very strong initiative focused on increasing the productivity and profitability of our assets in the country.

To this end, I would like to note that we have begun operations at the recycling center in Pindamonhangaba, Sao Paulo, and we are now conducting final integrated tests for the expansion of new iron ore capacity at our Miguel Burnier mine in Ouro Branco in the state of [ Minas Gerais], which is scheduled to begin operations in the fourth quarter. I will now turn the floor over to Japur, who is right next to me, who will detail the financial highlights and the impacts of the current environment on our results.

Hello, everyone. Thank you so much for joining us once again for the earnings presentation of the third quarter of 2026. We ended the third quarter with EBITDA of BRL 3.8 billion with a margin of 20.2%, the highest since the second quarter of 2023. Adjusted net income was also higher, reaching BRL 1.5 billion, whereas earnings per share rose from BRL 0.74 per share to BRL 0.79 per share. This quarter, we converted a significant portion of our EBITDA into free cash flow, generating BRL 1.4 billion, 6x the amount recorded in the second quarter.

When we look at the first 9 months of 2026, our free cash flow totaled BRL 1.7 billion compared to a consumption of BRL 1 billion that we had in the same period of '25. This difference is mainly driven by higher EBITDA, especially in North America, but also due to lower consolidated working capital requirements and lower investments when compared to what we did in the past few years.

Now reflecting the quality and resilience of our results, Gerdau S.A. will pay out this quarter BRL 0.34 per share in dividends, while Metalurgica Gerdau will pay BRL 0.16 per share. Combining dividends and share buybacks in 2026 done by Gerdau S.A. throughout the year 2026, we certainly returned more than BRL 1.85 billion to our shareholders, certainly demonstrating in concrete terms, our commitment to creating value to our shareholders. This is not merely words, but this is a testament to our commitments.

As for our balance sheet, our financial position remains very solid with a leverage ratio of just 0.58x net debt to EBITDA. In addition, throughout the third quarter, we renewed for an additional 5 years, our global credit facility, our revolving line because we can withdraw in different countries where Gerdau operates. And there was an increase of 29%, amounting to $1.125 billion available for withdrawal, which strengthens our liquidity and also the company's financial flexibility.

I mean in line with the previous topic, I would like to say that on October 22, the S&P rating agency revised our outlook from neutral to positive. So now we are BBB. We have a BBB rating with a very positive outlook, very similar to a movement done by Fitch, which earlier this third quarter also reviewed our rating. This not only reflects the resilience of our business, but also our financial discipline. These are levers that, in our view, are crucial to our capacity to invest while at the same time, we create value to our shareholders in the coming years. So I will wrap up here, and I'll join Gustavo for the Q&A session.

Thank you, Japur. I will just go on saying that in North America, despite the typical seasonality for the period, we continue to see steel demand at high levels with a very strong order backlog, driven by a solid portfolio from segments such as renewable energy and data centers. In Brazil, we are seeing a slowdown in demand due to the typical year-end seasonality, among other factors. The domestic market continues to be impacted by excessive imports of steel and a scenario of steel oversupply.

With President [ Lula's ] reelection, we expect the continuation and strengthening of the trade defense measures that have been adopted by this government as well as the implementation of new effective measures aimed at enhancing the competitiveness of Brazilian industry, insurance balanced competitive conditions in face of rising steel imports in order to preserve investments and the creation of new jobs in the country.

It will also be essential to make progress on the energy agenda, particularly in opening up and developing a more competitive natural gas market as well as achieving greater stability in access to and use of renewable and low emissions energy sources, such as solar power. Similarly, it will be important to continue implementing the tax reform on consumption approved by the current administration, contributing to the simplification of the tax system and the strengthening of the competitiveness of domestic industry. So I'll now turn the floor over to Mari and Japur and will be available to answer all of your questions.

We will now begin the Q&A session. First question from Leo Correa with BTG Pactual.

I don't know for some reason, I cannot really enable my camera. I apologize. I have 2 questions. First, in the last few weeks, there was an article that was very complete with many comments by you on Brazil, asking for some additional adjustments to what has been done in recent months. Can you talk about personnel adjustment, capacity adjustment. And you talked about heavily cutting down exports, some CapEx adjustment. And I know that we're going to have Gerdau in some weeks. And I know you're going to be addressing all that. But perhaps if you can elaborate on what adjustments you intend to make in Brazil given the current context, we would appreciate.

Second question and perhaps picking on Japur's brain. I know that this is old news. Japur, I apologize, but I think it is kind of obvious to ask about this. Given the relevance of the United States and given the super strong scenario ahead of you, the guidance you're providing a scenario that seems to have many implications in the future in terms of results. And the fact is that everyone has been monitoring this for years that the U.S. is totally detached from Brazil, the Brazilian operation and South American operation. And that there is a more difficult scenario in Brazil in the future. Is there any expectation that Gerdau would assess an opportunity for a spin-off or a more strategic movement in the United States? These are my questions.

Thank you, Leo. For what I talked in the new feed interview that we have a plan we're working on. It's not complete yet. We expect to give you more visibility and detail about the plan in the Investor Day, as you said it yourself. But the starting point is that we cannot just sit with the arm crop, waiting for factors which are not under our control will improve our profitability and margin to the [indiscernible]. In a way similar to the project we had in 2018 in North America, and now we have this level of results. On one hand, it's because of the conditions we found in the United States. And on the other hand, it's all the homework. Divestment in product segments that we thought would not bring the necessary profitability over time, investments in our mills, in our product portfolio, investments in competitiveness as we never had before.

So looking forward, regardless of the current administration, we have to do our homework. We have been pursuing profitability. Every way we look at our business, but it has not been sufficient for us to achieve an adequate profitability in Brazil that would balance the results better. We've done some -- perhaps a small part of what we can still do. We are detailing those plans, [indiscernible] coordinating the plan himself. I don't know whether he wants to give you a [ filler ] or not?

But during the Investor Day, we will be able to give you more visibility about that. We have been working heavily on what we can do, what is under our control, but we can continue to improve the profitability here. And well, I have to mention that if by any chance over the next 4 years, we see some efforts materializing efforts. We have been debating with the federal government.

In terms of the tax reform, in terms of improving trade defense mechanism and continue with the gas auction so that we can have more volume and better prices in natural gas, all of that will benefit the work that we are doing. Earlier today, when talking to the press. I mentioned that in whatever situation, positive and negative. And with the reelection of the current administration, I see that we will continue to have a dialogue on trade defense mechanisms and its positive all. We go back to square 1 and start from 0.

In the last of the 3 years, we have established a dialogue with the federal government. Your data, in fact, we have the basic trade defense mechanisms, and I think that they can be expanded in the future as the numbers show continue to have [ unloyal ] still flowing into [indiscernible], but we cannot rely on that. I'll stop here. And Japur will talk about North America. And perhaps we can add additional comments regarding the adjustments made in Brazil and to be made in Brazil.

How about Brazil, I think we've been talking a lot about, you know our rationale -- in the world where China is exporting structurally more with lower prices and more trade defense mechanisms. In an environment where we see less simple exports. So we are focused on reducing our with over time, and we're focused on making investments, which we believe are important in Brazil, [indiscernible] can be competitive. [indiscernible] silver bullet [indiscernible].

We have made an important stride forward with the CapEx adjustments we've made to expand HRCs in Brazil, expanding our mining activity, [indiscernible] now the opening of a shredder in our recycling center in [indiscernible], so you -- there are a number of support points in our strategy in addition to everything Gustavo mentioned, cut down costs. But we'll bring you more color on that during the Investor Day.

And that's for North America, is not new. We have been talking about this in the last earnings call. We increased the share in EBITA to 77%. In the past quarter, it was 75% share of North America segment. But we have no plans to have a spin-off or any major acquisition in North America to increase our exposure there significantly. We don't have that in our radar at this point.

Next question from Marcio Farid with Goldman Sachs.

I have 2 points here, when starting with [indiscernible]. I think we talk a little about demand. But in the [indiscernible] I remember, you talked about mining and final ore in Brazil [indiscernible] to understand, what would be the optimal time looking forward? But I would say that it [indiscernible] this would make up your portfolio with more projectile [indiscernible]. So think about different scenarios and optimizing the portfolio, how do you see mining -- now [indiscernible] will start renting up in Q3. But what [indiscernible] alternatives to grow iron ore, I know that this the short time is more challenging, but this impacts what your thinking -- and I think that a lot of the debate we've had with investors regarding the new normal of margin. And until when can you gain more momentum? It means that in the future, the momentum to be gained that line of [indiscernible] the negative could be the USMCA deal that could gain momentum after the midterm and the ramp-up.

So if you comment on how risky the trades can be for the U.S. moment and when we can -- where can we see the margins normalizing after the [ triggers ] are over because the market is seeing these triggers has netted out for North America.

Let me talk first about mining. We see rumors and avenue for growth and value information over [indiscernible] in mining, considering the portfolio of assets that we have, both industrial assets, the [indiscernible] expansion, the share we have in MRS [ logistic], the [indiscernible] of mining rights that we have in the state of [indiscernible].

So in addition to [indiscernible], we have the [indiscernible] to other mining rights that we can eventually explore. And we understand that structurally speaking, on all albeit under pressure now because of freight prices, fuel availability and it availability. We understand that these topic said after the mid run.

For the long term, it continues to be a market where high-quality assets or high-quality mining right we'll continue to be able to generate [indiscernible]. So this is a path for growth that we intend to explore in the future. We haven't got any tangible plans right now. No tangible initiatives regarding these projects. One major focus is the ramp-up of our expansion project at [indiscernible]. This is the big lever, the main driver we see Brazil segment 2027. But the fact that mining prices are lower, shipping prices are higher, it is something that it really cuts down on our appetite to [indiscernible]. We'll look into that, into those opportunities in line for North America and the new normal that you [indiscernible].

I can give you some thoughts about that [indiscernible]in market is much on bars and being in North America. This is a big and market of about 9 million tonnes. If we had merchants, we will more than that to 15 million, 16 million -- and of course, there will be a new in [indiscernible].

And they will compete in the line of speed, but an important part in the Mexican market is that they want to import. Have you been [indiscernible], we understand that. We will be focusing on the a part of that volume can be imported to North America. And we can already see volumes of imported material, the imports have been growing in North America, the statistics of inputs, but it's a very robust environment for our key markets there with this new entrant at 0 and I think that the new triggers we have to pay attention to there will be less free trade agreement between Mexico, Canada and the United States.

We believe is very unlikely we'll have a 3-party agreement. We believe there will be individual bilateral agreement between U.S. and Canada, Canada and Mexico, and U.S. and Mexico. And it is important that we break down the facts further down which has part of its production in Canada with mill dedicated to products only for Canada. And likewise, we have products that only the U.S. [indiscernible] us to have an agreement between Canada and the United States because this is what's being talked about in the media. It would be positive.

It would [indiscernible] transaction costs in our specialized mills, sometimes we lose, some shipments because of the tariffs. And like we have a symmetrical an agreement between Mexico and the United States. We understand can worsen for margins a little bit because of the [indiscernible] player, as you mentioned.

And today, we have got a big exchange in shipment volumes -- so for us would be kind of net negative if there is an agreement within Mexico and it would be net positive if we have an agreement between the U.S. and Canada. I think our big focus if we think about the risk with the investment and focused on [indiscernible] in North America [indiscernible] or America evenly this traded across the markets. have a market related to artificial intelligence investments in energy, transmission and power generation.

And when we break down the data of economic activity and nonresidential spending. Year-to-date, we have a slight [indiscernible] nonresidential spending, but a good part of that is explained by investment in AI and energy. If we see a substantial deceleration demand on the pocket. Perhaps this would be a much more representative risk the ramp-up of a new [indiscernible] mill, because given the nature of the products that their ramp-up will be slow.

Our next question from Carlos De Alba with Morgan Stanley.

Yes. So I wanted to ask maybe a little bit on the EBITDA benefit from the [indiscernible] and the [indiscernible] projects. How much do you still expect to capture this year in the second -- or in the fourth quarter, I guess? And then in 2027, should we see the full benefit of both projects already next year? Or maybe there is something that carries over and only sees the full potential in 2028?

I mean in terms of the benefits from the projects, we are now concluding the tests in [indiscernible]. The ramp-up will continue throughout the fourth quarter. It's not the ideal in terms of what we expected because the fourth quarter and the first quarter of the following year are rainier here in the southern part of the country, especially now with El Nino. So I think this will delay things a bit. We won't be able to do it as quick as we expected because we wanted to be very much focused on the safety of our industrial processes and our employees.

Therefore, so an important portion of the benefit will be captured throughout 2027, but not the full benefit, but we will give you more details about it during our Investor Day. But it will probably be very close to what we mentioned in our last Gerdau Investor Day, we thought it would ramp up in the third quarter of 2026, and we were expecting, I mean, something around BRL 400 million.

I think something around this order of magnitude may be since the -- we will get something close to that as it will come towards the benefit of the project in 2027. In the case of Midlothian, we are still in the midst of our maintenance shutdown, not only that will conclude maintenance, but we'll also focus on the expansion of our plant capacity of our mill in North America. And there will be also a ramp-up throughout the fourth quarter. And traditionally, this is a quarter when shipments are lower due to seasonality.

So in terms of Midlothian and all of the additions of productive capacity will be fully noted throughout 2027, considering that we do not have any setup. I mean any problems along the way. So these are the 2 most important projects, both in Brazil and North America. And both projects will have a lot to add to our company in '27.

On the capital allocation front, very active in the company in paying dividends and buying back shares, more importantly, canceling those shares congratulations on those decisions. How do you see that going forward? Maybe the split between dividends and share buybacks and just the appetite to continue to return it to shareholders.

I think that while our shares are below the book value, we will see good opportunities to continue to invest and then we will be canceling the shares over time. This is option is no longer an option for us. So in the third or fourth quarters of the year, that's when we have the bulk of our cash generation, and that's why we accelerated the results.

If we think about year-to-date, we -- our free cash flow for the past 9 months when we talk about our financial highlights in the presentation, you saw that we got BRL 1.6 billion of free cash flow. Remembering that the -- we go variation of the cash and all of the lines involved in.

So we pay back our shareholders with the recent dividend announcement, we paid BRL 1.8 billion. So more than 100% of are generated in terms of free cash flow after important investments for the long run of the company. And so we gave that to our shareholders, which demonstrates that we are fully committed to return to our shareholders. what we did. So this is something nonnegotiable for us.

Next question from Gabriel Barra with Citi.

I have 2 points. And still on that note about Miguel Burnier, I think that the landscape has changed a lot in the past few months, especially in terms of the margin. And I think exchange rate is moving quite fast. Therefore, without even talking about 2027. And speaking about the new project, we used to talk about that BRL 1.1 billion. I don't know how much you can share with me or advance the discussion that you will be probably talking about during the Investor Day. I would just like to understand the run rate at Miguel Burnier given the current landscape and probably foreign exchange may help us a bit, and this may change the scenario.

And on the other hand, even referring to some previous questions. The company is in a very comfortable position in terms of its leverage position, FX exposure, but looking forward, I mean, looking ahead, I would like to hear a bit about foreign excision, whether that 4.7% is still feasible for this year. And also about leverage, whether the current scenario, looking at the scenario globally and also locally in Brazil, whether this changes the scenario going forward? I mean whether that 0.6% or 0.5% will change or whether this is an adequate level or whether we should expect higher leverage over time? So these are my main points.

So Barra, how are you? I -- it's good to talk to you. So let me first refer to mining. When we gave you the outlook saying that throughout the cycle, the return anticipated was [ 1.1 ] million from the mining project. If you look at the footnote on the slides that shows how we calculated that return, there is an important portion there that comes loss, some related to mining shipments, I mean, 30% to 40% of the amount, but the bulk of the banner that relates to internal consumption in that ore in Ouro Branco at a low cost, lower than buying for third parties, but the quality is also much better, about 65% of that.

So in the past, when we calculated the benefit, we took into account a CFR price for iron ore of around [ 90 ] per ton. At that time, it was not even 61%. It was 62%, so slightly above if we think about that quality enhancement of 1%, and the [ ApoB ] price was about USD 70. So we understand that, yes, the variables have changed. They're already changing again. And the only certainty we have is that once we have a full ramp-up of our mining operations throughout 2027 when we go through the first priority which is own consumption at [indiscernible].

Certainly, we will find ourselves in a different situation, which, in our view, will be much closer to a normalized level for freight costs and ore. Another important element is that given that iron ore has a worse price if we think about FOB, I mean, [indiscernible] to get the iron ore in Brazil. On the other hand, coal is more expensive. Therefore, the benefit of having ore with a higher grade of [indiscernible], which will, in turn, reduce our consumption of coke and coal to produce the same amount of our -- I mean that increases. I mean it gains even more impact of having higher quality are that will reduce the consumption of coke in the blast furnace. So these are things that will be calibrated throughout time.

Now moving to the second part of your question, about investments, CapEx and leverage. I mean 2 questions I know, but CapEx, in our view, we are lagging a little bit behind. But right now, even due to uncertainties related to FX, we decided not to update our guidance. Thus, we understand that there is an upside risk thinking about free cash flow generation. So we might dispose less in 2026, rather than what we gave as a guidance in our Investor Day last year, in October of last year.

Now speaking about leverage, last but not least, given the current scenario. I mean we see a scenario of higher interest rates, not only in Brazil but all over the world. Now 10-year treasury is down to 5 after many weeks but it's still heating 5, which is a very high level, thinking about the last 10 years, in particular, and speaking about our markets and our business, let me just give you a statistic data.

When we run the results of our Brazil operation and compared with NTNB of 12 months ago, I mean, the Brazil result today versus, I mean, tracking NTNB of a year ago, that's when real estate investors in superconstruction investors, or those who are thinking about buying a truck, a car or a long-term debt, which is a capital-intensive investment, the comparison is greater than 70% comparing Brazil Gerdau's results in terms of long-term interest rates. So given a scenario with so many differences. This is an important flexibility and leverage. Not only in terms of balance sheet, but also operationally speaking, when you talk about allocating capital, it's nicer to have a less leveraged balance sheet.

Next question from Ricardo Monegaglia with Safra bank.

I'd like to start with an outlook of the United please. We had another sale maker in the United States, reporting their results, they are earnings with an outlook. I'd like to stress [indiscernible] of call my attention, give us an outlook for earnings. And in the case of Gerdau, it's by margin profitability. I would like to understand, given that another player is also seeing similar price movement and applying contain price increases that you do seeing the same dynamics of demand and scrap [indiscernible]. And that's my question. I'd like to understand, are you being conservative?

Are you being conservative, thinking about a more critical scenario for scrap because that's the point that all my attention because the scrap price does not increase. Did you have any signal from your suppliers that the scrap prices will increase? Are you seeing that happening? Because the Gerdau portfolio when I look at weighted average of the prices of Gerdau products. I see an increase of $70 in Q3. So the one reflected in the average and will be reflected in the beginning of Q4. I don't know -- there are some other things that can impact a bit low at a cost of BRL 100 million, at the same time, you have other expenses decreasing. So I'd like the moving part here something that we might be missing perhaps more downtime in addition to [indiscernible], that's my first question. I'll ask the second later.

Okay. Ricardo, you made an interesting question. We normally -- what's happening with our players in Brazil and Latin America and the first point, as you mentioned to us that we give you an outlook considering margin. you're referring to the outlook of because they give an outlook regarding total millions of dollars of profit and they're giving the softer guidance for Q4. And we're providing a margin stability steel products and I think that here, we have some [indiscernible] difference. We're talking about margin and the margin, as you said yourself, we have a positive event regarding prices and we also have the important effect related to cost, and these are related to seasonality.

Typically, in Q4, we have lower production volumes lower shipment organ. And that leads to a lower dilution of optics because we have fewer times to distribute to that production and you can answer your question. Over Q3, we started the stoppage at middle C significant part of today in the adult capability cost, we continue to pay the labor, but the plant is not producing. And this will be reported over the key for over the fourth quarter.

So that's your view regarding results despite a positive energy of positive momentum, for the top line in terms of prices realized. Now we see that -- in terms of costs and volumes, we're going to have a good tractor. They will kind of keep the margin stable or that was clear.

Second question to [indiscernible], and the questions are next. You mentioned that you might adopt additional measures to protect the Brazilian market of Brazilian business which is [indiscernible], are you talking about the approval of into something for [indiscernible] and wire [indiscernible] or do you think more measures will be necessary. Could you elaborate on what you've been discussing your priority, you spoke a lot about taxes and other competitiveness items? I just want to get more color in terms of what you're debating.

Well, Ricardo, there is one positive point [indiscernible] it delay in the adoption of a more robust trade [indiscernible] is the technical rigor with which this analysis is being done by the Ministry [indiscernible], the industry of defense industry. We might adopt more [indiscernible] mechanisms and then people can question that. And then the [indiscernible] implemented becomes on a political decision.

The fact that they are having this technical rigor is a positive [indiscernible] positive approach by [indiscernible] after tank debate with Vice President [indiscernible] with the current minister must [indiscernible] gold. And that's the point we'd like to highlight. There are technical rigor. I think this program, there has been a reduction in the penetration of imported steel, both [indiscernible] expected a greater reduction, which did not happen and tie down in is evolving in its technical debate.

That might be [indiscernible]. If it's not enough, more robust existing mechanism have to materialize. So at this moment, I think the progress made is positive and I believe that in the next 4 years, the fact that we've had an intense debate with the government. And the fact that we have this technical rigor, I believe the [indiscernible] car mechanism may be adopted. Like I said, [indiscernible], we are not putting all our betting chips on this. If my optimism is the reality. I think that it will help us accelerate this process of recovering profitability. And we get inspired by other trade of fast mechanism implemented elsewhere.

I like the hard core, setting a limit after which no more imports will come in. But that's my personal opinion. There are other mechanisms. I see continuity of the business positive. Having this technical rigor no [indiscernible]. We have to go back to square 1 and started all [indiscernible] with a new team I think that it would take us longer to reach the stage where we are at. That's kind of obvious thinking, Ricardo.

The next question from Daniel Sasson with Itau BBA.

My question were actually very straightforward. As a follow-up to [indiscernible] question regarding CapEx or 2026. You're executing the CapEx at a lower pace in [ Caputo ] about the intensity regarding explain. But given a stronger disbursement for [indiscernible] and with [indiscernible] this year. And [indiscernible] this is behind you, would it make sense to think about 2026 the top range for the 2027 guidance? I know you haven't got us on more guidance, but thinking about big building blocks that made up CapEx for [indiscernible]. Now thinking about the expected enforcement of CapEx, I'm not thinking about 2.7%, but perhaps thinking about a slightly lower level.

And my second question to you, [indiscernible]. Do you make any bank or do you have any formal policy of the company? So that you would revisit your policies for your gross debt up to BRL 12 billion. So do you think it would make sense to change any of the covenants because perhaps these were conceived at a moment where [indiscernible] generation and cash generation levels will go down for the trend? And now that it is [indiscernible].

As for CapEx, there could be a good assumption considering what we're executing of CapEx today will be kind of close to what we're going to be seeing in the coming years if there's no big change in our global strategy. We have a level of disbursement that is necessary for maintenance. And we have important maintenance coming up at Ouro Branco as we did in our Investor Day, considering the blast furnace, the cocoa plant, the maintenance that we provide to maintain our competitiveness at Ouro Branco. Could I think that, yes, it would be a USD 4.5 billion, depending on the currency that you want to use, right? To think that kind of a reasonable number for the coming years.

Like I said, we haven't got anything formalized. The most likely. At Investor Day, we might have more maturity to share with you a number. But given the discussions we've been having with the Board of Directors regarding new product, I think this is an adequate number. And then for the to give me 30 seconds for an additional comment on my end.

I have been saying is and when [indiscernible] asked the question, the past question. I talked about the fact that we pursue competitiveness and we have devoted a lot of work to choose the level of CapEx tonne because it is incredible how executing CapEx in Brazil became constantly sense. So we have a comparison in-house, which is CapEx in the United States, in North America as a whole, [indiscernible] in terms of term and budget is greater than here. So we have been in a patient for this -- we look to be constative in capital allocated to investment contracts. But also be looking for alternatives, looking the alternative way so that we can reduce CapEx per ton.

I just want to stress the works so we [indiscernible] that getting a lot of time because there are many opportunities. CapEx return abroad has been much more competitive than in Brazil. So just want underscore at this point. This is something that we are working on to improve competitiveness in CapEx per tonne right? [indiscernible].

And to your second question, Daniel, about the policies governance. We could revise our gross debt policy. We estimated this level of growth debt when the FX was totally different. So today, we are close to [indiscernible] per dollar when we set this policy. The dollar price was at BRL 350. But now as Gustavo mentioned, they will focus on the debate to improve -- the transformation of our business here in Brazil so that we can rely [indiscernible] on North American results.

Of course, we are very pleased with North American results, but we want Brazilian operation to give us a return on capital invested. That is necessary for us to continue to grow and to invest here. Yes, I believe that there is good growth to the policy of net debt over EBITDA ratio, for example. But our big focus right now has been to [indiscernible] so we can be more profitable, more competitive here in Brazil with the leverage as a result of our work on discipline, leverage is not a problem. So we are not looking into that so much at this point.

Next question from Caio Ribeiro with Bank of America.

My first question is about capital allocation in the U.S. We've seen Gerdau doing some recent moves in the past 5 years, like open and the new scrap processing centers as well. Looking ahead, what is your view about new acquisitions or new potentials or even organic expansion in the region? And among the options, maybe you would increase the amount of captive scrap or maybe expand the portfolio of existing products or yet trying to expand the share of other products, looking at downstream products, more specialized products with higher added value, like joint stand-back and new structures. So among all of these basket of options, what would be your preference today?

Secondly, looking at the margins in the U.S. market, you've been expanding constantly. And you already said a lot about how you see import risks and possible commercial trade agreements with Mexico and Canada, the [ Acero ] plant as well. Could you give me some color about the new offering components in the U.S. or whether anything has changed in terms of new projects, possibilities?

Bear in mind, the metal spread has been quite high for some products in the market. And also, how do you see demand evolving going forward? Especially demand related to data centers, whether you see any signs that could worry you about data centers and what would that represent in terms of steel demand for the coming years?

Well, thank you for your questions. I mean, in a way, you already -- you asked the question, but you already helped me answer. When you suggested a few possible pets in terms of organic investment, the expansion of selected capacity. And this is the path forward. We are not thinking about any major acquisition. We are not thinking about any greenfield plant.

I think the U.S. market will continue to post this adequate balance between supply and demand. And when you talk about the data centers or whether that will continue to post solid demand, I think questions that we got about a year ago were very similar, but 2 or 3 years ago as well. But we've managed to come up with long-term projects that can serve the country, but within some logic that allow overlapping of demand if we can probably anticipate solid demand going forward.

I mean 2019, with the 232, and then we have the [indiscernible] investments that are still in place in the U.S. of relocating plants from Asia into the U.S. So we are still delivering still for that. And then the stretcher bill, we thought that this could be translated in short-term demand. And in fact, that didn't come. But Nevertheless, this is very present in Brazil.

I was in Midlothian, 2 weeks ago. If you go down to Dallas and you drive around the, a lot of new construction site. And then we have the IRA. And we thought that in the government transaction transition that would be dropped, but it's still a reality, not only in terms of solar energy, but look at all of the demand around transmission lines. It's really awesome. So there has been an overlapping of a topic that I talked about in the past. And I'm referring to investment projects in the naval industry in the U.S.

There is a huge demand coming for destroyers, submarines, a lot of but also some other kinds of scale that are part of our portfolio in this new project to invest in the naval industry. And then we have the power project investments in nuclear plants in the U.S. mean all of these demands pile up over time. And when we look at the soundness of that, we know that on the demand side, this will be very solid.

And on the side of supply, I mean, maybe [indiscernible] can say a little bit more about that with the NDIC. I think the impact will be marginal. Therefore, I see that supply and demand is well balanced. It allows you to say that this current level of margins and results can be maintained. We are working at the limit of our mills, so we are trying to produce more in every mill. The investment in mid-low loan. It's today at the end, but there is a new phase of continuous casting to be executed until January. And it's an important expansion.

If we had that already in place, we would have been producing by now. So I mean [indiscernible] also talked about scrap. But with all this oversupply of Chinese steel coming all over the world. This does not allow people to buy more scrap that we could have a short-term market where scrap prices could be higher. So all in all, I see greater stability, more stability.

All right. I don't think I have a lot more to add, Gustavo. The major component is the demand for data centers, we understand that this is a very important avenue for nonresidential investment expansion. And also the entry of [ Acero], we know for experience that when we did the ramp-up of our [ Saracen ] rolling mill, that is a very lengthy process.

The product is quite complex. It involves a lot of steps and also involves different specs Therefore, it's not a very quick ramp up as it would be in the case of a rebar plant. So we do understand that there will be -- the product will enter there will be exports to North America. But North America is a net importer, just as Canada is. Canada does not produce, I mean, rebars. And so we do understand that this is an additional producer in terms of [indiscernible]. And in terms of the other players, we haven't heard any important announcement of capacity expansion. We just see more organic moves of brownfield investments, but nothing substantial that would indeed change the needle in terms of this balance between supply and demand.

Our next question from [indiscernible] with JPMorgan.

I just have a few follow-ups from my colleague's questions. And starting with Brazil. One thing that drew my attention. You said that you are selling more flat. There was an improvement in the automotive industry, and we know that especially the steel industry in Brazil, it's a bit complicated. So what is your outlook once you look at your very diversified portfolio, several products, do you see some room to gain more share in this kind of flats or special skills? Do you see any further opportunities for 2027?

And my next question has to do with CapEx. Just to clarify because I think it wasn't very clear to me. Whenever we think about this CapEx that could possibly be lower. Is this Thinking in terms of reducing CapEx per ton, does that comes from there or it has to do with a delay in Miguel Burnier.

[indiscernible], in terms of the opportunities in the automotive industry, I think the main lever has been the rebound we see month-over-month in terms of the production of heavy vehicles in Brazil. Now when you break down the numbers for light vehicles, according to ANFAVEA, we've seen that the bulk of sales growth can be in CKD and SKD. And so they do not consume a lot of special steel from us. I mean our clients are not the ones that supply into this category.

But production has been around 2% to 2.5% national production. I mean the tractor in their results for special skills in Brazil throughout the year is that we had very weak first and second quarters, especially if you look at the production of heavy vehicles. Unlike North America, basically, everything we sell is for light and commercial vehicles.

In Brazil, due to our product portfolio and the production industry. We also sell a lot to heavy vehicle production. It started with minus 20 or minus 18% in terms of production. Now this gap is shrinking when compared to the production from the previous year. And I think at the end of the year, we would have numbers similar to minus 5%, 4% or 6% for heavy vehicles.

So once things are more normalized, I think we should see a more robust production of heavy vehicles without that significant drop we saw in the first and second quarters because I think that hampered our productivity in terms of reducing fixed costs and gains with additional tonnes that we didn't have due to that low production of heavy vehicles.

Now speaking about CapEx, today, we believe that our CapEx disperse now is closer to BRL 4 billion rather than BRL 4.5 billion or BRL 4.7 billion that was originally in our GAAP. And it's not really related to motor delays in the mining sector from this year to next year. But mainly due to the efforts mentioned by Gustavo, we're being more assertive in terms of the projects that we approve, we are being -- more we are focusing more in what we want to do.

There are also the fact that we hibernated some units and that reduces the maintenance CapEx in these units. This is not just the matter of postponing CapEx disbursement, but it means that we are just heading towards a lower level of CapEx use.

Next question from Rafal Barcellos with Bradesco BBI.

I promise to be really brief because I know we're running out of time. Two points which I believe are important and that have not been [indiscernible] earnings call. So for industrial contribution, it happened with some investors point always raise in terms of capital allocation, mismatch between capital breakdown in CapEx. A good part of cash generation and [indiscernible] coming from the United States, most of the case executed in Brazil. So that's an important capital allocation how do you think this mix will be rebalanced in the -- any CapEx effort can make more adequate?

And the second question, this is the most important topic and that is seen that caused earnings assertion, which [indiscernible] is South America. So could you give more color where in [indiscernible], South America should normalize? What do you think is an adequate profitability for South America considering the outlook?

I think this is to do with the time. When we go back to 2018, we had a good operation in Brazil. Both growth margin results were very good and we had a big CapEx program for North America to invest in the unit after we sold the plant to full [indiscernible]. And then the question was back then, back then the United States of selling assets there. Why don't you invest in Brazil? That's where you're making money in?

Capital allocation investments in CapEx in fuel making and mining. CapEx that take a long time to make and to provide results. It involves [indiscernible] 30 engineering, commissioning the equipment with long [indiscernible] and in the past, you were asking us why are you investing in North America? Today, we see -- it was a good decision. It's bringing us good return.

Of course, because of trade defense topics and tariffs, but also because of the important investments we made in [indiscernible] and Midlothian [indiscernible] investments in Midlothian [indiscernible] thermal treatment, in plants to supply solar panels for photovoltaic industries.

Now to 2023, we said, okay, results in Brazil were getting worse. We understand we have to make structural investments in Brazil, to plan [indiscernible] see and reap the fruits in the future results in Brazil. So the CapEx disbursement in Brazil. For example, investment at Miguel Burnier for the mining project. That's an investment that we announced in the [indiscernible] market. In the end of 2022, between the end of 2022, mid-2023, that's when we have the [indiscernible], for mining. And only we now is starting to operate.

So yes, just this time on mismatch between at generation and [indiscernible]. We don't make this calculation thinking I'm going to invest now and reap the fruit now. We always have to think about the marginal results and when we are going to allocate new dollars, we think about where we should invest so that it will generate more value, create more value than in the long term today.

The North American investment is doing really well. We continue to make organic investments to continue to grow as the case of the Midlothian project, this is the second biggest second only to Miguel Burnier, our second biggest investment is in [indiscernible]. So this mismatch, but it's more like a time mismatch. And how we are thinking about the return of the projects in the long run.

We also asked about South America. The South American operation particularly weak, mainly into lower volume that we had in Argentina, and cost dilution because of the -- the market has not recovered, to the past level -- but we understand that given the nature of our operation. Until we have an important recovery of the economy and the construction industry in Argentina, we know that our results will be very close to the results we have in the Peruvian operations, which also leads between mid-teens, low-teens. Structurally, that's the level of results we've seen in Peru. So it's something close to end [indiscernible]. This is something that will help us model our future operations in South America.

[indiscernible] over to you.

Well, everyone, because of the time of [indiscernible] session is closed, the Investor Relations team remains available if you have any further questions. I now turn the call back to Gustavo for his final statements. And I'd like to thank you very much for joining us.

Thank you, Mary and Japur. Once again, I'd like to thank all of you for participating in our earnings conference call. I'd like to take this opportunity to invite you to our Investor Day that will be on December 4th. Thank you very much, and take care.

Good morning, and welcome to Gerdau's second quarter 2026 results presentation. I am Ariana Pereira, Investor Relations Specialist. And joining us on this conference call are our CEO, Gustavo Werneck; and CFO, Rafael Japur.

Please note that, this call is being simultaneously translated into English, and you can choose your preferred language by clicking on the globe icon at the bottom of your screen. [Operator Instructions]

It is worth noting that, the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available. Forward-looking statements are not guarantees of future performance and are subject to circumstances that may or may not occur.

I will now turn the floor to Gustavo to initiate the presentation.

Thank you, Ari. Good morning. And in fact, good afternoon, all of you. I hope you're doing well, and I really appreciate the opportunity to join you for another earnings release presentation. We will briefly discuss the highlights of the second quarter of 2026. I will also talk about the outlook for our operations, and then we will move on to the Q&A session.

In the second quarter, we recorded growth in shipments, both quarter-over-quarter and year-over-year with a 7% increase in volumes in North America when compared to the same period last year. Resilient demand in the key sectors where we operate led to a 15% increase in adjusted EBITDA in North America in the second quarter compared to the first 3 months of this year, 2026. This strong result also reflects solid operating performance from our plants in the region.

Meanwhile, we posted a slight improvement in the results of our Brazilian operations in the second quarter, reflecting a series of initiatives focused on increasing the profitability and productivity of our operations in the country. This gradual improvement in results occurred a at continued pressure from imports, which despite having slowed down during the period, remain at high levels year-to-date.

In this context, we await the overcome -- the outcome of the antidumping investigations into long and flat steel products, which are expected to be updated in the second half of the year. Finally, I would like to highlight the increase in our ownership stake in Dona Francisca Energetica, which has raised our self-generated energy to more than 50% of Gerdau's consumption in Brazil. This move helps boost the competitiveness of our operations in Brazil and is in line with our previously announced decarbonization strategy.

I will now turn the floor over to Japur, who will detail the financial highlights and the impact of the current environment on our results. And I will come back to you after that. Japur, over to you.

All right. Thank you, Gustavo. Good afternoon, everyone. And I'd like to extend a good morning to those of you who haven't yet had lunch. So good day to everyone.

Let's start talking about our operating results. Our adjusted EBITDA consolidated was BRL 3.4 billion in this quarter, posting growth compared to both the previous quarter and the same period last year. And with this, we are getting to our very best consolidated EBITDA since Q3 '23.

Gerdau's adjusted net income also posted a substantial increase of 45% quarter-on-quarter, reaching BRL 1.5 billion, reinforcing the company's ability to translate operating gains of our business into returns for our shareholders. Therefore, based on these results, Gerdau S.A. will distribute dividends of BRL 0.23 per share, while Metalurgica Gerdau will distribute BRL 0.11 per share. We also continue to make progress on our share buyback program of Gerdau S.A., which is now 31% complete now at the closing of Q2.

Now speaking a little about our financial discipline. It is important to highlight and stress that our financial discipline remains a priority. We ended the quarter maintaining a very solid balance sheet position, with low leverage with debt over EBITDA ratio of 0.69x in the last 12 months.

This quarter, we maintained a positive free cash flow of BRL 237 million. You might claim that it was just too little a timid generation, but we have to put this free cash flow generation into context, considering the typical seasonality of our business.

If we compare the first half of 2026 and how much free cash flow we generated comparing with the same period last year, first half of 2025. In 2026, we generated an additional BRL 2.3 billion in cash flow. And this was mainly driven by both the growth in EBITDA driven by the North American operation, as Gustavo mentioned earlier, and the reduction in our CapEx investments in accordance with the guidance that we released and communicated last year.

Talking about CapEx. From a strategic perspective, we are nearing the start of operations for major projects that will enhance Gerdau's structural competitiveness, particularly in our Brazilian operation.

Regarding the mining expansion at Miguel Burnier, we continue to make progress in line with the updated schedule that we released in our last earnings call with the start of operations expected in the third quarter.

We are running a lot of equipment tests, and we should start producing ore. We remain confident that we will realize the projected operational and financial benefits of the project in the range of BRL 1 billion and BRL 100 million per year when we are in full ramp-up.

In addition to investments made in energy mentioned by Gustavo, we are about to open our new recycling center in Pindamonhangaba. This will increase our competitiveness and reduce our exposure to volatility of this raw material in the long term.

With this, I would like to conclude by reaffirming our culture of always striving for operational and financial discipline, while simultaneously strengthening our competitiveness and allocating capital to initiatives and projects that will shape our future. We understand that we continue to grow, creating value in a sustainable way to our shareholders.

I will wrap up here and join you all and Gustavo for the Q&A session.

Thank you, Japur. I would just like to say that in North America, we continue to see steel demand at high levels with a strong order backlog driven by solid consumption in segments such as renewable energy and data centers. One point of attention is the review of the formal review of the USMCA, which is the commercial agreement between the U.S., Canada and Mexico.

In Brazil, we are seeing signs of more moderate growth in some consumer sectors such as construction and manufacturing, while still facing an excessive influx of imported steel in the local market. This unfair scenario of imports continues to affect the profitability of our operations in the country. And in this regard, we continue to invest in initiatives that strengthen the competitiveness and profitability of our assets.

Well, I'll now turn the floor over to Ariana, and Japur and I will be available from now on to answer your questions.

Thank you, Gustavo and Japur. We will now initiate the Q&A session. Our first session comes from Rafael Barcellos with Bradesco.

My first question is about a very hot topic with investors, which is the outlook for the next quarter in the U.S. You mentioned margin maintenance, whereas most of the market expected additional expansion, given all of the price increases we've seen in the U.S. market. Having said that, could you please give us an idea of cycles in the U.S.? How are you seeing the cycles operating in the U.S. market?

On our side, we see that the beginning of structure still in the U.S., that's something that is coming quite strong. I mean, that draws our attention towards being more stable. I just want to know whether there is something that is nonrecurring. I know that, you had the maintenance shutdown in Midlothian. I just want to know how relevant that is or whether that can explain this most moderate outlook.

And if you allow me a second question, we are also looking at the Mexican market and that market is very strong, especially in the last few months. I remember that in the past, you mentioned a potential investment in the Mexican market. Could you please let us know whether it would make sense to revisit that plan or not? That will be great.

Well, Rafael, this is what I mean cutting to the chase. No, going straight to the point. I mean, this is a discussion that Japur, Wang and I have had in the past few days. But let me give you a more qualitative view. Japur, the guy that deals with the numbers, he can probably add some additional information to what I'm about to say.

When you look at all of the elements in a very practical way, Rafael, what we see going forward, I mean, the next quarter and also taking into account the last price increases, we see a trend of margins going upward. There is no new element or any new risk that we could anticipate that is not well mapped out by you guys. I think that we are just being more conservative on the macro side.

I mean, is there really enough room to expand the margins? Will prices continue to escalate indefinitely? Or maybe we're being just more conservative or realistic, whatever name you want to give it. But there will be a time when this will hit a ceiling. We can't just think about indefinite margin expansion. I think there should be a sustainable level.

When you put everything on the table, you put price, you put our spread, cost equation, international scrap prices. If you look at the numbers, the raw numbers, you see that, that leads to margin expansion. But we are being more conservative, more down the earth. But I will allow Japur to come up with his own comments. We will have a maintenance shutdown at the Midlothian plant, but it will be in the melting part.

We have a very good billet inventory. So when it comes to shipments delivered and dispatch and the way we serve the market, everything is according to plan. So we do not anticipate any drop in shipments.

But before I turn the floor to Japur, the Mexican market and USMCA negotiations are moving forward more on the technical side, but nothing close to approaching a final agreement. And our teams, especially the team in Mexico, they have been talking to the people at the Ministry of Industry and the federal government in Mexico. Topics related to steel and automobiles are going on now.

I don't see the expansion of Chinese products that enter the U.S. market via Mexico. Therefore, when it comes to local steel production in Mexico and the insurance of automobile production in Mexico, all of these topics have led the discussion rounds. So there is nothing that would be a cause of concern.

But when I look at USMCA and the way going forward, I don't see any additional risk coming our way. I think that the way things are going will lead us to see more positive news rather than negative. But as you said it yourself, earlier this morning, we talked about that Wang and Japur and myself have been talking a lot about it. But now I think I'll give the floor to Japur to elaborate further.

Okay. Maybe I will repeat some of the points already mentioned by Gustavo, but I will do it like in bullet points. I think we will have to answer this question a lot more during this call.

First of all, when we think about the market, shipments and price, we don't see any loss in volume due to the Midlothian stoppage. I mean we will continue to serve our customers. So we are not anticipating any lack of supply to our current customers.

Prices, I think we might have been a bit more conservative because there has been some price increases like on Friday and now Monday in North America. We still need to have some more visibility about prices in terms of prices being indeed put into force. And half of our portfolio is earmarked to the distribution market where price changes occur more rapidly, but there are other segments like industrial segment, manufacturing and downstream, the speed of implementing prices is a bit different. The pace is different.

Having said that, when we think about the Midlothian maintenance shutdown, I mean, there is an accounting figure. It doesn't have any impact in terms of cash generation. But when you have some equipment in downtime for a few days, there is some idleness in our lines. And then we have to allocate the fixed costs directly to COGS, the results of that year, because we were not producing semifinished or crude still during that period.

And at the end, this impacts the margins a bit, but this does not hamper, I mean, the unit economics or the order book perspectives going forward and the stability we see with metallic spread that was expanding and also it doesn't hurt scrap prices. So this quarter, there was an important downtime in our largest unit in North America.

And I think we have to think about the glass half full rather than half empty because we are making investments to generate higher volumes in our main plant in our main market. So I think this should be the overall conclusion when we think about this expansion in Midlothian rather than thinking about whether this would be 1% more or less because at the end of the day, what matters is the long-term return from our investment in a market where we have the largest cash generation.

Perfect. If you allow me, 2 other very quick follow-ups. Japur, I understand that when it comes to cost, it was not necessarily Midlothian that impacted the cost, but just natural inflation coming from energy costs that we see in the market in different industries. So Midlothian, it's not so heavy in terms of cost. And then my second follow-up would be to Werneck.

Therefore, I understand in terms of cycle, the sustainability of the cycle is a different story. But when it comes to peak, you probably see it getting close to the potential to increase metallic. Spread and profitability is something else that -- or sustainability is something that, in fact, will happen. But this range is getting close to its potential. But even -- if you go forward to 2027, the cycle can be defined the way we want it.

And the main factors that have led us to see such relevant backlog, in our point of view, this will continue to be present because if you look at data centers, for instance, even though we were there in the U.S. when the debate started in Pennsylvania, New York, when they were talking about reducing or holding on the licenses to build new data centers because this will impact energy demand and water supply. This was restricted. And there is no other robust initiative that could stop the construction of new data centers. This is a path of no return.

So the backlog for this sector is quite strong, with data center comes energy generation in the U.S. Renewable energy, even though there was a concern whether this would be reduced in the current administration, but that was not the case. So we are still producing steel for renewable energy, and this has been quite strong. And then looking ahead in the next quarters, it doesn't seem to us that there is any imminent risk that could lead to a drastic reduction to our backlog or our shipments. I can even anticipate that. And I don't know whether Japur would have anything else to add.

Well, yes, we -- Rafael, we do see a very one-off impact of that downtime in cost in the first quarter due to idleness because since I have no production in the melt shop for that entire period. All of the electricity costs, take-or-pay gas and employees that work in the melt shop. I mean, I need to transfer that cost to our P&L. And by doing so without having production per se, the cost -- on the cost point of view, it didn't change the cost would be there anyway. But this puts a burden on the cost for that quarter.

Once again, this is just a temporary effect, nonrecurring effect. And we believe it will be around BRL 100 million to BRL 150. And maybe we are just being a bit conservative looking at other market aspects as we referred to earlier on. And we are also taking into account the impact of the cost in the overall results of the operation.

There were other inflationary impacts throughout the second quarter, like freight on average, there was about 8.5% additional freight expenses in North America when compared to the first quarter. I mean, this happened in the second quarter, mostly due to fuel issues. And this has to do with the conflicts in the Middle East. And we believe that these effects will still remain going forward. But it's not due to other cost inflation, but something very much related to Midlothian and the maintenance downtime.

Next question from Caio Greiner with UBS.

I'd like to have a quick follow-up question to Rafael's before I ask my own. Japur, let me know if I understood you correct. You are not yet considering the implementation of the 2 latest price increase announcements that you had -- that you made last week and this week. Is this correct? So we could expect expansion?

You're correct. Yes, you are correct. We haven't yet fully considered these 2 price increases in special steel and beams that happened last Friday. And we are following our competitors because it's August 5, we already had the month of July, we had a price increase, which is not retroactive. It has a date when it will take effect along the month of August. It will have a not full effect on the portfolio in addition to the different channels, which I referred to earlier. So it's not fully captured in our outlook. So putting it differently, there is an upside risk, which is not negligible in this outlook.

Okay. clear. Now, let me move to my 2 questions. One is about capital allocation and the other one about Miguel Burnier. First, capital allocation, Japur, you drew my attention that point on net debt. Net debt close to BRL 8 billion now in Q2. And we remember your target of having a net debt over EBITDA ratio close to 1x. Your EBITDA for this year 12.5%, 13% for next year 13%, 14%. It seems your net debt is at a very conservative level.

So I'd like to understand how you're thinking about capital allocation and indebtedness. If this target ratio of 1x should still make sense to us. And if that is the case, how do you intend to releverage the company to reach that target? That's number one.

Second question about Miguel Burnier. You mentioned the start-up starting and you will start a ramp-up process. the iron ore market is more under pressure. The prices have dropped a lot. I'd like to understand the economics of Miguel Burnier for 2027. Do you have any updates on EBITDA generation and whether in 2027, we should see the operations running in full steam or whether the account or the calculation changes?

Okay. Let me try to address this in part. Starting with capital allocation. A slight correction. When we talk about our net debt, our formal policy says that the limit of leverage is 1.5x. But in practice, we feel uncomfortable to be above 1x net debt over EBITDA ratio. So please keep in mind that this is a limit, not a target. So we are not in a hurry. We don't really have a need to say, we are at 0.69. We have to leverage another 0.31 to reach the target. We don't have that mindset.

Now, it is true that with the reduction in CapEx disbursement and with EBITDA expansion, we have a free cash flow generation to equity, which is greater than what we had before, and this is translating into more dividend payout, more share buyback for our shareholders and a reduction of the net debt, not just because of the reduction of net debt itself, but the reduction in leverage because of the expansion of EBITDA. So it's the EBITDA factor, not the net debt factor. and that is our preference.

As several analysts have highlighted, we have a significant consumption of working capital this quarter, both because of the price increases we had in the United States, and also the price changes we had here, the price increases here in the Brazilian operation at a lower measure, but they happened. And we expect to have free cash flow release in Q3 and Q4, given the typical seasonality we have. Typically, these are the quarters when we release more cash flow and working capital.

And also given the downtime at Midlothian, we accumulated an inventory of finished and semi-finished goods. And when we finish selling these inventories, we'll have a release of working capital. So we maintain our preference to continue to remunerate our shareholders via dividend payout or via execution of our share buyback program when we think about capital allocation.

That's for Miguel Burnier, when we had our estimates, our latest estimates that we communicated to the market, we always worked with the benchmark iron ore price close to $90 per tonne. And not considering $105, $106, $110 that we saw happening. So there might be some adjustment.

I am more concerned about executing the ramp-up well so that we can deliver the cost we proposed in the project when we designed the equipment and size our operation about $30 per tonne of cash cost delivered at the Ouro Branco unit. I think that at this point, we are more focused on the quality of our execution and on our operational discipline rather than on the international price.

At this point, in the call with the press, we got some questions whether we have sold the ore, whether we have been selling the ore. And I would like to highlight to the analysts that we have not yet any pull-through or pull forward or sale of ore. Our main focus is the ramp-up. First, we have to ensure competitiveness and the cost of Ouro Branco.

And later, we'll sell the surplus. And if everything unfolds according to our current schedule, we should be completing the ramp-up by year-end, start of next year and then enjoy a full benefit for this business over 2027, if we manage to deliver the cost that we proposed.

Next question from Caio Ribeiro with Bank of America.

My first question would go back to capital allocation. I'd like to explore with you the analysis of new projects. And what is your priority order today? What is the timing for the approval of new projects? And how should we think about the CapEx trend looking forward, particularly comparing maintenance CapEx and expansion CapEx?

Secondly, looking at the behavior of lead times in the U.S., they continue at very high levels despite price increases of long steel that you have been announcing and other competitors as well. This suggests that the demand is becoming more inelastic. So I'd like to explore with you how significant is this data center component for you, both directly and indirectly, considering related investments.

What is the growth that you expect in the future? And whether the order backlog should change if you see there is a risk of metal spread contraction given increased imports, given that the price spread in the U.S. domestic market versus the external market has been increasing. These are my questions.

Thank you for the questions. They are great questions. Capital allocation, I'll pass that to Japur for a full answer, adding to what he has mentioned about this before. But I -- the way I see capital allocation, we have to think about CapEx. If there is no significant change in what we're expecting in the future and considering what we have been saying before, we will continue to invest over time at a CapEx level that we consider to be healthy and sound, most likely the current levels of CapEx.

So what are the big themes coming? The maintenance of the blast furnace 1 in Ouro Branco and the coking perhaps we wouldn't need to have a CapEx peak to deal with that. Good news is we have had some technological and technical alternatives for us to increase the lifespan of the coke plants and the blast furnace. So we have been postponing the date of the downtime.

So we have been acquiring a level of knowledge of operation of an integrated mill that we didn't have before. The history of Gerdau was very much based on scrap. We master scrap. But blast furnaces, a more long-term operation considering a longer lifespan of the equipment, I think that we have evolved a lot in our knowledge and also learning from JFE in Japan and other parties.

Eventually, we'll have to stop Ouro Branco. We'll have to have an inventory of billets, so we won't impact the market. But I think that the postponement of downtime of these 2 important assets for us will allow us to dilute CapEx in the future.

United States, I would say that what we are facing in Brazil -- we faced 8, 9 years ago when we debated EBITDA margin of around 6%, 7%. We had a significant transformational process with divestiture of assets with the right investments in the right places, broadening the portfolio of our products in that concept of a one-stop shop. So I think that we're now reaping the fruits of important work that we did in recent years.

Of course, the current administration has created the right opportunities, but had we not prepared, we will not be able to enjoy these opportunities. And now with the Midlothian downtime, I think we'll end a relevant cycle for us. And now we'll have to analyze calmly what the next steps will be in the United States.

But -- we are not consolidating anything at this point. But in Brazil, we'll continue to go through a transformation kind of similar to what we had in the states. The need for CapEx, they need to build new plants to have more significant transformations or reforms. I think that this will come in the coming years, but diluted over a time frame that will not give us an unexpected peak of CapEx needed that we will not be prepared for. We will not leverage the company more to have more CapEx because we don't want to create difficulties.

And also, there's another point about this. When you want to do a lot of CapEx, you start entailing civil works, electromechanical assemblies, that investment that we mentioned earlier at Miguel Burnier, that was the maximum CapEx management. What was the problem? What was the delay reason, electromechanical assembly and civil works. So that's how difficult it is to make this kind of investment in Brazil.

Now, I'll turn the floor to Japur to say anything else about capital allocation. And Japur can start talking about the lead times, and I can add to that later.

All right, Caio. We had our guidance of about BRL 4.7 billion. We have a pace of disbursement, which is slightly below the guidance. And everything leads us to believe, as Gustavo mentioned, that given the focus we now have on the Brazilian operations, focus on our more competitive assets and to seek some optimizations. And given the extension of the lifespan of our assets in Ouro Branco, we understand that we might have room actually to reduce the maintenance CapEx guidance of around BRL 3 billion per annum from now on.

Now having said that, we understand that an eventual reduction of the guidance of BRL 3 billion per annum for maintenance CapEx, a possible reduction of that yearly amount. If that reduction happens, the difference will not be used to reduce our net debt or remuneration of our shareholders. We understand that, we will have minor maintenances and the right path would be to continue to reinforce the competitiveness of our operations here in Brazil, in Latin America and in North America.

So if we think about the total CapEx disbursement guidance between BRL 4.7 billion consider reduction to close to BRL 4 billion in the coming years. These possible reductions, we expect that we will have to spend less in maintenance. So we will invest more to be competitive and to transform our business in the long term. So I think that overall, that's the philosophy we're having right now. We understand that an investment of this order of magnitude is capable of bringing us good investments with excellent long-term returns.

As regards to the United States, I think it's hard to say that demand is inelastic. And you think that there is an important component of time to execute. And in that regard, metal construction is a solution which is much superior than other constructive models. And this is seen in the U.S. is greater demand for metal construction. So if you want to build a data center in 2 years or in 6 months, and that's totally different in terms of speed for a rollout of new models on account of these hyperscalers that provide service to AI companies.

So I wouldn't say that, demand is inelastic in that regard, but I would say that, we're at a moment, which is unprecedented or we would have to go back in time a lot to see such a robust and resilient demand for metal construction in North America. Gustavo, anything to add?

Well, what I can add is the issue of imported goods in the 2 main segments where we operate in the U.S., structural beams, merchant bars and beams. -- for beans, penetration of imports is marginal, very small. It's hard for these large merchant bars to be imported in different gates. So there are no imported.

Now we have the merchants, structural profiles, commercial profiles, they are lighter weight, and those are the ones being imported. Now in talking with our customers, they're in such a hurry to execute things over there that they get worried to import goods and have to clear customs and delay chips. The risk of imports is not creating a lot of momentum.

Let's get a practical example. Let's get Texas. The need to build transmission towers in Texas is creating a sense of urgency. People are getting almost desperate to get steel to build these transmission towers. So the customers in the very, very short term, they want to buy the steel that is ready to be delivered and shipped. So the speed of this kind of business is not really encouraging a lot of imports. So the system, I believe, is well controlled.

And please keep in mind that before this boom of energy and data centers, we already had a strong backlog. We already had margins, which historically were high and boosted by what we talked about the structural bill finally is translating into new projects of infrastructure. We see this happening in the United States.

Other U.S. federal government decisions like the CHIPS Act, construction of new semiconductor plants have about -- there are about 40 plants that we are supplying to. So there's strong demand, more sustainable demand in the process of reindustrialization over there.

And all of this gives us some peace of mind that our backlog is solid. But not everything is positive. So there's a concern in the automotive industry because of affordability, there's a delay in the renewal of the U.S. fleet. The U.S. fleet is aging a bit. So that business is facing a little bit more difficult to take off compared to the other ones I mentioned. But this will not last forever. Penetration of Chinese imported vehicles is almost nonexistent in the United States.

So I think that eventually, we're going to have a higher demand for special steels because cars don't last forever. The fleet needs to be renewed. So of the segments where we operate in the United States, this is what we are seeing. And that's where we see a little more difficulty. But my expectation is that over the next quarters, the business will ramp up again.

And lastly, to your question, Caio, understand that if we continue to see overheated demand for our products and if we have any kind of slowdown of industrial production, there might be an upside risk of scrap by year-end because there's always a seasonality involved. There is less industrial production and then we might have some difficulty in the scrap yards. Because of the individuals, they find it harder in winter time to go and deliver scrap.

So that's something to be monitored. We've seen some stability in a good part of the year regarding scrap price, but this is a time of the year when typically we see some seasonality because of the weather.

Next question from Henrique Marques with Goldman Sachs.

I would like to change gears now and focus in Brazil. In your outlook, you talked about margin expansion for Brazil, but with flat prices. So considering the cost lag that we usually see in this industry, I had understood that there was already some kind of increase coming in the third quarter. Is there any initiative to offset the higher cost of raw material that I mean, that should have been already contracted. What is the main driver that will lead to margin expansion in Brazil?

And my second question is looking at the long-term Brazil strategy, I believe that last time you talked about changing the way you operate in Brazil. You probably anticipated more radical changes when compared to that of the U.S. But thinking about the current demand situation in Brazil, imports still increasing, but both steel and indirect steel demand is slowing down, and some people are having a hard time to be competitive. And on the other hand, you see a very strong U.S. market with very high margins. And it seems like this is here to stay.

The question then is, what should we expect from all of these changes? Is there any room for you to rethink your footprint in Brazil and your industrial capacity in Brazil or maybe to expand or increase your capacity in the U.S. Do you have any target in terms of results target or whatever you think you need to have? So what you anticipate for Brazil structurally speaking?

Well, this is a very good topic for us to discuss now Henrique, when you look at the number of problems we have in Brazil and things that are coming forward, I mean, you see there is the entry of imported goods, increase in energy prices. And now with this geopolitical issue between Brazil and the U.S., our customers are no longer exporting to the U.S. This is not how we work. This is now how I work or Japur works.

Therefore, we are looking into a long-term landscape where internal competition and the entry of imported goods will be very similar to what we have here today. We cannot afford to design Gerdau in the future, thinking that we will -- that we think that the inflow of imports will go down to 11%. I mean, if things get better as they improve in the U.S., we may have better results when compared to what we have now.

And then we will certainly overcome all of the difficulties of the Brazil cost, and we will find a way to compete in Brazil like we've never done before. We are working in that direction. Some of the things we are not expecting or anticipating. But if you look at the past few days, we made announcement in Recife related to the readjustment of our capacity in that mill. So we will no longer produce steel or road products in that geography. So we will send you that macro plan.

All of the shutting down of capacities to adjust to the new volume capacity, the volume numbers, everything has been done. And so now our footprint is in line with the current demand. But just like we did in the U.S., there will be a significant change in the way we operate in the way we compete as well.

I don't want to jump the gun right now, but we are working diligently. So in a few months' time, when we call you again, in addition to our earnings results, we will call you up so you understand this plan more clearly. We are considering the future scenario for Brazil, which is much tougher than what we have right now.

And if in the short run, we have other mechanisms of trade defense like antidumping. And if there is any consolidation going forward, we will probably reap the benefits, but we will compete more intensively in Brazil when compared to our position in the past. This is how we see things.

Miguel Burnier is a clear example of our move. But now I'll turn the floor to Japur, who can talk about the short-term initiatives. As Rafael said it earlier, I mean, the topic of this morning's debate was the U.S. outlook, but there is also the outlook for Brazil, whether there is or there is not an actual possibility of expanding or having different results. I think that we should also give a response about Brazil, just like we did for the U.S. in our outlook.

Henrique, we don't see any effective improvement in unit prices. On the other hand, we see a better sales mix with some recovery on the side of heavy vehicles in Brazil. I mean, according to ANFAVEA data, heavy vehicles are quite important to our Special Steels division in Brazil -- segment in Brazil.

From the first to the second quarter of this year, we saw a mix improvement with higher shipments in the domestic market. And then when we take into account the fact that in the third quarter of the year, we will possibly have in Brazil 4 more business days when compared to what we had in the second quarter probably we will increase productivity and the numbers will be better when compared to the second quarter. And since we are talking about very tight margins in Brazil, these minor things are important to help our results.

As Gustavo said, this requires very diligent cost work. In the fourth quarter, we will see cost reduction effect in Ouro Branco due to the ramp-up of our expansion in Miguel Burnier.

Next question from Daniel Sasson with Itau BBA.

I hope everything is fine with you. Yes. My first question, I mean, everything has been quite clear when you said that you're being more conservative when it comes to your margin guidance in the U.S. because there is room for further improvement if price increases are fully implemented.

Is there anything else in addition to metal spread because it only considers 2 variables, price and scrap or maybe something that could concern you going to -- going forward to the third quarter, like higher fuel prices in the U.S., freight impact or things that sometimes are not captured in this guidance in relation to metal spread.

And still speaking about the U.S., you talked a lot about the fact that you're preparing the company with inventory to accommodate for the downtime in Midlothian. Do you have any public figure or any range of figures in terms of what would be the effective cost given the idleness that we should anticipate for the third quarter?

And my second question refers to capital allocation and CapEx. You said that, you were running slightly below the 4.7% guidance for this year. I mean, 55% of your CapEx is denominated in U.S. dollars, and that probably helps to explain it. But -- going forward, I know that you don't have any official guidance for 2027 and after that, but Rafael said that probably that BRL 3 billion in maintenance should be slightly lower, but the delta that you use for competitive projects.

I mean, you talked about CapEx with the conclusion of important projects would be probably lower next year, probably closer to 4% or 4.5%. Does it make sense to still bear that in mind, to keep that in mind? Or is there any given thing that changed?

Okay. I will start. Speaking about short term and lower risks and logistics, I think this reflects the reality. I mean, if you visit one of our mills and if you talk to an operator, they talk about inflation. And then you ask them where does that get you? And the first answer is supermarket prices. They said, I used to pay $70. And -- but today, I'm spending $100 every time I go to the market.

And this is impacting U.S. consumers. And this has its implications in the business world because there is pressure coming from freight costs and energy costs. But this doesn't mean that we have any managerial risk that it will be up to us to manage. But when it comes the time that we would have to make increases, we will try to mitigate going towards reducing costs. But we are talking about the inventory of billets related to the downtime.

Our maintenance downtime in the U.S. is better than that of Brazil. The cost of downtime is much lower in Brazil than there. I mean you know all of the reasons behind that. But even then, since every ton matters now in the past few weeks, I was in the U.S. and every time I visit them, please don't lead us to any scarcity of products. I mean products have to be available and any ton can really affect our customers.

So this risk is already managed. So a few months ago, we decided to work with an inventory level slightly above what we imagined before. This is a risk that is closely monitored. And I believe that through the methodologies that we know and then we manage risk like everybody else does. And I think so this issue is well managed.

But if I have to think -- you say, do I have to think about anything that I haven't yet mapped out? I don't think so. I think everything has been laid down. And so Japur will talk about capital allocation, and he can also talk about anything else he bears in mind about the U.S.

Sure. We believe that there's still BRL 150 million of idleness. It's not CapEx, but it's OpEx related to the Midlothian downtime and expansion. Rather than that, there is nothing specific in addition to what Gustavo already mentioned. But now related to CapEx, yes, we believe that there is still room to reduce further BRL 4.7 billion, maybe it would be BRL 4.5 billion, something in that range.

But right now, we don't believe that this number will be much lower than that because if we decide that it's not so important to have maintenance CapEx, maybe that's additional that surplus disbursement space will be earmarked to productivity, mainly focused in costs for Brazil and North America as well. I mean, we are growing, and we are also investing in downstream in the U.S. If you look at quarter-over-quarter, we posted 2-digit growth in our shipments in North America, and this certainly leads to higher margins when compared to what we had in the past.

Next question from Gabriel Barra with Citibank.

I have 2 points. I think we've spoken about many important topics, but there are 2 things I'd like to understand more about. The first, as you mentioned, there are a number of projects that we should see building blocks for EBITDA. They are important building blocks for EBITDA and next year's cash generation, 3 major projects that should reasonably well improve cash generation and the company's EBITDA in the coming year. And one of them, perhaps the most mature of them is Ouro Branco. When we look at volumes, we haven't seen volumes effectively impacting the earnings of the company.

So looking at the future and the other project, what is your perception regarding Ouro Branco flat steel? How is this evolving? How is this helping EBITDA and EBITDA margin of the company so we can understand the impact next year.

Second point, we spoke a lot about capital allocation in this sector that is going through more difficult times. We figured out deleveraged generating cash with a positive trend, improved margin. But when we look at next year, there are 2 points. We'll start the year with a CapEx that will be much lower than this year, not so many growth projects as we have seen in the last 2 years and in the past for that matter and with an expectation of divestiture of assets.

That's a point that we have been discussing with investors and in some past conference calls because this could lead to an additional cash generation for the company next year. So when we put it all together, how should we think about cash generation, considering lower CapEx, a greater cash generation, a deleveraged company. Should we expect much higher dividend payout next year? When are you thinking regarding all that, considering all of the factors involved in my question?

Gabriel. I'll start. I'll start saying that there is a relevant building block to be resolved in the coming years, which is exactly the one you mentioned, Ouro Branco. The equation of ore is resolved. Coal, our coke plants are very stable. The assets are operating really well. But there is a structural issue in Ouro Branco, and we can call it a building block. It will be sorted out in the coming years, although I don't have a definitive answer in terms of the how which is volume produced at Ouro Branco, which historically was and is geared for exports to the international market.

So Ouro Branco still has a mismatch between production of crude steel and the production of rolled products because for many, many years, we used that additional capacity to produce semi-finished goods to serve other rolling mills in Brazil in moments of demand peaks. When there were no demand peak, we would export the semi-finished steel. And as a rule of thumb, always with contribution margins, oftentimes with positive margins. But the world has changed. Just like we have a lot of penetration of steel in Brazil, we are finding over the years, fewer and fewer opportunities to export.

So the question that arises from it is what are we going to do to solve the problem? The problem will be solved. I haven't got a final answer to give you. It is being considered in this transformation work that we are doing. We have to solve it because an integrated mill with 2 blast furnaces without production that dilutes fixed cost that cannot be producing at that mill with a lower volume just geared to the domestic market. An integrated mill does not work that way.

So we will need to look for one or several alternatives over the coming years. We have been debating this internally to direct this volume, which historically was allocated to exports. We made a decision that we are no longer going to do that. We will find alternatives to allocate that volume to some other alternative that will bring us greater profitability.

Gabriel. To continue Gustavo's answer, I think we have to think about our target, our objective. We had the startup of our HRC mill in Ouro Branco. It started up at a very poor timing, and we had some problems, and we talked about it in previous conference calls, and we had a lot of imported material coming to Brazil, which really lowered the prices in the domestic market of Brazil.

We really have confidence in the technical work that is being done at the Ministry of Energy in terms of the claim for antidumping measures against rolled against the hot-rolled coils coming from China. We're going to have the return in the end of August. And hopefully, the investigations will be completed by year-end, and we'll have the effects of the antidumping measures. So in terms of benefit and expecting a better result in the long term in the Brazilian operation, this will come by the replacement of volumes, volumes that were exported elsewhere in the past, and it will be geared to the domestic market with better margins.

If we look at our competitors in flat steel, competitors that are listed, they're not having good margins, but we envision that in the long term with the investments made with the expansion at Miguel Burnier with access to more competitive raw materials with better quality with a state-of-the-art rolling mill operating, all of that will give us competitive gains that will lead us to the expected and desired results next year.

If we think about Miguel Burnier scrap processing in Pindamonhangaba in the Midlothian expansion project, we have a portfolio of projects that should potentially generate about BRL 1.4 billion, BRL 1.5 billion additional per annum when these projects are in full operation. So that's where the results improvement will come in our opinion. We're not focusing on price increases or market increase.

We are working in-house to look for solutions to address this chronic problem we have in Brazil of low earnings. It is hard to project what you asked about potential cash generation, considering possible divestiture of noncore assets of Gerdau. I think it's way too soon to talk about it, perhaps in 2027.

But for the record, when we look at the proportion of free cash flow that the company has been dedicating in recent years to our shareholders via dividend payout or share buyback, I think that this speaks for itself in terms of our commitment, i.e., when we have available cash generation, we return this to our shareholders in the most efficient way possible.

Super clear, Japur. Just a quick point, and please correct me if I missed something. You spoke about a onetime ratio. You feel comfortable below 1x. Is there any floor of leverage that should guide us in the next year given the cash generation to guide us in possible dividends and share buyback?

Well, structurally, Gabriel, we don't aim to be a cash net company. And with the interest rate environment in Brazil, this would be an excessively conservative approach for the balance sheet of the company. The fact is that today, we have an objective situation in Brazil where we are accumulating losses since the second half of last year in Brazil.

So you could advocate why don't you get more leveraged when actually, I am not doing anything with these deductions. I am generating a loss that will be offset eventually in the future. We are not generating any tax profit in Brazil, unfortunately. So I think that this leads us to be somewhat cautious when we think about changing gears and leveraging the company.

Last year, we had a significant distribution to our shareholders, dividends and share buyback, even though we generated little free cash flow over 2025. And we ended up increasing our leverage to continue to remunerate our shareholders. Of the around BRL 2 billion that we increased in leverage, BRL 1.7 billion. Actually, he corrects himself. Of the BRL 2 billion we distributed BRL 1.7 billion was by increasing the leverage.

And we understand that we should not pursue that path. It's better to have a deleveraged balance sheet, particularly with the interest rate scenario in Brazil with real interest rates, which exceed a lot the real growth rate of the economy.

Last question from Leonardo Correa with BTG Pactual.

Well, quick questions. I know we're getting to the end of the call. Everyone is hungry. So I think I have 2 questions that perhaps are still pending answer, still about the United States. USMCA, Werneck, you talked about this in the beginning about -- you talked about the outlook. About 5, 6 months ago, the big risk for the U.S. operation was an order down due to U.S. MCA and more volume from Mexico and Canada. Well, negotiations have started with Canada, it seems that things were more -- a little more difficult and steel, nothing changed.

And in Mexico, the conversation has been to reinforce tariff barriers in Mexico to equal the 50% tariff that the U.S. has in Mexico. So it seems that the conversations for steel are much better than expected. And that risk that even Wang and you mentioned as the key risk, at least to me, this risk seems to be a lot lower than some months ago. I just want to confirm whether I got this right. Does this make sense? Or is it too soon and we should wait?

Second point, for years and quarters, we have been discussing the ZIP code effect at Gerdau. And by definition, you are always evaluating the operations and corporate topics and so on and so forth. And I know that this topic -- so this kind of move to unlock value in the U.S. kind of slowed down given this significant valuation gap between 2 assets, Brazil and the United States.

I understand that there is very little or 0 being discussed at this point. Is this true, Werneck? Or is this still an operation you continue to study and assess? I would just like you to elaborate on that. You don't have to give us a very long answer.

All right. Well, let me address the first one, and Rafael will answer the second. Over there in the United States, nothing is linear. We can debate for hours on USMCA. And at the end, nothing can come to fruition. So what's happening today? No one is calling us to discuss USMCA right now in the United States and Canada. We were involved in the Mexican part.

Every week, we get invited to debate industry-related topics, particularly automotive steel in Mexico. We go back every week to participate with Mexico. So the conversations are moving to a technical level, which hasn't happened before. So the melting-pool still going into the U.S., whether it should be cast in Mexico or not, this is the current debate.

But regardless, I strongly believe that the possible changes to happen in the USMCA agreement will continue to benefit, can benefit us even more. So I don't dedicate so many hours at this point to study this more in depth than what we have done already. I think it's under control. I think it's kind of distant, but we are very much involved with Mexico.

We are always called, always invited. We are participating practically every week. I sometimes have to go there to debate or we align it with Japur. But on the U.S. and Canada sites, they haven't invited us to debate because I think that the U.S. has other biases in this negotiation as we speak. And about the ZIP code, I'll let Japur answer.

Well, again, we are always actively evaluating opportunities in our corporate structure, both what the market sees and what the market does not see. We had a significant change in the past year. We changed our structure in Spain to give us more flexibility to distribute dividends, not just in December, but in other months without having withheld income tax, which is important. But effectively, today, we don't have any action plan or any studies being conducted to implement an important corporate structure change or relisting spin-offs or carve-outs of our assets in North America.

I'd like to thank you. Ari, over to you.

We just concluded the Q&A session. Questions that were not answered, our IR team will be available to answer them further on. Well, thank you all very much. Well, very briefly, as Leo said, everybody, I think, is hungry. So we're not going to hold you any further.

But on our hand, and on behalf of all of us, I would like to thank you so much for joining us, and I would like to invite you for our next earnings release presentation related to the third quarter of 2026 on October 27. Thank you so much. I wish you the best, and take care.

Good morning. Welcome to Gerdau's First Quarter 2026 Results Presentation. I'm Ariana Pereira, Investor Relations specialist. And joining us on this conference call are our CEO, Gustavo Da Cunha; and Rafael Japur. Please note that this call is being simultaneously translated into English, and you can choose your preferred language by clicking on the globe icon at the bottom of the screen. [Operator Instructions]

It is worth noting that the forward-looking statements contained here and are based on the company's belief beliefs and assumptions based on information currently available. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may or may not occur.

And now I'll turn the floor to Gustavo to begin the presentation.

Good afternoon. I hope that you're all well. I thank you very much for this opportunity. to join you for another earnings release presentation. We will briefly discuss the highlights of the first quarter of 2026. We will also talk about the outlook for our operations. And next, we will proceed to our Q&A session.

For one more period, we posted strong result in North America. Between January and March of this year, we posted the best adjusted EBITDA for the first quarter since 2022 in our North American operations. which accounted for 75% of the company's consolidated EBITDA. This performance results from continued strong local steel demand, driven by consumption in segments such as data centers, infrastructure and solar power as well as the sound operating performance of our operations in the region.

Meanwhile, in Brazil, the domestic market remained under pressure from excessive steel imports who's volume rose 4.2% in the first quarter of 2016 when compared to the same period of the year before, reaching a penetration rate of 22.7%. Against this backdrop, we continue to closely monitor potential developments in the antidumping investigations regarding long and flat products, which are expected to be updated in the coming months. This scenario of unfair imports has impacted the profitability of our operations in the Brazilian market.

I then reiterate that we are investing in initiatives that strengthen the competitiveness and profitability of our operations. in the country. We have even seen a recovery in EBITDA for our Brazilian operation in this first quarter as a result of this strategy. And finally, I would like to highlight that we recently introduced Gerdau New Echo to the market, a low carbon steel solution developed to support customers seeking to advance their decarbonization journeys and strengthen their competitiveness in the transition to a low-carbon economy. With the launch of this new line, we now offer a complete portfolio of products with a lower carbon footprint for steel consuming sectors in general, like the automotive and construction industries.

I will now turn the floor to Japur, who is next to me, who will give you more details on the financial highlights and the impacts of the current scenario on our results. And then I will have -- I will conclude with some brief comments, and we will jump to Q&A.

Thank you, Gustavo. Good day, everyone. It's always a great pleasure to be here with you today in another Gerdau earnings conference call. We started 2026 with BRL 1 billion of consolidated net income, 50% up compared to the previous quarter, 34% above the same compared to the same period in 2025. And these results were driven by sequential growth across all our business segment, particularly our operations in North America, which continues to gain prominence as Gustavo just mentioned.

In Brazil, on the other hand, despite a decline in apparent consumption of long steel products, our main market, we achieved a higher EBITDA margin than in the previous quarter, a lot thanks to our cost discipline. Therefore, we recorded EBITDA of BRL 3 billion in Q1 2026. Please hold, the call froze, [indiscernible].

Well, we were talking about operations in Brazil even with a decline in apparent consumption of long steel products, typically, our main market. We achieved a higher EBITDA margin compared to the previous quarter, a lot thanks to our cost discipline. That's in consolidated numbers, we ended an EBITDA of BRL 3 billion in Q1 with an EBITDA margin of almost 18%. We ended the month of March with a leverage of 0.74x net debt over EBITDA ratio. However, we consider extremely sound and in keeping with our financial strategy and policy. .

In the first quarter 2026, we recorded a free cash flow of BRL 16 billion, even in a period, which typically consumes cash due to the replenishment of working capital and also the end-of-year maintenance shutdowns. Compared with the same period of 2025, we generated BRL 1.300 billion more in cash. This reflects not just the substantial improvement in our EBITDA, but also the substantial reduction in the pace of CapEx investments compared to previous years. But this does not mean that we are not investing in our future.

Until the end of 2026, I'd like to remind you, again, stressing what we have talked about in our previous earnings calls and Investor Day, Gerdau should complete 3 very significant projects for Gerdau, the mining expansion in Miguel Burnier, the scrap processing center in [indiscernible] and the first phase of the middle lithium expansion in Texas. Together, these projects have the potential to add nearly BRL 1.5 billion to our annual EBITDA when the ramp-ups are complete.

Lastly, we remain steadfast in our commitment to creating value for our shareholders. This quarter, Gerdau Assay will distribute BRL 0.18 per share in dividends, while Metalurgica Gerdau will distribute BRL 0.08 per share. In addition, talking about Metalurgica Gerdau, we just approved the launch of a new share buyback program, covering up to 10 million preferred shares, which today amount to approximately BRL 100 million at current market prices.

I'll wrap up here, and I'll join you again during the Q&A session. Thank you.

Thank you, Japur. I'd like to say that in Brazil, we see signs of a gradual recovery in domestic demand. particularly in the construction and infrastructure sectors following a more intense seasonality or seasonal slowdown at the beginning of the year. Well, we still face an excessive inflow of imported steel into the local market. In North America, meanwhile, we continue to see steel consumption stable at high levels. With the order backlog above historical averages, we continue to monitor developments regarding Section 232 and the formal review of the U.S., Mexico, Canada agreement, USMCA, scheduled for the beginning of the second half of the year.

We'll now turn the floor back to Ariana and Japur and I will be available to answer your questions and address your concerns. Ariana?

Thank you, Gustavo and Japur. We will now initiate the Q&A session. Our first question comes from [ Ricardo Monga ] with Software Bank.

It's always nice to talk to you. I don't know if you can see the screen if you can see me on the screen. Well, first, I would like to congratulate the performance in Brazil. It was a very pleasant surprise, both for me and also in my late conversations with investors. So I would like to go on with that topic of productivity in Brazil. You're talking about a new wave of improvement that is not coming from closing capacity but more efficiency and cost reduction.

So I would like to give you this opportunity to tell us what are the main levers that you see today I know I want to know whether this includes logistics, mining, industrial productivity. So this is a very broad question, but I think it's also very relevant for the current moment.

And then my second question in terms of capital allocation. I see that you still have -- there's still some differences between what the market expects in terms of CapEx for 2027. I would just like to confirm with you. So given the fact that you already delivered the mining project and with other very competitive projects being more clearly outlined in CapEx being lower, does it make sense for us to expect that next year's CapEx would be closer to the level of depreciation, mainly considering that the company's priority is to be very disciplined in capital allocation and cash generation?

Ricardo no, we cannot see your camera, but we could hear you loud and clear. I will talk about competitiveness in more general terms, can give you more detailed numbers, and then I can add if necessary. And also, Japur can answer the question about CapEx. Well, in general, Ricardo, the evolution of our margins in the first half of this first quarter of this year, they send from initiatives that we control. But we still see that there is still room to seek for further cost competitiveness. In Brazil, we serve all corners of the country from the south to the north.

And in terms of logistics, we have lots of opportunities because we take the materials from the mills, and we take to more than 70 locations. We deliver to construction stores. Therefore, our the maximization of our equation, competitiveness versus cost hasn't reached its limit yet. We see opportunities to go forward. So we will certainly pursue all the possible opportunities. On the other hand, looking ahead, we -- there is also a pressure over cost, especially in terms of the energy grid and this conflict between U.S. and Iran has led our main input providers are constantly ask us to negotiate prices and so at the moment, we are negotiating with our customers, trying to find a solution where they could probably transfer part of the cost to several segments.

And going forward, we still have the benefits coming from capital allocation and investments in CapEx projects that we are doing in Brazil. And maybe Japur can give you more detail competitiveness in terms of scrap and the investment in the Burnier mining project. So there are many things to look forward to going forward. But we are very much confident of things that we have under our control. For next quarter, we want to continue in our reduction cost trajectory, and we are putting all of our efforts to accomplish that. We will not -- we do not expect any margin or radical cuts. But gradually, we believe that we have only takes to improve our margins. without even considering the trade defense measures, especially concerning flat steel anti-dumping measures. We believe that this could bring a new reality to the sector starting the third quarter of this year. So this is my general view on the top. But now I turn the floor to Japur to elaborate further to give you more details. And I would also ask you to answer the question on CapEx.

Well, to give you a little bit more light, we are thinking about 2 major projects that should be delivered from now until the end of the year. One is mining and Miguel Burnier and this project should generate about BRL 1.1 billion a year and potentially with additional EBITDA, we are thinking about cost savings in our project in Ouro Branco, but also this would be incoming revenue. This project contemplate both components. And also thinking about our mini mills or the electric or power mills there is an investment to be concluded at the end of the year, which is the scrap recycling center, and this will generate about BRL 100 million in benefits, meaning that we have very robust projects and levers.

I mean, it's very complex to estimate performance. But structurally thinking, thinking about the mid- and long range, we will increase our level of competitiveness. And so we should be seeing that in Brazil in the next coming years. Structurally speaking, that's the major change. And this is probably linked to your second question on CapEx. We know that it's probably too soon to talk about any formal guidance for CapEx for 2027 because the year 2026 is just beginning. But typically, our CapEx guide for the current year is given in February. But last year, we anticipated our Investor Day because we thought it was important to be more accountable to the market.

I mean, we -- the Board had already made a decision to reduce the level of BRL 6 billion. of disbursement to something close to BRL 4.7 billion. And so if we think about the first quarter and then you annualize it, the pace is very much in line with the CapEx. But thinking about 2027, I think it's due too soon to give you any information about it. And we already talked during our Investor Day that the general maintenance CapEx, the maintenance CapEx should be close to BRL 3 billion for the next 5 years on average with some fluctuations depending on the shutdown of of the blast furnace or the Coke plan. But structurally speaking, this would be the maintenance level. And we also believe that it will be hard for us to think that we will always do maintenance as the company's CapEx.

I mean, whenever you think about the actual life. But when you think about how the model acts in terms of the cash flow, we cannot ignore the competitive projects are there just to generate additional EBITDA to generate growth and competitiveness. And this is what we are reaping with this investment in mid low and also with the scrap processing in Pindamonhangaba. And all of these benefits should also be incorporated in the cash flow and oftentimes what we see -- when I look at the analysts and their models, they disregard any kind of gain coming from new projects. And they consider as though everything is -- this is as usual.

But considering the level that we find ourselves today, I mean, excess capacity in Brazil and adjusted demand well adjusted in North America, we don't see room for large projects with large CapEx increase because I don't think it would make a lot of sense.

Ricardo. Next question from Rodolfo with JPMorgan.

I would like to hear more about the North American operation. We were here positive with that region for quite some time. And so to be honest, I mean, we were surprised with the level of very high backlog. So I would like to ask you, Gustav and Japur. If you could give us more details what is happening, what are the strengths that you see in the region and not only looking at the quarter, but what do you expect to see happening in the second quarter in that region of North America?

And my second question is similar to that 1 on North America, but now I'm referring to Brazil. I think it's clear because you referred to your fight against the imported products. But I would just like to hear from you, what do you see in terms of demand instead of supply? How is the construction activity going and whether you anticipate any positive surprises coming on the demand side?

Rodolfo. How are you? Well, it's never -- it's never all perfect because if you cheer for my soccer team, you never -- you're never in piece. Well, Japur, Okay, let's -- let's split the answer. I'll speak about Brazil and you talk about the U.S.

Well, first of all, demand is very resilient, both short and midterm. -- and the segments where we find the main demands for our backlog. They remain very steady and firm. data centers, think about data centers, the number of data centers that are being built, and they will be built in the next coming years in North America. That will demand a significant amount of still, and that's 1 strength. The other strength is that they will not build more greenfield mills in the coming years, but possibly in the areas where we operate.

The other strength is our business model, very much focused on merchants, structurals, directly related to the demands that I mentioned, infrastructure and data centers. This -- the U.S. trade defense mechanisms are very robust. Since Trump's first administration and then Biden's administration, they did not reduce what was mentioned in the 232 section. The negotiation of the USMCA will be even more favorable to North America, but we have also our internal strengths. We are very lean in North America since 2018, when we drew up a very strong plan to recover our industrial gap in terms of the USI, we are operating our mills very well, very few maintenance shutdowns. And we've been very assertive. We grew the critical surplus. So any shutdown, we solve their problems quite fast.

So things there are running very, very well. So you see China exporting a lot through the integrated route. Maybe they removed part of our competitiveness because of scrap exports. So there is surplus, there is additional scrap supply in North America. That's why prices in a way went up and spread is has been broadened, and we think it will continue to be like that. We are very positive. We are very certain that the results that we delivered this quarter will continue to be good in the coming quarters. And with that, we gained some time to implement what is in our control to improve productivity in Brazil. There is still a lot of things to be done, short-term adjustments. But also when we look in the midrange, we do believe that there is still a lot of room to improve and enhance our operations in Brazil. Somehow in North America, we have to continue to operate with a lot of discipline to do what we've been doing so far. Well, that's my general view. Maybe if you have any further questions, I can answer that further.

But now Japur, over to you.

Well, speaking about Brazil, qualitatively speaking, and looking at the results of this quarter, when we think about apparent consumption demand looking still in Brazil, there was a 6% decline in the consumption of long steels when compared to last year. And part of that is attributed to I mean we don't give you a lot of details, but that can be attributed to the consumption of special steels because we monitor ANFAVEA numbers. I know that you also look at the numbers posted by ANFAVEA. But January and February were weak months in terms of heavy vehicles. And -- that's an area that is very important to the consumption of SBQ or special steels, and that's an important market for us.

And this in that -- and that puts prices upwards because price per tonne is higher when compared to regular loans, and this impacts our realized net revenue or net sales because we sold less special steels because January and February were weak months in terms of heavy vehicles. On the other hand, thinking about potential upsides and risks. In March, there was an important rebound in the production of heavy vehicles by ANFAVEA. And then if we continue to see this rebound in the coming months for this particular line of products, we believe that this will also boost our shipments in terms of special steels because the prices and margins are interesting, and this can lead to more constructive margins in our Brazil operation going forward.

In addition to all the projects we mentioned before that will contribute to an improvement in our operations in Brazil. Certainly, there are still many uncertainties. There is the issue of freight and impact in terms of coal to complete, I mean, the metallurgical coal that comes to Brazil. But this is something systemic. It's nothing very specific of the company. Therefore, these are some positive points for short and midterm and other points of attention in relation to our business. infrastructure activities are going okay there. We haven't seen any major quantitative changes in this segment. I think what changed a bit the profile of realized prices and cost structure was mostly attributed to the lower volume of vehicles in the first part of the year.

Next question from Leonardo Correa with BTG Pactual. .

I have 2 questions. Perhaps the first 1 is about the top line. In the quarter, we saw the average price realized in Brazil dropping A little more than what we expected. 5% quarter-on-quarter, I understand there are a number of effects there. The mix, perhaps some effect related to seasonality impacting prices. And we have heard about all these attempts to pass through to 6% increases happening in the production chain.

So I would like to hear your expectation regarding implementation. I know that this is competitive market with a lot of players competing for market share and imports are still hurting. So what about this attempt? Platts is not showing a lot of pass-through. 2.3% increase. I don't know whether this number is accurate or not. So I'd like to add more detail on the top line.

And my second question, Werneck is kind of a more comprehensive one. I know you've been an advocate and you've been very vocal asking for equal conditions, trade defense mechanisms, fairness to compete in we see imports of long steel more controlled imports of flat steel that seem to be reducing the freight problem is going to make imports more expensive. We have antidumpings for BF galvanized in HRC, becotus,but in the stock market, we see some excitement. People kind of pricing results and thinking that things will improve in the future. And there will be a consistent recovery of results.

So what are you thinking? How excited are you about what the government is doing and what kind of impact are you seeing in your operations. Do you think that this idea of a substantial improvement in the second half of the year? Do you think it's exaggerated optimism in the market? Or do you see these green shoots? Did you see -- do you think that the worst is behind us and that things are on the right track to improve in Brazil. These are my 2 questions.

Good questions, good opportunities to debate. When we talk about cost pressure in price, when we look at the profit pool of the several chains in which we operate, the sector under the most pressure is ours. This is changing from time to time. It's different than in the post COVID pandemic time. But I mean -- we cannot avoid passing through this cost pressure to prices, this will happen. And Japur monitors this daily. And if he disagree is regarding Platts, he has all of the numbers in his head. But I mean, this will happen. Many of our clients have been working with a little more leeway in their balance sheet with a little higher margins, but this dynamic has been constant. Every day, somebody is knocking on our doors, suppliers of electrodes, inputs and others here knocking on our doors.

So I think that testing through a cost, which is well known, a global cost, a pressure that comes from a complex global situation or it will happen. If this were related to inefficiency in the sector [indiscernible], it would be difficult to create a narrative in the rationale that would allow us to pass through the cost increase. But this will happen. We have different segments, distribution, civil construction and civil construction, they work by contract per project. So I'm not worried that this will not happen. It will. My main concern is that when we pass through this cost increase, we'll need to improve the margins, deploy more improvements in the short term, which is something we're doing. Logistics is one, the amount of material being handled in Brazil, we are optimizing that, reducing that.

So there are things to be done -- homework to be done in-house. In terms of trade defense mechanisms. I'm optimistic as well because this is something that is developing over time. The fact that Minister Alcami left and [indiscernible] will be conducting this area of trade defense mechanism. He's very knowledgeable. He knows about all the damage caused to the chain. The numbers are clear. The evidence became very clear over the last 2 years. evidence of the terrible damage made to the sector. You look at our balance sheet, but not ours only. All of the companies in Brazil, we cannot continue to invest. It's not possible to survive that way.

So I believe that these 2 mechanisms, the cotariff system will continue in effect. I don't know whether they are going to broaden it, expand it to other products, but what we know of the quota tariff system in the last quarters, we'll be confident. And we believe that the antidumping investigations that took a little longer than normal, a little longer than expected, are unfolding -- the evidence is very clear. So I'm very optimistic at this point because we see that the trade defense will be broadened with a more entire dumping quota tariff system. This is what I'm thinking.

Anything else you want to ask Japur?

No, I think you said it all.

Next question from Gabriel Barra with Citi.

Can you hear me now?

Yes, we hear you super well. We can see you and hear you.

I have -- 2 points of clarification. The first about Miguel Burnier, if I'm not mistaken, in the last earnings call, Q4 '25, we spoke a little about the ramp-up. And the expectation of the BRL 400 million in EBITDA for this year. I'd like to hear from you Werneck perhaps Japur as well about your expectations regarding that. I think we have maintained this kind of "soft guidance". So that is for BRL 400 million for this year remain the project seems to be a little delayed or is it on time to be delivered? So if you could elaborate on the company's expectations regarding the earnings for this year and how this can impact next year's EBITDA?

My second question is about potential one-off actions for cash generation. I don't know if considering possible investments in real estate, land, -- the company has a lot of real estate that could be monetized. So I'd like to hear with you thinking about that -- can you wait -- can we wait for extraordinary dividends? Are you thinking about divesting? How are you looking at that given that the company has a more deleveraged balance sheet, a very sound balance sheet. -- in an environment of rising margins with the United States operation, very healthy Brazil with a positive trend for the second half. So I'd like to hear from you, investments and extraordinary dividend payout.

Right, Gabriel. Let's start with Miguel Burnier. That's exactly it. we released a soft guidance with our expectation. In our Investor Day in October of last year, we said we are expecting to generate BRL 400 million and specifically coming from the Miguel Burnier project this year. but we expected a ramp-up in start of operations. Operations haven't started. We are proceeding with caution. This is the largest investment in BRL in the history of the company. an investment for 40 years. So it's not because it's taking a few months more than we are going to do something that will sacrifice. So hinder the long-term return that we expect on the capital invested. We understand that we have typically this mining project, and it will be hard to have all the BRL 400 million. This year, we are working internally to calculate the impact, what will be the specific guidance for Miguel Burnier project, how much EBITDA it will generate this year. But in parallel to that, we have a number of other initiatives with a recovery plan to offset that loss margin. the with internal, improved operating efficiencies or through strategic alternative purchase more competitive ore in the region of [indiscernible].

And in that regard, we are very well positioned geographically speaking to buy or from other suppliers in the region. As a way to mitigate, part of this EBITDA that we will not see flowing in this year for our result. But we understand that in 2027, we should have a normalized ramp-up line or ramp-up curve. We're in keeping with what we expect with the mining project in the long term, okay? Gabriel.

Now as regards real estate and other one-off actions that we might have to improve liquidity, free cash flow via divestments, we continue to progress with our internal analysis of our real estate assets. In here, I think it's good to have controlled leverage so that we don't -- we are not forced to sell something or to expedite a sale, so that we won't hurt the long-term value created for our shareholders.

And in terms of cash allocation, that these businesses might generate this year and in the coming years, I think the commodities company is good when it is boring and predictable. We are not going to radically change our preferences in terms of capital allocation. We have been distributing dividends above the minimum set forth in our bylaws. If there's a surplus of capital when we are not hurting our liquidity, we are allocating for share buyback when we understand that the market is not really understanding the long-term value of our assets. And that's how we intend to proceed if everything else remains constant. So borrowing is good for a capital-intensive company like ours, okay, Gabriel?

Next question from Lucas Laghi with XP.

I have 2 points, and I'll start with a follow-up from the previous question, thinking about the optimization of your Brazil assets. I mean that you can focus on investments of high returns or reduce investments to optimize return. My question is, how do you view the market in terms of investing and divesting. You talked a lot about anti-damping and protection is few. And looking at a competitive scenario, I would just like to understand how this can impact your decision of investing more in Brazil or maybe seized with the divestment project in this current market scenario.

And we also talk a lot about Miguel Burnier, CapEx, et cetera. If you could just revisit the company's expectation. In terms of capturing incremental EBITDA from the projects, maybe -- I mean, -- you don't -- we just want to make sure that we are considering these marginal returns given the fact that CapEx is very clear, given your guidance for 2026. So these are my 2 questions.

Well, Lucas, thank you for your questions. I will start and then Japur will continue. What we will probably see in the future is a concentration or a combination of assets that is different from what we had a few years back. That business model, the traditional business model with mini mills where you have a small scale mill and you serve a very regional market and you buy scrap nearby and you turn scrap into steel and also serving customers in that region. This is a model that we reviewed in the U.S. We shut down plants. We concentrated our production in a lower number of mills, but highly competitive.

Now speaking about the market in the future, I think speaking about divestment or investments, it's not a very good explanation because it seems like the business model remains the same. It will be a transformational issue going forward, and we will focus our investments in the winning mills. We have some of those winning mills in Brazil. So it's very likely that the mills that were shut down. Maybe they are not competitive enough to resume production. And we are not willing to write -- to go too far away to serve customers. And the speed of things will follow our possibility of CapEx allocation without entering into debt, it will be a transformation of the kind that happens from time to time. Our way of operating in Brazil will change.

And there is also the issue of [indiscernible] the mill was initially built to serve the export market. And we were gradually reducing our export sales because we believe that in the future, we will find better opportunities to export at more attractive margins. So our operations in Brazil will go through a transformation, not only this one of short-term cost reduction, but it will be something more radical. And as soon as we have more detailed plans, we can show it to you. But we believe that we will have to change the way we operate because what we did in North America may be an example of what we would do here. We shut down some mills. We removed the last competitive mills. And so that now we have an industrial hub that is highly competitive, low cost, very reliable. So that's the general outlook.

And adding to what he said, and you also talked about projects that increase denominator or decreases the denominator, meaning that we have to invest in projects that improve our numerator. And gradually, we have to empty out our backpack because if you were running long distances, you have to run with a less heavy or a lighter backpack. We have a lot of real estate assets. And today, they are not being fully utilized. And eventually, the person that operates that asset doesn't really see that they are paying they're not paying rent. So okay, it's my own. But the capital is paying for it. The cost of capital is there.

So there are 2 things. And I think you already answered your own question when you talked about excess or I mean anything that is over is not good. If you have excess of forest is not good, if you have excess productive capacity, it's not good either. So the focus is having an operation just like the fact that we have a very healthy balance sheet, you have to look not only at the liability, but also assets. So we have to seek for a different balance compared to what we have today. I think you answered your own question.

Now in terms of the projects on the institutional side, we gave you a little bit of details out of the 3 major projects we have this year, they will go into a ramp-up process throughout the year. the recycling center in Pindamonhangaba is a new project and the investment in Miguel Burnier is more transformational also considering the scale of the project. As I said earlier, since we are talking about a delay I mean, thinking about returns of the project this year is probably that we don't see the $400 million in full that we had anticipated in last October, but we are also taking for other efficiency initiatives in Ouro Branco to compensate for what -- for the returns that we will probably not see this year coming from the mining project.

But in 2027, and in the next 40 years of the Miguel Burnier lifespan, we will certainly see good results in the numerator, generating more value to our shareholders. Look, I would just like to add that while Japur was speaking, I would like to say that Rest assured that we will not raise the company's debt. We will not disburse a lot of CapEx or much higher than what we're doing now. A good part of the resources that will be allocated in Brazil to promote the transformation will come from our decision to operate with lower number of commercial assets. So the amount of CapEx that goes into production will be reduced, and this will bring us more breadth to make more transformational investments. And our operation in Ouro Branco has been very successful in terms of efficiency. And this has allowed us to postpone major reforms in the blast furnace or the coke plant, the mill is very healthy. So we are moving forward that investment level.

And this creates a buffer in terms of the disbursement levels that we've seen in the past years. And this will also lead to greater transformation. And we do not want to accelerate transformation in Brazil by increasing CapEx or increasing our leverage. We know it quite well, and it's becoming more and more apparent the need we have to keep our CapEx dispersed and leverage at very healthy levels.

Next question from Daniel Sasson Hi.

My question, I think Gustavo already mentioned in his early comments, he talked about antidumping and the competition with imported goods. Maybe for us, it's a bit easier to understand the impact. and the importance to the flat market, maybe for logs with the eventual antidumping measures, I know that we have wire rod. So if you can tell us about the results of this investigation, Concerning other products also, also loan products and whether this will change the pace of the market. Okay. In addition to anti-dumping, how do you think that the long steel players are behaving. I think at some time last year, more or less at this time, you decided to lose market share in rebar and just start the fight. So how do you think this competitive dynamics, particularly regarding longs is shaping up the market?

And my second question, and maybe this is a follow-up related to Gustavo's last comment on CapEx. And now I know we understand that half cannot give us a CapEx guidance for '27. It's not even what we are expecting. But if we think about the opportunities in addition to BRL 3 billion in maintenance, the other projects. What are the priorities? Last year, you said that maybe it would make sense to allocate BRL 1 in the U.S. versus allocating that same amount in Brazil. So you even referred to a project in Mexico at the moment because you saw an increase in the auto parts market in the region and things changed. And even there, the market became more protectionist. So if you could tell us more about the priorities, maybe specifying it per region or types of projects related to competitiveness and growth? And so maybe that could help us think about where this will stand in the next coming months or years.

Okay. Japur can give you more details on the antidumping matter. But I will give you an overview of the topics you mentioned. Unlike North America, in Brazil, whenever we talk about trade defense, there lots of rumors in the consumer section. But in the U.S., since the days of Section 232, whenever they talk about trade defense or whenever they talk about defending the country. Everybody understands that that's important for the company -- for the country and that the industry matters for the country. maybe the members or the data is not so evident, but we are constantly talking to our customers there. So I'm very convinced that in the next coming quarters, we'll be able to have a better reading that the North American industry is going back to the game.

In Brazil, these debates take years and then the industry loses its size. And it's very much influenced by what happened in the last few years. And when we started noticing high penetration of imported, still, this has never been seen in Brazil. It came right after the pandemic and the sales industry was delivering results, had high margins. And 2 years ago, nobody talked about whether that was right or wrong, if that was here to stay and whether the trade defense would continue to deteriorate margins in other segments. But after 2 years, the topics became much more mature.

There are many balance sheets that have been published from clients and even steel companies and it's becoming very apparent from the discussions in Brazilia that if the country does not utilize more intense rate measures the steel industry cannot survive in the long run. So there are many sectors that are questioning the anti-dumping measures. More recently, they talked about the maintenance of margins by renegotiating prices with the sector, we saw discussions in manifestos and letters. The debate is intense. But I think they have to defend their beliefs in Brazil. I think we struggled a lot in the past 2 years. All of our discussions in Brazilia and at the ministry, we I see that the environment now is quite different when it comes to implementing these mechanisms.

I mean, for 2 years, the topic has become more mature. Many analysis have been done. We saw the good penetration of imported goods and also wire rod was also another product that was heavy penalized. But I see a better environment now that will lead to probably some more important trade defense measures.

Well, Daniel, my perspective here, it's far for me the truth, but what I think about what it means, especially for wire rod. In a rough approximation, whenever we think about lung, we have something between 10% to 20%, depending on the time of the year that is equivalent to wire rod, national production. And the proportion vis-a-vis rebar is approximately 3.5 to 1 or 4 to 1. What happens is that oftentimes, the producers of road products, they also produce rebar. And when you have a lot of wire rod entering the country with dumping margins of $550 per tonne of dumping, and this is what was verified by the Ministry of Industry and Trade.

And this then leads productive companies that they don't want to sit idle. It leads them to produce prices for contribution margin, so they produce rebars or other products. Therefore, this is not specifically about rebars, but it is also about the spillover, the tripling effect coming from a massive entry of wire rod, which leads producers to produce something else. And since this can be an input for other products like cutting band, profiles, coms, -- this has a detrimental effect in the entire margin of the long steel segment in general.

So we have -- there are 2 investigations going on like China with a margin of $550 per tonne and Russia with $100 per ton approximately. It is a significant amount that leads to a great impact in competitiveness. So what we are asking for is fair trade, we should conduct a technical analysis and say, okay, there is dumping, there is damage, there is nexus, and we cannot ignore the facts because the facts do not matter to us at the moment A or B. So we should be mature enough as a democratic country that the rules that have been set up, they have to be enforced. Those who are selling to Brazil, they should also abide by the same rules. So we should be able to enforce them. So in the second half of the year, we expect to see the conclusion of this investigation related to wire rod dumping, and we have the potential to improve not only wire rod specifically, but also other long products that grab-ate around this portfolio of products.

And my last point on this competitive dynamics is that I see that somehow the market share in Brazil is very stable. Now we still have further opportunities to be captured because it doesn't matter if I have all of my assets in the South, and I have a 30% share, but only in the north of Brazil because this is inefficient, logistically speaking, but we have a very encompassing product portfolio. And I think now this market share among more stable players gives us a very unique opportunity, which is improving our efficiency on the way that we serve our customers, and we started capturing these opportunities, and I see a very good avenue of opportunity going forward. We do have a market share that was redefined last year with all of our recent initiatives.

But once given our share of the market, it is not being served the most efficient way possible. I mean, from which mill we will serve the way we will serve, whether it's via [indiscernible] Gerdau or via a distributor. So there are things that are up to us to do or to decide the most rational possible way to serve the share that it has been given.

Our last question from Carlos De Alba with Morgan Stanley.

The cash flow generation in the quarter was particularly strong and working capital contribute definitely to that as well as low cash tax payments. Can you comment maybe what are you expecting for the second quarter, maybe the second half of the year in those 2 items? And then I have another question on projects.

Carlos, great. Well, regarding these working capital line items this quarter in terms of tax were 2 effects. The first Well, we do not generate property in Brazil. We have a loss. So our effective tax rate ended up being lower, because basically, profit of the United States operation, and we had more income tax, withholding tax on the distribution of results from the United States to Brazil, which we did most strongly in the end of last year. This contributed to a tax line item that was higher in Q4 than we had now. But over the year, we expect a normalization. Typically, we have a greater disbursement of taxes in Q4 paying in April, the income tax and corporate tax of the United States. But along the year, this should be normalized.

For the second half of the year, we expect to have a positive free cash flow generation, both due to our operating results and also because of working capital. all remain operating as important. We had almost BRL 1 billion of working capital in Q1 quarter-on-quarter. So we believe that this is relatively normalized for the second half of the year. And throughout the year, we believe that -- again, I'd like to remind you, we are going to have a lower investment of CapEx than last year. So we expect that we will have a stronger this year than in 2025, both because of an EBITDA that we are generating, which is by comparison, stronger in this past Q1 and also because of CapEx reduction. So there is a double benefit there.

Gustavo, Japur on the iron ore division or the iron ore business. First, on Miguel Burnier, can you give us any more color on what caused the slight delays this year in terms of EBITDA generation that the company was expecting? And then maybe longer term, as you transform the business strategy in Brazil, is investing in iron ore to increase the third-party shipments an option. I think Gustavo in the last Investor Day, you have mentioned the possibility of that investment taking place. So I don't know if you can add more color at this time.

Perfect Carlos, the problems that we faced at Miguel Burnier that led to the delays are quite well-known issues, which are the current difficulty of carrying out civil construction and electronic and electric assembly. The project is very robust. We had a schedule that started on time. And historically, the schedule was aligned with the traditional productivities that we have in the civil construction segment and electromechanical assembly sector. But this Brazilian companies are finding it hard to hire people. in finding it difficult to have a more technical and skilled labor. These sectors are facing difficulties. So our difficulties were 100% related to productivity issues in civil construction and the electromechanical assembly.

This is a theme which I believe will need to be addressed differently in the future by Brazilian companies. or else, we will continue to find it hard to have these projects in Brazil, it's becoming more and more complex to make investments because of civil construction and assembly points. That was the main reason. -- and we continue to wish to monetize our mining rights in the state of Minas Gerais. I think the success of this first operation, it's a big operation. BRL 5.5 million. And once it's in operation, and it is successful as we expect, it will give us not only safety but it will give us more time to have more in-depth studies in terms of what should be the next steps for us to increase our production of ore.

We have a lot of mining rights. The chronology of which 1 we should tap into first, that's being analyzed. But once this project is implemented and starts producing successfully will give us an opportunity to accelerate our plans for a second stage. And once this is more clear, we commit to give you more detail on that, all right?

We are now ending the Q&A session. And now I will turn the floor back to Gustavo Werneck.

Thank you, Ari. I'd like to thank everyone for joining us today. And on my behalf, and on Japur behalf, I'd like to say goodbye, and I'd like to take this opportunity to invite you to our next earnings conference call for the second quarter '26, which will be held on August 5. Thank you very much. Warm regards and take care.RECONNECT

Good morning and welcome to Gerdau's Fourth Quarter 2025 results presentation. I am [ Ariana Pereira ], specialist with Investor Relations, and it's a pleasure for me to be joined by CEO, Gustavo Werneck; and CFO, Rafael Japur.

Please note that this call is being simultaneously translated in english and you can choose your preferred language by clicking on the globe icon at the bottom of the screen. [Operator Instructions]

It is worth noting that the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available. Forward-looking statements are not guarantee of future performance and are subject to risks and uncertainties that may or may not occur.

I will now turn the floor over to Gustavo to begin the presentation.

Hello. Good afternoon, everyone. I hope you're all well, and thank you for joining us again for another earnings release presentation. We will briefly comment on the highlights of the last quarter and also the year 2025 as well as the outlook for our operations, and then we will move on to the Q&A session.

The year of '25 was marked by distinct scenarios in the main regions where we operate, North America and Brazil. In light of this, I would like to emphasize that Gerdau has greatly benefited from its business model based on geographic diversification and productivity -- and production flexibility.

Moreover, I would like to highlight the resilience of the North American market, which has seen strong steel consumption and the reduction in import levels as well as the robust operating performance of our operations in the region.

Even in the fourth quarter, when there is a typical year-end seasonality, we achieved solid results. In December 2025, we even posted record shipments in North America. Meanwhile, in Brazil, the market reached a new record for steel imports in 2025 with a 7.5% increase in shipments year-on-year, despite important advances in trade defense measures such as the recent inclusion of new NCMs in the list of products covered by the 25% import tariff and the implementation of antidumping tariffs on cold-rolled steel. This unfair import scenario has impacted the profitability of our operations in the Brazilian market.

On the other hand, I would like to highlight the progress of our new sustainable mining platform in Miguel Burnier in the city of Ouro Preto. In Minas Gerais, the project is about to go into operation and will contribute to a significant reduction in production costs at our Ouro Branco unit.

I will now turn the floor to Japur, who will elaborate on the financial highlights and the impacts of this current scenario on our results.

Thank you, Gustavo. Hello, and good morning, everyone. It's also a great pleasure to be here with you in the presentation of the fourth quarter of 2025.

We ended 2025 with EBITDA of BRL 10.1 billion, down 7% when compared to 2024 results, mainly reflecting a still challenging environment in Brazil marked by increased competition. On the other hand, our operations in North America continued to gain relevance, supported by resilient demand and excellent operating performance, significantly contributing to the group's consolidated results and the overall results of Gerdau.

Having said that, I would like to highlight four points related to this quarter's results.

First, in the fourth quarter, our net income was impacted by nonrecurring items related to impairment losses in Brazil units in the amount of BRL 2 billion. It's also important to note that these write-offs have no cash effect. Excluding these effects, Gerdau's adjusted net income in 2025, in our view, that accurately reflects the operating performance for the period; stood at BRL 3.4 billion, down 21% when compared to the previous year.

Secondly, regarding Gerdau's investments, we carried out CapEx in 2025 of BRL 6.1 billion. Now for 2026, as already disclosed, our guidance is BRL 4.7 billion, representing an important reduction of BRL 1.4 billion. And we understand that this will bring more flexibility to our free cash flow generation in 2026.

I mean this is the third topic, by the way, that I would like to highlight. Even with a very strong pace of investments in Miguel Burnier with our expansion mining project, even then, in this fourth quarter, we achieved a very strong free cash flow generation of BRL 1.4 billion. And as a result, the annual cash flow generation for the last 12 months, which was negative until then, is now positive and stood at BRL 394 million in 2025.

Part of this cash generation was earmarked for reducing our debt. And as a result, we ended the year with leverage of 0.76x net debt over EBITDA, a level that we consider to be extremely sound. Our resilient business model continue to be very, very resilient, combined with caution in capital allocation. And all of that allowed us to grow significantly without sacrificing shareholders' return. As evidence of this, throughout 2025, we paid out BRL 2.4 billion in dividends and share buybacks.

And finally, in addition to completing our buyback program initiated in December 2025, which we already announced last December, yesterday, we announced the launch of a new program for Gerdau S.A. It will be for approximately 2.9% of outstanding shares of the company. And if we think about today's numbers of the last exchange floor, this will be the equivalent to BRL 1.2 billion.

So I'll end here, and I'll join Gustavo for the Q&A session.

Thank you, Japur. And still speaking about Brazil, we expect moderate growth in demand in 2026, even despite the excessive influx of imported steel in the local market. I would like to point out that we are more optimistic about the progress of the trade defense measures recently announced by the federal government to combat unfair competition from imported materials and as well as the transparent and ongoing dialogue that the steel industry has maintained with pertinent agencies.

Meanwhile, in North America, we continue to see stable steel consumption at high levels with order backlogs above historical averages. The outlook for steel demand from sectors such as solar energy, data centers and infrastructure remains positive.

I'll now hand over to Ariana. And Japur and I will be available to answer your questions.

Our first question comes from Daniel Sasson with Itau BBA.

My first question has to do with the outlook of the Brazil business margins. You spoke about some stability expected for Q1 of 2026. I'd like to have your view about the trajectory over the years, starting with a somewhat weaker base.

But with Miguel Burnier ramping up in the second half of the year, could we expect a different trend? Normally, we have a worse seasonality in the end of the year. And do you think you can end 2026 with an EBITDA margin being double digit? Although perhaps double digit for Brazil would be too optimistic. It depends on more aggressive measures regarding price, et cetera.

My second question is about impairment. For more than 5 years, you didn't have a very relevant or substantial write-offs. So could you give us more detail on the more conservative assumptions you used to project the cash flow of some assets? What made the difference here, level of usage, price level, perhaps lower growth expectations for the coming years?

And in Brazil, some of your competitors may ramp up their own capacity. Will Gerdau consider closing down more capacity in addition to what you have done in the last few years when you adjusted your footprint?

Excellent to start the call. Addressing the elephant in the room, which is the outlook for the first quarter, we realized, we got some comments in the market that people were kind of surprised with the expectation we see now of maintaining margins in the first half.

There are some points here. First, we have a year with fewer business days compared to other years because there are many holidays, there's the FIFA World Cup and so on and so forth. And that has an impact on our economic activity; plus rainfall, which was stronger in the Southeast, particularly in Minas Gerais, stronger rainfall, heavier rainfall compared to prior years.

Also, considering consumption sectors as the automotive industry, we have ANFAVEA data, for example. In January, they started with a level 12% lower for vehicle manufacturing compared to January of 2025. And that matches the high level of inventory that there is in Brazil of imported vehicles.

And that matches of the data published last night of consumption of long steel and flat steel sales in the domestic market that were lower in January 2026 compared to January 2025. So a stronger resumption of volume is something that we are not seeing in terms of volume.

And as regards to our costs and margin, although we see prices that on average are better than we had in Q4 '25, there are still some cost pressures that we see in the long -- in the short term that may get a chunk of the margin that we would have with the more competitive prices.

And here, we have coal, the coal theme. We are not so exposed to coal as other companies listed in Brazil. Most of them are integrated, but half of our operation in Brazil rounding up is the Ouro Branco unit. And when we get our modeling, about 20% of our Brazilian costs have a relationship with the cost of coal, and we see that coal costs from Q4 to Q1 increased substantially.

It is true that we have a long lead time between 90 and 180 days between the price of coal increasing and this being passed through to our results. But we see that this will cause some level of pressure on our variable cost.

Now you put it all together. We understand that we will have an environment of better prices but perhaps costs under a little bit of pressure and at the same time, volumes that are not increasing significantly to improve the operating leverage.

I don't know whether Gustavo would like to add anything about the Brazilian outlook. Go ahead, if you have anything.

If I have anything to add, I'll do it in the end.

As regards to impairment, it has something to do with the Brazil conditions. When we run our annual tests in our accounting policy and recovery of PP&E, et cetera, we run a number of tests considering the future cash flow for our business operations, taking into account foreign exchange assumptions, profitability of the businesses and utilization of our capacity.

When we compare the set of the assets in the Brazilian business, it justifies some of the assets that we have in our balance sheet. Some plants were hibernating. They were depreciating slowly because we didn't have a definition of not returning these units.

Some other units that were not operating at full capacity, they were far -- you can see that our utilization capacity is below 60% in terms of the melt shop operating lower than 75%. So clearly, we see a high level of idle capacity. Except if we have a significant increase in demand and the level of profitability, we don't see any reason why we would maintain part of these assets.

It's a small amount of the total PP&E that Gerdau has in terms of premium prices, well, we had something around BRL 350 million, BRL 400 million. But we understand that with a more challenging foreign exchange, with a more challenging market, with a more challenging macro scenario; it's a moment for us to reflect these results in our accounting. That's why we had the impairments.

Rafa, perfect. Still on the margins, on the first question, is it reasonable to imagine that everything constant in the second half, we should see an improvement in the margins, at least in the part of costs with Miguel Burnier? Absolutely, absolutely.

And to answer the second part of your question, again, we are talking about stability of a margin of around 7%. We don't think it's unreasonable to have a second half, perhaps a year-to-date -- a full year with a 2-digit margin. It's not unthinkable. It depends on our ability to deliver the Miguel Burnier project. And if we have the trade defense mechanisms and market dynamics not deteriorating, things can happen.

I'd like to remind you that this is a presidential election. It's an election year. There might be some volatility in some of our target markets, but it's something that we're going to be monitoring over the year.

And Daniel, you also mentioned a possible closing down of further capacity. When Japur was talking about a lower usage, we were -- it was possible to think about closing down more operations. But the thing is we have such a variety of products manufactured at these mills that if we remove capacity now, we will not be supplying the market in some of those segments. So our 2026 plan does not include closing down any more capacity. What we had to do, we did last year.

Of course, over the next few years, depending on how things progress in Brazil, there's always space. And technically, it is possible to change these assets, we can make investments, particularly in the rolling mills to make them more flexible.

But looking at the short term, in 2026, we are not thinking and we're not considering closing down any more capacity. So our expectation of cost reduction and optimizing our Brazilian operations that will not come by closing down mills, okay?

Next question from Rafael Barcellos with Bradesco.

My first question, we have seen the United States posting very strong results, kind of contrasting with Brazil, but this has been discussed here. And in this quarter, South America was a negative surprise. You talked a lot about Brazil. You gave us a guidance. And I would like to know more about South America and how you're seeing the expectation for the year, for the quarter. What can you tell us to help us understand the future results?

And my second question is about the United States, which is indeed what is impressing all the investors. We're seeing very, very strong results. We are following metal spreads, and it seems that we are going to see even greater margins in Q1. But in talking with some local players, they tend to be less optimistic, which is only natural because margins and prices increased. But also there's parity of some products, which is kind of stretched in the region.

So if you could speak about the United States, what you're seeing about the sustainability of the U.S. profitability and comment on the main drivers? And since this is a segment that is really standing out, some investors consider a possible listing of the operation. If you can comment on that, we would appreciate it.

Rafael, starting with South America. In this specific quarter, we had a specific team in Argentina to maintain the level of utilization of our unit. We had a greater volume of exports, which ended up increasing our cost because we have a greater logistics cost that goes into our cost line item, and that impacted profitability.

We don't expect that we will maintain the same level of exports from Argentina this year. So we're expecting a normal conversion, a recovery of our margins in our South America operations already in the first half of this year and continuing in the second half of the year. Something in the mid-teens would make more sense to the South America operation, as was the case of what happened in the year of 2024, on average, what happened in 2025.

Now moving to the North America operation. We have a number of different situations that are worth highlighting. The situation in Canada is different than the situation in the United States. And in the United States, special steels, longs and rebar have different dynamics.

It is true that we had an expansion of spreads because of our beams that had some price adjustment at the end of the year. And that didn't have the same level of recovery in decrease of prices of scrap, but that does not account for our whole portfolio.

We have other lines of manufacturing such as special steel in the automotive industry of the United States. They are not recovering at the same level of production and sales that we would like to see to drive our SBQ operation in the region. So I guess that, overall, we don't see anything making us think that there will be a substantial reduction in the profitability of our North America segment in the short term.

We continue with our order book being very strong, remaining at very high levels. I think that we're actually now a little above the level of the end of the quarter. We are close to 90 days rather than 80 days. So that gives us good confidence that this is not the effect of just 1 or 2 months of results, but rather, it's something more recurrent.

Would you like to add anything, Gustavo?

Yes. Rafael, when we speak about North America, when we look at this in more detail, when we look at Gerdau results divided by business operations since 1990, plotting the results and looking at them with attention, there were many moments when the results in Brazil were much better than those in North America. Other times, North America overperforming. Rarely, both were doing poorly and very rarely, both were very good.

And when we look at this in more detail, after we published the results, I get bothered with a number of things about Gerdau. One thing that does not bother me that much is that we see this discrepancy between the United States and Brazil. I would say that this worries me less than you do. I was more concerned in 2017, '18 when our Brazil results were very, very strong. And our results in a solid economy like the U.S. economy were kind of poor.

And why? Why do I feel that way? Because I don't see any signaling of deterioration of our margins in North America in the coming quarters for a number of reasons. When we compare the soundness of our operation of our assets in 2017 to now, we have been operating quite well.

8 years ago, the comparison of our operating performance vis-a-vis our competitors, we had a number of $30 per tonne, and that was my judgment, my analysis regarding our performance gap vis-a-vis the competitors. But in the last 8 years, we worked hard in the U.S. Not only did we close this gap, but the public indicators and indicators we have access to clearly show that we have an operation from scrap to industrial with very good results and a more robust operation than our main competitors.

So we're doing very well in terms of the operation, in terms of raw materials. We learned to use only obsolescence scrap, so scrap that we have access to, that has easier access to. And from the commercial standpoint, our decision to leave those products where we see greater penetration of imported steel was a good one. When we look at the main category of products, the main structural beams, that's a product that is very difficult to import, given the size, the weight, the different gauges.

So I would say that we're very well positioned. In a way, we are very well protected in our business when we look forward. The health of our backlog in terms of infrastructure, in terms of solar power, data centers; that gives me some peace of mind that we will continue to have solid and sound results in North America in the coming quarters. As we solve -- and we will solve the competitive issues that we have in Brazil.

So I don't really worry about these points. Well, I read some of the comments made in general by the market, and this don't really worry me. And as regards to Brazil, this has happened previously. Of course, if we have an antidumping of HRC, as we're expecting, there will be some improvement. And there's a lot happening in the coming quarters. Ouro Branco mill operating in a very solid way. Testimonial of that is the quality of our coke plant, the quality of our blast furnaces.

And we have been delaying and postponing the stoppage. I would say that our Ouro Branco mill is very differentiated. We have the new sustainable mining platform of Miguel Boni that will increase our competitiveness. So I am fully convinced that we have adequate timing or sufficient time to improve margins in Brazil.

And we are far from a deterioration of margins in North America. I just wanted to stress this point. Most of the times, I agree with the comments that are made by the investors and the analysts. But right now, I kind of disagree with some of the analysis that kind of penalize our results because there's a significant difference in margin when we compare the U.S. operation, the Brazilian operation, okay? So I have a slightly different opinion on that regard.

Just as a follow-up question. Given everything you said in the relevance that the U.S. operation acquired in the Gerdau business and the difference in between the regions, that's always questioned by investors. Are you evolving with the listing possibility? How do you see this? Are you maturing in this discussion at the company? Can you comment on that?

Of course. Overall, themes regarding company restructuring, tax impacts and ways to unlock value. Well, these are always things that we are looking at internally. But we haven't got any tangible study or action plan being executed or about to be executed regarding the listing of the company.

We are monitoring some cases. We are monitoring some companies that did follow that path. They are reaping some fruit, but with some difficulty as we are monitoring them. And we will continue to look into that if the management of the company concludes that this is going to unlock value for the shareholders, it's something that we might explore.

Our next question comes from Caio Greiner with UBS.

I have two questions. I would also like to revisit something you briefly mentioned during your last answer, and that refers to antidumping and how this is impacting the company's view. And this has been a very frequent discussion point.

And if I recall, I think this is one of the points that you mentioned in the past, this lack of protectionism or even this unfair competition coming from imported steel that is being dumped into the country. And this is what led you to think about the putting some brakes on the CapEx investment.

But now we are seeing some approvals, not only in regards to the antidumping issue, but the 25% tariff. So I think somehow we see some movements on the part of the government in that direction. Certainly, the impact in terms of your products, I mean, it's there, but it's minimal. It's very small. But your products should be still impacted in the next coming decisions. Just like what you said before, you already envisioned some preliminary approval.

But the question is, how do you see protectionism expanding in the steel milling industry in Brazil? And how does that change this relationship with your Brazil unit. Are you more comfortable today to resume investing in the region or even maybe going in the opposite direction? Maybe you could start thinking about, I mean, reopening some of your units.

And I would also like to revisit one of your comments. Maybe you could start thinking about investing in some rolling mills going forward. So I would just like to hear your views about how this is impacting the company vis-a-vis the Brazilian market after the approval of the protection measures.

And my second question is about asset divestments. This has been an ongoing topic among your peers. Maybe you should start looking at some noncore assets, and I think there -- you still -- you already have a lot of things in the company.

I would just like to understand where this is something that you are discussing today in the company. And if the answer is yes, whether you could give me more details if you're looking at some assets that you think about selling, what the assets are? And what do you see going forward?

Okay. Thank you. Thank you, Caio. I will start and then Rafa will follow through.

Well, one of the main reasons that led me to be more optimistic about the trade defense measures is the fact that it's no longer a political thing, but it's becoming more technical. There are countries that right after the election, they -- some countries made a political decision to introduce these defense mechanisms.

I'm very careful when I use the word protection because I never use this word when I am in Brazilia. I would rather use the word defense because we don't need to be protected by anyone. I think the industry has to be defended against some fair competition.

Therefore, for political reasons, in the last few years, we didn't see any expedited decisions in the steel industry as we did see in the U.S. market. I mean, Section 232 is very important because it promotes reindustrialization and it also promotes the growth of steel milling industries. I mean when we are there, we see that reindustrialization is now taking place. So I believe that in the future, we will see better and clearer indicators.

The issue is, and I will say that in a way, I'm a bit frustrated because technical trade defense could happen faster. I understand the difficulties that we have today, especially in the federal government because there, we don't see a large number of experts like we had in the past. Some functional structures are being revisited. But I still believe that it could have been faster than what we saw.

But now when we look at HRC and a temporary measure being put in place, this shows a transition from a political measure to a technical measure. I think it's very difficult for any government to make a decision that is not aligned to clear proof of damage to the domestic industry. Therefore, I'm very confident that this HRC antidumping should become a definite measure come June and July. And this could be really a significant landmark in our trade defense measure.

This will not change our internal decision to allocate capital or our CapEx decision. I didn't talk about it extensively, but I am of the opinion that we should continue to allocate capital in Brazil to improve our competitiveness.

There are relevant alternatives in the future that indicate that we should bring our cost level to a level that would allow us to compete on equal footing with any other company, even with those that practice some fair competition. We are not going to change our CapEx for this year of BRL 4.8 billion.

And my future belief is that we will continue to invest in Brazil. Probably, we might continue to translate allocated capacities for exports in the domestic market. There is still some game, maybe some rolling mill or some production capacity that we believe will make sense for the future if it is to replace any additional capacity that we have in terms of exports.

But our main CapEx focus for Brazil will be aligned with what we are about to ramp up in Miguel Burnier, which is to bring our cost equation and competitiveness to a new level.

And I think I covered all your questions, but if you have any additional questions, let me know. But now I will turn the floor to Japur because he's the one leading the subject of noncore assets. So he has more details on that subject than me. And so over to you, Japur.

I don't want to make anyone nervous, that guidance is 4.7, not BRL 4.8 million. Okay. I don't want anyone to be nervous with the number.

Now going back to your question in terms of noncore assets, I think here, we have two main sources. I think we are speaking to investors as they approach us with the subject. The first front regards our forest assets and farms that we have in Brazil. And we have those assets because of our coal production to produce iron ore -- to produce the iron we need.

And today, we have excess capacity, both in terms of land and forest. So certainly, this has some value, and this has to be justified in our P&L. I mean it's nice to have assets, but they have also to generate value. So we understand that then if we have more clarity, and we are now working to validate that. So in fact, it's important that we have an important amount of forests and farms that can be monetized throughout time.

Another front of noncore assets has to do with real estate. Gerdau, both in Brazil and abroad, we grew a lot through acquisitions. And these acquisitions, sometimes, they come with some property, with some real estate attached; and sometimes due to operating aspects and the way we operate and the way we are organized. I mean, at the end, we end up keeping these properties, and we use them sometimes in full, sometimes not in full.

But now we are beginning to revisit some of our units and take a look at Comercial Gerdau in Brazil. We say, okay, this property was very well located, but this is not the case nowadays anymore. And this -- I mean this asset, I mean, changed in terms of its location and the surroundings. So it's not so important to us anymore.

Therefore, this asset portfolio, which is very fragmented, we are talking not about 1 or 2, but hundreds of properties; we understand that some of them have still a lot of value. We are trying to understand now how much it is worth and what will be the best way to extract value in the timeline.

Having said that, it's important to make a distinction. In time, I mean, along many years, Gerdau made an important effort to deleverage its balance sheet. And we are keeping a very robust and sound balance sheet so that we can continue to invest in our growth, paying off our shareholders without taking up unnecessary risks in such a cyclical industry like steel and commodities. Therefore, any divestment of noncore assets will certainly be subordinate to value generation for the company.

We don't feel the need to make any sale. And of course, I'm not against those who are doing it. What we want, I mean, at the end of the day is to create value and not simply just carry it out an operation just to take it out of our balance sheet because what we want is to indeed evaluate our asset portfolio and determine what will be the best location for every asset.

And when we realize that we are no longer the natural owners of the assets, be it a farm or any particular property, we will try to create value through that. I think this is the main idea behind it. We don't have any guidance, we don't have any concrete plan. But as we move forward, we will certainly inform the market.

So I'll go back to you, Ariana.

The next question is from Carlos De Alba with Morgan Stanley.

Just maybe following up a little bit to recent discussions, how is the company and maybe the Board of Directors to the extent that you can share their views thinking about the return to shareholders of any excess cash that the company generates?

We definitely acknowledge and took a very positive notice of the yet another share buyback after concluding the one successfully that you had implemented in the past. But despite the very strong cash flow generation in the fourth quarter, dividends came a little bit below expectations from the sell side. So I wanted to understand how are you waiting or the Board is thinking about shareholder returns to -- in terms of cash, excess cash between these two alternatives.

And maybe just complementing this one before I go to my second question is if you do execute the company does execute these noncore asset sales, would the company return the proceeds from those to shareholders? Or would it keep it as part of the cash balance of the company?

And then just my second question has to do a little bit with the CapEx, the view on the -- maybe not guidance, but just broadly speaking, how does the company see CapEx beyond 2026. Do you think that it will be closer to BRL 4.5 billion or maybe moving back closer to BRL 6 billion that we saw in the past?

Thank you, Carlos, very much for your three questions. I will try to answer each one at a time, starting with shareholders' return and noncore assets. And then I will talk a little bit more about CapEx, right? Carlos, it's good to see you again.

As we already said in the past, we've been maintaining the dividend payout slightly above our policy. And this has been so in a very consistent way. And the average has been 45% to 50% payout, which has been the case in the past.

And taking into account the value of our shares today, we still believe that it is below the intrinsic value of how much they should be worth it, taking into account the cash generation level, I mean, in North America, our profitability in that geography and the moment where we find ourselves in the CapEx cycle as we start to decreasing our investments in CapEx and then we start generating more free cash flow to our shareholders.

In time, we understand that in the long run, we want to return more value to our shareholders. So not only the amount that we are paying now above the mandatory level, we want to add some more with the buyback program.

In terms of capital allocation, taking into account the current status of our shares, but we must also look at taxes because this may impact our foreign shareholders because now they will be subject to withhold taxes over dividends. And the buyback is not subject to that tax.

And that's why when we take into account the shareholders' base of Gerdau S.A. and considering that more than half of that base consists of foreign shareholders, it is important that we bear that in mind. I mean, the effective return of how much money we place in the hands of shareholders, not necessarily how much cash leaves the company.

Now about the question on proceeds from noncore assets, I don't see any reason why other liquidity of things that we may have through our assets, of course, this should be returned to our shareholders. Throughout last year, if we look at the history of all the quarters, we basically saw an increase in net debt of BRL 2.4 billion, and we paid out BRL 2.4 million to our shareholders. Therefore, we experienced higher leverage throughout the year. So quarter after quarter, we continue to remunerate our shareholders.

This last quarter, when there was a significant release of cash, we thought that this would be the adequate moment to reduce our net debt, and therefore, we would have more breadth space and flexibility going forward in this current environment. So I think this can throw some light. I mean, I look at your report, you expected BRL 0.13. And I think you have now a better explanation of what led today.

About CapEx, Carlos, I don't have any guidance or any detailed information about guidance for 2027 onwards. And as Japur put it well, CapEx disbursement for this year is BRL 4.7 billion, not BRL 8 billion, right, BRL 4.7 billion.

What I can tell you, Carlos, is that we will be really diligent and we will not disburse CapEx that is not aligned with our capacity to generate cash. Therefore, in the future, we don't want to commit the financial health of our balance sheet or the levels of debt just to increase CapEx.

I mean we have strong beliefs. Therefore, we will not discuss any changes regarding these limits in the next coming years. But as any other companies, we have a wish list, which is full of projects. What we noticed today is that the wish list, in terms of investments in the future, this list is more populated by reinvestments to seek for further competitiveness, cost reductions rather than investments that will allow us to grow in capacity.

Certainly, in the future, we may make investments just to replace some capacity or exports of semi-finished goods or high added value just to serve the domestic market or maybe some marginal increase in capacity in one of our plants that may be directly related to the development of a new product or any product that may add up to our product mix of products. But going forward, I believe we will invest in things that will allow us to promote cost reductions or to increase competitiveness.

But I also want you to bear in mind that at some point in the next 10 years, we will have to invest in our Ouro Branco Mill. That mill has been operating at a very intense pace in terms of our blast furnaces and the coke production unit and shutdowns for maintenance.

But at some time, we will have to deal with the lifespan of the equipment. Therefore, this may require some more relevant investment in Ouro Branco. But obviously, if the need arises, this will be compensated by a CapEx reduction in other areas of Gerdau in order to maintain a disciplined balance sheet, which has been the case in the past.

Next question from Caio Ribeiro with Bank of America.

My first question is regarding avenues for growth in the U.S. segment. The company has the Midlothian operation that aims to be more competitive and increase its footprint in the U.S. market. But I would like to explore two related things.

Firstly, how do you see the option of growing through micro mills, considering the products where you operate the most in the United States? And on that same topic, other than organic growth options, would you consider M&A inorganic growth mainly via smaller players in the U.S. market?

My second question is about the project that you were looking into in Mexico. Could you give us more color on how a possible renegotiation of the USMCA could lead to an increase in tariffs of the United States? Could this impact your decision to go through with this investment or not?

Sorry, my mic was muted. Well, looking forward, we don't have any great wish or great ambition to significantly grow our production capacity. Growing for the sake of growing for many years now has not been part of our life. So I would say that overall, what we expect for the coming years is organic growth, where we can add some capacity for higher added value products and products that may bring value, not just for Gerdau, but for our customers.

So when we look at these micro mills, in our view, they make more sense or they will make more sense to reduce our production costs rather than adding capacity. We see that this is a very modern and smart solution in terms of joining hot rolling with a melt shop. So we won't need to reheat the billets. So it's interesting. But in our view, if this is included in Gerdau's plans, the goal would be to replace some existing production capacity, which is more inefficient from the cost standpoint.

And as regards to mergers and acquisitions or any such growth, of course, we are always attentive as we have always been. I take the opportunity to congratulate our team because if in the future, we can find an opportunity for M&A. This is the result of our discipline in the past few years of having a company with a very sound balance sheet.

We see in the market some companies that are facing difficulties, a lot of difficulties. We have seen them in difficulty for quite a while now. And we were very disciplined in our actions to have the company's balance sheet at a certain level that will allow us to think about M&A in the future.

But we are very down to earth. It doesn't make sense to make an acquisition that will not add value for the company in the long run. Of course, there are always things that can complement our business. We can always seek some synergies when we analyze a possible acquisition.

We're always keeping our ears and eyes open for an acquisition that will help us get to the Gerdau that we want, a smaller Gerdau, but one which is more profitable, more well prepared to face the coming years. And the Mexico investment has to do with that. We have a business case that is ready.

But Mexico, regardless of USMCA, is going through a very substantial change. I see in Brazil, a growing debate on reducing the working hour A few weeks ago, they approved a reduction in their working hours. So Mexico as a country has been losing competitiveness at the industry level. So these are always relevant elements that we have to take into account in our business case.

In the USMCA, the new USMCA that will be debated as of June of this year will be a very relevant point for us to review our business case and make a decision whether it's worthwhile -- whether it's worth investing in this new mill of special steel. It is an opportunity. We understand that the U.S. market, whether it's ups and downs with heavy and light vehicle market, remains an opportunity for us, but we will be very diligent in allocating significant CapEx for greenfield mill in Mexico, considering the debates involving Canada, U.S. and Mexico. Okay?

Let me just add a couple of points to your question about growth. We have been doing some important things to improve our profitability in North America. In recent years, we opened 2 downstream segments in Midlothian thermal treatment and solar piles.

And when we look at our quarterly report in the year-to-date, the different lines of products we see that the downstream line item in the North America segment increased 39% compared to 2024. into 2025. These are high added value products that are less susceptible to competitive imports and the ones in which we have greater differential or competitive edges. And I think that this matches what Gustavo said, we are very cautious and very prudent in allocating capital for growth in North America.

In addition, we're growing with smaller acquisitions and upstream investments, which is the case of scrap producers that happened last year that increased our scrap potential and our ability to process scrap in a cheap way. So that's more the kind of growth that we're thinking of rather than a major acquisition as we have seen in some cases in North America.

Next question from Igor Guedes from [ Genial ].

Looking at the level of exports, 370,000 tonnes growing quarter-on-quarter and year-on-year, we saw a level of BRL 140 million in the consolidated EBITDA compared to BRL 80 million in Q3 and only BRL 24 million in Q4 '24. So given that you export a large amount of semi-finished steel coming from you in Brazil, even to other regions in South America, you mean cut, bend, hot rolling; this higher level of eliminations, would it be related with intercompany transactions? Or was it due to other reasons?

And second question, you mentioned that part of the CapEx in Q4 that was BRL 1.5 billion was allocated to restructuring and improvement in the [ Seara ] unit, [ Maracanau ], about BRL 100 million. However, in one, this was one of the 2 mills that you hibernated together with Barao de Cocais. So I'd like to explore that.

Could you share with us what kind of changes have you made to these mills? And how does this fit now in the footprint of the company? Will you reactivate the mill with more efficiency than before? If you could comment on that, it would be interesting.

Okay. It's always good to see you. You made some interesting questions. Let me start with the eliminations regarding imports, exports and eliminations.

In eliminations, in all -- we have eliminations of all possible businesses between the reportable segments. Since we have little exports from North America to South America. What we have is more business between the Brazil segment and the South America segment.

I think in the previous question, we mentioned we had a large volume of exports of billets from Argentina to some of our Gerdau units in Brazil and in South America, Peru. And that kind of increased the amount of eliminations that we had. It was a lot because of that, because of this greater volume of exports from Argentina, which typically is not a country that exports a lot and all the time. So that increased the atypical volume that we had in the line item of eliminations.

To your second question about [ Maracanau ], that's a very good question. Back in 2024, when we had the hibernations, we also [ hibernated ] the [ Maracanau ] mill in [ Sierra ]. And we said that it was going to go through a modernization project and the program.

What was the goal of that modernization program? Today, the [ Maracanau ] unit operates integrated with our rolling mill that we also have in [ Sierra ] that we acquired from [indiscernible] when we acquired it in 2019. That's a rolling mill, state-of-the-art rolling mill that we have, very modern.

And the melt shop -- I'll be a little technical here. The melt shop made smaller billets, relatively small billets, about 6 meters long. When we rolled it and put it in the rolling furnace and started rolling it in a more robust rolling mill, a more modern rolling mill, the rolling mill of Silat, we didn't have a level of optimal cost and yield because oftentimes, I had to be feeding that furnace with smaller billets. So the project we had was to adapt the size of the billets manufactured at the [ Maracanau ] melt shop to 12 meters.

They are closer to the ideal size to be consumed in the Silat rolling mill. With that, we can increase our competitiveness in the Northeast operation. And again, as Gustavo has highlighted before, a good part of our portfolio of projects at Gerdau has been focusing on increasing our level of competitiveness, our ability to be cost efficient to compete with any competitor anywhere in the world. And this is an example of this goal.

We are not making a new mill. We are modernizing an existing mill and thinking about how to better integrate these two assets that we have in the state of [ Serra ]. So that's basically the rationale behind this project to modernize the [ Maracanau ] mill.

Just a follow-up question, Japur. In terms of integrating the mill to the footprint one more time, would that entail any cost increase, perhaps a one-off cost increase that we should be paying attention to? Or would it be like a smooth transition? Just to have an idea?

No, no. It's basically the melt shop that will start operating again, supplying billets for the Silat rolling mill. There will be no one-off cost increase, no additional cost. It's basically allocating billets, also imported billets that we get to Silat and that now we will be supplying to a neighboring mill in the state of [ Seara ].

Our next question from Ricardo from Safra.

I have just two very quick questions, but they were very important in the discussions we had yesterday.

First, looking at your cash flow, I would just like to understand what is your outlook? You have 2 lines, mainly working capital. There was a significant release of working capital. How much of that is structural and how much of that can be reverted in the short run?

And the second line is the cash financial expenses. There was a significant drop of almost BRL 4 billion. But I just want to understand, how much more reduction you anticipate in this line or whether we could review like more expensive debt being paid out and the balance paid at a lower interest rate?

And my second question is that I would like some help to build a double-digit margin for Brazil in 2026 because Japur, I think you said that if there were not for the deterioration of market conditions, we could probably reach double digits throughout the year or even year-to-date, including Miguel Burnier.

I just want to understand if in your number, are we starting with a weaker margin and this will improve in the second quarter and maybe getting even better in the second half? Or probably there is some room for getting a better margin quarter-on-quarter. And with that, you will create a bigger buffer. Therefore, throughout the second half, you will be able to deliver a double-digit margin.

Ricardo, so working capital, your first question. Yes, we believe that there will be a use of working capital even because of the strong results that we posted in our North America operation, we saw increase in volumes, increased shipments.

And also, there was an increase in the average of our product mix, and this will require some additional working capital in addition to the resumption of our operations, especially considering our operations in Brazil because of seasonality.

So there should be a certain level of working capital use, but we will not go back to everything that we were able to build because especially when you look at the inventory line, we posted important gains of efficiencies, not really thinking about working capital, but cash conversion cycle, days of working capital.

This quarter, since we had the settlement of our make-whole call, we had to pay interest that had been accrued until the make-whole date. So there was an increase of what was expected in terms of cash interest because not only I had to pay for what we already anticipated in terms of payments in the due date, but also there was a make-whole of the bonus that was settled in full. So that interest account was a bit bigger.

But if you break down our P&L, you look at the fact that we break down the debt per currency and type of debt. And this is very clear in our P&L. So you could have WCD in U.S. dollars and reals. And then looking forward, you can have an estimate of that interest account.

But in terms of cash flow, all you have to do is pay more attention to the maturity date of the bonds because they follow dates that are more concentrated between -- in April and then October. These are the 2 months that concentrate the bulk of the interest.

Now finally, about the Brazil operation. I'll start with the end of your question. Significant improvement in Brazil in terms of margins, I think this is a bit far-fetched looking at the current situation. But again, if we hadn't seen this very strong move of over 20% in coal increase that we saw from the fourth quarter onwards, probably we could have seen a more consistent improvement in the first quarter of the Brazil operation despite the fact that the market is not growing so much. So maybe the data could have been worse in January.

So I don't think it's so far fetched yet to think about a 2-digit margin, considering that in the second half of the year, we will already post concrete benefits related to our Miguel Burnier ramp-up, the mining project. So a bit of this construction, I would say, is like a first quarter, very close to the margin we have today, which is high single digits and maybe other coming quarters with a gradual improvement.

If you look at the combined numbers, if everything else remains constant, so we may say that by year-end, if you look at the combined numbers of the year, the EBITDA margin, everything combined would be around 2 digits.

Perfect. Just to confirm, so Miguel Burnier's EBITDA will be around BRL 400 million a year?

It will certainly depend on our capacity to deliver the Miguel Burnier project in due time and at the stability level that we want to imprint in the project.

It's important to mention that this is not an existing mill because something that is new and starts ramping up every month from the end of the year that I eliminate, I have to do the math accordingly.

And this affects the calculation. We don't have any number in terms of what will be the ramp-up result of the Miguel Burnier operation. But as soon as we have more information available and the project is in its integrated test phase, so as soon as we have additional information, we will soon share that information with you. So this is very important to achieve the competitive level that we expect to have.

Our last question from Emerson Vieira with Goldman Sachs.

I would like to review the U.S. profitability level. It's very clear what you said that you will maintain the levels in the short run. But my question, especially if I look at cost and the scrap prices, the pricing have not recovered in a way that it would make sense, given the rebar price level because this is growing in the U.S.

But so -- looking towards the second half, do you think that there will be a more relevant scrap prices or the current scenario -- I mean, or this scenario is very unlikely. And it will be more likely for us to see the same scenario that we have today.

And the second question is about what is your view regarding the potential impact of the antidumping measures related to steel exports coming from Vietnam and Algeria and whether this should lead to some marginal share gain or this is not really impacting the company in the U.S.

Well, let me share the answer with Japur because I don't want him to answer everything by himself.

I mean it's very difficult for us to project scrap prices in the U.S., I mean, looking at prices 2, 3 quarters ahead. But we believe that with this level of semi-finished produced in the world, produced based on coal and iron ore coming from China, this will probably take some share of scrap coming from the U.S. Therefore, the trend going forward will be for scrap prices to be more stable.

And reinstating what I said before, this lead us to believe that the metal spread will be very similar to the levels we are seeing now. And this is another reason in addition to all the reasons that I mentioned before, this is one of the reasons that lead us to be more certain about the stability of our results coming from the North America when you look at the entire year of 2026.

Now I will turn to Japur to talk about antidumping.

The point is that when we look at the product portfolio, rebar is a product that is a feeder of our line. Like I have the full rolling mirror with the products that I want to produce, then I dilute my fixed cost by producing rebars. It's not something that it's a very significant portion of our business. I mean it accounts for about 10% to 15% today because beans and others have a strong price.

So rebars account for about 10% of our price. But what happens, Anderson, is that at times when there are producers that make merchant bars and rebars.

When profitability increases, on the rebar side, and they have modern assets or micro mills that are location for the production of rebars, so their appetite increase to use -- I mean, in terms of using scrap for merchant bars because not necessarily this has to do with the antidumping measures when you look at our own rebar producers. But this would be a secondary effect to improve merchant bar prices and producers have to look at a trade-off because they can at times produce rebars and at times produce merchant bars.

Very well, our Q&A session is now closed. I would like to take this opportunity to invite you to our next earnings conference call. It will take place on April 28. Werneck, you have the floor for your final comments.

Well, before we disconnect, I would like to send my very best to Mari. She's not here with us today. She's living a very special moment. She had a baby called Pedro Antonio. So I would like to send her all the best and wish all the best for baby and mother.

And I would like to thank Ariana that you called Ari during this call. I'd like to congratulate her on how well she conducted this call today. This only reinforces Gerdau's commitment and culture to have excellent teams onboard.

On my own behalf, on Japur's behalf, I'd like to close this call, wishing you all the very best. And I am sure that I will see you in April when we discuss our Q1 earnings results. Thank you very much. I will see you then.

Hello. Good morning, and welcome to Gerdau's Third Quarter 2025 earnings release presentation. I'm Mariana Dutra, Head of Investor Relations. And joining us on this conference call today are CEO, Gustavo Werneck; and our CFO, Rafael Japur. This call is being simultaneously translated into English, and you can choose your preferred language by clicking on the globe icon at the bottom of the screen. [Operator Instructions]

It is worth noting that the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available. Forward-looking statements are no guarantees of future performance and are subject to circumstances that may or may not occur.

So now with no further ado, I would like to turn the floor over to Gustavo to begin the presentation.

Thank you, Mary, and good morning, everyone. Well, by the way, this afternoon because it's past noon -- past [indiscernible]. I hope you're all well, and I really appreciate the opportunity to be together for another earnings release presentation. I will briefly comment on the highlights for the quarter and the outlook for our operations. And right after that, we will follow up with a Q&A session.

I would like to start by highlighting that we had a quarter marked by different dynamics in the main regions where we operate. North America and Brazil. We ended the third quarter of 2025 with a very solid performance in North America, reflecting fairly resilient demand for steel in the domestic market. The reduction in imports contributed to an increase in total shipments in both quarterly and annual comparison, reaching more than 10% increase. In addition, once again, the North America segment had a record share in our results, accounting for 65% of consolidated EBITDA in the period.

Meanwhile, in Brazil, in Q3, the local market continued to be heavily impacted by the excessive influx of imported steel. The import penetration rate remains above 6 million tons in 2025, which accounts for 29% of domestic sales reinforcing the urgent need for measures that can effectively protect the Brazilian steel industry and domestic jobs. Given this landscape, I will highlight the internationalization and geographic diversification and important strategic differentiators for our business. And finally, I would also like to highlight the progress of the sustainable mining project in Miguel Burnier, which has reached 90% physical completion. Equipment, commissioning and hot testing has already begun and the integrated operation of the project is scheduled to start in early 2020.

I will now turn the floor to Japur, who will give us more details on the financial highlights and the impacts of the current scenario in the Brazilian market in our results. Over to you, Japur.

Thank you, Gustavo. Hello, everyone. It's always a great pleasure to be here with you for another earnings conference call. We ended the third quarter posting an EBITDA of BRL 2.7 billion, 7% higher quarter-on-quarter. The positive highlights both they were mentioned by Gustavo. We have the continuous growth of our results in the North America segment, driven by higher steel prices and more shipments compared to prior periods and the recovery of results in South America and in the South American segment, which together more than offset the decline in results that we unfortunately experienced in Brazil.

During this Q3, we generated a free cash flow of BRL 1 billion, converting 37% of our EBITDA into cash. Reversing a trend that we have been seeing in the prior quarters of cash consumption in third quarter. There was an important working capital release of BRL 300 million, enabling us to reduce our cash conversion cycle, which was above 80 days. And now in Q3 was down to 78 days, 6 days less than in the second quarter. Our leverage measured by net debt over EBITDA. Given the cash generation we had in Q3 was reduced 2.81x. Because of that, and since we are talking about leverage -- we announced yesterday. The make-whole call of our 2030 bond, which had an outstanding amount of $480 million. And this will collaborate for our gross debt by year-end, considering The make whole of the bond and also considering other maturities that we have scheduled for the fourth quarter of this year. We should have a significant reduction in our gross debt that should end the year at around BRL 14 billion.

In terms of capital allocation and CapEx, our investments totaled BRL 1.700 billion this quarter, 60% of which earmarked for projects to boost the competitiveness of our assets, particularly the mining project, as mentioned by Gustavo. In addition, I would like to emphasize information that we presented during our Investor Day on October 1. That's when we announced the CapEx guidance 2026 of BRL 4.7 billion, significant 22% reduction below what we had forecast for 2025..

Based on the results for the period, we approved the distribution of dividends in the amount of BRL 0.28 per share at Gerdau S.A. and BRL 0.19 per share at Metalurgica Gerdau. With regard to share buybacks, we have already achieved 88% of Gerdau S.A.'s 2025 program. which represents 2.9% of the company's outstanding shares or an investment of BRL 902 million that we returned to our shareholders. If we sum it up, and include in this quarter, what we invested considering dividends and share buybacks. In Q3, we had a payout of 75% of our net income, more than double what is established in our policy in our bylaws. The significant capital return to the shareholders happened without sacrificing our leverage, we actually improved our net debt over EBITDA ratio this quarter and maintaining investments which are fundamental for Gerdau to continue to create value for our shareholders in the future. I will end here, and I will join us later for the Q&A session.

Thank you, Japur. So let's speak a little about the expectation for the coming months and for 26. In North America, we continue to see stable steel demand at high levels. with order backlogs at healthy levels and above the historical average, with a possible negative impact on shipments linked to the typical seasonality of the fourth quarter. Although the scenario for 2026 is still taking shape. We have a positive outlook for steel demand in the North American market, driven by the performance of the smaller power data center and infrastructure sectors where they projected finance prioritizing tens of steel produced locally.

Meanwhile, I presume the domestic market is expected to be negatively impacted in the fourth quarter, may be typical end of unseasonality. For 2026, [indiscernible] is also uncertain. But we are slightly optimistic with the progress of some trade defense mechanisms to be adopted by the government. Based on a solid dialogue that the sector is having with the authorities. We also believe in a slight recovery of the automotive and industrial sectors as well as stability in the civil construction sector. In view of this market scenario, we continue to boost internal operating efficiency and cost management initiatives.

I will now hand over to Murray, and we will be available, myself and Japur to answer your questions and queries. Thank you.

Thank you, Gustavo and Japur. So now we will start our Q&A session. The first question comes from Rodolfo De Angele from JPMorgan.

Well, I have 2 questions. First, we -- I mean, I would like to hear more? Or I would like to give you -- I would like to give us more details about what needs to happen? What are those strategies that will lead to changes in this very challenging scenario in Brazil for the business? And also, along the same lines, we noted that there was an increase in exports, and this came as a surprise to me. So the question is whether this is part of a reaction that is under your control, speaking mostly about the [indiscernible].

And my other question is about prices in the U.S. We heard about price increases last week especially for our merchants. And apparently there wasn't a follow-up. I don't know. I just want to understand if something happened, and what we could expect going forward. So that's all -- we're doubtful.

Let me start. I'm just finishing writing down some knows about your question. So I will start answering the question, then Japur will complement. In Brazil, I think we reached a limit in terms of measures that could allow us to seek for further competitiveness and reduce costs, given a scenario where we have 30% of imported goods coming into the country, I mean we always try to get further productivity to reduce SG&A, et cetera, et cetera. This has been a continuous -- but what can we do now to get more shifts or decrease volumes or shipments, it came to a point when this is no longer so effective.

Therefore, the major change that we should have in Brazil is a trade defense. I know that with time, Gerdau could probably do more things. We can grow on the ore side we could even look for recycling some of our capital in Brazil. I mean, there are things that we could do. But in the short term, there isn't much more we can do. or I don't think anything could change the scenario except for the trade defense. Trade defense, I think I can mention a few points that I believe led to some focus. So first of all, and I know that you've been monitoring this in the past 2 years, when we talked about trade defense, there were some dissenting views about different industrial sectors of the economy and also customers, some against and some in favor of the trade defense. But this is a thing that got everybody by surprise. There were significant changes, the entire commercial sector, machinery and equipment, everyone understood that it's something more structural is not done. The Brazilian industry will just be over.

So we have to work together with the different ministries. And even with President [ Lula ], that's something has to be done. It's also necessary that there should be a deeper involvement of the President of the country because I think he is the only individual that can seek for solutions that can suit different interests. In terms of having a better commercial relationship, a trade relationship, but at the same time, in China, but at the same time, introducing mechanisms that can allow the Brazilian industry to survive. I think the path is being paid so that in an also distant future, we can find some balance between experts and imports. And our share of the domestic market. So I hope that things can move on. I mean steel production in Brazil, Japur can talk about that.

And the other aspect is North America. Of course, you talked about merchants, et cetera. But we understand that the metal spread has already reached a level where we don't see the possibility of major increases. Scrap is flat because most U.S. scrap buyers like Turkey, they are also being pressured by semifinished goods coming from China. So it will be it will make more sense for them to buy the bill at almost ready made rather than buying scrap. So with flat prices of scrap at this current level of prices, the spread. In our view, I think it's healthy. So I don't see a lot of room for further expansion. On the other hand, we are working with our mills at full capacity demand remains sound, not only it sounds in the short run, [ Rodolfo ]. But when you look at the coming quarters, everything leads to believe that this demand will remain as such.

Just to give you an example of telecenters. The amount of steel that we are delivering to data sellers is large. And when you look at the number of new data centers being built in the U.S. is really scattering. I was just doing some very quick calculation in terms of square meter. The data center is being built in the U.S. correspond to 800 Maracas or soccer fields. That's the amount of data centers that are currently being built in the U.S., and this will continue to happen because of AI and technology in general. If you look at renewable energy, and there is still some incentives, and we are still delivering a lot of steel. Therefore, in the North America segment, things are very much balanced. I'm not concerned with the fact that some competitors announced increases. And the competitor that you mentioned didn't follow on the same footsteps. But reinstated my view, I don't think that there is any environment that will lead to further dilution of metal spread in terms of what is happening there at the moment. But Japur, I think there is something related to exports that I think is over to you.

So about exports, exports usually occur by sea. So one or another ship doesn't really impact 1 quarter compared to the next. Last quarter, we exported 17% of our sales. And this quarter, shipments were 20%. So this is pretty much in line with our operations. So there is nothing out of the ordinary there are some shipments that sometimes if they are not happening in the end of the month, they will happen right in the next month. So there is nothing really different when you compare that to our results.

But I would also like to answer a few questions that I saw in the chat about prices and results in North America. It's important to remember that there was an exchange variation issue in Brazil because there was a depreciation of the U.S. dollar. So in dollar terms, what was the price variation in the market. And there is also the issue of mix. I mean, in terms of structural, we were able to capture some price throughout the quarter and the half year. But thinking about other products, like SPT and rebars for some clients we have agreements that link the sale price to the cost of scrap. And in some sense, that cost has gone down in the U.S. So in dollar terms, the price was down a bit. So if you look at the U.S. dollar mix, there was a variation of 1.5% in the quarter in regards to prices in North America.

Excellent. I mean, I was just talking to Mari, you were doing some excellent job.

Our next question comes from Ricardo Monegaglia with Safra Bank.

I also have 2 questions. My first question is about rebar antidumping in the U.S. We talk a lot about anti-damping of flat steels in Brazil, but I think there might be another decision coming on the 12th of November about antidumping of rebar. So I would just like to learn more about what will happen since once this is implemented. I know it's not so relevant vis-a-vis the other segments where you operate, but maybe do you think we could expect something new in terms of the preliminary adhesion or maybe if maybe there will be an impact in case it's positive next year? And whether you think that the application of this dumping could probably impact price increases, not only for rebars but other products as well.

And the second question is about capital allocation for dividend payout and buybacks. There has been some discussion about changes in the taxation. So how are you dealing with the top it in-house, given the fact that your cash position is very robust, you generated a lot of cash in the third quarter, and I think you generate just as much cash in the fourth quarter. So should we expect any changes or maybe a dividend payout or a more aggressive buyback going forward, given this general backdrop of sound results and a change in the dividend payout policy?

Well, thank you for your questions. I will start speaking about rebars in North America. We have been monitoring the possible implementation of these antidumping for rebars in the U.S. And I mean, even though rebar is only accounts for 10% of our product mix, depending on the quarter, now it's closer to 10% of our mix is rebar.

But there are 2 positive aspects. First is the obvious impact in our shipments, but also related to the competition because some competitors, they can produce both merchants and rebars. So if we start seeing a movement where rebars are better for these companies to produce, they may replace merchants by rebars. In our mills are more focused and they have a location for merchants. So therefore, there will be more room for us to sell products because of our focus. So we've been monitoring the progress.

But now to your second question, you said -- you asked whether this could be like an example for other authorities vis-a-vis the competition. I don't think that's very likely to likely because the discussions are very technical, and it takes into account the different realities of the different countries and markets. And these [indiscernible] investigations, they have, first of all, to prove dumping. They have to prove damage caused by dumping and the correlation between the 2. So I don't think this will have an impact in Brazil, but will we might be even hopeful that in terms of margins and results, they may have a positive effect for us. I mean, this period of the year is a bit complex because there's a lot of seasonality in the U.S. in this period, mostly due to climate. Therefore, I think it's a difficult to imagine that there will be significant price moves given the current period of the year.

Now moving to your second question on capital allocation. We've been very vocal, both in terms of our last Investor Day and our last earnings release presentation because at the moment, Gerdau's focus has been to privilege buyback of shares over extraordinary events. This has been so true that this year, we already invested almost BRL 1 billion in buybacks. That was part of the 2025 program. We still have to conclude the program. And if we continue to have strong cash generation going forward in the next quarters, the idea is certainly to privilege buyback over dividend payout.

Next question from Carlos De Alba with Morgan Stanley.

I think that our link, you answer with Rodolfo's question. In the short term, what needed to be done in the operation to adjust our shipments to the current reality of 30% steel import, everything has been done incrementally. Next year, we will pursue some additional performance gains and there is one relevant factor for next year, which is the startup of the mining project, which will bring an important benefit for our EBITDA. So we understand that for 2026 compared to 2025, we believe that we could have the Brazil operation performing better with more competitiveness. If the Brazilian government does not implement additional trade business mechanisms, we will need to accelerate our plans to transform predown turn. We will need to review more in depth our routes of production, whether it makes sense to continue to maintain 3 production routes as we have today.

I'd like to remind you, we have 1 production out the scrap 1 for the integrated mill, [indiscernible], another one for [indiscernible]. So this is a topic that we only [indiscernible]. We will also revisit the mining efforts, whether it makes sense to continue to grow and produce more our, we will need to review more in depth our footprint in Brazil because we believe that we have an opportunity over the next few years to drive some changes, and we might have to follow them. So the big question, [ Mark ], now to what extent we will need to accelerate our transformation plans in Brazil so that we can be on equal footing to compete with subsidized Chinese steel. This transformation can be accelerated for some reasons. If we show that the results of North America will remain strong, this will give us more momentum to accelerate that. I would say that even we might add more CapEx or not over the next 5 to 10 years depending on the results to accelerate this transformation. So the plans for the next 10 to 15 years already.

So that it is to what extent we will accelerate them. We wish to improve our footprint in the United States. So we have to decide where to allocate capital to accelerate the changes in Brazil. That's the topic that we have been developing and debating. So that would be my general answer.

And you kind of anticipated the question on behalf of Japur. I don't know whether he or you could answer. How should we understand the sequential benefit of the iron ore project that is almost ready?

Well, you joined our conference call well identified with our team here, but [indiscernible]. Gustavo kind of spoke about this. We are doing some tests for crushing and some other initiatives. And that's the dry part of the project. And in the end of the year, we'll have the web part of processing, and we'll start to ramp up in the end of the year and beginning of next year. The main benefit we'll have in the first year will be cost reduction of the mix in the blast furnace. It's not going to be integral in year 1 because we're going to have a learning curve in the mine to operate the new complaints and also in the Ouro Banco mill to use the new product mix. So we don't expect it to have a substantial reduction in first quarter of operation of mining. But over the year, we understand that we compared to a cash cost of $30 per tonne, which is what we disclosed in the project.

And this is going to be an important lever for our blast furnace. we will reduce our metal basket. How much ore we use to have a reduction in the last furnace. And this is estimated for year 1, not just reducing the metal load in the blast furnace, but also the amount of coal that we used to produce the same amount of steel. We are reducing the cost of the metal load, but also increasing the percentage of iron in the metal load. Since we're going to have a higher concentration of iron in the same volume in the blast furnace will produce more steel with this consuming less coal to produce an equal amount of steel. In year 1, we expect to have about BRL 400 million of benefit. That's what we mentioned in our Investor Day, particularly with the cost driver and also selling iron ore to third parties. And after that, we should have the full benefit of the project, BRL 1 billion, BRL 1.1 billion with the price levels for ore that we see today, close to $100 per tonne.

And Carlos, I'm not sure I made this comment before. So here it goes the mining rights we are exploring now at [indiscernible] is one of the several mining rights we have in the state of Minas Gerais. So it's a mining right, which is very significant. In terms of the quality of the ore, but also in terms of volume that we can explore in the coming years. this project specifically ensures a production of high-quality iron ore for a period longer than 440 years. And we also have the possibility in the future to mine more ore because the amount of ore in this asset is very large. We have other mining rights according to your question, we can decide to explore those or monetize those in time. If we understand that this is indeed an opportunity we will not have to rely on CapEx disbursement to buy mining rights. We've had those mining rights for many, many years now. And those are high-quality mining rights with a good location, a good geography in the state of Minas Gerais, okay?

Next question, from Caio Ribeiro with Bank of America.

Good afternoon, everyone. Thank you for the unity -- my question would be about the infrastructure package is a considerable amount of resources to be dispersed. We're having the sounds chop, so we apologize for that. I would like to hear from you your expectations. Over the next 10 months, what you expect regarding the remaining resources? And also -- we apologize, but the sound is cutting. How do you see this possibly impacting their operations in Canada, in the United States and the possible decision to invest in a project in Mexico?

Thank you, Caio. Well, the sound was chopping quite a lot for us, but I think I could get your questions. This is important information that you bring. Indeed, 60% of what we call of the infrastructure bill is still to be dispersed. Only there's approval of this package of infective. So the only thing that we imagine would happen differently was that this would be spent faster. But then we understood that considering the U.S. bureaucracy, the detailed approval of the budget which depends on involving some states, municipal legislations, Well, this would take longer than we expected. So the budget was not dispersed in the time line plan.

But undoubtedly, this will be renewed, and this will be extended because -- and two, U.S. infrastructure goes back to an acceptable level to support the economic and industrial activity that the current administration expects. I am totally convinced that these segments will continue to develop. The main point that it has a connection to your question, there might changes regarding incentives to renewable power. And I'm talking about impact closer to our business. We continue to deliver a lot of steel. And if we look at our backlog, there is a lot of demand for steel for renewable power, particularly solar power. If the incentives start producing, there might be smaller or lower demand for power.

On the other hand, we see the strategies of the current administration regarding fossil fuel power and the production of oil and gas, and that drives the demand as well, one, which is important for our special steel operation. So there might be a trade. But in terms of having a solid demand for our business, we are not concerned. [ MCA ] will be approved eventually. It's hard to say, given the way the President Trump conducts the current administration. But I see that Mexico is caring for that, considering what the U.S. considers of what is negotiable. So in terms of concerns about our business, if Mexico has the right conditions to ensure that all of this deal, that will translate into some kind of component to be exported to the United States that it will be melted locally. [indiscernible], Mexico is implementing mechanisms to avoid the triangulation of shines, still going through Mexico and then going to the United States. So it will be a balance among all 3 countries and very soon, and this will benefit us.

Just like the agreement was beneficial while it was in force. We have some doubts regarding the real possibility of executing that investment in special steel that we paralyzed. This is not something we'll get out of the draw just after the agreement. We will need to observe if there are other phenomenon impacting the local production of automotive engines in North America because the decision to invest a relevant amount, I mean, this could make us flow in other capital disbursements that we think are relevant. So we'll be careful. So this is our general approach. Okay, Caio?

Our next question from Daniel Sasson with Itau BBA.

My first question is related to something you mentioned on Miguel Burnier, which is very important for the company, but I would also like you mention the other project, which HRC that you started early this year, it ramped up and is now operating at full capacity. Could you comment on how much of that additional benefit of BRL 400 million that you disclosed during your [ Gal ] Day about the project. How much of that was using 2025. So I can calculate the additional EBITDA or the delta that will contribute or what will be a building block to improve EBITDA quarter-on-quarter in addition to the Miguel Burnier project. I just want to have a better understanding of the project preset.

My second question probably addressed over net and revisiting your point on capital allocation. I just want to get a better understanding about the U.S. dollar or whether anything changed given the fact that there are more protectionist measures in the U.S.? And maybe it seems like Brazil is moving in the same direction in terms of the allocation of $1 in the U.S. and $1 in Brazil, whether it will be reasonable for us to think that investments in the U.S. continue to be better productivity or enhance productivity, increase efficiency and you choose different plants from time to time to focus on that improvement or whether in Brazil, like you said, you already did everything in your power to be more and more efficient to face the competition with imported goods. So would it be fair to say that you would only put more money in Brazil if the scenario leads towards consolidation? Or is there any room to acquire smaller players? Maybe this is easier to justify with CAD giving like 25% or 35% of what is consumed here comes from abroad is important. So I would just like to get your views about capital allocation between regions.

Good. Okay. I will start because in my rationale when it comes to capital allocation, I will just pave the way for Japur to elaborate more on the other issues, okay? So we've been doing CapEx for 125 years. So we've had 25 years of experience. We know what it works and what it doesn't work. So we made a lot of progress in terms of our capacity to analyze investments, pretty much motivated by the questions that you ask us and our interactions with you, even though we made enormous progress in capital allocation and investment decisions.

In general, we noticed that in Brazil, there are more variables that impact our business as compared to North America, a practical example that everybody is facing in the electric side or like payments. We would think that there would be this level of energy cuts as we see now. So throughout the years, we learned that it's more difficult to allocate $1 in Brazil then allocating $1 abroad. There are many variables that escape our control. We've been looking at this very carefully because the capital allocation process, I mean, we will only see returns 1, 2 or even 3 years later. When you look at investments in HRC, we were very optimistic that once we invested, the market will be there for us. But now the reality is different. So when we think about the next phase because the project is not over. There is still a third phase of hot pro court that we could implement, but we have to be more capital.

On the other hand, in Brazil, this motivates us to be very careful with our operation. I mean we've always been very careful with the quality of our operation. And there is one topic that you know very well, blast furnace and coke plant. And there are a lot of companies struggling without our coke plant and our blast furnace, especially the blast furnace one. And we are seeing year-on-year a dilution in their time lines. I mean we are postponing with [indiscernible] because this gives us some additional breadth in terms of not taking investments from other areas to put in the blast furnace and the coke plant. When we look at integrated meals, many companies are having a difficult time to invest 800,000 or I mean, 800 million or $1 billion. So the help we the health and breadth we have at Ouro Banco give us the opportunity to produce relevant transformation at Gerdau in the coming years. And this could also leads to much higher competition in Brazil even to compete with the Chinese in the U.S., we have lots of opportunities as well.

The execution of CapEx in North America is simpler because they do not have the variables that we cannot control in terms of the quality of vendors, civil construction and assembly, we can control that much better. Therefore, in terms of business environment, in general, investing $1 in the U.S. today is much easier than here. So we will look at investments in Brazil much more carefully. And I'll say that my demand and Japur's deman is that we look at a portfolio with many opportunities. So how can we select the best among the best. So now I will turn the floor over to Japur because this backdrop also raised questions about HRC, what kind of returns we anticipated, how much we're going to sell, how much -- what would the price be? I mean this is also a very important symbol to the federal government, Daniel, when we invite the government agents to visit our plants, we show that we already anticipated BRL 1 billion of investments. Now all of the shareholders need return. And sometimes, we lack enough customers to buy our products. This helps them to really believe and reinforce the fact that the trade mechanisms of the fence are very necessary

Okay. Let me just detail some of the things where do we get the return from our investment in HRC? Out of the BRL 400 million, we mentioned BRL 100 million comes from cost reduction. More so in terms of metallic spread. I mean we have a better metallic mix for the entire production volume there and about BRL 20 million or BRL 30 million is due to fixed cost reductions. So BRL 100 million roughly speaking, is to reach the ramp-up. And we are reaching that number. This past month, we will get close to 100,000 tonnes of production. This is a record production level in terms of performance and production in costs, we are performing very well. But to produce results, we also need price, not only these results.

When we think about HRC prices from the beginning of the year and through now, there was a drop of about 15%. So much of the benefit that we have from the other BRL 300 million that was an arbitration between the cost of opportunity to sell plates in the farm market or to sell [indiscernible] the domestic market an important amount of that benefit was diluted. So if we were thinking about x knowledge, x minus 15%. So this is what was quite hurt this year because we are talking about an integrated mill. Therefore, ore cost and coal costs did not move much throughout the year. And this -- basically, the dilution of fixed cost is that moves the needle a little bit in terms of performance. That's why we have to look for prices. Once we have something moving some competition-wise things are improving.

But if you look at the big numbers, the U.S. is performing with a margin of 20%, but there was an 11% reduction in exports year-to-date. Brazil, that we are running with less than 10% margin at a loss. We have plus 24% of imported goods in the year. So if we see an evolution in this scenario, we will be able to materialize the benefit of BRL 400 million.

Next question from Gabriel Barra with Citi.

I think my first point would be a follow-up on the investment in mining. During our Investor Day, I think for net key talked about something and the market was quite curious when you refer to your desire to invest in mining to have production surplus of iron ore and take advantage of the company's potential that sometimes is not very clear to most of us. So could you elaborate a bit more on that and talk about the mining rights because nobody -- not everybody is aware that you have these mining rights. So what do you have in mind about the investment? And I was speaking about Miguel Burnier. We believe that both Ouro Branco and Miguel Burnier will have a positive effect next year. Ouro Branco -- there was a point in the next quarter. There was initial cost because of that new operation in Miguel Burnier, do you think we should expect something similar? Do you think that there will be any impact in the process to adjust the production given the fact that iron ore now has a higher grade? Will there be any impact? Just wanted to get that clear.

And my second question, and this is very much related to an Asia raise during the Investor Day. And you talked about the multiple that the company is trading today when we compare that to the multiples of other companies abroad, there is a gap. This gap has been with the company for some time. And in a way, is something that we've been discussing with you for some time. My question is, how can we mitigate or reduce the gap vis-a-vis other U.S. companies? And the point to my question is could we discuss like some listing, something similar to what JBS did more recently. Do you think it would be fair to discuss this today to maybe try to reduce the gap? I don't know. I don't know whether that makes sense to you or not. I would just like to hear your views about that. So these are my 2 points.

Well, you listed 3 points rather than 2. So I will start with the numbers, and then we'll go from there. I think you asked about the Miguel Burnier system. That was a nonrecurring event, there was a worsening of our Brazil operation this quarter, but there was an improve of 300,000 and 8% of our cost. So we showed that it was not structural at Ouro Branco, it was a one-off situation and a nonrecurring event, mostly due to imports.

In my previous answer to Carlos when I refer to ramp-up, it is possible to have cost fluctuations in the mills, not only due to the learning curve of the mining equipment, I mean, the cost of processing ore is not going to be $30 per tonne on day 1 of operation, and this is obvious. And maybe the operating cost will require a learning curve in terms of centering and the use of mining in our blast furnace. But to that end, we are doing a few things to mitigate these effects, probably having a higher inventory of pallets just to add up to the basket and then promote gradual change. We are not going to this 5.5 million tonnes on year 1 because there is a ramp-up curve. We will produce -- I mean, consume more pellet feed in the centering operation. there might be some effect throughout the year. For example, we will have to have some stoppages in our sintering system to make some connections when investment starts operating, we will consume pellet feed in our centering process using a process of cold clustering so that we could have pellet feed clusters in the sintering operation. So there may be some stoppages that will probably affect costs, but it's nothing structural. It can be changed from 1 quarter to the next. In case this occurs.

Now speaking about mining investments, as Gustavo said during the Investor Day, I think Rodolfo asked that question at the end of our Investor Day, when we invested in mining, way back in 15 years ago, we acquired different areas in the state of Minas, some closer and some further away from the [indiscernible] mill at first. We focus on [indiscernible] or where the material was closer to the ore that was being used without processing. We had hematite and renovated products at our disposal, but we understood that this wouldn't be the case in the long run, and we needed a more robust investment in that mine that is close to our Ouro Branco mill because by doing so, we could perpetuate cost competition that will be very unique in Brazil still milling steel mining industry, but there are other minerals. And we already have those mining rights that we can explore. I mean, not self-sufficient in terms of work like Miguel Burnier, but these could be profit centers.

We're not interested in competing with Vale because Vale is a huge mining company. But we do believe that there is some potential to find some interesting partnerships and maybe work with other mining companies in the industry or even with large mining companies in the region, just as a way to unlock value that's something which is already in our balance sheet is a mining right, but not bringing any economic benefit. So that's why we decided to invest more in prospecting the labs, doing some probes in the area just to have a more informed view for the future. But this is Plan B. Our main focus is to deliver Miguel Burnier and build the ramp-up of the investment of mining in Miguel Burnier and then maybe we could use our mining team to explore other frontiers.

And last but not least, about the multiple and your question about the probable or the like realistic. This is a question we often get, both from the market and investors. I would say this is notable for us to talk about that or to discuss the reorganization of the capital structure of the company -- of the ownership of the company, I mean, we look at JBS debt, but we do not have any concrete study underway, which would lead to ownership restructuring of the company, not only we are looking at what is being done by other companies in the market and how the multiples of companies are performing, but we also have to consider structural changes like taxation, on dividends, taxation on profits abroad. These are things that can have an impact on our appetite. So we may take longer to discuss possible changes. But it's not a taboo, it's not something that we never internally, but we will take a look at it when the time is right.

Next question from Marcio Farid with Goldman Sachs.

I'll try to be brief within the time limitation. A follow-up question regarding the U.S. Of course, potential renegotiation of tariffs with Canada and Mexico is important for you. I think you spoke a little about this Gustavo. But the debate we have with investors is about role, how sticky the U.S. moment can be. Assuming that we will see U.S. government negotiating with Canada and Mexico, what will be the reaction in the plus one for your operations considering port risks and to operations in Mexico and Canada? And very quickly thinking more about the short term, fourth quarter and first quarter. Well, these are seasonally weaker, but there is an important margin for the United States. In Brazil, we had a one-off effect, as you mentioned. So how should we see the short term with profitability improving, shipments decreasing? Should we expect some stable earnings for the next 2 quarters? Can we say that we reached a floor for Brazil in the United States with a more favorable moment?

I think that in terms of margins, I think that Gustavo talked about this in his part. We expect a more challenging environment in Brazil in Q4 because of the seasonality, we have some maintenance shutdowns, normally, they take place in Q4. So unfortunately, I'm not sure we can be we have reached a floor for the operation in Brazil. In addition, a part of our business, special steels having even a stronger seasonality in the last quarter of the year. So this should hurt our margins. And that's why Gustavo detailed it in that way when he spoke about our outlook for Q4 and for 2026.

In North America, we have seasonality that is very much weather-related. But in terms of margins, we don't expect a significant shrinkage of the margins looking forward, given what we are seeing both in prices and in metal price. And routing your question about the U.S. MCA in terms of immediate impacts, we have seen in Mexico adopting measures to protect themselves, not allowing imported goods coming in, so they won't have transshipment for the U.S. So we see that even if Mexico, Canada and the U.S. have an agreement, the effects will not be the same as we had in the pre-Trump period. We would have an environment with more protectionism than we had originally owed more 3 defenses better yet than we originally. And to us, some kind of agreement between U.S. and Canada would be very positive because we have a big volume. The way in which we are organized with mills close to the border of the United States and Canada, which were typically very integrated.

Now we see some operational difficulties in our product mix because of the tariffs, if they were reduced or eliminated, that would that would optimize sales from our U.S. mills Canada and from Canada to the U.S., given the location of these mills. For example, in Canada, heavy merchants [ unproduced ] they're produced in the U.S. So structurally, Canada imports beans end merchants. So what is kind of change for the positive. Internally, in our discussions, we use what was negotiated between the United States and the U.K. as a good proxy as the best agreement possible to be achieved regarding steel. Considering that the U.S. and England are perhaps the closest allies historically from the geopolitical and commercial standpoint. Sticks to us than what it's kind of difficult to affirm anything, but it seems to us to be unlikely. That's the best word that they will achieve a steel agreement that will be better than what England achieved with the United States, a tariff of 25%.

Next question from Lucas Laghi with XP.

Well, I just have a follow-up question. regarding capital allocation. I just want to understand a little better. I don't want to depict the topic, but I just want to understand better the difference between the United States and Brazil in this process of defining new projects because when we look at EBITDA converted into cash, it becomes very clear that the United States are very different from Brazil today. But in a consolidated way, the company still has a comfortable balance sheet. So I just want to understand, with the approval of new projects. if return is accretive, if the projects have a positive effect, does it makes sense to allocate regardless of the geography where they are as long as the balance sheet will allow it or if we use depreciation as a proxy of sustained perhaps EBITDA less sustaining CapEx will not allow for the project if the consolidated balance sheet will allow it kept change our decision of capital allocation to some projects in a certain geography?

You see -- the reason I'm asking is because we talk a lot about the United States, difference of multiples in companies abroad. I just want to understand if there is a segregation of capital allocation at the company. You aligned the deployment and the approval of new projects.

Well, this is a useful question. We have a lot of segregation to see these -- this is the pocket of investment for Brazil. This is the pocket of investments for North America and budget limitations for the country. We have a consolidated approach regarding our total portfolio. But yes, we took a option considering consolidated balance sheet. This is the maximum amount that I can invest. What are my priority investments for the coming years? Not a way leverage, expected returns and my strategic priorities. In that context that we use discount rates.

In terms of minimum desirable unnecessary returns, which would differ according to the different geographies. But overall, we have been prioritizing in Brazil, all the United States, Canada or Mexico. Those investments that will drive cost competitiveness [indiscernible] of investments that will prioritize growth or revenue because we understand that with our macroeconomic context, thinking about China globally, we have an oversupply of steel capacity in the world. So looking to be more competitive in cost is absolutely essential for our long-term existence.

Now, we are heading towards the end of our call. We have 1 last question from Rafael Barcellos with Bradesco BBI.

From everything I've heard this morning, I would like to connect that in some of the conversations we had with investors. I think the main issue is how much the company can distribute recurrently cash returns to shareholders. It's very clear that the company favors buybacks. Now given the valuation level, that's very clear. Now it's very clear that buyback is your preference. And the company is doing some excellent work to reduce CapEx, to improve balance sheet. And now we are about to see the company running at a lower CapEx.

My question is, how do you see cash generation for the company going forward? The first topic is that what drew my attention was your cash generation this quarter and some specific issues, very low financial expense. And again, I know that there has been improvements to your balance sheet. But I just want to understand from this quarter, I mean, removing the seasonal effect, EBITDA and price. So what this quarter we could see as something normalized or not. And the other thing I want to understand has to do with -- I mean your gross debt guidance is BRL 12 billion. You have like minimum cash. So how do you see these KPIs? I think this is something that can allow us to have a better understanding of how much the company can generate things in a recurrent way going forward.

Oh, again, just -- I was rejoining and I don't know whether I heard everything about the last question, not only the story about Brazil U.S., but today, I see a clear difference in terms of where most of your cash generation is located, and it's clearly in the U.S. and if you look at minimum cash in Brazil and buyback, considering that particular issue.

Well, speaking about this particular quarter and what is different when compared to other quarters. If you look at our financial expenses, not in terms of cash flow. But when you look at the financial statement, there were 2 things that were not present. First of all, the exchange variation was lower in South America and in Argentina when compared to the previous half year. And the other aspect is that in the second quarter, we issued a bond, it's a 2035 bond with buyback of other bonds. So there was an expense with the buyback of bonds and issuance of bonds, about BRL 40 billion to BRL 50 that was not repeated this quarter. I mean this is different. But since we do not issue bonds every quarter, so this should not occur in the fourth quarter as well. So I think this is the difference that you noticed in terms of our P&L financial statement. But the third quarter seems to be more normal.

I mean, if there is such a thing as normal nowadays, but more normal when compared to the second quarter. And this is linked to your second question. When you talked about capital structure, we announced the make whole of our 2030 bonds several things that will be settled. And that will lead to a reduction of our gross debt close to BRL 14 billion, which is closer to our financial policy level. We are not anticipating any structural changes to our financial policy because in our view, it is adequate. There might be just some fine-tuning here or there, but this is not a priority. And structurally speaking, we wouldn't want to leverage the company too much in considering our current debt position. I think is 0.81x net debt-to-EBITDA ratio. We used to be higher than that in the past.

And even with a worse EBITDA in year-to-date, we got better leverage because of cash generation. And as we said in our last Investor Day that we expected to reduce CapEx investments in the coming years. If we think about maintenance of the other results in lines like EBITDA, working capital, et cetera, there was an increase in cash generation. And as you said it quite well, we will return that to our shareholders through the share buyback. So usually, we -- our payout is between 30% to 40%, maybe it could be more room, but at the current level, we put our priorities in the buyback side. And once we have a stronger cash generation in the next coming quarters and years, we will continue with the buyback program. The program is approved till the end of the year, we still have 12% of the program to be completed. So eventually, I believe that it makes your provocation and the expectation that we might engage in other buyback programs in the future.

Well, thank you very much. Our Q&A session is now concluded. And now I would like to invite you to join us on February 24 for the earnings presentation of the fourth quarter. Thank you so much, and I will see you next quarter.