Gerdau S.A. Sponsored ADR Pfd Aktie

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.

Good morning. Welcome to another Gerdau Investor Day. It's always a pleasure to welcome all of you here, and it's nice to see so many familiar faces.

Next to me is Gustavo Werneck, CEO of the company. I am Mariana Dutra, Head of Investor Relations. I will just go over the agenda very briefly. Well, so for today's event, we will start with our CEO. The second topic will be one of the most expected topics, which is CapEx and general capital allocation or financial management that will be presented by our CFO, Rafael Japur.

And for the first time in our Investor Days, we have Mauricio Metz. So he is Gerdau Brazil Officer, and then we will conclude with Wang's presentation, who is the leader of the North America operation. And then I'll come back for the Q&A. I wish you all a very good event. Thank you.

Thank you very much, Mari. Good morning. And again, welcome to our Gerdau Investor Day. We've been together for many years, but this event, in particular, is always a very good opportunity for us to give you more details about what we've been doing, how do we see the future.

And today, I'm also taking this opportunity to bring a good part of my team. And more specifically, as Mari was saying, I would rather speak a little less today and give the opportunity to all of our other leaders to tell you more about what they do.

We will talk about mining, and we will talk about what we think about Brazil and Wang last year, he joined us. And so I invited Wang to come over here. He's been working with us for several years, Brazil, Canada, the U.S. So he has a very encompassing view of the North American steel market. He has a very precise view of that market. I mean, Japur has been with me for years. And together, we will talk about all of the financial issues.

But before we begin, we do a lot of these events in Brazil. And sometimes, there might be emergency situations and events like that. So when we come to a space like this, we look at everything in many details, especially regarding security and emergency matters. Many events happen in this venue. This building has a very trained firefighter team. We also have emergency exits that are very well located and distributed according to our legislation. So in the event of an emergency, I'm sure we will be able to exit the building very safely.

I only have 2 slides in my brief introduction, and then I'll briefly turn the floor over to my colleagues. This is -- I'll just give you a general overview of a few of the things that run through our minds. Speaking about security and people, we always understand and understood through our 25 years of history that one way of our stakeholders to look at the health of the organization is through some indicators that are often disregarded. I mean, environmental and security things. Every single employee in our plants, in mining, et cetera, we look at what attitude they have. I mean they have to look at the company as they are the owners. They cannot accept any deviations. And I'm personally very shocked when I look at security, not only in Brazil, but abroad. And sometimes, I am puzzled of how little, sometimes we evolve.

Every year in Brazil, there are 5,800 people that lose their lives in a work environment. So we all experienced a distinguished situation, a different situations. And sometimes it's hard for us to feel the pain of the families that go through that. So we measure all of these indicators because at the end, we believe that this develops the level of emotional development, the level of engagement of people and how committed they are to our customers and how committed they are to their own lives. Therefore, we are very mindful of security. In the last few years, we achieved the best accident levels -- I mean, lack of accidents in our history. We've never been so prepared to face the challenges ahead. But Brazilian companies are struggling in general when it comes to attracting and retaining talent.

And another topic that is constantly in our minds relates to the lack of engineers in Brazil. Not very long ago, [ Stad, ] a major newspaper said that by 2030, Brazil will have a deficit of 1 million engineers. This is staggering because in the past few years, metallurgical engineers were very few. I mean just Gerdau alone would be capable of hiring all of the newly graduates in mechanical and other types of engineering. Therefore, now we are focusing on education because the future of companies like ours, we have to be mindful of the education, especially engineer education of people in our country.

Steel remains a crucial element for the future of mankind. So in the last few years, I was constantly looking at new business models and even because I was concerned to see whether there was any material that could probably replace steel. And from all of the progress that I saw in the past, there are materials that will coexist with steel. And we've seen in our everyday work that we are also already using some of these products, but steel is something that will not be replaced even though there is volatility in general.

And when we talk about that, our business will be around for a long time. The main product that we manufacture is the product that brought us to this state, and this is something that will exist for a long time. Competitiveness in production are also relevant topics for us. We will talk a little bit here about China and the absurd penetration of imported steel. The largest player in Brazil is still the steel that comes from China subsidized. So it is really an unfair competition.

But -- and then despite the fact that we remain constantly seeking for trade defenses in Brazil, we cannot afford to just sit and wait that our strategy in Brazil is based on trade defense. We understand that there are several opportunities for us to improve our competitiveness in Brazil. There are -- in several segments of our business, I know and I'm sure that we can compete on equal footing with other countries, especially China. So we are looking at other opportunities in the mining sector.

If you look at the exchange rate in Gerdau's history, a sustainable mining operation is something that will start ramping up at the end of this year, and this will allow us to be even more competitive, something that we didn't have in Brazil in this industry, in this sector. So investments like that will increase our competitiveness edge. And in several cases, we will be unbeatable in regards to competitiveness, even comparing ourselves to Chinese steel.

And we are still very firm in our financial discipline and capital allocation. Throughout the past 10 years, we made important divestments. We left 13 countries, and now we remain in 7 countries. These are geographies where we have a competitive edge. We do not intend to open other operations in other countries or leave where we are. We think we are in the geographies that are most suitable for us. We are very disciplined in capital allocation.

This morning, we officially said that we will promote a reduction in CapEx disbursement. You know that usually, we give visibility of CapEx disbursement early in the year, but we decided to anticipate that because the decision was already made in our last earnings release presentation, I told you that we were looking at that very carefully. So we understood that we didn't have to wait until March. But Japur will give you more details about that.

So before I turn the floor over to Japur, I would like to emphasize security. If we look at all steel producers in the world, we are a reference when it comes to accident levels. The indicators -- one of the indicators measured by industrial companies in general, the number of accidents per hours worked in the steel industry, most companies release these indicators. As you can see through the years, we promoted a very significant reduction, not only in terms of the number of accidents, but the severity of the accidents. That's why we are very proud to say that preserving the lives of our people has been a crucial part of our existence, and we made important advances. And that's why I wanted to show you those numbers. But I'll stop right now, and we will certainly return later on. And if you want more details, you can send me an e-mail. I will now turn the floor to my colleagues. Now I'll turn the floor over to Rafa, and he will start with CapEx. Thank you.

Thank you, Gustavo. Good morning. Good morning, everybody. Gustavo is always great to listen to Gustavo's remarks because we start the day full of energy. Well, so as Gustavo was saying, our release -- the release of this morning, we talked about Gerdau's CapEx for the coming years. So I will start by elaborating a bit more on the facts that were released in our material fact.

In regards to 2025 CapEx, we do not anticipate any changes vis-a-vis the guidance of early this year, BRL 16 billion of investment. However, Gustavo, myself and the company's management, we've been very vocal in our last quarterly results when we refer to the need to review part of our project portfolio. We went through a very important investment cycle related to crucial products that will help us to build the future of the company. One of them is the integration project and will also bring us some more details.

But we are approaching the conclusion of a great part of these projects. That's why it makes sense that once we do not have other large projects of the same magnitude, there will be a reduction in CapEx disbursement, which is natural. So for 2026, we are just anticipating the disclosure of the CapEx, but I'm saying that we are reducing our CapEx disbursement by 22%, which totals BRL 4.7 billion. Out of this total, BRL 2.9 billion will be earmarked for maintenance. We will keep our assets operating at a great level of security. And BRL 1.8 billion will be invested in competitive edge and competitiveness return. I will detail those further on.

The left side of the slide, I think we already knew that, but this relates to our main projects that will be the strategic CapEx of the company. And since we started talking about that, a great part of that portfolio was gradually concluded was the case of downstream investments in North America, the Ouro Branco hot-rolled coils. And so we spent some good time updating our project portfolio. So on the left side of the slide, we present the new view for our main projects. So this was a substantial reduction in the amount of projects we have. Now we have -- we're focusing on 3 projects that, in our view, will be prioritary projects for the next 3 years of the company, one of them being the expansion of our plant in Midlothian, Texas. And in the last quarter, we told you that we postponed the maintenance stoppage to conclude that expansion in the next half of next year because of the impacts we are seeing in North America. And as this is a brownfield expansion, this comes with some risks. So once we understand the scope of the project better, we decided to go through a more secure route.

This will reduce disbursement by BRL 300 million in the asset. But again, this also reduced the additional capacity with the investment. The second important project for our future in Brazil is our recycling center in Pindamonhangaba. The shredder and the recycling center will be state-of-the-art. Not only this includes important ferrous activities, especially to increase competitiveness in the Southeast part of Brazil, but this will also include the recovery of nonferrous, copper and other elements that are very important for the energy transaction. And this will also be a leverage to generate increased revenue.

And finally, our investments in mining to be concluded at the end of this year and the ramp-up should occur in early next year. And so after a deep evaluation and once we get closer to the conclusion of the project, we believe that, first of all, we gave an update of the amount invested, which was BRL 3.2 billion. And now we understand that as visibility increases for the -- in the last phases of the project, the investment will be around BRL 3.6 billion, which is slightly higher.

So when you look at the project that was approved in the first half of 2023, when the exchange rate was about 4.5 and 4.8. And today, the exchange rate is much higher, about 10% to 12% higher than what was initially forecasted. But as we got a better understanding of the project, and we will see that further on, we understood that some changes in the scope had to be done to improve the project. And because of that, there was an increase in that investment that in part is mitigated by the reduction we had in the investments in Midlothian.

Now throwing more light to this. This is a more consolidated view in terms of our portfolio in the coming years. So you noticed that CapEx -- competitive CapEx for 2026 of BRL 1.8 billion. Almost half of this investment is concentrated, I mean, BRL 800 million, slightly above that as mostly concentrated in these 3 main projects that are about to be concluded soon. Part of the disbursement in mining, even though it's about to be concluded at this year-end, and some of the structures will only be concluded throughout the ramp-up of the operation. That's why we still have some disbursements even though the project -- I mean, the bulk of the project will be completed at the end of this year, part of the disbursement will occur next year.

I think something new in terms of guidance and market communication, a recurring question has to do with Gerdau's need throughout time to maintain its assets maintain -- I mean, in terms of maintenance. So here, we have a guidance that as we understand it, on average, we will invest BRL 3 billion in maintenance. And here, this includes general maintenance for our mini mills. And also, we will invest in our Ouro Branco integrated mill, including investments in the coke plant and furnaces.

Now in terms of the furnaces and the coke plant, we have something new to share with you. In the last few years, Metz and the engineering team, they made important advances in terms of building a multidisciplinary team. dedicated to the maintenance of our assets in Ouro Branco. So they engaged in partnerships with suppliers and other vendors. And whenever we have our predictive maintenance activities, we start by analyzing the lifespan and the current status of our assets. And by doing so, we came to the understanding that we needed in the case of blast furnace #1, we needed a stoppage for maintenance that was forecasted for 2027. But according to the level of the assets, we looked at it, and we could postpone that while at the same time, we maintained the level of performance. So that stoppage was postponed to 2028.

In terms of our coke plants, and we do have expert maintenance teams. We understand that a good surprise that we had through the last maintenance is that coke plant #2, which lifespan would be until 2034. Now that lifespan can be extended to 2038, very close to the lifespan of blast furnace #2.

Another recurring frequently asked questions by our investors has to do with one of the few M&A investments made by Gerdau in recent years, particularly those focused on electricity generation in Brazil. Why does it make sense for Gerdau to invest in power generation? And here, I bring you some information. electricity accounts for 4% of the production cost of Gerdau in Brazil, something which is extremely representative, particularly in moments when the market is more challenging with our margins close to 10% at some moment. So some investments are capable of improving our competitiveness and reducing by 2 percentage points our cost.

So these are extremely important for our performance level. The biggest advantage we have in investing in those assets has to do with 3 main drivers. The first is that when we purchase power with a PPA, with a provider or a distributor. We pay for the electricity itself, which is in the pie chart. It accounts for kind of half of the value, but there is a hidden part, which are the charges and field fees that we pay and that increased the total cost of electricity, and they account for the other 50%. And by investing in self-generation in Brazil, we can eliminate that light blue part of charges. If we self-generate, we do not pay for the sectoral charges and that reduces by half, the field charges.

And as regards power itself, we replace a take-or-pay contract by OpEx and depreciation of the asset over time. That means savings of 20 percentage points. So overall, by investing in self-generation assets in Brazil, we reduced our electricity bill by 60%, which is a lot. If we consider 4 percentage points to 1.6, 1.8 percentage points. These investments without leveraging the company in our understanding, these investments in self-generation assets have brought to Gerdau a return of IPCA plus 16%, which we believe is very adequate to remunerate our capital. And we continue with the possibility of evaluating these power assets to continue to increase our competitiveness in Brazil. Now moving to financial management, indebtedness and debt indicators. As Gustavo mentioned in the presentation, perhaps this is one of the biggest strengths of Gerdau, its balance sheet, its financial policy, its financial health, low leverage and the quality of our debt.

Why do I highlight the word quality of debt? When we think about Gerdau's cash generation, the percentage of cash generation in strong currency is extremely representative. Today, more than 100% of the free cash flow of the company, which would be a proxy of EBITDA minus cash, excluding working capital for this analysis. More than 100% of the cash generated today at the company is generated in U.S. dollars, which gives us a level of predictability and quality of credit, which is unprecedented in Brazil. When we think about our debt portfolio, credit quality is reflected in the performance of our bonds in the foreign market. Today, our level of potential issuance, the lower left part of the chart, where we show the difference of spread in U.S. bonds and Gerdau bonds. The last bond issued by Gerdau with maturity in 2035. The last price we had for our bond is a spread of 112 basis points compared to treasury rate, which is extremely low and extremely competitive.

When we compare with other Brazilian players and even Brazilian treasury, we are very well positioned. And even compared to international players, our U.S. competitors, we see that we are not so far from them. And what is important to highlight is that Gerdau bonds have a high level of liquidity. They trade really well in the secondary market, as we can see on the top right, more than $63 million of monthly trading, which means that the level of price does not -- is not a level that does not have significant liquidity.

No, this is a strong mark-to-market given the volume of trading. And the long-term outlook is very clear regarding the intrinsic quality of credit of Gerdau when we see the difference between a 30-year bond compared to a 10-year bond, the price difference, which is normally [ that's ] 30 is just 5 points -- 5 basis points only, which shows the long-term quality and the trust that institutional fixed income investors have in Gerdau and also the credit ratings.

And here, we have a loan portfolio with a long maturity and with a very competitive spread level. In the latest earnings conference calls, there were some questions regarding the increasing leverage of Gerdau. And I can tell you, Gerdau may have many issues, but leverage, indebtedness is not one of them. Since 2015, we have been consistently reducing the level of leverage measured by net debt over EBITDA ratio. Even with a strong EBITDA generation levels in 2021, '22, Gerdau had a level of net debt over EBITDA ratio of investment grade.

Normally, companies work with 2x net debt over EBITDA ratio if they're investment grade. And Gerdau has a BBB flat. with levels of 1.5x net debt over EBITDA. And 1.5x net debt over EBITDA ratio is our internal covenant. It is our top -- our cap for net debt over EBITDA ratio. But at 0.85x, we would have some time to increase that, depending on the projection of the front row guys, the sell-side analysts, this would mean between BRL 6 billion and BRL 8 billion additional without impacting the company's rating.

It doesn't mean that we intend to increase our level of leverage. It just shows the health and the strength of Gerdau's balance sheet. And [indiscernible] just talking about credit and balance sheet, let's speak a little about the return to our shareholders. Consistently, Gerdau since 2018 has been paying more of its net income than it is set forth in our bylaws. The corporate law in Brazil establishes a minimum requirement of 25%, but Gerdau says that we have a minimum payout of 30% of net income. But consistently, as we can see in the top yellow line, Gerdau has been distributing more than what is set out in our bylaws.

And over the last few years, when we evaluate how much the company has generating free cash flow, 75%, 3/4 of what we generated of cash flow has been returned to our shareholders through dividend payout and share buyback. This is a non-negotiable priority for us at Gerdau. And speaking more about return to shareholders and speaking about share buyback because oftentimes, we get asked about that. Since we started share buybacks as an instrument of more effective capital allocation for our shareholders, we reduced at Gerdau S.A., the share count, number of shares outstanding, by 7%, which is a substantial reduction. It means that all shareholders who remained with us, they are more -- they are greater owners of Gerdau than they were in the beginning of the process. And we continue with our share buyback program.

The current share buyback program for 2025 up until September 30 has been executed by 85%, which is the blue part of the pie chart. We have 2.8% of outstanding shares already repurchased. And a good part of the repurchased shares have been canceled. And today, undoubtedly, even in perhaps the most challenging market for the company with a level of CapEx for 2025, which was higher with the cash generation in Brazil, which was not as strong as we were accustomed to, still Gerdau is investing in share buyback and is perhaps increasing a little bit its leverage, it was 0.3x, 0.4x increasing to 0.85x.

Why? And why are we doing this? Why we continue to repurchase our shares. I've shown this to you a couple of times, but I'd like to show it again. When we compare the sum of the parts of Gerdau, comparing bananas with bananas in the case of Brazil, in the case of the U.S., apples-to-apples. If we look at the last 12 months EBITDA of the company in each one of the reportable segments comparing with the multiples of similar companies in their respective geographies, the implicit firm value of Gerdau would be around $10 billion, $9.8 billion of firm value. If we discount the joint ventures, noncontrolling shareholders that would detract $1.7 billion, the equity value -- implicit equity value would be $8.1 billion, which would mean a value of about BRL 22 per share, very similar to the target price of most sell-side analysts, which would give us an enterprise value over EBITDA multiple for the company of 5.4x, low, but decent.

On the other hand, when we look at the balance sheet, the book value, how much we have accumulated, the book value of Gerdau would be around BRL 10 billion or BRL 28 per share with an implicit multiple of 6.5x EV over EBITDA, very much aligned with the track record of the last 15 years of Gerdau. It is between 5.5x and 6.5x. However, in the gray middle column, we see that Gerdau on screen is trading at around BRL 16 per share with a multiple of EV over EBITDA of 4x.

In other words, either comparing to our assets or -- our equity or comparing with our peers, we are substantially underevaluated compared to all of these metrics. So with that, we understand that continue to have share buyback programs and continue to rewarding our long-term investors in the current context is an excellent driver of return and -- return to shareholders and capital allocation. And we understand that once we complete the program, we will possibly consider other share buyback programs.

Thank you very much for your attention. Now I would like to invite on stage Mauricio Metz, our Head of the Brazil segment.

Thank you, Japur. Well, this year, I think that some people liked it more, some people liked it less, but we changed the reportable segments of Gerdau. Now we have the Brazil operation, the North America operation and South America operation, and we don't have the specialty steel operation anymore.

So it's important to remind you of the Brazil operation, the Brazil segment. And what I can affirm to you is that there is no one more prepared to speak about the Brazil segment than my friend, Mauricio Metz. He's not only the head of the Brazil segment, but he built a good deal of his career in specialty steel. I think it's interesting that whenever he visits the mills, we visit them together. He's a very curious guy. And I tell them, I'll shadow you in the mills. In the Investor Days, I told him, you're going to be on stage side-by-side with me. So what about the Brazil operation? We have 13 industrial plants. And Aldo is here, he's responsible for the specialty steel and segment and for the automotive steel. We have 13 industrial plants. We have the integrated operation and the mini mill operations. So we have a lot of flexibility. Of course, we can have very high basis costs and high scale. But because the plants are positioned all over the country, we can have a flexible production.

Over time, we expanded the product portfolio. And today, we have an operation that makes us very proud. We have the DNA of rebar and reinforced concrete, but that accounts for 30% of our product portfolio. 40% is longs for the industry, including automotive ones, and we get stronger and stronger in flat steels as we can see in the pie chart. Additionally, we have 23 downstream units and 74 branches of commercial Gerdau with our own distribution, practically representing the GDP of the country and our operation, which is very much verticalized.

So it's basically that. What are we seeing in terms of trends for the year? We're discussing a lot the Brazilian context, the oversupply, GDP, demand. It's a hot topic in our sector overall. we see moderate growth for next year, very much aligned with the GDP with nuances in the different segments. We follow 30 different segments with very different drivers in the country. For civil construction, which is the segment that has surprised us the most in terms of being resilient. We see small growth for next year, but still growing, but with a good base of activity, basically because of the interest rates. The interest rates should affect the growth of high-income residential segment as well as commercial segment.

Well, individuals have different ways of getting credit, and there are new concessions, which are improving investments in infrastructure. And we understand that there will be a demand for steel that can come to life with those concessions. Industry overall in energy transmission, we had recent auctions, which were very relevant. For a long time, we haven't seen that. So that's positive.

Solar power, likewise, although a lot of the panels are imported. And there's some demand for our products and all segments linked to agribusiness and productivity of the agribusiness and even basic topics for the agribusiness. So that has a positive outlook as well. So in a way, they escape the interest rate issue, which is very important for civil construction. So in terms of light vehicles, we see a good demand and a good outlook for next year, but we are still uncertain about the inflow of important goods that could probably jeopardize the growth or things coming from China. There are several inputs that are now coming from abroad to serve the automotive industry. And there is a recurring question about demand. And I think here, you'll have a good idea of what the sectors represent.

A recurring question we get is, how is Gerdau affected by the major tariffs imposed on Brazil? Brazil does not export plates or almost nothing to North America. So, unlike other players, we are not really feeling the effects from the major tariffs, but many of our clients are impacted. Downstream industry, yellow line and others, they -- these are industries that export to North America. They are competitive enough. And obviously, this external factor can probably impact demand and probably decrease demand and impact the use of steel and the portfolio.

All right. This is a very simple example of auto parts. About 20% of auto parts produced in Brazil are exported and 20% -- out of the 20%, 20% goes to the U.S. These are data from [indiscernible] Fabio. So we are saying that 40% of the top line of a very important sector that generates a lot of jobs eventually will be impacted by the big tariffs. So this is -- I mean, we are talking to our customers, we are trying to support them, but we have to be very alert because even though Gerdau has positive results in North America, and we will hear more about it soon. It doesn't mean that we don't have to be alert to all of the other businesses that we have in Brazil.

I mean I talked about the operation. I talked about demand, and I also talked about what we expect for every segment. And this is probably one of the most critical factors in terms of this imbalance between supply and demand and profitability is also another topic that we monitor very closely. Recently, we had the Steel Brazil Congress, and we talked about that. Now we are experiencing a record level of steel imports. Putting data in an annual perspective, it's 6.3%, most of the imports come from China, about 4 million. And there are also some important characteristics that should be taken into account. From 10% history figure, I mean, most of the imports were for flat steels, flats are reaching close to 30% according to recent data. And long steels are surpassing 15%, especially wire rod, which is something different from our historical numbers. And this certainly impacts profitability because the competitive dynamics is even more complex for Brazil.

And this has led most of the movements in the market that we have seen in the past few years. We are constantly speaking to the government. So we saw the quota tariff system as something good, but there is a lot of dumping and subsidies. So we still have to think -- I mean, the industry as a whole has to discuss more mechanisms and stronger mechanisms like antidumping, which is mechanisms that tries to combat low prices, prices that are even below the cost.

So we should have a better balance here. And we look at the productive chain as a whole and this topic of direct steel import as a movement, this is not a problem of steel alone, but equipment, parts, vehicles, all of the other sectors are being impacted because we meet with these people all the time and the story repeats itself. So there is an impact in the downstream industry, and this is an important topic that needs to be revisited.

Well, we were talking about the leverages -- the levers. Having said that, we put together a strategic plan, and we are putting together our own internal defense line. In a very competitive environment, we have to position our operation with a cost structure that can be ironclad. We have to tackle competition in a very strong way. So we put together 3 pillars of what is happening today, and we will see the benefits of this strategy in the coming years. So we decided to verticalize our Ouro Branco assets.

I mean, basically, this means having my own ore to stabilize the production at competitive costs. We also want to grow in flat steels. Our Ouro Branco mill was an exporting unit. We exported semi-finished goods. Therefore, Ouro Branco is increasingly importing a full portfolio with high added value to the domestic market and the strategic optimization of mini mills to increase the potential of the mini mills focus in a very specific market, buying scrap at competitive costs.

So I will elaborate on every topic. Mining, therefore, 5.5 million tons of high-grade iron ore. This is an investment that will allow us to have our own supply of iron ore for many years. So we have 40 years of certified reserves, CapEx of BRL 3.6 billion. I mean, 65% of iron grade is a luxury for a blast furnace. We are not using dams. Gerdau does not have any active dams, integrated logistics with a mine duct, and we have BRL 1.1 billion in EBITDA a year. We expect ramp-up to start early next year. The cash cost of that iron to be delivered at Ouro Branco is $30 per ton. In a typical year, we will consume 3 million tons, and we will have 2.5 million tons to sell in the connection of the train line we have in our Ouro Branco mine. I will just show the video and as the video plays, I will talk about it.

The team just produced a time lapse of the construction of that mill. It's an interesting investment because we use a lot of metallic profiles. In terms of the verticalization of the buildings, the construction occurred very, very fast. If you -- some people visited the work site and all of a sudden, there was an entire construction already standing. We use metallic construction to expedite the construction of the industrial facilities. Obviously, this operation is longer than dry processing, and this is what will allow us to produce [ etaborites, ] which is -- has a lengthier production process, and this will allow us to get a 20% iron, which is the secret to the competitiveness of the blast furnace. It's quite interesting because we have lots of videos and photos. You can also check that out in the social media.

At the plateau of the wet sector, we see Ouro Branco at a lower level. I mean, gravity will also help us to take that iron ore to the blast furnace. These are more recent pictures. Yesterday, I mean, last night, I heard that 2 areas. I mean, the primary graveling and also filtering of the concentrate is already in their ramp-up phase. So since this is a very integrated plant and very long and today, the critical path is the middle part of the project. I mean, the mill and also all the wet parts of the plant, the team is already testing and are commissioning the edges so we can integrate everything by the end of the year, reaping the benefits in the first quarter of '26.

So this is an illustration that helps us to see what's coming. What is the benefit of the project? Well, we hope to have a potential gain of BRL 400 million by next year. So as the ramp-up occurs, we will then -- we will no longer use ore from third parties. We will increase the use of our own ore. Not only ore is important, but we can also consolidate a high grade of iron. If you look at the total volume of ore, I mean, this higher rate of iron will bring about indirect gains when it comes to reducing things at Ouro Branco because the quality of the iron not only will lead us to a lower cost because this will reduce the use of third-party ore.

In 2027, once the ramp-up is concluded and all of the costs and qualities are stable, we will be able to save BRL 1.1 billion. 60% is the cost of performance at Ouro Branco and 40% refers to sales of iron ore. So I am passionate by this project. That's why I wanted to make that video. Well, I share your excitement. But in 2026, not only '27, in 2026, we estimate that in the Brazil operation, we will have benefits of about BRL 400 million, mainly due to the fact that we are consuming the iron ore internally. We won't have a large number of sales in the first year of shipments in the first year, but we estimate that we will be able to post something more tangible at the beginning of next year.

Perfect. The second pillar, very briefly, this is -- this shows the growth of flats in general. We have a new capacity or we will get capacity gains, but we will continue to develop new qualities for heavy plates, a strong focus in the oil and gas industry. So we reinstate our position as a major producer of flats. And I have another video of how we operate. Last week, we produced 4000 tons of [indiscernible]

[Presentation]

Beautiful video. Congratulations, Mari. How is the ramp-up moving? And what are the benefits of the project? As we developed all of the new sections of the plant, and we were moving it faster, certainly, our productive capacity increases, and we reached 100% of production capacity in this last quarter. The benefit of the project, 80% is revenue. We are no longer selling plates in the domestic market or the external market. We are selling now coils. We have a very good go-to-market approach, not only in terms of production, but industry. We have gains in productivity and revenue and also quality improved. The surface of the material allows for new applications. And through the [indiscernible] chain, we don't have to cut the sites in the finishing process.

Obviously, new sectors can also be served with this new product. And we continue to use Comercial Gerdau and other partners to process and industrialize the coils. As part of that approach, we have now a supplier that can also process structurals and merchants in Araucária as part of that model to use our own facilities to serve our customers. Japur?

Now speaking about the mini mills, I think we talked about mining, flats and the maintenance of our critical assets. I mean, the DNA of our company has to do with scrap recycling. That's why we thought it would be important for us to tell you what we are doing to optimize our assets.

Obviously, there are some different characteristics when you look at the integrated route and mini mills. So we are looking at the units more regionally. We are trying to make better use of our assets. We are focusing in the local market, what is the DNA of that plant? How can I better recover scrap? What is -- how can I increase the use of assets and then acquisition and processing, I will talk about an investment we did in that area. We have a very competitive energy portfolio and CapEx adjusted to that region.

This is just an example of changes in our footprint. We're potentializing that concept. And to do that, we stopped the Mogi das Cruzes unit. We invested in the billets, in billets after starting with settings. We have a mega shredder in Pindamonhangaba, which is capturing scrap in that Pindamonhangaba region. We are now getting scrap at more competitive prices. This portfolio of competitive energy is totally earmarked to these units. And we have a regional view of products. For instance, this is a small investment, but it makes it feasible for us to produce larger profiles at Cosigua, increasing the portfolio and also decreasing our dependency on Ouro Branco.

These are just a few examples of how we are improving our footprint organically, serving our customers better and also increasing competitiveness, which is the name of the game right now. So thank you very much. I'm very pleased because I just concluded my remarks. We are becoming stronger in Brazil. I mean, Gerdau's DNA is here. This is where our strength is. And regardless of all the challenges, we have a very strong plan going forward. And now I will call my colleague, Wang, to talk about North America.

Thank you, Japur. Next time, I'll come here by myself.

Good morning, everyone. It is a pleasure to be here. It's always good to come back to Brazil. I've been in North America for 24 years. But I grew up here. And I'm extremely thankful to Brazil. They gave me practically my education free of charge. And I was a record intern at Gerdau at Rio Grande and then 10 years in Canada, 2 years in China dealing with M&As, which didn't work. It was a good thing looking back, sometimes not doing a couple of things is a better outcome. And of course, in Canada and the United States now. So it's a pleasure to be here.

And I'm representing the North American segment and [ Block ] was my friend in college is here as well if he has anything to add. I'm going to give you an overview of North America, the North America business. And I think that we cannot speak about steel in the United States without talking about the tariffs, right? So this is very clear. When we look at this, well, I don't intend to give you all of the details. I think you know and things changed dramatically.

Last year, things were declining. And now with the tariffs increasing to 50%, things changed completely. So what was the impact? When we think about the tariffs, we think about the level of imports. So on the chart, on the right, we start seeing that imports started declining as the tariffs were imposed. And one more detail for the United States, it's not just 25% to 50%, but there's also the byproducts involved. So it includes a lot more in terms of total steel volume. In Canada as well, Canada imposed a retaliation tariff to the United States. So it's a 25% tariff, and this has an impact for us. I'll speak about our operations because we have assets both in Mexico and Canada. And also, Mexico is proposing like everyone is trying to defend themselves, proposing new tariffs of 10% to 50% on steel imports. And the impact is that imports are dropping to levels similar to 2018, '19 and '20.

I'll speak about the demand as well. Demand is kind of sideways. Occupation or servicing demand in Mexico includes the players in Mexico that benefited us. We practically operate with the U.S. assets with 100% that reduced imports, and that was substantial. And there's a reflection on price as well. As you saw, prices started increasing in the first quarter. And in terms of line of product, the strongest line of product would be for structural profiles and beams, merchant bars are a little weaker. But overall, the prices are quite strong right now. And we look at the import spread. In terms of beams, structural profiles, about 7% for the profiles overall.

So if we start looking at U.S. prices compared to international markets, it's a big differential, and this has driven our profitability. Another point that I think is worth highlighting is that normally, when we start negotiating commercial agreements, steel is included. And only the United Kingdom has reached 25%. The rest hasn't changed. So there's a big movement around the world of seeing steel as a national security item. And we believe that this trade defense tends to be prolonged.

We don't know how long, but our feeling is that it will continue. And USMCA negotiations will be critical in the end of the first quarter of next year. In our mind, I think it makes sense to have this block. It should mitigate flows between Canada, United States and Mexico. This will have an impact on our operations. To me, these are the most important highlights. And here, we see the impact of all this on Gerdau. We know that we have 25% of our assets in Canada. And we have about 250,000 tons from the United States to Canada and the other way around.

So when the tariffs are as they stand today, we had to quickly examine the flow between the borders, across the borders. And what happened was we try to ship less material to Canada and vice versa, and we tend to focus more on the domestic market. So the U.S. operation is focusing on the domestic market quite strongly with high utilization of the assets and with very good profitability. In Canada, well, we had to adapt there. Now we are working more on merchant bars and rebar.

Financial results is a little lower, but quite sustainable, particularly for Cambridge and with the -- we have the [ Manitam ] operation with slightly differential. Those are specialty profiles and 50% of the volume will come to the United States. So on average, we are sharing tariffs in some cases. So the result of all that is that we generate a lot more results in the U.S. offsetting Canada. So this is manageable. And in the United States, the sectors that are bringing is a big up is solar power, and I'll speak in more detail about that. Gerdau operates in a differentiated way, and I will show you how.

In SBQ, 25% to 50% for automotives and auto parts. And here, this is an onshoring process. It takes a long time, but we're starting to see some positive results in terms of quotations. The quotations normally translate and result in orders. So this trend is also pointing to a positive trend. People ask about manufacturing, remanufacturing in the United States. And if we are seeing an impact. In terms of volumes, perhaps it's too early to think that there will be an extra demand for steel for remanufacturing or nearshoring in the United States.

But in the case of North America, we provide the automotive industry, more than 85% of the portfolio. When a carmaker is going to launch a new product on a new platform, they have to have approval by the OEMs, and they have to have approval of the parts early on. These are not off-the-shelf parts. They are parts for specific models. So on specialty steels, this is a good indicator of trend, as Wang mentioned. We are seeing a greater number of quotations, new orders. They are saying, what would be the price to manufacture this type of specific steel for this kind of application?

This is a good lead indicator that there is indeed a process underway to increase consumption of the steel industry. In the USMCA negotiation is bringing benefits for us. We are not bringing steel from Mexico to the United States. By the way, that's an important point. But the overall result is positive. And then we start looking at the demand in the U.S. Demand overall is kind of skidding sideways. There are some positives and negatives. It's quite stable, typical of a stable economy of the United States. Now a reduction of imports makes players have a big advantage, even if the demand is sideways.

So considering the sectors, 55% -- well, 5% of the portfolio is downstream, 50% of profiles, 45% of merchant bars. I'll speak more about renewable power. That's a strong sector. that has an impact in the United States. And renewable power, the One Big Beautiful Bill, OBBB, will accelerate spending with renewable power. We believe that the cost is so positive today compared to conventional power that this will continue. And we are well positioned to capture this demand and have a high utilization of our assets operating in this market. And the nonresidential construction, that's the weak point. And I think that the big hope here is regarding interest rates. The trend is of a declining interest rate. And this could be slightly negative, but could improve.

In infrastructure, I personally expected more. We're not seeing such an impact, but this is good. Perhaps it's some savings that we can activate in the coming years. One thing is sure. If you travel to the United States, you know that the infrastructure is deteriorating, and they'll need money to invest in infrastructure. There's still very little signaling in that direction, and this impacts practically all of the product lines.

Automotive, there is a big negative impact in terms of affordability. Automobiles are very expensive right now. There's a 1.9% decline in production of lightweight vehicles. But in terms of demand, Mexico players are changing. So the trend is that this will be recovered by Mexican players and reshoring will take a little time. I think that the process is not clear yet. So this is slightly positive.

Manufacturing, if we look at the PMI indices, this has been contracting in 31 of the last 33 months, but this is stable. This results in merchant bars being not as strong as structural profiles because of solar power and investments in data centers. So that's the overall picture for demand.

And now looking at supply. We start studying new capacity in the United States, and it's kind of scary. However, if we analyze in detail, most of the new investments is going to flats and rebar, particularly in micro mills. These are new technologies that bring us new sections or that bring a significant cost differential. They make new investments, expecting that they will exit the noncompetitive assets. And this is not happening in merchants and structurals, and most of our portfolio operates with that. So these technology opportunities are not present. Everyone is investing in brownfield. And that's why we're not hearing about greenfield in this product line of merchants and structurals. It is estimated that the structural profiles capacity in the north of Mexico.

The north of Mexico will reach the American market in 2027. It will depend on the tariffs and what will happen with the unfolding of this project. We're talking about 7% of merchants and structural that there's also Midlothian involved in here and some micro mills expanding to merchant bars. This can be done, but we cannot ensure the full range, and we do not believe that they will be producing this at competitive costs with a dedicated merchant bar mill. What can happen is that with the appearance of more micro mills, this will allow the hybrid competitors to participate more in merchant bars. But again, they will not have a much better cost level than we do. In that regard, I think that we will remain very competitive in structural profiles, merchants and structurals.

So this is something for us to look in detail. I think that we are in a very strong position. And here, looking a little at our journey in North America starting in 2018. Here, we have a combination of divestments in St. Paul's sale of rebar. We spoke about optimization of assets. We've done that as well. What matters is we're not losing volume or market share. We're just transferring to other plants. So we have the rebar mills that can work as a buffer for us. We have a utilization level, which is much higher of our mills compared to 6, 7 years ago. This is a big differential. This resulted from investments. We can see investments in Petersburg, Cotter'sville, Midlothian, Jackson, they are the powerhouses for us. That's where we will invest. That's what will bring us results, the assets that will remain competitive for many, many years to come.

We also changed the go-to-market strategy. We had a structure based on segments, construction, manufacturing segments. It's no longer done by region. And now at Gerdau, we have the most well manageable commercial platform that gets a good feedback from our customers, and we are expanding a lot the downstream segment. One example, solar power.

So we had our CapEx because we needed to invest in sustainability. We do this to bring new sections, expand the portfolio, increase profitability. At the end of the day, this is about the cost structure. Today, our mills have a higher utilization rate with a better cost structure with an offering of our portfolio, which is better. And this is what's bringing us the results.

And solar power, this chart in terms of installed capacity in gigawatts, we can see that because of the law, this has increased a lot. So it would be a market of about 1 million tons a year for Gerdau. Well, we have about 30% of that because we are very well positioned in our Midlothian, Cotter'sville, mills and in Florida over there. We have the solar farms installed in the United States. And we have a vertical integration. We have 3 channels to go to market. We can sell rolled products directly. We can hire third-party processing and sell directly to projects. And the trend now is to sell directly with the processed bar directly for the projects. This helps us retain market share. It adds value, and it increases our margins quite a lot. So when we look at piles used for solar power, 7 years ago, this was 0. Now it accounts for GLN 6% of the total portfolio. About 4% for the whole of North America. So this is reasonably high and with a good profitability.

And this sets us apart from our competitors. One important point of renewable power. This is a frequently asked questions. They ask, how worried are you with the reduction of investments in solar farms in the United States in the future? In immunology of Brazil, it is important to individualize for individuals, distributed generations when individuals set up solar panels on their roofs. In the U.S., there are more houses rather than flat apartments. So they will be placing solar panels on their roofs, but investments in industrial solar farms, this does not have a clear trend of reduction.

The impact will not be that representative. And given the demand that we see of power sources for consumption and for the investments made in data centers and in LLM models, there's an outlook of not just solar power, but all power sources will be needed to supply the power needs of the United States in the future. Even with the total investments in solar power being reduced, perhaps the specific consumption of steel for solar farms will not be that reduced. So 1 million down to BRL 750 million, BRL 800 million. So that's still a good volume for us. And this is an example of agility project.

We saw this opportunity and we approved this in the Board very quickly with Gustavo in 3 weeks. That means a significant investment. And now we are delivering it 6 months while we're starting the project 6 months before planned. This is a downstream investment. It has no channel conflict with our customers. Nucor is also doing that. And just beside the Midlothian plant, we have the thermal treatment. The solar farm has 80 megawatts. So here, our vision is to create a solar pile park capacity of 90,000 metric tons a year, accounting for about 1/3. We will always want to have a 5% utilization, prioritizing our downstream with an extremely competitive cost. 4 lines, one line is already operational. The second one is being tested.

By year-end, we'll complete the ramp-up. By the end of 2026, we'll complete the ramp-up. And the whole processing of the piles is done via laser. Our competitor chose the press. What is the advantage? Laser cuts a lot faster with a better finishing. And I don't have to change the setup from one order to another. In the press, you have to do a physical setup adjustment, not here. So this is very innovative, and we are learning more and more how to operate downstream. And just like with scrap, we want to expand vertically.

We have 8 people per shift to operate the 4 lines. And here, we look at the data centers. This is surprising if you look at the investment. We are participating in [indiscernible] vis-a-vis our competitors, but we have great advantages because our plant in Virginia is located in the region where there is a large amount of data centers. We have a dedicated team serving data centers. They are constantly adding new projects to our portfolio. And -- this is a region with the lowest carbon emission in the world, particularly in North America, and this can bring us future benefits if the agenda grows.

And we also have other investments in Midlothian that helped us to prepare a good portfolio to serve that market. And finally, I would like to speak about Midlothian. Midlothian is our largest plant in North America to melt shops. And I mean, we had to do a lot of things. We are working to upgrade. I mean there is Phase 1 investments of BRL 1.2 billion translated into BRL 275 million a year. So what is the project entitles? First of all, we will increase the runs. I mean, if you're familiar with melt shop, the easiest way to increase the volume is by refurbishing the structure, putting new bridges. So one of the ingotings we call knock ball, we are doing a significant ramp-up that we are introducing a state-of-the-art new area.

And this ingoting will increase the production of the rolling mill. We call this combo caster, meaning that if you put 3 areas, one goes to ingot line and the other one to other areas. This will increase output, and this will allow us to produce more and to produce things of larger sizes. So this is Phase 1. Phase 2, I will elaborate when that comes. So thank you, Wang. Thank you very much.

Wang almost missed his flight. And the pilot lost his passport and Brazil didn't allow him to get a passport waiver, but all things considered, I'm here. So let's move to our Q&A. So thank you, Wang and Japur and Gustavo for the presentation. I don't -- I couldn't tell who raised the hand first. But let me just put the chairs together. Let's wait until our presenters to drink some water. There is a microphone in the auditorium and we will take the microphone to you so you can ask your questions through the microphone. Please identify yourselves and tell us the company you work for when asking your question.

[Presentation]

I see a lot of hands up. Okay. We can start with Caio.

I'm Caio Greiner from UBS. I would like to focus on 2 subjects, especially like we have Metz and Wang here today. My first question is to Metz. We talked a lot about the commercial strategy of Gerdau in Brazil. And I think you're mostly focused on rebars. In the last 9 months, it became very clear that Gerdau adopted a more aggressive position in terms of market share because you understood that it wouldn't make sense to operate with such a low market share because you lost a lot of market share due to recent imports and the entry of new players in Brazil. And still, when we talk to a lot of people in the industry, they said that the Gerdau is now more aggressive and you're operating at prices that are lower than the competition in some instances.

So my question is, how far will Gerdau go with that strategy? What should we able to recover x points of market share. And now the company is ready to add more value, maybe they should start thinking more about margin. I know that Gerdau thinks about margins. You were very aggressive in your cost strategy. But thinking more on the commercial side. And Wang, my question to you, even going back to what Japur said, Japur said that when the market is complaining that your net debt -- your net debt over EBITDA ratio is too low. Now I will play the devil's advocate with Wang.

Last time we talked. We talked about value over volume in North America. And you said something quite interesting because now we are seeing extremely high prices of your products, merchant bars, you were able to increase prices. And I think there is room for further increases. But the question I hear from investors is, why is it that this does not motivate new capacity entries in the U.S. How come this balance is not broken? And why is it that you do not add more capacity? Is it because competitors are not adding capacity? Wouldn't it make sense in economic terms? Is -- I mean, is there a little bit of this volume over value approach at play? Okay, Metz. Before you talk about rebars.

And Caio, -- whenever people talk about rebars, I just want to give you an overview in general terms. The audiences with whom we talk to and our customers as well, they still believe that Gerdau is a rebar-only company. I mean, or reinforced concrete is the fourth largest segment of our total portfolio. We are a company that produces flats. We produce special steels. We are a company that produces structurals. And we are then a company that produces reinforced concrete. And that involves many products and many customer channels. So this very specific point that you were mentioning, and Mati, you can also then talk about the percentages of each side.

This battle in rebar is more related to rebars that goes to distribution. I mean, rebars that goes to civil construction, there is no competition with imported products because our service level is different. And you also need ready delivery. If you look at putting concrete to build a skyscraper. In the past, that would require a lot of steel and cement. It was a very confusing working site. But today, if you look at our work site, there is nothing stored right there. The truck arrives and it delivers steel and the -- I mean, the construction company prepares the floor, every piece is numbered. Every position is numbered. So competing in this segment is very difficult.

I mean the imported good finds competition in the product that goes to the construction starts, the construction shops. So it's -- we're talking about 2 different markets. In the U.S., you have big Home Depots. But in Brazil, the market is very fragmented. It's more focused on residential construction. There are 150,000 construction stores. And so the imported goods penetrate that distribution industry. Because when you look at the profitability level in view of that battle with rebars, this does not motivate the entry of imported goods because of the profitability issue. I think Caio is referring to the fact that there is a lot of competition in the distribution of rebars. Yes.

Gerdau in its long history was the one that now got a lot of market share in long. It's very difficult to export using scrap. you do not have a cost structure that would be enough to sustain that going forward. So we made a decision and the market understood the context. It understood the dynamics of the distribution sector importing things. And you run all the matches through iron ores. So this was a movement that was extensively discussed. But this can change any time. I mean, if there is a reduction in imports or for other reasons. But today, we set up a limit to ensure at least a minimum production in the plants and to reduce costs.

And speaking about prices, oftentimes competitors, I'm not going to mention any names. Sometimes competitors set the price as saying, is Gerdau's price minus x percent. So if you think about Gerdau as someone that is reducing prices, it sounds like is something contradictory or maybe it's just a commercial strategy of the other companies. But in general, the price reference starts with Gerdau. I mean, considering our presence in Brazil. The topic of distribution and rebars and imports, this is part of the debate we have when we go to Brasilia because we are asking for some isonomic competition, and there are difficulties in Brazil.

Take, for instance, this bilateral agreement that Brazil has with Egypt since the beginning of the years 2000, this is a great entry door for rebars. So how can we have an equal footing competition if with this bilateral agreement with Egypt is different. I mean, Santa Catarina, this ICMS rebate, this is a lack of level playing field. I mean, when you have equal footing competition, there are 2 major non-isonomic entry doors of this rebar. And one is the bilateral agreement with Egypt and Santa Catarina. So we want to fight that.

And we believe that by increasing our competitiveness with this cost reduction in mining, we just occupied a space that was ours to begin with. So we will see more competition because we want to occupy that space, and we will be there for good. Well, that's a good question. I mean, we ask ourselves that question all the time. But I think I will revisit what I said. First of all, in terms of supply and demand in the U.S., things are -- that is very fierce, especially in terms of merchants and structurals. And if you look at the structures or merchants, there are only 3 players.

Commercial structures, there are 4 players, no more than that. And so these players set some discipline. Do you remember the bio mill, they produce merchants, and they ended up closing their doors. They shut down. If you look at the prices in the U.S. market before and after that mill, totally different now. There was a player that was desperate to sell, but now today, we have consistent players, well disciplined. Therefore, now if you start analyzing the equation, there is a very high CapEx cost. It takes much longer than we think because it's hard to find contractors, civil workers as they are expensive. When I look at a melting shop, I ask, should I refurbish that equipment or just buy a new one.

Sometimes the cost of capital of having a new one is too high. And all of our competitors are now investing in organic growth. It doesn't show here, but it's 50,000 tons here, 25,000 there. Once you add up, that will be the equivalent to a greenfield mill. So for -- it's mainly for these reasons. And in addition, the market dynamic can change overnight. Today, you say, okay, I mean, maybe tomorrow, the numbers should come down to 80 or 95. So there is no technology that can bring any significant differential in terms of cost. So for all of these reasons, I mean, everyone wants to avoid cannibalization because we've seen that in the past. And we do not want to move value in the change either up or down. So that's the answer.

I mean the productive steel production does not have any major innovation since its inception. So we are constantly looking for cost reduction opportunities. And one of the innovations that we saw in the past few years in terms of rebar production is what the Americans call micro mills to reduce cost, they remove a reheating furnace, what you produce of different sales specs. And this has to do with CapEx as well because CapEx is very high, and this does not motivate the sector to invest there because in the U.S., people are very aware the profitability falls not when you have a new plant.

But once the day you announce that the new plant is being built, profitability falls. So that business view to operate in the U.S. is more mature than we are here in Brazil. Therefore, I think that if someone were to have a new plant in the U.S., they would have announced that maybe in Trump's first administration with Section 232. And I mean, we won't do that. Japur already said that this will hardly happen. And the idea of betting on the phaseout of legacy assets is very dangerous. You recently saw how much money that the Canadian government is giving to Alcoa. I mean even noncompetitive assets take a long time because there is a lot of risk involved.

I'm Rafael Barcellos with Bradesco BBI. Congratulations on the event and congrats to the IR team for the organization. My first question is about a topic mentioned in your presentation, Japur, Slide #17, where you showed the sum of the parts. It's not highest [indiscernible] performance in North America, how different it is versus the Brazil operation. So we see the difference in pricing. In that regard, we have seen other Brazilian companies exploring the same point, unlocking value with a more appropriate structure to capture that value. How are you debating this topic at the company? This could be interesting for us to hear.

My second question is more specific, capturing what Wang mentioned about the micro mills. Wang, we've talked about this in the past. It continues to be a hot topic. I'd like you to elaborate so we can get more detail. To what extent can we see migration to merchants. We see a level of profitability for merchant bars quite interesting in the U.S., even with a lower profitability level. Perhaps that can be a move that can happen. And how big will be this movement? In [indiscernible] , how can the U.S. example be followed in Brazil, perhaps to get away from a more challenging market and migrating to a better market in comparative terms.

Thank you. I'll start answering your first question on Slide 17. We are following the moves that companies like JBS and others are making perhaps to reconsider their domicile. It is not a dogma at Gerdau to evaluate the reflex benefits and costs necessary for making this kind of corporate change. We do not have any tangible plans to execute in that regard. But of course, it is an opportunity that we may explore in the future. It is important to highlight that today in Brazil, we are discussing the eventual tax reform that will impact both dividends and perhaps profits abroad. So these are topics that Gustavo, the Board and myself, we evaluate. But right now, we don't have any tangible plans for that, but we are monitoring the moves made by Brazilian companies in that regard.

At the SEC, there is also some debate ongoing some open consultations regarding the eligibility of foreign issuances. So there are a number of moving parts that we have to take into account to make a decision, a decision which is extremely complex and which has a lot of repercussions, not just for the company, its shareholders, stakeholders and the community overall. Mike? As for the micro mills, this is an interesting topic. We don't have a micro mill, but we look at into that a lot in North America. Our biggest micro mill competitor at California, they are trying to produce merchant bars and rebar at that plant, and it's not easy. They're having a hard time.

And the OEMs are not good for that. And even with rebar, you agree with Gustavo, small gauges of rebar for micro mills are not desirable because productivity declines substantially. If you look at another competitor operating with micro mills, after all that, they made a decision of not making profiles and merchant bars in the micro mills to avoid the kind of risk and complication. It's not just the rolling setup. When you have to change the section, have to stop, change the setup, that takes time. And that kills the biggest advantage of the micro mill. It contradicts the whole equation.

The second point is casting. When you cast 4 meters per minute and you increase that to 8 and 10, the chemical composition, the whole variation in the run will have an impact on productivity. There are technical consequences involved, which are not yet solvable today. So perhaps in the future, micro mill merchant technology will appear. But I don't think that it will be able to convert the current micro mills to convert merchants. So it's all very complicated. But what happen is when you have more rebar capacity via micro mills, the hybrid mills for some of the competitors, they can pivot to merchants, but it depends on where the mill is located, the logistics, the cost structure that can add pressure to the market.

But I even think that they will be in an advantageous position vis-a-vis us in terms of location portfolio and even the cost structure. And let me add, Rafael. I think that all 4 of us here, we are each dealing with a relevant project at Gerdau. You spoke about changing the fiscal domicile. Japur is getting a lot of energy to that. There's nothing mature in the radar, but Japur is studying that together with the Board, I mean, we have to discuss that given the maturity and the moment that the organization is living. Another big project for us is what are we going to be in the future, 10 years from now in the United States. Wang spoke a little about downstream. Nucor has been doing this for a while. We have been cautious about that, but we are taking some steps in that direction.

Metz is looking in detail at the reconfiguration of Gerdau Brasil. So is it possible to replicate experiences in the U.S., in Brazil? It is possible. But in the next 10 to 15 years of steel production in Brazil, I think that there will be significant changes. I cannot really tell you how it will be, but there are some very important questions that have to be considered in our day-to-day. If we look at mining, for instance, if we don't have your own low cost and highly competitive ore, it will be very difficult to compete.

And also the level of care with the coke plants, for example, it's incredible. If you monitor the segment, you know that if the coke plants are not healthy, the cost to replace the equipment is almost prohibitive. So in 10 years, will everyone continue to manufacture steel in Brazil? Well, perhaps in 10 years, Brazil will be importing the slabs. And then we will roll more than produced crude steel. Perhaps it's a question that will be answered. It's a very relevant question. This concept of micro mill in Brazil, when you have a small-scale mill in a certain region, in a certain geography, you buy local scrap and you use local resources to sell to the local market that worked in Brazil for many, many years. So these are questions. Will it continue to work in the future?

Perhaps not, perhaps yes. So Metz is doing all kind of analysis. We've been closing down, decommissioning less competitive mills. [ Caraíba in Bahia ] is not operational. There's another one that is losing competitive and it is closed. We're in the process of migrating specialty steel from Mogi to Pindamonhangaba mill. [ What weighing ] and people in the U.S. call powerhouse. That's a concept that is changing. We move from small scale, we start having greater scale and move around the material more. Perhaps the charcoal route will no longer be competitive in Brazil. There are lawns and flats that are using this. There's the cost of land, there's the cost of trees, the availability of hematite, low-cost ore. It does not exist anymore. If you look at mining and if you look at all players, even the mainstream players, they have a very high level of CapEx because to enrich you temperate, remove silica and removing other components, it requires a lot of CapEx. So there will be significant changes coming in the mining environment and in the steel manufacturing environment in Brazil. And we want to be in the up and guard of that.

We are looking for more detailed answers than whether this model is replicable or not, but rather if replication makes sense or not, looking at the substantial changes that are coming in Brazil in mining and in steelmaking in the coming years. So this will be important changes.

Daniel Sasson with Itaú BBA. Mari, the IR team, thank you for the organization. Thank you for the presentation. And I think that you made an internal effort to communicate the guidance for next year. So to that point, Japur, if you could detail if we spend BRL 2.9 billion of maintenance CapEx with the BRL 800 million for the 3 major projects, Miguel Burnier, Midlothian and the Pindamonhangaba shredder, that increases to BRL 3.7 billion. So what about the remaining BRL 1 billion to get to the BRL 4.7 billion in the guidance? I imagine it's a number of smaller projects. So perhaps if you could elaborate. What are these projects? What has been approved by the Board? Is there anything not approved yet?

Do you have space to maneuver to perhaps disbursement in 2026 to be below BRL 4.7 billion? My second question is perhaps to Wang, and it's related. Briefly, Wang, you mentioned briefly the Phase 2 of Midlothian? So you're looking at a good moment for the business in the U.S. So what kind of market conditions? What do you need to see for you to want to move forward with that Midlothian expansion? Or do you already want to do it and you just have to convince Japur to give you the money?

I just want to understand, in addition to the BRL 3.7 billion for maintenance, this has been a super nice guidance for the next 5 years. But how are you thinking about the new projects? Perhaps you have room to even increase the 75% of money returned to the shareholders in the absence of major projects.

We try to detail in the disbursement CapEx for 2026. We're going to have BRL 1.8 billion for competitiveness projects and almost 45% of that are the major projects, those 3 major ones. And this BRL 1 billion for other projects. In our portfolio of projects, we have a number of smaller initiatives underway. Many of them are already approved, and they're moving forward. To give you some examples, Metz mentioned one example. We are investing to expand our capacity of W150 profiles of Cosigua and Rio de Janeiro. It's not an investment of hundreds of millions of euros. It's a smaller investment, but a competitiveness one. It's not a maintenance investment, but it creates value for us. It improves the Cosigua portfolio, our go-to-market strategy, and it brings us a return.

Just like Wang mentioned other investments we made, smaller to debottleneck our mills in North America, which add competitiveness and add capacity. But these were not projects which individually will move the needle. So I think that many of the projects are of that nature. Of course, we always have room to disburse less with these competitiveness projects because we will not stop performing our maintenance investments because we have to ensure the health of our long-term operations. But in this BRL 1 billion of other competitiveness projects, there are some initiatives that have not yet been approved and will be approved most likely over 2026. And this may be discussed. We have a good outlook that they will continue. A good part of that investment is already contracted, has been approved already.

This 22% reduction in disbursement for 2026 is the result of a smaller number of projects approved. So there might be some room for that, but that reduction would not be very material in 2026, considering these competitiveness projects. Before I turn the floor to Wang, regarding the investments, you said I need to put money in the pocket. Well, I think that there is the financial aspect, but it is also important to remember that there is also the technical aspect that Wang will explain. And it has to do with the complexity of making a brownfield investment. It's almost like renovating our homes, either you move out or it's going to be a hassle. When you're operating at the mill and you're going to make a brownfield investment, there will be many interactions with the existing assets in the day-to-day operation. And oftentimes, you don't have clarity when you're starting the project of all of the repercussions you're going to have when you make that kind of investment.

So this is not just a supply-demand topic, but it's also a risk management topic. We have to have more clarity, right Wang, in terms of industrial engineering before we invest more. So Midlothian involves that, Wang?

It's good to have a CFO who understands the business. But it's quite interesting. When do we want to invest when we're doing well, when the market is hot. What do I do with Midlothian? How many days can I stop? Or what is the risk involved? When the market is poor, Japur will not let me do it. So one important point. When we approve an next amount to invest in Midlothian, it is understood that a part of that, sometimes 50% of that will be done anyway. So the question is, what are the next steps? I spoke about the size the size of the tapped weight. And in Midlothian, what do we want? We have a production capacity. Gustavo spoke about the powerhouse at Midlothian, we have 1.4, 1.5. It really depends on the market portfolio. We would like to increase that to 1.7 or 1.8. And not just that, with a combo caster, do we need 3 casters or 2 because we can cut down dramatically the headcount and the costs. Other than that is the orientation of the rolling mills. The rolling mills are the ones that will deliver the results. We have a midsection.

The middle rolling mill is protected because of solar power project. What if it drops, I have a problem of rolling cycle to solve. In other words, I have to have automation in the setup. So we have to invest in that. And we are looking at the least yield rolling mill that produces SBQ and rebar.

Looking at SBQ and the market perhaps will have a different orientation for the future. It is not just about capturing merchant bars, but this simplifies the whole DNA of the melt shop with an SBQ furnace, with one furnace for SBQ and another furnace for commodities, we simplify the whole process. So these things, well, we debate them all the time until we get to a solution. So we are looking at all of the aspects. We have to improve the furnaces, the production costs and increase capacity. The best way to avoid greenfield is to have good brownfields to make the existing mills competitive. This is our strategy.

Just to complement on the qualitative side. Regarding the investments, one of the things that can really hinder companies is when they lose the capacity to listen, your ego grows and you lose the ability to listen. That's the first step for you to lose. So I always tell my team, we should never lose the ability to listen. This debate we are having with most of you with you, Caio, Rodolfo, Thiago, all of you, Leo, they have been very useful for us to ponder, particularly regarding CapEx. And also the fact that we are communicating this to the market today, it comes from your feedback, your stimulus, your incentives. So we have to have this ability to listen all the time. And of course, we do detailed analysis of the CapEx in the last 20 years of Gerdau. We'll look at this considering all kinds of indicators. And in the last 20 years, we did very well in terms of return on capital invested in terms of competitiveness. When we compare the return of our shares and actual returns, we measure 1, 2, 3 years later. We did very well in terms of having return on our projects, just like the mining project. So we do well, reasonably well in terms of achieving the return on our projects to increase capacity because it depends on the market, it depends on a number of things. Our big wish with this BRL 1 billion is that we will focus on competitiveness CapEx because we have good assertiveness there.

It's very rare for us to go wrong in such a project. So most likely, what we will see at Gerdau in the coming years, regardless of the amount, and this is a commitment for 2026. We're going to be very conservative in capital allocation for CapEx. So my commitment is that we are going to have more CapEx focused on competitiveness in the U.S. and mostly in Brazil than in growth CapEx because there's a risk in our track record. Considering our track record, it's a risk we don't want to we don't want to have right now. So it will be more competitiveness CapEx.

Marcio Farid with Goldman Sachs. I have a follow-up question still on the topic of CapEx. I mean -- these numbers are anxiously expected by the market. We saw a peak of almost BRL 6.5 billion, including some investments related to the energy sector. But to your point, Gustavo, maybe the competitiveness CapEx would have a greater return when compared to growth, but this may penalize the company. And when we look at the numbers of BRL 3 billion, there is BRL 3 billion -- an additional BRL 3 billion for the competition CapEx, and they look at the numbers without looking at the necessary counterpart.

So maybe we don't have an answer yet, but I would just like to get a better understanding about how should we think about Gerdau? I mean, what is the difference between maintenance CapEx and recurrent CapEx? It seems to me that we have 2 different numbers because this may lead us to difficulties in pricing. Anyway, I don't think my question is clear. I don't think I don't have any clear question. But more like are we going to see that BRL 3 billion in your P&L? Maybe the answer is no. That maybe you would penalize with an additional BRL 1 billion a year. And my second point to one. I think your major project is to develop downstream about 2% of the total. And as according to what Gustavo was saying, you were benefiting from better margins and you try to communicate that as being more recurrent. So maybe if you could give us more details about where you're looking at, if it's just energy or if you see an upside in other sectors that could probably add more volume. And with that, we would have bigger margins, recurring margins and what you see coming for the U.S.

First of all, this provocation is absolutely relevant. Even though it might be difficult, and I talked to Japur and Mari saying that we have to give you more visibility and give you more and more details, probably very similar to what we did with the mining project because it's not easy to put things in paper and show it to you. So how can I translate in writing the health of our blast furnaces and the coke plant? I mean if I look at the competitors we had in the past when they talked about the health of the equipment, how it would be if we didn't have an operating coke plant and how much value that could destroy.

So how can we translate the health of our equipment in Ouro Branco and also the fact that safely, we could postpone a maintenance stoppage of our blast furnace. So for you to say that the health of my equipment will certainly allow me to deliver to my promise, this is the summation of many investments. But the equation is ready. I think what we are lacking is more visibility. I mean, how can we show you in numbers because when we say that we have to be mindful of the health of our equipment, I mean, this is something that is already in my mind. We just have to work on the details, how we can give you more details. Maybe we could look at the insurance, how much insurance are we paying?

So when the insurance company has to reinsure your assets, they do a great scrutiny of the equipment. When you look at the insurance policy, maybe we could also show that it pays off to invest BRL 1 billion, BRL 2 billion, BRL 3 billion just to ensure operating safety. So we wouldn't have problems in the future in the blast furnaces or coke plant. I think for us, sometimes it's frustrating for us when we want to show you the returns we have in the mining project, et cetera. And sometimes we don't perceive that as being totally captured. So when we say BRL 1 billion of others in competitiveness, I would say all of this BRL 1.8 billion of competitiveness, including scrap processing, mining and HRC. I mean, the summation of the parties is not perceived by the market at all. This is frustrating, but it's up to us, then I know it's not that easy. I'm a very optimistic guy. Gustavo provokes me a lot, but we will certainly give you more information about the project.

Like today, we talk more about HRC. We are talking about mining going forward. And as Gustavo was saying, it's important that you come and demand answers from us because it's important that you demand that Gerdau delivers to our promise. Speaking about the competitiveness projects, just to refer to Gustavo's point, and Wang also mentioned that in one of the answers he gave, sometimes it's difficult for you to draw a line in the sand and to say that the project is competitive with maintenance. Let me give you the example referring to part of our investment in Midlothian when we increase the running capacity. We had 2 choices. Choice a. The rolling bridge has been there for a long time. It needs to be maintained all the beams, I mean, the cost of the project, okay, we have to change the conveyor belt. I mean by something with the same capacity, same model, the cost will be 10, let's say. But there is another opportunity here.

If we have to stop to remove the conveyor belt, maybe we can refurbish that conveyor belt, maybe to increase the ceiling height. And with that, we increase the tapped weight and increase the steel production. And we would have to do maintenance of 10, and then we will invest in competitiveness, and this investment will be like 20 because we would be paying for that 10 in a way in maintenance. But at the same time, we will increase the mill's capacity. So we ask ourselves, is this an investment in maintenance or competitiveness?

Internally at Gerdau I don't know whether this is good or bad, but our criteria is one in doubt, let's put it as competitiveness. And why? Because then the leaders of the business operations will need to prove that, that incremental investment is necessary and it's worth it because we don't want to fall into the trap because we have a very strong bias of operating safety because we don't want to approve more investments than whatever is necessary or adequate. That's why it's difficult. Sometimes we talk about investments, we scratch our ears. I mean is this an investment of critical level 1 or something a bit disguised. So we classify it as competitiveness. And the example that one gave is quite recent because we had to invest in Midlothian. I would have to do maintenance investment anyway. So I'm just taking advantage of this stoppage moment to do maintenance and do something else.

In Midlothian, there is an aggravating factor. In Midlothian due to the risk of the infrastructure, I mean, means we were reducing the tapped weight. We are investing in reversing the situation. Of course, there is a little size and everything, but we will certainly bring increased productivity. But speaking about downstream, I think the first point is very clear that in order to gain share in steel market. The market is very complicated. It's well grounded. So we would have to look for other ways downstream. And also, we won't be able to buy large operations that will cost billions of dollars. And we are already operating downstream. We have mills. We participate in the roadway industry, [ Mineração ]. There are several plays of super light beans for trailers. I mean, we already have a certain experience there. But when we look at downstream alone, the objective is to protect share. This will add more value and profitability, and we also try to avoid getting into segments where there is no conflict of interest or competition with the other 50% of service centers that we sell. I mean, then we saw an opportunity, and we got into that. Are we getting into these new stream? We don't want to adopt old technology. We want to bring robotic technology that will increase productivity to indeed make a difference. And we have to learn that. This is a learning process. We are looking into that.

I think that 2 important factors. One is a different business model, different than still because we cannot do the same thing. This will be a strategic mistake. And the second aspect and the most important one is having human resources, people who understand the market and they know how to do it. So we are trying to build a team in the market, just like we did with market segmentation. And [ CSN ], I mean, they have extensive experience with downstream, given thermal treatment. So we want to elaborate more on that. These are the ideas. If the solar project works out, we will be confident enough to venture into new areas, things that are adjacent to areas that are adjacent to what we do. Well, to conclude, Gustavo Pimenta, I mean, he's my friend. We -- he is my namesake. We come from the same state. We cheer for the same soccer team. And sometimes our chairs at the soccer arena are next to each other.

So I wish the market would look at Gerdau in the days of mining. So sometimes the market doesn't see as well. We have an opportunity to talk more about admiration. This is a good opportunity for us. So if you don't have integrated mills in Brazil with a very competitive operation, this absurd transformation that this industry is going through, if you're not there, you will have a hard time competing. We have mining assets that are very robust. This project is adjacent to Ouro Branco. There will be a mining pipeline connecting our feed to the mill. We will start selling iron ore capacity that we didn't have, about 2 million tonnes or at about 65% or 67% of iron grade. I mean, this small mining space will significantly increase our competitive edge. So in our operations outside Brazil, we will give more visibility of what I personally see a competitive transformation of Gerdau, very intense. We are getting into a more robust production of pellet feeds there in the U.S.

I'm Gabriel Barra from Citi. Well, congratulations to your IR team. I have 2 points here. First of all, I would like to link 3 points that drew my attention. First is CapEx. You're operating with a lower level of CapEx compared to what we've seen in past years. And secondly, your leverage and capital structure is quite comfortable. And I also notice the issue of valuation. As you said, there is a very interesting upside, especially in regards to valuation. Once we put all these 3 points together, you have space, capital structure, you will generate more cash going forward. We saw a strong cash generation, but the valuation is not at the level that it should be. How do you see capital allocation going forward?

Looking at the buyback, maybe buyback would be a good option, especially envisioning a scenario of uncertainties, not only in the U.S. but also in Brazil. So maybe buyback could be a good option in terms of capital allocation. The second point, another slide that drew my attention was the one on cash generation and how much the dollar-denominated cash generation is so strong. I mean there is a positive side because the U.S. is performing well. North America is performing well. But on the other hand, South America and Brazil are facing difficulties. So what I didn't see you mention is OpEx. How can you bring that discussion to the table? And how much room do we have given the fact that there are still uncertainties, high interest rates? How can you talk about OpEx and capacity rationalization? And sometimes, I know that this is difficult, but I would just like to hear your opinion about that or your remarks about that.

Well, Mari was just telling me that I have to be more objective -- Mari is saying that I should be more objective in my answers to give opportunity for more questions. About buyback, I would say, yes, today, this is a priority for the company. This is an opportunity for the company and also long-term shareholders. It's important that Gerdau continues to invest in buying back shares. This is what we've been doing. This is not just what we are saying. This is something that we are doing and we will continue to do. Now in terms of CapEx, there was a significant reduction of 22% of CapEx vis-a-vis what we are doing now in 2025 because we understand that this will allow us to be more flexible to allocate capital, including buyback. And so these are things that we are taking into account.

And last but not least, when we talk about OpEx, Metz was very clear when he talked about all the mills that we hibernated to consolidate productive capacity and to increase the optimization level of the companies and also by the same token to reduce fixed costs. So we see that there are opportunities and other levers we can use to continue capturing fixed cost optimization. But in the short run, we do not contemplate stoppages or hibernation of the mills, especially in terms of mini mills and long steels in Brazil.

Thinking about OpEx, I think the major lever that we envision for the next quarters are related to what Gustavo and Metz said related to mining in the case of our blast furnaces. There was a significant reduction basically related to cost reductions for next years, those BRL 400 million of EBITDA. This is the reference of what we think in terms of the return of the first year of operation of our investment in Miguel Burnier, but there are other levers as well. Part of the power mills that we acquired in the beginning of this year we will see the full year of power generation in terms of savings in OpEx of power in the following year. The same thing goes to our investment in greenfields or solar farms that are not completed. They will be completed next year. And the same thing goes for our recycling center investment in Pindamonhangaba, which will ensure access to a more competitive raw material, cheaper raw material. Not only that, it will improve performance of our blast furnace because we will be able to have a more compacted scrap. So the furnace will not be idle for a long time.

So we did not quantify in terms of BRL per ton of steel, how much reduction we will see in CapEx. But if you think about the individual levers of every project, mining, Pindamonhangaba's shredder and the reduction in energy. And this is a very good question, but I think we should translate that into something more practical. Just as we did about 1.5 years ago when we clearly stated our opportunities to promote cost reductions. Maybe we could say on the one hand, well, we are referencing many KPIs. If you look at G&A over revenue, nobody has one as low as ours. But looking at what you're saying now, maybe in our next meeting, we could give you more clarity on the numbers. We are just finalizing the plan for next year.

Last year, we hibernated Barão de Cocais, and we clearly stated the magnitude of that opportunity. So maybe this is a way for them to evaluate our project. And then we have to track that later on. Yes, we are used to doing that. And more recently, we did that, that BRL 1 billion of cost. And then we monitor that, we track that. And then we can translate your point into something more clear. OpEx, you have something to say about OpEx?

No.

So write it down then.

Caio Ribeiro with Bank of America. My question is about Mexican projects and rolling mills in Brazil. What would need to change in your mindset and in the whole scenario to have these projects approved and have a more constructive view of them? Would we need a change in the trade defense mechanisms in Mexico perhaps trade agreements with the United States, exception made to the tariffs?

And my second question is about mergers and acquisitions, particularly regarding collection or scrap collection and processing centers in the United States and small players in longs that have been expanding capacity. Are you comfortable with the proportion of scrap collection in scrap usage in this market? Or do you intend to expand more via acquisitions? Along those lines, speaking about smaller players in the U.S. who have been expanding capacity. I understand that in rebar, I know you're getting less focus on this market. But given what Wang mentioned that today, the market has a certain supply and demand that are well balanced. Would it make sense to pursue M&A opportunities to acquire these smaller players? Would Gerdau be a consolidating agent in the market?

For specialty steels, we are a player, a relevant player in the Americas, not only in terms of volume, but in the way in which we have been preparing our 2 major mills, Monroe in the United States in Michigan and in the Pindamonhangaba mill. They are ahead of the needs of their time in terms of producing specialty steel to meet the needs of future automotive industry. They are seeking to reduce the weight of vehicles, what we call clean steel, more resistant steel. And we've made these investments. We are very well prepared for that. We are relevant players in the Americas. We're very well prepared.

We understand, we continue to have an opportunity in the Americas for a new specialty steel mill. That detailed study that we conducted for Mexico it's not lost at all. The opportunity exists, but there is a reconfiguration of many production chains, naval industry. So this is a big opportunity. When we look at remilitarization, the need for retrofits or to rebuild military and civil vessels and also the reconfiguration of this global and more regional chain of specialty steel production for the automotive industry. But there's also the USMCA with the Mexico, U.S., Canada agreement. We'll need more detail on that. There is the reindustrialization trend. So we thought it's about time to extend to hold back on that study for now until we have more clarity on all these aspects involved to make a decision to have a green light or not.

The opportunity exists, but it's not the adequate moment to enjoy this opportunity in use CapEx, which is not small, considering the commitment that we've just taken on. So let's maintain the opportunity alive, but we are still waiting for more clarity of the automotive production chain in the Americas for us to make a decision. Wang?

As regards scrap, we see scrap as fundamental for our operations. It's a differentiator for us. We have a captive percentage. Recently, we bought some 9 yards around our Jackson mill, and this is going to help us a lot. In terms of concept, ideally, all of our powerhouses we have a shredder. We are close to that, and we would have yards supplying it in the concept of a mini mill. It's more profitable. And GLN uses practically 5% of scrap obsess together with the cars and shredder. So we don't have to get to prime in and also have a certain dependency on that, but a lot smaller. So we are looking for yards and shredder assets that can favor us in terms of the localized scrap. We've invested in nonferrous to be in ferrous. We have to be in nonferrous copper, aluminum, et cetera. The moment that we create a critical mass, we have to start thinking of how we can have a nonferrous operation. So we are still experimenting. So this is our vision. The scrap operations are of the cost center for us, not a profit center. They can become a profit center, but our priority is to ensure competitive scrap for the mills and in feed for our shredders and our shredders, particularly at Midlothian and [ OP ] are the most productive in Americas in terms of processing volume. This ensures competitiveness -- cost competitiveness, but we have to have in-feed collections, and we will continue with that process.

Henrique Braga with Morgan Stanley. I'd like to go back to CapEx. We have your guidance for maintenance CapEx for the next 5 years. What about the total CapEx for that period in terms of competitiveness projects? What would be the options? What would make you have a green light for each one of the projects or not? And as for competitiveness CapEx in 2026, we have a good understanding from your presentation in terms of EBITDA gain coming from the big projects. But for the smaller projects, what could be the gain for the company when we consolidate all of these smaller projects?

Well, let me start from the last comment. Typically, the return we have for approval of competitiveness projects would be 15% to 20% in dollars of nominal return. So that would be 15% to 20% IRR, a payback of 4 to 6 years in competitiveness projects when we approve them. As Gustavo mentioned, we have a big focus on cost projects because we understand that they entail a lower execution risk because we don't have to rely on a demand growth in most of them. When we think about total CapEx disbursement, not just for maintenance CapEx, but also of competitiveness CapEx for the years of 2027, '28 and '29. At this point, -- we don't -- well, we don't intend to give you clarity or guidance every year because it will depend on market conditions. They might be a smaller or lower disbursement than in 2026. And as American say, we'll cross the bridge when we get there. We are anticipating by 5 months our guidance.

Normally, we provide a guidance in February or March. And we are giving you the guidance beforehand, 5 months before for transparency reasons. But we -- I think it would be too premature to commit to have a CapEx disbursement above BRL 4.7 billion compared to below BRL 4.7 billion at this point. In terms of differences compared to what we have disclosed here, it is what Japur mentioned. There will be a need in the future to have an overhaul of blast furnace 1, blast furnace 2 and the coke plants. So we are monitoring this. We have global partnerships with the Japanese to have a level of excellence that very few players in the world have. This has allowed us to dilute the CapEx over a longer time horizon.

In that slide that Japur mentioned, he mentioned that overhaul would be in 2027, and it's now going to happen in 2028. We have the need to maintain the health of the assets. And what's coming in the next 5, 6, 10 years, it will be the necessary CapEx to maintain the equipment at the level of excellence that we've maintained in recent years. The more we dilute the CapEx, the more predictability we have of the necessary CapEx for us to keep the current equipment up and running well.

I am Rodolfo with JPMorgan. I think that this mine will be the last question.

You can ask as many questions as you want, Rodolfo.

Well, I will ask a quick question because I don't want to take too much time. My question is, we see CapEx declining, which is something that people expected and that you delivered. But we heard you mention competitiveness, CapEx, that's where we get it all right. Is there a subliminal message there that investing in growth and new things is perhaps something more difficult. And I would like to ask you, Gustavo, how do you see not in the coming years, but thinking about the long term. How do you see mining in all that? You mentioned mining is something important that we have to look at with more attention. But can we think about mining gaining more weight in the future?

Well, Rodolfo, this is a very interesting topic. Our story in mining started more than 20 years ago when we found an opportunity in the market to acquire the mining rights, some mining rights that were very, very interesting. And we had a first mining right to operate back in 2008 with a Várzea do Lopes mine that had been supplying our own internal needs. So what happened in recent years is that in Brazil, we had more difficulty in cost because in transitioning from one mine to another, that's not a simple project. It's not plug and play. We need to demobilize the mine and the need to invest in the other. And this brought along a cost difficulty for us in the last 2 to 3 years. And as of next year, we'll not only recover the cost gap, but we'll be in a whole new level of competitiveness, something that the other mine did not offer to us.

Over the last 20 years, we've been perhaps more optimistic that we could become a mining player. In the past, we even announced some projects that we were considering. But then we realized that it didn't make a lot of sense, and we regained focus on mining for self-sufficiency. But when we see all of the transformations happening in the world, a greater need to -- for the world to consume pellet feed and Australian iron ore being corrected and the quality of our mining rights, which are very good and very well located close to railroads. It is not by chance that we made a decision to approve the Miguel Burnier project, slightly above our need because we see the possibility of selling about 2 million tonnes of pellet feed. But we understand that in terms of mining rights, we're very well positioned. And then we have to consider the existence of railroads, the logistics involved.

Another interesting point that happened was post the tailing dam events. After that, it's a [indiscernible] with that. There came a difficulty for miners to continue to produce hematite there's none anymore. You had to produce pellet feed and everyone needed to invest CapEx and smaller miners find it very hard to do so. More recently, there was an event in Minas that is going to cause more difficulty to smaller miners. So now there's a possibility for us to conduct more studies so that perhaps in the future, we can produce more ore using the mining rights that we already have.

So answer your question, looking forward, if Gerdau sees the possibility of being more on the mining side, I think so. Not that dream of becoming a big miner that we had in the past. But I think that there is an opportunity for us to improve our average profitability in Brazil, producing a little more ore. I think that this is a topic that is going to consume more energy from us. Perhaps it would be a waste not to take advantage of the quality of the mining rights that we have in the state of Minas Gerais in light of the opportunities to produce a pellet feed with the quality that we produce here. So I think it will match what we have with the opportunities. So this will be a driver for us to study this possibility more.

Well, I know that when the subject is good, it ends soon. And unfortunately, we are not able to answer all the questions. But certainly, we are here at your disposal in case you need follow-up questions -- in case you have follow-up questions. And before we finish Gustavo, I would like to ask you to stay here on stage. And I would like to thank Metz, Japur and Wang for joining us today. And as we always do it, Gerdau has a long-standing partnership with ABIMAQ. It's our 30th anniversary with ABIMAQ, and I would like to call [ Sandra ] to give us the frequency seal for the last 30 years.

I would like to thank you and also to congratulate the entire team at Gerdau. This partnership that you have with us, showing transparency and speaking to the market like you do and the entire management of Gerdau is here today. And this really shows that even though Gerdau is a large company in Brazil, and it's also important that you listen to the market, you continue to listen to the market, and this is really important. And now I would just like to briefly tell you that right before you, you have a list with a questionnaire I know there is a pen in case you come with the excuse that you have no pen. This questionnaire is for us to see how these meetings are. You are one of the 5 best companies in our quality assurance topic. I would like you all to answer the questions. And once again, thank you very much and congratulations for this event. Thank you so much for this long-standing partnership. And certainly, we will continue working to improve even more. I hope that we can meet again next year. And certainly next year, we will show you even better numbers. Thank you. Thank you all very much.

Just to conclude, I know that you are all hungry. You are already standing up. I mean, for us to evaluate if we are doing a good job, it's important that we work in a very transparent way. The fact that Mari returned to Gerdau after a few years, in my view, she is developing some excellent work. And all of that is due to her relationship with you.

So please now or even later, keep telling us about what we can do to improve our relationship with you. Thank you for everything we've built throughout the years. And if you still feel room for further improvement, please let us know. Thank you, and thank you for coming.

Good morning, everyone, and welcome to Gerdau's Second Quarter 2025 Results Presentation. I'm Mariana Dutra, Head of Investor Relations.

And joining us today 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 item 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 no guarantee of future performance and are subject to risks and uncertainties that may or may not occur.

I will now turn the floor to Gustavo to begin the presentation. You may proceed, Gustavo.

Well, good afternoon, everyone. I hope you are all well, and I really appreciate the opportunity to be together for another earnings release presentation. I will briefly comment on the highlights of the quarter and the outlook for our operations. And then we will proceed with the Q&A session.

Well, firstly, I would like to highlight that we ended the second quarter of '25 with another positive milestone in our historical series of workplace accident rates, reinforcing our commitment to the health, well-being and safety of our employees and all stakeholders with whom we interact.

Reaffirming our commitment to sustainability, I would also like to highlight that we recently published Gerdau's annual report for the 2024 cycle. Among other indicators, the report highlights that we achieved an average GHG emissions of 0.85 tonnes of CO2 per tonne of steel, the lowest in our historical series and less than half the global average for the steel production sector.

Now in terms of the financial performance, I highlight the strong recovery of our North American operations, which in the second quarter posted the highest all-time share in our results, representing 61% of consolidated EBITDA. I would like to emphasize that Gerdau operates as a U.S. company in the United States, meeting domestic demand with steel produced 100% locally without relying on imports from Brazil.

Our decades-long presence in the North American market reflects a favorable business environment in the country and is part of a business strategy of internationalization and geographic diversification, which allows us to operate autonomously in the 7 countries where we are present in the Americas with independent executive and operating management.

Meanwhile, in Brazil, the domestic market continued to be impacted by excessive imports of steel throughout the second quarter. The import penetration rate reached 23.4% in the first half of the year, once again, demonstrating the ineffectiveness of the current quota system with tariffs and the urgent needs to implement measures that can effectively defend the Brazilian steel industry and domestic jobs.

Given this scenario of lack of competitive quality in the Brazilian market and the slowness of the authorities in taking more effective measures, we decided to reduce our investments in Brazil and the details of which we will announce over the coming months. At the same time, we are continuing to adjust our current production capacity to this alarming scenario of high penetration of imported steel.

And now I will hand over to Japur, who will detail the financial highlights and the impacts of this current scenario in the Brazilian market on our results.

Thank you, Gustavo, and hello, everyone. It is always a great pleasure to be here with you in our earnings release presentation.

Our adjusted EBITDA was BRL 2.6 billion, 6.6% higher than in the first quarter of 2025, with the North America segment's performance standing out, as mentioned by Gustavo. And on the other hand, we saw a reduction of our operations in Brazil as well as in South America. Net income stood at BRL 864 million or BRL 0.43 per share, up 14% compared to the first quarter of '25.

During this first quarter, we issued 2 important debt issuance, a USD 650 million bond maturing in 2035 and a 7-year debenture totaling BRL 1.4 billion. The issuance were aimed at strengthening the cash flow of the company while extending the average maturity of the company's debt.

Speaking about leverage, the company's leverage ratio, net debt over EBITDA, ended the period at 0.85x, way below the level established by our debt policy, reinforcing Gerdau's capacity to continue executing the investment necessary for our business despite a more adverse scenario.

Now regarding CapEx, our -- we invested BRL 1.6 billion in the quarter, where we allocated most of it in our Miguel Burnier sustainable mining project, which has already reached 72% completion. We are in the pre-operational planning phase, starting up at the end of this year. And this will really change the competitive scenario of our Ouro Branco mill, adding 5.5 million tonnes of high-quality iron ore. And the potential of the project is to generate about BRL 1.1 billion a year once the ramp-up is finalized.

Now in North America, due to the excellent moment of the market, both in terms of shipments and prices, the company decided to postpone the implementation of Phase 1 of the Midlothian expansion project in Texas, which will not significantly change the project completion of that expansion process because it will take years and not even the amount of CapEx allocated to the project.

Based on the results for the quarter, we approved the distribution of dividends in the amount of BRL 0.12 per share, totaling BRL 239 million. In addition, we continue to execute our 2025 share buyback program, which already reached 68% completion, representing 2.2% of the company's outstanding shares, totaling almost BRL 700 million throughout the year in terms of returns to our shareholders.

We continue to believe that share buybacks at the moment are an excellent way to allocate capital and, at the same time, return value to our shareholders. And speaking about shareholder return, if we take into account dividends and also share buybacks, our payout ratio came to 90% in the second quarter of the year, which is basically very close to 3x what has been set up in our bylaws.

And with that, I conclude my remarks, and I'll join you again during the Q&A.

Thank you, Japur. And in North America, we continue to see steel demand at high levels, with the order backlog above historical levels, mainly driven by demand coming from the nonresidential construction sector. Our capacity utilization in the U.S. continues to be positively impacted by steel import tariffs announced over the last few months. And we maintain a very healthy market outlook while remaining very attentive to the macroeconomic scenario and interest rates, which remain high.

In Brazil, on the other hand, the domestic market, although experiencing good demand for steel continues to be impacted by excessive imports, as I mentioned at the beginning of my presentation. Therefore, much of the increase in steel consumption recorded at the beginning of this year was met by imports. There is even a risk that new import records will be set in the coming months if trade defense mechanisms are not improved.

For the coming months, we see a resilient civil construction market. And we are closely monitoring the level of activity in the automotive and agricultural sectors, which are already being impacted by high interest rates. In addition, we are cautiously monitoring the possible impacts that the imposition of tariffs by the U.S. on Brazil may have on our domestic industry.

I will now hand the floor over to Mari and Japur and I will be available to answer your questions.

Thank you, Gustavo and Japur. We will now begin the question-and-answer session. First question from Lucas Laghi with XP.

I would like to tap into some topics with you geared to investments and your CapEx expectations. First point, perhaps you could give us more color regarding the mining project. We see this CapEx being executed, start of operation expected through the end of the year with ramp up next year. So in the context of the current exchange rate, price of iron ore, pellet premium, how do you see that BRL 1.1 billion CapEx materializing over time?

Do you have any estimates regarding how much of the incremental EBITDA come from the operations today? How much would be incremental if you do not make the investments considering loss of competitiveness if you don't have a sustainable mining operation advancing with the new investment?

And then the second point is a broader question regarding investments. We see a more difficult context in Brazil and some projects are included in the strategic CapEx. Meanwhile, we see a clearly better outlook for North America. So how are you thinking about capital allocation? Are you thinking about a structural change in terms of levels of return for projects in North America, perhaps assessing new projects there or given the more advanced execution of strategic CapEx, although there are other investments in competitiveness, should we be thinking about a reduction in the level of investments for 2026 and beyond?

So these 2 points: mining and a broader question about what you're thinking in terms of capital allocation when we have different contexts in Brazil and North America.

Thank you, Lucas. This is a very relevant topic. I'm glad that we are starting talking about this. I'm going to give you a more general conceptual view, and then I'll turn the floor to Japur, and he can give you more numbers.

Overall, we have always been concerned about the CapEx and our annual disbursement, always considering our ability to generate cash flow over the years. Over the last few years, we have understood that an annual disbursement of CapEx of about BRL 5 billion, BRL 6 billion would be very sustainable.

From a qualitative standpoint, we can see a significant change in the disbursement. We are allocating a lot more CapEx in competitiveness projects and cost reduction projects to create a future equation, which is more competitive than today than that is allocated to increase production capacity. So even with the same level of disbursement, there has been a significant change in the CapEx in the last few years.

This level of BRL 5 billion to BRL 6 billion a year was able to meet the CapEx needs of Brazil and the CapEx needs in North America. So we didn't have to make choices to prioritize Brazil or the United States. We were able to meet the investment needs of the 2 macro regions simultaneously.

So Lucas, in light of everything that has been happening, more specifically considering the decision made in the COMEX meeting on July 24 of not adopting trade defense mechanisms that would be more intense and stronger, then we made a decision to reduce the global CapEx disbursement from 2026 and beyond.

We are not going to stop any ongoing investments, especially in Brazil in the mining project, in Ouro Branco. They are fundamental for our competitiveness and low cost. So we're not going to paralyze anything that is underway. In other words, the BRL 6 billion we announced of disbursement for this year will be fully executed.

But after 2026, a decision has been made to reduce the level of disbursements. Japur and I are not ready yet to tell you what will be the new level and which investments will be cut. And this more detailed analysis will be taking place in September and August.

And so in the Investor Day in October, we will speak more about that. But the decision has been made and the decision is to reduce future investments in Brazil and maintain the investments -- future investments, in North America because over there, we understand that the investments being made have translated into gaining more market share and supplying the current demand.

More specifically, in the segments that we serve in the United States, particularly [ beams ] and merchants, we understand that maintaining a balance between supply and demand is important over the coming years. And that's why it doesn't make any sense to build a new plant and a new industrial unit because we want to keep the balance.

But marginally, we've been adding capacity. We've been adding products to our mix, products with a higher added value, and we've been doing this in the past few years. And we've been making investments in the Midlothian plant that we have in Texas, the most relevant one we have. We made an important decision to remove a shutdown we would have in the second half to implement another phase of that investment, as Japur mentioned.

But we understand that demand at this moment is so solid that we intend to keep the production capacity to meet the demand in the second quarter and leave the shutdown for later. It's an investment program. It entails a number of shutdowns. So it doesn't impair the rest of the project. But this year, we want to keep the production capacity allocated to meet the demand, which is very, very solid.

So that's the general approach in a nutshell. As of next year, we'll see a reduction in this level of CapEx. It will no longer be BRL 6 billion. This will be reduced, especially investing less in Brazil and maintain investments in North America because we understand that with everything that is happening in the short and medium term and future demand that will remain solid. It is important that we have a competitive and relevant presence in the U.S. market.

So that's the general concept. I'll turn the floor to Japur to perhaps add some more figures.

Lucas, so going back to your first question, which was more specific about CapEx for the Itabirito's project at Miguel Burnier. It is kind of hard to get to the scenario to say how would it be if we didn't have that investment because we will not be operating with this level of prices for iron ore and pellets to make the comparison.

But we have some big numbers to remember. This project of ours was approved, taking into account CIF China price for 62% ore, that now will be changed to 61%. The price was $80 per tonne. That was one of the assumptions of the project.

And the second assumption was regarding the quality of the ore and the replacement of pellets in our production route and considering a price of $45 per tonne. Now we know that the premium is below $45 of pellets. On the other hand, the price of ore is higher. But even with that combination, we understand that the guidance that we provide as a reference that this project should lead to BRL 1.1 billion incremental EBITDA to our current result when we have the ramp-up, and that assumption remains kind of at the same order of magnitude.

But our understanding is that over time, if we hadn't made this investment, we would have less and less access to granular iron ore in Minas Gerais. And so we would need to increase even further the consumption of pellets, and this would lead to a cost inflation that could be close to BRL 300 million, BRL 400 million. But since we don't have that scenario in mind, it would be very difficult to compare.

But we understand that the investment is proceeding well, more than 72% physical progress. We continue with our plan to start it up in the end of the year. And in 2027, we would expand the new mining project.

And an important part of this BRL 1.1 billion will start being captured along 2026. Of course, the project will not start operating at 100% capacity. There will be a ramp-up, but we understand that an interesting part of this benefit should be materializing in our results along 2026.

Next question from Leo Correa with BTG Pactual.

So I have 2 points I'd like to explore. Perhaps the first one to Japur. Japur, based on the debates we had this morning and in the last quarters, Gerdau continues to post a very healthy balance sheet compared to some of your peers. And I don't want to convey a different message from this in my question, but there is some concern regarding the pace of increase when we look in the last 2, 3 quarters. Net debt increased from BRL 5 billion in the end of the year to BRL 9 billion now in Q2, which is an expansion, which is kind of unusual when we look at your results posted in the last few years.

I know that you've probably heard criticism from the market that you were being too conservative that there was room for more. And then now you're hearing that your leverage is slightly higher. I know that the market always oscillate in our wishes and in our points for discussion. But the reality is that we are not having a cash conversion. We have very little cash flow. EBITDA to cash conversion has been below the results of the prior quarters. So how are you thinking about this? What should we expect looking forward?

Free cash flow will come in the second half of the year. And I imagine that this debt level will follow or will fall a little bit. So what would be your target for net debt? And how do you see all that? So that's the first question.

No, go ahead. Go ahead, ask all questions and we'll answer them.

Yes. My second question is, Werneck, you have been an advocate of more balanced trade practices and competition and quality in the domestic market. And we have been voicing together with the sell side that what the government is doing has been insufficient, and the quotas clearly did not help. They didn't change anything in the market. Prices dropped. I don't remember seeing a rebar price deflation that strong as what we've seen this year. Please correct me if I'm wrong, if you remember another drop like this.

But my question is a competitor in the morning announced an increase in rebar like 8% or 10%. The premium today is low. Theoretically, by the book, we could accommodate this price increase. The competitive landscape is complicated and demand, there was some slight deceleration, but demand is still resilient.

So Werneck, how do you see this? Is there a room for this increase? You're leaders, of course, but how does Gerdau see these price movements with the current dynamic?

All right. So let's respect the order of the questions. So Japur can answer, and then I'll elaborate on the market and rebar.

I think that in your question, you kind of answered it when you said that in some quarters, the market was saying, oh, you're not very much leveraged. You could accelerate that more. So when we think about our minimum net debt over EBITDA that we had in Q3 of last year to date, we had an increase of about BRL 5 billion to our net debt, but still at a very low net debt over EBITDA of 0.85, less than 1x net debt over EBITDA ratio.

And when we break down this increase in leverage, more than half of the BRL 5 billion was invested in return to shareholders through dividend payout or share buyback. We invested from Q3 of last year to now almost BRL 2.8 billion in dividends and share buybacks for our shareholders.

So the main focus we had to use these proceeds by increasing our leverage was in providing return for our shareholders. Of course, part of these proceeds, about 30%, 35% of the proceeds went for funding for us to have a free cash flow that was negative for the equity. And we understand that this is totally natural in our execution process with a significant CapEx program in Brazil, culminated with the end of the hot-rolled coil mill that we concluded this year and the expansion of Itabiritos with our mining project, the BRL [ 3.2 ] billion investment, which is the highest investment in the history of the company.

And we understand that in some future quarters, this will be bringing us very good news. And we are in a cyclical industry. It is only natural when there are moments when you are planting seeds, when you're investing in moments when you're reaping the fruits. So I think that what matters is that Gerdau got ready in the past, deleveraging, keeping a robust balance sheet so that in moments of transformational investment cycles for the company, as is the current one, even in a slight more adverse scenario of cash generation, we wouldn't have to just stop projects, which are underway, as some other companies do.

So this would be our mindset, Leo. This is a natural movement in an important expansion cycle in which we did not want to sacrifice our return to our shareholders because we trust the investments we're making, and we trust our ability to generate cash over time.

Leo, now talking about rebar in the trade defense mechanisms. It is very disappointing. After 12 months, with deep knowledge of the quota tariff system, we don't see any stronger measures adopted by the ministry. And we have read many news, not just about steel. And this shows the rationale of trying to please everyone, of making everyone happy, and you can't read that way.

To me, it is very hard to understand how the federal government gives up BRL 6 billion worth of taxes from the steel industry because they accept this almost 30% of Chinese imports. So there is -- if you think about legal assurance, there is knowledge at the level of the Mercosur decrease that would create a very adequate and safe environment to implement stricter trade defense measures. And to us, it's very hard to understand why this is not done.

Other than that, what happened more specifically in the rebar market is that, as you mentioned, this is concern about new launches, civil construction. But at this moment, it continues to be solid. If we look at our backlog, nothing points to a slowdown. It's possible this will come later. You guys are analyzing this, but in practice, we still have a very good demand and no slowdown.

So in specific rebar, considering what happened with flat steel and all, there are some elements that I would like to mention. First, we will maintain our market share of rebar in Brazil. So part of what you mentioned is not just a wish, but this is math that we do. In the short and long term, it makes sense to us to maintain the share that we have.

With the arrival of the imported products, of course, this reduces profitability a bit. And when we look at the imports, if we look at the numbers, why is it that we have more flat steel than long steel? Because the measures that we made ended up blocking and barring the arrival of long rebar through 2 doors in Brazil, the Santa Catarina door, given the deduction of ICMS in the bilateral agreement with Egypt that would bring a lot of rebar and long steel through the Northeast of Brazil.

So rebar has a price level that kind of prevented this greater penetration rate of imports. If it weren't for this, a lot of long steel would be getting here. There's a lot of material that was ready to come here, and it didn't come here because it didn't make economic sense for the importers.

And we understand that with everything that was done, we got to a premium or profitability that is beyond an optimal point to balance the whole. And I think that now there's room for us to recover some profitability and price in rebar to say that it's going to be just like the past that this would be easy to happen. Everybody included this recovery in the model, and I don't think it will happen like this. I think it's going to be a difficult fight, a daily debate. It will pick up, but it won't be as easy as it was in the past.

An equation of many variables now has multiple variables, which I believe that profitability, margins and prices are below what they should be. So I believe there's room for improvement, although, Leo, if this fight continues to be fierce, we believe that the big benefit we will bring in Brazil in the results in the second half will be more linked to costs. And we ended Q2 with the cost in Brazil coming from Ouro Branco above our potential.

So there's work ongoing, and this will bring the cost level of our Brazilian operation to a level below what it currently is. And if the battle becomes fiercer, we'll be able to compete well with a lower cost level. So overall, in general terms, this is what I have for you.

Japur?

Yes, I have something to add. I realize that I didn't fully answer Leo's question. So let me go back to an important point. We do see in the second half of the year a positive cash generation in our business. We don't anticipate an acceleration in our CapEx disbursement. In North America, we had consumption of working capital because of higher volumes and prices. And we understand that this is going to start generating more cash in Q3. Q3, normally, we generate more cash. So in the second half of the year, we expect free cash flow to equity ratio that is better.

Regarding costs, it's an important point mentioned by Gustavo. We mentioned this in our earnings release. In this important CapEx program that we have in mining, there are a number of topics which are interconnected with our Ouro Branco plant such as our [ yard of ] raw materials, some cold processes to use pellets in the centralization process. So a number of interventions that we made during the quarter.

And we understand that they kind of got in the way of the production pace of our high -- of our blast furnaces in Ouro Branco. About 100,000, 150,000 extra tonnes could have been produced with the same base of fixed costs that we currently have if we didn't -- if we hadn't had these events in the Ouro Branco industrial unit.

So in terms of variable cost and the volume of production, we imagine that we would have had a nonrecurring effect, which is part of the growth pain that we have when we have such a comprehensive CapEx program in Ouro Branco and around it with our mining project. And I believe that we should have a production increase and return of the pace at Ouro Branco, and this should contribute to improve our cost -- fixed cost dilution in the coming quarters, as Gustavo mentioned.

Next question is from Daniel Sasson from Itau BBA.

It's always a pleasure to talk to you. In fact, I just want to go back to Leo's question when you referred to your debt position and leverage levels. I mean in fact, 0.85 is really below your policy, but your gross debt is about BRL 18 billion, slightly above your policy, which is -- will be up to BRL 12 billion. This policy was envisioned when probably EBITDA was BRL 5 billion pre-COVID, exchange rate was 4:1.

Would it be now the time to review that policy? I mean, in fact, just to make sure, you're not very much concerned in absolute terms with your gross debt whenever you think about dividend payout or buybacks or other options to give return to your shareholders. So is it okay for your gross debt to be high once your cash position is high?

But I think we are now going through a very difficult moment in this industry. And you talked a lot about that. And now you even refer to the issue of cost and efficiencies that you were constantly seeking to achieve because this is something that is part of your control.

So my concern is, okay, if we already know that the government measures to protect the domestic market were very incipient and very inefficient, how far can you hold investments, rethink about CapEx and make hard decisions to probably cut your overhead or cut personnel? What type of structural measures would be necessary for Brazil to escape that trap of having per capita consumption the way it is or it has been for the last 30 years?

Okay. Let me try to answer your questions as they were asked. Daniel, I mean, there are 2 things here. Of course, that in a scenario of high interest rates and gross debt is not what we aspire to have, but there are also some internal issues like generating more cash in North America than in Brazil. So we will not bring the money straight from North America to Brazil. And we have an important CapEx program in our Brazil segment.

The great part of our CapEx disbursed like BRL 4 billion of CapEx would be invested in Brazil, but we are not generating the same level of CapEx in Brazil. And it is Brazil that pays dividends and, thus, the share buybacks. And sometimes there is a mismatch that leads to cash increase, I mean, vis-a-vis gross debt, but we understand that this is something temporary that this should be solved in the coming quarters.

By the same token, we understand that we are generating -- we should generate positive cash in the second half, and this will allow us to reduce the leverage in the coming quarters as well.

I think you also mentioned a very important point. I mean if you look at our 125 years of history, I cannot afford to sit down here and look at how many people will be dismissed and how we can reduce things here and there. But earlier on today, when we talked to the press, I mean, they asked me, and I said that we already dismissed 1,500 people this year and particularly after the 24th after the release when we saw that there will be the announcement of tougher measures, which never came, especially in Pindamonhangaba in Mogi in the past weeks. I mean, all of the measures are on track.

But your question is really crucial. What does the future hold? I mean if you look around the globe, a lot of countries are imposing defense mechanisms, mostly against China and unfair competition. And I talked to one of my peers, it's a Chinese manufacturer, and they don't understand when I ask them about cost of capital. I mean, the level of public money that they have to maintain the productive capacity. I mean, it makes it difficult to compete with other countries.

I mean if this will change 10 years from now, would it pay out for us to invest in the short run? We never waited for things to happen. Maybe that's why in a difficult moment that we experienced 10, 15 years ago led us to transform our assets. We exited from several countries. We raised some cash by divesting. We sold some operations.

I mean now we are facing a new reality. Therefore, we understand that will have to make long-term adjustments in Brazil as well. I mean, after all the investments Gerdau made, now is the time when we do not want to shrink as a company. I think our size as a whole is an optimum size because we can accommodate the needs and desires of all of our stakeholders.

When we look at the long run, I mean, not all imported goods can penetrate our customers, I mean, because they need more service. So we are thinking about whether it would make sense for us to maintain our production quotas, to maintain our productive capacity, whether it would make sense for us to revisit all of our assets.

And right now, Japur and I, we are working on measures that are not short term because our team can promote good actions, but we are thinking about having more structural responses vis-a-vis the current scenario that is probably heading towards deglobalization, the U.S. is trying to bring all the industries back to the U.S. I mean we are intensively working on that subject.

So Daniel, I mean, the question is still yet to be answered. And in our Investor Day, we will have more information for you, but we use all of our lessons learned and the relationship we have with you. And we are constantly looking for long-term alternatives that will keep Gerdau standing out and not only bringing good returns to our shareholders, but we want to align ourselves to the needs of society today.

Now the question is from Rafael Barcellos from Bradesco BBI.

First, starting with Brazil, I would like to have a better understanding about your strategy with rebars. We've noticed that since early this year, the market is fighting for share, and we understand that Gerdau is not losing any share. But I would just like to learn more about the strategy. I mean, in your view, how much that strategy is working out? And even in competitive terms, how do you see Gerdau's position vis-a-vis your main competitors in the market?

And my second question is, we don't have a lot of visibility when it comes to structurals and merchants. What -- how do you see the demand versus price behavior? And then what about the -- follow-up question on CapEx. I understand your intention to reduce the company's CapEx level going forward. And I also understand that you will give us more visibility about these possibilities during Gerdau's Investor Day. So I don't want to jump the gun. But this will be more like a quantitative question.

How do you balance your desire to run the company at a lower CapEx level? And what are the decisions that the company has to make to maintain your business like refurbishing a furnace? And so like what would be the minimum CapEx? So these are my points.

Rafa, thank you. As I already answered that part on rebars, I will just give the floor to Japur because he can also have his own way of answering that issue on rebars. He can give you some more light to what I said before. So Japur, the floor is yours.

Sure. Rafa, my namesake. As we said before, the first interactions with the market in general, when we refer to our commercial position in longs, I think we also had a meeting with you and some other investors. In fact, we are not willing to give any part of our market share. We made some capacity adjustments. We revisited our mills in the past few years.

And I think now we achieved our optimum level in terms of the cost curve. So it doesn't make any sense for us to reduce our presence in long steels, given all of the investments and employed capital, given the capillarity of Gerdau to trade our volumes. Considering our capillary, our commercial breadth, our reach, our position in the cost curve, we understand that it makes no sense for us to give out any market share. This is point number one.

Point number two, I mean, high import volume. And in the past, this was not very significant. When we think about longs and flats, even if the long percentage is lower when compared to the import of flats, I mean, the share growth was higher in longs when compared to flats. And this can also cause a negative impact on prices of rebars because this is the area where we monitor more closely, I mean, more for rebars than other products.

Speaking about other products, I will now refer to merchants and structurals. The market that presents higher prices when compared to rebars, but the market is very much related to the metal and mechanical industry and the downstream industry because this is one of the segments that has been more affected in terms of the civil construction industry that they are probably more resilient when compared to the manufacturing industry at the moment.

So there, we have seen some price and competitiveness, readjustments in terms of pricing. But we are very cautious going forward, especially looking at potential effects of the tariffs imposed to the mechanical industry. So our marketing teams are evaluating sectors of the industry that did not receive any exceptions in view of the recent tariffs imposed. So we are carefully looking at the health and breadth of our customers.

Now going to your second question on capital allocation, I think we have to look at the cause-and-effect topic. We are not cutting CapEx because the company's leverage went from 0.3 to 0.8. We are considering reducing our CapEx plans, mainly in Brazil because we are not seeing any concrete possibilities of economic returns to the investments in a current steel industry scenario that has been inundated by a very unfair competition from imported products.

It's not a matter of need or necessity that we are thinking about reducing our investments, but it's just a matter of choice because we don't see any perspective of returns. So this has been mostly due to a more assertive measure by the Brazilian authorities, given the fact that we see an increase in imported goods coming to the country.

But by any means, this doesn't mean that we will not do maintenance investments because these are important investments to allow us to remain very competitive and to keep the good health of our business. Of course, we are not going to let go of refurbishings of the blast furnaces or even other areas of the company, the coke plant, et cetera. All of the things that we -- that have to do competitive and growth, these investments with the current scenario of Brazil, I mean, unfortunately, for all of us, it makes less sense, right?

Next question from Rodolfo with JPMorgan.

I would like to ask 2 questions. The first, still on Brazil. And then I'd like to hear from Werneck about the United States. So my question on Brazil. I think it is clear that it is a complex situation. Looking back when we saw something similar happening, the company was very different. So you are not considering the same mechanisms now. The message via capital allocation is very clear. I think that you're not envisioning growth in Brazil.

But you kind of mentioned, Gustavo, about the possibility of cutting costs. You said that there are possibilities to cut costs further. And I would like you to elaborate on this. What are the opportunities? Because I think that this is an extremely important lever, particularly when you're thinking about defending our market share in Brazil. And now to ask a question with a smile on my face.

Yes. I was waiting for a question in the United States so that we can be happy.

Well, I'm going to make a very broad question since you are willing to talk about it because we are talking about the difficulties in Brazil, and the United States has been a positive surprise, a good backlog, strong demand. The market over there is still protected. We hear about some price increase attempts that didn't work. So what are you seeing? What can we expect?

And as this is a super relevant piece of the company, so if the CapEx focus will not be on Brazil, what can you do over there where you have a more interesting ability to compete in a market that has much equalized competition conditions?

Good, Rodolfo, good things that you raised. Japur, can you speak about the costs? And then I will answer the question about the United States.

All right, Rodolfo. I think that we had a super relevant program to cut costs, thinking about the 2023 level and reducing it to date. And these gains have happened already. But this quarter, and we actually mentioned this in the earnings release, given the high number of works and interventions that we are making at Ouro Branco mill with mining, with the flat rolling mill, our mining program, for example, includes some adjustments and adaptations to centralization to centering and the raw materials we have there.

So we reduced the production pace of our blast furnaces. So we understand that we might have missed an opportunity to produce at a regular pace for Ouro Branco between 125,000, 150,000 tonnes in Q2. Even considering a marginal return on this additional production volume, for exports, for example, we saw that within export, there was an almost 40% reduction in our exports quarter-on-quarter.

So if we think about contribution margin, of this volume, it would have been an important improvement, about BRL 150 million in our EBITDA. But this is what I call growing pains. That's the CapEx investment we are making there. And considering this additional production volume, we would have had a more significant fixed cost dilution in our results. But we believe that once a good part of these adaptations that Ouro Branco have been made already, so we believe that we would have a greater dilution of fixed costs with a higher production pace in Q3 and Q4.

Okay, Japur, you talked about BRL 150 million what?

120,000 to 150,000 tonnes of production at Ouro Branco that we did not produce due to a loss of pace in the blast furnaces. And if we consider that our variable cost with a simple rule of 3 is about BRL 3,000 per tonne. And if we consider about BRL 4,500 of price realized, considering the mix, a little bit of imported products and some domestic products, we could think about BRL 1,000 to BRL 1,500 of contribution margin on this volume that we did not produce that would have been posted in our results.

But since we are resuming adequate levels of production in the blast furnaces, we believe that we are going to have a greater dilution of fixed costs in Q3 and Q4. I'm sorry, I did the math very quickly in my head. I just wanted to size the greater dilution of fixed cost that we would have had in this quarter if we hadn't had so many adaptations and adjustments at Ouro Branco.

Rodolfo, about the United States, I kind of joke about this as managers. We love to interfere, have action plans. But sometimes, the best thing you can do is doing nothing to not get in the way of what is working. So sometimes I tell my team, let's be careful to not do too much and get in the way of what is doing well.

So the result in Q2 there reflects what we happened -- what we have there. And I would say that we are living our best moment in 2025 in North America. So in terms of price increases, that was not specifically in our segment. Perhaps it was more in flats. I think that things are well aligned for us to deliver short-term and mid and long-term results as well. Because you see, Rodolfo, a good part of our backlog is aligned with more mid- to long-term moves in the United States, things related to reindustrialization and so on and so forth.

So if you ask me, what is strong in our backlog, I would mention solar that continues to be very strong. We believe that perhaps in the future, with the reduction of incentives with the current -- in the current administration, everybody is accelerating a lot of these investments. So the backlog is very important, strong to deliver steel for the racks that support solar panels, transmission towers, energy distribution in general, using a lot of steel and data centers also using a lot of steel.

We also have steel to build new industrial facilities, factories that manufacture chips that started in the past, new facilities for the naval industry. The United States lost a lot of capacity in the naval industry. So there's military equipment, all the way to private vessels that need refurbishment and retrofits. So we understand that in the mid run, there will be a lot of demand.

So it doesn't make sense for me to say, oh, we're going to have a greenfield in the United States. That's going to get in the way because it will imbalance supply and demand. So we are very careful about what we are doing there so that we won't hurt what is already doing quite well.

As Japur mentioned in his presentation, we decided to suspend the downtime we would have at the Midlothian industrial unit. If the problem is adding more capacity in our main plant in Texas, we thought, let's not reduce capacity right now because we are surfing a very good wave, let's postpone this for later. So we are preserving the capacity we currently we have to meet the demand and maximize the results in a very good moment.

Another debate we are having is people are asking, do you intend to have more downstream in the United States? We are doing a little bit of it. Now we are starting a downstream plant that is small but important for this business of solar power. Instead of delivering just the shapes for the racks, we are delivering process that shapes that are already drilled for consumption. This will help us grow and keep our market share.

We are also adding new products, marginally some mills like Petersburg may make steel for piling and foundations. So we are being super precise so we won't hurt what is working well. So we believe we will continue to do well this year. Let's see if we will have an ability to expand the spread, perhaps a little.

But in terms of demand, considering the cost equation, we got to a very good level. We started in the past to be on equal footing with our competitors, and we've seen this from a very positive approach. Even our specialty steel business over there improved in the past few months with the reduction of imports. So we have an expectation to continue to post good results. So we shouldn't think about possibilities that can get in the way.

Next question is from Gabriel Barra from Citi.

I have 2 questions. Also about good things, Gustavo. When we look at next year, if everything remains constant in the United States, you will have some projects maturing. You have Midlothian, you have Miguel Burnier. So maintaining the same base, we should expect a higher EBITDA. When we look at the current debt of the company, if everything is constant, the EBITDA should be higher with the net debt not increasing that much. And perhaps with a lower CapEx, perhaps we should have more room for cash generation by the company.

So my question is, in terms of capital allocation, given what you said in this call and in the interviews today, it seems that you're not going to invest in growth. Perhaps you would have more room for share buyback and dividend payout. So my question is, how will you allocate capital given that you are going to have more cash generation with the United States doing better?

And looking more specifically at the projects, we talk about BRL 1.1 billion always. Those 3 projects maturing next year. But also, you have the point that Japur mentioned about BQ. The ramp-up had a relevant impact on the cost. It should be a one-off. So we should think about numbers above the numbers that we were considering, perhaps even greater than the number that we had been talking about. This is one-off of the second quarter.

So I'd like to hear what you're thinking about this number next year. If you could rethink it, given that we're getting closer to the completion of the projects, Miguel Burnier, 75% physical progress. So I'd like to hear more.

And if I may ask about Ouro Branco, does it make sense to think about the normalization of production starting in Q3? And what I talked about the one-off, should we think about this for next year as one factor to add to the EBITDA? If you could put all of this into context, it would be very helpful.

Excellent. Well, trying to put your questions together. Well, let me start in the right order. Today at this point, with Gerdau share prices, looking from different metrics, share -- price per share versus shareholders' equity, we understand that an excellent capital allocation and return for our shareholders would be to repurchase the shares of the company.

So if we see a reduction of our indebtedness in the coming quarters and expansion of our free cash flow, I would say that our #1 priority in the current context would be to have share buybacks. We would prefer share buybacks over extraordinary dividends. As we have mentioned in previous quarters, and that's why we had a share buyback in 2024, and we approved a new share buyback program in 2025.

As regards to the projects, I think that summarizing a bit, I think you kind of captured our spirit at this moment. And I would say that we are in a moment of transition. We are completing very representative projects in our Brazil segment. Growth projects, projects that will generate cash and EBITDA alike in the future, that will start giving us fruit in the case of the hot coiled rolled mills in 2025. But the ramp-up will be in 2026 when we are going to have the mill operating throughout the year at 100% capacity.

Likewise, we are going to have the Miguel Burnier investment in mining. We started the year accelerating, and we start the year accelerating. And in 2027, we are going to have the full benefit of that project reflected in our results. But we understand that given the size of the return of the mining project, we will have a significant growth and a potential EBITDA increment.

If we consider, for example, half of the BRL 1.1 billion that we use as the reference of expected return for the mining project, plus the return of our HRC project. And if we have this normalization of this one-off cost that we had given the adaptations in the Ouro Branco mill, we understand that there is an important room to increase our EBITDA in Brazil and particularly next year if everything remains as they are.

Next question from Carlos De Alba with Morgan Stanley.

So look, I ask about one topic in particular, working capital. You did mention, Japur, that in the second quarter -- second half, you should generate cash as working capital comes down. But maybe beyond just the second half of the year and 2025, I think this is an area that we analyze where the levels where the company was back in 2017, maybe to 2020, it was lower than it is today.

So I wonder if there is any structural initiatives that the company can take and implement in order to more permanently reduce that level and generate more free cash flow, which ultimately, I think, is at the core of a lot of the discussion today. The company needs to generate more cash flow, return more money to shareholders. Hopefully, that increases the value of the shares in the market.

Carlos, I mean I can answer your question in 2 parts. What changed? I think, first of all, we went through a major transformation process. I mean, if you think back in time when we had many divestments, mainly in North America, I mean, iron ore and rebar, these products had a lower margin. But at the same time, the cash conversion cycle was shorter. So there was no more niche of high added value, less direct sales and more -- I mean, sales to end users and this if, on the one hand, increases our profitability, if you look at the EBITDA margin of Gerdau U.S. when compared to other peers.

On the other hand, proportionally speaking, this consumes a bit more cash in terms of terms and the value added in the inventory because the unit cost is higher. Well, having said that, even then, we understand that there is still some room for performance improvement in our cash conversion cycle, thinking in terms of working capital, not in absolute U.S. dollar terms, but in terms of working capital days.

So we understand that the level is today around 84, 85 days. And then we should pursue a level close to 80 days. I mean there are challenges, and these challenges will also be present when there are fluctuations in the market and pricing like what happened in the North America this quarter or this will require more working capital as it did during the pandemic. But what we are doing now in our different business segments, we are looking for 4 to 5 days lower than the current level today.

Our next question from Caio Ribeiro with Bank of America.

I do apologize if probably my question sounds repetitive. But first of all, about the tariffs in the U.S., many of the discussions about the topic around some possible exemptions for Mexico and Canada in light of what happened in previous years. So it's very difficult to have a very concrete view of whether this scenario will be materialized or not. But given the current landscape, how do you think this would impact your operations in also Mexico and Canada?

And still on the same note, whether you believe that the incentives that you were mentioning and also the spike in long prices, is that mostly due to demand in the domestic market or whether this is related to that share of imported goods? And how will be the impact if the exceptions come along?

And my second question is about special steels. What is the progress in terms of demand in the Brazilian market? And how would this possibly impact your margins going forward?

Well, Caio, I will answer your first question and then Japur will do the rest. We believe that this debate between the U.S., Mexico and Canada will continue to happen, and this will end up in a review of that agreement between the U.S. and the country. So we believe that the entire debate has, as a backdrop, a search for a new configuration of the agreement. So I think that until then, this debate will go on. This is our belief.

Speaking about rebars, Caio, it's just related to supply. I mean if -- I mean, Brazil has surplus supply. And if that's not enough, you have a reduction in prices, so then I can hold back probably the entry of imported goods. But what we can anticipate at the moment is that we know that this -- the share we have at the moment is important for us in the short and mid-range, and we don't think there will be in rebars any major changes in the next few months.

As I said before, we believe that there is still room for some pricing and profitability recovery, but this is not something that will happen easily. In the next coming weeks, we will probably see how much we will be able to recover. This is our belief at the moment. And so maybe Japur can talk about special steels both in Brazil and the U.S.

I mean, you had 2 questions, but in there, you also added a third question. We think that this has to do with capturing shares from imports and the industry as a whole, is managing to capture that share. I mean, this is the reverse process that we see in Brazil. I mean, we see positive demand in the U.S. We don't see any apparent issues with demand. But local importers are losing ground. And in general, the situation is improving, especially in terms of longs.

Now about special steels, we have 2 different opinions here. Maybe in Brazil, we are a bit more concerned in the second half of the year because there might be potential impacts coming from the tariffs imposed by the U.S. to Brazil. And so this should have an impact on the automotive and auto parts industry. And that's an important supplier. I mean, that's an important segment for us, 15% of our deliveries in Brazil are earmarked to the automotive sector.

On the other hand, in North America, this quarter when compared to previous quarters, we saw the growth of margins coming from our special steel products, not much in terms of SBQ prices, but mostly due to operating improvements because of all of the investments we made in our Monroe mill in the past few years that they are approaching the end of the investment cycle. And now this is bringing results of efficiency, capacity utilization, costs, and this, together with a better metal spread, this is leading to better margins for SBQs in North America.

Well, due to the limited time, our Q&A session is now concluded. And I would like to take the opportunity to invite you all to our 2025 Investor Day that will take place in Sao Paulo on October 1. Thank you very much for your attention, and I'll see you then.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]