Gerdau S.A.

Good afternoon, everyone. Thank you for waiting. Welcome to the video conference for the release of Gerdau's Q4 23 results. With us here, we have Gustavo Werneck, COO, and Rafael Jafur, CFO. This video conference has been recorded and will be available on the company's IR website, where the complete material for the earnings release is available. You can also download the presentation using the chat This video conference has simultaneous interpretation and this platform. So you have just to click on the interpretation button and the bottom part of your screen in the globe and you can choose Portuguese or English. For those of you listening to the video conference in English, there is an option to mute the original audio in Portuguese. by clicking on Mute original audio. During the company's presentation, all participants will have their microphones disabled. Following the presentation, we will begin the Q&A session. Analysts and investors may send their questions previously via chat, and they might open their cameras in the Q&A session if they wish to do so. We wish to emphasize that the information contained in this presentation and any other statements that might be made during the video conference concerning Girdal's business prospects, projections, operating financial goals, are based on the beliefs and assumptions of the company's management as well as on information currently available. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties, and assumptions. because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect Gerdao's future performance and lead to results that differ substantially from those expressed in such forelooking statements. So now I turn the floor to Gustavo Werneck to start the presentation. Please, Gustavo. Thank you, Renata. And good afternoon, everyone. I would like to start by welcoming each one of you to the video conference call to announce Gerdau's results for the fourth quarter of 2022 and the year-end closing. I hope all of you are doing well. And as Renata mentioned, also participating in this presentation, our CFO, Rafael Japor. And for both of us, it is always a pleasure to talk to you about our performance and answer questions that may come up during our presentation. I will start by talking about the international scenario and the highlights of the overall results, and then I will detail the performance of our business operation in the quarter. Next, Jaipur will come in to share some information about our financial performance. And finally, I will highlight some points on our ESG agenda. At the end, the two of us will be available to talk to you about any points you might want to explore in more details. Before I continue, I would like to once again give a very special thanks to our employees and the countries where we operate for having contributed to another extraordinary year in the history of Gerdau, a 122-year history. So I will start talking about the macroenvironment in which Gerdau is a part of. Throughout 2022, we were able to test Gerdau's resilience against a challenging macroeconomic scenario. Gerdau is today an agile, modern, and flexible company, the result of a profound cultural and digital transformation carried out in recent years, which enabled us, even in a complex scenario, to have a historic era with exceptional results. We closely followed the unfolding of logistical and geopolitical challenges resulting from the continuing COVID-19 pandemic and the conflict between Russia and Ukraine, which brought uncertainties to the global economic and inflationary One example of this impact was the pressure on production costs, especially energy costs. I emphasize, however, that even in the midst of this challenging scenario, Gerdau continued to perform very well as a result of its business model, geographic diversification in the Americas, and an innovative mindset focused on the challenges and needs of our customers. Now, turning to the next slides, the two next slides, I would like to briefly bring to you some highlights that reflect the solid performance posted by Gerdau in the fourth quarter. Later on, as I mentioned, Jaipur will give details of our financial performance. We ended the year with the highest net sales in Gerdau's history, totaling 82.4 billion reals. Also last year, we recorded the company's second-best adjusted EBITDA, 21.5 billion reals, with an EBITDA margin of 26.1%. When we analyze our history, as you will see in this presentation, today, Gerdau is at a new level of financial and operating results. This performance demonstrates Gerdau's capacity to transform itself and continue sharing value with its customers and other stakeholders. offering the market even more innovative and sustainable products and services. Today, the company stands out for its delivery not only of solid financial results to our stakeholders, but of a transparent business strategy based on strong discipline in cost management and continuous improvement in assets competitiveness. A good example of that is the level of our sales general and administrative expenses, the SG&A, which has remained at levels well below of those our peers have. I also emphasize the performance of the North America business operation throughout 2022, which posted an adjusted EBITDA of 10 billion reais with an EBITDA margin of 32%, both historical annual records. This result reflects the consolidation of our strategy and the positioning in the North American market and the management efforts deployed in recent years to advance the competitive levels of our operations in the region and generate even more value for our customers. In addition to the financial highlights, I would like to mention the establishment through Gerdau NEXT, our new business unit, complementary to STIHL-Ubidata, a joint venture with Space Time Labs. The new company specializes in high technology and the development of platforms that integrate with everyday industrial life by means of artificial intelligence, autonomous systems and robotic operations. Uberiton is yet another chapter in the journey of business transformation via digital that Gerdau has embraced in recent years, reinforcing the company's ability to adapt, innovate, and transform itself over its 122-year history. So let's turn to the next slides. I will give more details on the highlights of each of our business operations and the outlook for the markets where Gerdau operates. On slide number six, as I mentioned earlier, and now talking about our North America business operation, we have delivered record results in 2022, and the outlook for 2023 remains positive. Steel shipments to the local market in January were at the highest since 2015, and our order backlog in the United States remains at high levels around 60 days. The steel demand has been positively influenced by the level of activity in the construction sector, which is expected to grow by more than 6% this year. In particular, the infrastructure segment should advance 16% by 2023, driven by projects linked to the infrastructure investment package, the results of which are beginning to be received. This package should generate additional steel demand by the next year as states advance in these projects. So this can already be seen, though, in January. The North American government has announced, as an example, funds of $2.1 billion to revitalize bridges in the country. In addition to that, I should stress the reassuring that has contributed to the consumption of domestic steel in the region. And also, we'll have also additional demands coming in the future from the Given this scenario, we continue to operate our mills in the region with capacity utilization levels above 90%. We will continue to invest in improving the profitability and productivity of our North American units, aiming to share even more value with our customers. I would highlight now the investments in the Whitby Mill in Canada whose new mill shop will start operating this half of the year. And also an investment in the electric furnace in Midlothian, Texas plant seeking greater productivity and efficiency of the equipment. This last investment is part of a continuous investment plan directed at the Midlothian plant focused on the modernization and expansion of the product portfolio manufactured at the plant to meet the needs of local customers and consumers. I would like to say that our operation that has with the production of rebar and a state-of-the-art plant, has right now its best historical moment in terms of production, sales, and financial results. It is benefited by the local market, but also by the commercial agreements with the United States and Canada, and also for ensuring finance. Now turning to the next slide to talk about our specialty steel operation as a financial highlight. Our adjusted EBITDA in 2022 was 40% higher than the previous year, driven by the current levels of profitability. In the United States, I emphasize that the CHIPS Act, approved by the American government, will contribute to increasing the number of the semiconductor plants in the country over the next few years, solving the ship shortage problem in the vehicle market, which has impacted the demand for specialty seals in recent years. There are around 30 projects, including expansions and greenfield units, estimated in $200 billion. In terms of market, the production of light vehicles in the United States should recover and stay above 15 million units. On the other hand, the estimate for the heavy vehicle sector remains positive, with a forecasted increase of 5% in 2023, reaching more than 300,000 units. There is an additional investment of 200 million rials in Monroe, Michigan is moving on as expected with this new investment. Monroe will be an SBQ producer, the most technological in the global market to cater to the future needs of our clients and continue searching for solutions for hybrid and electric cars segments. Now, the perspectives here in Brazil are influenced by the lack of semiconductors and also uncertainties related to access to credit lines and high interest rates. In any case, the production of light vehicles should grow 4% in 2023 compared to 2022, according to the National Association of Vehicle Manufacturers, ANFAVIA. The production of heavy vehicles, in turn, accelerated at the end of 2022, to the change in truck technology to Euro 6 standards. At the beginning of January, a new emission rule for heavy vehicles came into force. The agricultural machinery sector should maintain a favorable scenario with the modernization of the fleet amid good harvest levels. I also would like to reinforce that industry that consumes specialty steels, especially auto parts, have proven to be very competitive in the global market, generating export opportunities. I would like to highlight that we continue to advance with the new continuous casting of blooms and billets at Pindamonha Gaba Plant in São Paulo, whose products are in the certification phase with our customers. The equipment with state-of-the-art technology allows a specialty steel unit to have a more automated process with better yield. resulting in the delivery of differentiated products and much higher quality catered to the demanding markets. Moving on to the next slide, I will talk about the long and flat steel scenario in Brazil, whose performance in the fourth quarter reflects an accommodation of the demand for steel in the different sectors in which we operate. After a period of two years, 2020 and 2021, when we did not have the seasonality of December, which is typical, 2022 once again behaved at similar standards of this month, bringing as additional elements to a higher drop in the demand, the World Cup, and expectations about the new elected government. We seized this period to have a longer stoppage planned a downtime to recover the life of our assets after a period of two years that we needed to have shorter stops. About 2023, we see a recovery in demand after the second part of January in the different areas in which we work. Our order book since then, since January 15, added to the expectation of future consumption of steel by our clients, make us confirm our initial projections that we will have a steel demand in 2023 in Brazil in line to the one that we had in 2022. The steel consumption in residential and commercial construction sectors is still high. And despite of the current concerns of the market regarding the number of new launchings and also the level of inventories in some cities, the number of construction sites active in Brazil, for instance, has reached a historical record in February, over 10,000 construction sites up 3% in the annual comparison. According to the last survey in the construction industry, the GDP of construction should increase 2.5% vis-à-vis the prior year. The sector can also benefit from the reforms in the housing programs aimed at the low-income segment over the next few quarters. Retail sales remain at good levels, but slower, but they can be positively impacted by new aid measures implemented by the government. I would like to point out that Gerdau's current business model has made the company less dependent on retail, allowing it to capture various market opportunities. In addition, I anticipate the resumption of large public investment in infrastructure works, thus acting as a driver of the country's growth. BNDS disbursements in this segment are estimated at more than 31 billion reais for this year. In addition, I would like to highlight the demand for steel from the industrial sector. It has settled at a high level, reflecting the good performance of the agribusiness, capital goods, machinery and equipment, yellow line and energy segments. The growth of centralized generation, for instance, should reach 10.3 gigawatts in 2023, the highest ever recorded in the country. Solar and wind power plants should account for more than 92% of this expansion. Now, moving on to the next slide, talking about the South America, I start by Argentina, where the demand for steel from construction, agribusiness, energy, and mining sectors remains strong, which has stimulated sales in the local market. The Argentinian construction sector should repeat in 2023 the good performance posted in 2022 when the level of activity was up by 3.5%. The same scenario is repeated in the Uruguayan steel market. In Peru, in turn, despite the local political uncertainties the demand for steel continues at good levels boosted by the construction industry which resulted in an increase of nine percent in shipments to the local market in the fourth quarter vis-a-vis the previous quarters so our outlook for this business operation remains positive in south america and this initial part i now turn the floor to japur to go into the details about our financial performance, and then I come back to talk about our ESG agenda, and later we'll have our Q&A session. Japor, the floor is yours.

Thank you, Gustavo. Good morning, all. Good afternoon. It's a huge pleasure to be here with you once again in our earnings conference call. Well, I'll start with slide 11, focusing on our cash flow and working capital. In 2022, like Gustavo said, we had a strong EBITDA of 21 billion and 500 million reals. Like we saw before, it is the second best annual EBITDA in our history, confirming the resilience of our business model. Our investment in CAPEX over 2022 amounted to R$ 4,3 billion, very much in line with the guidance that we shared in early February this year. The big difference that we can see in terms of operating cash flow in 2022 was the working capital. In 2022, we invested 2 billion and 700 million reals in working capital, almost 4 billion reals less than the business required or invested in 2021. As you know, in this year we had a big expansion of our revenues and sales, therefore requiring more working capital investment compared to 2022. Thanks to the reduction of our general debt throughout the year, we had interest expenses that were lower compared to previous years. despite this global scenario of high interest rates. Therefore, we ended year 2022 with a record cash flow of 10 billion and 500 million reals, equivalent to almost 50% of EBITDA for the period, and almost 900 million reals above what we generated as cash flow in 2021, which was also an extremely important cash generation year for us. Moving on to the lower chart on the slide, we can see the evolution of working capital on a quarterly basis. We ended the year with working capital level of 16 billion and 200 million BRL and a cash conversion cycle of 81 days, slightly above what we had seen in recent quarters. and this is pretty much due to seasonal adjustments in demand and also the lower level of net sales, like Gustavo said when he dived deeper into the performance of each one of our business operations. Moving on on the CAPEX slide, And now I'll dive deeper into this topic. I'll give you a thorough description of our investment. We ended the year 2022 with an investment of 4 billion and 300 million BRL, like we said before on the free cash flow slide. These amounts include both investment in maintenance, which we can see in the grey upper part of the pie chart, and also investment in expansion projects and technical upgrade. For year 2023, and by the way, we had material information with the guidance showing investment of 5 billion BRL in CAPEX with our steel operations, 50% Of this amount, approximately 50% for maintenance and the other 50% in expansion and technological upgrade of our business. Like Gustavo said, always pretty much focus on pursuing increasing efficiency in cost and competitiveness and also growing in the business lines that we consider able to generate value and provide excellent results on the capital investment. In addition, in this amount of R$ 5 billion, approximately R$ 830 million will also be invested for the benefit of the environment, very much in line with our goals to reduce greenhouse gas emissions. On the right-hand side of the slide, we highlight this quarter two projects. The first project is the expansion of our Whitby Mail Shop in Canada, like Gustavo said during his speech, which is expected to be concluded by the second quarter of 2023. That's what we referred to when we had the earnings presentation for Q1. And the second expansion project is for coyote hot-row strips in Ouro Branco. We had significant growth. in the share of flat steel in our Gerdau product portfolio in the Brazilian operation, and we are still committed to grow this product line. The expectation is that together, these two projects, once they are concluded, they should generate between 300 and 450 million reals additionally as EBITDA per year, naturally, once they are fully operational. I would also like to highlight on this slide that in addition to the R$ 5 billion exclusively related to our steel operations, CAPEX and steel investments, in addition we also have some disbursements related to Gerdau Next initiatives. These initiatives were already disclosed and Gustavo announced them in his speech. We also told as material information to the market last year. So now I would like to give you a projection that for 2023, we expect that disbursements related to these projects at Gerdau Next are in a range between R$ 500 million and R$ 800 million as effective disbursement. Moving on to the next slide, let us talk about our indebtedness and liquidity. We continue with a healthy net debt over EBITDA ratio of 0.33 times. In the fourth quarter of 2022, more specifically, we had a slight increase in our net debt, largely due to record dividend pertaining the third quarter, which we effectively paid in December, so in Q4. total amount of 3 billion and 600 million reals. So this contributed to increase the numbers this quarter. In addition, it's also important to say that we closed the year with a healthy cash position of 5 billion and 400 million reals. We also ended this quarter with our revolver line fully available aligned with several first-class banks and they are worth 875 million dollars which can be withdrawn if necessary So, considering all the aspects shown on this slide, we are very much in line with the parameters that we've been setting in our financial policy. We'd also like to remind you all that in April we will also have the maturity and settlement of our 2023 bond amounting to approximately $119 million, which should support our goal of reducing our debt denominated in dollars. Now, on slide 14, I'll talk about the return to our shareholders. When we think about Q4, a dividend payout of 133 million Reals, we expect to close 2022 with 6 billion and 100 million Reals as dividend payout, a record amount. In addition, it's also important to recall you that we had over the year more than 1 billion rials of share buyback. In other words, if we take into account dividends and buyback, within this year we paid more than 7 billion and 100 million rials, equivalent to nearly two-thirds of the free cash flow of... approximately that we mentioned in the beginning, or almost 70% of payout or the net income for the year, which is more than twice the amount stated in our bylaws. I highlight that we closed the second consecutive year, as we can see at the lower part of the slide, the second consecutive year of dividend yield above 10%. This shows Gerdau's capacity to give return to its shareholders. We keep on having two buyback programs, both at Gerdau SA and Metallurgica Gerdau. They remain open and we strengthen that we have our dividend payout policy unchanged according to our bylaws as 30% of adjusted net income. Now, on the last slide of my presentation today, I would like to share a long-term outlook when Gustavo talks about the difference between our current performance parameter compared to the past. I would like to compare and highlight the period between 2014 and 2018, when we went through an intense process of cultural and digital transformation, and we also performed some divestments, as you all know. This year, 2022, we reached many significant milestones. We reached our lowest net debt over the last 10 years. We also had our lowest average level of leverage in recent years. We also reached the second highest net income and the second best EBITDA in our history and broke our record in free cash flow generation. And this all put together enabled us to return more value to our shareholders than ever before via dividends and buyback. We are confident that the strategic decisions made in recent years, as well as our intense process of cultural transformation, to our discipline in execution and capital allocation will enable us to continue delivering higher results in the longer term. So once again, thank you very much for your attention. And I give the floor back to Gustavo so we can come back together at the Q&A. Thank you, Japur. So very briefly, Let me share some information about our ESG agenda and we open then our Q&A session soon. Sol's Light 16. I would just like to highlight that we concluded in year 2022 an accident frequency rate of 0.76, which is the lowest rate ever recorded in our historic series of 122 years. This performance underscores our commitment to the health and safety of our people. Here at Gerdau, safety always comes first, since no result is more important than people's lives. In this sense, in our digital transformation journey, we have broadly invested in artificial intelligence and industry 4.0 initiatives to improve the monitoring of critical tasks and prevent accidents. I also highlight that we obtained the certification of our second operation as a B Corp. Cide Peru, the company's steel production operation in Peru, joins Gerdau Summit. Our joint venture with the Japanese company Sumitomo Corporation and Japan Steel Works focus on the supply of rolling mill rows and parts for wind power generation, which now become the first two steel producers in the world to be certified as B Corp. As part of our sustainability agenda, this certification recognizes that Gordel complies with good sustainability practices and that it effectively connects the business with our purpose of empowering people who build the future, leaving a legacy for society. In addition, I also highlight that we recently invested by Gerdau Next on a new platform for renewable energy. In this sense, we are partnering with New Wave Capital, A Brazilian investment managing company focused on the energy sector for the acquisition of a stake in New Wave Energia's capital stock. The deal also includes the acquisition of long-term energy by Gordel and its subsidiaries, corresponding to up to 30% of the energy generated by power generation projects directly or indirectly owned by New Wave Energia. self-production basis. The operation aims to generate greater competitiveness in steel production costs in addition to supply Gerdau's plants in the country with renewable energy as part of the commitment to reduce our greenhouse gas emissions. Finally, I would like to highlight that we are very proud to join the town, Gerando Falcões, and the São Paulo local administration to provide a cross-sectional positive impact on the lives of countless families in vulnerability, reinforcing Gerdau's commitment to be part of the solution for social challenges. Together, we will take the Favela 3D initiative by Gerando Falcões to the Haiti favela in São Paulo. The project comprises a systemic action that proposes solutions for development, income generation and social urban planning. co-created in collaboration with the local population this partnership will make it possible to build a new future through a project that transforms and fosters socioeconomic development for locals so this is what i had thank you all for your attention and for listening to our explanations And from now on, we'll be here to answer questions and even dive deeper into any topics that are of major interest to you. Renata, back to you so you can support in the Q&A session. Thank you, Wernecki. So now we'll begin the Q&A session. As a reminder, if you want to ask questions, please click on the Q&A icon at the bottom of the screen and type your question to enter the queue. On being announced, a request to unmute will appear on the screen. So, at that time, please turn on your microphone to ask your question. If you want to open your cameras, please let us know so we can enable your camera. We kindly request that all questions be asked at once. So let us begin with our first question. Caio Ribeiro, sell-side analyst with Bank of America. He asks, good afternoon and thank you for the opportunity. My first question is about prices of long steel in Brazil. we can see a pressure on these prices in recent months, whereas in the latest weeks, the Turkish rebar is increasing, increasing the discount of rebar in the domestic vis-à-vis the Turkish rebar, double digit, according to our accounts. Do you see an improvement in order to justify increases right now and close discounts vis-a-vis the turkish material or which trigger should happen in your point of view in order to improve the chances of implementing an increase secondly i wonder if you could tell us about your expectations vis-a-vis the fact of the infrastructure investments job Act and Job Inflation Act and the CHIPS Act in the demand for long steel in the US market. And when do you expect this effect to become material? This would be very helpful. Thank you. So now I give you the floor, Japur and Virnecki. Thank you. Caio, thank you for your question. I'll give you an overview for both topics that are mentioned in Japur. Be ready to provide any more details for Caio and other listeners. Caio. Your question about profitability for long steel in Brazil is already happening. This resumption is already taking place. Actually, particularly to low demand that we saw in Brazil in December for the reasons already mentioned like World Cup and expectation with the new administration, profitability went down to a level which is not normal. Since January 15, mid-January, the demand is already recovering in all sectors, some a little bit stronger, others not so strong. And by the way, I said that right now we envisage demand for 2023 in Brazil at the same level as we had in 2022. So February, we're already back to normal in terms of demand. This process of resumption to profitability levels for long steel is already happening as we speak. What about Turkey? It certainly helps. The Turkey thing, well, if we look at the impact on our BO in Brazil, but there's also an impact on US BO. Just to give an explanation about what happened in Turkey right after this tragedy, humanitarian problem this huge earthquake in turkey there was also an early concern of how it would affect the local steel production in turkey remember turkey is the eighth steel producer in the world about 30 million tons and the largest scrap importer about 30 percent of world imports so the following day there was a concern about the assets for local production of steel. At first, there were imports of semi-finished, particularly billets, in order to come back to long steel rolling productions in Turkey with a drop, particularly in the US, for scrap. But after cleaning all the tragedy sites and with the possibility of reconstruction, the Turkish administration, so to speak, reserved 4 million tons of rebar to rebuild the country. And that led to an increase in the price of rebar in the international market and also an increase in scrap in the US, because Turkish is now importing scrap in the US market more strongly. So this process to evolve international prices, I would say it also helped by the resumption of profitability levels for long steel in Brazil after the drop in December. As for the US, The outlook is very positive. Actually, we were even taken by surprise how January was a very strong month for our deliveries. February continues the same way. We are at the top of our capacity in production. I would say that some of the mechanisms to encourage steel production, the infrastructure package, or also the Inflation Reduction Act, the phenomenon of the reshoring, which is already very present in our order book, with new production capacities being built in the US. And macroeconomic indicators that we saw in the coming weeks and job generation and other indexes, they all bring the outlook of another historic year in North America. We are ready to take it. Investments in recent years brought additional capacity of products related to non-residential production put in place. So we expect to see levels not only this quarter, but by year end, very robust. for results in North America. So overall speaking, this is it. Japur, anything to add? Feel free to bring more color. Sure. Thank you, Caio. Thank you, Gustavo. An important thing to mention in addition to short-term outlook, I would also like to think about the RNA package in the mid and long-term vision for our operations in North America. That's quite an ambitious project, a package that has an important share of its resources related to energy transition. more than $350 billion for transition and conversion of clean energy. And the production of clean energy typically takes up to three times more steel compared to other sources, conventional sources of power. So some studies that we follow estimate that this investment announced by RA should be translated from 25 to 35 million tons additionally of steel used to build electric or photovoltaic and wind power plants. A significant share of this deal comes from projects or products which we can provide in the US for these construction sites and these projects. We have facilities in the US for that, particularly in our beams and merchant bars business. This gives not only a short term outlook, but also mid to long term. in terms of keeping levels of capacity in the mills with very value-added products longer in North America. Thank you, Japor. Renata, back to you.

Thank you all very much. Marcio Farid, a sell-side analyst from Goldman, wants to ask a question. I think he wants to do it by video. Hello, everyone. Renata, thank you. Thank you very much for the opportunity. Hello, can you hear me? Yes, we can hear you very well. Good morning or good afternoon. Thank you very much for this opportunity. I have two questions. The first one is about your CAPEX. I don't know if Shapur Orvanek can go into the details for us. This is one of the things that we have seen and observed is an increase in your maintenance capex, not only in the sector, but in different industries, actually. I would like to understand how we should think about the maintenance capex. If the level of 2023, what you already have as guidance, Is this a new recurring one or if you have anything for us looking ahead? And also, one of the black furnaces of Odo Branco, the renovation is already being questioned by investors. We would like to understand what is the magnitude of this capex. One of your competitors has a capex of around 3 billion for a renovation of a similar black furnace. when that should be done, what is the magnitude of cost, and when do we expect that these figures will be reflected on the capex. And also, in Brazil, Wernicke went into the details on the price side. I would like to understand how we can think about costs. Obviously, a lot of the raw material is volatile, has been gone up and down different prices, but scrappy, we have seen a strong correction in the second half of the year. It looks like it has not been translated into the metallic results yet. So how can we think about costs in terms of for the profitability in Brazil business unit when we look ahead? Gustavo, please. Because you already talked about prices. Thank you, Marcel. These are good topics. So, Jaipur, let's do the same thing. I will go over the questions briefly, and then you can add to them anything that you might want to comment on, and I'm sure that's going to enrich the answer. So, Marcel, first, when we talk about CAPEX, we always think about capital allocation. I didn't want to miss this opportunity to say two words that are in my agenda here, which are discipline and predictability. So when we look ahead, we are not going to allocate capital in large green field projects. There are no projects for the future that could in any way surprise those that are in relation with Gerdau. So the capital allocation for CAPEX, that share is going to be related to the maintenance of our plants and the marginal increase of some productive capacity for markets where we have demand or technological improvement so that our assets can be prepared to meet the future challenges. So there are no surprises ahead. And I stress, this word predictability for us is very much present in our daily lives. So specifically talking about Ouro Branco, we are using everything that we can in terms of what we invested in the last few years of investment, technology and everything else. We have good equipment and in addition to that, we have learnings from the renovation of the blast furnace number two. In addition to that, we use specialized consulting services for that type of job so that we could postpone the stoppage of the furnace in Ouro Branco to 2025. That will allow us to reduce capex for Ouro Branco. So this level of 5 billion reais, that will be there for the next few years. So we do not have any piece of equipment faulty or with any problems or anything in terms of capex that's going to be of surprise to the market. So we imagine that the current level of capex will be enough to do all the renovations that needs and not only the blast furnace but also the talk machine and investment in mining so and or area as well so the level that we mentioned here for 2023 is going to be that level of investments for the next few years so we want to make sure that we are comparing apples to apples so When we talk about 5 billion, it's compared to 4.3 from last year. And this is still, because Gerdau Next is something else. So this is a general overview for Ourobranco. So right now, we are at ease because we postponed this stoppage from 2024 to 2025. Now, about costs in Brazil. In a way... they will be similar to costs that we have seen last year in terms of energy. I think this is an advantage, and our competitiveness in buying scrap allows us to mitigate other costs that are not as under our control. So now, really, what we have to see is coal. Yes, it has been very much volatile. It goes down, then it goes up after news coming from Australia. In order to understand where costs will drive us here in Brazil, we have to pay attention to coal. And as I mentioned to Caio, this process of rebuilding between the prices and everything, that is already being taken care of. And that has to do also with imports. I will stop here, Chapori, and you can... um take over uh please a quick follow-up before you turn to japer and that might be relevant if we think about this stoppage in 2025 this money would be spent already in 2024 or closer to 2025. oh excellent question we are already spending this money okay yes because when we talk about normalizing in five, we are considering that different pieces of equipment and components we are already acquiring. So a practical example, if you know the, The blast furnace, some of the parts like crucible, they take two years to be delivered. So we are already working on that so that we can have this downtime in 2025. So nothing is going to happen at the last minute. That's why we are telling you that we are going to have this normalization in the CapEx level, and no one will be surprised with a very high CapEx five years from now or two or three years from now. So, Marcio, just a simple math on the CapEx figures. In this past year, we invested $4.3 billion in CapEx. Out of those, two-thirds rounding up, 2 billion, 6 million rounds was for maintenance and the remaining 1.7 billion in competitiveness and growth projects. Now, this year, 2023, our capex is up to 5 billion rounds. But its proportion is different. If we think about maintenance itself, we are reducing it a little bit. It's more or less in line. We could say it's a flat in terms of general maintenance. But what is in fact increasing is on the competitive projects. We are investing 800 million euros more in 2023 in projects. to grow profit, to provide a profitability, other products, other capacities more than we invested in 2022, aligned to what Gustavo mentioned. When we talk about maintaining our plants efficient, and we are talking also about gaining costs, expanding product lines that we believe that will be generating more value over time. Just agreeing with Gustavo here, our idea is to maintain these levels of disbursement for the next years with no major changes. This is going to be all very well planned. Just to show you, the highest individual disbursement that we have this year is our investment in... the expansion of the coiled hot rolled strip that individually is the project that is taking up more disbursements for this year and the investment and growth and competitiveness this is not investment in maintenance let me tell you a little bit about girdle next yeah about girdle next then the disbursement that we forecast for this year not con The 5 billion that we mentioned is still only, as we said, but it's for Gerdau next, the 500 million reals and 800 million reals. But why this difference, Gustavo? This is a high range because these projects and initiatives are not 100% from Gerdau. Sometimes we are doing partnerships with investments such as Ubiratan, as Gustavo mentioned, or Adianti with Random or with New Wave. These are investments that depend on licenses. If these are companies that work with energy generation or the execution speed vary or these are joint ventures or they have an independent board. So it's not in our total control when we plan a downtime that we know that's going to happen in December. So it's not that clear. uh so that's why we have this open range for gear down next we expect to invest and go down next between 500 and 800 million rounds and i have already seen other questions in the chat about this so where do where are these investments if they are not in capex line and the capex line is exclusive capex that is going to generate uh depreciation in the future but in gear down next we invest in joint ventures or subsidiaries so these are corporate shares that are they are going to come up in the line of investment and not in uh the line the same line as our other capex okay thank you very much so renata back to you