Gerdau S.A.

My name is Renata, Head of Investor Relations, and participating in our video conference, I'm the CEO of Gerdau Gustavo Werneck and the CFO and RO, Rafael Japor. We would like to inform you that this video conference is being recorded and it will be available and the company's IR website where the complete material of this earnings release is available. You can also download the presentation using the chat icon. We would like to remind you that the broadcast of this video conference is being done with simultaneous translation through the tool available in During the presentation of the company, all participants will have their microphones disabled. Following the presentation, we will begin the Q&A session. Analysts and investors can send their questions in advance using the Q&A button, and they can open the camera if they prefer during the Q&A session. We would like to highlight the information in this presentation. and other information related to this video conference, related to Gerdau's business prospects, projections, and others.

Good morning, all of you.

Hello, everyone. I hope you're all well. And thank you for the opportunity to join us today during this video conference to announce Geerdau's results for the second quarter of 2023. Next to me is our CFO, Rafael Japor. And for both of us, it's always a pleasure to talk to you about our performance and also clarify issues that may arise during our presentation. I would like to start by talking about the macro business environment, the general results, and right afterwards, I will give you more details about our business operations. Right after there, Shapur will talk about our financial performance. And at the end, I will give you some more details about our ESG agenda. And at the end, we will both be available to talk to you about any points that you want to elaborate further. I would like to start the second slide talking about the macro environment in which Gerdau operates. Throughout the second quarter of 2023, and amid a very challenging scenario, we continue to deliver very consistent results based on a model of geographic diversification of assets in the Americas in our flexible production routes to factories. China remains having very high steel production, very close to historic levels, while at the same time, measures of stimulus to boost steel consumption, particularly coming from the construction sector, are not yet reflecting in the dynamics of the market. In view of the scenario of excess steel production in China, China's steel exports total about approximately 90 tons a year. even a bit of backdrop of import-restricted markets, such as the United States and Europe, which has impacted the markets where we operate, in particular Brazil. In this next slide, even before we start talking about Gerdau's financial results in the second quarter, I would like to say that we came to the end of the first half of the year with an accident frequency rate of 0.66. And this is below the 0.76 rate recorded in consolidated 2022, which represented the lowest rate ever recorded in our historic series. This performance reinforces our Therefore, as part of our digital transformation journey, we have invested in several artificial intelligence and industry 4.0 initiatives in our operations to improve our monitoring of critical tasks and prevent accidents and enforce the safety and active care among our employees and partners. Now, in the next two slides, I'll briefly bring you some highlights that reflect the results recorded by Goddard in the second quarter. Later on, Jaipur will provide details of our financial performance. Even in the face of a challenging global macro scenario with a decline in steel consumption, as I mentioned earlier, Gerdau posted between April and June of 2023 another quarter with financial consistent results, with the best adjusted EBITDA for the period, which amounted to 3.8 billion BRLs. This performance reflects the continuity of the company's sustainable growth strategy focused on the continuous generation of value for our estate,

and the integration of the process in this platform.

It is possible to reduce the delivery forecast of orders placed by about seven days. Girdal is currently experiencing the best moment of its 122 year of history, a result of its cultural transformation, which has enabled the company to innovate and transform itself in the face of dynamic, different, and challenging scenarios. this agile and innovative mindset of the company, of our employees who work daily in several initiatives in search of continuous operating excellence, improving our ESG practices and offering products, solutions and services centered on the present and future needs of our customers and other stakeholders. And all of that ensures that Gerdau finds itself in a very high level profitability and operating efficiency that is higher than it spears in the global industry. Now on the next slides, I will talk about the highlights of each of our business operations and the outlook for the markets where Godal operates. The North America business operation continues to deliver sound results. In the second quarter, the biologists did a total 1.8 billion BRLs, reflecting a still very resilient market. Our order backlog in the United States, for example, remains stable at a high level of 60 days, mainly influenced by non-residential construction activities, infrastructure, energy, and industry in general. The recent measures adopted by the U.S. government, such as the Inflation Reduction Act, and the CHIP Act have had a positive effect on the market. Although the inflationary landscape, the interest rate hike, which reached its highest level in 22 years and a possible downturn in the local economy are points of attention, which may also impact still consumption in the coming cycles. In this sense, our North America business operation remains well prepared focus on improving the profitability and productivity of the meals, I would like to also highlight that we also start... highlight the startup of solar farm adjacent to our Midlothian site in Texas with 230,000 solar panels. The farm has a capacity of 80 megawatts, which is expected to be reached already in August. The initiative reflects Gerdau's plans to increase the use of renewable energy at its industrial units in all the countries where it's present in the Americas. And this is part of our commitment to reduce greenhouse gas emissions. The solar plant will contribute to reduce The carbon emissions at the Midlothian side by 65,000 tons of CO2 equivalent annually, equivalent to more than 10% of the mill's emissions. Moving on to the next slide, I'm now talking about our special students. In addition, the oil and gas segment remains flat, approaching a monthly average of 900 rig counts over the months. In turn, the outlook for the special steel market in Brazil continues to be influenced by uncertainties linked to access to credit lines, and the high interest rate contributing to the lower demand for vehicles. In the second quarter, as a result of plant shutdowns and reduced shifts, it is estimated that around 90,000 units, including light and heavy vehicles, were no longer produced. The National Association of Vehicle Manufacturers, MFAVIA, even aimed a I would also highlight that the competitiveness of the vehicle sector, especially auto parts, was lower this quarter, this half year, due to the depreciation of the US dollar. Moving on to the next slide, I would like now to talk about the long and flat steel scenario in Brazil, whose performance in the second quarter reflects a reduction in steel consumption in the country in several industrial sectors. According to data from the Brazil Steel Industry Institute, domestic shipments fell 5.7% in the first half of 2023 when compared to the same period last year. Initiatives such as the new fiscal framework and progress in tax reform, coupled with the possible drop in interest rates, have not yet been enough to unlock the Brazilian economy. It is worth remembering that steel consumption is a leading indicator of GDP. And in this sense, it is important that there is a progress in actions aimed at improving the competitiveness of Brazilian industry, such as Custo Brasil, or the Brazil Cost, so that the steel sector can start a new cycle of sustainable growth. Initiatives that seek to boost the competitiveness of the steel sector in Brazil and fair market conditions are also crucial to address the world's surplus, mainly in China. As I said earlier in my presentation, and this resulted in an increase in direct and indirect imports of steel and also imports of machines and equipment. According to the members from the Brazil Steel Institute, Brazil steel exports were up more than 43% in the first quarter. in the first half of 2023 year-on-year, totaling 2.2 million tons. Chinese products account for more than 50% of this total amount. As a positive outlook for the Brazilian steel market, there was a 30% increase in the number of real estate launches in the second quarter when compared to the previous quarter. The city of Sao Paulo, for example, is already showing in June the resumption of launches with sales when compared to the months of April and May, posting a 9% increase in the period, according to data from Secovi Sao Paulo. This scenario is supported by better financing conditions. The number of active construction sites in Brazil remained at a record level in June, above 10,500 units, an increase of 14.5% year-on-year. In addition, I would like to mention that the industrial construction segment remains stable with good demand from the pulp and paper sector, for example. Another factor that should positively impact the agribusiness sector in the second half of the year is the recently announced crop plan of more than 360 billion barrels. In turn, Retail sales in the second quarter remained flat when compared to the immediately previous period. We have already seen some impact from the one-off government aid measures in the popular housing program called Minha Casa Minha Vida, but the sector's performance remains hindered by high interest rates and credit crunches. In addition, I anticipate a return to public and private investment in infrastructure works, which will drive the country's growth, such as possible expansion works in ports in Ceará and Santa Catarina, and the new Sabespi project here in Sao Paulo. There was even a signal from the federal government regarding public investment of around 70 billion BRLs in highways and railroads over the next four years. Auctions in the energy sector for the construction of transmission towers, also expected for this half year, should have a positive impact on steel demand in the coming cycles, as well as the new PAC or growth acceleration plan to be launched by the federal government in the next few days. We now move to the next slide. Generally speaking, the drop in commodity prices and the appreciation of many currencies vis-à-vis the US dollar and the high interest rates bring about a very challenging economic growth scenario for the South American region. In Argentina, steel demand remained firm in the second quarter, mainly driven by the construction sector. which led us to record the best EBITDA for the operation in our historical series in the period. The inflationary pressure, the effects of the drought, and the presidential elections scheduled for October remain a point of attention for the future performance of the local markets in the coming quarters. The scenario in Uruguay remains positive, reflecting good levels of steel consumption, particularly in the agribusiness sector, which are close to historical records. In Peru, we continue to monitor political tensions, social conflicts, and climate issues linked to El Nino and also its impacts on the domestic market. The forecast, despite the uncertainties, is that the economy will recover throughout the second half of 2023, stimulating the demand for steel, mainly coming from the construction industry. I will now turn the floor over to Rapport, and then I'll be back to talk about our ESG journey and also to answer your questions. Thank you, Gustavo. Hello, everyone. It's always a great pleasure to be here with you once again for our earnings release call, and I hope that you all will. Well, let's start with slide 12. And here we'll talk a little bit about our working capital and cash conversion cycle. In the chart on the left of the screen, we see the evolution at the end of the period of our working capital and how it has evolved in the last few quarters, as well as our cash conversion cycle. At the end of the quarter, we had a working capital of 16.4 billion BRLs with a slight increase of 36 million BRLs when compared to the previous quarter. It is worth noting that this is the third consecutive quarter in which we have reduced the level of inventories in our business with signals that our action plans in business operations are bearing fruit and that we should see a reduction in working capital in the second half of the year. We understand that there is still room for further reduction in both our working capital and also our cash conversion cycle. Now, moving to the right side of the slide, we will talk about our quarter's cash flow. Our adjusted EBITDA, as mentioned by Gustavo, our EBITDA stood at 3,792,000,000 BRLs with a margin of 21%. It is worth noting that we had an average dollar 5% weaker this quarter. which affects both the profitability of our exports from Brazil and the currency translation of the results generated mainly in North America. We allocated 569 million BRLs in working capital. And here, the difference compared to the number we just mentioned And the number of our cash flow is basically attributed to the exchange rate variation of the working capital of the companies located outside Brazil. We also invested 1,229,000,000 BRLs in CapEx this quarter in line with our guidance of 5,420,023. Looking at the cash flow after net interest and income tax disbursements, which historically occur in greater concentration in the second quarter, we ended the period with a free cash flow of 784 million barrels. In the chart below, on the right-hand side, we have the historic evolution quarter on quarter of free cash flow generation since 2014. And here, the second quarters of each year are highlighted in the chart in green. So I draw your attention to the continuous and positive cash flow generation that we've been experiencing in recent years. Well, now let's move to the next slide. And now I will talk a bit about our liquidity and debt. We continue to post an excellent level of leverage with a net debt to EBITDA ratio of 0.37 times. This quarter, we reduced our gross debt by 1.6 billion BRLs. mainly due to the payment of 931 million BRLs of the 2023 bond and 600 million BRLs of the first tranche of the 16th Series debenture. Thus, we ended June with a gross debt of 10.7 billion barrels. This is our lowest debt since September of 2007, meaning more than 15 years ago. We ended the quarter with a net debt of 6.5 billion BRLs, very much in line, as you can see in the bottom of this slide, much in line with the financial policy parameters and very close to what we believe to be our optimal capital structure for the business. The average cost of our BRL denominated debt is around 105% of CDI, while our dollar denominated debt has an average cost of 5.6% per year. In the chart on the right-hand side of the page, and now I will detail our liquidity, we have here The debt profile, I mean, how much we have of available cash. And also here we have the debt amortization schedule. Considering our cash position at the end of the quarter of 4.2 billion BRLs, plus our revolver facility of 875 million U.S. dollars fully available and at the moment not drawn, we have a liquidity position of almost 8.5 billion BRLs. Now, speaking briefly about our debt amortization schedule, I would like to highlight the extension of our debt, whose long-term maturity profile this quarter went from 78%, which is what we had in the previous quarter, to 92%. Our next most important maturity, as you can notice in the chart, will only take place in 2027 when our bond matures. This well-balanced and well-distributed schedule, together with our healthy capital structure, allows us to make the necessary investment in the years to come to ensure the evolution and sustainability of our business, always focused on generating more value to our different stakeholders with whom we interact. And to finish this part, due to the results of the second quarter of this year, the Board of Directors of Gerdau SA approved the payout of dividends in the amount of 752 million barrels, or 43 cents per share. The payment will be on August 29th. Metallurgica Gerdau, in turn, will pay out 268 million bureaus, or 26 cents per share, also in the form of dividends, and this payment will occur on August 30. In both cases, both for Metallurgica Gerdau and Gerdau SA, the payment will be made on the basis of the shareholding position on August 18th. Thank you so much for your attention. And now I turn the floor back over to Gustavo to talk more about our investment in our new sustainable mining platform, as previously mentioned. Thank you, Shapur. In the following slide, I will detail the Sustainable Mining Investment Plan, which we announced last June at an event held at the Gerdau Museum of Mines and Metal in Belo Horizonte. We will invest 3.2 billion BRLs in the period between 2023 and 2026 in a new sustainable mining platform in Minas Gerais, reinforcing the state's role as a growth platform for Gerdau in Brazil. This amount is part of a cycle of investments of more than 6 billion BRLs made by Gerdau in the state of Minas Gerais in recent years to modernize to perform a technological upgrade, improve environmental practices, and also expand its local operations. Mining operations at the Miguel Bernier mine located in the district of Oro Preto are scheduled to start up at the end of 2025. With this, our annual R&R processing capacity will reach a total of 5.5 million tons. This project will allow Gerdau to increase the competitiveness of its operations and expand its steel production in Lina Gerais in the future. Now, I will say that this investment, which includes equipment and processes with the most modern technologies available, will follow the best mining practices and will use the dry stacking method to dispose of 100% of the mining tailings, eliminating the need to use a dam. The use of an ore pipeline for the transportation of iron ore will also bring important logistic gains in addition to reinforcing our commitment to sustainable mining. I would like to highlight that this new sustainable mining platform is also an important decarbonization initiative as it will ensure steel production with an even lower carbon footprint than the one we have today as we will have high quality ore. I highlight the high quality ore with a higher iron content and better agglomeration requires less coal in its production process and improves the energy and operating efficiency of the blast furnace, which contributes to reducing greenhouse gas emissions, making it a relevant product for the decarbonization process of the global steel industry. Currently, as a result of our sustainable production matrix, CEDAW already has one of the lowest average greenhouse gas emissions at 0.89 tons of CO2 equivalent per ton of steel, which is approximately half the global industry average of 1.91 tons of CO2 equivalent per ton of steel, according to the World Steel Association. And by 2031, our target is to lower carbon emissions to 0.83 tons of CO2 equivalent per ton of steel. And this higher quality ore that will be processed in Miguel Bernier will supply Gerdau's four steel production units in the state, also taking these mills to another level of sustainability practices. Finally, I would like to highlight that the independent certifier SRK Consulting has prepared a report certifying the iron ore reserves at the Miguel Bernier mine and this is a very important milestone for this investment in sustainable mining according to the report cadal now holds certified reserves of seven hundred and seventy six million tons of iron ore this document has been prepared in accordance with subchapter 1,300 of Regulation SK issued by the U.S. Securities and Exchange Commission in compliance with the technical report standard established by that regulation. Considering the expected annual production level of 5,500,000 tons of iron ore, the certified reserves guarantee a 40-year lifespan for the investment, reinforcing Gerdau's commitment to the socioeconomic development of the state of Minas Gerais today and in the future. Well, now I would like to thank you all for listening to our comments and we are now available to answer questions and also detail points of greater interest to you. Thank you, Vernick. Now we will initiate the Q&A session. I would like to remind you that to ask questions, you must click on the Q&A icon that is in the lower part of your screen and wait for your question to be available. And when you're ready to ask your question, you'll have to activate your microphone to ask your question. In case you want to open your cameras, please let us know so that we can enable camera view. We ask you to ask your questions all at once. Our first question, comes from Caillou, an analyst from BTG Pac-12. Caillou, you may proceed.

Hello, good morning, everyone. Thank you. Can you hear me well?

Great. Well, thank you. I have two questions here. The first question is about your results in North America. It's interesting to see that you were able to sustain margins above that level of 25%, even in a quarter when you had you know, lower shipments. You know, you had several, you know, scheduled and non-scheduled maintenance shutdowns. And maybe now with the recovery anticipated for the third quarter, we see some slight movement of expansion in the metallic spread. And when we put that together with comments from your peers, the impression is that we could continue to see high levels and still moving into the third quarter. I would like to know your impression about how you see that profitability of margins going forward and now still focusing on the third quarter. But if you have any comments about the fourth quarter and what you anticipate for 2024, that will be great. And my second question is about dividends. This quarter, we saw that you paid dividends in line with your policy, 30% of net income and maybe 30% of cash generation, and the buyback program had a slowdown. I just want to understand, because given the fact that we are seeing your net debt slightly below that indication of 7 billion BRLs, and also putting that together with your poorest commons during the presentation that we have, a great possibility of seeing working capital in the second quarter because you paid more taxes now in the second quarter. Maybe that leads me to understand that you should use more cash now in the second half. So I just want to understand whether the company still thinks that you will maintain that net debt at $7 billion, and that would indicate that your entire cash generation in the second half could be paid in terms of dividends and whether your or where you believe you would be a little bit more cautious given the current market situation. So I would just want some light in terms of dividend payout. Caillou, thank you for your question. I will start by answering your first question and talking a little bit about North America, and then I'll talk about dividends. Now, about margins in North America, our projections indicate that we would have flat margins throughout the next quarter. On the one hand, the volumes and the backlog are still very resilient. Now, when we look at our shipments and even when we compare ourselves to our peers, we see a general drop in demand. We had a higher decline because of our meal in Canada, Whitby. We had a one-off problem in our charlotte. But in general, this 10% drop in demand was already expected. And I think it will resume normal levels. And due to the number of orders we are receiving, I think that this is a level that will be maintained throughout the third quarter. And while the fourth quarter has a typical seasonality, so that's why it's difficult now to tell you how big that seasonality will be. But our backlog remains very sound. We still have to take into account that we haven't yet seen orders related to the major incentive packages. If I look at our backlog, the infrastructure deal and everything else, we haven't seen large orders stemming from this package. Even incentives... related to renewable energies. We are now seeing an increase in our backlog of steel being delivered to the construction of solar farms. But if you look at the magnitude of these packages, we anticipate future demand coming from these And this also could anticipate the risk of a drop in demand in view of the macroeconomic scenario in North America. In terms of scrap, we concluded our purchases of scrap last Friday. The price has been flat in terms of comparison with the past few months. Now, as for prices, prices remain flat. Costs. I think we... we're able to capture a lot of good opportunities in relation to energy. So in general, Kyle, in my view, things remain very stable in North America and it should remain in this quarter. In the fourth quarter, it's difficult to tell. There were years where There was no seasonality. In some other years, seasonality was stronger. And in 2024, it should be very similar to what we're seeing now. The spread levels will be maintained. So in general, our business in North America is very sound, very solid. And so this is how we see our business. And now I'll give the floor to Shapur. But Shapur, if you want to add anything else about North America, just go ahead. Feel free to say. I just want a further clarification because you said that In terms of volumes and shipments, despite that reduction, because maintenance shutdowns, you still expect stable shipments in the second quarter, right? Yes. Yeah, we delayed some deliveries due to these two one-offs. events. You know, when we extended the shutdown in Whitby, we had to move into, you know, to make a transfer from Canada to the U.S. So there was just a drop of two percentage points when compared to the average of other players in the U.S. But we already recovered that number. Therefore, this drop in demand of 10% when you're comparing the first and the second quarter, I think we already reached a demand level that should be in place for the coming quarters. Okay, Shapur. Now, in terms of dividends, Kyle, I will start with our net debt at the end of the quarter. we ended close to 6 billion BRLs of net debt. So this is pretty much in line with what we expected. Gross debt was slightly lower, but the cash was lower due to the important disbursements we had during the quarter with the maturity of some important, you know, the venture and the bond and payment of taxes that was quite relevant this quarter. But now, when we think about dividends, we even, you know, move forward with our policy. Both in the case of Gurdjieff and Metallurgica, we paid slightly over 30%. So, despite the fact that the results were slightly worse in terms of in terms of corporate net income, we maintain the same cash distribution per share in relation to what we did in the previous quarter. In the coming quarters, in the next quarters, I think we will continue to monitor the performance of the market and we will continue to monitor our business. There will be probably some additional pressures, even though we truly believe that there should be a reduction in working capital in the next quarter. quarters in relation to our position today. And on the other hand, whenever we think about CapEx disbursement, the one that we had this year, you know, year today, it is below the average. If I were to take that $5 billion, as I mentioned in the guidance, in addition to the disbursements that we mentioned, specifically for Gerdau Next, they didn't occur yet. I mean, it is about $2.1 billion BRLs in terms of cash disbursement vis-a-vis that 5 billion. So there are other elements that may compensate that cash generation that we expect to see in the coming quarters. We remain very optimistic with cash generation, and we will continue to pursue our policy of not reducing significantly our net debt vis-a-vis our optimal capital structure. Well, truth be told that that it is the third consecutive year that we've been talking about a possible taxation of dividends and interest on equity. So not only our treasury department, but also our tax area. I mean, we are monitoring that very closely, not only ourselves, but all of the other companies in Brazil. So we are following that very place. And regardless of how things will advance, we may be more or less assertive, let's say, in terms of dividend payouts in the coming quarters. Great.

Both of you. Thank you. Thank you, Kyle.

Our second question comes from Danielle Sassoon, a sell-side analyst from Itao BBA.

So please open his camera.

Hello, good morning. Thank you, Bernanke, and thank you, Shapur, for the presentation. My first question relates to CapEx. Looking at the chart of your presentation, when you show the disbursement profile of 3.2 billion of investments in this new mining platform, It seems that the disbursements in 2024 should be probably three times larger than that of 2023. So should it be reasonable to imagine that your 5 billion capex will increase next year? Or there are other areas that maybe you could postpone in terms of, you know, postponing investments. So then you would... have a flat capex in 2024 vis-a-vis 2023. I know that you don't have any approved guidance, but this could be helpful for us. My second question has to do with Brazil. We've seen imports, at least when I look at SESACs and ABR, exports increasing even in a period when the domestic market, the premium is not as high when compared to historical levels. I mean, the long steel premium in the domestic market is around 5%. So what do you think can justify this increase of imports? And how do you see the competition dynamics in the domestic market more specifically? Thank you. Hi, Daniel. It's a pleasure to talk to you. I can answer both questions, but, Jaipur, you can jump in if you think it's important. I mean, there is no guidance for CapEx for the next coming years, but we will continue to be very conservative when it comes to disbursements or CapEx spending. So there is no expectation on the part of the company that to significantly increase our investments, our investments. So we will remain conservative. So when we approve an investment of 3.2 billion that will be spent in a certain period of time, this will necessarily have to fit into a spending level that we consider We deem adequate. I mean, even in a very complex scenario that we're experiencing right now. Therefore, I would say that we will continue to be very conservative. We will remain very conservative. So this is not a guidance, but there is no... estimate to grow our capex level at least in the next coming years. In terms of imports in Brazil, this is a concerning issue because it's not very rational. When we look at a rational market situation, I mean, we could draw a correlation with a import premium using the known variables. By doing so, we can arrive at some good conclusions because we've been in the market for a long time. But the world at the moment, it's being flooded with Chinese steel. And we knew we know that this is a still highly subsidized China. I mean, with this attempt to cut production in the last few months, this is not as fast as people would imagine. China continues to put non-competitive and subsidized steel in the global market. So it's very hard to do that math. Therefore, Everybody is concerned, even the more mature countries are putting some kind of protection in their industries to mitigate unfair competition in the market and to reinforce my speech. I mean, the numbers that you see in some statistics, like even the ABR report, does not reflect another concerning aspect, which is the import of continuous steel. When we look at the first months of the year, there was a significant drop. in our deliveries, in our shipments to the industry, because... In Brazil, we saw the entry of machines and equipment with steel that wasn't ours. It's difficult to quantify that, but this influenced our demand from the industry. The demand coming from civil construction didn't drop as much, but the industry, that was impacted. So this is irrational, but I think this may be corrected throughout the next months. We are closely monitoring the movements from China. I mean, these cuts in production take a long time, but they are happening. At the same time, this attempt to reinvigorate the Chinese economy to reach percentages that are close to what was expected in terms of GDP growth of 7% are taking place. So this remains a concern. Now, speaking about Brazil, now for the third quarter, we see that the demand is quite stable. There was a decline, maybe more for longs than flats. But I think in terms of demand, we find ourselves at a comfortable level. So what we see today will remain in the next quarters. But in the mid-range, we see that some sectors will resume growth, even civil construction. You know, there have been many launches and these launches will demand more steel. there have been auctions for transmission lines and they are very relevant when it comes to the demand for profiles and bars. Well, it may be slow, but it will happen. But looking more specifically to the third quarter, Danielle, I believe that the domestic market the domestic market level will be very similar to what we saw now in the second quarter. Now, Jean-Paul, it's with you. I would just like to say, I mean, in relation to what I've heard from your questions about mining, this year in 2023, we already spent 500 million BRLs related to the new sustainable mining. program in the mine in Minas. This is a portfolio with important assets of investments that include not only the mine per se, but everything around it, like logistics, utilities, transmission lines. This has been in progress. And so as part of that disbursement, a big chunk of it, a big chunk of the investment relates to that program. As you well noted, in terms of that chart I showed you, I mean, deliberately, we didn't put the amount, we just put some order of magnitude. Precisely because of what Gustavo said, we do not have any guidance for next year's CAPEX, even though we, again, ratified that we do not anticipate any substantial increase in CAPEX for the next coming years. But in fact, a very substantial amount of that 5%. 5 billion or maybe 45% of that amount is concentrated in 2024. So there is no doubt that there will be a more significant spending. in 2024, earmarked for that investment in that sustainable program this year. If you recall that CAPEX material facts this year, almost two-thirds of our CAPEX disbursement is earmarked for Minas Gerais. We already said in the past, we talked about these investments that we are making now. It is also important to highlight, also in line with what Gustavo said and also linking that to my initial presentation about our balance sheet. This quarter, we reached the lowest level of gross debt of the last 15 years. And this is due to all of the hard work that we did and our partners did as well. And this is also preparing the company to move on with all of the projects that we have in the pipeline with a lot of resolve and without having to, you know, make changes in the investments that we already started to execute. One of the reasons that will, when you look at our debt amortization schedule, you see that the most significant maturity only occurs in 2027 with our bond. And this gives us a clear path to growth. make all the necessary investments to modernize and to continue to generate value to our business. Perfect. That is very clear, Shapurin Brunecki. Thank you. Brunecki, if you allow me, just a very quick follow-up. Do you see any movement maybe coming from the industry sector in terms of increasing import tariffs for steel products Or maybe, I mean, you talked about the fact that the Chinese teal is flooding the world in this. Do you think that this could be also another concern? This wasn't the case in 2015 or 16 when we saw some similar move. Do you think that this is possible? I think it's possible, yes. And these are talks that happen every day. I mean, When you talked about 17.4 level, I think that was the level of import penetration, 17.4, I think. I haven't seen that for a very long time. Also, I talked about continuous steel. As we've always said, this is a narrative that has been prevailing in Brazil, that the steel industry is not competitive, that we want protection. No, we just want to compete on equal footing. We've been very vocal about that, and we... We give clear examples to the authorities that there is an unfair competition. So that's why I think that every Brazilian industrial sector should seek for that. Just as it is done in the U.S., you are very familiar with Resolution 232 and adjustment mechanisms and carbon in Europe. These are mechanisms that have to be utilized by countries whenever we see some predatory moves, like in this case, in the case of steel. Thank you. That's perfect. Our next question is from Rafael Barcelos, sell-side analyst from Santander. So please enable his camera.

Good morning, everyone. Can you hear me?

Yes. Good morning, Vernaki, Shapur, and Renata. Thank you for taking my questions. And the last time you talked to investors, one of the main discussion points was related to cost, mainly due to the fact that we look at some figures that are referenced for price that are coming down. So the cost debate is very important because it helps us understand about margins and stability in the Brazil market. Could you comment on about your cost expectation for the third quarter, looking at the movement of the main raw materials. Do you think it will make sense to see some more stability? I would just like to hear more about the topic of cost. And my second question is about special steel. We consider it to be one of the highlights of the quarters. We saw a very significant recovery in terms of shipments in Brazil, but we also see some more modest numbers when we look at the MFAVIA members. Do you have any specific issue that really led to that situation? And so how do you see that division as a whole evolving in the second and third quarters?

Okay. Hello, Rafael.

We had a technical problem. I'm sorry. Well, basically, I think there's a very important element because the cost index, and also you refer to price of raw materials and products. There is an important element in our Brazil operation, in addition to managing the fixed cost, and I'm referring to coal. We consume coal in our Ouro Branco Mio. Coal typically has a long lead time. And this probably explains a little bit of our working capital issues. It's about 150 to 180 days. So what we see today, when we look at the price index, this will only, you know, reflect in terms of COGS 150 to 180 days ahead. So the drop in prices of coal mainly throughout the first half of the year should probably have a greater effect in terms of the coal cost, which is our raw material that is more representative of the Brazil cost. This will be more important, more relevant in the third and fourth quarter, just to show you a few elements that in our view are important in terms of cost. In addition, we are seeing some moves in the scrap market in Brazil in terms of price adjustments, and this should also reflect in cost reduction. In addition to that, we have our journey in our business operation in terms of everything that we try to do to maximize our efficiency. And we diligently seek for expense reductions in general. About special steels, we are going through different moments in our special steel operations at our North American operation and the Brazil operation as well. In North America, our operation remains very sound. The Volumes or shipments are very good, both in the automotive sector, both for heavy duty and light vehicles and oil and gas segments and others. Volumes are very sound and we are also benefiting from some benefits from, you know, improvements in our Monroe meal in Michigan, which is, you know, one of the most modern meals in the world. So we are now reaping the benefits you know, due to the fact that for years we made movements to improve that mill. So we are investing a little bit also in the rolling mill. So the mill is now equipped to cater to all of the new industrial needs. So our operation in North America is quite sound. On the other hand, we are facing difficulties in Brazil. We are looking at constant layoffs and plant shutdowns in the automobile industry. And the slight recovery of volumes that we saw through that government incentive in terms of the acquisition of popular cars, that was not relevant. So in addition to the credit crunch and high interest rates, I mean, there was some anticipation in the purchase of heavy vehicles in the beginning of this year. There was a change in the diesel engine because there was a replacement to Euro 5. So we have an advantage with our specialty operations when we compare it to flat and long steel operations because we can make very quick changes in our cost level. So we do not face the issue of coal that Chopra mentioned, and it's not as complex. So I think we were very quick and very efficient in adjusting the capacity of our special steel plants in and we are now adjusted to a good level of production. So I don't think this demand will recover in the short run. So in Brazil, we will see lower volumes, but We believe and we trust that our operation is very lean and very adequate to navigate in these dire periods while we wait for a recovery of demand. I mean, if we look at special skills, putting North America and Brazil together, I see the situation very stable, repeating. Going forward, what we were able to do this quarter, but there is also seasonality at the end of the year, and we have to monitor that. So the fourth quarter may bring some variables that at the moment we cannot describe to you. But in general, I see stability. North America very well, and Brazil still facing some difficulties. Thank you. Shapur, I just have a quick follow-up. Maybe it was my connection that was bad. So you understand that this cost should start coming down now in the third quarter, or do you think that this will only happen at the end of the year? Can I say something in between, between the third and fourth quarter? Well, okay. We expect something already in the third quarter in terms of coal and other initiatives, but In fact, I think that that full reduction in the average cost, which is a bit tricky because we are working with FIFO. Maybe we could have a little bit more clarity in terms of the absorption cost. But as we work with the average cost of Brazil, things are a bit shaky. But we expect some results bearing from that in the third quarter. But it will be more relevant in the fourth quarter. Thank you. Thank you very much. Thank you, Raphael. Next question from Tiago Lofiego, sell-side analyst from Bradesco BBI. So Tiago, please open the camera.

Hello, how are you? Hi, Tiago.

I have two questions. Going back to the dividend issue and capital allocation, in fact, I have a few questions on the topic. First, the 35% payout, which is slightly higher. Is this a one-off situation? Was there any rationale behind it? Should we expect any changes in that level? I just want to understand what the rationale was. And, Shapur, you also talked about the the credit line, that revolver facility. And then, I mean, just to clarify, you do not consider that level of liquidity whenever you think about dividend payouts. I just want to clarify that concept because your cash, is below that 5 or 6 billion that you mentioned. And in your view, that is the optimal position. But after all, all I want to understand is what is the possibility in the third quarter of you not paying extraordinary dividends because the cash position is slightly below the ideal level? I know that leverage is... pretty much in line and it's comfortable. That's not the issue. I know working capital helps, but the capex, maybe it's more intense in the next quarter. So I just want to understand if there is any possibility of you becoming more conservative and probably maybe not paying that extraordinary dividend that you usually pay in the third quarter. And also, if you can clarify the issue that 35%, that will be good. And the other question, going back to the Brazil operation, I just want some further clarification, because I understand, and you said that we should see the beginning of a drop in cost in the third quarter. The price of rebars in Brazil should fall. A 14% margin, Vernac, do you think that this is a margin that is in line with the current moment. Okay, now it's August. Is this the market dynamics today, or you think that we should see some additional margin pressure, even though costs are beginning to fall? Okay, Shapur, you answered the first part. You talk about Brazil, rebars, etc. Hi, Tiago. Well, let me start with the easier question. In the first quarter, we paid based on interest on equity. So when we think about the net dividend perceived by shareholders, that was below 30%. So this quarter, taking into account the cash position, the profitability levels that we have, and the predictability of disbursements for the next quarters, we chose to maintain the profile so that the shareholders will perceive the same economic benefit, I mean, in terms of you know, price per share, and then we escalated to 35%. But when we look at the end of the year, we are maybe slightly above that 30% that our buy loss mandates. But it's a bit of what we saved, I mean, with expenses in the first quarters, and that also reflected on a lower price tax rate. And so that was basically it. That was the rationale behind that slightly higher payout of 30% or like the default payout of 30%. Now, in terms of the extraordinary dividend payout, and I think you mentioned several aspects, and I think I mentioned that when I answered Kyle's question, in addition to our own uncertainties and considerations about our own business, considering, I mean, in terms of CapEx pay, CapEx investments and working capital, I mean, working capital is becoming a buzzword in the company. I mean, we seek for further reductions, but it will certainly depend on other external aspects. Like the tax reform or maybe some possible changes in our, you know, tax system. performance, I mean, the tax rate, I mean, certainly, maybe we could revisit our capital structure. When I talk about the revolver facility, it is not structurally thought to to do the balance sheet. It is a facility of immediate liquidity. It is there to support us and to act as a bridge for some transaction. But this is not something that we think about using, let's say, to do some refunding of the company. But once again, Our leverage position is very good. Our disbursements of debt maturity in the next years will allow us to move on with our investment program in a very comfortable way with no hiccups. And we are just evaluating, giving good returns to our shareholders based on what I said. Good. So now, Tiago, I will answer that question about Brazil. I understand that the dropping rebars, even, I mean, to draw a model about measuring prices in some construction stores of rebars. I think for the model, it is correct, but I'm a bit careful because in our specific case, in the case of Gerdau, this does not represent the whole. So we have a big strength at Comercial Gerdau and it doesn't necessarily uses the prices at the distribution. And we have contracts and agreements with construction companies. So this drop in rebar prices does not necessarily represent the current reality. Of course, it is a concern, and how do we create mechanisms to prevent this drop? We've been working on that. Our number today, does not reflect the numbers on the screen. So we are working on that. Another very sensitive topic, and we are always very careful when we talk about that, refers to the margins, the export margins of the domestic market. Our major concern right now, we are mitigating the risks. I mean, and we don't see the possibility of continuing, you know, practicing margins in the domestic market as we have today. So how can we not deteriorate these margins with bad outcomes? So we are removing export capacity very quickly now in the fourth quarter. The numbers that you saw in the results for the second quarter will be lower, I would say, closer to the shipping volumes of the third quarter downwards. So when we talk about 14, the topic today is how can we prevent further deterioration of the export margins. Our capacity, we have a capacity of 20 to 22% in terms of exports. Sometimes this is helpful, sometimes it's not. This time it's not helping us because it pulls the domestic margin down. Therefore, we are betting that this volatility in the market will not be of a long run, but we believe that there will not be a reversal in the short run international prices, considering the situation coming from China. So we are, you know, we are removing our productive, I mean, taking some of this production capacity out, not to be hurt in terms of experts. So this is what we are doing at the moment. Thank you. That was very clear. Thank you for the answers. Thank you, Tiago. Our next question from Gabriel Simoes, a sales side analyst from Goldman Sachs. He asked two questions through the platform and I will read them. Good afternoon and thank you for the presentation. I have two questions. The first, despite the drop in profitability coming from the North America business, the business operation still posts strong margins. I would just like to understand how do you see the market dynamics in the region, whether the metal spreads remain at similar levels going forward and whether you can see a deeper effect of the Inflation Reduction Act. And if you have more examples of nearshoring, et cetera. The second question is we saw the need I mean, we saw working capital requirement increasing this half year while we expected a decline. So what is leading that, especially when you look in terms of days and whether in fact we should see an increased reduction of this line in the next quarters or whether there are more structural factors that should keep that line still high for longer? Let me, well, you can talk about North America. And then I will add with, I will talk about North America and then I'll be very brief. Somehow we already talked about that before, but as I said, you know, it's very resilient, our backlog and the the medium range outlook is very, very good. So in terms of metal spread, a relevant aspect of metal spread is scrap. We are working with a scrap level that has low volatility at the moment. I said that we already ended our August purchases at a flat level in terms of scrap purchases. We look at our backlog and we see near shoring appearing, I think a good example has to do with automotive components and more specifically semiconductors. We see now a transfer of plants from Asia into the U.S. We are delivering, you know, still. This is part of our business. So we see things running very smoothly and stable. Now we are trying to have more visibility in terms of what the fourth quarter holds. And so I'll leave that for Jaipur, because in terms of working capital, how do we see the dynamic of the markets where we operate? Starting in the fourth quarter of this year. So Jaipur, now it's up to you. Hi, Gabriel. I don't have a very simple answer, but I will try to summarize the topic of working capital at the speed of things. When we break down our working capital structurally or basically, we have about 30 days of accounts receivable, 30 days of accounts payable. And basically the difference is the inventory that it's very close. Even when we look at our historical chart, I mean, apart from some one-off moments, working capital is very close to our inventory. So accounts receivable and inventories, one cancels the other. What happens when we have a reduction in the level of activities with a reduction in sales volumes? When we look at the second quarter of last year and compared to the first quarter this year, our net sales sales is about 30, I mean, 5% lower, 3% refers to prices and then, you know, physical things. I mean, as our cash conversion cycle is calculated in days of net revenue, so I take into account the past revenue, once that sales come down, and as there is a difference between the the supplier's account, which is quicker versus the inventory account, one is 30 days and the other 80 days, what happens is that when you anticipate that you are selling a bit less or when you think that you will sell less, like in the case of this quarter, you reduce that trade accounts payable but the inventory accounts will only react not in that same 30 days, but in 40 or 50 days later. That's why many times there is this mismatch between you start having these incentives in that working capital and you start preparing the operation, as Gustavo said in the previous question when you referred to volumes that we were removing some export capacity. And this is also translated into reductions, the adjustment of working capital. But there is a certain delay between the reduction in the trade accounts payable because this generates less cost. And that means less working capital and less. I mean, so this difference in days is explained by this topic. But once again, that's why it's important. to say that we really monitor our inventory volume. And as in the three past quarters, we've seen a reduction in the inventory levels. We then believe that this already signals that all of our action plans focus on reducing and adjusting our working capital and our cash conversion cycles should bear good fruits in the second half of the year. Moving on to questions that came in writing. We have a question from Kyle he beta he says good morning everyone, and thank you for this opportunity. First of all, I have a question about. what you've been saying in past calls about the level of the optimal gross debt and that level of 5 and 6 billion BRLs. Could you say whether this implies that you understand that a net debt of 6 billion would be the most important metric to follow or whether the minimum cash of 6 million is more important or maybe as important as that? If you have a minimum cash of 6 million, what do you believe to be more important, given the fact that today you are below that level? Would you try to issue more debt in the coming months to recover your cash position so you'd have more room to pay extraordinary dividends? That's question number one. Now, question number two. My second question is about your North America bill. Given the fact that you posted lower volumes this half year due to maintenance and the prices of bar and profiles in the US are stable in the third quarter versus the second quarter, whereas scrap prices are down. Do you see room to see a margin expansion especially if you see volumes, maintenance shutdowns and improvements in cost. So I turn the floor to you. Okay, Caio, I can start answering the first question about our capital structure and the slide when we talk about debt and leverage in our financial policy. We are not, we were not referring to our net debt, but our net debt over EBITDA, which is below one and a half times. And this is our gross debt ceiling. That's the number we work with so that we don't have a gross debt that is higher than 12 billion bureaus. So this is not a target that we want to owe 12 billion. 12 million. We do not want to owe more than 12 billion BRLs. About the weight that we give to cash or net debt in a timeline varies a lot taking into account what are the financial obligations we see in the consecutive quarters. I would say, I mean, in the previous quarter, this would be a weaker free cash flow level, because we knew that we had the maturity of our bond and the debenture, as well as we knew that we had an important obligation of income tax payment that we had this quarter. So Okay, when we have okay when we say okay we have important things maturing in the next few months we are a bit more concerned in terms of our cash position, but we are structured with a pool of first line banks with a revolver facility that is fully available and It's probably just as big as our cash today. We have that facility because if needed, if we need more liquidity, we have like D plus two. And so we want these resources to be available if we need or maybe we want to structure a longer term debt. Maybe it would make sense to take a short-term debt just to pay dividends or to refund the company or to do a long-term CapEx. We try to match uses and sources. in terms of our capital structure. And now in terms of North America, I already said it before, we don't anticipate any expansion in the margins. The margins should fluctuate up or down. It depends on some moves in terms of cost. We have concluded our initiatives in terms of energy and logistic costs. So for the third quarter, if I look at North America, I see it very stable when compared to what we delivered in the second quarter. Moving to our next questions, we received some questions from Carlos De Alba from Morgan Stanley. He has a few questions. The first question, could you share more details about your mining investment plan, the year capex amount recovery, the average cost of mining, sales to third parties, et cetera? Now, his second question is, how do you see the outlook for flat and long steel prices giving the high premium in relation to exports and very challenging demands? Third question, SG&E expenses, six months in 2023 of 3% versus 2.3% six months later. in the year 2022? How do you see these numbers going forward? Fourth question. What is the expert level that you expect for flat and long stills in Brazil in the coming quarters? Fifth question. What was the impact on EBITDA of maintenance shutdowns in North America in the second quarter of 2023? Costs and loss of revenue and margins in that shipment reduction. Sixth and last question. Do you expect steel shipments in the South America division to remain above production levels in the coming quarters? Thank you, Carlos. So I'll now turn the floor to Virnek and Jabur. Thank you, Carlos, for your questions. So as he has six questions, let's follow Carlos' order. So this is easier for us to organize. So you can start talking about mining. Okay, looking at the numbers he mentioned. I mean, roughly speaking, 10% of the disbursement is a covenant for 2023. The most important check is about 45% of the covenants in the year 2024. And the remaining will occur in the following years with the startup of our main asset, which is... the mining concentration and filtering that will occur at the end of 2025, as mentioned by Gustavo during his presentation today. We just announced a material fact related to the certification of the reserves. That's part of the program of sustainable mining. And that was a report produced by SRK, giving us 40 years of lifespan in terms of the investment in that reserve. With that in mind, as part of that certification process, in order to do the classification of resources for the probable and possible reserves, the cash cost, I mean, it's something that we mentioned in the presentation when we gave you the returns expected, both for the use of that 5.5 million tons, as well as the improvement in the quality of the ore, In Oro Branco, we expect to generate about 220 million US dollars a year during the ramp up. And for that, we consider a cash cost of around $30 per ton in the mill, when the material is ready in the mill. That 476 million of reserves they have an average concentration of 35.7% with a strip rate of 63%. And basically this is what justifies the fact that the material is about 35.7% in situ to a palafit of highly concentration of 65%, with a high concentration of 65%. I think these were the main points related to that mining question. Yeah, I don't have anything else to say about mining unless somebody else has another question about that subject. But quickly moving to the second question, prices of flats and longs. I don't see any possibility in the short run to see any increases, but I don't see the possibility of keeping these prices at the current levels. Of course, that there is a lot of work to be done in that regard. And in the last few years, in fact, I mean, we look, you know, the... We look at exchange rate and things that really affect the levels of export premium. At the same time, we have a service level that is excellent in Brazil in terms of delivery terms. shipments, the strength of Comercial Gredal, our total mix of products, we have a series of alternatives that allow us to maintain prices at the current levels. This is a challenge. And this challenge, I think it's well worth detailed in-house and we have good plans in that regard. The third point was SG&A. This is the number that I've been referring to for quite some time. A company like ours with our culture and with the level of austerity, shouldn't have over 3% of SG&A over revenue. So now we are heating the ceiling at the high level of that trench. And this is explained by two factors. On the one hand, Carlos, there is the issue of lower revenue and there's lower sales, and that affects part of the calculation. And in the last three years, We put in this SG&A all expenses related to Gerdau Next. Gerdau Next is an operation that is not yet delivering revenues at the level expected, even Ajanchi, which is the company that we recently established for the rental of trucks and machineries is not already producing the levels of revenues we expect. So there are some expenses that are included in that SG&A line. So these two factors, allow SG&A to hit three. But there's many initiatives. Also, we have a very intense and rigid control of our expenses and costs. And all of that is part of our nature, is part of our culture. And more specifically, during my administration and Jaipur's. So today, we do not have any plan to increase SG&A above 3% over revenue. The fourth point I think somehow I already answered about exports. We are removing our installed capacity, earmarked for exports, but what we could expect now in terms of export volume in the third quarter are volumes returning to the levels of the first quarter or even below. So we are already removing 100,000 tons of exports so that we can We can reach lower levels when compared to what we delivered in the first quarter, which I believe it was 190. And the other question about maintenance shutdown, maybe you can help me, Shaboor. I just remembered another point related to mining and the use of that ore. That ore will be fully utilized by our units in Minas Gerais. Ouro Branco, Barão de Cocais, Sete Lagos, etc. The four units in Minas Gerais. So at the moment, we're not intent to sell that ore to third parties. And also about SG&A, as Gustavo was saying, And he referred to a girl down next. I go down, ask. We have a more associative nature when compared to our business. And most of our assets are fully consolidated, but you're now next. and New Wave and IGNT, these are all investments that we do not consolidate, meaning that they are not part of our net sales, even though general expenses to run the business, they are part of the SG&A. So in a certain way, this affects that numerator, but we still have to work in a few issues like the ones Gustavo mentioned. Now, I forgot the other question. Oh, about shipments. In North America, there was a delay because there was a delay of over 30 days in the Whitby maintenance shutdown. I think he's referring to South America, not about volumes or shipments in South America. I think the sixth question is related to steel shipments This quarter, whether we expect to see the maintenance of these shipments. Yes, we do expect maintenance. In Peru, we had some climate issues, which were very challenging in terms of our level of activity. Well, certainly also there is an upcoming election in Argentina, and this should probably remove some uncertainties. But at first, we expect... you know, the shipments to be maintained, volumes maintained in South America. I think we answered all of the six questions. Renata, now next. Thank you. Now, Vanessa Quiroga, sell-side analyst from Credit Suisse. She would like to speak live. Please, can you open her camera? Good morning. Thank you. My question is just to clarify a point that it's a bit confusing to me. In North America, there was a drop in shipments in the second quarter versus the first because there was lower demand. So do you think that... you expect to see the same volumes in the third quarter because demand is already lower than what it was in the beginning of the year. Is this a correct view? Yes, Vanessa, you're correct. The demand we saw in the second quarter is the demand that we are also seeing in the third quarter. We haven't seen any additional drop in demand. That is something that could happen going forward, but But it's not included in this demand, all of the incentives from the federal government. So we see a flat demand in the coming quarters. So to answer your question, the answer is yes, this is the current demand level that we are seeing. Okay, thank you. Thank you very much. Thank you. Next question from Rodolfi Angelli, a sell-side analyst from JP Morgan.

Please open his camera. Thank you.

After so many questions, I promise I only have one question and it will be very brief. It's on mining. I think we already talked about several numbers, et cetera. I just want to understand, Miguel Bernier is an area where you were for quite some times. What motivated you? What motivated you? I just want to have a picture of the before and after. That's all. Thank you. Well, I knew that you would come with a very special question like that. Yeah. I'm used to being left behind. So, okay. We have to talk about that later. Okay, but that's a very good question. Miguel Bernier is an area we've been exploring for quite some time, but we are far from exploring all the possibilities of that area. But the aren't belt of Minas Gerais has been reducing the iron content in general, that's a geological phenomenon. At the same time, if you consider future competitiveness of Ouro Branco, if we create other alternatives to allow the mill to grow in the future, I mean, it is growing now in terms of semi-finish, we are exchanging it by I mean, we want to be a meal dedicated to finished goods, as we are doing now with BQ, but we want to create other options for the meal to grow in the future with low greenhouse gas emissions, etc. Everything converged for our decision to make that investment in Miguel Bonilla. There is a major advantage because it's physically very close to our Ouro Branco Mio. So our logistic cost is absolutely low with this ore pipeline. The logistic cost will be really low. We will no longer have to use trucks in our ore processing industry. you know, it only has to cover a distance of 13 kilometers. So with a 5.5 million in capacity, not only for the present, but this will give us more options for the future. This will allow us to be self-sufficient with competitive or in very long term of 40 years, part of that, or will be sent to Divinopolis, Kokai, and Satchelagoa. So in the long run, we will have the adequate competitors with a good level of CO2. So this explains a bit of the rationale when it comes to our decision to make that investment. Okay, Rodolfo? Okay, thank you. Good, thank you. Renata, back to you. Well, in the benefit of time, And I will now conclude our Q&A session. And we from the IR team, we are committed to give you all the answers very briefly. So I'll turn the floor back to Werneck. Thank you. I would like to thank you all for organizing this session. And also I would like to thank all of you for all of your questions. On my behalf, on behalf of Jaapur and Renata, it's always a great pleasure to be with you. Also, I would like to invite you to join us for our next video conference related to our third quarter 2023 results, which will be on November 7th. But before that, I would like to take this opportunity to invite you to participate in our GDAL's Stakeholder Day. It will be on September 28th. in our Museum of Mines and Metal in Belo Horizonte. We will have the Stakeholders Day on September 28th, and the next day, we invite all of you to visit our mill. So you will be more acquainted with that new concept of no damn mill. Mine. And also, it's a very good opportunity for us to visit the Ouro Branco Miu, and that will give us the opportunity to discuss in more detail some topics that we do not have enough time to discuss in a meeting like that, like the one today. So that's the invitation. And so thank you so much for being with us today, and I hope to see you soon.