Gerdau S.A.

Good morning, and welcome to Gurdon's fourth quarter 2025 results presentation. I am Adriana Pereira, Specialist with Ambassador Relations, and it's a pleasure for me to be joined by CEO Gustavo Wernicke and CFO Rafael Jotor. Please note that this call is being simultaneously translated into English, and you can choose your preferred language by clicking on the globe icon at the bottom of the screen. During the presentation, all participants will be in listen-only mode, and then we will begin the Q&A session. Analysts and investors can join the queue by clicking on the raise hand button. It is worth noting that the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available. Forward-looking statements are no guarantee of future performance and are subject to risks and uncertainties that may or may not occur. I will now turn the floor over to Gustavo to begin the presentation.

Hello, good afternoon, everyone.

I hope you're all well, and thank you for joining us again for another earnings release presentation. We will briefly comment on the highlights of the last quarter and also the year 2025, as well as the outlook for our operations, and then we will move on to the Q&A session. The year of 25 was marked by distinct scenarios in the main regions where we operate, North America and Brazil. In light of this, I would like to emphasize that Gerdau has greatly benefited from its business model based on geographic diversification and production flexibility. Moreover, I would like to highlight the resilience of the North American market, which has seen strong steel consumption and the reduction in input levels, as well as the robust operating performance of our operations in the region. Even in the fourth quarter, when there is a typical year-end seasonality, we achieved solid results in December 2025, We even posted record shipments in North America. Meanwhile, in Brazil, the market reached a new record for steel imports in 2025, with a 7.5% increase in shipments year on year. despite important advances in trade defense measures, such as the recent inclusion of new NCMs in the list of products covered by the 25% import tariff and the implementation of anti-dumping tariffs on coal-roled steel. Unfair import scenario has impacted the profitability of our operations in the Brazilian market. On the other hand, I would like to highlight the progress of our new sustainable mining platform in Miguel Burnier in the city of Ouro Preto, in Minas Gerais. The project is about to go into operation and will contribute to a significant reduction in production costs at our Ouro Branco unit. I will now turn the floor to Japur, who will elaborate on the financial highlights and the impacts of this current scenario on our results. Thank you, Gustavo. Hello and good morning, everyone. It's also a great pleasure to be here with you in the presentation of the fourth quarter of 2025. We ended 2025 with EBITDA of 10.1 billion BILs, down 7% when compared to 2024 results, mainly reflecting a still challenging environment in Brazil marked by increased competition. On the other hand, our operations in North America continued to gain relevance. supported by resilient demand and excellent operating performance, significantly contributing to the group's consolidated results and the overall results of Gerdau. Having said that, I would like to highlight four points related to this quarter's results. First, in the fourth quarter, our net income was impacted by non-recurring items related to impairment losses in Brazil units in the amount of 2 billion BRLs. It's also important to note that these write-offs have no cash effect. Excluding these effects, Perdao's adjusted net income in 2025, you know, in our view, that accurately reflects the operating performance for the period, stood at 3.4 billion barrels, down 21% when compared to the previous year. Regarding Gerdau's investments, we carried out CAPEX in 2025 on 6.1 billion BRLs. Now, for 2026, as already disclosed, our guidance is 4.7 billion BRLs. representing an important reduction of 1.4 billion barrels. And we understand that this will bring more flexibility to our free cash flow generation in 2026. And this is the third topic, by the way, that I would like to highlight. even with a very strong pace of investments in Miguel Bonier with our expansion mining project. Even then, in this fourth quarter, we achieved a very strong free cash flow low generation of 1.4 billion barrels. And as a result, the annual cash flow generation for the last 12 months, which was negative until then, is now positive and stood at 394 million barrels in 2025. Part of this cash generation earmarked was earmarked for reducing our debt, and as a result, we ended the year with leverage of 0.76 times net debt over EBITDA, a level that we consider to be extremely sound. Our resilient business model continued to be very resilient, combined with caution in capital allocation, and all of that allowed us to grow significantly without sacrificing shareholders' returns. As evidence of this, throughout 2025, we paid out 2.4 billion BRLs in dividends and share buybacks. And finally, in addition to completing our buyback program initiated in December 2025, which we already announced last December, yesterday we announced the launch of a new program for Gerdau SA. It will be for approximately 2.9% of outstanding shares of the company. And if we think about today's numbers of the last, you know, exchange floor, this would be the equivalent to 1.2 billion bureaus. So I'll end here, and I'll join Gustavo for the Q&A session. Thank you, Japor. And still speaking about Brazil, we expect... moderate growth in demand in 2026, even despite the excessive influx of imported steel in the local market. I would like to point out that we are more optimistic about the progress of the trade defense measures recently announced by the federal government to combat unfair competition from imported materials, and as well as the transparent and ongoing dialogue that the steel industry has maintained with pertinent agencies. Meanwhile, in North America, we continue to see stable steel consumption at high levels, with order backlogs above historical averages. The outlook for steel demand from sectors such as solar energy, data centers, and infrastructure remains positive. I'll now hand over to Arianna, and Jafur and I will be available to answer your questions. Thank you, Gustavo.

Thank you, Gustavo and Jacques Bourg. We will now begin the Q&A session. Our first question comes from Danielle Sasson with Itaú BBA. Danielle, go ahead.

Good morning.

Thank you, Ari, Jabur and Gustavo. It's always good to speak with you. My first question has to do with the outlook of the Brazil business margins. You spoke about some stability expected for Q1 of 2026. I'd like to have your view about the trajectory over the years, starting with a somewhat weaker base, but with Miguel Bernier ramping up in the Could we expect a different trend? Normally, we have a worse seasonality in the end of the year. And do you think you can end 2026 with an EBITDA margin being double-digit, although perhaps double-jaded for Brazil would be too optimistic. It depends on more aggressive measures regarding price, etc. My second question is about impairment. For more than five years, you didn't have a very relevant or substantial write-off. So could you give us more detail on the more conservative assumptions you used to project the cash flow of some assets? What made the difference here? Level of usage, price level, perhaps lower growth expectations for the coming years? And in Brazil, some of your competitors may ramp up their own capacity. Will Gerdau consider closing down more capacity in addition to what you have done in the last few years when you adjusted your footprint? Thank you. Good afternoon, Daniela. Excellent to start the call. but addressing the elephant in the room which is the outlook for the first quarter we realized we got some comments in the market that people were kind of surprised with the expectation we see now of maintaining margins in the first half there are some points here first we have a year with fewer business days compared to other years. Because there are many holidays, there's the FIFA World Cup and so on and so forth, and that has an impact on our economic activity. Plus, rainfall, which was stronger in the southeast, particularly in Minas Gerais. Stronger rainfall? heavier rainfall compared to prior years. Also, considering consumption sectors as the automotive industry, we have Amplavia data, for example. In January, they started with a level 12% lower for vehicle manufacturing compared to January of 2025. And that matches the high level of inventory that there is in Brazil of imported vehicles. And that matches other data published last night of consumption of long steel and flat steel sales in the domestic market that will lower in January 2026 compared to January 2025. So a stronger resumption of volume is something that we are not seeing in terms of volume. And as regards our costs and margin, although we see prices that on average are better than we had in Q425, there are still some cost pressures that we see in the short term that may get a chunk of the margin that we would have with the more competitive prices. And here we have coal, the coal theme. We are not so exposed to coal as other companies listed in Brazil. Most of them are integrated, but half of our operation in Brazil, rounding up, is the Ouro Branco unit. And when they get a modeling, about 20% of our Brazilian costs have a relationship with the cost of coal. And we see that coal costs from Q4 to Q1 increased substantially. It is true that we have a long lead time between 90 and 180 days between the price of coal increasing and this being passed through to our results. But we see that this will cause some level of pressure on our variable cost. Now you put it all together. we understand that we will have an environment of better prices but perhaps costs under a little bit of pressure and at the same time volumes that are not increasing significantly to improve the operating leverage i don't know whether gustavo would like to add anything about the brazilian outlook go ahead if you have anything if i have anything to add i'll do it in the end as regards to impairment. It has something to do with the Brazil conditions. When we run our annual tests in our accounting policy and recovery of PP&E, etc., we run a number of tests considering the future cash flow for our business operations, taking into account foreign exchange assumptions, profitability of the businesses, and utilization of our capacity. When we compare the set of the assets in the Brazilian business, It justifies some of the assets that we have in our balance sheet. Some plants were hibernating. They were depreciating slowly because we didn't have a definition of not returning these units. Some other units that were not operating at full capacity, they were farfetched. You can see that our utilization capacity is below 60%. in terms of the melt shop operating lower than 75%, so clearly we see a high level of idle capacity. Except if we have a significant increase in demand and the level of profitability, we don't see any reason why we would maintain part of these assets. It's a small amount of the total PP&E that Gridal has. In terms of premium prices, well, we had something around 350, 400 million BRLs, but we understand that with a more challenging foreign exchange, with a more challenging market, with a more challenging macro scenario, it's a moment for us to reflect these results in our accounting. That's why we have the impairments. rafa perfect still on the margins on the first question is it reasonable to imagine that everything constant in the second half we should see an improvement in the margins at least in the part of costs with miguel absolutely absolutely and to answer the second part of your question again we're talking about stability of margins of a margin of around seven percent We don't think it's unreasonable to have a second half, perhaps, a full year with a two-digit margin. It's not unthinkable. It depends on our ability to deliver the Miguel Bournier project. And if we have the trade defense mechanisms and market dynamics not deteriorating, things can happen. I'd like to remind you that this is a presidential election. It's election year. There might be some volatility in some of our target markets, but it's something that we're going to be monitoring over the year. And Daniel, you also mentioned a possible closing down of further capacity. When Jean-Paul was talking about a low usage, it was possible to think about closing down more operations. But the thing is, we have such a variety of products manufactured at these mills that if we remove capacity now, we will not be supplying the market in some of those segments. So our 2026 plan does not include closing down any more capacity. What we had to do, we did last year. Of course, over the next few years, depending on how things progress in Brazil, there's always space. And technically, it is possible to change these assets so we can make investments, particularly in the rolling mills, to make them more flexible. But looking at the short term, in 2026, we are not thinking and we're not considering closing down any more capacity so our expectation of cost reduction and optimizing our brazilian operations that will not come by closing down mills okay thank you very much Next question from Rafael Barcelos with Bradesco. Thank you, Ari. Thank you, Renek and Japor, for the opportunity. My first question. We have seen the United States posting very strong results, kind of contrasting with Brazil, but this has been discussed here. And in this quarter, South America was a negative surprise. you talked a lot about brazil you gave us a guidance and i would like to know more about south america and how you're seeing the expectation for the year for the quarter what can you tell us to help us understand the future results and my second question is about the united states which is indeed what is impressing all the investors seeing very very strong results we are following metal spreads and it seems that we are going to see even greater margins in in q1 but in talking with some local players they tend to be less optimistic which is only natural because margins and prices increased but also there's parity of some products which is kind of stretched in the region so if you could speak about the united states what you're seeing about the sustainability of the u.s profitability and comment on the main drivers and since this is a segment that is really standing out Some investors consider a possible listing of the operation. If you can comment on that, we would appreciate it. Hello, Rafael. Starting with South America, in this specific quarter, we had a specific theme in Argentina to maintain the level of of utilization of our unit we had a greater volume of exports which ended up increasing our cost because we have a greater logistics cost that goes into our cost line item and that impacted profitability we don't expect that we will maintain the same level of exports from argentina this year normal condition a recovery of our margins in our south america operations already in the first first half of this year and continuing in the second half of the year something in the mid teens would make more sense to the south america operation as was the case of what happened in the year of 2024, on average what happened in 2025. Now moving to the North America operation, I have a number of different situations that are worth highlighting. The situation in Canada is different than the situation in the United States, and in the United States, Special steels, longs and rebar have different dynamics. It is true that we had an expansion of spreads because of our beams that had some price adjustment at the end of the year. and that didn't have the same level of recovery in decrease of prices of scrap but that does not account for our whole portfolio we have other lines of manufacturing such a special steel in the automotive industry of the united states so they are not recovering at the same level of production and sales that we would like to see to drive our sbq operation in the region so i guess that overall We don't see anything making us think that there will be a substantial reduction in the profitability of our North America segment in the short term. We continue with our order book being very strong, remaining at very high levels. I think that we're actually now a little above the level of the end of the quarter. We are close to 90 days rather than 80 days. So that gives us... good confidence that this is not the effect of just one or two months of results, but rather it's something more recurrent. Would you like to add anything, Gustavo? Yes. Rafael, when we speak about North America, when we look at this in more detail, when we look at Gerdau results divided by business operations since 1990, plotting the results and looking at them with attention. There were many moments when the results in Brazil were much better than those in North America. Other times, North America over-performing. Rarely both were doing poorly, and very rarely both were very good. And when we look at this in more detail, after we publish the results, I get I get bothered with a number of things about Pedro Cardal. One thing that does not bother me that much is that we see this discrepancy between the United States and Brazil. I would say that this worries me less than you do. I was more concerned in 2017-18 when our results were very, very strong. And our results in a solid economy like the U.S. economy were kind of poor. And why? Why do I feel that way? Because I don't see... any signalling of deterioration of our margins in North America in the coming quarters for a number of reasons. When we compare the soundness of our operation of our assets in 2017 to now, we have been operating quite well. Eight years ago, the comparison of operating performance vis-à-vis our competitors, we had a number of $30 per tonne, and that was my judgment my analysis regarding our performance gap vis-a-vis the competitors but in the last eight years we worked hard in the u.s not only did we close this gap but the public indicators and indicators we have access to clearly show that we have an operation from scrap to industrial with very good results and a more robust operation than our main competitors so we're doing Very well in terms of the operation, in terms of raw materials, we learned to use only obsolescence scrap, the scrap that we have access to. that has easier access to. And from the commercial standpoint, our decision to leave those products where we see greater penetration of imported steel was a good one. When we look at the main category of products, the main structural beams, that's a product that is very difficult to import, given the size, the weight, the different gauges. So I would say that we're very well positioned. In a way, we're very well protected in our business when we look forward. The health of our backlog in terms of infrastructure, in terms of solar power, data centers, that gives me some peace of mind that we will continue to have solid and sound results in North America in the coming quarters. as we solve, and we will solve the competitive issues that we have in Brazil. So I don't really worry about these points. Well, I read some of the comments made in general by the market, and those don't really worry me. And as regards Brazil, this has happened previously. Of course. If we have an anti-dumping of HRSC, as we're expecting, there will be some improvement. And there's a lot happening in the coming quarters. Ouro Branco Mill operating in a very solid way. Testimonial of that is the quality of our coke plant, the quality of our blast furnaces. And we have been delaying and postponing the stoppage. I would say that our Ouro Branco mill is very differentiated. We have the new sustainable mining platform of Miguel Bonier that will increase our competitiveness. So I am... I am fully convinced that we have adequate timing, sufficient time to improve margins in Brazil. And we are far from a deterioration of margins in North America. I just wanted to stress this point. Most of the times I agree with the comments that are made by the investors and the analysts, but right now I kind of disagree with some of the analyses that, kind of penalize our results because there's a significant difference in margin when we compare the U.S. operation to the Brazilian operation, okay? So I have a slightly different opinion on that regard. Thank you, Werneck. Just as a follow-up question, Given everything is said in the relevance that the U.S. operation acquired in the Gerdau business and the difference between the regions, that's always questioned by investors. Are you revolving with the listing possibility? How do you see this? Are you maturing this discussion at the company? Can you comment on that? Of course. Overall, things regarding company restructuring tax impacts and ways to unlock value well these are always things that we are looking at internally but we haven't got any tangible study or action plan being executed or about to be executed regarding the listing of the company we are monitoring some cases we are monitoring some companies that did follow the path they are reaping some fruit but with some difficulty as we are monitoring them and then we will continue to looking to look into that if the management of the company concludes that this is going to unlock value for the shareholders it's something that we might explore thank you very much thank you very much thank you raphael all the best

Our next question comes from Caio Grena with UBS.

Hi, guys.

Good afternoon, and thank you for taking my question. I have two questions. I would also like to revisit something you briefly mentioned during your last answer, and that refers to anti-dumping and how this is impacting the company's view. And this has been A very frequent discussion point. And if I recall, I think this is one of the points that you mentioned in the past, this lack of protectionism or even this unfair competition coming from imported steel that is being dumped into the country. And this is what led you to think about the... putting some brakes on the capex investment. But now we are seeing some approvals, not only in regards to the anti-dumping issue, but the 25% tariffs. So I think somehow we see some movements on the part of the government in that direction. Certainly the impact. in terms of your products. I mean, it's there, but it's minimal. It's very small. But your products should be still impacted in the next coming decisions. Just like what you said before, you already envisioned some preliminary approval. But the question is, how do you see protectionism expanding in the steel milling industry in Brazil, and how does that change this relationship with your Brazil unit. Are you more comfortable today to resume investing in the region or even maybe going in the opposite direction? Maybe you could start thinking about, I mean, reopening some of your units. And I would also like to revisit one of your comments. Maybe you could start thinking about investing in some rolling mills going forward. So I would just like to hear your views about how this is impacting the company vis-à-vis, you know, the Brazilian market after the approval of the protection measures. And my second question.

is about asset divestments.

This has been an ongoing topic among your peers. Maybe you should start looking at some non-core assets, and I think you already have a lot of things in the company. I would just like to understand whether this is something that you were discussing today in the company, and if the answer is yes, whether you could give me more details. If you're looking at some assets that you think about selling, what the assets are, and what do you see going forward? Okay, thank you. Thank you, Caio. I will start, and then Rafa will follow through. Well, one of the main reasons that led me to be more optimistic about the trade defense measures is the fact that it is no longer a political thing, but it's becoming more technical. There are countries that, right after the election, Some countries made a political decision to introduce these defense mechanisms. I'm very careful when I use the word protection because I never use this word when I am in Brazil. I would rather use the word defense because we don't need to be protected by anyone. I think the industry has to be defended against unfair competition. Therefore, for political reasons, in the last few years, We didn't see any expedited decisions in the steel industry as we did see in the U.S. market. I mean, Section 232 is very important because it promotes reindustrialization and it also promotes the growth of stimuli industries. I mean, when we are there, we see that reindustrialization is now taking place. So I believe that in the future we will see better and clearer indicators. The issue is, and I would say that in a way, I'm a bit frustrated because technical trade defense could happen faster. I understand the difficulties that we have today, especially in the federal government, because we don't see a large number of experts like we had in the past. Some functional structures are being revisited. But I still believe that it could have been faster than what we saw. But now, when we look at HRC and a temporary measure being put in place, shows a transition from a political measure to a technical measure. I think it's very difficult for any government to make a decision that is not aligned to clear proof of damage to the domestic industry. Therefore, I'm very confident that this HRC anti-dumping should become a definite measure come June and July, and this could be really a significant landmark in our trade defense measure. This will not change our internal decision to allocate capital or our CAPEX decision. I didn't talk about it extensively, but I am of the opinion that we should continue to allocate capital in Brazil to improve our competitiveness. There are relevant alternatives in the future. that indicate that we should bring our cost level to a level that would allow us to compete on equal footing with any other company, even with those that practice unfair competition. We are not going to change our capex for this year of 4.8 billion BRLs, and my future belief is that we will continue to invest in Brazil. probably we might continue to translate allocated capacities for exports in the domestic market. There's still some gain, maybe some rolling mill or some production capacity that we believe will make sense for the future if it is to replace any additional capacity that we have in terms of exports. But our main CAPEX focus for Brazil will be aligned with what we are about to ramp up in Miguel Bernier, which is to bring our, you know, cost equation and competitiveness to a new level. And I think I covered all your questions, but if you have any additional questions, let me know. But now I will turn the floor to Shapur, because he's the one leading this subject of non-core assets. So he has more details on that subject than me. And so over to you, Shapur. Hi, Caio. I don't want to make anyone nervous that guidance is 4.7, not 4.8 million. Okay, I don't want anyone to be nervous with the number. Now, going back to your question in terms of non-core assets, I think here we have two main sources. I think we are speaking to investors as they approach us with the subject. The first front,

regards our forest assets and farms that we have in brazil and we have those assets because of our coal production to produce iron to produce

to produce the iron we need. And today we have excess capacity, both in terms of land and forest. So certainly this has some value and this has to be justified in our P&L. I mean, it's nice to have assets, but they have also to generate value. So we understand that then if we have more clarity and clarity We are now working to validate that. So, in fact, it's important that we have an important amount of forests and farms that can be monetized throughout time. Another front of non-core assets has to do with real estate. Here now, both in Brazil and abroad, we grew a lot through acquisitions. And these acquisitions, sometimes they come with some property, with some real estate attached. and sometimes due to operating aspects and the way we operate and the way we are organized. I mean, at the end, we end up keeping these properties, and we use them sometimes in full, sometimes not in full. But now we are beginning to revisit some of our units and take a look at... Comercial Gerdau in Brazil. This property was very well located, but this is not the case nowadays anymore. And this asset changed in terms of its location and the surroundings, so it's not so important to us anymore. Therefore, this asset portfolio, which is very fragmented, we are talking not about one or two, but hundreds of properties. We understand that some of them have still a lot of value. We are trying to understand now how much it is worth and what will be the best way to extract value in a timeline. Having said that, it's important to make a distinction. In time, I mean, along many years, Gerdau made an important effort to deleverage its balance sheet, and we are keeping a very robust and sound balance sheet so that we can continue to invest in our growth, you know, paying off our shareholders without taking up unnecessary risks in such a cyclical industry like steel and commodities. divestment of non-core assets will certainly be subordinate to value generation for the company. We don't feel the need to make any sale. And, of course, I'm not against those who are doing it. What we want I mean, at the end of the day, is to create value and not simply just, you know, carry it out in operation just to take it out of our balance sheet. Because what we want is to indeed evaluate our asset portfolio and determine what will be the best location for every asset. And when we realize that we are no longer the natural owners of the assets, be it a farm or any particular property, We will try to create value through that. I think this is the main, you know, idea behind it. We don't have any guidance. We don't have any concrete plan. But as we move forward, we will certainly improve the market.

Thank you.

Thank you, Caio. So I'll go back to you, Ariana. The next question is from Carlos Diaba with Morgan Stanley.

Just maybe following up a little bit to recent discussions, how is the company and maybe the board of directors to the extent that you can share their views, thinking about the return to shareholders of any excess cash that the company generates? We definitely acknowledge and took a very positive notice of yet another share buyback after concluding the one successfully that you had implemented in the past. But despite the very strong cash regeneration in the fourth quarter, dividends came a little bit below expectations from the sell side. So we wanted to understand how are you waiting or the board is thinking about your shareholder returns in terms of cash, excess cash, between these two alternatives. And maybe just complementing this one before I go to my second question, is if you do execute, if the company does execute these non-core asset sales, would the company return the proceeds from those to shareholders, or would it keep it as part of the cash balance of the company? And then just my second question has to do a little bit with the CAPEX, the view on the, maybe not guidance, but just broadly speaking, how does the company see CAPEX Beyond 2026, do you think that it would be closer to $4.5 billion or maybe moving back closer to $6 billion that we saw in the past? Thank you very much.

Thank you, Carlos, very much for your three questions. i will try to answer each one at a time starting with you know shareholders return and non-core assets and then i will talk a little bit more about capex right hi carlos it's good to see you again as we already said in the past we we've been maintaining the dividend pay payout slightly above our policy. And this has been so in a very consistent way. And the average has been 45 to 50% payout, which has been the case in the past. And taking into account the value of our shares today, we still believe that it is below the intrinsic value of how much they should be worth it. Taking into account the cash generation level, I mean, in North America, our profitability in that geography, and the moment where we find ourselves in the capex cycle, as we start to decreasing our investments in capex, and then we start generating more free cash flow to our shareholders in time, we understand that in the long run, we want to return more value to our shareholders. So not only... you know, the amount that we are paying now above the mandatory law bill. We want to add some more with the buyback program. In terms of capital allocation, taking into account the current status of our shares, but we must also look at taxes because this may impact our foreign shareholders because now they will be subject to withhold taxes over dividends, and the buyback is not subject to that tax. And that's why when we take into account the shareholders' base of Gredau SCA, and considering that more than half of that base consists of foreign shareholders, it is important that we Bear that in mind. I mean, the effective return of how much money we place in the hands of shareholders, not necessarily how much cash lease the company. Now, about the question on proceeds from non-core assets, I don't see any reason why other companies liquidity of things that we may have through our assets, of course this should be returned to our shareholders. Throughout last year, if we look at the history of all the quarters We basically saw an increase in net debt of 2.4 billion BRLs, and we paid out 2.4 million BRLs to our shareholders. Therefore, we experienced higher leverage throughout the years. So quarter after quarter, we continue to remunerate our shareholders. This last quarter, when there was a significant... release of cash we thought that this would be the adequate moment to reduce our net debt and therefore we would have more breath space and flexibility going forward in this current environment so i think this can you know throw some light i mean i i look at your report and you expected 13 cents And I think you have now a better explanation of what led today. About CapEx, Carlos, I don't have any guidance or any detailed information about guidance for 2027 onwards. And as Japor put it well, CapEx disbursement for this year is $4.7 billion, not $8 billion, right? $4.7 billion. What I can tell you, Carlos, is that we will be really diligent and we will not disperse capex that is not aligned with our capacity to generate cash. Therefore, in the future, we don't want to commit the financial health of our balance sheet or the levels of debt just to increase capex. I mean, we have strong beliefs, therefore we will not discuss any changes regarding these limits in the next coming years. But as any other companies, we have a wish list which is full of projects. What we notice today is that the wish list, in terms of investments in the future, this list is more populated by reinvestments to seek for further competitiveness, cost reductions, rather than investments that will allow us to grow in capacity. Certainly, in the future, we may make investments just to replace some, you know, capacity or exports of semi-finished goods or high added value just to serve the domestic market, or maybe some marginal increase in capacity. And one of our plans that may be directly related to the development of a new product or any product that may add up to our product mix of products but going forward i believe we will invest in things that will allow us to promote you know cost reductions or to increase competitiveness but i also want you to bear in mind that at some point in the next 10 years we will have to invest in our auto branco mill That mill has been operating at a very intense pace in terms of our, you know, glass furnaces and the coke. production unit and, you know, shutdowns for maintenance. But at some time, we will have to deal with the lifespan of the equipment. Therefore, this may require some more relevant investment in Ouro Branco. But obviously, if the need arises, this will be compensated by a capex reduction in other areas of Murdao.

in order to maintain a disciplined balance sheet, which has been the case in the past few years.

Well, see you soon.

Next question from Caio Ribeiro with Bank of America.

Good afternoon, everyone.

Thank you for the opportunity. My first question is regarding avenues for growth in the U.S. segment. The company has the Midlothian operation that aims to be more competitive and increase its footprint in the U.S. market. But I would like to explore two related themes. Firstly, how do you see the option of growing through micro-mills? considering the products where you operate the most in the United States. And on that same topic, other than organic growth options, would you consider M&A in organic growth, mainly via smaller players in the U.S. market? My second question is about the project that you were looking into in Mexico. Could you give us more color on how a possible renegotiation of the USMCA could lead to an increase in tariffs of the United States? Could this impact your decision to go through with this investment or not? Thank you.

Hello, Caio.

Sorry, my mic was muted. Well, looking forward, we don't have any great wish or great ambition to significantly grow our production capacity. Growing for the sake of growing for many years now has not been part of our life. So I would say that overall, what we expect for the coming years is organic growth. where we can add some capacity for higher added value products and products that may bring value, not just for Gerdau, but for our customers. So when we look at these micro mills, in our view, they make more sense or they will make more sense to reduce our production costs rather than adding capacity. We see that this is a very modern and smart solution in terms of joining a hot rolling with a melt shop, so we won't need to reheat the billets. So it's interesting. But in our view, if this is included in Gerdau's plans, the goal would be to replace some existing production capacity, which is more inefficient from the cost standpoint. And as regards mergers and acquisitions or any such growth, of course, we are always attentive, as we have always been. I take the opportunity to congratulate our team because if in the future we can find an opportunity for M&A, this is the result of our discipline in the past few years of having a company with a very sound balance sheet. We see in the market some companies that are facing difficulties, a lot of difficulties. We have seen them in difficulty for quite a while now, and we were very disciplined in our actions to have the company's balance sheet at a certain level that will allow us to think about M&A in the future. But we are very down to earth. It doesn't make sense to make an opposition that will not add value for the company in the long run. Of course, there are always things that can complement our business. We can always seek some synergies when we analyze a possible acquisition. We are always keeping our ears and eyes open for an acquisition. that will help us get to the grid out that we want, a smaller grid out, but one which is more profitable, more well-prepared to face the coming years. And the Mexico investment has to do with that. We have a business case that is ready. But Mexico, regardless of USMCA, is going through very substantial change. I see in Brazil a growing debate on reducing the working hours few weeks ago they approved the reduction in their working hours so mexico as a country has been losing competitiveness at the industry level so these are always relevant elements that we have to take into account in our business case in the usmca the new usmca that will be debated as of june of this year will be a very relevant point for us to review our business case and make a decision whether it's worthwhile whether it's worth investing in this new mill of special steel. It is an opportunity. We understand that the U.S. market, with its ups and downs, with heavy and light vehicle market, remains an opportunity for us. But we will be very diligent in allocating significant capex for a greenfield mill in Mexico, considering the debates involving Canada, U.S. and Mexico. Okay? Let me just add a couple of points to your question about growth. We have been doing some important things to improve our profitability in North America. In recent years, we opened two downstream segments in Middle-earth and thermal treatment. and solar piles and when we look at our quarterly report in the year to date the different lines of products we see that the downstream line item in the north america segment increased 39 compared to 2024. into 2025 these are high added value products that are less susceptible to competitive imports and the ones in which we have greater differential or competitive edges and i think that this matches what gustavo said we are very cautious and very prudent in allocating capital for growth in North America. In addition, we're growing with smaller acquisitions and upstream investments, which is the case of scrap producers that happened last year that increased scrap potential and our ability to process scrap in a cheap way. So that's more the kind of growth that we're thinking of, rather than a major acquisition, as we have seen in some cases in North America. Okay? Okay, that's very clear. Thank you very much, Werneck and Jaipur. Thank you, Caio. All the best. Next question from Igor Gued, Genial. Good afternoon. Thank you for the opportunity to ask question. Looking at the level of exports, 370,000 tons are growing quarter on quarter, year on year. We saw a level of 140 million in the consolidated habitat compared to 80 million in Q3 and only 24 million in Q4-24. Given that you export a large amount of semi-finished steel coming from you in Brazil, even to other regions in South America, you mean cut, bend, hop rolling, this higher level of eliminations, would it be related with intercompany transactions or was it due to other reasons? And second question, you mentioned that part of the capex in Q4, there was 1.5 billion, was allocated to a restructuring and improvement in the Sierra unit, Maracanaú. About 100 million BRLs. However, in one This was one of the two mills that you hibernated together with Baron de Cocais. So let's explore that. Could you share with us what kind of changes have you made to these mills? And how does this fit now in the footprint of the company? Will you reactivate the mill with more efficiency than before? If you could comment on that, it would be interesting. Thank you very much.

Okay.

Hi, Igor. It's always good to see you. You made some interesting questions. Let me start with the eliminations regarding imports or exports and eliminations. And eliminations. We have eliminations of all possible businesses between the reportable segments. Since we have little exports from North America to South America, what we have is more business between the Brazil segment and the South America segment. I think in the previous question we mentioned we had a large volume of exports of billets from Argentina to some of our great DAO units in Brazil and in South America, Peru. And that kind of increased the amount of eliminations that we had. It was a lot because of that, because of this greater volume of exports from Argentina. which typically is not a country that exports a lot and all the time. So that increased the atypical volume that we had in the line item of illuminations. To your second question about Maracanaú. That's a very good question. Back in 2024, when we had the hibernations, we also hibernated the Maracanãu mill in Ceará. And we said that it was going to go through a modernization project and a program. What was the goal of that modernization program? Today, the Maracanãu unit operates integrated with our rolling mill that we also have in Ceará that we acquired from Silate when we acquired it in 2019. That's a rolling mill, state-of-the-art rolling mill that we have, very modern. And the mill chop, I'll be a little technical here. The mill chop made smaller billets, relatively small billets, about six meters long. When we rolled it and put it in the rolling furnace and started rolling it in a more robust rolling mill, a more modern rolling mill, the rolling mill of Silati, we didn't have the level of optimal cost and yield because oftentimes i had to be feeding that furnace with smaller billets so the project we had was to adapt the size of the billets manufactured at the maracana melt shop to 12 meters they are closer to the ideal size to be consumed in the silati rolling mill with that we can increase our competitiveness in the northeast operation and again as gustavo has highlighted before a good part of our portfolio projects at girdal has been focusing on increasing our level of competitiveness our ability to be cost efficient to compete with any competitor anywhere in the world. And this is an example of this goal. We are not making a new mill. We are modernizing an existing mill and thinking about how to better integrate these two assets that we have in the state of Ceará. So that's basically the rationale behind this project to modernize the Maracanãú mill. Just a follow-up question, Japor. In terms of integrating the mill to the footprint, one more time, would that entail any cost increase, perhaps a one-off cost increase that we should be paying attention to, or would it be like a smooth transition, just to have an idea? No, no, it's basically the mill shop that will start operating again, supplying billets for the Silati rolling mill. There will be no one-off cost increase, no additional cost. It's basically allocating billets, also imported billets that we get to Silati, and that now we will be supplying. to a neighboring mill in the state of Ceará. Perfect. Thank you very much, Shapur, everyone. Thank you.

Our next question from Ricardo. Good morning, and thank you for taking my question. I have just two very quick questions, but they were very important in the discussions we had yesterday. First, looking at your cash flow, I would just like to understand what is your outlook. You have two lines, mainly working capital. There was any significant release of working capital, how much of that is structure or how much of that can be reverted in the short run. And the second line is the cash financial expenses. There was a significant drop of almost 4 billion BRLs. But I just want to understand how much more reduction you anticipate in this line or whether we could review like more expensive debt being paid out. and the balance paid at a lower interest rate. And my second question is that I would like some help to build a double-digit margin for Brazil in 2026. Because, Chaput, I think you said that if it were not for the deterioration of market conditions, we could probably reach double digits throughout the year or even year-to-date, you know, including Miguel Bernier. I just want to understand if in your number, are we starting with a weaker margin and this will improve in the second quarter and maybe getting even better in the second half? Or probably there is some room for getting a better margin quarter on quarter. And with that, you will create a bigger buffer. Therefore, you know, throughout the second half, you will be able to deliver a double-digit margin. Hi, Ricardo. So working capital, your first question. Yes, we believe that there will be a use of working capital. Even because of the strong results that we posted in our North America operation, we saw increase in volumes, increased shipments, and also there was an increase in the average of our product mix, and this will require some additional working capital in addition to the... you know, resumption of our operations, especially considering our operations in Brazil, because of seasonality. So there should be a certain level of working capital, you know, used, but we will not go back to everything that we were able to build, because especially when you look at the inventory line, we posted important gains of efficiencies. not really thinking about working capital, but cash conversion cycle, days of working capital. This quarter, since we had the settlement of our, you know, make whole call, we had to pay interest that had been accrued until the make whole date. So there was an increase of what was expected in terms of cash interest, because not only I had to pay for what we already anticipated in terms of payments in the due date, but also there was a make-hole of the bonus that was settled in full, so that interest account was a bit bigger. But if you break down our P&L, you look at the you look at the fact that we break down the debt per currency and type of debt. And this is very clear in our P&L. So you could have WCD in U.S. dollars and reals and then you know looking forward you can have an estimate of that interest account but in terms of cash flow all you have to do is pay more attention to the maturity date of the bonds because they follow you know dates that are more concentrated in April and then October. These are the two months that concentrate the bulk of the interest. Now, finally, about the Brazil operation. I'll start with the end of your question. Significant improvement in Brazil in terms of margins. I think this is a bit far-fetched, looking at the current situation. But again, If we hadn't seen this very strong move of over 20% in coal increase that we saw from the fourth quarter onwards, probably we could have seen a more consistent improvement in the first quarter of the Brazil operation, despite the fact that the market is not growing so much. So maybe the data could have been worse in January. So... I don't think it's so far-fetched yet to think about a two-digit margin, considering that in the second half of the year, we will already post concrete benefits related to our Miguel Brunier ramp-up, the mining project. So a bit of this construction, I would say, is like a first quarter, very close to the margin we have today, which is high single digits. and maybe other coming quarters with a gradual improvement. If you look at the combined numbers, if everything else remains constant, so we may say that by year-end, if you look at the combined numbers of the year, the EBITDA margin, you know, everything combined would be around two digits.

Perfect.

Just to confirm, so Miguel Buñuel's EBITDA will be around $400 million a year? It will certainly depend on our capacity to deliver the Miguel Buñuel project in due time and at the stability level that we want to imprint in the project. It's important to mention that this is not an existing mill because something that is new and starts ramping up every month, From the end of the year that I eliminate, I have to do the math accordingly, and this affects the calculation. We don't have any number in terms of what would be the ramp-up result of the Miguel Bonilla's operation. But as soon as we have more information available and the project is in its integrated task space, So as soon as we have additional information, we will soon share that information with you. So this is very important to achieve the competitive level that we expect to have. Our last question from Emerson Vieira with Goldman Sachs.

Good morning, and thank you for taking my question.

I would like to review the U.S. profitability level. It's very clear what you said, that you will maintain the levels in the short run. But my question, especially if I look at cost and the scrap prices, the pricing has not recovered in a way that it would make sense. given the rebar price level because this is only in the U.S. So looking towards the second half, do you think that there will be more relevant prices or the current scenario, I mean, or this scenario is very unlikely and it will be more likely for us to see the same scenario that we have today? And the second question, is about what is your view regarding the potential impact of the anti-dumping measures related to steel exports coming from Vietnam and Algeria, and whether this should lead to some marginal share gain, or this is not really impacting the company in the U.S. Well, let me share the answer with Jaipur. because I don't want him to answer everything by himself. I mean, it's very difficult for us to project scrap prices in the U.S. I mean, looking at prices two, three quarters ahead. But we believe that with this level, semi-finished, produced in the world, produced based on coal and iron ore coming from China, This will probably take some share of scrap coming from the U.S. Therefore, the trend going forward will be for scrap prices to be more stable. And reinstating what I said before, This leads us to believe that the metal spread will be very similar to the levels we are seeing now. And this is another reason, in addition to all of the reasons that I mentioned before, this is one of the reasons that leads us to be more certain about the stability of our results coming from the North America when you look at the entire year of 2026. to talk about anti-dumping. The point is that when we look at the product portfolio, rebar is a product that is a feeder of our line. Like I have the full rolling mirror with the products that I want to produce, then I dilute my fixed costs by producing rebars. It's not something that it's a very significant portion of our business. I mean, it accounts for about 10% to 15% today because, you know, beans and others have a strong price. So, revised account for about 10% of our price. But what happens, Emerson, is that... At times when there are producers that make merchant bars and rebars, when profitability increases on the rebar side and they have modern assets or micro-mills that are vocationed for the production of rebars, so their appetites decrease in terms of using scrap for merchant bars. Not necessarily this has to do with the anti-dumping measures when you look at our own rebar producers, but this would be a secondary effect to improve merchant bar prices, and producers have to look at a trade-off because they can at times produce rebars and at times produce merchant bars. Okay, thank you. Very well.

Our Q&A session is now closed. I would like to take this opportunity to invite you to our next earnings conference call that will take place on April 28th. Renek, you have the floor for your final comments. Well, before we disconnect, I would like to send my very best to Mari. She's not here with us today. She's living a very special moment. She had a baby called Pedro Antonio. So I would like to send her all the best and wish all the best for baby and mother. And I would like to thank Ariana that you called Ari. During this call, I'd like to congratulate her on how well she conducted this call today. This only reinforces Gerdau's commitment and culture to have excellent teams on board. On my own behalf, on Jean-Paul's behalf, I'd like to close this call wishing you all the very best. And I am sure that I will see you in April when we discuss our Q1 earnings results. Thank you very much. I will see you then.