Gerdau S.A.

Good morning and welcome to Gerdau's second quarter 2026 results presentation. I am Mariana Pereira, Investor Relations Specialist, and joining us on this conference call are our CEO Gustavo Werneck and CFO Rafael Japur. Please note that this call is being simultaneously translated into English and you can choose your preferred language by clicking on the globe icon at the bottom of your screen. During the presentation, all participants will be on 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 not guarantees of future performance and are subject to circumstances that may or may not occur. I will now turn the floor to Gustavo to initiate the presentation. Thank you, Adi. Good morning, and in fact, good afternoon, all of you. I hope you're doing well, and I really appreciate the opportunity to join you for another earnings release presentation, where we'll briefly discuss the highlights of the second quarter of 2026. I will also talk about the outlook for our operations, and then we will move on to the Q&A session. In the second quarter, we recorded growth in shipments, both quarter over quarter and year over year, with a 7% increase in volumes in North America when compared to the same period last year. Resilient demand in the key sectors where we operate led to a 15% increase in adjusted EBITDA in North America in the second quarter compared to the first three months of this year, 2026. This strong result also reflects solid operating performance from our plants in the region. Meanwhile, We posted the slight improvement in the results of our Brazilian operations in the second quarter, reflecting a series of initiatives focused on increasing the profitability and productivity of our operations in the country. This gradual improvement in results occurred amid continued pressure from imports, which despite having slowed down during the period, remain at high levels year to date. In this context, we await the outcome of the anti-dumping investigations into long and flat steel products, which are expected to be updated in the second half of the year. Finally, I would like to highlight the increase in our ownership stake and Dona Francisca Energetica, which has raised our self-generated energy to more than 50% over Gerdau's consumption in Brazil. This move helps boost the competitiveness of our operations in Brazil and is in line with our previously announced decarbonization strategy. I will now turn the floor over to Japur, who will detail the financial highlights and the impacts of the current environment on our results. And I will come back to you after that. Japur, over to you.

All right. Thank you, Gustavo. Good afternoon, everyone. And I'd like to extend a good morning to those of you who haven't yet had lunch. So good day to everyone. Let's start talking about our operating result. Our adjusted EBITDA consolidated was 3.4 billion BRLs in this quarter, posting growth compared to both the previous quarter and The same period last year. And with this, we are getting to our very best consolidated EBITDA since Q3 23. Gerdau's adjusted net income also posted a substantial increase of 45% quarter on quarter, reaching 1.5 billion BRLs, reinforcing the company's ability to translate operating gains of our business into returns for our shareholders. Therefore, based on these results, Gerdau S.A. will distribute dividends of 23 cents per share, while Metallurgica Gerdau will distribute 11 cents per share. We also continue to make progress on our share buyback program of Gerdau S.A., which is now 31% complete now at the closing of Q2. Now, speaking a little about our financial discipline, it is important to highlight and stress that our financial discipline remains a priority. We ended the quarter maintaining A very solid balance sheet position with low leverage with debt over EBITDA ratio of 0.69 time in the last 12 months. This quarter, we maintained a positive free cash flow of 237 million BRLs. You might claim that it was just too little a timid generation, but we have to put this free cash flow generation into context, considering the typical seasonality of our business. If we compare the first half of 2026 and how much free cash flow we generated, comparing with the same period last year, first half of 2025, in 2026, we generated An additional 2.3 billion BRLs in cash flow. And this was mainly driven by both the growth in EBITDA, driven by the North American operation, as Gustavo mentioned earlier, and The reduction in our CAPEX investments in accordance with the guidance that we released and communicated last year. Talking about CAPEX, from a strategic perspective, we are nearing the start of operations for major projects that will enhance Gerdau's structural competitiveness, particularly in our Brazilian operation. Regarding the mining expansion at Miguel Bernier, we continue to make progress in line with the updated schedule that we released in our last earnings call, with a start of operations expected in the third quarter. We are running a lot of equipment tests and we should start producing ore. We remain confident that we will realize the projected operational and financial benefits of the project in the range of 1 billion and 100 million BRLs per year when we are in full ramp-up. In addition to investments made in energy mentioned by Gustavo, we are about to open our new recycling center in Pindamonho, Angaba. This will increase our competitiveness and reduce our exposure to volatility of this raw material in the long term. With this, I would like to conclude by reaffirming our culture of always striving for operational and financial discipline, while simultaneously strengthening our competitiveness and allocating capital to initiatives and projects that will shape our future. We understand that we continue to grow, creating value in a sustainable way to our shareholders. I will wrap up here and join you all and Gustavo for the Q&A session.

Thank you, Japur. I would just like to say that in North America, we continue to see steel demand at high levels with a strong order backlog. Thank you very much. In Brazil, we are seeing signs of more moderate growth in some consumer sectors, such as construction and manufacturing, while still facing an excessive influx of imported steel in the local market. This unfair scenario of imports continues to affect the profitability of our operations in the country, and in this regard, we continue to invest in initiatives that strengthen the competitiveness and profitability of our assets. Well, I'll now turn the floor over to Adriana. And Japur and I will be available from now on to answer your questions. Thank you, Gustavo and Japur. We will now initiate the Q&A session. Our first session comes from Rafael Bastelos with Bradesco. Good morning. Can you hear me? Well, thank you for this opportunity. Thank you, Arianna, Werneck, and Japur for taking my questions. My first question is about a very hot topic with investors, which is the outlook for the next quarter in the U.S. You mentioned margin maintenance, whereas most of the market expected additional expansion, given all of the price increases we've seen in the U.S. market. Having said that, could you please give us an idea of cycles in the U.S.? How are you seeing the cycles operating in the U.S. market? On our side, we see that the beginning of structure still in the U.S., that's something that is... Thank you for joining us. And if you allow me a second question, we are also looking at the Mexican market and that market is very strong, especially in the last few months. I remember that in the past you mentioned a potential investment in the Mexican market. Could you please let us know whether it would make sense to revisit that plan or not? That would be great. Thank you very much. Well, Rafael, this is what I mean, you know, cutting to the chase. No, going straight to the point. I mean, this is a discussion that Japur Young and I have had in the past few days. But let me give you a more qualitative view. Japur, the guy that deals with the numbers, he can probably... Add some additional information to what I'm about to say. When you look at all of the elements in a very practical way, Rafael, what we see going forward, I mean, the next quarter, and also taking into account the less price increases, we see a trend of margins going upward. There is no new element or any new risk that we could anticipate that is not well mapped out by you guys. I think that we are just being more conservative on the macro side. I mean, is there really enough room to expand the margins? Will prices continue to escalate indefinitely? Or maybe we're being just more conservative or realistic, whatever name you want to give it. But there will be a time when this will hit a ceiling. We can't just think about indefinite margin expansion. I think there should be a sustainable level. When you put everything on the table, you put price, you put our spread, Cost equation, international scrap prices. If you look at the numbers, the raw numbers, you see that that leads to margin expansion. But we are being more conservative. More down the earth, but I will allow Japur to come up with his own comments. We will have a maintenance shut down at the Midlothian plant, but it will be in the melting part. We have a very good billet inventory. So when it comes to shipments delivered and dispatch and the way we serve the market, everything is according to plan. So we do not anticipate any drop in shipments. But before I turn the floor to Japur, the Mexican market and USMCA negotiations are moving forward. More on the technical side, but nothing close to approaching a final agreement. And our teams, especially the team in Mexico, they've been talking to the people at the Ministry of Industry and the federal government in Mexico. Topics related to steel and automobiles are, you know, I don't see the expansion of Chinese products that enter the U.S. market via Mexico. Therefore, when it comes to low-cost production in Mexico and the insurance of automobile production in Mexico, all of these topics have led the discussion rounds. So there is nothing that would be a cause of concern. But when I look at USMCA and the way going forward, I don't see any additional risk coming our way. I think that the way things are going will lead us to see more positive news rather than negative. But as you said it yourself, you know, earlier this morning, we talked about that and Young and Japur and myself, we've been talking a lot about it, but now I think I'll give the floor to Japur to elaborate further. Okay, maybe I will repeat some of the points already mentioned by Gustavo, but I will do it like in bullet points. I think we will have to answer this question a lot more during this call. First of all, when we think about the market shipments and price, we don't see any loss in volume due to the Midlothian stoppage. I mean, we will continue to serve our customers, so we are not anticipating any lack of supply to our current customers. Prices, I think... We might have been a bit more conservative because there has been some price increases like on Friday and now Monday in North America. We still need to have some more visibility about prices in terms of prices being indeed you know put into force and half of our portfolio is earmarked to the distribution market where price changes occur you know more rapidly but there are other segments like industrial segment manufacturing and downstream the speed of implementing prices is a bit different the pace is different having said that when we think think about the Midlothian Thank you for joining us. In downtime for a few days, there is some idleness in our lines. And then we have to allocate the fixed costs directly to COGS, the results of that year, because we were not producing semi-finished or crude steel during that period. And at the end, this impacts the margins a bit, but this does not I mean, the unit economics or the order book perspectives going forward and the stability we see with metallic spread that was expanding and also it doesn't hurt scrap prices. So this quarter there was an important downtime in our largest unit in North America. And I think we have to think about the glass half full rather than half empty because we're making investments to generate higher volumes in our main plan, in our main market. So I think this should be the overall conclusion. When we think about this expansion in Midlothian, rather than thinking about whether this would be 1% more or less, because at the end of the day, what matters is the long-term return from our investment in a market where we have the largest cash generation. Perfect. If you allow me, two other very quick follow-ups. It was not necessarily Midlothian that impacted the cost, but just natural inflation coming from energy costs that we see in the market in different industries. So Midlothian, it's not so heavy in terms of cost. And then my second follow-up would be to Werneck. Therefore, I understand in terms of cycle, the sustainability of the cycle is a different story, but when it comes to the peak you probably see it getting close to the potential to increase metallic spread and profitability is something else that or sustainability is something that in fact will happen but this you know range is getting close to its potential but even If you go forward to 2027, the cycle can be defined the way we want it. And the main factors that have led us to see such relevant backlog, in our point of view, this will continue to be present. Because if you look at data centers, for instance, even though we were there in the U.S. when the debate started in Pennsylvania, New York, When they were talking about reducing or holding on the licenses to build new data centers because this will impact, you know, energy demand and water supply, this was restricted and there is no Other robust initiative that could stop the construction of new data centers. This is a path of no return, so the backlog for this sector is quite strong. With data center comes energy generation in the U.S. Renewable energy, even though there was a concern whether this would be reduced in the current administration, but that was not the case. So we are still producing steel for renewable energy, and this has been quite strong. And then looking ahead in the next quarters, it doesn't seem to us that there is any imminent risk that could lead to a drastic reduction to our backlog or our I can even anticipate that, and I don't know whether Japur would have anything else to add. Well, yes, Rafael, we do see a very one-off impact of that downtime in mid-Lothian in-cost in the first quarter due to idleness. Because since I have no production in the melt shop for that entire period, all of the electricity costs, take-or-pay, you know, gas, and employees that work in the melt shop, I mean, I need to transfer that cost to our P&L. And by doing so without having production per se, the cost, you know, on the cost point of view, it didn't change because it would be there anyway. But this puts a burden on the cost for that quarter. Once again, this is just a temporary effect, non-recurring effect. and we believe it will be around 150, under to 150 million BRLs. And maybe We are just being a bit conservative, looking at other market aspects as we referred to earlier on. And we are also taking into account the impact of the costs in the overall results of the operation. There were other inflationary impacts throughout the second quarter, like freight. On average, there was about 8.5% additional freight expenses in North America when compared to the first quarter. I mean, this happened in the second quarter, mostly due to fuel issues. And this has to do with the conflicts in the Middle East. And we believe that these effects will still remain going forward. But it's not due to other cost inflation, but something very much related to Midlothian and the maintenance downtime. Perfect. Thank you very much. Well, we thank you. Thank you. All the best.