Usinas Sa S/Gdr

Welcome to Usiminas Conference Call, where we will discuss the results of the second quarter of 2025. I'm Leonardo Karang, Investor Relations Officer at Usiminas. To those who want to follow us in English, there is translation on the webcast presentation. We also have an interpreter for simultaneous translation. Please choose the sound channel using the icon at the bottom of your Zoom screen. All participants are connected in listen-only mode and questions may be submitted in writing in the Q&A session. It's the icon at the bottom of your screen. Participants listening in English may also submit their questions directly in this section. This conference call is being recorded and broadcast simultaneously on Uzi Mina's YouTube channel. Please note that this call is exclusively for investors and market analysts. We ask that you identify yourself so that your question can be addressed. We also kindly request that any question from journalists Be directed to Usiminas Media Relations by imprensa at usiminas.com. Before proceeding, we would like to clarify that any statements made during this conference call regarding the company's business outlook, projections, operational and financial goals, and potential for growth are forward-looking statements based on the management's expectations regarding the future of Usiminas. These expectations depend heavily on the performance of the steel industry, the country's economic conditions, and the situation of international market. Therefore, they're subject to changes. Joining us today, our CEO, Marcelo Chara, VP of Finance and Investor Relations, Thiago Rodrigues, and Commercial VP, Miguel Holmes. First, Marcelo will make some opening remarks, then Thiago will present the results. Afterwards, we will respond to Q&A sessions questions. Now I turn it over to Marcelo. Thank you to Leonardo. Ladies and gentlemen, good morning to everyone. It's a pleasure to be here with you for the presentation of the presentation of the second quarter of 2025 results, what we expect it to be. A challenging scenario for the market in the second semester of the year has already manifested earlier than anticipated as a result of a high volume of steel imports, which has negatively impacted not only the steel industry, but the entire value chain of manufactured products. We remain focused on internal initiatives and the implementation of effective cost reduction measures, with the goal of ensuring the sustainability and the competitiveness of our operations by june the volume of imports reached two point three million tons a fifty per cent increase compared to the same period in twenty twenty four In 2025, imports account for 28% of the apparent consumption of flat steel in Brazil. This is one-third. This is almost equivalent to Aizimina's operating abroad generating jobs, income, and investments outside Brazil. These numbers demonstrate the ineffectiveness of the quota tariff system implemented in June of 2024. and renewed in june this year with adjustments that do not seem to structurally change the previous condition for the sustainability of the steel industry in brazil it is imperative that the anti dumping investigations into steel products which have already proven dumping practices and their harm to the industry be concluded swiftly and that concrete measures be deployed to eliminate this unfair and harmful practice affecting the industry and the entire value chain the critical import situation also affects other links of the steel chain indirect imports of products containing steel are at record levels with a seven per cent increase vis vis the first half of twenty twenty four this is according to the instituto aso brasil data from the national association of motor vehicle manufacturers and favias showed a sixty per cent increase in imports in the first half of twenty twenty five compared to the same period the previous year while the registration of domestically produced vehicles grew only three per cent in the same time frame and favia also highlighted the high inventory of imported vehicles in the country a situation similar to that of flat steel in the international context recent announcements by the u s government about raising tariffs on brazilian exports will have a significant impact on the performance of various sectors of the economy even though direct exports from the company to the market are limited the impacts on brazil's industrial chain and particularly on our export oriented clients to the united states are another cause of concern this negative scenario combined with the lack of effective trade defensive measures for the steel industry was reflected In UziMina's Q2 results, we had a consolidated EBITDA of 408 million BRLs with a 6% margin, a reflection of lower domestic market volumes, net revenue per ton in the steel division, and lower international prices in the mining division. Given this scenario, we are adjusting our 2025 capex. to between 1.2 to 1.4 billion BRLs, optimizing our cash without compromising projects that impact our competitiveness and environmental performance, reaffirming our commitment to Usimina's long-term transformation, In the industrialization of Brazil, the Board of Directors has approved the reconstruction and the modernization of Battery 4 at Co-Plant 2 in the Ipatinga facility, a $1.7 billion project that will enable greater fuel efficiency in the blast furnaces, competitiveness, and energy optimizing in the plant. We continue to deepen our initiatives to reduce costs across all industrial operations in addition to focusing on our operational efficiency, financial soundness, and discipline our pilots. pillars of our management. Despite the challenging commercial and results scenario, we delivered positive free cash flow, reduced our net debt by 24% and decreased our leverage. In July, we completed the early redemption of the remaining balance of the bonds, maturing in 2026, thus leaving the company without significant amortizations until 2028. For Q3 of 2025, we expect better results in steelmaking, driving by progress in cost reduction, efficiency, and raw material prices. We anticipate stable volumes and lower net revenue per ton, reflecting the price trend caused by the ongoing pressure from unfair and rampant imports. In mining, we expect a slight reduction in volume, but we remain on average. 2025, a total volume that exceeds that of 2024 and is aligned with our planning. We remain focused on adding value and differentiating the quality of our products and services towards our customers, driving continuous improvement in our operational performance in every activity we undertake. supported by the capability and commitment of our employees. Thank you very much. And now I hand it over to Thiago, our CFO. Thank you, Marcelo. Good afternoon to everyone. So this is a brief presentation of our results. Subsequently, we will have our Q&A session. Well, as Marcelo mentioned, the highlights of the quarter are here in cash generation with a positive cash flow of 280.14 and are leveraged 2.5 times. now we can go directly to our next slide where we see the consolidated results of the company the net revenue of the quarter was six point six million reais a three per cent drop vis-a-vis the last period the drop of the revenue is in the steel unit and lower from the mining unit the two segments were impacted by the drop of the sales prices the adjusted EBIT after three periods of growth and a first quarter of strong results presented a drop That shows the drop of the prices of steel and iron ore with 408,006%. We have to see the trajectory of good results that the company has presented vis-a-vis the last year when the price dynamic was even more favorable. The accumulated EBIT of the first semester of 1.1 billion, over 70% above what we presented during the same period of 2024. And the net income followed the same trajectory, ending with $128 billion. Million reais. Now, when we see the steel unit, as Marcelo mentioned, our quarter expectations did not materialize because of the deterioration of the market that we expected for the second half of the year anticipated itself in terms of volumes and prices in the domestic market, the volume of sold goods. still one million seven million a slight drop but the drop was mainly in the domestic market specially in the vehicle market because of the adjustments of the inventories of heavy and light vehicles During the last quarter, we had an increase of 5% of the volume for the sector and also an important drop in highway material in distribution. We can see strong pressure on prices. This is because of the increase of steel imports. and mostly in these are unloyal conditions and with a speculative bias from the importers now navy Industry and highway material offset this. There was a drop in the net revenue that was $5.8 million, and it was the lowest per ton in the past years. This, together with the increase of COGS, of the sole products well deteriorated our results in the quarter that ended with an EBIT of $287 million and a margin of 5%. We have to mention the improvement In the accrual of the year vis-a-vis last year because of the progress after the ramp-up of the blast furnace III, the $250 million accumulated EBITDA was twice was double of what we presented during the first six months of 2024. And now the EBITDA of the last quarter with the current quarter, here we see the price and sales mix affected, impacting 149 by 149 million, the results, the cost of of the sold products also affected because the anticipation with repairments and other costs that offset the gains that we gained with efficiency and better prices of raw material there were non-recurring effects of two millions with refills in Minas Gerais and other expenses that were 12 million Now we'd like to strengthen our expectation for the next quarter. Although with a challenging market scenario, we expect a total volume of sales stable. The net revenue per ton will drop with the carryover of prices. that were realized in the past quarter. But on the other hand, we expect a drop of the COGS that will offset these effects. This drop comes because of the best operational performance and the reduction of raw material that we've observed in the past months that are more visible with the inventory turnover and the impact on our P&L. Now, when we go to the mining unit, Well, our sales volume was 2.5 million tons, an increase of 11% vis-a-vis last quarter, and it followed the production volume. That also improved because of better operational performance. Now the net revenue was affected by the drop of prices in the international market, the reference prices of iron ore, and also the mark-to-market of the material that were in transit. so the appreciation of brl vis-a-vis dollar and greater sales volume with maritime freight so the net revenue per two dropped from seventy eight dollars to seventy one million the production cost in cruise because more material in the plants and maintenance expenses, but were offset by more volume sold to the maritime industry. Now the mining EBITDA ended the quarter with 115 million reais, a 3% margin. Next quarter, we expect lower volumes. And this is within 9 million tons. Now financial indicators. Now after a significant increase of our working capital during Q1, there was a drop of $454 million, which was expected. We mentioned this in the past call. Great part of the drop is because of accounts receivable of $300 million and $150 million because of inventory reduction and the operational cash flow was positive by $615 million next quarter. We expect an additional drop in working capital. especially in raw material inventory that will have to go through certain adjustments. Now our capex of the second quarter gained momentum. It was 334 million expected because of the projects of the new PCI plant that will become operational. next year and the battery of the new coke plant these are good projects to increase our competitiveness in the mid and long run in terms of cost now now capex was adjusted by 200 million we will be waiting 1.2 and 1.4 billion because of savings generated and the optimization of management and the execution of projects and hiring we did not cancel any projects but we rescheduled and savings with greater efficiency within our process. We also announced that the board approved a $1.7 billion investment in the battery of our coke plant eliminate our dependency of purchased coke we want coke of better quality and this gives this is a cost saving this a four-year project it will become operational in 2029 and with 500 million tons of coke a year now with free cash flows and the capex our free cash flow was 281 million brls now going to our next slide with this cash generation and the and the effect of the currency variation our net debt dropped and it was c 0.5 times we saw the we saw the debt profile and we concluded the purchase of the remaining value of the bonds maturing in 2026 using the resources from, so we will present next quarter an even more extended profile that will, so that we feel reassured with our investment plans in the future. Now I give it back to Leo so we can start our Q&A session. Thank you. Caio Ribeiro to Miguel. He wants to know about the supply side reform in China. He wants you to elaborate how we interpret the recent announcement of the cut of steel production in China and how this impacts Brazil. Well, as a matter of fact, anything that gives balance to supply and demand to China is relevant not only for the Brazilian steel industry, but for the worldwide steel industry. During the last three years, we've seen how the surplus of steel from China has and this exceeding 100 million tons a year, and we are suffering directly today in Brazil with Chinese imports, but indirectly by the strong pressure In the Southeast Asia, this is how we see a strong pressure from the exports from China. Anything that brings a balance to supply and demand will generate a positive impact to our industry. It's important to highlight during the first five months of the year, Chinese production dropped 1.7%. But... But the use dropped 4.1. This means that still Chinese has important surplus of exports month by month. During the first five months, they produced over 50% of surplus. It's very relevant and urgent any reform that bring back the balance between supply and demand from China. Thank you, Miguel. The next question. For Marcelo Chara, we have two questions. I'm going to merge. Kyle Bejero wants to know about anti-dumping and Carlos de Alba about the quotas. Kyle wants to know about the anti-dumping processes. What are the expectations of the company relighting these processes? And Carlos wants to know, well, in your opinion, the change of the tariff quotas, the quota tariffs that were approved recently, what is the company's opinion regarding? this point, the quota tariff system. Marcelo, you're muted. Thank you very much, Carlos and Cayo. Unfortunately, the quota tariff system has not been successful. It has been inefficient in reducing and controlling import of steels in extremely unfair conditions. This is because the systems had a number of multiple exceptions. In addition, the quotas were high vis-a-vis the growth that we expected for the consumption. and in addition to this there there was exponential growth of productives that would be the ncds of fuga now ever this didn't generate any impact in the in the damage that Brazilian industry has suffered because with an increase of 50% of imports during this semester, vis-a-vis to the one of 2024, shows how ineffective the system is. What is the solution? There is no solution. There are a number of measures that have to be complemented in order to reassure effective defense. To avoid unfair practices, one would be the implementation of anti-dumping measures or safeguard measures. Many countries throughout the world are doing this specially, this flow. The countries are defending themselves. They're defending their industry, especially in points where they verify that this is a technical thing. The damping is technical. You can see that it's a damage. In Brazil, we verified damage. There are two products. galvanized where we saw damages and cold rolls. Cold rolled steels and now the we. We should have a definition and we need to apply measures with no exceptions. Adopt measure because the only thing that can affect every league or That can guarantee fair competition. We cannot compete with who subsidizes. This is not fair and this significantly affects highly qualified employment in a country. This is impacting in Brazil because the reduction in CAPEX means less jobs. And this is a loss of jobs. And if we add to all of this the imports of manufactured products of all kinds that our country is receiving, if we add the amount of products that hold steel like Alphaville, the impact... of highly qualified jobs that defines the development of a country and its industry will be threatened as a matter of anti-dumping measures. can be applied in the short run. I do trust that they will apply to defend all the industry and the value chain of our country. I do trust that this will be implemented and adopted. Thank you, Marcelo. Our next question for Thiago about cogs. There are many questions regarding cogs. And I will now, the current cogs, Lucas Lakshispe and Stephan from West Cotton City ask, when we see eighty reais of ton of reduced tons because mixed efficiency can you tell us how many how much of a reduction reflects the cost of inputs what about and have you have quantified the this for the second semester okay lucas stefan thank you for the questions the first would the reduction that we observed During the second quarter, because of price and mix, half of 80 tons was because of the price of raw material and less than half because of efficient and the price of the slabs is impacted within these 80 reais per ton. Now regarding the great major repairments that offset in a certain way this cost reduction, this accounts 50% of the effect of 60 reais per tons and the expectation is that we will not see a significant variation during the next semester. So, Thiago, what about COGS? We have a number of questions. Kyle Hibeda from Bank of America, Stephen Westcott from Citi, Ricardo Monegale from Safra, and Tachi Kanjini from JP Morgan. we will start with cogs and steel they expected to drop during the next quarter what reassures you that this time this trend will materialize itself and could you give us details of what frustrated this expectation during the second quarter And if what we've seen this quarter can repeat itself during the next quarter, could you better quantify the expected drop for Q3 and how much would come from the drop of raw material and efficiency? This magnitude is implicit in the question. Okay, let's see if I can answer all the points correctly. Well, what frustrated the cost reduction during the second quarter, remembering that during the first quarter we had non-recurring effects, first we had to overcome the non-recurring effects of the second quarter. And we had the additional expense. We had to reschedule major repairments. And this is something that we expected. What reassures us that we can drop the COGS during the next quarter. well first we see clearly an improvement in the cost of production due to efficiency and also because of the drop of cost of raw material that effectively are affecting our cogs there was an increase in the volume of inventory of raw material in the past and therefore the recent drop in the price of raw materials will take longer to dilute itself and to affect the cogs. We are in a process of dropping our raw material inventory. We have less material coming in at current prices, and it takes longer to see the effect. So today, when we see the value of the products in our inventory, Their value is lower than that of the last quarter. So we do believe that we will see a more relevant drop in COGS during the next quarter. And I would like to add something here. We have adopted DRIP measures in operational management. We've simplified maintenance jobs, and we've reduced a great amount of contracts. And we've also increased working productivity in all the operational fronts. We are not duplicating jobs. activities that are repetitive and we have implemented management tools of IT or all types of tools in order to analyze our processes with video analytics and math models. So we are actually transforming the execution dynamic of all the industrial operations. And we believe that we see the results of this entire dynamic. And we are also seeing how how the improvement processes flow in a systemic fashion. We have a long-term project and we are fulfilling the different stages and they're aligned with our plans. And regarding the magnitude of the impact of all of this, we generally do not disclose percentage But the expectation is that the COGS drop will be sufficient in order to offset the impact in the net revenue. Now, obviously, in the current market conditions, so our expectation actually is an improvement of margin with the offset of a COGS drop and the drop of net revenue per ton. We've also reduced the cost of energy inputs. We have a co-production plant of solar energy in the state of Minas Gerais. So this improves our condition and our costs in energy. And also we've introduced automated processes in our processes and boilers, and we are seeing the improvement in energy efficiency, and this progressively will impact our costs. Thank you. We have two questions here from Kyle Grainer, and you go from Janelle. They were answered. It was about magnitude. Now, Marcelo, we have another question regarding anti-dumping. Ricardo Monegagli from Safra wants to know regarding dumping. Do the studies use benchmarks from U.S. and India? Do you believe to calculate the anti-dumping on this prices? $500 per ton of anti-dumping inferred. Could this be reduced? What is important to compare it to the market economy, this is what creates a reference. In addition to this, I am going to share something that is evident. The metallic margin is easily calculated in the steel industry when you see that systematically we have in the country products with visible losses of metallic margin, which are negative losses. Well, I say the damage is huge. We cannot compete with this. There's no way of competing with this situation. And here a basic comparison. In a store of any type of products that sell subsidized products in a region, this generates two effects. A fake expectation of price reduction for those that buy it. but this generates a great damage because it employs people from a store, but you lose 10, 20 times these jobs of all the value chain that allows you to produce a product that goes to the store within Brazil because at the end of the line, the subsidy wins in such a way that the job, the industrial employment is lost And at the end of the line, who can buy this product doesn't have money because they don't have a job. So the dumping measures... We have technical points that are important and they should be adopted. And this will allow us in a certain way to balance the tsunami of imported products coming into the country. Thank you, Marcelo. We have many questions regarding our CapEx. Initially, regarding the guidance, our CapEx guidance, Stephen, Wescott, and Sasson, they want to know regarding the new CapEx. Is the company planning to reduce investment in another part of the business to maintain CapEx? a lower total disbursement, especially between 2027 and 2029. And regarding this drop, has there been a postponement in investments this year, 1.6 to 1.4, 1.4 to 1.2? Have you postponed projects or there were lower costs in execution and in hiring? Precisely. In greater scale, it was because of saving and hiring and execution and project management. For many months, we have been focusing on optimizing the use of our labor, and we want to find gains of efficiency in the execution of the projects. Nothing was canceled. and nothing was postponed regarding the beginning of a project. What we did was we rescheduled, and there was a cost reduction of the projects that had already been approved. Would Marcelo like to say something? Basically, what Thiago just mentioned, we have been able... we have created CapEx management systems. And this is something that And we have applied this in complex projects in many countries. Well, we've applied the main practices for the execution that allows us to optimize the execution process, the hiring process, and this allows us to have a better efficient flow. I have a feeling that the first question was not approached. When you talk about planning, no to maintain the disbursement of the periods where we will spend more in the Coke plan. No, this wasn't planned, but the reduction must be because of savings and efficiencies in our projects. Now, capex, still Rafael Barcelos from Bradesco, Marcio Farid from Goldman, and Lucas Lark from Chispe want to know an average, which should be the total company's capex in the next year. What is the recurrent maintenance capex of the level of the company? Is it close to 1.2, 1.4 this year? They want to know if there are investments in addition to maintenance. any need for this and if we can expect a 1.5 1.7 level for 2027 forward use it but if these new investments in 2027 from here on 2027 on well we are not going to give you a guidance or announce the capex for the next years but we do understand that it is a complex of 1.5 billion is a reasonable CAPEX to bear in mind as of 2026. Our maintenance CAPEX is around $1 billion, so this additional $1.5 billion would be the projects to gain competitiveness like the PCI plant. the hot repair of the coke plant that are the main ongoing investments and the new investment in the coke plant so this takes our capex to a level close to one point five billion and of course as we are closer to twenty twenty six we will provide you more clarity regarding our investment plan for the next year. Now in terms of maintenance, I would like to say that we also carried out a deep transformation of all the industrial area. and the maintenance area, well, we focused on this to optimize our efficiency process. In each one of the lines, we are executing a systemic plan. And in the last two years, we have been able to significantly increase our adherence level in our production plans, with which we will continue With the reliability improvement plan, we have an internal project called maintenance, world-class maintenance. strongly focused in developing the skills of our employees in addition to incorporating technologies and tools that will allow us to optimize the cost and to increase the efficacy and the availability of all of our machines. Thank you. Our next question from Marcio Farid from Goldman Sachs. He wants to know about CapEx Musa. What are the plans for Minera San Jose Minas? Marcelo Thiago, you can answer. Well, regarding the Musa investments, we have not updated this yet. We continue focusing on the ramp-up project and the feasibility projects and the environmental licensing process, but we still have not made a decision. This decision will not come before 2026, but yes, we continue focusing on this project. What do I mean so that we can make a decision next year? Thiago, our next question regarding mining from Igor Guedes. He says, volume was good in mining quarter and quarter, year on year, and the drop by third parties dropped 3.5% the next quarter. Thiago expects higher volumes. What generated the increase of volume during the quarter? Was it accumulation of the inventory? What is your strategy for inventory? He said that your inventory strategy is more discussed in the market where the inventory of iron ore is highly discussed. In reality, there is not a lot of space to stock material in our plants. So we do not work with this strategy of high volume inventories. The volume, there was better productive performance, so there was better productivity in production, and the consumption were around 40,000 tons of stocks, which is not a very relevant volume. Now, still about Moser, Rafael Barcelos from Bradesco wants to know, he wants you to elaborate on the cost dynamic in the mining unit. Well, in the mining unit, well, connected to what I just mentioned, of inventory aerial and material movement well we have we've observed an increase of cost of internal movement in the plants according to the situation that is being changed we have initiated different areas and this brings more complexities and this has impacted the cost so so we will see the cost at a level of close to what we saw during the second quarter with additional increases but nothing very structural regarding the movement of material. Our next or What about the announced investment of Coke 2 battery for Tachika and Gina J.P. Morgan, Lucas Lager XP? They want to know the rationale. We want to understand the rationale. of the coke plant reducing costs per ton with the production of your own coke instead of using coke from third parties they want you to elaborate the idea of efficiency gain or margin with this new investment how could this coal plant could reduce the purchase from third parties and reduce costs and capex of one point seven will be distributed in twenty seven twenty nine how do we see a marginal return of this project Well, number one, it's important to mention that this project is highly profitable. The impact is important in terms of cost reductions. Because of the quality of the coke that we will produce and our blast furnace will consume us when you have a production beside your blast furnace, you avoid all the wear of the material when it comes from a third party. And this generates a possibility or an improvement of fuel rate in our fuel load in the blast form. And this is a significant improvement in terms of cost. You asked about the investment flow. well the expenses expected for twenty twenty six is lower it is below a hundred and million and as of this point the period will be of higher expenses distributed until twenty twenty nine where the coke plant will become operational this coke plant will produce slightly above five hundred thousand tons of coke And depending on the productive situation and the market situation will make us self-sufficient or not very exposed to Coke from third parties. We currently have one battery in the Coke plant that is being repaired. It's this hot repair is working now. and it is aligned to our plans. It is effective, and throughout the next two years, there will be a progressive increase of the production capacity of this battery. Now, this new battery is a side where the efficiency gains in terms of operation costs, in terms of labor productivity, in terms of in all industrial terms, is high. It is highly competitive. So in addition to the benefits that Thiago mentioned regarding the produced coke and the energy gain is significant, what will allow us to capture The processed gas replacing a more expensive gas like natural gas. This is a highly profitable project. And it's highly attractive. Thank you. Our next question, Chagall. Nippon Enter, their new from Santander. He wants to know if Nippon still has manifested its interest in the put exercise. This is something regarding shareholders. Uzi Minas does not participate in these matters. We could not mention anything regarding this point. Miguel, now we start our commercial session. Regarding the wants to know about the steel dynamic in Brazil because of the volume guidance of 3Q. Are you seeing a weaker volume and what is your view regarding the stocks in the chain? During the second semester, we see better production in heavy and light vehicles and also something positive regarding highway and agro machinery. The other sectors are showing a slowdown because of high interest rates and because of the pressure of imported products coming to Brazil in unfair conditions. In the automobile sector, this trend will be maintained during the next quarters. When we see the expectation of on Fabi is 8% to maintain this pace, the production should be above the two quarters. Now, agro and highway machinery, we expect to maintain this pace. loss of breath that we saw during the second quarter. Now the steel sector is an excellent thermometer to anticipate the industry behavior and this is what we have been seeing in the indicators of May and June and we are seeing a slowdown in the industry sector of the country. The agro industry that has a positive third and fourth quarter by and large We have to pay attention to what the U.S. government has announced, because this is an area that has positive effects during Q3. We have not seen a slowdown, but we will perhaps see news in the next weeks and months. Now, inventories, the situation is different in each sector. In vehicles, we have observed a decrease A destockage throughout the second quarter when we see the production data from first and second quarter were different. In one, there was a 14% production drop vis-a-vis the past quarter. But the second quarter, an increase of 10% throughout the second quarter. there was the stockage and the chain of light and heavy so there was a slight drop in vehicles now All the industries have been adjusting their inventories and we can say that industrial and automobile sector, the inventories have been normalized until the end of June. Now the distribution sector, we could differentiate and announce the difference. Data until June, a slight increase of inventory of companies that are part of India going from a history of normal inventory between 3.3.2 months of sale. June, they ended 3.4 months. Now, regarding the importers, we can see a high level of inventory, and this is the speculation of importers. We have to pay attention to the speculation behavior of imports that can affect the activity, especially in the construction and more commercial sectors as of the second semester. So now we have regarding exports. For you Miguel, Rafael Barcelos from Bradesco and from Genial, he wants you to discuss about the export market, what should be the domestic mix slash exported for the next quarters. And Igor says if you see opportunities of holding projects in Argentina and in other countries, If you could achieve this volume without dropping the price or the quality of the milk, Rafael Higa, Uzi Mines has a 90%, 12% for export. Our exports are focused on added value products, and we participate in major products, especially in oil and gas exports. So we do not see major changes in this mix. Mix for the next quarter, the next Q, we will maintain a mix very similar in Argentina, counting for 70, 75 of our sales and the rest divided by the rest of the market. What could be a novelty would be the resumption of the sales batch to Europe because of the market situation. So maintaining a sales level. of 10%, 12%, well, we will not see major changes in the mix. Regarding projects, the oil and gas and mining projects in Argentina have been positive. Not only today, we are dealing with a major project in the southern region of Argentina. This project is advanced. and it will end throughout the third quarter we are negotiating we haven't ended a negotiated negotiations of similar projects that can start as of q four and this will replace the vaca muerta project that will be delivered by the end of q three Now we have questions regarding prices for the third quarter. Our expectation from Carlos de Alba, Morgan Stanley, Stephen Westcott City, Lucas Gable XP, Enrique Braga, Morgan Stanley. So all of them want to better understand what will be this net revenue per 10 during Q3 if we can quantify it. the carryover of price of steel from June in relation to the quarter or for the next quarter? What do we expect for the next quarter? What are their discussions regarding the price of steel? What are the discussions like? Are there plans to increase or to provide discounts? Okay, let's start. Well, regarding the prices of Q3, we are going to provide you information so you can calculate your expectations better. There was a drop in prices throughout the second quarter, especially by the end of the second quarter. In the Q3, we will see the impact of the carryover, the price adjustment. of three five percent that only impacted the end of the second quarter we could calculate an impact of two-thirds of what we saw adjusted during q2 impacting the total average price in the distribution for Q3. Now, regarding the industry, we updated a number of contracts or we adjusted contracts during the second quarter, but there are contracts that must be updated during Q3. These contracts, as we always explain, will follow the trend that we expected for the distribution sector. They will be adjusted as of the Q3. Now the automobile industry, we see price stability. There will be no changes in the contracts during Q3. This can allow you to calculate what Q3 will be like without expecting any greater changes in our sales mix and products and market. Now, Leo, what was the other question? If we do have spaces, we have space for major adjustments, right? Well, the industry contracts are already being renegotiated. We've defined the prices that we will see through our Q3 and in the distribution sector, which is related to the first question of the call regarding The Chinese reform, any change that provides balance will affect the spot prices. These are prices that we can adjust every month or given moment that is necessary because of the cost and because of the price conditions and there are a number of variables that are that are observed today, we do not see a major impacts or major variables that will take us to adjust upwards or downwards. We have seen changes. regarding prices in the international market in the past weeks. But we have to see how the situation will consolidate itself that can result in future adjustments. And probably we will see this during the second half of the next quarter. Our next quarter, Thiago. Before that, so we're coming to the end. So a number of questions will not be answered, but our investor relations team will be at your disposal. The working capital, Chago. Carlos de Alba from Morgan Stanley. Igor Gagez from Genel. He wants to know about the expectation of the behavior of the working capital for Q3. This is because of the destockage of inputs that were more expensive. What influenced the working capital? now regarding the drop during q2 the greater effect was because of the accounts receivable because a dropped of volume and price and volume dispatched by the mining unit although there was a higher volume as a whole during the quarter And regarding the inventory, it was a lower volume. But as I mentioned, the expectation is that we will see an important reduction during the next Q in working capital will be similar volumes. similar volumes than the ones we've seen this quarter. We saw there's an increase of COC inventory at the end of Q1, and now we're reducing the level of inventory, and we will see a strong impact during the third quarter. And thank you, and we end with a question. regard automobile industry igor gages if the possible reduction of taxes can allow production to increase and favi saw slowdown in june what can you see from this demand from here on igor any incentive policy is positive and we are following the possible impacts from the reduction of the taxes on industrialized projects july is greater than may and in order to reach a good level we should see an increase in a continuous production from june till december so we are following all the indicators and now the ipi announcement is positive but the automobile industry is also suffering because of the import from chinese cars with an at unfair condition so we have to pay attention to the potential impact of these variables and to follow the measures that the government can adapt together with Anfabia in order to improve the sector that is a sector that is so important for the Brazilian economy. So thank you, Miguel. Thank you to everyone. We will bring our Q&A session to an end and a result live. We thank you for your participation. And if you have any questions, our investor relations team is at your disposal. Thank you very much and have a good afternoon.