Usinas Siderúrgicas de Minas Gerais S.A.

Good morning. Welcome to the Usiminas conference call to discuss the results for the first quarter of 2025. I'm Leonardo Cadena, Investor Relations Director at Usiminas.

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All participants are logged in as listeners only, and their questions can be asked in writing in the Zoom Q&A session. The icon below on your screen. Participants listening in English will also be able to ask questions directly in this session. This conference call is being recorded and broadcast homogeneously on Uzumina's YouTube channel. Please note that this conference call is exclusively for investors and market analysts. Please identify yourself so that your question can be answered. We also ask that any questions from journalists be forwarded to usiminasmediarelations at limpenisa at usiminas.com. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects as well as projections, operating and financial targets regarding its growth potential, are forecasts based on management's expectations regarding Uzumina's future. These expectations are highly dependent on the performance of the CEO industry, the country's economic situation, and the situation of the international market, and therefore are subject to change. With us today we have our CEO, Marcelo Chara, the Vice President for Finance and Investment Relations, Thiago Rodrigues, and the Commercial Vice President, Miquel Olmes. Initially, Marcelo will make a few comments. Thiago will then present the results. Then, the questions asked in the Q&A session will be answered. I now turn over to Marcelo. Marcelo, please. Good morning, everyone. It is a great pleasure to be here with you. to share the results of the first quarter of 2025. We started the year following the positive journey or trajectory of the last quarter. We attained 41% on consolidated bid with 773 million Reais and a margin of 11%, confirming our expectations of best results in the first quarter. Increase of 4% in the sales of steel in the domestic market shows a resilient demand, but our focus to keep on having better results is still in gaining competitiveness, seeking efficiency in all our operations to continue with a cost reduction trajectory that is consistent. In mining, we had 11% higher sales compared to the same period last year, impacted by the rainfall in the region, and the quality was higher of the materials extracted from the new. mining areas allowing and contributing to better results. For the next quarter, we have an expectation of consolidated results that is quite stable, since the sales volume in similar volumes and the continuity of the gradual reduction in sales and in mining, the volume should be stable, regarding uncertainties on the price of ore. However, we see a scenario that is challenging and uncertain for the second half of 2025, especially because of the high volumes of imports of steel. unfair competitive conditions, the impact of domestic consumption considering the high interest rates and the uncertainties of the international market. In Uzi Mina's mission, the lack of applying effective measures to create fair conditions of competition and the strong presence of imports subsidize the main threat to the sustainability of the steel industry in Brazil and its whole value chain. Several countries have reacted against the excess of Chinese steel production. According to investors in Brazil, mid last year, there were 215 commercial defense measures against the Chinese steel, and in four months, new Nine new investigations on protection measures against China have been applied. The rest of the world is doing what Brazil should have done already, defending its industry, its employment and its investments against an unfair commercial practice. In Brazil, we had 43 investigations that are anti-dumping. In January last year, several products in the metal industry, plastic, chemical and textiles of mosartas the 34 only are only against china the secretariat of foreign trade has recently published the preliminary reports that are under for co-rolled and also coated steel by china excellent work of the technical teams of the ministry they have found the practice of dumping with a margin of up to $645 per cold road and $552 for hot road. And although those unfair practices, no recommendation has been made of preliminary application of the anti-dumping right or law. This goes against what has happened in most countries defending their industries against the Unfair commercial practices. Imports data of steel in Brazil are alarming and unacceptable. In March 2025 has shown the third largest volume and import of steel in history, and the expectations are very concerning. The volume of import of fat steel has attained 1 million tons, a growth of 42% regarding the same period of 2024. The data reports that the attempts of the country to control the problems of import of steel have been effective. have not actually been effective and they must be urgently reviewed. We keep on working on focusing on operational excellence and serving our customers via development of products and services and integration with the communities where we operate. And our main focus is care and best practices of environmental and performance and safety, allied to high commitment of our teams and our people. Thank you very much. And now I turn over to Thiago, please. You can continue. Thank you very much, Marcelo. Good afternoon, everyone. So we're going to make a brief presentation of our results before opening up for questions. Let us move on to the first slide, please. We highlight in the period the best performance in the steel industry with a bitter margin of 9%, 2.4% point above previous quarter, with an increase of 4% in the sales volume in the domestic market, reduction of 2% of caulks. One of the best results in the mining segment it consolidated between 733 million reais with a margin of 11% and net income of 337 million reais. Here we see consolidated results. with higher volumes at price, both in the steel and mining. Net revenue was 6.9 million, a growth of 6% in the quarterly comparison, 10% with the first quarter of 2024. It follows the trajectory of growth in the third or second quarter and exceeds 10% margin since the first quarter of 2023. and confirming our expectation of better results, as we see, and as we have been communicating in previous calls. With operating strong results, we actually reverted the conditions, and we had net income higher since the fourth quarter of 2023. Here we have some more results on results of the steel industry. We see first quarter steel sales above, 3% above previous quotes compared to the previous the year, 5% higher, highlighting the resilient demand. In the domestic market, even with a lot of imported steel that is subsidized, we were able to increase the sales volume. Net revenue followed the increase in volume and grew 4%, 6 billion. A small increase in net revenue per ton because of better prices applied to the segment. Beta had a growth of 44% compared to previous period, 538 million, moving up margin from 6% to 9%. Despite the improvement, we see, we understand that we're still far from what would be a margin that is sustainable for the industry that enables investment to an industry that is so capital-intensive as ours. We are still focused on the main goal, which is improving margins with cost reduction and gaining productivity, but we also need a market that is functional with isonomic competition so that this improvement can be possible in a gradual way. As mentioned by Marcelo, the both internal and external supplies with a lot of uncertainties, Imports make it difficult to have short and long-term forecasts for the second half. We expect stable prices, whilst the cost and steel industry should follow a trajectory of drop. but we are paying attention to risks associated to imports that could still impact the results in June. Hence, it is key, as Marcelo highlighted, that Brazil should position itself quickly, just as many countries are doing, to ensure competition, autonomy, and prevent the import of subsidized products that may impact the industry. On the next slide, we have the comparison of the EBITDA previous quarter to this quarter, first quarter 2025, as commented, the effect of price and volume have contributed to an improvement of video 64 million reais, whilst the cost, low cost, additional cost added 109 million reais to the EBITDA regarding previous quarter. The cost improvement was due to $140 million in costs, the reduction of fixed costs, the operation of efficiency, $35 million in overarching expenses regarding freight, and $35 million because of an insurance indemnification on raw materials. Here we see the results of mining. Sales volume was 2.2 million tons, slightly higher regarding previous quarter, 13% higher to the same period in the previous year. Man revenue presented an increase of 20%, closed the quarter at 917 million reais. This increase in revenue was generated because of the higher volume of sales with steep rate included and also because of the higher quality of material and lower distance and quality applied by the market. These were the main reasons for the increase of 34% in EBITDA and reached 206 million with a margin of 22%. In the next quarter, as Marcelo mentioned, we expect stable volumes for the steel industry. On the next slide, we have financial indicators. In this quarter, we had a temporary increase of working capital of 778 million reais, and we expect that most of this increase should be returned in the next quarter. The main reasons for this increase in working capital were first because of higher volume of sales in March as compared to the sales in December last year, which led to receiving accounts for 100 million Riyals, a natural effect when we have an increase in volume. Well, Cal3Cibo is following normal levels as the portfolio heading, temporary increase in raw materials, 770 billion reais, is part of the strategy of optimizing the mix for cost reduction, as our expectation is also that there should be a reduction in the next quarter. and we've had a reduction of the forfeiting of 341 million reais since we have robust cash and we don't see a need of increasing the use of this instrument capex in the period was 219 million We expect to improve this pace in the next quarter as we keep our investment plan around 1.5 billion for this year. With this, we had a negative cash flow in 560 million, as I've mentioned. We expect to revert this increase as of next quarter. on the next slide we see the debt and leverage so cash generation that we saw on the previous slide the net debt to increase to 1.4 billion we still keep a quite comfortable leverage level for 0.71 times the profile the debt is being equalized as we mentioned previously we concluded the emission of bonds in january with the best spreads attained by us i mean that's showing that the market strategy has been ascertained since the market today does no longer have this favorable condition we're using these resources to buy back the bonds of 2026 we still have 200 million dollars outstanding that would will be re bought back in july when we have the right to call apart this is the brief results presentation and i go back to leo so that we can start the questions thank you we start with our q a session now we have a The price, which is... Lots of questions, Ricardo. Lots of... Lots of people asking questions. They want to know about the behavior of prices. So what about the price discussions after the March drops? and imports a quite strong dollar falling. Is there space to keep the prices at current levels? And most people are asking about price transfers to auto industry in April, if we apply the same level of transfer that we applied in the first group, in the first quarter. Basically, this is it. Miguel, please. Good afternoon, Leo. Thank you all for the question. Let us start with the closing of contract with OEMs of 1st of April. We closed negotiations and we closed with the same adjustment that is effective of the contract in January, about 3% was the price transferred for contracts as of 1st of April. Speaking of prices in other industries, it is a fact, as you've mentioned, the strong pressure that we have at the end in certain regions and industries regions as Midwest, the South of the country, and North, Northeast, there is a lot of pressure with an increase in imports, as we've mentioned, most of them, in our view, in unfair competition conditions added to the appreciation of rail. There's great pressure of price adjustment in the coming weeks. Up to now, we haven't changed our prices. We kept the current conditions. If we have all those factors, high pressure, strong imports and increase in the foreign exchange, we analyze the exchange, we move from late 2024 So first quarter, 22,585, and today a bit below 570, we should certainly expect adjustment in prices, spot negotiations in the coming weeks. And we also talked about expectation for the average price of first quarter. In our release, we mentioned stability in price, and there is a bit the consequence of the increase, obviously, of the average price to be invoiced in the second quarter for the automobile industry, and the updated price is up first. April, and then we have adjustments justified by the two factors I mentioned, high imports and appreciation of the rail. I expect to have certain stability of average price with the industrial sector. Miguel, still for you, we have questions on export. Igor Gedes from Genial, Tati Kanjinian from JP Morgan, and Guilherme Nietz from XP. They would like to know what kind of mix are you working on for exports, if there is any project on the pipeline to increase the aggregate value of the mix, or if the price has been something specific at T125 plus. Paul, we measure certain contracted volumes in Argentina. And if you could see that reflected on the quarter, or if you can expect these volumes in the second quarter as well. And then Guilherme adds also on this Argentinian share, what has driven these increases. Please, Miguel. Thank you, Igor, Tati and Guilherme. Actually, in the previous quarter, we said that we would have an improvement in the imports over the first quarter compared to the fourth quarter of 2024 because of sales projects that we have capitalized and selling. We are invoicing over this quarter, and this is, voicing is keeping of imports over this quarter, just as our focused to serve the auto chain in the region. In our expectation today, we would keep these two industries, automobile industry in the region, added to oil and gas projects that are already sold, that will continue to be served over the second quarter. So, answering the question, we expect to keep this mix of the first quarter over the second quarter.