Caio Ribeiro

Caio Ribeiro asked about Gerdau's growth avenues in the U.S. segment, specifically exploring the option of growing through micro-mills and considering M&A inorganic growth via smaller players. He also sought an update on the Mexico project, inquiring how a potential renegotiation of the USMCA and increased tariffs could impact the investment decision for the new special steel mill.

Answer

CEO Gustavo Werneck stated that Gerdau's focus for U.S. growth is organic, adding capacity for higher added-value products, and micro-mills would primarily serve to reduce production costs by replacing inefficient capacity rather than adding significant new capacity. He confirmed that M&A is always considered if it adds long-term value and synergies, enabled by Gerdau's sound balance sheet. Regarding the Mexico project, Werneck noted that while the business case is ready, the USMCA debate starting in June will be a critical factor in reviewing the investment decision for the greenfield special steel mill, considering Mexico's changing competitiveness. CFO Rafael Japur added that downstream segments in Midlothian and upstream scrap producer acquisitions are examples of current growth strategies.

Caio Ribeiro inquired about Gerdau's growth avenues in the U.S. segment, specifically the potential for growth through micro mills and inorganic M&A with smaller players. He also asked for an update on the Mexico project, and how a potential renegotiation of USMCA might impact the investment decision.

Answer

CEO Gustavo Werneck stated that Gerdau's ambition is not significant production capacity growth but organic growth in higher added-value products. He views micro mills as more suitable for reducing production costs by replacing inefficient capacity rather than adding new capacity. Regarding M&A, he confirmed attentiveness to opportunities, leveraging Gerdau's sound balance sheet, but stressed that acquisitions must add long-term value and synergies. For the Mexico project, he noted that while a business case is ready, the country's changing competitiveness (e.g., reduced working hours) and the upcoming USMCA renegotiation (starting June) are critical factors that will influence the final investment decision for the greenfield special steel mill. CFO Rafael Japur added that recent growth in North America has focused on downstream segments (Midlothian, thermal treatment, solar piles) and upstream scrap producer acquisitions, which are high-value and less susceptible to imports.

Caio Ribeiro inquired about the potential impact of US tariff exemptions for Mexico and Canada on Gerdau's operations. He also asked about the demand outlook for the special steels business in Brazil and its effect on margins.

Answer

CEO Gustavo Ferneki stated that the US trade debate with Mexico and Canada will likely continue until a new agreement is reached. CFO Rafael Japur noted concern for the Brazilian special steels segment due to potential tariff impacts on the auto industry, but highlighted that margins for special steels in North America are improving thanks to operational efficiencies.

Caio Ribeiro asked about Gerdau's cash generation, specifically the outlook for working capital and future CapEx levels, and inquired about the U.S. market, including the high order backlog, potential margins, and the second-half outlook considering tariffs and infrastructure projects.

Answer

CEO Gustavo Werneck explained that while 2025 CapEx will remain high to complete strategic projects like mining, future levels will likely be lower, citing the cancellation of a planned investment in Mexico. CFO Rafael Japur noted that working capital consumption in Q1 was seasonal and should normalize. Regarding the U.S., Werneck highlighted the strong quality of the backlog, driven by non-residential construction, and expressed a positive outlook despite broader economic uncertainty.

Caio Ribeiro asked about the potential for price increases and margin expansion in the Brazil division following the government's new trade defense measures, and whether cost-cutting initiatives would be sufficient to counter import pressures.

Answer

CEO Gustavo Werneck explained that the new import quotas are a positive first step but are not expected to translate into immediate price increases. He stated the primary short-term benefit will be an increase in domestic production volume and market share as the company shifts away from less profitable exports, rather than a significant margin rebound. CFO Rafael Japur added that the measures will help increase operating leverage through higher sales volumes in the domestic market.

Caio Ribeiro inquired about the latest developments at Fábrica and Vega operations, seeking information on the cause of the sediment overflow, potential broader impacts on other operations, the need for upgraded safety parameters, and the status of asset freezing or fines. He also asked about Vale's progress in de-risking through dam de-characterization and reduction of emergency levels, specifically how much restricted Assets Under Management (AUM) is still perceived, and the key triggers to unlock it.

Answer

Gustavo Pimenta, CEO of Vale S.A., explained that the Fábrica Vega overflow was due to heavy rainfalls, resulting in water with sediments. He stated that the operational impact has been limited, with restoration expected in 2-3 weeks pending authorities' approval. Pimenta confirmed that no dams or geotechnical structures were impacted and performed well, but Vale is reviewing facilities to enhance resilience to climate change. Marcelo Bacci, EVP of Finance and Investor Relations, Vale S.A., estimated that approximately $5 trillion in AUM (equity and fixed income) became restricted after the accidents, with about 30% or $1.5 trillion having been unlocked, primarily last year. He attributed this to improved ESG ratings and direct engagement with investors, citing an upcoming roadshow in Scandinavia to demonstrate progress and accelerate the unlocking process.

Caio Ribeiro asked Gustavo Pimenta for an update on Fábrica and Viga operations, seeking details on the cause of the sediment overflow, potential broader impacts on other operations, and the need for upgraded safety parameters. He also inquired about the current status of asset freezes or fines related to the incident. For Marcelo Bacci, he asked about the amount of Assets Under Management (AUM) still restricted from investing in Vale due to de-risking efforts and the key triggers to unlock this AUM.

Answer

Gustavo Pimenta, CEO of Vale, explained that the Fábrica Viga overflow was due to heavy rainfalls, with limited impact, and operations are expected to resume in 2-3 weeks pending authority approval. He assured that no dams or geotechnical structures were impacted and performed well, but the company is reviewing facilities for increased resilience against climate change. Marcelo Bacci, EVP of Finance and Investor Relations, Vale, estimated that approximately $1.5 trillion of the initial $5 trillion restricted AUM has been unlocked, primarily due to improved ESG ratings and direct engagement with investors. He noted that continued delivery of results and direct interaction with investors, such as an upcoming roadshow in Scandinavia, are key to accelerating the unlocking process.

Caio Ribeiro inquired about the strategic rationale for developing several smaller copper deposits in Brazil over a single large project like Hu'u, and asked about the progress of the strategic review for the Thompson nickel asset.

Answer

Shaun Usmar, CEO of Vale Base Metals Ltd, explained the focus on Brazilian projects is driven by lower execution risk and superior capital intensity, leveraging existing infrastructure. He noted the strategic review for the Hu'u project is in an advanced stage. Regarding Thompson, he confirmed its review is also advanced, with an update expected next quarter, but cautioned against using its outcome to predict actions on other assets.

Caio Ribeiro questioned the potential for an extraordinary dividend following the $1 billion cash influx from the Alianca Energia deal, especially in relation to the company's expanded net debt level. He also asked if the ramp-up of new projects could lead to a downward revision of the cash cost guidance for the year.

Answer

Executive Marcelo Bacci stated that it is not the right time to discuss extraordinary dividends due to market uncertainty, noting the cash is already factored into plans to reduce net debt to the $15 billion mid-range. He added that while Q1 cost performance was strong, it's too early to revise the full-year guidance, and Q2 is seasonally a higher-cost quarter.

Caio Ribeiro questioned the strategic review of the Thompson asset, asking if other Canadian assets like Voisey's Bay or Sudbury were also being considered for divestment. Additionally, he sought Vale's perspective on the potential impact of China's renewed discussions on steel supply-side reforms on the iron ore business.

Answer

Executive Shaun Usmar explained that the Thompson review is part of a disciplined portfolio optimization to focus capital on higher-return opportunities, particularly in copper. He noted significant interest in the asset. Executive Rogério Nogueira commented on China, stating that capacity rationalization will happen, either through consolidation or reform, which would impact premiums, but the timing remains uncertain.

Caio Ribeiro of Bank of America questioned the possibility of an upward revision to the 2024 iron ore production guidance and asked for color on the potential payment structure of the railroad concession renewal agreement.

Answer

Executive Gustavo Duarte Pimenta acknowledged that strong year-to-date performance makes the top end of the guidance highly achievable and that the company would update the market if an opportunity to do better arises. He declined to provide specifics on the concession payment structure, stating the conversations are confidential but that any settlement would fit within cash flow projections.

Caio Ribeiro questioned Suzano's strategy and process behind buyback execution, asking if past M&A transactions influenced the magnitude or pace of the previous program, and if the new program might see higher execution given the focus on asset absorption. He also sought clarity on how potential divestments could accelerate deleveraging, identifying possible assets and the company's target leverage level.

Answer

João Alberto Fernandez de Abreu, CEO, stated that the company's top priority is reducing net debt to $11 billion. Buybacks are executed opportunistically, considering leverage, share price, pulp price, and currency outlooks. He clarified that divestments are a small portion of 2026 free cash flow expectations, primarily focusing on forestry assets where land could be converted for higher-value uses. Marcos Moreno Chagas Assumpção, Director of Investor Relations, complemented that the deleveraging plan is operationally driven, not reliant on divestments, which would only occur for specific shareholder value opportunities.

Caio Ribeiro from Bank of America asked about Suzano's buyback execution strategy, including the decision-making process, the impact of recent M&A transactions on the pace of past buyback programs, and the potential for higher execution of the new buyback program given the company's focus on asset absorption. He also inquired about potential divestments to accelerate deleveraging, specific assets considered, timing, and the company's targeted leverage level.

Answer

Marcos Moreno Chagas Assumpção, Director of Investor Relations, stated that the company's priority is to reduce net debt to $11 billion, and buybacks are executed opportunistically based on leverage, share price, pulp price outlook, and currency. João Alberto Fernandez de Abreu, CEO, clarified that deleveraging is primarily operational, not dependent on divestments. Marcos added that divestments, mainly in forestry (converting land for higher-value crops), are a small portion of 2026 free cash flow expectations and not core to the deleveraging plan.

Caio Ribeiro asked about the dynamics of wood chips and softwood in the Chinese market, specifically inquiring about changes in domestic wood chip prices due to new supply additions and their impact on pulp production costs, as well as the reasons behind weaker softwood prices and the ongoing incentive for fiber substitution.

Answer

Leonardo Grimaldi, Executive Vice President, explained that wood chip prices in China have seen an uptick, increasing cash costs for Chinese producers and supporting paper price increases. He noted that softwood prices are weaker due to the availability of unforeseen softwood chips and a continued strong incentive for fiber substitution from softwood to hardwood, despite a reduced price gap.

Caio Ribeiro asked if higher U.S. duties on Canadian lumber could create a market share opportunity for Suzano. He also sought an update on the Kimberly-Clark transaction, specifically if the $175 million synergy target is still feasible and if new opportunities have been found.

Answer

EVP of Pulp Commercial & Logistics, Leonardo Grimaldi, acknowledged that U.S. trade actions against Canadian wood could benefit other producers and accelerate fiber-to-fiber substitution. EVP of Consumer Goods & Corporate Relations, Luis Renato Costa Bueno, reaffirmed that after further analysis, the company remains comfortable with achieving the $175 million cost reduction synergy from the KC deal.

Caio Ribeiro asked if Suzano is considering production cuts during the current pulp down cycle, similar to past actions, and what is fundamentally different this time. He also questioned the rationale for pursuing M&A when the company's own stock appears undervalued, trading at a low multiple and high free cash flow yield.

Answer

Marcos Assumpcao, an executive, explained that the company continuously analyzes the marginal variable cost of each mill and that this analysis intensifies in challenging price environments. Leonardo Grimaldi, an executive, added that the cycle is even tougher for softwood producers, which could lead to accelerated downtimes and create substitution opportunities for Suzano. Regarding M&A versus buybacks, Marcos Assumpcao acknowledged the stock's attractive return potential but stated that with leverage near the policy maximum of 3x, a cautious approach to all capital allocation, including buybacks, is necessary.

Caio Ribeiro from Bank of America requested clarification on recurring versus non-recurring CapEx items in the company's guidance. He also asked about the potential for another major pulp expansion, especially if significant forestry assets became available.

Answer

Executive João Fernandez de Abreu outlined the 2025 CapEx guidance, identifying BRL 7.8 billion in maintenance CapEx as the recurring base, with discretionary spending dependent on deleveraging and project returns. Executive Marcos Assumpcao added that maintaining market relevance is key, so a pulp expansion would be analyzed in that context for the mid- to long-term.

Caio Ribeiro asked about Suzano's M&A strategy, specifically whether to expect more smaller, bolt-on acquisitions or larger, transformational deals. He also inquired about the potential for increased dividends given the company's strong free cash flow generation.

Answer

CEO Beto Abreu emphasized that future M&A will focus on assets where Suzano can achieve scale and differentiation, without specifying deal size. Executive Marcelo Bacci confirmed that robust free cash flow will first be used for deleveraging, with capital allocation decisions based on the best potential returns. He noted a current preference for buybacks and no plans to change the existing dividend policy.

Caio Ribeiro inquired about Ternium's expectations for 2026 EBITDA per ton, including the premises considered (e.g., anti-dumping structures for Brazil) and the confidence level in achieving the $150 per ton target. He also sought an update on the Compactos project for Usiminas, asking about the decision timeline, potential postponement, and its priority as an iron ore mining project.

Answer

Máximo Vedoya, Ternium's CEO, stated that a decision on the Compactos project is not required until mid-to-late 2026, with various alternatives and environmental permissions currently being analyzed. He noted ongoing work at Musa to extend the life of non-Compactos processes. Pablo Brizzio, CFO, acknowledged the $150 per ton EBITDA target but indicated it would not be reached in 4Q 2025. He explained that achieving it in 2026 depends on factors like tariffs, import reductions in Brazil, and market growth, but noted the company is entering 2026 with improving margins (around 10-11%) and continues to pursue the goal through cost reduction plans.

Caio Ribeiro, Equity Research Analyst at JPMorgan Chase & Co., inquired about Ternium's expectations for 2026, specifically regarding the $150/ton EBITDA target, the premises supporting it, and whether it accounts for potential anti-dumping measures in Brazil. He also requested an update on the Compactos project for Usiminas, asking if there's room for postponement given current market conditions or if it remains a priority.

Answer

Pablo Brizzio, Ternium's Chief Financial Officer, acknowledged the $150/ton EBITDA target as a long-standing goal, noting that while Usiminas's Q3 margin was 7% and Ternium's (ex-Usiminas) was closer to 12%, the company does not expect to reach $150/ton in Q4 2025. He explained that achieving this target in 2026 depends on various factors, including Brazilian tariffs, import reductions, internal cost efficiencies, trade negotiations, and market growth, making it difficult to provide a precise number due to trade uncertainties. Máximo Vedoya, Ternium's Chief Executive Officer, stated that a decision on the Compactos project is not required until mid-to-late 2026. He confirmed ongoing work on alternatives, environmental permissions, and project analysis, including efforts at Musa to extend the life of non-Compactos processes, with an update expected by mid-2026.

Caio Ribeiro from Bank of America inquired about Ternium's intentions regarding its option to increase its stake in Usiminas and asked about the next operational priorities for Usiminas following the completion of the blast furnace revamp, particularly regarding mining CapEx.

Answer

CEO Maximo Vedoya stated that while the purchase/sale options with Nippon Steel become exercisable in July, he is pleased with the current partnership's performance and the focus remains on maximizing Usiminas's potential. Key priorities for Usiminas include making a decision on mining CapEx by late 2024/early 2025, improving mill performance to reduce costs, and enhancing its commercial strategy to compete with imports.

Caio Ribeiro of Bank of America asked for CSN's perspective on China's policy to resolve steel oversupply and its potential impact on Brazil. He also questioned how the market for lower-grade iron ore is affecting the company's commercial decisions.

Answer

An executive, likely Martinez, expressed optimism, stating that coordinated production cuts in China could have a positive impact on the steel premium in Brazil. He noted that with only 55-60% of Chinese plants having positive margins, there is pressure to reduce output. Regarding iron ore, Executive Marco Hebello stated that demand from China for lower-grade ore remains strong and that CSN's quality-related price discount is expected to remain stable until the P15 project improves the product mix.

Caio Ribeiro of Bank of America asked how the challenging macroeconomic environment, including high interest rates and import pressures, impacts the dividend and buyback policies for both CSN and CSN Mineração.

Answer

Executive Antonio Marco Rabello clarified that the primary commitment is to deleveraging, which led to the decision to suspend the usual May dividend payment to preserve liquidity. Future payouts will depend on results and market conditions. For CSN Mineração, which has a stronger balance sheet, a BRL 300 million dividend was announced, but further distributions will be contingent on its own project funding needs and performance.

Caio Ribeiro asked about the potential for IPOs of CSN's other divisions, such as cement or logistics, to accelerate deleveraging. He also inquired about opportunities and profitability in the steel export market given the depreciation of the Brazilian Real.

Answer

Executive Director Antonio Marco Rabello confirmed the long-term intention to list other business units, with cement being the next candidate, but stated that current market conditions and the ongoing M&A process make an IPO unfeasible for now. Executive Luis Martinez described the steel export market as 'practically closed' due to global protectionism and intense competition, making exports largely unprofitable compared to the domestic market.

Caio Ribeiro inquired about CSN's corporate structure, asking about the potential for IPOs of its cement, logistics, or energy divisions to accelerate deleveraging. He also asked about the steel sales mix and whether the depreciated exchange rate created opportunities to increase export profitability.

Answer

Executive Antonio Marco Rabello confirmed the company's intention to eventually list other divisions, with cement being the next in line, though any IPO would follow the conclusion of current M&A activities. Executive Luis Martinez described the export market as 'practically closed' due to global protectionism and tariffs, making it unfeasible. He stated the focus is now on the domestic market, where margins are superior.

Caio Ribeiro asked if Petrobras would be interested in acquiring Shell's divested blocks in the Caribbean and questioned the rationale for cutting diesel prices while keeping gasoline prices stable.

Answer

Sylvia dos Anjos, Executive Director of Exploration and Production, confirmed they constantly evaluate portfolio opportunities like the Caribbean assets. Claudio Schlosser, Executive Director of Logistics, Commercialization and Markets, explained that pricing is product-specific, with international gasoline prices rising while diesel falls. He stressed the strategy aims to shield consumers from short-term volatility, noting the long periods of price stability for both fuels.

Caio Ribeiro inquired about CSN's expansion project priorities, specifically the status of the P15 mining project, port expansion, and cement growth. He also asked for an update on the steel import parity premium in Brazil and the company's strategy regarding price adjustments and antidumping actions in light of new U.S. tariffs.

Answer

An Unknown Executive, likely Antonio Marco Rabello, identified the P15 mining project as a top priority, targeting operation by the end of 2027, alongside a multi-year steel mill reorganization. Edvaldo Rabelo, Executive, detailed three greenfield cement projects, with the Paraná plant being the most advanced. Luis Martinez, Executive, addressed trade, noting the current import parity premium is 15-20%. He expressed frustration with Brazil's 'innocuous' trade defense measures against Chinese imports, viewing them as a more critical issue than the direct impact of U.S. tariffs.

Caio Ribeiro inquired about the company's expansion project priorities, specifically in mining and cement, and asked for an update on the steel segment, including the import parity premium, pricing strategy, and the expected impact of U.S. tariffs and Brazilian anti-dumping suits.

Answer

An executive, likely Antonio Marco Rabello, identified the P15 mining project as a top priority for 2025, aiming for full operation in 2028. Edvaldo Rabelo, an executive, detailed three greenfield cement projects, with the Paraná plant being the most advanced. Luis Martinez, an executive, provided a comprehensive overview of the steel market, stating that the current import premium is 15-20%. He noted that U.S. tariffs have a neutral effect due to high U.S. prices but emphasized the critical need for Brazilian anti-dumping measures against Chinese imports to ensure fair competition.