Daniel Sasson

Daniel Sasson inquired about Gerdau's Brazil business margins, specifically the outlook for Q1 2026 stability, the trajectory over the year with Miguel Burnier's ramp-up, and the potential for double-digit EBITDA margins by year-end. He also asked for details on the BRL 2 billion impairment, including the conservative assumptions used, lower growth expectations, capacity utilization, and whether Gerdau would consider further capacity closures in Brazil.

Answer

CFO Rafael Japur explained that Q1 2026 margins face pressure from fewer business days, heavy rainfall, automotive industry decline, lower steel sales, and increased coal costs impacting variable costs. CEO Gustavo Werneck added that while a 7% margin is expected initially, a double-digit margin for the full year is not unthinkable with Miguel Burnier and trade defense measures. Regarding impairment, Japur detailed it resulted from annual tests considering future cash flow, FX assumptions, profitability, and capacity utilization below 60-75%, reflecting a challenging market. Werneck confirmed no further capacity closures are planned for 2026, emphasizing cost reduction through optimization rather than shutdowns.

Daniel Sasson inquired about the outlook for Gerdau's Brazil business margins, specifically if a double-digit EBITDA margin is achievable by year-end 2026, considering the ramp-up of Miguel Burnier and typical seasonality. He also asked for more details on the conservative assumptions used for the BRL 2 billion impairment losses and if Gerdau would consider closing more capacity in Brazil.

Answer

CFO Rafael Japur explained that Q1 2026 margins are expected to be stable due to fewer business days, heavy rainfall, lower automotive production, and cost pressures from coal. He clarified that the impairment was due to annual tests reflecting challenging Brazilian market conditions, lower capacity utilization (below 60% melt shop, 75% overall), and the decision not to return hibernating units. CEO Gustavo Werneck added that a double-digit margin for Brazil by year-end 2026 is not unthinkable, depending on Miguel Burnier's delivery and trade defense mechanisms. He confirmed no plans to close additional capacity in 2026, focusing instead on optimizing existing operations.

Daniel Sasson followed up on capital allocation, asking about the flexibility to revisit previously approved projects and the criteria for approving new ones versus executing share buybacks. He also asked for an outlook on the Brazilian market if no effective trade defense measures are implemented.

Answer

CEO Gustavo Werneck stated that critical competitiveness projects like mining will proceed, but the company is actively debating future capital allocation, with share buybacks being a strong alternative. He expressed frustration with the Brazilian government's inaction on trade defense and said that if nothing changes, Gerdau would have to consider measures like hibernating production lines or further reducing fixed costs. He also noted Gerdau is positioning itself robustly in the rebar market.

Daniel Sasson requested details on the BRL 6 billion CapEx guidance for 2025, asking what it includes (such as energy assets), the expected spending curve, and the outlook for 2026. He also inquired about the new hot coil rolled strip project's expected shipment volume and ramp-up curve for the year.

Answer

CFO Rafael Japur clarified that the BRL 6 billion CapEx for 2025 will be spent more evenly throughout the year compared to prior years and includes approximately BRL 400 million for Gerdau's own solar energy projects. CEO Gustavo Werneck added that the new hot coil mill is projected to ship 250,000 tonnes in its first year, primarily to existing clients, as part of a strategy to shift from semi-finished exports to higher-value products.

Daniel Sasson asked for more details on the cost and headcount reduction efforts in the Brazil operation, including the timing of their financial impact. He also sought a qualitative comparison of sustainable EBITDA margins between the U.S. and Brazil operations.

Answer

CEO Gustavo Werneck stated that the company is actively working to make the Brazil operation more competitive, with a goal of bringing its margins closer to the higher levels seen in North America. He explained this involves optimizing assets like the Cosigua mill and reducing exposure to low-margin exports. CFO Rafael Japur added that cost reduction efforts have upfront investments and take time to flow through the P&L, but the improved domestic sales mix in Q1 already had a positive impact on profitability.

Daniel Sasson asked Rogério Nogueira about Vale's iron ore product portfolio strategy, the decline in 4Q realized prices and weaker quality premiums, and the comfort level with the current strategy involving mid-grade products. He then asked Shaun Usmar for alternatives to reduce nickel cash costs without relying on high by-product revenues, detailing urgent operational goals beyond volume ramp-up and rational capital allocation to achieve free cash flow neutrality.

Answer

Rogério Nogueira, EVP of Commercial and Development, Vale S.A., clarified that the price realization decrease was due to lower market premiums and mix optimization, not structural deterioration, driven by declines in IOCJ and BRBF premiums and the introduction of a mid-grade Carajás product. He reiterated that the strategy aims to optimize contribution margin across the supply chain, not just price, and that flexibility will be a key strength. Shaun Usmar, CEO of Vale Base Metals, emphasized a track record of execution, noting that the nickel business met its budget for the first time in nearly 20 years. He highlighted successful ramp-ups at Onça Puma (on time, under budget, record production) and Voisey's Bay Long Harbor (20% ahead of plan, record production), and increased throughput at Sudbury. Usmar detailed a focus on asset integrity, reliability, and productivity, committing to reach the lower half of the cost curve and cash flow breakeven in lower price environments by year-end, without relying on by-product credits.

Daniel Sasson asked Rogério Nogueira about Vale's iron ore product portfolio strategy, noting a decline in 4Q realized prices and weaker quality premiums. He sought clarification on the dynamics of this decline and the company's comfort with its mid-grade product strategy. For Shaun Usmar, he followed up on nickel cost reduction, asking for alternatives to reduce cash costs without relying on by-product revenues and detailing urgent operational goals to achieve free cash flow neutrality.

Answer

Rogério Nogueira, EVP of Commercial and Development, Vale, clarified that the decrease in iron ore price realization was due to lower market premiums and mix optimization, not structural deterioration. He highlighted the resilience of flagship product premiums and emphasized that the strategy aims to optimize contribution margin across the entire supply chain, leveraging flexibility to boost value through cycles. Shaun Usmar, CEO of Vale Base Metals, detailed operational improvements, including Onça Puma's on-time, under-budget ramp-up and record production at Long Harbour. He stressed the focus on asset integrity, reliability, and productivity improvements across operations like Sudbury, aiming to be in the lower half of the cost curve and achieve cash flow breakeven by year-end, independent of by-product credits.

Daniel Sasson asked about the drivers behind declining pellet premiums and whether Vale is interested in renegotiating its gold streaming agreements to increase its exposure to gold, given higher prices.

Answer

Rogério Nogueira, EVP of Commercial & Development, attributed weak pellet premiums to lower demand in key markets caused by high steel exports from China. Shaun Usmar, CEO of Vale Base Metals Ltd, stated that the gold streaming deals are long-term financing contracts that will be honored, emphasizing that the focus is on optimizing overall production, from which Vale benefits from the residual gold.

Daniel Sasson requested more details on Vale's strategy for purchasing iron ore from third parties, particularly how it would be affected by the production ramp-up of the Vargem Grande and Capanema projects.

Answer

Executive Rogério Nogueira clarified that third-party ore is only purchased if it is value accretive. He expects volumes to be around 25 million tons, similar to last year, assuming current price levels. He emphasized that if market prices decrease, Vale will gradually cut non-profitable ore purchases to protect margins.

Daniel Sasson inquired about Vale's sales mix, the impact of increased quality concentration on inventory levels, and the company's 'value over volume' strategy. He also asked if the flat 2025 production guidance, despite new projects, implies lower third-party purchases and what the cost evolution might look like.

Answer

Executive Gustavo Duarte Pimenta explained that new projects like Vargem Grande and Capanema have a ramp-up period and provide more flexibility for the 'value over volume' strategy. Executive Rogério Nogueira added that the focus is on maximizing cash flow, which currently involves beneficiating more ore, leading to a short-term increase in inventories but ultimately higher value.

Daniel Sasson of Itaú BBA inquired about the status of the Samarco resell negotiations with the government and sought clarification on Vale's strategy for its high silica iron ore products in the second half of the year.

Answer

Executive Gustavo Duarte Pimenta stated that Vale remains optimistic about reaching a resolution on the Samarco agreement in the next couple of months. Executive Marcello Spinelli explained that the company has a structural high silica component in its portfolio post-Brumadinho and manages it based on market conditions, aiming for a 10% share in the portfolio but gradually reducing it to 0% by 2026-2027.

Daniel Sasson asked for clarification on Suzano's cost front, specifically quantifying the expected improvement in 2026 cash costs, given that Q4 2025 was already 5% below the 2025 average, and how this aligns with the 2027 Total Operational Disbursement (TOD) guidance. He also questioned if there were any recent signs of weakness in the pulp market, such as declining resale prices or the shift from $20 to $10 price increases, and sought an update on wood costs for Chinese producers.

Answer

Aires Galhardo, Executive Officer of Pulp Operations, stated that Suzano aims for an average 2026 cash cost around the Q4 2025 level (BRL 780/ton), representing a ~5% reduction from the 2025 average, despite expected higher costs in Q1/Q2 due to planned maintenance. Leonardo Grimaldi, Executive Officer of Commercial Pulp, People & Management, confirmed strong order intake in Q4 and January with higher prices. He attributed the $10/ton increase in February to calendar considerations, not weakness, and expects resale prices to react post-Chinese New Year. He noted that Chinese wood costs are stable to higher, with imported woodchip prices increasing and potential further pressure from Indonesian demand.

Daniel Sasson from Itaú BBA asked about Suzano's cost performance, specifically comparing the Q4 2025 cash cost with the 2026 average expectations and the total operational disbursement guidance, seeking quantification of the expected improvement towards the 2027 guidance. He also questioned Leonardo Grimaldi about any recent changes or signs of weakness in pulp order intake and prices, such as declining resale prices or smaller price increases, and the current wood costs for Chinese producers (domestic and imported wood chips).

Answer

Aires Galhardo, Executive Officer of Pulp Operations, stated that the average cash production cost for 2026 is expected to be in line with Q4 2025 (BRL 780/ton), representing a 5% reduction from the 2025 average, with Q1 and Q2 facing pressure from scheduled maintenance. Leonardo Grimaldi, Executive Officer of Commercial Pulp, People & Management, confirmed strong order intake in Q4 and January with higher prices, noting no changes in customer purchasing patterns despite the Chinese New Year. He explained the decision for a smaller February price increase was calendar-related. He expects resale prices to react post-CNY and detailed that while imported woodchip prices increased by 12-15%, Chinese wood prices fell by 10-12%, stabilizing overall wood costs for Chinese producers at year-end 2025 levels, prior to new Indonesian developments.

Daniel Sasson inquired about Suzano's cash cost trajectory, particularly the potential for further improvements towards 2027 and the linearity of cost reductions. He also asked about expectations for London Pulp Week, the impact of Chenming Paper's stoppage, and the basis for Suzano's optimism regarding price increases despite recent challenges.

Answer

Aires Galhardo, Director Executive, stated that the Eldorado deal is expected to reduce wood consumption per ton by 4% and reaffirmed the target of running below BRL 800/ton/year, committing to the 2027 TOD guidance. Leonardo Grimaldi, Executive Vice President, highlighted the unsustainable market scenario, an increase in unexpected closures, and a slightly upgraded optimism due to rising wood chip costs for Chinese producers and new recycled fiber regulations, though acknowledging limitations due to oversupply.

Daniel Sasson asked about the market impact of the new 10% tariff on U.S. pulp imports, including its effect on order books and who bears the cost. He also requested an update on the Kimberly-Clark joint venture timeline and integration planning.

Answer

EVP of Pulp Commercial & Logistics, Leonardo Grimaldi, reported that order books for the U.S. are normalized and that Suzano successfully negotiated for customers to bear the cost of the 10% tariff. EVP of Consumer Goods & Corporate Relations, Luis Renato Costa Bueno, confirmed that dedicated teams are in place for the KC deal, with the project on track for a 2026 closing.

Daniel Sasson followed up on the mentioned $3 billion in potential capital allocation, asking if this figure represents a target for revenue diversification or simply the sum of current opportunities. He also asked about potential positive catalysts for pulp prices and where the market might be underestimating a potential recovery, such as from logistics constraints.

Answer

Beto Abreu, an executive, clarified that Suzano has a target for value creation, not revenue diversification, and will only pursue opportunities with high returns. Leonardo Grimaldi, an executive, identified several potential positive catalysts for pulp prices: 1) commercial downtimes from high-cost European producers, 2) logistics disruptions creating opportunities for Suzano's differentiated network, 3) a potential downward revision of tariffs boosting demand, and 4) integrated Chinese producers becoming market buyers.

Daniel Sasson of Itaú BBA asked about the potential impact of a more protectionist U.S. administration on Suzano's growth strategy and M&A. He also inquired about the market impact of a major Chinese competitor's shutdown and Suzano's own inventory levels.

Answer

Executive Marcos Assumpcao stated that Suzano's long-term U.S. strategy is unchanged, viewing the market as robust and not expecting new pulp tariffs. Executive Leonardo Grimaldi confirmed the competitor's halt creates over 200,000 tons of monthly hardwood demand, viewing the situation as complex but likely temporary. He acknowledged Suzano's inventories are tight, creating short-term challenges.

Daniel Sasson asked about the current state of pulp demand from China following recent price drops and the strategic rationale behind the Pactiv and Lenzing acquisitions, including potential for fiber-to-fiber substitution and growth in dissolving pulp.

Answer

Leonardo Grimaldi, an executive, addressed the pulp market, stating that customers likely cannot skip more purchases due to low inventories and that the recent price adjustment was intended to reactivate the market. Executive Marcelo Bacci explained the Lenzing deal is a strategic, learning-focused entry into the textile market with no immediate plans for pulp mill conversion. He and executive Fabio Almeida Oliveira described the Pactiv acquisition as a move into a growing U.S. market with potential for operational improvements and future fiber-to-fiber substitution.

Daniel Sasson from Itaú BBA asked for an update on the milestones for the P15 expansion project in the mining segment. He also inquired about the key levers for value creation in the cement business, given low industry prices and capacity utilization.

Answer

Executive Marco Hebello reported that the P15 project is progressing, with core equipment contracted and delivery forecast for 2027. An executive, likely Martinez, explained that the cement strategy is focused on driving volume through its competitive logistics and distribution platform. He noted that while prices are low, CSN grew sales 8% in the quarter and sees significant opportunity for price recovery in the Brazilian market, alongside cost benefits from falling raw material prices.

Daniel Sasson inquired about CSN's confidence in achieving its year-end leverage target below 3x, a comfortable leverage level for 2026-2027 given higher CapEx, and the competitive outlook for steel prices amid Chinese import pressures.

Answer

Antonio Marco Rabello, an executive, affirmed the commitment to deleveraging, highlighting a transformational infrastructure project as key to reaching targets below 3x. He noted that investments are being managed cautiously due to high interest rates. Another executive detailed the steel market challenges, explaining that despite achieving a 3.2% price increase in Q1, the company faces a 27% import penetration rate and is focusing on operational excellence and product mix to maintain profitability.

Daniel Sasson inquired about CSN's deleveraging strategy, including the status of cement M&A, a potential energy business partner, and the sale of its Usiminas stake. He also asked about the steel segment's recovery, focusing on pricing power and the impact of new import quotas.

Answer

Executive Director Antonio Marco Rabello confirmed the company's commitment to deleveraging, highlighting strong operational cash flow from mining and cement as the primary driver. He noted that deals for an energy partner and a mining stake are targeted for 2024, while the cement acquisition is being structured carefully to not increase consolidated leverage. Executive Luis Martinez added that steel demand grew significantly, but government import measures remain 'innocuous' in intensity, limiting pricing power despite some reductions in discounts.

Daniel Sasson inquired about CSN's deleveraging strategy, including the status of potential asset sales in mining and energy, and the impact of a potential cement acquisition. He also asked for an update on the steel market, specifically regarding price increases and the effectiveness of new import quotas.

Answer

Executive Antonio Marco Rabello affirmed the company's commitment to deleveraging, stating that operational performance is the primary driver, supplemented by strategic partner transactions for mining and energy targeted for 2024. He noted the cement acquisition is being structured carefully to avoid impacting consolidated leverage. Executive Luis Martinez added that steel demand is recovering, but the government's import quotas remain 'innocuous' in their impact, though price adjustments are being made through reduced discounts.

Daniel Sasson from Itau BBA asked two follow-up questions: the potential size of the share buyback program that could start in 2026, and which specific countries in the SCAC region are under review for divestment.

Answer

CEO Jaime Muguiro stated it was too early to specify an amount for the 2026 share buyback but confirmed it would be part of a progressive shareholder return program, noting a $500 million program is already approved by shareholders. He declined to name specific countries for divestment in the SCAC region due to ongoing negotiations but expects transactions to occur between October 2025 and late 2026.

Daniel Sasson of Itau BBA requested details on CSN's deleveraging plan to reach a sub-3x leverage ratio, asking about the key drivers and the flexibility to postpone CapEx. He also asked for a comparison of the market environments for flat steel versus long steel in Brazil.

Answer

Luis Martinez, Executive, described the flat steel market as strong, driven by automotive and white goods, while the long steel market is more challenging due to intense competition and price pressure. Antonio Marco Rabello, Executive, explained that the primary deleveraging driver is improved operational results, with 2025 EBITDA projected to be higher than 2024. He confirmed the <3x leverage target, noting that while capital recycling projects like 'CSN Builder' can provide liquidity, the company also has flexibility to adjust the timing of investments like the greenfield cement projects.

Daniel Sasson requested more detail on CSN's deleveraging plans, including the drivers for the sub-3x target and the flexibility to postpone CapEx if needed. He also asked for a comparison of the market environment for flat steel versus long steel in Brazil.

Answer

Luis Martinez, an executive, explained that the flat steel market is performing well, driven by automotive and construction, while the long steel market is more challenging due to multiple players and a fight for market share. Antonio Marco Rabello, an executive, detailed the deleveraging plan, emphasizing that it is primarily driven by structural operational improvements. He confirmed the guidance of reaching below 3x leverage, supported by strong operations and potential liquidity from projects like 'CSN Builder', while maintaining flexibility on non-essential CapEx.