Ricardo

Ricardo asked about Gerdau's cash flow outlook, focusing on the working capital release (structural vs. reversible) and the significant drop in cash financial expenses, inquiring about anticipated further reductions or debt restructuring. He also sought clarification on how Gerdau plans to achieve a double-digit margin for Brazil in 2026, specifically whether it involves a gradual improvement from a weaker Q1 into Q2 and H2, with the impact of Miguel Burnier.

Answer

CFO Rafael Japur stated that a use of working capital is expected due to increased North America volumes and Brazil seasonality, but not all efficiency gains will be reverted. He explained that Q4 cash financial expenses were higher due to the make-whole call settlement, and future interest depends on bond maturity dates. Regarding Brazil margins, Japur indicated that a double-digit margin for Q1 is 'far-fetched' due to coal cost increases, but a gradual improvement from high single digits in Q1, combined with concrete benefits from the Miguel Burnier ramp-up in H2, could lead to a combined year-end EBITDA margin around two digits. He noted that Miguel Burnier's ramp-up results are not yet quantified.

Ricardo asked about the outlook for Gerdau's cash flow, specifically regarding working capital release/usage and the significant drop in cash financial expenses in Q4 2025, inquiring about anticipated further reductions. He also sought clarification on how Gerdau plans to achieve a double-digit EBITDA margin for Brazil in 2026, considering a weaker start and the ramp-up of Miguel Burnier.

Answer

CFO Rafael Japur stated that some working capital usage is expected due to strong North America results (increased volumes, shipments, product mix) and Brazil's seasonal resumption, though not reverting all efficiency gains. The drop in cash financial expenses was impacted by the settlement of a make-whole call, which included accrued interest, making the Q4 interest account larger than expected. He advised looking at P&L breakdowns by currency and debt type for future estimates, noting interest payments concentrate in April and October. For Brazil's double-digit margin, he clarified that a significant improvement in Q1 is 'far-fetched' due to coal cost increases and slow market growth. He anticipates a Q1 margin close to high single digits, with gradual improvement in subsequent quarters, and a combined year-end EBITDA margin potentially around two digits, contingent on Miguel Burnier's ramp-up and market conditions. He did not provide a specific ramp-up result for Miguel Burnier.