Gerdau S.A. 2026 Q2 Earnings Call

Good morning. Welcome to Gerdau's second quarter 2026 results presentation. I am Mariana Pereira, investor relations specialist. Joining us on this conference call are our CEO, Gustavo Werneck, and CFO, Rafael Jappur. Please note that this call is being simultaneously translated into English. You can choose your preferred language by clicking on the globe icon at the bottom of your screen. During the presentation, all participants will be on listen-only mode. Then we will begin the Q&A session. Analysts and investors can join the queue by clicking on the raise hand button. It is worth noting that the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available. Forward-looking statements are not guarantees of future performance and are subject to circumstances that may or may not occur. I will now turn the floor to Gustavo to initiate the presentation.

Thank you, Ari. Good morning. In fact, good afternoon, all of you. I hope you're doing well. I really appreciate the opportunity to join you for another earnings release presentation. We will briefly discuss the highlights of the second quarter of 2026. I will also talk about the outlook for our operations. Then we will move on to the Q&A session. In the second quarter, we recorded growth in shipments both quarter-over-quarter and year-over-year, with a 7% increase in volumes in North America when compared to the same period last year. Resilient demand in the key sectors where we operate led to a 15% increase in adjusted EBITDA in North America in the second quarter compared to the first three months of this year, 2026. This strong result also reflects solid operating performance from our plants in the region.

Meanwhile, we posted a slight improvement in the results of our Brazilian operations in the second quarter, reflecting a series of initiatives focused on increasing the profitability and productivity of our operations in the country. This gradual improvement in results occurred amid continued pressure from imports, which despite having slowed down during the period, remain at high levels year to date. In this context, we await the outcome of the anti-dumping investigations into long and flat steel products, which are expected to be updated in the second half of the year. Finally, I would like to highlight the increase in our ownership stake in Dona Francisca Energética, which has raised our self-generated energy to more than 50% of Gerdau's consumption in Brazil. This move helps boost the competitiveness of our operations in Brazil. It is in line with our previously announced decarbonization strategy.

I will now turn the floor over to Jappur, who will detail the financial highlights and the impacts of the current environment on our results. I will come back to you after that. Jappur, over to you. Thank you, Gustavo.

Good afternoon, everyone. I'd like to extend a good morning to those of you who haven't yet had lunch. Good day to everyone. Let's start talking about our operating result. Our adjusted EBITDA, consolidated, was BRL 3.4 billion in this quarter, posting growth compared to both the previous quarter and the same period last year. With this, we are getting to our very best consolidated EBITDA since Q3 2023. Gerdau's adjusted net income also posted a substantial increase of 45% quarter-on-quarter, reaching BRL 1.5 billion, reinforcing the company's ability to translate operating gains of our business into returns for our shareholders. Therefore, based on these results, Gerdau S.A. will distribute dividends of BRL 0.23 per share, while Metalúrgica Gerdau will distribute BRL 0.11 per share.

We also continue to make progress on our share buyback program of Gerdau S.A., which is now 31% complete at the closing of Q2. Speaking a little about our financial discipline, it is important to highlight and stress that our financial discipline remains a priority. We ended the quarter maintaining a very solid balance sheet position with low leverage, with debt over EBITDA ratio of 0.69x in the last 12 months. This quarter, we maintained a positive free cash flow of BRL 237 million. You might claim that it was just too little a timid generation, but we have to put this free cash flow generation into context considering the typical seasonality of our business.

If we compare the first half of 2026 and how much free cash flow we generated comparing with the same period last year, first half of 2025, in 2026, we generated an additional BRL 2.3 billion in cash flow. This was mainly driven by both the growth in EBITDA, driven by the North American operation, as Gustavo mentioned earlier, and the reduction in our CapEx investments in accordance with the guidance that we released and communicated last year. Talking about CapEx, from a strategic perspective, we are nearing the start of operations for major projects that will enhance Gerdau's structural competitiveness, particularly in our Brazilian operation. Regarding the mining expansion at Miguel Burnier, we continue to make progress in line with the updated schedule that we released in our last earnings call, with the start of operations expected in the third quarter.

We are running a lot of equipment tests, and we should start producing ore. We remain confident that we will realize the projected operational and financial benefits of the project in the range of BRL 1.1 billion per year when we are in full ramp-up. In addition to investments made in energy, mentioned by Gustavo, we are about to open our new recycling center in Pindamonhangaba. This will increase our competitiveness and reduce our exposure to volatility of this raw material in the long term. With this, I would like to conclude by reaffirming our culture of always striving for operational and financial discipline, while simultaneously strengthening our competitiveness and allocating capital to initiatives and projects that will shape our future. We understand that we continue to grow, creating value in a sustainable way to our shareholders.

I will wrap up here and join you all and Gustavo for the Q&A session.

Thank you, Japor. I would just like to say that in North America, we continue to see steel demand at high levels, with a strong order backlog driven by solid consumption in segments such as renewable energy and data centers. One point of attention is the formal review of the USMCA, which is the commercial agreement between the U.S., Canada, and Mexico. In Brazil, we are seeing signs of more moderate growth in some consumer sectors, such as construction and manufacturing, while still facing an excessive influx of imported steel in the local market. This unfair scenario of imports continues to affect the profitability of our operations in the country, in this regard, we continue to invest in initiatives that strengthen the competitiveness and profitability of our assets.

I'll now turn the floor over to Adriana, Japor and I will be available from now on to answer your questions.

Thank you, Gustavo and Japor. We will now initiate the Q&A session. Our first session comes from Rafael Barcellos with Bradesco.