Gerdau S.A. (NYSE:GGB) Q2 2018 Earnings Conference Call - Final Transcript

Aug 08, 2018 • 01:00 pm ET

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Gerdau S.A. (NYSE:GGB) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon, and welcome to Gerdau's conference call to discuss the results related to the second quarter of 2018. (Operator Instructions)

(Forward-Looking Cautionary Statement)

Here today are Mr. Gustavo Werneck, Director, President and CEO; and Harley Scardoelli, VP and CFO.

Now I would like to turn the floor to Mr. Gustavo Werneck. You may proceed, sir.

Executive
Gustavo Werneck

Good morning, everyone -- good afternoon, everyone. Welcome to our conference call to discuss the results of the second quarter 2018. I must say that it is an enormous pleasure for me to be here again with you to discuss our results, our main highlights and also the outlook for the markets where we operate.

After my remarks, Mr. Scardoelli who is joining me today, will elaborate on Gerdau's financial performance, and at the end, both of us will be available to take your questions.

I would like to begin by talking about Gerdau's highlights in the second quarter of '18. We came to the end of the period with an impressive progress in our results, as shown on slide two. This performance reinforces our confidence and the fact that we are on the right track, seeking for higher profitability and return to our shareholders.

We have the best quarterly consolidated EBITDA of the last 10 years. This was possible due to improvements in the world steel market and also our management efforts. These management efforts resulted, for instance, in our capacity to maintain cost increases below the growth of net sales through the extensive use of digital tools.

This quarter, foreign exchange and then more particularly, exchange variation of Brazilian currency was positive for us because we posted gains converting revenues accrued outside Brazil into BRL.

Another highlight of the quarter was the good performance of our operation in North America because, as you know, it produces longs. The quarterly EBITDA of this operation was the highest one since 2008, reflecting the economic effects coming from the North American tax reform and the implementation of Section 232 that has a positive impact on our performance in the region.

At a global level, we remain stringent regarding investments and CapEx and SG&A reached its best historical level ever, accounting for 3.6% of net sales.

I want to stress once again that at the base of this evolution is a transformation of our business culture, which involves being simpler, more agile and more independent. In regards to the indebtedness, the net debt over EBITDA ratio remains flat. And it might come down further looking forward in the year after the divestment of our rebar units in the U.S. announced in January.

More recently, we concluded the sale of our operation in Chile in keeping with our divestment strategy already mentioned before. The focus is on assets that have greater profitability potential in the Americas, also like the sale of the HPPs in Goias.

Well, now let's look at the next slide and then we will talk about the market outlook that remains positive. In Brazil, the