Gerdau S.A. (NYSE:GGB) Q4 2018 Earnings Conference Call - Final Transcript

Feb 21, 2019 • 12:00 pm ET


Gerdau S.A. (NYSE:GGB) Q4 2018 Earnings Conference Call - Final Transcript


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Good afternoon, and welcome to Gerdau's Conference Call to discuss the results for the Fourth Quarter of 2018. At this time all participants are will be in listen-only mode, and later on we'll initiate the Q&A session. (Operator Instructions).

We would like to emphasize that any forward-looking statement that might be made during this conference call related to Gerdau's business outlook, projections and financial and operating goals are mere assumptions based on the management's expectations related to the future of the company. Even though Gerdau believes that its comments are based on reasonable assumptions, there is no guarantee that future events will not affect this evaluation.

Here today are Mr. Gustavo Werneck, Director, President and CEO of the company; and Harley Scardoelli, Executive Vice President and CFO.

With no further ado, I'd like to give the floor to Mr. Gustavo Werneck. You may proceed, sir.

Gustavo Werneck Da Cunha

Good afternoon, everyone. I would like to begin by saying that it's a pleasure to be here with you once again. And again, I would like to welcome you to Gerdau's conference call on the results of the last 12 months of 2018. I will talk about our results for the year, and then Scardoelli will elaborate more on the performance of our operations and will also talk about our debt position. After that, I will talk about the outlook for the markets where we operate and investments looking forward. At the end, we will be available to answer your questions.

So let's move to slide two to talk about the main highlights of the year. 2018 ended with important achievements in the goals and priorities that the company set forth for the year. We posted the best annual EBITDA and net income since 2008. And we also had improvements in the profitability of almost all of our operations.

Our main consolidated figures were positively impacted by three factors: higher shipments in the Brazilian domestic market; more profitable exports; and lastly, the positive effect of the exchange rate when converting sales generated abroad into BRL.

Also, Gerdau's divestment plan was concluded successfully, reaching more than BRL7 billion in the last four years. And we significantly reduced our net debt to 1.7 times EBITDA. Moreover, we generated the highest volume of free cash flow of the last few years of BRL2,600,000,000. We also managed to achieve the lowest historical level of SG&A equivalent to 3.6% of net sales.

Well, I would also like to stress that there was significant progress in the EBITDA margin of the North America operation, a market that remains extremely relevant to us. As a result of our team's dedication and the evolution of the markets in 2018, we are paying out higher dividends to our shareholders, much higher levels when compared to previous years. I also want to emphasize that these achievements demonstrate that the efforts from our teams to transform Gerdau into a more innovative and open organization is beginning to bear fruit.

Throughout 2018, we worked on something very important