Gerdau S.A. (NYSE:GGB) Q1 2019 Earnings Conference Call - Final Transcript

May 08, 2019 • 01:00 pm ET


Gerdau S.A. (NYSE:GGB) Q1 2019 Earnings Conference Call - Final Transcript


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Good afternoon and welcome to Gerdau's Conference Call to discuss the results related to the first quarter of 2019. At this time, all participants will be in listen-only mode, but later on, we will initiate the Q&A session, when further instructions will be provided.

(Operator Instructions)

We would like to emphasize that any forward-looking statements 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; and Harley Scardoelli, Executive Vice President and CFO.

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

Gustavo Werneck Da Cunha

Good afternoon everyone. As usual, I would like to begin by welcoming each one of you to Gerdau's earnings conference call to discuss the results for the first quarter of 2019. Next to me is Scardoelli, our CFO. And we're always pleased to talk to you about our performance and discuss and clarify questions you might have.

I will initiate talking about our overall results in the quarter, and next, Scardoelli will elaborate on the financial figures of the Company. Next to that, I will talk about the outlook for the markets, where we operate and also our investments. At the end, we will both be available to answer your questions.

Let's move to Slide 2 to initiate our conversation on the main highlights of the quarter. We came to the end of the first quarter 2019, keeping the good results we posted on the same period of 2018. Net income was BRL443 million (ph) and a 5% EBITDA growth, mainly due to improved results coming from the North American operation that posted an EBITDA margin of 13.2%, and also lower SG&A. This is, therefore, the best EBITDA of the Company in the first quarter in the last 12 months.

Now, I would like to emphasize that we are confident that we did a great job regarding the divestment plan carried out along the last few years and concluded in 2018. Even with the sale of several operations, which accounted for a 23% reduction in shipments this quarter when compared to the same quarter of the previous year, we were able to grow EBITDA by 5% and EBITDA margin by 1.2 percentage points. This successful divestment plan, which economic value amounted to approximately BRL7 billion, resulted in a sharp reduction of our debt. When we look at the net debt over EBITDA ratio, that went from 2.7 times to 1.8 times, when comparing 1Q19 to the same period of 2018.

In our North America BD, we posted a significant increase in EBITDA that more than doubled in the quarter vis-a-vis 1Q18. The good results reflect the full impact of the measures to boost local