Gerdau S.A. (NYSE:GGB) Q2 2019 Earnings Conference Call - Final Transcript

Aug 07, 2019 • 01:00 pm ET

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Gerdau S.A. (NYSE:GGB) Q2 2019 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 of the Second Quarter 2019 of Gerdau. [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 of 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, Vice President and CFO.

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

Executive
Gustavo Werneck Da Cunha

Good afternoon, everyone. I would like to begin by welcoming each one of you to our conference call to discuss Gerdau's results related to the second quarter 2019. Sitting next to me is our CFO, Harley Scardoelli, and for both of us is always a pleasure to talk to you about our performance and also clarify any questions that you may have about our presentation. I will start by talking about our overall results in the quarter. And next is Scardoelli, will elaborate on the financial performance of the Company. After that, I will come back to discuss the outlook for the markets where we operate, and we will also talk about our investment plan. At the end, both of us will be available to answer your questions.

So now, let's move to Slide two to begin our conversation talking about the main highlights for the quarter. I would like to start by highlighting the translation into figures of our strategy to focus on the more profitable operations in the Americas. The management of a new and more profitable asset portfolio allowed us to post the best EBITDA margin for the period in the last 11 years, of 15.5%, even despite a very complex scenario faced by the steel industry worldwide since 2016, led by low demand and also high offers and the high cost of raw materials.

In regards to the North America operation, although the EBITDA margin was down when compared to the first quarter of 2019, mainly due to market reasons that we will elaborate further on, the sale of most of the rebar units in the US, coupled with a spike in metallic spread cause EBITDA margins to be up from 9.2% in Q2 of 2018 to 11.1% in Q2 2019.

I would also like to highlight that we continue to pursue and expand our strategy of being very stringent with our costs and expenditures that together with a profound digital and cultural transformation allowed us to reach BRL354 million in SG&A in the second quarter 2019. This amount represents a reduction of 18% vis-a-vis the same quarter of the year before. And this is the lowest amount ever reached by the Company.

To conclude our highlights, I want to emphasize that even with the additional inventory