Gerdau S.A. (NYSE:GGB) Q2 2020 Earnings Conference Call - Final Transcript

Aug 05, 2020 • 01:00 pm ET

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Gerdau S.A. (NYSE:GGB) Q2 2020 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 2020. [Operator Instructions]

We would also like to emphasize that any forward-looking statements that might be made during this conference call related to Gerdau's business outlook productions 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, Vice President and CFO. With no further ado, I would like to give the floor to Mr. Gustavo Werneck. You may proceed, sir.

Executive
Gustavo Werneck Da Cunha

Good afternoon, everyone. I would like to start by welcoming all of you to Gerdau's conference call to discuss the results of the company related to the second quarter of 2020. I hope you're all well, healthy and safe and navigating through this period the best way possible. Joining us today is our CFO, Harley Scardoelli, and we are both very glad to share with you our performance in the quarter and also clarify possible issues that might come up during our presentation.

I would like to point out this conference call is being conducted in compliance with all social-distancing protocols adopted by Gerdau. Scardoelli will talk about the highlights of the results in the quarter. And also, he will talk about the performance of our operations. After his presentation, I will comment on the markets where we operate and the landscape looking forward, even though the moment still poses many uncertainties. And as usual, at the end, both of us will be available to answer your questions.

So now I will give the floor to Scardoelli. You may proceed.

Executive
Harley Lorentz Scardoelli

Thank you very much, Gustavo, and good afternoon to you all. It's always a pleasure to be with you again for another earnings release call, and I hope that you're all well. I'll start by talking about the financial results for the second quarter 2020. As you can see from this slide, in the second quarter 2020, we posted a positive free cash flow of BRL205 million, even considering the drier period of the COVID-19 pandemic. This improvement vis-a-vis Q1 2020 reflects the combination of an EBITDA 12% higher than in Q1 and the maintenance of a stringent financial discipline in terms of capex and the control of some items like delinquency and accounts payable. It's worth mentioning that in the last 12 months, the company posted positive free cash flow of around BRL four billion, reinforcing its liquidity position.

The cash conversion cycle went from 83 days in March 2020 to 95 days in June due to lower net sales in the period. It's worth highlighting that part of the working capital increase was influenced by the exchange variation in the period caused by converting the working capital of the North America