The following is a summary of the Gerdau S.A. (GGB) Q4 2023 Earnings Call Transcript:
Financial Performance:
Gerdau ended Q4 2023 with EBITDA of R$2.39 billion and net sales of R$14.7 billion, a modest 14% margin.
These indicators were largely impacted by the significant devaluation of the Argentine peso, causing a 40% decrease in EBITDA and a 54% decline in net sales.
The company's working capital as of the end of December was R$14.2 billion, down by 10% compared to the previous quarter.
Gerdau generated R$1.285 billion in Q4 free cash flow and ended the year with gross debt of R$10.892 billion, while maintaining a low net debt-over-EBITDA ratio of 0.40x.
A dividend payout totaling R$2.6 billion, comprising 37% of the company's free cash flow, is scheduled for March 2024.
The CapEx investment concluded at nearly R$5.700 billion in 2023, with a projected investment of R$6 billion in 2024.
Business Progress:
Increased imports of cheap Chinese steel have disrupted operations in Brazil, resulting in decreased production and significant layoffs.
Despite inflationary concerns in Argentina, high demand in North America, fueled by U.S. GDP growth and the Inflation Reduction Act, resulted in a backlog of 60 days.
Gerdau's advocacy for stronger trade defenses in Brazil mirrors efforts in other countries against cheap Chinese steel.
The company's selection for the B3 Carbon Efficient Index and A- rating by CDP reflect its commitment to sustainability, further demonstrated by the inauguration of a solar plant in Texas.
Business division Gerdau Next initiated a R$1.5 billion solar farm project in Arinos predicted to generate approximately 4,000 jobs to boost local income and development.
Gerdau's divestment from Colombia and the Dominican Republic enhances focus on optimizing assets, looking for profitability improvements through cost reduction.
Positive impacts from existing North American infrastructure projects and anticipated rise in steel demand bodes well for the future.
Possibility of a company relist is contingent on upcoming tax reforms in Brazil, with 2024 expected to continue their strong financial returns, bolstered by a robust backlog and anticipated infrastructure projects.
Despite a leaner structure following significant divestments, Gerdau maintains a resilient balance sheet capable of sustaining their strategic investment plan, which they are prepared to revise in accordance with future business conditions.
More details: Gerdau IR
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