Gerdau S.A. (NYSE:GGB) Q3 2022 Results Conference Call November 9, 2022 12:00 PM ET

Company Participants

Renata Battiferro - IR

Gustavo Werneck - CEO

Rafael Japur - VP, IR

Conference Call Participants

Leo Correa - BTG Pactual

Danielle Sasson - Itaú BBA

Gabriel Simmons - Goldman Sachs

Thiago Lofiego - Bradesco BBI

Carlos de Alba - Morgan Stanley

Guilherme Rosito - America

Alejandra Andrade - JPMorgan

Gustavo Werneck

[Foreign Language]

[Call Starts Abruptly] …years of experience in logistics and allocation. So now in the next slides, we'll talk a little bit more about the highlights of each one of our business operations and the outlook for the markets in which Gerdau operates, so that later on we can talk more about it during the Q&A.

On Slide 6, I would like to begin by talking about North America. I would like to highlight that the adjusted EBITDA of our North American business operation totaled BRL2.6 billion with an adjusted margin of 32.9%, both historical records for our third quarter and above the margins achieved by our local competitors confirming that our strategy and position in North America has been successful over the last few years. When the bulk -- well, I think you'll remember that you had margins that were single digit margins.

I also highlight that the metallic spread remains at a historically high level, and that's the trend for the coming months. Volumes remained at high levels in the third quarter, reflecting strong demand from the non-residential and manufacturing and energy sectors. The outlook for the fourth quarter remains very positive, even despite seasonality of the period since our order backlog remains at normal levels and very positive.

Considering this scenario, we will continue to operate our mills in the region at capacity utilization levels above 90%. We also remain optimistic about the demand for steel in North America, especially from the construction sector. We follow some indicators like the Architectural Billing Index, which measures the activity of the non-residential construction sector in the country, and the Institute for Supply Management Index, which monitors the performance of the manufacturing sector remain accommodated at positive levels above the 50 point line. Data from the US Census Bureau show that the total spending on domestic non-residential construction reached a record high of almost $80 billion in August this year.

I would also stress the reshoring phenomenon that has continually brought in new customer orders and also infrastructure investment package valued at $1 trillion to $2 trillion, which should begin to generate additional steel demand of up to 5 million tons in the US market through 2023 as states move forward with their projects. In this context, we continue investing in digital transformation and improving the productivity and profitability of our units in North America, making our steel even more competitive and generating more value to our customers.