Investor Presentation | 2017 - Gerdau - Investor Presentation.pdfThe Gerdau we are creating. 17...
Transcript of Investor Presentation | 2017 - Gerdau - Investor Presentation.pdfThe Gerdau we are creating. 17...
www.gerdau.com1
Investor Presentation | 2017
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Outlook
Gerdau Highlights
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Better outlook for steel consumption
Source: World Steel Association
Region / Country (in mt and %)
2017f 17/16
World 1,535 1.3%
European Union 158 0.5%
NAFTA 135 2.2%
USA 94 3.0%
Central & South America 41 3.5%
Brazil 19 2.8%
Asia and Oceania 1,016 1.0%
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GDP growth
Inflationbelow the target
FGTSR$ 44 billion
PPIInvestment Partnership Program
Agenda reform Ceiling on public spending
Labor Social security
Tax
Interest ratesharply reduction
Political Scenarioincreasing uncertainty
Job generation
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Tax rateFocus to reduce from 38% to 15%
Fight unfair importsRebar
Wire rod
Infrastructureadditional US$ 1.0 trillion (10y)
Deregulation
Stock market
Section 232
Job generation
Consumer confidence
GDP growth
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Source: World Steel Association
World steel capacity utilization rate improved
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Steel industry Consolidation Partnership with steel-users
GDP growthFAI 6M17: +8.6%Infrastructure 6M17: +17.3%
Steel Consumption6M17: +10.2% y-o-y
Capacity closures 2016: 60 Mt
All induction furnaces ~120 Mt 2017: 50 Mt
Steel exports reduction 5M17: -53% in long steel
PricesStrong price in domestic market
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Source: World Steel Association
In million metric tons
*January to July of 2017 annualized
China steel exports decreased significantly
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Source: Platts
Margins were updated until August, 14
In US$/tRebar margin in Chinese domestic market is in good shape
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Source: Platts
Better price in the international steel market
Prices were updated until August, 14
In US$/t
Turkey
China
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Outlook
Gerdau Highlights
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Profile
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YE
AR
S
OF EXPERIENCE
ONE OF THE MAIN
SPECIAL STEEL
SUPPLIER OF THE WORLD
LEADING IN THE PRODUCTION OF
LONGIN THE AMERICAS
STEEL
LARGEST RECYCLER
OF LATIN AMERICA:
12 MILLION TONS
SHARES LISTED ON
ON THE SÃO PAULO
NY AND MADRID:
+ 120,000 SHAREHOLDERS
OPERATIONS IN FLAT STEEL
PIONEER IN THE IMPLEMENTATION
OF DIGITAL INNOVATION
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Player with dominant presence and broad product portfolio
Steel Units
Associated Companies
USA & Canada
Mexico
Colombia
Peru
Chile
Uruguay
Argentina
Brazil
Dominican Republic
Venezuela
India
SBQ
Rebars
Wires
Structural
shapes
Billets, blooms
& slabs
Wire rod Nails
HRC Iron Ore
Merchant bars
& light shapes
Ready-to-use
products
Heavy plates
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Geographic diversification
Brazil North America Special Steel► Housing
► Infrastructure
► Industrial and commercial buildings
► Agriculture
► Exports
► Infrastructure
► Non-residential
► Industrial
► Automotive
► Shipbuilding
► Energy
South America► Housing
► Infrastructure
► Industrial and commercial buildings
*Net sales and EBITDA in the last 12 months
32% of Net Sales
43% of EBITDA
40% of Net Sales
19% of EBITDA
12% of Net Sales
14% of EBITDA
16% of Net Sales
24% of EBITDA
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Vertically integrated operations
► Relevant level of direct
purchase and captive scrap
(50%)
► 6.3 billion tons of iron ore
resources
– Self-sufficiency at Ouro
Branco mill
► Partial level of energy self
generation
Upstream
► Low cost structure
► Mini-mills and integrated mills
key to low cost strategy
► Latest generation technology
Steel
► Reinforcing steel fabrication
facilities (Fab Shops)
► Drawn products
► Multi-product distribution
network
► Tailor-made added-value
approach (~40% of sales to civil
construction)
Downstream
Digital Innovation
Digital mill
GE partnership
Uber for heavy truck
Use of drones
Roadmap Economic value: R$ 2.8 billion since 2014
New partnership in wind power market
New Ideas Partnership with startups and
innovative companies to think different
Culture modernization Leaders as role model
People Development Committees
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The Gerdau we are creating
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Roadmap: economic value of R$ 2.8 billion
Sold operation in Spain and Guatemala
Sold a mill and coal assets in Colombia
JVs in Dominican Republic and Colombia
Sold a mill, downstream operations and real state assets in US
Technical assistance agreement
Partnership to produce forged parts for the Wind power industry
Divestments
Strategic alliances
2014-15: R$ 1.1 bi
2016: R$ 1.3 bi
1H17: R$ 0.4 bi
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EBITDA margin in 2Q17 improved compared to 2Q16 and 1Q17
Unit 2Q17 2Q16 Δ% 1Q17 Δ%
Shipments '000 ton 3,707 4,240 -13% 3,591 3%
Net Sales R$
million9,166 10,249 -11% 8,459 8%
Cost of Goods Sold R$
million(8,229) (9,165) -10% (7,805) 5%
SG&A R$
million(420) (578) -27% (439) -4%
EBITDA* R$
million1,120 1,201 -7% 853 31%
EBITDA Margin % 12.2% 11.7% 10.1%
Net Income* R$
million149 184 -19% (34)
Free Cash Flow R$
million241 827 -71% (227)
* Adjusted by extraordinary events
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Geographic diversification reduces volatility
EBITDA and EBITDA margin per BD
EBITDA (R$ million) EBITDA Margin (%) Participation of adjusted EBITDA per BD
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Strong reduction in SG&A, corresponding to 4.6% of net sales in 2Q17
SG&A
Reduction of cash conversion cycle to 77 days
R$ million and in % of Net Sales
Working CapitalR$ billions and Days
2Q17
4.6%
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Selectivity in CAPEX
CAPEX in 1H17 was R$ 432 million, focused on productivity improvement and maintenance
1H17 CAPEX by Business Division
CAPEX Disbursements (R$ billion)
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R$ 1.6 billion of FCF generation in the last twelve months
2Q17 Free Cash Flow (R$ million)
Evolution of Free Cash Flow(R$ million)
Free cash flow of R$ 241 million generated in 2Q17
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Deleveraging of R$ 1.2 billion on Net Debt y-o-y
Graph 1: EBITDA in the last 12 months
Average Debt Term: 5.5 years
R$ billion
Debt & Leverage Ratio
Average Debt Cost: 6.9%
Net debt/EBITDA stable at 3.6x, despite the unfavorable exchange variation.
R$ billion
Debt Amortization Schedule
Graph 2: 2017 Bond
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Closing Remarks
Free Cash Flow generation Deleverage
Roadmap execution
CAPEX selectivity
High productivity
Shareholder return
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Statement
This presentation may contain forward-looking statements. These forward-looking
statements rely upon estimates, information or methods that may be incorrect or
inaccurate and may not actually occur. These estimates are also subject to risks,
uncertainties and assumptions, including, among others: general economic, political and
commercial conditions in Brazil and in the markets where we operate and existing and
future government regulations. Potential investors are hereby informed that these
estimates do not constitute a guarantee of future performance as they involve risks and
uncertainties. The Company does not undertake, and specifically denies, any obligation to
update any estimate, which only speak as of the date they are made.
Thank you! www.gerdau.com/ri [email protected] +55 51 3323 2703