Good afternoon, everyone, and thank you for waiting. Welcome to the video conference for the release of Gerdau's Q4 '22-'23 results. With us today are Gustavo Werneck, CEO, and Rafael Japur, CFO. This video conference is being recorded and will be available on the company's investor relations website along with the complete material for the earnings release. You can also download the presentation using the chat icon. We want to highlight that the information in this presentation and any statements made during the video conference regarding Gerdau's business prospects, projections, operating and financial goals are based on the beliefs and assumptions of the company's management as well as currently available information. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions as they relate to future events and depend on circumstances that may or may not occur. Investors should recognize that general economic conditions, market conditions, and other operating factors may impact Gerdau's future performance, leading to results that may differ significantly from those expressed in forward-looking statements. Now I will turn it over to Gustavo Werneck to begin the presentation. Please, Gustavo.

Thank you, Renata, and good afternoon, everyone. I want to welcome you all to the video conference call where we will announce Gerdau's results for the fourth quarter of 2022 and the year-end closing. I hope you are all doing well. As noted, our CFO, Rafael Japur, is also joining this presentation. It’s always a pleasure for us to discuss our performance and address any questions you may have. I will begin by discussing the international landscape and the key highlights of our results, followed by a detailed look at our business operations for the quarter. After that, Japur will provide insights on our financial performance, and I will conclude by discussing our ESG agenda. We will be available at the end to delve into any points you wish to explore further. Before I proceed, I want to extend my heartfelt thanks to our employees in the countries where we operate for their contributions to another remarkable year in Gerdau’s 122-year history. To start, I will address the macro environment that Gerdau operates within. Throughout 2022, we faced a challenging macroeconomic environment that tested Gerdau's resilience. Today, Gerdau is an agile, modern, and flexible company, thanks to a significant cultural and digital transformation undertaken in recent years. This has allowed us to achieve historic results even amid a complex backdrop. We closely monitored ongoing logistical and geopolitical challenges stemming from the COVID-19 pandemic and the Russia-Ukraine conflict, which introduced uncertainties in the global economy and inflation. Despite these pressures, particularly on production costs, especially energy, Gerdau continued to excel due to our business model, geographic diversity across the Americas, and an innovative approach to meet customer needs. Now, moving on to the next slides, I would like to highlight some key points demonstrating Gerdau's strong performance in the fourth quarter. We concluded the year with the highest net sales in Gerdau's history, totaling BRL 82.4 billion. Additionally, we reached the second-best adjusted EBITDA for the company at BRL 21.5 billion with an EBITDA margin of 26.1%. Our historical performance indicates that Gerdau has reached a new level of financial and operational results. This achievement showcases Gerdau's capacity to evolve and consistently deliver value to our customers and stakeholders by offering more innovative and sustainable products and services. Today, we stand out not only for our strong financial results but also for our transparent business strategy characterized by disciplined cost management and continuous asset improvement. This is evident in our sales, general, and administrative expenses, which are significantly lower than those of our peers. I'd like to point out the remarkable performance of our North America operations in 2022, which achieved an adjusted EBITDA of BRL 10 billion with a margin of 32%, both record figures. This reflects our successful strategy and positioning in the North American market, as well as the management efforts we've invested in recent years to boost our operational competitiveness in the region and enhance value for our customers. Beyond the financial highlights, I'd like to mention the establishment of Gerdau Next, our new business units complementary to steel, particularly the Ubiratã joint venture with SpaceTime Labs. This new venture focuses on high technology and developing platforms that integrate with everyday industrial processes through artificial intelligence, autonomous systems, and robotics. Ubiratã represents another step in Gerdau's digital business transformation over the years, reinforcing our ability to adapt, innovate, and evolve through our 122-year history. Now, let's move to the next slide for a detailed look at each of our business operations and the market outlook. On Slide #6, focusing on our North America operations, we achieved record results in 2022 with a positive outlook for 2023. Steel shipments to the local market in January reached their highest level since 2015, and our order backlog in the U.S. remains robust at around 60 days. Demand for steel has been positively influenced by construction activity, which is expected to grow by more than 6% this year. Specifically, the infrastructure segment is projected to expand by 16% in 2023, driven by initiatives linked to the infrastructure investment package now coming online, which is expected to boost steel demand next year as projects progress. For instance, the North American government has announced $2.1 billion in funding to revitalize bridges across the country. Additionally, we should note the impact of re-shoring, which has further increased the consumption of domestic steel in the region, along with anticipated demands from the IRA. In light of this landscape, we are operating our mills in the region with a capacity utilization rate exceeding 90%. We will continue to invest in enhancing the productivity and profitability of our North American units to deliver even more value to our customers. I also want to highlight the investments made in the Whitby mill in Canada, where a new melt shop is set to start operations this half of the year. Furthermore, we are investing in the electric furnace at our plant in Midlothian, Texas, aiming for greater productivity and equipment efficiency. This investment is part of an ongoing modernization and expansion plan at the Midlothian facility, tailored to meet the needs of local customers and markets. Currently, our operation focused on producing rebar is experiencing its best historical performance regarding production, sales, and financial results, benefiting from the local market and favorable commercial agreements with the U.S. and Canada, as well as new regulations. Now, turning to the next slide to discuss our Special Steel operation, our adjusted EBITDA for 2022 rose 40% compared to the previous year, reflecting current profitability levels. I should point out that the CHIPS Act, recently approved by the U.S. government, will facilitate the establishment of numerous semiconductor plants across the country over the coming years, addressing the chip shortage that has affected the demand for specialty steels in the vehicle sector. Approximately 30 projects are underway, including expansions and new facilities, with estimated investments around $200 billion. Production of light vehicles in the U.S. is expected to recover, remaining above 15 million units. The heavy vehicle sector also has a positive outlook, with a forecasted growth of 5% in 2023, reaching over 300,000 units. In Monroe, Michigan, we are progressing as planned with an additional BRL 200 million investment, and this facility will become the most technologically advanced producer of SBQ to meet future client needs and explore solutions for hybrid and electric vehicles. However, the outlook in Brazil is affected by a semiconductor shortage and uncertainties surrounding access to credit lines along with high interest rates. Nevertheless, light vehicle production is projected to increase by 4% in 2023 compared to 2022, as per the National Association of Vehicle Manufacturers, ANFAVEA. Heavy vehicle production accelerated toward the end of 2022 due to technology updates for trucks complying with Euro 6 standards. A new emissions regulation for heavy vehicles was enacted at the start of January. The agricultural machinery sector is set to remain favorable, driven by fleet modernization amidst strong harvests. I also want to emphasize that industries utilizing specialty steels, especially auto parts, have remained competitively positioned in the global market, generating export opportunities. We continue to advance with new continuous casting of blooms and billets at our Pindamonhangaba plant in São Paulo, and these products are currently undergoing certification with our clients. This modern equipment allows us to have a more automated process with improved yields, resulting in higher quality products tailored to meet the demands of our markets. Moving to the next slide, I will address the long and flat steel scenario in Brazil, where the fourth-quarter performance reflects a stabilization of steel demand across various sectors. After two years, 2020 and 2021, that did not display the typical seasonal downturn in December, 2022 has returned to a more usual pattern, with additional factors like the World Cup and expectations surrounding the newly elected government contributing to a notable drop in demand. We utilized this time for longer scheduled downtimes to extend the life of our assets. Following a period of shorter stoppages, we anticipate a demand recovery in 2023, particularly after mid-January. Our order book since January 15, along with projected future consumption, reinforces our initial expectations that steel demand in Brazil for 2023 will align with 2022 levels. Steel consumption in residential and commercial construction remains robust, despite market concerns about the number of new launches and inventory levels in some areas. For instance, Brazil saw a historical peak in active construction sites in February, exceeding 10,000, up 3% year-on-year. The latest construction industry survey indicates that the GDP for construction is set to rise by 2.5% compared to the prior year. The sector also stands to benefit from reforms in housing programs aimed at low-income families in the coming quarters. Retail sales are holding steady, although at a slower pace, and could be positively influenced by new government aid measures. I would like to underline that Gerdau's current business model enhances our ability to capitalize on various market opportunities, making us less reliant on retail. Moreover, I foresee the resurgence of significant public investments in infrastructure, which will contribute to the country's growth. Public sector investments in this area are estimated to exceed BRL 31 billion this year. Additionally, I want to highlight the sustained steel demand from the industrial sector, which reflects robust performance in agricultural, capital goods, machinery, equipment, yellow line, and energy sectors. For instance, the growth of centralized energy generation is expected to reach 10.3 gigawatts in 2023, marking a record high for the country, with solar and wind power plants projected to comprise over 92% of this increase. Moving on to the next slide, we will discuss South America, starting with Argentina, where strong demand for steel from construction, agribusiness, energy, and mining sectors continues to drive local market sales. The construction sector in Argentina is likely to mirror the strong performance of 2022, when activity increased by 3.5%. A similar trend is also observed in the Uruguayan steel market. In Peru, despite local political uncertainties, steel demand remains high, bolstered by the construction sector, which led to a 9% rise in shipments to the local market in the fourth quarter compared to earlier periods. Thus, our outlook for South American operations remains positive. I will conclude this section and now pass the mic to Japur for a deeper discussion on our financial performance, after which I will return to address our ESG agenda. Japur, please take the floor.

Thank you, Gustavo. Good morning, everyone. It’s a pleasure to be here for our earnings conference call. I'll begin with our cash flow and working capital. In 2022, as Gustavo mentioned, we achieved a strong EBITDA of BRL 21.5 billion, marking the second-best annual EBITDA in our history, which demonstrates the resilience of our business model. Our CapEx investment in 2022 was BRL 4.3 billion, consistent with the guidance shared earlier this year. The notable change in operating cash flow for 2022 was due to working capital; we invested BRL 2.7 billion in working capital, nearly BRL 4 billion less than in 2021. This year, we experienced significant revenue and sales growth, necessitating increased working capital investment compared to 2022. Due to the reduction of our overall debt, interest expenses were lower than in previous years despite the global trend of high interest rates. Consequently, we ended 2022 with a record cash flow of BRL 10.5 billion, which is almost 50% of our EBITDA for the period and nearly BRL 900 million more than our cash flow in 2021, an important year for cash generation as well. On the lower part of the slide, we can observe the quarterly evolution of working capital. We concluded the year with a working capital level of BRL 16.2 billion and a cash conversion cycle of 81 days, slightly higher than in recent quarters, which can be attributed to seasonal demand adjustments and lower net sales. Now, moving to the CapEx topic, as we ended 2022 with an investment of BRL 4.3 billion, this includes both maintenance investments and those for expansion projects and technical upgrades. For 2023, we anticipate a CapEx investment of BRL 5 billion in our steel operations, with roughly 50% allocated to maintenance and the remaining 50% to expansion and technological advancements. Our focus remains on enhancing efficiency, cost reduction, and growth in business lines that promise value. Additionally, about BRL 830 million of this amount will be directed towards environmental initiatives to align with our goals for reducing greenhouse gas emissions. On the right side of the slide, we emphasize two projects this quarter. The first is the expansion of our Whitby melt shop in Canada, expected to be completed in the second quarter of 2023. The second is for coil hot rolled strips in Ouro Branco, where we have seen substantial growth in the flat steel segment of our product portfolio. We remain committed to expanding this product line. Together, these two projects are projected to generate between BRL 300 million and BRL 450 million more in EBITDA per year once they are fully operational. It’s worth noting that beyond the BRL 5 billion associated with our steel investments, we also have disbursements related to Gerdau Next initiatives, which we had previously disclosed. For 2023, we expect these Gerdau Next project disbursements to be between BRL 500 million and BRL 800 million. Moving to the next slide, let’s discuss our indebtedness and liquidity. We maintain a healthy net debt over EBITDA ratio of 0.33x. In Q4 2022, we noted a slight increase in our net debt primarily due to record dividends from Q3, totaling BRL 3.6 billion paid in December, which influenced this quarter's numbers. Importantly, we finished the year with a solid cash position of BRL 5.4 billion and closed the quarter with our revolver line fully available with several top-tier banks, amounting to $875 million that can be withdrawn if necessary. Overall, we are aligned with the guidelines we've established in our financial policy. Additionally, we will have a bond maturity of approximately $190 million in April 2023, which will support our goal of reducing our dollar-denominated debt. Now, on Slide 14, I want to discuss returns to our shareholders. For Q4, we anticipate a dividend payout of BRL 133 million and expect to finish 2022 with a record dividend payout of BRL 6.1 billion. Throughout the year, we executed over BRL 1 billion in share buybacks. Therefore, accounting for dividends and buybacks, we distributed over BRL 7.1 billion, roughly two-thirds of our approximate BRL 10 billion free cash flow or nearly 70% of our net income for the year, which far exceeds the amounts specified in our bylaws. I would like to highlight that we closed the year with a dividend yield exceeding 10%, showcasing Gerdau's ability to provide returns to shareholders. We continue to have two ongoing buyback programs at Gerdau S.A. and Metalurgica Gerdau, with our dividend policy remaining unchanged at 30% of adjusted net income. To conclude, I would like to share a long-term outlook. When Gustavo references the differences between our current performance compared to the past, I’d like to highlight the years between 2014 and 2018 when we underwent significant cultural and digital transformation, as well as divestments. In 2022, we hit numerous important milestones, achieving our lowest net debt in a decade, the lowest average leverage levels in recent times, the second highest net income, the second best EBITDA in history, and setting a record for free cash flow generation. All of this has allowed us to return more value to our shareholders than ever through dividends and buybacks. We believe that the strategic decisions made in the recent years, coupled with our cultural transformation and disciplined execution in capital allocation, will help us continue to deliver greater results in the long run. Thank you for your attention, and I'll now pass it back to Gustavo for the Q&A session.

Thank you, Japur. So very briefly, let me share some information about our ESG agenda before we open our Q&A session. So on Slide 16, I would just like to highlight that we concluded in year 2022, an accident frequency rate of 0.76, which is the lowest rate ever recorded in our historic years of 122 years. This performance underscores our commitment to the health and safety of our people. Here at Gerdau, safety always comes first since no result is more important than people's lives. In this sense, in our digital transformation journey, we have broadly invested in artificial intelligence and Industry 4.0 initiatives to improve the monitoring of critical tasks and prevent accidents. I also highlight that we obtained the certification of our second operation as a B Corp. SIDERPERU, the company's steel production operation in Peru, joins Gerdau Summit, our joint venture with a Japanese company, Sumitomo Corporation and Japan Steel Works focus on the supply of rolling mill rolls and parts for wind power generation, which now become the first two steel producers in the world to be certified as B Corp. As part of our sustainability agenda, this certification recognizes that Gerdau complies with good sustainability practices and that it effectively connects the business with our purpose of empowering people who build the future, leaving a legacy for society. In addition, I also highlight that we recently invested by Gerdau Next on a new platform for renewable energy. In this sense, we are partnering with Newave Capital, a Brazilian investment managing company focused on the energy sector for the acquisition of a stake in Newave Energia's capital stock. The deal also includes the acquisition of long-term energy by Gerdau and its subsidiaries, corresponding to up to 30% of the energy generated by power generation projects directly or indirectly owned by Newave Energia self-production basis. The operation aims to generate greater competitiveness in steel production costs in addition to supply Gerdau's plants in the country with renewable energy as part of the commitment to reduce our greenhouse gas emissions. Finally, I would like to highlight that we are very proud to join The Town, Gerando Falcões and the São Paulo local administration to provide a cross-sectional positive impact on the lives of countless families in vulnerability, reinforcing Gerdau's commitment to be part of the solution for social challenges. Together, we will take the Favela 3D initiative by Gerando Falcões to the Haiti Favela in São Paulo. The project comprises a systemic action that proposes solutions for development, income generation and social urban planning, co-created in collaboration with the local population. This partnership will make it possible to build a new future through a project that transforms and fosters socioeconomic development for locals. So this is what I had. Thank you all for your attention and for listening to our explanations. And from now on, we'll be here to answer questions and even dive deeper into any topics that are of major interest to you. Renata, back to you, so you can support in the Q&A session.

So let us begin with our first question from Caio Ribeiro, a sell-side analyst with Bank of America. He asks about the prices of long steel in Brazil and notes the recent pressure on these prices, while observing that Turkish rebar prices have been increasing, widening the discount of domestic rebar compared to Turkish rebar. He inquires whether there is an expected improvement to justify price increases and what factors might need to occur to enhance the chances of implementing such increases. Additionally, he asks about expectations regarding the impact of infrastructure investments, the JOBS Act, job inflation act, and the CHIPS Act on the demand for long steel in the U.S. market, and when these effects might become significant. Now I hand it over to Japur and Werneck.

Caio, thank you for your question. I'll give you an overview for both topics that you mentioned. Japur, be ready to provide any more details for Caio and other listeners. Caio, your question about profitability for long steel in Brazil is already happening. This resumption is already taking place. Actually, particularly low demand that we saw in Brazil in December for the reasons already mentioned, like the World Cup and expectation with the new administration, profitability went down to a level which is not normal. Since January 15, mid-January, the demand is already recovering in all sectors, some a little bit stronger, others not so strong. And by the way, I said that right now, we envisage demand for 2023 in Brazil at the same level as we had in 2022. So February, we're already back to normal in terms of demand. This process or resumption to profitability levels for long steel is already happening as we speak. What about Turkey? It certainly helps. The Turkey thing, while if we look at the impact on our business operations in Brazil, but there's also an impact on U.S. operations. Just to give an explanation about what happened in Turkey, right after this tragedy, humanitarian problem, this huge earthquake in Turkey, there was also an early concern of how it would affect the local steel production in Turkey. Remember, Turkey is the eighth steel producer in the world, about 30 million tonnes and the largest scrap importer, about 30% of world imports. So the following day, there was a concern about the assets for local production of steel. At first, there were imports of semi-finished, particularly billets, in order to come back to long steel rolling productions in Turkey with a drop, particularly in the U.S. for scrap. But after cleaning all the tragedy sites and with the possibility of reconstruction, the Turkish administration, so to speak, reserved 4 million tonnes of rebar to rebuild the country. And that led to an increase in the price of rebar in the international market and also an increase in scrap in the U.S. because Turkey is now importing scrap in the U.S. market more strongly. So this process to evolve international prices, I would say, it also helped by the resumption of profitability levels for long steel in Brazil after the drop in December. As for the U.S., the outlook is very positive. Actually, we're even taken by surprise how January was a very strong month for our deliveries. February continues in the same way. We are at the top of our capacity in production. I would say that some of the mechanisms to encourage steel production are the infrastructure package or also the Inflation Reduction Act, the phenomenon of the re-shoring, which is already very present in our order book with new production capacities being built in the U.S. And macroeconomic indicators that we saw in the coming weeks in job generation and other indexes, they all bring the outlook of another historic year in North America. We are ready to take it. Investments in recent years brought additional capacity of products related to non-residential production put in place. So we expect to see levels not only this quarter but by year-end, very robust for results in North America. So overall speaking, this is it. Japur, anything to add? Feel free to bring more color.

Sure. Thank you, Caio. Thank you, Gustavo. An important thing to mention, in addition to short-term outlook, I would also like to think about the IRA package in the mid- and long-term vision for our operations in North America. That's quite an ambitious project, a package that has an important share of its resources related to energy transition, more than $350 billion for transition and conversion of clean energy. And the production of clean energy typically takes up to three times more steel compared to conventional sources of power. Some studies that we follow estimate that this investment announced by IRA should be translated from 25 million to 35 million tonnes additionally, of steel used to build electric or photovoltaic and wind power plants. A significant share of this deal comes from projects or products which we can provide in the U.S. for these construction sites and these projects. We have facilities in the U.S. for that, particularly in our beams and merchant bars business. This gives not only a short-term outlook but also mid- to long-term in terms of keeping levels of capacity in the mills with very value-added products longer in North America.

Thank you, Japur. Renata, back to you.

Thank you all very much. Marcio Farid, a sell-side analyst from Goldman, wants to ask a question. I think he wants to do it by video.

Can you hear me?

Yes, we can hear you very well.

I have two questions. The first one is about your CapEx. I don't know if Japur or Werneck can go into the details for us. This is one of the things that we have seen and observed, is an increase in your maintenance CapEx, not only in the sector but rather in different industries, actually. I would like to understand how we should think about the maintenance CapEx, if the level of 2023, what you already have as guidance, is there a recurring one or if you have anything looking ahead. And also one of the blast furnaces of Ouro Branco, the renovation is already being questioned by investors. We would like to understand what is the magnitude of this CapEx? One of your competitors has a CapEx of around BRL 3 billion for renovation of a similar blast furnace. So when that should be done, what is the magnitude of cost? When do we expect that the figures will be reflected on the CapEx? And also in Brazil, Werneck went into the details on the price side. I would like to understand how we can think about cost. Obviously, a lot of the raw materials volatile pull has been gone up and down, different prices. But scrap, we have seen a strong correction in the second half of the year. It looks like it has not been translated into the metallic results yet. So how can we think about costs just in terms of profitability in the Brazil business unit when we look ahead? Gustavo, please? Because you already talked about prices.

Thank you, Marcio. These are important topics. Japur, let's approach it similarly. I will briefly address the question, and then you can add any comments you may have, which I’m sure will enhance the response. First, when we discuss CapEx, we always consider capital allocation. I want to take this chance to emphasize two key concepts: discipline and predictability. As we look forward, we will not be investing in large greenfield projects. There will be no future projects that could potentially surprise our relationship with Gerdau. Capital allocation for CapEx will focus on maintaining our plants and marginally increasing productive capacity in markets where demand exists or where we can achieve technological improvements to prepare our assets for future challenges. We foresee no surprises ahead, and I want to highlight that predictability is a significant part of our daily operations. Specifically regarding Ouro Branco, we are leveraging our recent investments in technology. We have excellent equipment and valuable insights from the renovation of the Blast Furnace #2. Additionally, we are utilizing specialized consulting services, allowing us to postpone the furnace shutdown in Ouro Branco until 2025. This postponement will help us reduce CapEx for Ouro Branco. The planned level of BRL 5 billion will be maintained for the next few years. There are no faulty pieces of equipment or other CapEx issues that could surprise the market. We believe this current CapEx level will be sufficient for all necessary renovations at Ouro Branco, including the blast furnace, the coke machine, and investments in mining. The mentioned investment level for 2023 will remain consistent for the following years. We want to ensure we are making equivalent comparisons; BRL 5 billion stands in contrast to BRL 4.3 million from last year, noting that Gerdau Next is a separate matter. This provides a general overview for Ouro Branco, and we currently feel comfortable delaying the shutdown from 2024 to 2025. Regarding costs in Brazil, they are expected to be similar to last year’s energy costs, which is advantageous for us. Our competitiveness in scrap purchasing helps us manage other costs that are beyond our control. The main variable we need to monitor is coal, which has shown significant volatility. It fluctuates frequently due to news from Australia. To understand how costs will evolve in Brazil, we must pay close attention to coal prices. As I mentioned to Caio earlier, we are actively managing the adjustments related to pricing, which also involves imports. I'll pause here and let you take over, Japur.

Werneck, please, a quick follow-up before you turn to Japur and that might be relevant. If we think about this stoppage in 2025, this money would be spent already in 2024 or closer to 2025?

Excellent question. We are already spending this money. When we mention normalizing, we are taking into account that we are already acquiring different pieces of equipment and components. For instance, some parts of the blast furnace, like the crucible, take two years to be delivered. We are actively working on that to ensure we can accommodate this downtime in 2025. Therefore, no last-minute actions will occur. This is why we are communicating that we will achieve normalization in our capital expenditure levels, and no one should be surprised by a significant increase in capital expenditures in two or three years or even five years from now.

So Marcio, let's go over the CapEx figures. Last year, we invested BRL 4.3 billion in CapEx, with approximately BRL 2.6 billion allocated for maintenance and the remaining BRL 1.7 billion focused on competitiveness and growth projects. This year, our CapEx has increased to BRL 5 billion, but the allocation is different. We are slightly reducing maintenance spending, keeping it roughly flat overall. The increase is primarily in competitive projects, where we are investing an additional BRL 800 million in 2023 to enhance profitability and expand our product offerings compared to 2022, in line with what Gustavo mentioned regarding plant efficiency and cost management, as well as product line expansion that we expect will generate more value over time. We aim to maintain these disbursement levels in the coming years without major fluctuations, and our spending will be carefully planned. The largest individual expenditure this year is on the expansion of the coiled hot-rolled strip, which represents the most significant portion of our growth and competitiveness investments, excluding maintenance. Regarding Gerdau Next, the forecasted disbursement for this year is the BRL 5 billion we've discussed, applicable to steel, while Gerdau Next will see investments ranging from BRL 500 million to BRL 800 million. The variation in this range is due to the nature of these projects, which sometimes involve partnerships that are not fully under our control, such as those with Ubiratã, Addiante with Randon, or Newave, where factors like licensing and execution timelines can vary. This is why we have an open range for Gerdau Next. While we expect to invest between BRL 500 million and BRL 800 million in Gerdau Next, these investments will not be reflected in the same CapEx line that generates future depreciation since they pertain to joint ventures or subsidiaries.

So Renata, back to you.

Next question, Thiago Lofiego, sell-side analyst, Bradesco BBI. He opened the camera, we have a slight delay, but Thiago is almost there.

So let's go for it. My first question is about cost in the U.S. plan, the U.S. BO, better said. In addition to scrap, what else can you tell us about energy cost, evolution of labor services considering scrap and steel prices? Well, we can see it very clearly on the screen and maybe even consider a projection. But what about the other items? They are more challenging to follow. So what should we expect? And as a result, what is the outlook for metal scrap for the coming months? And the second question is about profitability in Brazil. Werneck, you said it's already improving. Just to give us more color, is it improving because the volume is going up, and therefore, you dilute costs? Or is it improving because costs are actually going down? Or maybe you're working better with prices? So still considering prices, if we think about imported rebar vis-a-vis the domestic product, we can see the domestic rebar with a big discount. For the moment, demand recovers seasonally. Do you think manufacturers in Brazil can make up this margin on prices?

Your question about profitability, well, you gave us so many options and multiple questions, so multiple-choice question, all of the above. We are checking all the boxes. All these actions are taking place at the same time.

Well, what about metal spread in the U.S., historic levels, and it will remain like this?

If you ask me what is the range, it is around $800 per tonne. All of our expectations, all the guidance, they show us that this is the metal spread to continue over the year. So you put it very well. If you think about scrap metal spread. They are more visible and maybe another smaller but relevant is operational and manufacturing costs. This is under control. Levels are similar to last year. But what is still slightly affecting us is labor. We expected in the last quarters to have a balance in labor. But believe it or not, we still have open seats, vacant positions since the beginning of the pandemic. But the labor market in the U.S. is still very intense. We're still facing challenges to bring labor to our units, our plants. Overall speaking, costs will be in line with what we know, metal spread in this level that I mentioned. And the plants are working with a very high production capacity, very high level of use. We were taken aback in January and February with the deliveries we performed, not only the deliveries that we managed to perform but also the backlog over 60 days. We believe this year will be very intense. We could speak about recession, hyperinflation, but even those who are more pessimistic economists in the U.S., they consider that would be an intense impact, but they already consider this for the end of the year. So we tend to believe this year will be pretty strong for our operations, Thiago. If I may, I would just like to mention again what I said in my speech about Mexico. Mexico's share is very relevant today. Very relevant in our North American BOs, and our production capacity is fully taken at the limit. You sell everything you manufacture, not only to the domestic Mexican market, but also because Mexico is becoming a platform to support the U.S. in economic and manufacturing industries.

I think these are the most important topics. Naturally, as we check the volumes in the U.S. at healthy levels, then we can also have more dilution of our fixed costs, which are always important there for a leaner operation and absolutely focused on mini-mills. In addition, another point is that last year, early in the year, there was some pressure about energy prices in general. And now we begin to see as a result of the winter in Europe, we can see that natural gas prices and other energy prices are slightly lower compared to other times of the year. So it could also be a driver to help lower our downstream costs in North America.

Werneck, if I may, could we revisit the multiple choice question? Alternative C, which involves focusing on margins or premium makeup in the domestic market. To clarify the rationale, it seems that we currently have a discount of over 15% on imported rebar. Based on your comment, do you believe it's reasonable to assume that you and the industry in Brazil can recover this premium in the upcoming months?

Yes, yes. That's the goal. Go back to premium? Yes. And this premium is an amount that is way below what is practiced. Thiago, like I said before, it was influenced by December and the first two weeks of January, but with the resumption of demand, which is one of your multiple choice alternatives, which is already consistent in all segments. So international prices and other factors that we mentioned, I believe that during this May and early April, we will see a resumption in profitability. So that's the expectation. Working with a negative import premium at the level it is, is surreal.

Now turning to our next question, Daniel Sasson, sell-side analyst from Itaú BBA. He also has a question. Also, please, you can open the camera.

Part of my questions have already been answered, but I would like to return to North America. Can you provide insights on Mexico? What percentage of your EBITDA in North America currently comes from Mexico? We tend to focus on the U.S. It seems to me that Mexico's representation is limited due to capacity constraints. Am I correct? Additionally, could you discuss the metal spread? How does your current level compare to what you consider sustainable, especially if you view 2023 as a transition year moving from peak cycles in the U.S. to a more sustainable margin and metal spread? Are there any risks regarding the potential reevaluation of Section 232 in the U.S.? With all the infrastructure projects related to energy, the U.S. seems reliant on imports to satisfy domestic demand. Are you concerned about this? Do you think it’s reasonable to expect a reduction in protectionist barriers to gain momentum?

Japur, please take note while I begin to answer Daniel's question. Daniel, regarding Mexico, as mentioned, we produce rebar, commercial and light merchant bars, and we have a state-of-the-art plant also manufacturing structural merchant bars. We have capacity to increase production as we enhance our operating performance. Currently, our three plants are operating at full capacity. The rebar segment in Mexico faces a supply-demand imbalance, yet we still observe a demand for rebar in the country. This situation utilizes our productive capacity along with the broader market. We can marginally expand our capacity in Mexico, particularly for structural merchant bars, and I will provide further information later. As for the metal spread in North America, it will remain at the current level. Historically, when examining the last five, six, or ten years, we see it has reached a historical high. It is crucial to recognize that Gerdau is positioned differently, and the market has undergone significant changes. Sometimes, we may mistakenly consider this situation an outlier, hoping to revert to historical levels, but we need to shift that mindset. Additionally, regarding our operations in the U.S., we have discussed this for several years. Five or six years ago, there was a $25 per tonne performance gap compared to our competitors, which we have now fully captured. We are seeking more opportunities to lower our manufacturing costs, and I see our plants as highly competitive. Currently, they are performing well, and given everything we've discussed, I do not foresee the metal spread declining. Moreover, differing from the current U.S. scenario, there are no significant new capacities targeted for long steel. Therefore, looking ahead over the next few years, with the demand we anticipate from these incentives, our productive capacity appears to be fully utilized. Section 232 has a substantial impact on rebars, but it does not directly influence our products. Our decision to divest from rebar in the U.S. was well-considered, and we stand by that choice. Comparing past quarters, we can clearly see that our EBITDA margins have outperformed those of traditional rebar producers, confirming we made the right decision. I view this situation positively on all fronts. Japur, do you have anything to add? Daniel, feel free to share any further thoughts as well.

Well, just to add, look, Mexico in 2022, for example, went through a transformational journey, the ramp-up of the investment of the plant that Gustavo mentioned and then now in 2022 represented between 6% and 7% of our Gerdau business, with margins that were similar to the gross margins that we have in our operation in the U.S. There are no major discrepancies between these operations. So it did have an important growth between '21 and '22. So this is an operation that, as Gustavo mentioned, is working within its capacity, a great performance, diluting fixed costs and increasing the level of competitiveness and efficiency. We are very happy about this investment.

Perfect. Werneck, just to confirm, you talk about $800 per tonne metal spread in the U.S. Is that correct?

Yes. This is the current level of metal spread. Thank you, Daniel.

The next question is from Carlos De Alba, sell-side from Morgan Stanley. He sent us a couple of questions. I'll ask them all at once so you can answer them. The first question is the following. Can you give us more detail on the CapEx budget of BRL 5 billion for 2023 and discuss what are the investments or cash out by Gerdau Next which are not included in this BRL 5 billion? Second question. Working capital days have significantly increased in Q4 of 2022. What do you expect to see in the first quarter of 2023? Third question. Why is it that prices of rebar are going down in Brazil? And the fourth question, how can we tell the very strong benefit of higher prices in 2021 and 2022 from specific initiatives by the company in good results in these two years? I give the floor back to the company's management.

Okay, Carlos. Let’s start again. When assessing performance, how can we differentiate among various aspects? We can examine our performance, the progression of margins, and the results we've achieved over the past two years in comparison to other operations and businesses. We've seen substantial improvement, not just in total figures but also in percentage terms regarding our margins. Today, we acknowledge significant progress that has not solely originated from market conditions but also from our efforts. This relative comparison can help illustrate our performance. Regarding capital expenditures, as I mentioned before, the BRL 5 billion is entirely dedicated to steel, our main business, with 50% allocated to maintenance and the other 50% towards growth and competitiveness, featuring projects with specific returns. These BRL 5 billion do not include any investments planned for Gerdau Next. We provided a range for these investments because we don't have complete control over them; they involve partnerships or joint ventures where we are usually minority stakeholders. These investments are expected to be between BRL 500 million and BRL 800 million for 2023. All the investments we've previously discussed have already been announced and are progressing as expected over time, reflecting in our cash flow under the investment category. When we invest in a company that is not entirely owned by Gerdau, it is included in our property, plant, and equipment, and will eventually be subject to depreciation. Additionally, our share in new companies will enter our cash flow and investment line, thus impacting our balance sheet. Regarding rebar, it experienced a significant negative import premium due to high activity for about 45 days, particularly seasonal since early December with the World Cup. Expectations from distribution clients concerning policies with the new administration also played a role. On our end, we halted all production plans requiring extended maintenance at our scrap-based facilities. Following the pandemic in 2021 and 2022, demand increased, leading us to boost exports. Consequently, we had reduced maintenance downtimes in December 2021, which contributed to this unusual episode of lower-than-normal import premiums for rebar. Overall, that's the situation with rebar, and I want to emphasize that we are starting to see recovery. We are optimistic about changes in the coming weeks. I believe we still need to discuss working capital, right Japur?

Carlos, working capital, well, we needed to go up because it means we are selling more steel at better prices. Jokes aside, we ended the cash conversion cycle higher than we usually see, 81 days, owing to the shrink we had, particularly in the Brazilian market, which has a big operation with high volumes. Like Gustavo mentioned, in his introduction, we have seen since day 15, January 15, a resumption in the sales volume in Brazil. And with that, we expect that the volumes of sales shipments over 2023 be in line with what we set over 2022. So possibly over this first quarter, we expect to see a slight reduction in the cash conversion cycle and working capital days. However, because we still expect to see a new volume or different shipment mix in our BOs like U.S. and Brazil, we expect to see this change in working capital.

Back to you, Renata.

Carlos De Alba sent a final question. He's asking us what is the historical backlog in North American operations vis-a-vis the current one?

In general, we could say that the historical backlog was around 500,000 tonnes. During the best demand moments after the pandemic, it exceeded 1 million tonnes. Currently, it is over 700,000 tonnes and continues to show growth.

Thank you, Werneck. We have a question from Mary, sell-side analyst from Banco do Brasil. She has two questions.

And I have two questions. First, could you share how is the market in the U.S. based on these two first months of 2023. And if you expect to continue operating close to the installed capacity limit in North America business operation? And second question is about the investments. Can we expect a higher level of CapEx in the next years when compared to the prior years? I turn the floor back to you.

Okay. Mary, thank you very much. I have already touched on these two topics, but I will stress what we already said. January and February have been months that were very good, above our expectation. This backlog started strong in the beginning of the year. So it is higher than our expectations, but we are very prudent and cautious. And also considering our 122-year experience, we imagine that this could happen. We turned the year with a little bit more inventory, better prepared to cater to an increased demand if it were to happen, which it did happen. And so we were prepared to have higher delivery in January and February. And we expect that the demand will continue to be high. We hear people saying that the economy might change, that there might be a recession, but this is being moved ahead. So as far as investments are concerned, the BRL 5 billion, I also mentioned, we are trying to normalize that level. We already consider or are considering the downtime in Ouro Branco in 2025, so that we don't have surprises over the years, and we do not expect a higher CapEx.

We received a question from Victor, sell-side analyst. Congratulations on the results. Gerdau is generating a lot of good results. And the Brazilian macroeconomic scenario in Brazil is difficult and the strategy for the results is important to generate value to shareholders. Do you consider to maximize the distribution interest on equity and dividends and not the buyback considering that the company has greater fiscal benefits and shareholders can buy back shares if shareholders want?

In 2022, we had a lot of dividends paid out. If you think about the amount paid to our shareholders between buyback and dividends, predominantly, we invested to return to shareholders via dividends. Could we have done it with more buyback? Yes, but we didn't. We decided to favor effective liquidity to our shareholders. And even if we purge from the payout, all buyback and consider only the BRL 6 billion, BRL 6.1 billion as dividends, this was way above the 30% set by our policy buyer bylaws. So we think it is important to continue returning to our shareholders. However, buybacks are also good when our active prices are discounted vis-a-vis what we believe makes sense in the longer term. So it's an efficient way to allocate value to shareholders without having to declare dividends, extraordinary dividends out of quarters. So we can return value to shareholders away from the periodic earnings release windows. As an exception, Gerdau already adopts this practice of paying dividends on a quarterly basis. This is a liberal action by the company vis-a-vis was set by the corporate law. He talked about IOC strategy, right, Japur?

Yes. Regarding IOC, we always push for maximum financial efficiency. There are some constraints on the availability for the IOC account within our holding company and its subsidiaries, which sometimes pay IOC through Gerdau S.A. We continuously focus on tax savings while considering the profitability levels of our subsidiaries, their obligations, and the effects of deductible expenses at Gerdau S.A. Renata, over to you.

Thank you. We have a question from Victor, sell-side analyst. What can we expect for exports for the business unit of Brazil in 2023? And how are the margins?

Good question, Victor. It's good for us to comment on that. Well, in general, we should be in Brazil with the operation at a level of 13% of exports. So this is a level that historically is lower. We did have moments at '18, '17, '19 where we would support 28% of our productive capacity. But since the pandemic, we are bringing down these numbers to lower than 20%. So I believe that it's going to be around 13%. We held exports now in December and January because international prices were not very good for exports. But with the recovery of international prices, we closed good deals with interest margins to deliver from April on. So in the second quarter of this year, we will see a growth in exports and higher margins. But in the consolidated in the area, we believe that we should be around 13% in our export.

Victor has a question. He wants to know about CapEx allocation in the future. North American BO, considering the excellent moment and excellent outlook, should it deserve more investments compared to the total expected by the company for 2023?

North America has been fully receiving funds and resources to meet the needs and CapEx possibilities, that's for the last five years. And for the coming years, it will remain as such. So these are investments earmarked to improve production capacity, particularly in those mills when we have the chance to expand our asset portfolio and meet the needs of local markets. We invested massively in our mill in Georgia, investments in Jackson, in West Tennessee. And right now, we are investing in Whitby mill in Canada, investing in Midlothian, Texas, important investments. So this is the adequate level, in my opinion. We don't lack funds and resources to invest in North America and also to benefit from these investments and return that these investments can bring us considering the current market and what we expect to see in the market very strongly in the coming years.

We are coming to an end to our call, but we still have many questions. But we have time for one last question. David Fink from Contrarian asks us, out of the BRL 830 million of CapEx for the environment, is that included in the BRL 2.5 billion maintenance CapEx? Or is that considered as expansion CapEx?

David, it's great to see you again. Our investments encompass both competitiveness and maintenance. Sometimes, maintenance investments improve the environment by replacing older machines with more efficient ones that have better energy use or lower emissions. This contributes positively to the environment. Additionally, our investments in competitiveness and expansion also offer environmental benefits. This year, we're focusing on enhancing the growth of our forests, which we utilize in a miniaturized form for the bio-reduction of steel with minimal CO2 emissions, making it one of the most environmentally friendly processes available. Although we categorize this as a maintenance investment, it still provides environmental advantages. Therefore, within our environmentally beneficial investments, we can undertake both expansion and maintenance projects.

Thank you, Japur. We're getting to the end of our earnings conference call. And now we give the floor back to Gustavo Werneck with the final remarks.

So just very briefly, on behalf of myself, Japur, Renata, and the Investor Relations team, I would like to thank you all for joining us today. It's always a huge pleasure to talk to you. And if you have any further questions or a point that was not clarified, your team is fully available for you. And I would also like to invite you to join our next earnings release conference call regarding the first quarter of 2023, which will take place on May 3. Thank you very much. All the best, and take care. See you soon.