Earnings Call Transcript - SID Q3 2022

Operator, Operator

Good morning ladies and gentlemen. At this time, we would like to welcome everyone to CSN's Conference Call to present Results for the Third Quarter 2022. Today, we have with us the company executive officers. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company presentation. Ensuing this, there will be a question-and-answer section at which time further instructions will be provided. We have a simultaneous webcast that may be accessed through CSN's Investor Relations' website ri.csn.com.br/english where the presentation is also available. The replay of this event will be available on the website for a week. You can flip through the slides at your own convenience. Before proceeding, we would like to clarify that some of the statements herein are mere expectations or trends and are based on current assumptions and opinions of the company management. Future results, performance, and events may differ materially from those expressed herein as they do not constitute projection. In fact, actual results performances or events may differ materially from those expressed or implied by forward-looking statements as a result of several factors, such as general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, future rescheduling or prepayment of debt denominated in foreign currencies, protectionist measures in the U.S., Brazil, and other countries, changes in laws and regulations, and general competitive factors at globally, regionally or national bases. I will now turn the conference over to Mr. Marcelo Cunha Ribeiro, CFO and Investor Relations Executive Officer, who will present the company's operating and financial highlights for the period. Mr. Ribeiro, you may proceed.

Marcelo Cunha Ribeiro, CFO

Good morning, and thank you for joining our third quarter results call. During this turbulent period, characterized by fluctuating commodity prices, especially in the international market for iron ore, and a slowdown in the Chinese economy, we managed to achieve a solid operational performance, marked by increased volumes and reduced production costs in our primary business. This indicates our resilience. We successfully executed our strategy to transform the cement business by integrating plants and assets from LafargeHolcim, now known as CSN Cement Brazil, which was reflected in our figures starting in September. We also completed two acquisitions aimed at enhancing our energy sector, including Quebra-Queixo and gaining control of CEEE-G, paving the way for renewable and competitive self-energy solutions with low risk. Looking at our consolidated operating and financial indicators, we experienced a normalization of profitability after the significant price fluctuations during the pandemic. We noted a 16% drop in EBITDA primarily due to margin compression in the steel sector and falling international prices. However, we are seeing a decrease in raw material costs. In mining, production volumes increased, which helped mitigate lower iron ore prices. The cement segment performed strongly with 24% margins following the consolidation of CSN Brazil. In terms of investments, we've communicated with the market about our careful approach to reimbursements in this turbulent environment, which has led to a revised investment expectation for 2022, down from BRL34 billion to BRL3 billion. Delays in our main expansion project have contributed to this adjustment, and we anticipate a decrease in CapEx for the fourth quarter. Our liquidity stood at BRL15 billion this quarter, supported by initiatives to manage our liabilities effectively. We also achieved significant cash flow improvements, generating BRL3.2 million amid a challenging environment. Although our leverage has increased to 1.7 times net debt due to normalized EBITDA, we are adjusting our medium-term leverage guidance to between 1.75 and 1.95 times. Moving to our individual business performances, in steel, we achieved nearly 20% growth driven by strong domestic market performance, while international prices for slabs decreased by about 9%. The EBITDA margin was impacted, dropping to BRL1.2 billion to BRL1.3 billion. In mining, production volumes made notable strides despite earlier operational restrictions, though prices fell by about 15%. In cement, the consolidation of LafargeHolcim significantly boosted our numbers, yielding a monthly growth of 600,000 to 650,000 tons and a substantial increase in our EBIT. Finally, in the energy sector, we completed acquisitions that will enhance our operations and efficiency, and we're optimistic about the opportunities ahead. I will now hand over to Helena Guerra, who will discuss our ESG performance for the quarter.

Helena Guerra, ESG Officer

Good morning, everybody. Here we are, again to present results for the third quarter. The full material is being presented here towards offering you a very transparent vision of ESG and the company. In the last quarter, for the eighth consecutive year, we received an award, because this is the highest level of qualification of our inventories. During this period, because of a better understanding of our actions, we were able to improve our performance and the rating went up to 55 points, the average of the world is 20 points. And we also began our study on climate changes, we're analyzing our processes to detect some opportunities. Now, this construction of scenario is based on the best market practices. And they will enable us to make more assertive decisions when it comes to climate changes. To continue speaking about climate and our emissions for the quarter, the accrued results for the nine months of the year going to adherence to the plan set forth for each segment. Improvements in the production of steel and a slight increase in the level of emissions in the production of iron ore. And, of course, we do have great expectations in terms of performance and the implementation of projects that have been set forth. We spoke about renewable energy of course, when it comes to speaking about climate changes, and this is so important for the company, it is through the company strategy that we will be able to stand out and also work with new innovation projects. We will have clean energy that can be scaled up in several of our new developments. Now, speaking about our dam management, we're continuing the de-characterization works on the Vigia Dam. We have completed the structural building and officially we're seeing acknowledged as being a characterized and then there is nothing reported in terms of our license. We have had a significant evolution in operational terms. Quarter-on-quarter, we speak about our security, which is also under evolution. We have reduced the number of accidents. The problem of parties is always presenting the best results are historical series. This quarter we reached the best figure and we end up the quarter with zero fatalities. And in terms of social and diversity, of course, we're under constant evolution. We have increased the representation of women in leadership positions. In nine months, we have significant advances compared to 2021.

Operator, Operator

Well, thank you. We will now go on to the question-and-answer session for investors and analysts. Our first question is from Daniel Sasson from Itau BBA. You may proceed, Mr. Sasson.

Daniel Sasson, Analyst

Good morning to everybody. Thank you for taking my question. Marcelo, if you could remark on CapEx, the reduction in your guidance is coming from something that will continue on the next year, what is your expectation of CapEx for 2023? At this moment of greater certainty, it seems that you're revising the execution of some projects when it comes to steel. If you could speak about your expectations for volume and the guidance for 2022 was given 1.6 million tonnes if you could remark on this? and perhaps Martinez, if you're comfortable with these levels, and give us more color in terms of volumes and prices for their short-term? Thank you.

Marcelo Cunha Ribeiro, CFO

Thank you for the question. I will begin to answer the question on CapEx and then give the floor to Martinez for his outlook on volume. Regarding CapEx in the medium term, we still don't have anything. We're carrying out this exercise now. We're going to share this during CSN Investor Day in the middle of December. But of course, we're working with priorities as we have during 2022. This gave us a savings of BRL1 million because of the moment of uncertainty. And we're trying to increase the cadence of projects that will be delivered in a different timeframe. We're thinking of productivity gains in steel, growth in mining, but we do have to respect the environment and liquidity and leverage issues. This doesn't mean that we're changing our direction in steel. We're going to work with changes and centering, have some shutdowns and in terms of mining, the great project is the expansion of P15 and PK expansion. In the other projects, we do have a master plan and part of our trajectory is to de-characterize the dams and of course, work with the tailings. This is a subsequent enrichment, and their timeframe might become somewhat more flexible. We're going to maintain the annual CapEx but far from the levels of BRL10 million that we had in 2022. Of course, we will have significant expenses in these projects. But so far, we do not have a precise figure for the medium term. Very soon we will be sharing this with you in the following 30 days. I give the floor to Martinez. Should you have any more doubts, we can continue speaking.

Unidentified Company Representative, Company Representative

Daniel, good morning and thank you for your questions. Let me start with the market overview. This year, the Brazilian flat steel market is expected to reach 14.4 to 14.6 million tons, which shows a slight decline compared to previous years, particularly a small drop in 2021. We anticipate interesting volume figures due to the market conditions we've experienced this year. Regarding the fourth quarter outlook, certain sectors remain very promising, such as agribusiness, construction, agricultural equipment, and packaging trucks, all of which are performing well skill-wise in Brazil. There is currently a 12% market penetration for trucks and machinery. However, we expect improvement in the automotive sector, which, while it saw gains in the third quarter, is anticipated to perform better in the fourth quarter. The white goods sector also experienced significant seasonality in the third quarter but is preparing for Black Friday and various year-end activities. For domestic market guidance, we project 3.3 million tons for the year and a total of 4.7 million tons for the group, including contributions from Lusso sider and US operations. This year, we expect strong penetration and a reduction to levels between 14% and 15%, which is favorable as it will reintroduce significant volumes to the domestic market. Price-wise, we've focused on recovering market share and achieved a 20% growth in the domestic market. While seasonality typically affects prices at year-end, the premium for domestically produced products is currently between 18% and 20%. Our slab pricing has shown improvement, with the worst-case price of BRL 4,200 per ton likely ending the year at competitive levels around BRL 3,700 to BRL 3,600. Our market strategy involves diversifying production and focusing on added value across all markets. Geographically, we have a strong presence in Germany and Portugal, and we're expecting a recovery trend continuing into early 2023. Additionally, there’s good news for the US market; we have a sunset review for cold and hot lamination, allowing us the potential to export an additional 50,000 tons of cold lamination and 150,000 tons of hot lamination. Brazil successfully eliminated anti-dumping duties, which indicates a positive outlook. We aim to enhance our horizontal integrations and pursue vertical integrations in long-term processes with strategic planning. Pricing remains a challenge as we compete against imports, particularly from China, which arrive at significantly lower prices than domestically produced goods. We are committed to maintaining our margins and improving our cost structure. We recently announced an investment in a new painting line, with plans for 160,000 tons per year dedicated to automotive and white goods, which will increase our product diversity. In the metals sector, we are working diligently to expand our share in the small quota available in the US market, with a target of increasing exports to 80,000 or 100,000 tons a year, which would be highly advantageous. That concludes my remarks, and thank you for your question.

Rafael Barcellos, Analyst

Good morning. Thank you for taking my question. I have a question about the leverage that you have spoken about. Will you speak about the price of iron ore or the same prices, you spoke about steel? Now, regarding cement with the consolidation of Lafarge, what is your outlook for profitability? And if you could detail the growth that you're going to have in investment? Thank you.

Benjamin Steinbruch, CEO

Thank you for the questions. Concerning leverage, we do have a target range in mind, but it is primarily a goal. We understand the challenges involved in increasing leverage, particularly with fluctuating commodity prices, which is crucial for CSN. In our forecast, we have already accounted for iron ore prices in a different range from this quarter, between $80 and $90. If iron ore prices continue to decrease, CSN aims to keep debt levels below 1.95. We will explore other strategies to maintain this cap. Management takes action to reduce leverage whenever we see it rising to ensure we return to acceptable levels. Now, I will turn it over for a more detailed response. I apologize for my hoarseness. Regarding the profitability of cement, CSN currently boasts the most competitive platform in Brazil, operating with margins of 130%, while Lafarge operates at lower levels. Marcelo has indicated that we have acquired a well-structured company with strong assets, and we are identifying more synergies than initially anticipated. We are confident that in the short to medium term, we will integrate Lafarge into our operations, achieving high EBITDA levels. We are actively working on this, encompassing various synergies across commercial, logistical, and operational aspects. We aim to replicate our successful pricing strategy and optimize our logistics and services focusing on specific regions. In operations, we see numerous synergies starting with electrical energy. In the latter half of the coming year, we anticipate significant energy production due to the acquisition of mentioned plants. We are capturing efficiencies and preparing for 2023, feeling quite optimistic about this. Regarding our growth plan, we currently have 16,000 tons of capacity and are selling between 12 million and 13 million, leaving room for further growth. We recognize the importance of seizing market opportunities, expecting continued consolidation in Brazil. CSN will remain disciplined in exploring these chances alongside an organic growth strategy that includes building new facilities. We have three projects in the pipeline that we will initiate as market conditions warrant. There are projects in Pará and Paraná. While we won’t start these projects immediately, we are working on project maturity, including licensing and government agreements, to ensure they are competitive. I hope this addresses your question, and I apologize if I missed anything. We will continue our diversification strategy in cement. CSN is now positioned advantageously, having shifted focus to bulk cement and technical cement to support Brazil's infrastructure growth. In terms of geography, we have a solid presence in various regions, including the Northeast, Southeast, and specifically in Rio de Janeiro, Minas Gerais, and São Paulo, where we hold a 20% market share in Brazil. In certain areas, we are market leaders, which enables us to diversify sales channels and distribution strategies, enhancing the company’s value across both bagged and bulk products.

Rafael Barcellos, Analyst

Thank you. Thank you very much.

Operator, Operator

Our next question will be in English from Mr. Carlos de Alba from Morgan Stanley.

Carlos de Alba, Analyst

Thank you. Good morning, everyone. Just a couple of questions. One is when do you expect, when do the hedges that you had in place in Germany for energy cost or energy inputs will expire? And if you could give us a sense of how much below current spot prices were you purchasing energy at in Germany? That will be useful. And then the other question is on the benefit of the energy acquisitions that you recently did on the steel sector in particular, have you quantified how much dollars per ton of a slab reduction in respect to reduce or cost per ton? And however you have quantified that will also help us. Thank you.

Marcelo Cunha Ribeiro, CFO

Thank you for the questions, Carlos. Speaking about Germany, we have had that hedging policy for 10 years. There hasn't been any alteration and the policy is to hedge 100% during the short-term period. And then quarter-on-quarter, we work with a scale with a percentage drop this year. We had more than 80%, logs had 74 hours per megawatt hour, and the coming year 25% to 30% of our volume will stand at that same price. We would be working with those spot market where the prices are much higher 300, for example, but even with these lower hedge levels for the coming year, we are looking at a result that will be double our historical results. €50,000, €60,000 for the unit, and we will pay double of that, because gas and energy will be more expensive. This is the combination of limited supply. There are production problems there. And gas perhaps we'll go down. We will work according to the policies with lower prices. And we hope to have a very strong market for the coming year. Regarding CEEE, it brings us BRL 300 million in terms of benefits reduction in the cost of energy for steel, mining and cement. And approximately half of this refers to steel, was speaking of BRL 650 million, or $30 million, $10 per ton. This is what improves in terms of our margin because of this synergy.

Caio Ribeiro, Analyst

Good morning, and thank you for taking my question. My first question is about the expansions in the steel sector. If you could speak about the growth that you're contemplating here, and perhaps convey some details in terms of volume and CapEx? Secondly, you spoke about the results that you think there will be a drop in the price of some inputs during the fourth quarter and a drop in the price of the slab. Could you give us an outlook, which will be the margin that you expect in the steel sector for the fourth quarter? Thank you.

Marcelo Cunha Ribeiro, CFO

Well, regarding the expansion, it would be interesting for Martinez to mention what we announced recently. Martinez?

Unidentified Company Representative, Company Representative

Hi. Good morning. The new painting line is a significant step in our strategy toward enhancing the value chain. For context, we have a facility in Paraná that produces 120,000 tons annually. This new line, which we acquired, was previously operational in Korea and is a state-of-the-art Japanese facility that produces 160,000 tons. We are currently in the process of disassembling it and collaborating on engineering plans. We anticipate this line will be operational in Brazil by the first quarter of 2024. This addition is crucial as we aim to increase our focus on zinc materials and painting, specifically targeting exports. Given the current market conditions for pre-painted materials, we are confident that this line will operate at full capacity. It is designed for simple construction in selected markets. Regarding CSN's expansion, consolidation is key. We are producing 350,000 tons of steel sheets for the domestic market and have the potential to increase this to 600,000 tons with minimal capital expenditure, contingent on opening up the North American market. Therefore, we are concentrating on this market, which will influence our operations moving forward. In terms of overall growth, we are actively investing upstream, with our engineering and commercial teams collaboratively deciding on future initiatives. We are exploring options to boost our capacity and volume in Brazil, particularly with imported products. We see potential in increasing the capacity for the same products. This is still under consideration as we seek to shift our focus away from hot-rolled products to more coated products with added value, aiming to connect more closely with end consumers and optimize profitability per kilo. This is the overarching goal of CSN.

Marcelo Cunha Ribeiro, CFO

I believe I will also comment on the company's strategy. It is essential to expand internationally, particularly in more developed markets like North America. We are currently assessing the timing for implementing these projects. We have made progress in terms of long steel and are enthusiastic about this international initiative. However, it will be executed at the appropriate time, depending on the overall circumstances. Now, I will hand it over to Benjamin to discuss this further.

Benjamin Steinbruch, CEO

Regarding your second question cost. Simply to clarify what was said during the presentation, we had the cost of flat of 40,100 in the third quarter. In the fourth quarter the cost is 8% below that the average points to the trend, there will be a greater drop in the fourth quarter here, which means that as part of price expectations, our margin per ton may increase marginally. There are too many variables involved. There's a seasonality of the quarter, but our margin increases marginally because of this drop in prices.

Isabella Vasconcelos, Analyst

Good afternoon. Thank you for taking my question. I have two questions. The first is about costs. You're planning to enhance productivity, and there have been several comments about this. Could you provide more details on other initiatives you're exploring in the company's value chain? The second question is to confirm with Martinez about the strategy you’ve been working on and whether it has changed, specifically if most of your volumes will continue as they have in the past. Thank you very much.

Unidentified Company Representative, Company Representative

Isabella, if I can begin answering the second question. This is Martinez. Regarding the contracts, nothing has changed quite the contrary. In the United States, we have seen that the negotiations continue to close annual volumes without any problem and revising the price every quarter or every six months according to the market. Our strategy is the same in Brazil, in typical construction and industry in some sectors, and then the white line and automotive sectors. We do this quarter-on-quarter. Basically this is what we're thinking of regarding the negotiations with these sectors there beginning once again now, in a month or a month and a half, we'll have an idea of which will be the negotiations for 2023. In the case of coated material, where I have 51% of my portfolio, we're going to continue to fight against imported products, we want to grow more and sell to more customers, there's no other way out. And commercially, we're working on all fronts. Trying to go from the sunset review from hot to cold, the metal, cheater, metal folio, because we do find a great deal of Chinese coated material in Brazil, it's very difficult to compete with this, and the supervisors tend to prefer the import of materials in this area. So we're going to focus on pricing in the fourth quarter, as Marcelo mentioned, we're imagining that we will maintain our margins through a cost reduction. Marcelo mentioned the word marginally. But we're going to work on costs so that we're able to marginally maintain our margins.

Marcelo Cunha Ribeiro, CFO

Thank you. To speak about cost, our main costs are raw material energy and services, maintenance contracts, followed ICT support. Now, in logistics, we do have a strategy. And the strategy is virtual utilization, and working with premiums. And this has given us good results. We have subsidiaries that are no longer suppliers of CSN. They're working with competitive products, the entire segment, came with this company as well. Where we work with very tight costs, and in energy, we're doing what we can. We're reaching indices of high production, to work with natural gas is also something that we could do we have projects for the longer term. So it's a combination of things and partnership with as Casa de Pedra looking for greater yields for the blast furnace working less with pellets. We are seeking activities to increase our sale rate, and we're working just statistically in this market where we still have a great deal of opportunities. And all of these, we're able to have a very competitive cost.

Leonardo Correa, Analyst

Good afternoon. Can you hear me? I hope you're all well.

Marcelo Cunha Ribeiro, CFO

Yes, we can hear you well.

Leonardo Correa, Analyst

I have one question to clarify some points regarding our capital strategy. We have made significant progress, including notable acquisitions, and now we are in a phase where we need to effectively integrate synergies. Alongside the IPO process, we have various projects underway, and many aspects are still evolving. My question pertains to the impact this has on the company's leverage. For many years, CSN has been focused on reducing leverage, and the market seems to recognize this effort, as our current leverage is nearly half of what it used to be. This places us in a different position within global industries, including those in Latin America, the United States, Europe, and Asia. Currently, our leverage is 1.5 times above the average, which feels like we are at the limit with little room for flexibility. While you have expressed a desire to make the company more international, most of your activities have been domestic. Considering these factors—your strategy, leverage, scenario risks, and commodity prices—still appear unclear. It may be time to integrate everything and continue with your current approach. I would appreciate your insights on this, as it is crucial for the market, which is paying close attention. This is my question.

Benjamin Steinbruch, CEO

Thank you for your question. I appreciate everyone joining our results call today. We have successfully prepared the company for deleveraging, positioning ourselves for both organic growth and acquisitions. We are ready to engage in mergers and acquisitions, and we are advancing our investment plan with a clear priority to invest outside of Brazil. While our Brazilian businesses have strong margins, we face lower multiples compared to our peers both domestically and internationally, influenced by the reliability of our assets. Our focus remains on internalization across our businesses. We are also making organic investments for growth. We identified an opportunity with Lafarge Holcim, which arose because there were no internal buyers for the company and a need for a quick sale due to their previous acquisition. We acted swiftly to analyze this opportunity, which was not part of our original strategy, but its quality, geographical diversification, and synergy potential were compelling. We decided to proceed with the acquisition of Lafarge Holcim, even if it meant postponing our organic growth initiatives in Brazil. We have two projects at the port of Cimentos that are well-prepared, but seizing this opportunity was beneficial. The synergies we have gained exceeded our expectations. Although the acquisition cost was higher because our assets are newer, the logistics and supply efficiencies will lower our costs and improve our margins. Looking ahead, we anticipate a significant EBITDA for the group starting next year. Regarding energy investments, we considered partnerships with EDP and EDF for the acquisition of CEEE but chose to proceed independently when they opted out. Given that 66% of CEEE is for sale and 32% belongs to Eletrobrás, we prepared for the auction and found it to be a good business opportunity, especially in comparison to our previous acquisitions like Quebra-Queixo, Saucony, and Santa Ana. The margin of 10% from CEEE made it an attractive acquisition, allowing us to build our energy business. We now own shares in hydroelectric and thermoelectric plants and are committed to clean generation, which is critical for us. The acquisition cost was surprisingly low, and we expect it to positively impact our EBITDA results, making us efficient energy producers with significant growth potential, even more than our mining or cement operations. These have been opportunities outside our original strategic priorities, but we've achieved excellent results and feel confident with our decisions. While leverage has increased, we're prepared for new opportunities in cement, energy, and steel sectors. Our previous commitment to maintain leverage below one-time levels remains, and we will continue managing our finances conservatively, ready to act on any opportunities that arise for financial operations. We're keenly aware of the value of operational assets versus new developments, whether in Brownfields or Greenfields, which can be significantly more costly. Our focus on organic growth and strategic investments will guide our decisions. We are committed to de-leveraging, and while we may occasionally deviate, we will act quickly whenever a financial operation presents itself that allows us to return to our deleveraging goals. We need to balance seizing investment opportunities with our conservative approach to financial management so that we can produce efficiently and improve our market competitiveness.

Leonardo Correa, Analyst

Thank you. Thank you very much.

Operator, Operator

Thank you. As we have no further questions, we will now turn it over to Mr. Marcelo Ribeiro, the CFO and Executive Investor Relations Officer.

Marcelo Cunha Ribeiro, CFO

I would like to thank you for your attendance and I would like to give the floor to Benjamin Steinbruch for the closing remarks.

Benjamin Steinbruch, CEO

Thank you for joining our call today. I’ll keep my comments brief regarding our strategy and company priorities, as well as share some insights into our current thinking and actions. We believe this moment resembles 2020 when the pandemic hit, prompting us to take decisive measures to prepare the company for significant changes in production and consumption. We are currently following that same approach to ready ourselves for a highly competitive market, which is different from what we have previously navigated. As you are all aware, raw material prices, in general, are declining, and the overall economy is shifting. We must adapt to a new market landscape and operate with lower competitive prices to seize our market opportunities. While we cannot predict the market dynamics, we can be proactive by managing our costs effectively, which is our current focus. Our company is equipped to produce at lower costs and remain actively engaged in the consumer market. We have already seen a downturn that started in the second quarter, as you may know. The pricing for materials and the costs associated with various services have led to margin decreases initially due to inventory impacts. However, this is followed by advantages from reduced costs in raw materials and services. The second quarter felt the effects of this while the third quarter was the toughest. We anticipate improvements beginning in the fourth quarter and continuing into the first quarter of 2023. Overall, we are well-prepared to engage aggressively in various markets while maintaining our pricing strategy. We aim to differentiate ourselves through partnerships and uphold our operational philosophy, enhancing both domestic and foreign markets. Regarding investments, we see numerous opportunities out there, possibly increasing due to global changes. We need to be ready for these prospects while keeping our short-term goals aligned with smart decision-making for the company. We are mindful of managing our debt responsibly with upcoming maturities over the next six years and are focused on optimizing working capital. Achieving a balance of around 15 billion in cash is critical for us, allowing us flexibility for decisions that may arise. Our strategy emphasizes low costs and high-quality products. We are dedicated to maintaining quality, which is crucial for our growth rates. The focus on product quality and added value provides us a competitive edge in the market while ensuring we are not heavily leveraged. This commitment, alongside domestic market engagement and dividend payments, is something the market values and respects. We are also pursuing international investments, and this balance keeps us attentive to quality. Our organizational structure is streamlined and efficient. We believe these efforts will lead to improved margins across all product segments. The market is ready, and we are enthusiastic to tap into it. Regarding our interests in China, we see its economic activity gradually improving, albeit at a slower pace than before, but still beneficial for its population and the demand for iron ore. On our commitment to sustainability and governance, we remain dedicated as ever. I appreciate your participation in this call. We are cautiously optimistic with our forecasts and satisfied with our previous investments. We anticipate new opportunities in mergers and acquisitions, both domestically and internationally. We aim to be an active player in the market while prioritizing our commitment to reducing company leverage. Thank you for your time, and I look forward to seeing you at our next meeting.

Marcelo Cunha Ribeiro, CFO

Thank you.

Operator, Operator

The CSN results call end here. You can now disconnect. And have a very good afternoon.