Earnings Call Transcript - SID Q2 2020

Operator, Operator

Good afternoon and thank you for joining us. We welcome everyone to CSN's Conference Call to discuss the results for the second quarter of 2020. Present with us are the company's executive officers. Please note that this event is being recorded, and all participants will be in listen-only mode during the company's presentation. After that, we will move on to the question and answer session. There is a simultaneous webcast available on CSN's Investor Relations website, where the presentation can also be accessed. A replay will be available for one week, and you can review the presentation at your convenience. Before we continue, we want to mention that some statements made today involve expectations or trends based on the current assumptions and views of the company's management. These statements refer to future events and performance, which may differ substantially from what is discussed today. Actual results and performance may vary significantly due to various factors, including economic conditions in Brazil and elsewhere, interest and exchange rates, potential debt restructuring or prepayment of foreign currency debts, protectionist policies in the U.S., Brazil, and other nations, as well as competitive factors on global, regional, or national levels. Now, I will hand the floor over to Mr. Marcelo Cunha Ribeiro, Investors Relations Executive Officer, who will present the company's operating and financial highlights for the period. Mr. Ribeiro, please proceed.

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

Good day to everyone, and thank you for joining our earnings release presentation for the second quarter of 2020. I would like to mention that due to the logistical challenges posed by the pandemic, Luis Martinez, our Executive Commercial Director, will be speaking alongside me. Before we discuss the highlights of the period, I want to emphasize that we are still operating in the context of the pandemic. I will take this opportunity to update the market on how the pandemic has affected our company. Our executive team has achieved positive results during this turbulent time. Fortunately, we have experienced very few cases in our operational areas, including our mines, port, and administrative offices. This success is a result of the strict protocols and procedures followed by our leadership and workforce, which have allowed us to maintain uninterrupted operations. We have seen some impact on key performance indicators and procedures, but these have not affected our overall results, thanks to the efforts of management and cooperation across the board. During this period, we complied with all requests from health authorities and made necessary adjustments to our operations. We believe that the worst is behind us, and we anticipate a very low risk of further complications for our business moving forward. Now, let's move on to the highlights for the period, which can be found on page two of the presentation. The first highlight was a solid operational result, measured by our adjusted EBITDA, which benefitted significantly from positive pricing in mining and other sectors. At the beginning of the quarter, we faced substantial impacts from lockdowns and quarantines in major cities where we operate. This initial situation negatively affected our financial results and demand. However, the subsequent recovery has exceeded our expectations, particularly in terms of altered demand. We have maintained price stability, enabling us to sequentially improve our results alongside a gradual recovery in mining volumes, all within a favorable pricing environment. To illustrate, we recorded an EBITDA of R$1.9 million, which was surprising even for the most optimistic projections given the pandemic context. The second highlight was a successful quarter in terms of deliveries. We have taken steps to relieve pressure on our liquidity by extending our liabilities. In the second quarter, we announced a debt extension agreement with Banco do Brasil, which provided us with a cash inflow of R$1.7 billion. We have also made progress with private banks, with announcements expected soon regarding further financing options, both in Brazil and internationally, using our subsidiaries in Europe and the United States. This has resulted in a significant boost to our liquidity, which is critical during this crisis, and we celebrate this achievement. The last highlight concerns a one-time increase in leverage due to currency devaluation. However, our hedge accounting policies have helped shield our results from exchange rate volatility. Given our export revenues, this will offset the slight increase in leverage over time. Additionally, we reduced our debt by over R$600 million from mining profits, which has helped keep our leverage stable. With clearer visibility of improved results, we can confidently aim to reduce leverage to below four times by the end of the year, a commitment we announced last night and will elaborate on during the presentation. As for the performance indicators, the growth of our consolidated EBITDA was 45%, amounting to more than R$500 million. While the mining sector had previously faced challenges due to rainfall and low production levels, we were surprised by the robust performance of our steel mills, which experienced a 29% increase. Furthermore, our cement division saw a remarkable 95% growth in EBITDA, driven by a combination of increased volume, price, and strong operational performance related to cost management. Our capital expenditures remained consistent with first-quarter levels, but we foresee a significant reduction for the second half of the year as we reassess our 2020 investment plans to ensure financial stability. Cash generation during the period was promising, with over R$400 million generated from working capital, offsetting increased finished product inventory levels. In terms of our mining performance, we saw rapid recovery driven by favorable iron ore prices, despite challenges in the previous quarter. We expect production volumes to resume closer to 10 million tons in the second semester, enhancing our operational efficiency and margins. In conclusion, our cement division is also poised for a positive recovery, with a notable increase in demand that we expect will continue into future quarters. Overall, we have achieved a good balance and are preparing to venture into significant growth opportunities for 2021 and 2022. Thank you, and I now open the floor for questions and answers.

Operator, Operator

We will now begin the question and answer session for investors and analysts. Our first question comes from Thiago from Bradesco BBI.

Thiago Lofiego, Analyst

Hey, good day to all of you and thank you. I have two questions, the first referring to volumes in mining for the coming quarters. How is this evolution going to work? And of course, you have that issue of authorization. And we still think this will have a strong impact on production during the year. Now to work with 35 million tons if this is feasible for this year? The second question refers to the liquidity events and capital allocation. Considering you have been able to renegotiate with the bank and you're generating cash, should we expect further prepayments, higher sales in mining, or are you somewhat calmer at present? And so you now have a positive accounting balance, which means that you are calmer when it comes to your balance in general. And, well this question leads to capital allocation. What is it that we should expect in mining or eventually in a new line downstream during this period of the pandemic? What is it that you're thinking about for this period? Thank you.

Operator, Operator

Ladies and gentlemen, please hold while our speaker reconnects. Thank you. Once again, Marcelo Ribeiro has been able to reconnect. Marcelo, would you like me to repeat the questions now? The first refers to mining volumes and secondly, the liquidity events. I complimented the second question was capital allocation. This trend for improvement in your balance leads you to think about why in terms of capital allocation well they'll be done in mining or any new line, galvanized products as part of the steel mills.

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

Thank you for your questions, Thiago. In mining, our guidance is between R$33 million and R$35 million. We have successfully sourced higher volumes from third parties. The margins remain strong, leading us to maintain an optimistic view within the previously mentioned range. Concerning liquidity, we still aim to be below R$23 billion in the upcoming year, 2021. This will be achieved through asset management, capital opening, and subsidiaries. We are actively pursuing this strategy and might see favorable conditions for mining. Our global liquidity is strong, and we are currently analyzing options. The potential sale of our subsidiary in Germany is still on the table, having been paused due to the pandemic, but we are reconsidering it. We also have other opportunities such as iron ore streaming, which are already included in our plans to reduce debt, aligning with your second question. All these efforts will focus on investments aimed at attractive growth opportunities, especially in mining. The 10 plus 5 million plant project is progressing well, as we secured a preliminary license in May, and we are moving forward with detailed engineering work. We plan to start next year with a $500 million investment. Additionally, we are investing in steel mills and enhancing capacity. While we are not drastically changing our projections, the galvanized project looks promising, though we must be cautious due to the global automotive industry's situation. We will maintain a minimum of 25% of our net revenues for dividends.

Thiago Lofiego, Analyst

Marcelo, if you allow me to go back a bit, which are the liquidity events that have greater probability that’s still happening this year? As the capital market is quite receptive, you have had an improvement. In mining, the situation is favorable. So, which will be the ones with the greatest probability of happening in the short-term and in the second semester basically? Which are the ones that you are focusing on mainly?

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

So, the work that we're working on actively at present, profitability is a crystal ball, of course. But we're actively working on the possibility of holding an ideal for mining. We're also working on negotiating the service of some of our assets. These are the assets, the projects that are underway presently. The profitability is happening, as I said before, is somewhat binary. I really can't say more than this. These projects are well advanced. They have profitability. They're not remote profitability.

Thiago Lofiego, Analyst

Very well. Thank you, thank you very much, Marcelo.

Operator, Operator

Our next question comes from Daniel Sasson from Itau BBA.

Daniel Sasson, Analyst

Hey, good day to all of you and thank you for taking my questions. Another question Marcelo, which is into the cash generation, I had a slight difficulty in understanding the R$1.4 million for cash generation, especially because of the impact you have mentioned in the exchange variation. In the previous quarter, you had a problem with I don't know, something that was very obvious. Now perhaps, you couldn't help us to continue to sum up and what it is most impacted this cash generation during the quarter? And second question to Martinez, who still have not spoken up this quarter. Martinez, if you could explain that surprising performance for the steel price in the domestic market. What is it that underlies all of this, is it distribution? I know that you made some attempts in June and the quality, the COVID products, if you could share with us your expertise and your forecast for prices going forward? Thank you.

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

Well, regarding the evolution of net debt, we have a bridge that explains stage by stage of this variation reaching 31, that R$1.4 billion and is being offset by 1.48 as exchange variation. And that is why we have that slight increase. Now, the only thing that has not been included in these two concepts is the prepayment we advanced by Glencore; we had an increase of R$68 million. Now, why do we exclude this? Because we just announced another one of R$600 million, and we have a line of others, which is the only thing with a difficulty of conciliating a R$100 million. Part of this R$16 million refers to our contribution to the Transnordestina work, which is something non-recurrent. It's the end of our commitment. We had done at the beginning of the work. The rest we have conciliating very well, through explanatory notes in the release. You should look carefully at the footnotes referring to our cash flow. Once again, should you have any doubt we are at your disposal to clarify your doubts? I now give the floor to Martinez.

Luis Martinez, Executive Commercial Director

Good morning, Daniel, thank you for your question. I have to be intellectually honest, to be able to respond to your question and to respect the report done by analysts, and to respond to your question with the necessary detail about the CSN performance. Marcello has already told you some of this, but I will give you other details to solidify what we're doing going forward. Our net revenue with all of this turbulence in the market and the world dropped only 2.8%. We maintain a level of R$3.5 billion for the quarter. Another aspect, which is very important is we see the importance of having price; the price is the best asset a company has. We have a price of 330, 10% and is highly challenging and unfavorable situation. You have to be more than resilient; you have to be tenacious not to go bankrupt. In the second quarter, Daniel, although there was a drop of 20%, we had a profit of 12% for the entire semester, which is something positive in my opinion. Now this will go into greater details of what we did. I think perhaps, we never had such a mix of added value. We got 33% of our sale of flat steel. If you add this 750,000 tons of flat steel, 400,000 tons of coated material and that’s a 400,000 a 100,000 or 110,000 tons were sold in the United States with a local premium, so it helped us a great deal because of the dollar and the U.S. prices. Another very important price is that of the template, which helped us to give thrust to our results. The prices at present are R$5,500 per ton, and that got to a volume of a 100,750, sold 400,000 and then the templates. So if you calculate, the prices gave us a significant thrust and the sizes we put in place the increases that we had mentioned at the beginning of the quarter. In the last call, I mentioned that there would be a 6% to 7% price increase in the quarter which did materialize. Another aspect is the export of slabs. We exported 35,000 tons of slabs and 32,000 of templates. By adding all of this and as you bring together these factors, this is what led to our revenue results that are very similar to other quarters. And that's the performance of the CSN. Now to speak a bit about prices, to speak more in depth about prices. We've had a drop of 29% and for the year, the drop was 15%. Our market protection in general terms is that flat steel will close up 10% or 12% for the year and long steel at 0%. If we break this down further and to give you more color on our business, the industry drop of 4% to 6%, automotive is still unknown factor. It can be better than the 40% announced. Distribution, we’re quite optimistic 5% to 10% of drop only and civil construction practically stable. Speaking about several constructions, CSN has an umbilical relationship with this market. Besides everything that I say, of having a focus on the domestic market, working on added value, fragmentation, not putting everything in the same basket and working with geography, and civil construction, we can work with long steel and cement additionally. All the sectors performed this year in a very satisfactory fashion. The outlook is to end the year with a zero drop in civil construction and perhaps the growth in some sectors. As part of these sectors, and more relevant such as packaging, which is very relevant for the food sector and the chemical sector. We're working as we did pre-COVID. We're working at full steam and highway implements or agricultural implements that had a drop of 30% at the beginning of the pandemic have reached levels of usage of 80% to 90%, heading to the fourth quarter, reaching 95% to 100%. Consumption sectors such as the white lines with a change of consumption habits, as people stay home more. The sales were practically normal during the second quarter, with an excellent outlook for the third and fourth quarters. The only sector that still brings down the demand for steel and CSN has a relatively low stake in this; in the second quarter, it was 5%. In the automotive sector, they have said that drop will be 40%, but we had 60,000 vehicles being produced, which isn't so bad. Perhaps, in the third and fourth quarter, this will go up to 80% and machinery and implements speak about ending the year at 90%. I wanted to give you more color on these businesses, but because this is what will guide our second semester. The outlook is very good when it comes to the market.

Daniel Sasson, Analyst

Thank you, Martinez. To make sure that I have understood about prices of our domestic market, in distribution, the prices are 7% higher than they were in the first quarter. And do you foresee the possibility of further increases?

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

The increase was 10% in July, Daniel, for distribution. On September 1st, we're going to have a new price increase for distribution and depending on the product, this will vary between 10% to 12.5%. This is a new increase as of July, which has been fully put in place. For you to understand is better in terms of premium. If you think about in BQ and there are two accounts that I will share with you, one on the table and what is happening in China. China has even bought slabs from Brazil and the BQ reached $500 in China. Let's imagine that the variation of BQ is $470 in China to $500 with a fixed exchange rate and a price domestically of $2800. Without that 10% increase, that premium will be from 8% to 12%. The September price increase is more than rational when it is applied. There is a favorable demand supply ratio. The plants are working at levels of 758,000 tons. There is no surplus in terms of surplus and demand. We should have a normal export and the dollar at the level that this will allow for stronger exports. Therefore, the scenario for a price correction is surely favorable for September. I don't know if this has remained clear. Once again, the pricing risk in July has already been implemented and it is not in our price release, Daniel.

Operator, Operator

Our next question is coming from Mr. Carlos de Alba with Morgan Stanley. You may proceed.

Carlos de Alba, Analyst

Yes, hello and good morning. Thank you very much. My first question is, maybe coming back to your capital payment. What about $204 million of change in working capital absorb the cash flow operations in the quarter in the Portuguese or Russian? Is it attributed to EBITDA and fees? So I wonder if you can explain a little bit more what that is given that $204 million of cash which you mentioned is in the quarter? And then, coming back to the balance sheet discussion. The expectation the company had is to be able to reduce net debt and net debt-to-EBITDA to R$23 billion and three times by the end of next year, the annual price and the forecasting improvement in these numbers as well as any subsequent increases in domestic prices that are embedded in that calculation? Thank you very much.

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

Carlos, thank you for your question. Now, regarding the cash flow and working capital, as I mentioned in the presentation, we had significant variations. Thanks to intentional initiatives we carried out some activities during the quarter to increase the liquidity in terms of the inventory. The finished product inventory increased, but we have taken actions to reduce the margin in parts and raw material. Presently we have a higher inventory. When it comes to the liabilities, we have a significant lengthening with suppliers. We negotiated results that of course can work with this, especially international vendors for coal. This has helped us significantly in terms of our cash flow. When it comes to our receivables, we have been fortunate to have receivables in mining with confirmed letters of credit. These receivables are very nickel currency. Some will have no cost whatsoever and others will have a low financial cost and that is why we have that significant cash flow. What helped mostly were those activities of support from the government towards liquidity reduction or deferral of taxes and rates and social security contributions. All of this helped us; it is a set of actions that allowed us to have that working capital that has helped us significantly. When it comes to our forecasts, what we have in terms of iron ore is the consensus curve. If the consensus of the analyst that the coming year, the projections will be of $75, we're not inventing anything. We think these figures are conservative at present and their assumptions as well. In terms of exchange rate, it will be the market exchange rates as foreseen, and we'll focus survey of the central bank and the price of steel, we're working with the present-day prices. This is what has been included in our forecast.

Operator, Operator

Our next question is from Thiago from Goldman Sachs.

Thiago Ojea, Analyst

Good afternoon to all of you. Thank you for taking my question. I have a question for Martinez regarding the steel supply and demand situation. You spoke about the general activities of the sector, where activities came to a standstill. Now the demand is surprising you. So, what will happen with the resumption of this activity? Will this increase the competition for prices, despite having the parity that you have? And the second question refers to mining. We have seen an increase in volume, but the cost per ton also increased. There's the concept of idleness that was put in place during the first quarter. But why has the cost increased while the quality has decreased, if you could explain this?

Luis Martinez, Executive Commercial Director

Good morning Thiago. The accounts that I have at present for capacity, we have older mines operating with the blast furnace. They have announced a resumption of a blast furnace dedicated to export data down working with logs to and others. What they're going to do is quite restricted and see a span. If we bring together all of this installed capacity that is operating, according to my accounts, the supply of steel will be of 750,000 tons to 780,000 tons per month, which is a supply that can fulfill the market at present. Additionally to this, we have two players in the domestic market that supply slabs to extend steel market and others that can also supply slabs. We have the possibility of the resumption of the blast furnace in CSN. Supply and demand is an important curve where we can implement a price increase. It is not a hurdle to already have that price increase in September. All of this will move because of the demand in China. The price in China, so there will be no price in China lower than $500 in the second semester, with $5.15, the present-day price of the Q will have a negative price. That varies from 9% to 12%. The increase in September has to be implemented fast, and it has to go throughout the entire value chain. It's the issue of costs; we cannot fall behind. When it comes to capacity, we have to fully understand this. We have to look at this based on product lines. Because imports in this scenario, so zero impact on CSN, what comes into the country is galvanized material. CSN will focus on supply and demand cost, idleness, and the value chain and we will do whatever we can in our mix to maximize value in that quest for that figure that is mentioned by Marcelo, that idea of resuming profitability of steel by $100 per ton. This is an idea that we have; it is not a forecast. But this is what we're seeking. I don't think this will be an obstacle or a hurdle. Does that respond to your question?

Thiago Ojea, Analyst

Yes, thank you. That has been very clear by clarifying what is happening in mining.

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

And the sequential comparison of prices of the second quarter, where the first quarter is very useful, the first quarter had distortion because of the high cost of idleness. These costs don't refer to the merchandise sold. Another point is that we also have an increase in the cost of the product that is purchased. We bought iron ore at a higher price and of course, this makes the costing in reais somewhat higher as well. But this adds to the margin. But it's more relevant in this discussion is that our cash costs for production stood at $17. This is a transition cost. It is not the cost that we would like to obtain in the second semester with volumes going back to what we had last year 10,000 per ton. This will value our fixed costs. We will see a positive evolution in costs regarding what we saw in the second quarter.

Thiago Ojea, Analyst

Thank you Marcelo, so there's no tripping issues. And Marcelo, do you have the figure of the iron ore for third parties which is the percentage for the second quarter?

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

We stopped doing this because we were working according to the benchmark. We're trying to be transparent and also protecting strategic information such as the purchase of products from third parties. This is not a market that will change a good deal year-on-year. It will be very similar to 2019. So, it's only this transition going towards higher volumes in the second semester with the cost that we had last year. Yes.

Operator, Operator

The next question comes from Thiago from Bradesco BBI.

Thiago Lofiego, Analyst

Thank you. A quick follow up for Martinez. The same question that Thiago has already posed, the demand and the steel price mix. So, you are already selling at 850 and this is the price that you are working with after the increase in July and with those 850, you still have a negative result of 9%.

Luis Martinez, Executive Commercial Director

That's right, Thiago, exactly that. The present-day price of BQ without fees and concluding taxes in the domestic market is to 800 to 850, and if we think of BQ in China at $470 to $500, this premium is negative between 8% and 13%. That is why the increase should be from 8% to 12% in September, depending on the project. Now if we don't have this premium, we have to be more cautious. We want to work more with the market and not allow a penetration for imports. For the industry, and I have forgotten that in industry at large, with the exception of some clients, we have a contract where we have a very small share in the automotive market. We work with 10% in the automotive market through August. And of course, we have this different because there is a delay in the implementation. Otherwise, those private distributions for the industry will be much too strong. On August 1st, we will have an increase in galva aluminum that is being invoiced in Brazil and the increase will be for civil construction and distribution for the White Line industry. For the increases for long steel, I forgot to speak about long steel. In long steel, we’re working at full steam. It is smallest of our markets. We have 20,000 clients that are registered, and every month, we sell to 10000, and every month we have 8,000 clients. Month after month, I sell less to more clients. The increase will be about 12%. Last month, the increase was 6%, this month another 6% price increase, 6 and 6 that’s it. Long steel, the average sales per month here in our balance is 18,000 to 19,000 per month. In Brazil once again, we haven't taken into account Germany here. Thank you.

Thiago Lofiego, Analyst

Thank you Martinez.

Operator, Operator

The next question is from Leonardo Correa from BTG Pactual.

Leonardo Correa, Analyst

Good day, gentlemen. Good afternoon. The first question is to Martinez. Martinez, there is a great discrepancy in the data. The large steel mills had a double-digit drop. While in distribution, we see an increase of double digits as well. Now, I imagine that there has been a migration of volumes, perhaps. I would like to hear from you if something additional is happening in the market and this change will continue going forward; which is your reading of this movement? I think there's a big gap in the data. And a question for Marcelo, you spoke about the guidance for iron ore for 2020, R$33 million to R$36 million. What happens with 2021 and 2022? This would be very helpful. Thank you.

Luis Martinez, Executive Commercial Director

Leo, good morning. This is a very smart question. It's hard to understand what is happening, for those who don't closely follow up on the market. There has been an increase in our parent consumption. During this crisis, clients were hesitant in terms of planning and scheduling. They're buying only what they need. Distributors have inventory and had to sell; they began to sell in fragmented amounts. It was easier for a client to access that distributor purchase smaller amounts and wait a bit. What happened simultaneously at present is the following. There was this certain relay. CSN does not stop production. It was the last to stop production, and there was a certain lack of planning in the industry besides losing the inventory. They did not plan correctly, the millers stopped production, and clients have to resort to distribution as they have inventory. What’s happening to distributors? So, ridiculous figures because everything was stocked with them. There’s the dynamic of distribution and industry that is normal whenever there is this crisis.

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

I'm still here, Martinez. So, this dynamic industry and distributor happens when there are market asymmetries, and this is what happened in the second semester; all of this should go back to normalcy. I don't know if what I said is clear.

Luis Martinez, Executive Commercial Director

Thank you for the question. Now Marcelo, regarding the coming year, it's still too early but the expectation is to resume our normal levels. The levels we have changed last year and which is what we expect for the time being. This is where we're going to remain until we have the coming into entry of our project eventually with $10 million and another $10 million beginning in 2023. This is the range of figures we're working with excellent, Marcelo. Now, the projects are the ability to this incremental. Let me reformulate my question. I think your capacity of about 40 million tons, without requiring investment, assuming it would be 40 million tons. Could you add 40 plus 15, to get to 55,000? Now, if you could simply clarify this point, I still have some doubts regarding this. Yes, that's what it is. If you look at the consolidated figures, this is what we're working for, to put those 10 million in incrementally. What is going to happen within the company, a gradual replacement of all center feed product based on the production from hematite to have a larger production of pellets. The central plant during the coming years will have this production converted from hematite to itabirite. We will do this without having any drop in shipments or production and the 15 million are only a marginal value. We have several fronts and initiatives for this to happen and this is what we're projecting.

Gabriela Joubert, Analyst

Congratulations for your results. My first question, the first is of the assumption of Blast Furnace 2. Is there a plan for this resumption? If you could share with us what it is that you are expecting? The second question refers to possible expansion to enable you to reach that level of 3.75 in 2021. Are you planning to announce any expansion in the mega line of galvanized products? Are you going to invest more to have greater availability of properties as you mentioned recently? This is my second question.

Luis Martinez, Executive Commercial Director

Regarding the Blast Furnace 2, we're working on this so that it will be ready by the end of the year. The preparations include the cleaning and the purchase of the factory material. That have already begun, and this will be ready before the end of November. Everything will depend on the demand and the cost is between $10 million and $15 million. It's not such a high cost as mentioned formerly. When it comes to the new investments, we have a broad range of opportunities. This depends on the expansion of mining; mining does have a project of 10 plus 5 million, $5,500 million this will come soon from our cash generation. We also have projects in other areas. Depending on our capital flow, we may diversify on the matter of energy. Energy has always been an important sector for CSN. We want to go back to being self-sufficient. Generation is something that we are considering for the future, logistics structure as well, and consolidation in the cement sector. Once again, these are opportunities that we're always considering.

Marcelo Cunha Ribeiro, Investors Relations Executive Officer

I simply would like to thank all of you for your presence on the call. We have more than one hour of discussion. We hope to be able to talk to you again when we release results for the third quarter. Thank you very much and have a good afternoon. This leads conference call to end, and yes you can now disconnect, and have a good afternoon.