[Foreign Language] We will then open the audio and video channel for your question. The presentations will be available in Portuguese and English through our chat icon. So you will be able to follow that in your own computers, and we will then play the slides in the Portuguese version. I would like to mention that any forward-looking statements that might be made during this conference call related to Gerdau's business outlook, projections and financial and operating goals are mere assumptions based on management's expectations related to the future of the company. Even though Gerdau believes that its comments are based on reasonable assumptions, there is no guarantee that future events will not affect this evaluation. Now I would like to turn the floor to Gustavo Werneck. Please, Gustavo, you may start the presentation.

Good morning, everyone. I would like to start by welcoming every one of you to our earnings release call related to the third quarter of 2021. I hope you are all healthy and well. Also participating in this presentation is our CFO, Harley Scardoelli. And as usual, for both of us, it's always a pleasure to talk to you about our performance and clarify possible questions that may arise during our presentation. I'll turn the floor over to Scardoelli, who will start by talking about the highlights of the overall results for the quarter. And also, he will talk about the performance of our operations. Next, I'll share some information about our ESG agenda and comment on the markets in which we are present. And close to the end, both of us will be available to talk to you about any points that you would like to exploit in more details. So Scardoelli, you have the floor now, and I'll come back to you later on.

Thank you, Gustavo, and good afternoon, everyone. It's a pleasure to be with you in another earnings release call, and I hope everybody is doing fine. Let's start the presentation of the financial results with the main factors that influenced the consolidated results of EBITDA. Our EBITDA went from BRL 5.9 billion in the second Q of this year to BRL 7 billion in the third quarter of the year, a level close to that achieved in the entire year of 2020. All of our operations had a great performance in the third quarter, which reflects the scenario of high demand in the steel sector in all countries where the company operates. Added to this is our team's ability to anticipate market opportunities. This quarter, we had another record performance in the North America operation, which reached BRL 1.9 billion, a level higher than the EBITDA of the whole year of 2020 with an EBITDA margin of 25%, which is a record for this operation. This result reflects the heating up of the construction and industry sectors and the continuous recovery of the metal spread. Because as you know, that's the difference between scrap prices, the price that we pay for this input and the average price of our products. The Brazil BD also posted a strong performance, reaching an EBITDA of BRL 4 billion in the third quarter and a margin of 40%. The main steel-consuming sectors remain with resilient demand. And for this reason, we continue to allocate most of our sales to the domestic market, ensuring supply to the Brazilian market. In terms of our South America BD, we posted an EBITDA of BRL 602 million with a margin of 32%. This operation has also benefited from the good performance of civil construction, especially in Peru and…

Thank you, Scardoelli. And I would like you -- I would like to ask you, please, to move to the next slide. Here, I will give you an update on the most relevant points of Gerdau's ESG agenda, presenting some highlights and advances on our journey. As you know, the theme of sustainability is core to Gerdau's strategy. And we continue to increase the presence of this topic in our conference calls. I would like to highlight at first, our commitment to contribute to solving societies problems and in particular, to change the housing panorama in Brazil. In this regard, we recently announced the launching of the Reforma Que Transforma Program, renovation that transforms, which has the purpose of promoting the transformation of the low-income housing scenario in the country. With an investment of BRL 40 million, the project will contribute, in the first stage, to the improvement of more than 13,000 vulnerable dwellings in Brazil over a period of 10 years starting in 2022. We will offer families 2 alternatives; credit at below market interest rates or full donation of the renovation carried out by the project according to social vulnerability criteria. The initiative is fully aligned with our social strategy, which has housing as one of the strategic pillars. I would also like to mention that we remain fully committed to enabling renewable forms of energy production, advancing the sustainable management of natural resources. This quarter, we began construction of a solar farm adjacent to our Midlothian Texas facility in partnership with 174 Power Global and TotalEnergies. Scheduled to open in 2022, the farm will have 230,000 solar panels, and we'll allow the plant to run on solar power. Well, finally, I would like to highlight our satisfaction, which I share with all of Gerdau teams in being…

Thank you, Gustavo. Ladies and gentlemen, we will now initiate our Q&A session. [Operator Instructions] Our first question comes from Rodolfo Angele from JPMorgan. Rodolfo, you may proceed. Rodolfo, can you here me? While we wait for Rodolfo, our next question is from Leonardo Correa from BTG Bank. Leonardo, please, you have the floor.

I don't know if I'm still on that list. May I proceed?

Yes, of course, you can. Rodolfo, yes, we can all hear you well.

Well, thank, God. I am a commodities analysts rather than technology because it took me a while to get this right.

Well, me too. I know. I join your pain.

Sorry, Leo, I didn't even know that you are ahead of me. Well, I'll be quick. My main question is about your capital discipline and also your growth outlook. In your release, you said that in the U.S., we already achieved full capacity in Brazil. The utilization rate is quite high. And obviously, we saw that you paid a very robust dividend in the quarter. But given everything you said, about the outlook for the next quarter, next year, we can still operate at a very robust cash generation and high cash generation, especially if we look back in terms of cash generation of the company in the past few years. So I see some concern on the part of investors in terms of this discipline because it comes a time when -- and I even imagine that the production people, they may turn to their managers and say, "Well, we have to add more capacity here. There's another opportunity there." So then that thing about discipline may change a bit. Therefore, I would like to hear about you -- hear from you, what do you have in mind in terms of your future plans, your plans going forward? I mean you painted a very positive landscape for the next coming quarters. So I think one point of attention that I heard is just related to labor in the U.S. But can you please tell us what really worries you now? It seems like this demand and price ratio remains strong. So what are the points of attention that we could expect? So what worries you? So in fact, these are my 2 questions.

Thank you, Rodolfo. I'll turn the floor to Scardoelli, because I think he will be better suited to talk about capital discipline, and then I'll go back and answer your part about the growth outlook.

Rodolfo, it's always a pleasure to talk to you. Well, this, in fact, is a very recurring point. Well -- that this has been a going concern on the part of shareholders. I've been maintaining the Z-Scores in the last few quarters. Our capital allocation has been very disciplined. This year, we were able to execute the CapEx that Gustavo just confirmed. Our expectation is to spend BRL 3.5 billion in CapEx this year when compared to 2017, we would just spend BRL 800 million. So for this year, we will invest heavily on CapEx. And you also mentioned that our plants sometimes have to operate with bottlenecks. So we are taking good care of that with a lot of discipline. We're being very cautious. So we are applying a very robust methodology in terms of CapEx investment, focusing on return on equity, et cetera. So in this regard, our allocation is very careful, but we are investing heavily in CapEx and dividend payout. We are now paying out good dividends, and this was a recurring question that we got from the market. So we consider the extraordinary results we had this year with all of our operations. So we thought that was the right moment, and it has been approved by the Board to give return on equity. Or at least for the past years, we had very good returns. And at the same time, we are also working to reduce our debt. We've been very diligent, both in terms of our net and gross debt as well. Our objective remains the same: to lower our gross debt. And we will continue to do that. So I think the allocation of capital is well in place, and we are able to meet the desires and meet the needs of all the parties involved.

I would just like to add something to that first part. I've been in the company for quite some time, and I've been here throughout many transformations. And I can recall years ago that we had many questions, because people asked us when are we going to deploy new capacity? And for us, culture is something that takes some time until it really changes. And then today, we see other questions, how can we serve our customers better? How can we increase our performance? How can we enhance our productivity? So I think the topic of growth for the sake of growth. I mean, for us, I see that this culture is present throughout the organization. And for us, what we consider to be more relevant is much more related to people, ESG rather than growth itself. I don't lose sleep over variables that I control because we have risk under control. I can give you an example. But so maybe later on, we can talk about the market. A segment that stopped growing and that is stabilized is retail. So retail has been growing for quite some time. And then after the government's incentive, it really picked up and grew a lot until June of this year. And now it's stabilized. So this is -- what we can control is how we are going to operate in this segment. We will emphasize our Juntos Somos Mais because we want to have a quicker penetration in the retail segment. These are variables that we can control. We went from 2,000 customers that we used to serve through construction material stores. We jumped to almost 50,000. So we were -- this has become a very relevant market for us. But there are a few things, Rodolfo, there are variables that scape…

Our next question is from Leonardo Correa with BTG Pactual. While we wait for Leonardo to be connected, we move to the next question. Carlos De Alba with Morgan Stanley. Carlos, over to you. Hello? Oh, here is Leonardo again. Hi Leonardo, how are you doing? Hi, Leo.

Can you hear me? Can you hear me well?

Yes, we can hear you clearly.

Okay. What I think is going on is that when you call us out, there is a slight delay to be online. Anyway, it works fine now. So congratulations.

Rodrigo, please take care of this delay being charged.

No, it's great. Congratulations, folks, on the results, truly another amazing quarter. My first question. Gustavo, I know the price topic is a very sensitive one. And it changes really fast. However, when we check prices in the domestic market in Brazil, I think everybody expects to see a correction, a restatement for months or discounts. Instead of construction, there are some discounts being granted. At the same time, foreign exchange is being depreciated and differences abroad are -- well, they are being appreciated. When you think about premium in the domestic market, it's minus 10 already, a 10% discount vis-a-vis the domestic market. So 10% discount of price in the export vis-a-vis the export market. So do you think this price level is sustainable? Or should we expect to see a new upward trend, which comes from FX and international moves? The second question is more timely. And I apologize, there will be a third question as well. Anyway, Harley, in the second quarter, we talked a lot about working capital. It was a heavy debate in the conference call. To some extent, it shallowed the international scenario because of a big consumption of working capital. And it also happened this quarter. So I'd like to hear from you if, for the fourth quarter, we should expect to see a relief going forward. I'm understanding in the third quarter, there was a big change in the scenario. The risk of rationing increased a lot. Many companies were getting ready to a slightly worse scenario in the future or disruption in production. So it made sense to work on inventory levels, but that's not so likely nowadays. And last but not least, what about GOAU, G-O-A-U? I think everybody was a little bit anxious about the use of cash, BRL 1.5 billion which was in GOAU's cash for a while? You announced a big annual dividend, but GOAU was higher, greater than 12%. So once again, please, I'd like to hear a statement if we should expect to see diversification or not because everybody is concerned about a possible entry into new business. So I imagine what the answer will be, but I'd like to listen from you, the final answer about G-O-A-U, Metalurgica GOAU.

Thank you for asking 3 questions in one.

I apologize.

No, no. These are very important topics. Let it begin by answering you -- well, you congratulated us on our results. And we see these statements by these big gurus, professor and strategic experts. As managers, I think it's important to take these sentences and statements from the wall and put them into practice, a rupture or disruption as a strategy at breakfast. I think at Gerdau, over recent years, we've been trying to put it into practice. For us, culture is increasingly more relevant. I dedicate most of the results achieved in the third quarter to transformations that we've been going through, Leo. I understand there are favorable conditions, but if we hadn't been agile and close to consumers and had engagement and passion from all our employees to make the company move forward and get ready for 2021, certainly wouldn't be delivering these results. So it's a combination of the market and our ability in recent years to build this culture that certainly would be a winning culture in the future. So what about profitability and not necessarily price? We believe we have plenty of conditions to maintain the current profitable level for the future quarters. The offer in Brazil, supply in Brazil of steel came to a balance with demand. And usually, at the end of the day, competition becomes tougher, and competition can be helpful or not. In a scenario that we had about lack of supply or -- it's hard to imagine that we would have even more fierce competition, but that what has been happening for the last 2 months when supply reached demand, met demand. On the other hand, there is a lot of volatility like FX and a sudden increase in international prices in the market. And it leads us to believe…

Leo, when it comes to working capital, that's an important point. And just as a reminder, when we work on the release of our conference call for Q2, we made comment that the second half of the year, working capital will already be more balanced. Why the second half? Because we knew already that we would still have a little bit of capital use for working capital in Q3. That's what we're showing now. The trend now is to have a more adequate working capital level despite higher demand levels that we continue to see. So I would say that further down the road, possibly working capital is going to be more stable. So in Q4, possibly, working capital is going to be neutral or slightly upwards or downwards, but levels pretty close to what we believe it should be. And please bear in mind that there's working capital composition. And the third quarter is always focused on having an adequate level of customer service. We have significant market share in Brazil and also in North America in our segment. So in order to make these results and margins possible, we need to have a balanced working capital.

And what about the cycle, 60 or 62 days?

That's a very good level, historically speaking. And if we check the curve of 8 years, you'll see we drop from 90 days, first quarter, almost 100 days, down to 60 days. And today, the service level is very satisfactory, considering the current demand. So working capital will be neutral. As for Metalurgica G-O-A-U, just confirming what Gustavo already said, we don't have any plans to have diversification. Our cash position, which was very much charged by the market, if you do the math about dividends in Gerdau for Metalurgica, it's what comes in, comes out. And nearly half of the cash balance that Metalurgica had is BRL 1.5 billion or BRL 1.6 billion it was in Metalurgica's cash, BRL 800 million to BRL 900 million or half of it was already returned via dividends paid to shareholders. And what is there, we'll continue as we did today. No further allocation yields, but no intention, no plan to diversify Metalurgica by using cash. We're not considering this.

Carlos, Carlos De Alba, right? Carlos, please go ahead.

So I just wanted to go back to the very strong demand in Brazil. Can you talk about the risks, because we're seeing interest rates increasing. The fiscal situation is complicated. You have an election year that typically would incur potentially result in more projects. But given the fiscal situation, they might not be able to do it. They might not be able to execute. So how do you see the risks that demand for steel might actually decrease next year given the higher interest rates and the significant slowdown that people are expecting on the GDP for the country? And then my second question, if I could. How are you seeing the increase in imports from Turkey that we saw recently in prior months? Is this something that maybe was triggered by a specific period in time in the recent past where you saw a premium that is obviously much greater than the discount that you're seeing today, depending on the BRL? How are you understanding that increase in Turkish imports into the country.

Thank you, Carlos. Thank you for the question. Can I ask Scardoelli? And maybe Scardoelli, you can add any further detail.

Brazil is a country of risks and opportunities for many years now. When it comes to elections, volatility goes up. What we consider as risk today is more a long-term risk when it comes to interest rates. If over time, they keep on going up and coming back to past levels, we believe this might be another hindrance for the civil construction segment. We believe the interest rate level that is evolving right now. Certainly, it's been offset by a very significant growth in real estate credit lines in Brazil. High interest rates, the GDP level, which was transformed into real estate credit for civil construction was not higher than 15%. But in the U.S., it's 85%, Carlos. So we believe there are possibilities today to buy property. And certainly, this is mitigating, at least for next year, this hike in interest rates. We've been watching very closely, more specifically, not a number of active construction sites but new ventures for next year. And we believe that despite all this volatility in the construction sector, this factor will continue to support demand. Another aspect that I would like to highlight to you, Carlos, has to do with the industry. Manufacturing industry vigorously increased demand for steel in the latest months, and particularly owing to the opportunity or windows of export that our clients found via FX or disruption of logistics, local chains. So we have traditional clients in machinery and equipment, our agribusiness, and they have a portfolio sold for 5 years. So there were moves by many clients in exhibitions and fares where we sell products. And participation was lower this year because they understood it wouldn't make sense to be at a fair to supply products and to talk about new launches. They have 5 years of a portfolio. So that's what we also see in heavy vehicles and trucks. The very long delivery terms to deliver trucks in Brazil unprecedented. So now we can navigate next year with these volatility at a calmer pace.

What about exports?

Our exports at Gerdau, Brazil, they will start to increase again. That's a window of opportunity for us. If we find a window of volatility or difficult in a quarter next year, we can quickly reverse the picture and reverse the domestic production for exports. Back in 2019, our exports were about 30% of production in Brazil; and 2020, if I'm not mistaken, around 15%. And we went down strongly to meet the domestic market, close to 2% in the first quarter this year. And if you check the number of the third quarter, it went up to 12%. So we still have opportunities to resume exports, if necessary. So we believe, for the next 5 quarter horizon, this thing about steel demand in Brazil will mitigate political and economic risks down the road. As for imports, we also consider imports to growing marginally in Brazil, owing to difficulties in supply. Once supply gets stable in Brazil in all segments, our projection is that imports will go down slightly. At current level, around 13%; historical, around 10%. So a marginal difference. And we believe that now that we have a balance in latest months between supply and demand, they should go back to historic levels. So overall speaking, that's what I have to say. Scardoelli, anything that you would like to add to Carlos?

No, I guess these are the highlights. Carlos, great to see you.

If I may ask an additional question, if possible. With the very strong cash flow generation that you have, would the company consider -- or management propose to the Board to do some share buybacks as another way to return money to shareholders?

On this topic, Carlos, was addressed this, Carlos, via dividends. So there are 2 ways to return capital to shareholders. And the management's decision or the Board decided to have this return consistent with our extraordinary results, dividends. So that's a format, to some extent, more to the point. And we believe, as a result, we don't have to decide what is the right moment to work on buybacks. Historically, we use buybacks to maintain our treasury and to have our long-term plan. So this can be as effective as all the rest.

The next question is from Rafael Barcellos with Santander.

Hi, Rafael. What's up?

Hi, Scardoelli.

We can hear you well?

Thank you. My first question was just answered. It was about exports. Exports in Brazil have gaining traction. And if you think about the third quarter, you reported an 85% mix in domestic markets. So I would just like to have some color about how you see exports for the coming months or next quarter, especially, like you said, exports could be a relief mechanism. And you said that supply recovered in recent months. And as for demand, clearly, it remains strong. But maybe I would like to have some color about your current order book. What is your sentiment? But clearly, demand is strong and supply recovered. In this scenario, the burning question is about the competitive environment. So I wonder if you could make some comments on competition. It could be interesting to hear from you.

Okay, Rafael. Exports went down dramatically. We exported 30% of our production in 2019. It went down to 15% in 2020 and went down the third quarter of this year to 4%. Everything in the domestic market in the second quarter went down to 8% and in third quarter, 12%. So from 12%, going back to 15% or 20% , we can do this very fast. Because the bulk of our exports eventually are for subsidiaries or partners in Latin America. So the need, if we need to ship completely to the domestic market, well, we let this opportunity for the future to go back and meet these partners and subsidiaries. So it's very easy for us should we need it. And if there is volatility in demand for the current quarters, we can do that. So exports is ready for us. That's an opportunity, a very short-term opportunity. All we have to do is to press the play button if we have a current or actual need, which is not happening right now. Well, our order book is very strong. There is a concern by our clients, particularly in the manufacturing industry, they want to have steel supply guaranteed so they can honor their exports agreements. So we have a very robust confirmed portfolio, not only for Q4, but also taking into account the transition into next year. The automotive market, we also have expectations to see whether 2020 year will be better than this year. We don't believe there's going to be a full recovery of the sector owing to the chips or semiconductors. We've been watching very closely the topic with experts involved in the market, and it's only expected to be fully stable in 2023. But we have an additional opportunity in Brazil. More than 50% of our special steel production is oriented to the heavy vehicle market trucks. And it doesn't rely so much in chips compared to light vehicles. Certainly, we can have 200 chips in these vehicles. So the heavy segment for us also has high prospects or booming next year and also agribusiness with machinery and equipment. So overall speaking, things are stable. And the competitive environment goes back to what we had before the crisis. So these are the players we already had. They are competing in the arena. And I would say that maybe we moved away from the pandemic even stronger in the civil construction segment by acquiring Silat, known as Gerdau Caucaia. But in the short term, it turned out to be a very powerful relief valve to meet demand peaks that we will have in coming quarters. So let's say Gerdau is getting out of this pandemic period even stronger with the progress in our strategy and also some positions in retail and also Caucaia. So overall speaking, that's my answer to you.

Our next question is from Isabella Vasconcelos with Bradesco.

Hello? Can you hear me well?

We can see and hear you clearly, Isabella.

Okay. Great to talk to you again. It's been a while, great to see you. I have 2 questions. I guess most of the topics were already answered. But the first question is about short term; and the second long term. Short term, if you think about the U.S., Gustavo, you said that you expect the level of profitability to remain the same. Seasonally speaking, scrap usually goes up during the winter season. And I think you have other cost and imports that are going up. Do you see opportunities to maintain the EBITDA margin at 25%? Or should we expect to see some variation next quarter or in the first quarter of next year? And my second question, more long term. If you think about renewable energy, I think if we're doing some moves already and it makes all the sense. If we think about Gerdau Next and potential revenue streams that might arise from this new business, is energy something that you really focus on in terms of growing the long-term strategy at Gerdau? So these are my questions.

Thank you, Isabella. Speaking of our U.S. operation, this quarter, we reached historic levels in terms of EBITDA margin. And it comes from some factors. Firstly, we had a metal spread and unprecedented metal spread level. And our expectation is that these spreads will be sustainable for the coming months. I think it's too early to say that we expect to have the spread maintained by the end of next year. I think it would be just clairvoyance rather than fundamentals. But if we check our short-term fundamentals, our expectation is having spread and profitability levels to be maintained with slight variations. In addition to spread, this quarter, we managed to put into practice nearly fully a plan that I mentioned 3 years ago, which was to recover a $30 per tonne gap that we had vis-a-vis our competitors. And this was possible, owing to a very robust performance management. But also coming from a CapEx program that we've been using for 3 years, it has proved to be very successful in terms of having a more noble mix of products and meeting our full customers' needs. So it all happen at the same time. Our expectation for next year is good and also for Q4. We don't believe there is going to be something going back, just usual volatility. But I couldn't say categorically if this EBITDA margin will be the same, but it will remain high. As for scrap, you're absolutely right, Isabella. We had a higher time for collection and transportation in the winter, like Michigan in the North, we have an important special steel operation there. And in the market, we have a hard time to buy prime scrap. That scrap that comes from the automotive market, owing to the stoppage of OEMs, and we use…

We don't have any more questions coming from the Raise Hand icon. continuing with questions through the Q&A. We have a question from Daniel Sasson from Itaú BBA. Can you comment on the sustainability of margins in the North America BD? Would it be reasonable to say that the goal there should be higher throughout '22 and '23 versus the historical numbers, because now the moment is a bit tighter than normal. Thank you for your question.

Daniel, now adding to what I already said to Isabella, spread -- metallic spreads are historically very, very high. And I think it will continue to be at these high levels, looking in the short run. We believe that I don't think it will ever go back to lower amounts we had in our recent history because we look at the fundamentals, and that's the conclusion we draw. So we believe that 2022 -- in 2022, our metallic spread level will be among the highest in our history. So it's in our hands to work hard to make that still a reality going forward.

Thank you, Gustavo. And I would like to thank the question from Leonardo from Bank of America, which is very similar to the question just posed by Daniel. I would also like to thank the question from Alejandro, he is a Gerdau investor, who asked us about working capital, and the question has already been answered. Therefore, I would like to thank you for asking all of your questions. And now we conclude the Q&A session. In case any question has not been answered, please forward your questions to our IR team. May you inform me at gerdau.com.br and we will be happy to answer your questions. Now I'll turn the floor back to Gustavo for his final remarks.

Thank you, Rodrigo. Once again, I would like to thank you all for joining us today in our earnings release call. It's always a pleasure, and we're always very happy to talk to you. As Rodrigo said, we are always available. Also, I would like to invite you to join us again on February 23, when we will talk about the results for the fourth quarter of 2021. Thank you all very much. Take care, and please put your safety and your health in the first place. So Gerdau's conference call is now over. I would like to thank you very much for joining us, and I wish you a very good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]