EX-99.1 2 tm2026939d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

KEY MEASURES ADOPTED BY THE COMPANY

· | We are closely following all guidance for preventing the spread of Covid-19 issued by the health authorities in the countries where we operate. As such, we have adopted a series of measures to mitigate infection risk in workplaces, such as working from home, creating crisis committees and cancelling all domestic and international travel and participation in external events, just to cite a few.

· | At all our units, if needed, we are opting for collective leave and shorter work shifts for our employees.

· | We also intensified hygiene measures at units, adopted flexible meal times, expanded the supply of chartered transportation and implemented triage protocols at plant entry points, among other measures.

· | On a daily basis, employees who must be physically present at Gerdau units follow the mandatory standard hygiene procedure and undergo a clinical evaluation that includes temperature measurement and answering a questionnaire.

· | Expansion of the + Care Program, which offers online psychological support, and of the telemedicine channels.

· | In 30 days, we delivered, jointly with our partners and setting a new record time for the construction of a hospital in Brazil, the new Covid-19 Treatment Center, which was built as an annex to Independência Hospital in Porto Alegre, Rio Grande do Sul.

· | Donation of funds to the recyclable material collectors of the Bolsa Reciclagem Program to support the association of recyclable material collectors in Minas Gerais state.

· | Development, in partnership with the startup Monkey, of a platform for suppliers to receive in advance payments from Gerdau in a fast and easy way, at attractive costs, to support them during the pandemic.

· | For information on other measures, please visit the Company’s website.

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São Paulo, August 5, 2020 – Gerdau S.A. (B3: GGBR4 / NYSE: GGB) announces its results for the second quarter of 2020. The consolidated financial statements of the Company are presented in Brazilian real (R$), in accordance with International Financial Reporting Standards (IFRS) and the accounting practices adopted in Brazil. The information in this report does not include the data of associates and jointly controlled entities, except where stated otherwise.

GERDAU’S PERFORMANCE IN 2Q20

Operating Results

CONSOLIDATED |  | 2Q20 |  |  | 2Q19 |  |  | ∆ |  |  | 1Q20 |  |  | ∆ |  |  | 6M20 |  |  | 6M19 |  |  | ∆
Volumes (1,000 tonnes) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Production of crude steel |  |  | 2,433 |  |  |  | 3,425 |  |  |  | -29 | % |  |  | 3,188 |  |  |  | -24 | % |  |  | 5,620 |  |  |  | 6,768 |  |  |  | -17 | %
Shipments of steel |  |  | 2,365 |  |  |  | 2,972 |  |  |  | -20 | % |  |  | 2,691 |  |  |  | -12 | % |  |  | 5,055 |  |  |  | 5,957 |  |  |  | -15 | %
Results (R$ million) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Sales |  |  | 8,745 |  |  |  | 10,154 |  |  |  | -14 | % |  |  | 9,228 |  |  |  | -5 | % |  |  | 17,972 |  |  |  | 20,180 |  |  |  | -11 | %
Cost of Goods Sold |  |  | (8,027 | ) |  |  | (8,881 | ) |  |  | -10 | % |  |  | (8,372 | ) |  |  | -4 | % |  |  | (16,399 | ) |  |  | (17,638 | ) |  |  | -7 | %
Gross profit |  |  | 718 |  |  |  | 1,273 |  |  |  | -44 | % |  |  | 855 |  |  |  | -16 | % |  |  | 1,574 |  |  |  | 2,542 |  |  |  | -38 | %
Gross margin (%) |  |  | 8.2 | % |  |  | 12.5 | % |  |  |  |  |  |  | 9.3 | % |  |  |  |  |  |  | 8.8 | % |  |  | 12.6 | % |  |  |  |
SG&A |  |  | (306 | ) |  |  | (352 | ) |  |  | -13 | % |  |  | (370 | ) |  |  | -17 | % |  |  | (677 | ) |  |  | (713 | ) |  |  | -5 | %
Selling expenses |  |  | (97 | ) |  |  | (120 | ) |  |  | -19 | % |  |  | (120 | ) |  |  | -19 | % |  |  | (217 | ) |  |  | (243 | ) |  |  | -11 | %
General and administrative expenses |  |  | (209 | ) |  |  | (232 | ) |  |  | -10 | % |  |  | (250 | ) |  |  | -16 | % |  |  | (460 | ) |  |  | (471 | ) |  |  | -2 | %
%SG&A/Net Sales |  |  | 3.5 | % |  |  | 3.5 | % |  |  |  |  |  |  | 4.0 | % |  |  |  |  |  |  | 3.8 | % |  |  | 3.5 | % |  |  |  |
Adjusted EBITDA |  |  | 1,318 |  |  |  | 1,574 |  |  |  | -16.2 | % |  |  | 1,177 |  |  |  | 12.0 | % |  |  | 2,495 |  |  |  | 3,131 |  |  |  | -20.3 | %
Adjusted EBITDA Margin |  |  | 15.1 | % |  |  | 15.5 | % |  |  |  |  |  |  | 12.8 | % |  |  |  |  |  |  | 13.9 | % |  |  | 15.5 | % |  |  |  |

Production and Shipments

In 2Q20 compared to both 1Q20 and 2Q19, crude steel production decreased due to the stoppages at the Company’s mills, as mentioned in the material fact notices disclosed to the market. The stoppages were carried out due to the Covid-19 pandemic and its impacts on businesses.

Steel shipments in 2Q20 declined in relation to both 1Q20 and 2Q19, due to the lower shipments at all business divisions, with the exception of the Brazil BD, which registered an increase in shipments compared to 1Q20.

Operating Result

The reductions in net sales and in consolidated cost of goods sold in 2Q20 in relation to 1Q20 is mainly due to the lower shipments.

Consolidate gross profit and gross margin decreased in relation to 1Q20, mainly due to the impacts from the costs with the stoppages at mills during the quarter. Meanwhile, in relation to 2Q19, gross profit and gross margin decreased, basically due to the decline in net sales outpacing the decline in cost of goods sold. In the same comparison period, cost per tonne sold increased by 14%, compared to the increase of 8% in net sales per tonne sold.

Selling, general and administrative expenses decreased in 2Q20 in relation to both 1Q20 and 2Q19, due to the measures adopted by the Company to reduce costs and expenses given the effects of the Covid-19 pandemic and despite the adverse effect from exchange variation. As a ratio of net sales, selling, general and administrative expenses were 3.5% in 2Q20, in line with 2Q19.

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Breakdown of Consolidated EBITDA (R$ million) |  | 2Q20 |  |  | 2Q19 |  |  | ∆ |  |  | 1Q20 |  |  | ∆ |  |  | 6M20 |  |  | 6M19 |  |  | ∆ |
Net income |  |  | 315 |  |  |  | 373 |  |  |  | -15 | % |  |  | 221 |  |  |  | 43 | % |  |  | 537 |  |  |  | 825 |  |  |  | -35 | %
Net financial result |  |  | 330 |  |  |  | 300 |  |  |  | 10 | % |  |  | 232 |  |  |  | 43 | % |  |  | 561 |  |  |  | 675 |  |  |  | -17 | %
Provision for income and social contribution taxes |  |  | 131 |  |  |  | 252 |  |  |  | -48 | % |  |  | 21 |  |  |  | 528 | % |  |  | 151 |  |  |  | 415 |  |  |  | -64 | %
Depreciation and amortization |  |  | 611 |  |  |  | 527 |  |  |  | 16 | % |  |  | 557 |  |  |  | 10 | % |  |  | 1,168 |  |  |  | 1,033 |  |  |  | 13 | %
EBITDA - Instruction CVM ¹ |  |  | 1,387 |  |  |  | 1,452 |  |  |  | -4 | % |  |  | 1,030 |  |  |  | 35 | % |  |  | 2,417 |  |  |  | 2,948 |  |  |  | -18 | %
Impairment of financial assets |  |  | 25 |  |  |  | 2 |  |  |  | 1192 | % |  |  | 43 |  |  |  | -41 | % |  |  | 69 |  |  |  | 8 |  |  |  | 762 | %
Equity in earnings of unconsolidated companies |  |  | 4 |  |  |  | 39 |  |  |  | -89 | % |  |  | (10 | ) |  |  | -139 | % |  |  | (6 | ) |  |  | 24 |  |  |  | -126 | %
Proportional EBITDA of associated companies and jointly controlled entities |  |  | 91 |  |  |  | 81 |  |  |  | 12 | % |  |  | 114 |  |  |  | -20 | % |  |  | 204 |  |  |  | 151 |  |  |  | 35 | %
Fixed cost of plants without production |  |  | 119 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 119 |  |  |  | - |  |  |  | - |
Credit recovery / Provisions |  |  | (308 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (308 | ) |  |  | - |  |  |  | - |
Adjusted EBITDA² |  |  | 1,318 |  |  |  | 1,574 |  |  |  | -16.2 | % |  |  | 1,177 |  |  |  | 12.0 | % |  |  | 2,495 |  |  |  | 3,131 |  |  |  | -20.3 | %
Adjusted EBITDA Margin |  |  | 15.1 | % |  |  | 15.5 | % |  |  |  |  |  |  | 12.8 | % |  |  |  |  |  |  | 13.9 | % |  |  | 15.5 | % |  |  |  |

CONCILIATION OF CONSOLIDATED EBITDA (R$ million) |  | 2Q20 |  |  | 2Q19 |  |  | 1Q20 |  |  | 6M20 |  |  | 6M19 |
EBITDA - Instruction CVM ¹ |  |  | 1,387 |  |  |  | 1,452 |  |  |  | 1,030 |  |  |  | 2,417 |  |  |  | 2,948 |
Depreciation and amortization |  |  | (611 | ) |  |  | (527 | ) |  |  | (557 | ) |  |  | (1,168 | ) |  |  | (1,033 | )
OPERATING INCOME BEFORE FINANCIAL RESULT AND TAXES³ |  |  | 776 |  |  |  | 925 |  |  |  | 474 |  |  |  | 1,249 |  |  |  | 1,915 |

1 - Non-accounting measure calculated in accordance with CVM Instruction 527.

2 - Non-accounting measure calculated by the Company. The Company presents Adjusted EBITDA to provide additional information on cash generation in the period.

3 - Accounting measure reported in the consolidated Income Statement.

Adjusted EBITDA and adjusted EBITDA margin increased in 2Q20 compared to 1Q20, mainly due to the higher shipments at the Brazil BD. In addition, adjusted EBITDA is reported with the elimination of the non-recurring effects of the fixed costs of plants without production, net of credit recovery / Provisions in the quarter.

In relation to 2Q19, adjusted EBITDA and adjusted EBITDA margin accompanied the decline in gross profit, after the elimination of non-recurring effects in this indicator, as explained above.

EBITDA (R$ million) and EBITDA Margin (%)

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Financial Result and Net Income

CONSOLIDATED (R$ million) |  | 2Q20 |  |  | 2Q19 |  |  | ∆ |  |  | 1Q20 |  |  | ∆ |  |  | 6M20 |  |  | 6M19 |  |  | ∆ |
Income before financial income expenses and taxes¹ |  |  | 776 |  |  |  | 925 |  |  |  | -16 | % |  |  | 473 |  |  |  | 64 | % |  |  | 1,249 |  |  |  | 1,915 |  |  |  | -35 | %
Financial Result |  |  | (330 | ) |  |  | (300 | ) |  |  | 10 | % |  |  | (232 | ) |  |  | 43 | % |  |  | (561 | ) |  |  | (675 | ) |  |  | -17 | %
Financial income |  |  | 51 |  |  |  | 48 |  |  |  | 6 | % |  |  | 46 |  |  |  | 10 | % |  |  | 97 |  |  |  | 89 |  |  |  | 9 | %
Financial expenses |  |  | (390 | ) |  |  | (353 | ) |  |  | 11 | % |  |  | (325 | ) |  |  | 20 | % |  |  | (715 | ) |  |  | (698 | ) |  |  | 2 | %
Exchange variation, net (including net investment hedge) |  |  | 29 |  |  |  | 27 |  |  |  | 11 | % |  |  | (56 | ) |  |  | - |  |  |  | (26 | ) |  |  | (22 | ) |  |  | 22 | %
Exchange variation (other currencies) |  |  | (20 | ) |  |  | (15 | ) |  |  | 38 | % |  |  | 103 |  |  |  | - |  |  |  | 83 |  |  |  | (37 | ) |  |  | - |
Gains (losses) on financial instruments, net |  |  | 0 |  |  |  | (7 | ) |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 1 |  |  |  | (7 | ) |  |  | - |
Income before taxes¹ |  |  | 446 |  |  |  | 625 |  |  |  | -29 | % |  |  | 242 |  |  |  | 84 | % |  |  | 688 |  |  |  | 1,240 |  |  |  | -45 | %
Income and social contribution taxes |  |  | (131 | ) |  |  | (252 | ) |  |  | -48 | % |  |  | (21 | ) |  |  | 528 | % |  |  | (151 | ) |  |  | (415 | ) |  |  | -64 | %
Exchange variation including net investment hedge |  |  | 19 |  |  |  | (42 | ) |  |  | - |  |  |  | 80 |  |  |  | -76 | % |  |  | 99 |  |  |  | (21 | ) |  |  | - |
Other lines |  |  | (85 | ) |  |  | (211 | ) |  |  | -59 | % |  |  | (101 | ) |  |  | -15 | % |  |  | (186 | ) |  |  | (394 | ) |  |  | -53 | %
Non-recurring items |  |  | (64 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (64 | ) |  |  | - |  |  |  | - |
Consolidated Net Income ¹ |  |  | 315 |  |  |  | 373 |  |  |  | -15 | % |  |  | 221 |  |  |  | 43 | % |  |  | 537 |  |  |  | 825 |  |  |  | -35 | %
Non-recurring items |  |  | (124 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (124 | ) |  |  | - |  |  |  | - |
Fixed costs of plants without production |  |  | 119 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 119 |  |  |  | - |  |  |  | - |
Credit recovery / Provisions |  |  | (308 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (308 | ) |  |  | - |  |  |  | - |
Income taxon extraordinary items |  |  | 64 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 64 |  |  |  | - |  |  |  | - |
Consolidated Adjusted Net Income² |  |  | 191 |  |  |  | 373 |  |  |  | -48.7 | % |  |  | 221 |  |  |  | -13.7 | % |  |  | 412 |  |  |  | 825 |  |  |  | -50.0 | %

1 - Accounting measure disclosed in the consolidated Income Statement.
2 - Non-accounting measure calculated by the Company to show net profit adjusted by non-recurring events that influenced the result.

In 2Q20 compared to 1Q20 and 2Q19, the variation in the financial result was basically due to the effects from exchange variation.

Adjusted net profit decreased in 2Q20 compared to 1Q20 and 2Q19, due to the lower gross profit, which was mitigated by the reduction in selling, general and administrative expenses.

Dividends

The Company’s Board of Directors opted not to anticipate the payment of dividends for 2Q20, due to the uncertainties caused by the effects from Covid-19 on the result for fiscal year 2020, in line with the other initiatives to ensure liquidity. We reiterate that the Company’s dividend policy remains unchanged with the distribution of 30% of adjusted net profit for the fiscal year, with its anticipation discretionary.

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Working Capital and Cash Conversion Cycle

The cash conversion cycle (working capital divided by daily net sales in the quarter) went from 83 days in March 2020 to 95 days in June 2020, affected by the reduction in net sales and by exchange variation in the period.

Working Capital (R$ million) and Cash Conversion Cycle (days)

Financial liabilities

Debt composition (R$ million) |  | 03.31.2020 |  |  | 12.31.2019 |  |  | 03.31.2019 |
Short Term |  |  | 3,659 |  |  |  | 1,562 |  |  |  | 2,939 |
Long Term |  |  | 16,370 |  |  |  | 14,488 |  |  |  | 12,054 |
Gross Debt |  |  | 20,029 |  |  |  | 16,050 |  |  |  | 14,993 |
Cash, cash equivalents and short-term investments |  |  | 5,979 |  |  |  | 6,295 |  |  |  | 2,532 |
Net Debt |  |  | 14,051 |  |  |  | 9,755 |  |  |  | 12,461 |

On June 30, 2020, gross debt was 18.4% short term and 81.6% long term. Broken down by currency, 14.4% of gross debt was denominated in Brazilian real, 85.5% in U.S. dollar and 0.1% in other currencies.

On June 30, 2020, 53% of cash was denominated in U.S. dollar.

The evolution in key debt indicators is shown below:

Indicators |  | 03.31.2020 |  |  | 12.31.2019 |  |  | 03.31.2019 |
Gross debt / Total capitalization ¹ |  |  | 40 | % |  |  | 37 | % |  |  | 36 | %
Net debt² (R$) / EBITDA ³ (R$) |  |  | 2.55 | x |  |  | 1.67 | x |  |  | 1.81 | x

1 - Total capitalization = shareholders' equity + gross debt - debt interest
2 – Net debt = gross debt – interest on debt – cash, cash equivalents and financial investments.
3 – Adjusted EBITDA in the last 12 months.

The increase in the net debt/EBITDA ratio from 2.55x on March 31, 2020 to 2.78x on June 30, 2020 is explained mainly by the exchange variation in the period.

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Payment schedule of gross debt (non-current)

On June 30, 2020, the nominal weighted average cost of gross debt was 4.7%, or 2.3% for the portion denominated in Brazilian real, 5.6% plus exchange variation for the portion denominated in U.S. dollar contracted by companies in Brazil, and 3.9% for the portion contracted by subsidiaries abroad. On June 30, 2020, the average gross debt term was 7.2 years, with the debt maturity schedule well balanced and distributed over the coming years.

Investments

Capital expenditure amounted to R$ 271 million in 2Q20, with R$ 144 million allocated to general maintenance, R$ 43 million to maintenance of the Ouro Branco Mill and R$ 84 million to technological expansion and modernization. Of the total amount invested in the quarter, 45.5% was allocated to the Brazil BD, 18.1% to the Special Steel BD, 31.1% to the South America BD and 5.3% to the North America BD.

The Company’s investment plan for 2020, which recently was revised due to uncertainties given the effects of Covid-19, is R$ 1.6 billion. Accordingly, the capital expenditure estimate for the period 2019-21 was decreased to R$ 6 billion.

The investments in technological expansion and modernization will be made as expectations for the market’s recovery and for free cash flow generation in the period are confirmed.

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8

Free Cash Flow

Free cash flow in 2Q20 was positive, which represents a recovery in relation to 1Q20, due to the various efforts to ensure the Company’s financial liquidity. Note that in the last 12 months the Company registered positive free cash flow in excess of R$ 3.9 billion, reinforcing its liquidity position.

Free Cash Flow (R$ million)

Free Cash Flow - Quarterly (R$ million)

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PERFORMANCE BY BUSINESS DIVISION (BD)

The information in this report is divided into four Business Divisions (BD) in accordance with Gerdau’s corporate governance, as follows:

| · | Brazil BD (Brazil Business Division) – includes the operations in Brazil (except special steel) and the iron ore operation in Brazil;

| · | North America BD (North America Business Division) – includes all operations in North America (Canada, United States and Mexico), except special steel, as well as the jointly controlled entities and associate company, both located in Mexico;

| · | South America BD (South America Business Division) – includes all operations in South America (Argentina, Peru, Uruguay and Venezuela), except the operations in Brazil, and the jointly controlled entities in the Dominican Republic and Colombia;

| · | Special Steel BD (Special Steel Business Division) – includes the special steel operations in Brazil and the United States.

NET SALES

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EBITDA & EBITDA MARGIN

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BRAZIL BD

BRAZIL BD |  | 2Q20 |  |  | 2Q19 |  |  | ∆ |  |  | 1Q20 |  |  | ∆ |  |  | 6M20 |  |  | 6M19 |  |  | ∆ |
Volumes (1,000 tonnes) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Production of crude steel |  | 1,135 |  |  | 1,626 |  |  | -30 | % |  | 1,239 |  |  | -8 | % |  | 2,374 |  |  | 3,045 |  |  | -22 | %
Shipments of steel |  | 1,169 |  |  | 1,343 |  |  | -13 | % |  | 1,117 |  |  | 5 | % |  | 2,287 |  |  | 2,701 |  |  | -15 | %
Domestic Market |  | 930 |  |  | 985 |  |  | -6 | % |  | 940 |  |  | -1 | % |  | 1,870 |  |  | 1,924 |  |  | -3 | %
Exports |  | 239 |  |  | 359 |  |  | -33 | % |  | 178 |  |  | 34 | % |  | 417 |  |  | 777 |  |  | -46 | %
Shipments of long steel |  | 836 |  |  | 961 |  |  | -13 | % |  | 761 |  |  | 10 | % |  | 1,598 |  |  | 2,002 |  |  | -20 | %
Domestic Market |  | 635 |  |  | 658 |  |  | -3 | % |  | 611 |  |  | 4 | % |  | 1,247 |  |  | 1,299 |  |  | -4 | %
Exports |  | 201 |  |  | 304 |  |  | -34 | % |  | 150 |  |  | 34 | % |  | 351 |  |  | 704 |  |  | -50 | %
Shipments of flat steel |  | 333 |  |  | 382 |  |  | -13 | % |  | 356 |  |  | -6 | % |  | 689 |  |  | 698 |  |  | -1 | %
Domestic Market |  | 295 |  |  | 327 |  |  | -10 | % |  | 328 |  |  | -10 | % |  | 624 |  |  | 625 |  |  | 0 | %
Exports |  | 38 |  |  | 55 |  |  | -31 | % |  | 28 |  |  | 37 | % |  | 66 |  |  | 73 |  |  | -11 | %
Results (R$ million) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Sales¹ |  | 3,561 |  |  | 4,018 |  |  | -11 | % |  | 3,414 |  |  | 4 | % |  | 6,975 |  |  | 7,867 |  |  | -11 | %
Domestic Market |  | 2,994 |  |  | 3,280 |  |  | -9 | % |  | 3,008 |  |  | 0 | % |  | 6,002 |  |  | 6,290 |  |  | -5 | %
Exports |  | 567 |  |  | 737 |  |  | -23 | % |  | 406 |  |  | 40 | % |  | 974 |  |  | 1,576 |  |  | -38 | %
Cost of Goods Sold |  | (3,148 | ) |  | (3,426 | ) |  | -8 | % |  | (3,009 | ) |  | 5 | % |  | (6,157 | ) |  | (6,747 | ) |  | -9 | %
Gross profit |  | 413 |  |  | 592 |  |  | -30 | % |  | 406 |  |  | 2 | % |  | 819 |  |  | 1,120 |  |  | -27 | %
Gross margin (%) |  | 11.6 | % |  | 14.7 | % |  |  |  |  | 11.9 | % |  |  |  |  | 11.7 | % |  | 14.2 | % |  |  |
Adjusted EBITDA² |  | 663 |  |  | 717 |  |  | -8 | % |  | 537 |  |  | 23 | % |  | 1,200 |  |  | 1,398 |  |  | -14 | %
Adjusted EBITDA Margin (%) |  | 18.6 | % |  | 17.8 | % |  |  |  |  | 15.7 | % |  |  |  |  | 17.2 | % |  | 17.8 | % |  |  |

1 – Includes iron ore sales.

2 – Adjusted EBITDA due to the elimination of non-recurring effects of fixed costs of mills stopped in the quarter.

Production and Shipments

In 2Q20 compared to both 1Q20 and 2Q19, crude steel production decreased due to the stoppages at the Company’s mills, as mentioned in the material fact notices disclosed to the market.

Total shipments increased in 2Q20 compared to 1Q20, driven by the opportunities for increasing exports and the favorable exchange variation in the period. The highlight was the 10% increase in long steel shipments, mainly due to the resilience of the construction industry.

In 2Q20, 387,000 tonnes of iron ore were sold to third parties and 942,000 tonnes were consumed internally. In 6Q20, 480,000 tonnes of iron ore were sold to third parties and 2,071,000 tonnes were consumed internally.

Operating Result

Net sales increased in 2Q20 compared to 1Q20, mainly due to the higher shipments.

Cost of goods sold increased in 2Q20 compared to 1Q20, due to the production stoppages at the Company’s mills.

Gross profit and gross margin remained stable in 2Q20 compared to 1Q20, despite the stoppages at mills, given the flexibility in raw material routes and the capture of business opportunities in the short term. Meanwhile, in relation to 2Q19, the reductions in gross profit and gross margin was due to the lower dilution of fixed costs explained by the decline in shipments.

Compared to 1Q20, adjusted EBITDA and adjusted EBITDA margin increased in 2Q20, mainly due to the higher shipments. In addition, adjusted EBITDA is reported without the non-recurring effects from the fixed costs of mills undergoing stoppages in the quarter. Meanwhile, in relation to 2Q19, EBITDA and EBITDA margin in 2Q20 declined, accompanying gross profit.

12

EBITDA (R$ million) and EBITDA Margin (%)

13

NORTH AMERICA BD

NORTH AMERICA BD |  | 2Q20 |  |  | 2Q19 |  |  | ∆ |  |  | 1Q20 |  |  | ∆ |  |  | 6M20 |  |  | 6M19 |  |  | ∆ |
Volumes (1,000 tonnes) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Production of crude steel |  | 1,031 |  |  | 1,195 |  |  | -14 | % |  | 1,345 |  |  | -23 | % |  | 2,376 |  |  | 2,462 |  |  | -4 | %
Shipments of steel |  | 960 |  |  | 1,066 |  |  | -10 | % |  | 1,122 |  |  | -14 | % |  | 2,081 |  |  | 2,142 |  |  | -3 | %
Results (R$ million) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Sales |  | 3,979 |  |  | 3,812 |  |  | 4 | % |  | 3,966 |  |  | 0 | % |  | 7,945 |  |  | 7,654 |  |  | 4 | %
Cost of Goods Sold |  | (3,730 | ) |  | (3,441 | ) |  | 8 | % |  | (3,648 | ) |  | 2 | % |  | (7,378 | ) |  | (6,841 | ) |  | 8 | %
Gross profit |  | 249 |  |  | 371 |  |  | -33 | % |  | 318 |  |  | -22 | % |  | 567 |  |  | 813 |  |  | -30 | %
Gross margin (%) |  | 6.3 | % |  | 9.7 | % |  |  |  |  | 8.0 | % |  |  |  |  | 7.1 | % |  | 10.6 | % |  |  |
EBITDA |  | 418 |  |  | 426 |  |  | -2 | % |  | 425 |  |  | -2 | % |  | 842 |  |  | 930 |  |  | -9 | %
EBITDA margin (%) |  | 10.5 | % |  | 11.2 | % |  |  |  |  | 10.7 | % |  |  |  |  | 10.6 | % |  | 12.1 | % |  |  |

Production and Shipments

Steel production and shipments declined in 2Q20 compared to both 1Q20 and 2Q19, due to the impacts caused by the Covid-19 pandemic, especially in April. Despite the decline, May and June registered a recovery, reflecting the resilience of construction activities in general.

Operating Result

Despite the lower shipments, the slight increase in the metals spread in 2Q20 (US$ 411/st in 1Q20 vs. US$ 415/st in 2Q20) and the effects from exchange variation in the comparison periods contributed to the stability in net sales in relation to 1Q20 and to the growth in net sales in relation to 2Q19.

Cost of goods sold increased in relation to both 1Q20 and 2Q19, due to the average Brazilian real depreciation of 21% and 37%, respectively. Excluding the effects from exchange variation, cost of goods sold decreased 14% and 20%. Note that the Company has been making efforts to reduce its fixed and variable costs, such as idling its mill in St. Paul, Minnesota.

Gross profit and gross margin in 2Q20 registered reductions compared to both 1Q20 and 2Q19, due to the lower shipments resulting from the impacts caused by the Covid-19 pandemic in April.

EBITDA in 2Q20 remained stable in relation to the other periods, due to the effects from exchange variation, as mentioned above. EBITDA margin presented relative stability, reflecting the efforts to reduce costs.

14

EBITDA (R$ million) and EBITDA Margin (%)

15

SOUTH AMERICA BD

SOUTH AMERICA BD |  | 2Q20 |  |  | 2Q19 |  |  | ∆ |  |  | 1Q20 |  |  | ∆ |  |  | 6M20 |  |  | 6M19 |  |  | ∆ |
Volumes (1,000 tonnes) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Production of crude steel |  | 79 |  |  | 156 |  |  | -50 | % |  | 142 |  |  | -44 | % |  | 220 |  |  | 295 |  |  | -25 | %
Shipments of steel |  | 128 |  |  | 262 |  |  | -51 | % |  | 202 |  |  | -36 | % |  | 330 |  |  | 506 |  |  | -35 | %
Results (R$ million) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Sales |  | 554 |  |  | 840 |  |  | -34 | % |  | 699 |  |  | -21 | % |  | 1,253 |  |  | 1,580 |  |  | -21 | %
Cost of Goods Sold |  | (471 | ) |  | (719 | ) |  | -35 | % |  | (594 | ) |  | -21 | % |  | (1,064 | ) |  | (1,349 | ) |  | -21 | %
Gross profit |  | 83 |  |  | 121 |  |  | -31 | % |  | 105 |  |  | -21 | % |  | 189 |  |  | 231 |  |  | -18 | %
Gross margin (%) |  | 15.0 | % |  | 14.4 | % |  |  |  |  | 15.1 | % |  |  |  |  | 15.1 | % |  | 14.6 | % |  |  |
EBITDA |  | 145 |  |  | 169 |  |  | -14 | % |  | 164 |  |  | -11 | % |  | 309 |  |  | 326 |  |  | -5 | %
EBITDA margin (%) |  | 26.2 | % |  | 20.1 | % |  |  |  |  | 23.4 | % |  |  |  |  | 24.7 | % |  | 20.6 | % |  |  |

1 – EBITDA adjusted for the elimination of non-recurring effects from the fixed costs of mills undergoing stoppages in the quarter.

Production and Shipments

Steel production and shipments decreased in 2Q20 compared to both 1Q20 and 2Q19, due to the impacts caused by the Covid-19 pandemic, especially the state of emergency declared in Peru, under which all activities were suspended.

Operating Result

Net sales and cost of goods sold declined in 2Q20, mainly due to the lower shipments compared to 1Q20 and 2Q19, which were offset by the effects from exchange variation in the periods.

Gross profit decreased in 2Q20 compared to both 1Q20 and 2Q19, due to lower shipments. Gross margin was in line in both comparison periods.

EBITDA declined in 2Q20 in relation to 1Q20 and 2Q19, accompanying gross profit, after the elimination of non-recurring effects from the fixed costs of the mill stoppages in the quarter. Meanwhile, EBITDA margin increased in 2Q20, also reflecting these eliminations, in comparison with both periods.

EBITDA (R$ million) and EBITDA Margin (%)

|  | 16

SPECIAL STEEL BD

SPECIAL STEEL BD |  | 2Q20 |  |  | 2Q19 |  |  | ∆ |  |  | 1Q20 |  |  | ∆ |  |  | 6M20 |  |  | 6M19 |  |  | ∆ |
Volumes (1,000 tonnes) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Production of crude steel |  | 188 |  |  | 448 |  |  | -58 | % |  | 462 |  |  | -59 | % |  | 651 |  |  | 967 |  |  | -33 | %
Shipments of steel |  | 176 |  |  | 426 |  |  | -59 | % |  | 329 |  |  | -46 | % |  | 506 |  |  | 857 |  |  | -41 | %
Results (R$ million) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Sales |  | 893 |  |  | 1,844 |  |  | -52 | % |  | 1,437 |  |  | -38 | % |  | 2,330 |  |  | 3,684 |  |  | -37 | %
Cost of Goods Sold |  | (908 | ) |  | (1,670 | ) |  | -46 | % |  | (1,407 | ) |  | -35 | % |  | (2,316 | ) |  | (3,319 | ) |  | -30 | %
Gross profit |  | -15 |  |  | 174 |  |  |  |  |  | 30 |  |  |  |  |  | 15 |  |  | 366 |  |  | -96 | %
Gross margin (%) |  | -1.7 | % |  | 9.5 | % |  |  |  |  | 2.1 | % |  |  |  |  | 0.6 | % |  | 9.9 | % |  |  |
EBITDA |  | 106 |  |  | 242 |  |  | -56 | % |  | 119 |  |  | -10 | % |  | 225 |  |  | 481 |  |  | -53 | %
EBITDA margin (%) |  | 11.9 | % |  | 13.1 | % |  |  |  |  | 8.2 | % |  |  |  |  | 9.7 | % |  | 13.0 | % |  |  |

1 – EBITDA adjusted for the elimination of non-recurring effects from the fixed costs of mills undergoing stoppages in the quarter.

Production and Shipments

Steel production and shipments declined in 2Q20 compared to both 1Q20 and 2Q19, given the effects of Covid-19, mainly in the automotive industry, and which were more intense in the United States than in Brazil.

Operating Result

The reduction in net sales and cost of goods sold in 2Q20 compared to both 1Q20 and 2Q19 is due to lower shipments.

Gross profit and gross margin were negative in the period, given that capacity utilization rate was below 30%, which resulted in the lower dilution of fixed costs, reflecting the mill stoppages in April and the weaker demand from the automotive industry.

EBITDA declined in 2Q20 in relation to 2Q20, accompanying gross profit in the period, after the elimination of non-recurring effects from the fixed costs of mill stoppages in the quarter. Despite the low capacity utilization rate, the efforts to reduce costs softened the contraction in EBITDA margin compared to 2Q19.

EBITDA (R$ million) and EBITDA Margin (%)

|  | 17

THE MANAGEMENT

This document contains forward-looking statements. These statements are based on estimates, information or methods that may be incorrect or inaccurate and that may not occur. These estimates are also subject to risk, uncertainties and assumptions that include, among other factors: general economic, political and commercial conditions in Brazil and in the markets where we operate, as well as existing and future government regulations. Potential investors are cautioned that these forward-looking statements do not constitute guarantees of future performance, given that they involve risks and uncertainties. Gerdau does not undertake and expressly waives any obligation to update any of these forward-looking statements, which are valid only on the date on which they were made.

GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
In thousands of Brazilian reais (R$)

|  | June 30, 2020 |  |  | December 31, 2019 |
CURRENT ASSETS |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 4,063,661 |  |  |  | 2,641,652 |
Short-term investments |  |  | 2,484,834 |  |  |  | 3,652,949 |
Trade accounts receivable - net |  |  | 3,612,036 |  |  |  | 2,672,370 |
Inventories |  |  | 9,515,481 |  |  |  | 7,659,737 |
Tax credits |  |  | 521,055 |  |  |  | 504,302 |
Income and social contribution taxes recoverable |  |  | 389,623 |  |  |  | 483,088 |
Fair value of derivatives |  |  | 2,078 |  |  |  | 2,846 |
Other current assets |  |  | 1,174,417 |  |  |  | 618,769 |
|  |  | 21,763,185 |  |  |  | 18,235,713 |
NON-CURRENT ASSETS |  |  |  |  |  |  |  |
Tax credits |  |  | 612,518 |  |  |  | 465,549 |
Deferred income taxes |  |  | 3,661,581 |  |  |  | 4,071,219 |
Unrealized gains on financial instruments |  |  |  |  |  |  | - |
Related parties |  |  | 127,996 |  |  |  | 95,445 |
Judicial deposits |  |  | 1,806,140 |  |  |  | 1,991,715 |
Other non-current assets |  |  | 524,939 |  |  |  | 464,169 |
Prepaid pension cost |  |  | 37,862 |  |  |  | 45,381 |
Advance for future investment in joint venture |  |  | - |  |  |  | 0 |
Investments in associates and joint ventures |  |  | 2,156,718 |  |  |  | 1,812,399 |
Goodwill |  |  | 12,723,896 |  |  |  | 9,469,311 |
Leasing |  |  | 817,637 |  |  |  | 777,314 |
Other Intangibles |  |  | 743,017 |  |  |  | 673,262 |
Property, plant and equipment, net |  |  | 17,624,940 |  |  |  | 15,901,493 |
|  |  | 40,837,244 |  |  |  | 35,767,257 |
TOTAL ASSETS |  |  | 62,600,429 |  |  |  | 54,002,970 |

|  | 18

GERDAU S.A.

CONSOLIDATED BALANCE SHEETS

In thousands of Brazilian reais (R$)

|  | June 30, 2020 |  |  | December 31, 2019 |
CURRENT LIABILITIES |  |  |  |  |  |  |  |
Trade accounts payable |  |  | 3,908,476 |  |  |  | 3,762,768 |
Short-term debt |  |  | 3,856,347 |  |  |  | 1,544,211 |
Debentures |  |  | 10,666 |  |  |  | 18,015 |
Taxes payable |  |  | 527,497 |  |  |  | 432,988 |
Income and social contribution taxes payable |  |  | 118,308 |  |  |  | 205,092 |
Payroll and related liabilities |  |  | 378,476 |  |  |  | 479,693 |
Dividends payable |  |  | - |  |  |  | 50,968 |
Leasing payable |  |  | 227,319 |  |  |  | 202,536 |
Employee benefits |  |  | 233 |  |  |  | 495 |
Environmental liabilities |  |  | 67,916 |  |  |  | 60,913 |
Fair value of derivatives |  |  | 103 |  |  |  | - |
Other current liabilities |  |  | 1,068,741 |  |  |  | 666,858 |
|  |  | 10,164,082 |  |  |  | 7,424,537 |
NON-CURRENT LIABILITIES |  |  |  |  |  |  |  |
Long-term debt |  |  | 14,216,089 |  |  |  | 11,594,612 |
Debentures |  |  | 2,893,992 |  |  |  | 2,893,029 |
Deferred income taxes |  |  | 69,642 |  |  |  | 517,413 |
Provision for tax, civil and labor liabilities |  |  | 769,348 |  |  |  | 809,299 |
Environmental liabilities |  |  | 156,280 |  |  |  | 51,395 |
Employee benefits |  |  | 1,927,665 |  |  |  | 1,469,949 |
Obligations with FIDC |  |  | 1,050,526 |  |  |  | 1,018,501 |
Leasing payable |  |  | 625,900 |  |  |  | 601,733 |
Other non-current liabilities |  |  | 465,532 |  |  |  | 449,375 |
|  |  | 22,174,974 |  |  |  | 19,405,306 |
EQUITY |  |  |  |  |  |  |  |
Capital |  |  | 19,249,181 |  |  |  | 19,249,181 |
Treasury stocks |  |  | (229,788 | ) |  |  | (242,542 | )
Capital reserves |  |  | 11,597 |  |  |  | 11,597 |
Retained earnings |  |  | 6,173,084 |  |  |  | 5,644,706 |
Operations with non-controlling interests |  |  | (2,870,825 | ) |  |  | (2,870,825 | )
Other reserves |  |  | 7,718,373 |  |  |  | 5,163,584 |
EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT |  |  | 30,051,622 |  |  |  | 26,955,701 |
NON-CONTROLLING INTERESTS |  |  | 209,751 |  |  |  | 217,426 |
EQUITY |  |  | 30,261,373 |  |  |  | 27,173,127 |
TOTAL LIABILITIES AND EQUITY |  |  | 62,600,429 |  |  |  | 54,002,970 |

19

GERDAU S.A.

CONSOLIDATED STATEMENTS OF INCOME

In thousands of Brazilian reais (R$)

|  | For the three-month period ended |  |  | For the six-month period ended |
|  | June 30, 2020 |  |  | June 30, 2019 |  |  | June 30, 2020 |  |  | June 30, 2019 |
NET SALES |  |  | 8,744,833 |  |  |  | 10,154,053 |  |  |  | 17,972,374 |  |  |  | 20,179,714 |
Cost of sales |  |  | (8,026,768 | ) |  |  | (8,881,496 | ) |  |  | (16,398,848 | ) |  |  | (17,638,146 | )
GROSS PROFIT |  |  | 718,065 |  |  |  | 1,272,557 |  |  |  | 1,573,526 |  |  |  | 2,541,568 |
Selling expenses |  |  | (97,034 | ) |  |  | (120,131 | ) |  |  | (216,956 | ) |  |  | (242,768 | )
General and administrative expenses |  |  | (209,415 | ) |  |  | (231,833 | ) |  |  | (459,870 | ) |  |  | (470,501 | )
Other operating income |  |  | 639,724 |  |  |  | 59,321 |  |  |  | 663,279 |  |  |  | 147,841 |
Other operating expenses |  |  | (245,997 | ) |  |  | (14,219 | ) |  |  | (248,425 | ) |  |  | (28,663 | )
Impairment of financial assets |  |  | (25,467 | ) |  |  | (1,971 | ) |  |  | (68,759 | ) |  |  | (7,978 | )
Equity in earnings of unconsolidated companies |  |  | (4,090 | ) |  |  | (38,587 | ) |  |  | 6,400 |  |  |  | (24,359 | )
INCOME BEFORE FINANCIAL INCOME (EXPENSES) AND TAXES |  |  | 775,786 |  |  |  | 925,137 |  |  |  | 1,249,195 |  |  |  | 1,915,140 |
Financial income |  |  | 50,759 |  |  |  | 47,756 |  |  |  | 97,068 |  |  |  | 88,773 |
Financial expenses |  |  | (390,326 | ) |  |  | (352,901 | ) |  |  | (715,748 | ) |  |  | (698,274 | )
Exchange variations, net |  |  | 9,440 |  |  |  | 12,052 |  |  |  | 56,764 |  |  |  | (58,404 | )
Gains (Losses) on financial instruments, net |  |  | 197 |  |  |  | (7,173 | ) |  |  | 720 |  |  |  | (7,094 | )
INCOME BEFORE TAXES |  |  | 445,856 |  |  |  | 624,871 |  |  |  | 687,999 |  |  |  | 1,240,141 |
Current |  |  | (74,154 | ) |  |  | (105,467 | ) |  |  | (159,075 | ) |  |  | (231,073 | )
Deferred |  |  | (56,379 | ) |  |  | (146,653 | ) |  |  | 7,749 |  |  |  | (183,691 | )
Income and social contribution taxes |  |  | (130,533 | ) |  |  | (252,120 | ) |  |  | (151,326 | ) |  |  | (414,764 | )
NET INCOME |  |  | 315,323 |  |  |  | 372,751 |  |  |  | 536,673 |  |  |  | 825,377 |
(+) Fixed costs of plants without production |  |  | 119,356 |  |  |  | - |  |  |  | 119,356 |  |  |  | - |
(-) Credit recovery / Provisions |  |  | (307,773 | ) |  |  | - |  |  |  | (307,773 | ) |  |  | - |
(+) Income tax on extraordinary items |  |  | 64,062 |  |  |  | - |  |  |  | 64,062 |  |  |  | - |
(=) Total of extraordinary items |  |  | (124,355 | ) |  |  | - |  |  |  | (124,355 | ) |  |  | - |
ADJUSTED NET INCOME* |  |  | 190,968 |  |  |  | 372,751 |  |  |  | 412,318 |  |  |  | 825,377 |

*Adjusted net income is a non-accounting indicator prepared by the Company, reconciled with the financial statements and consists of net income adjusted for extraordinary events that influenced the net income, without cash effect.

20

GERDAU S.A.

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands of Brazilian reais (R$)

|  | For the three-month period ended |  |  | For the six-month period ended |
|  | June 30, 2020 |  |  | June 30, 2019 |  |  | June 30, 2020 |  |  | June 30, 2019 |
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income for the period |  |  | 315,323 |  |  |  | 372,751 |  |  |  | 536,673 |  |  |  | 825,377 |
Adjustments to reconcile net income for the period to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 611,529 |  |  |  | 526,838 |  |  |  | 1,168,158 |  |  |  | 1,032,637 |
Equity in earnings of unconsolidated companies |  |  | 4,090 |  |  |  | 38,587 |  |  |  | (6,400 | ) |  |  | 24,359 |
Exchange variation, net |  |  | (9,440 | ) |  |  | (12,052 | ) |  |  | (56,764 | ) |  |  | 58,404 |
(Gains) Losses on financial instruments, net |  |  | (197 | ) |  |  | 7,173 |  |  |  | (720 | ) |  |  | 7,094 |
Post-employment benefits |  |  | 41,685 |  |  |  | 35,216 |  |  |  | 99,304 |  |  |  | 81,636 |
Stock based compensation |  |  | 10,713 |  |  |  | 9,330 |  |  |  | 19,656 |  |  |  | 19,714 |
Income tax |  |  | 130,533 |  |  |  | 252,120 |  |  |  | 151,326 |  |  |  | 414,764 |
(Gains) Losses on disposal of property, plant and equipment, net |  |  | (13,503 | ) |  |  | 7,141 |  |  |  | (12,677 | ) |  |  | (836 | )
Impairment of financial assets |  |  | 25,467 |  |  |  | 1,971 |  |  |  | 68,759 |  |  |  | 7,978 |
Provision (reversal) of tax, civil, labor and environmental liabilities, net |  |  | 146,552 |  |  |  | (3,418 | ) |  |  | 76,019 |  |  |  | (74,805 | )
Credit recovery, net |  |  | (457,185 | ) |  |  | - |  |  |  | (457,185 | ) |  |  | - |
Interest income on short-term investments |  |  | (21,376 | ) |  |  | (11,979 | ) |  |  | (53,004 | ) |  |  | (28,721 | )
Interest expense on debt and debentures |  |  | 282,494 |  |  |  | 256,599 |  |  |  | 510,349 |  |  |  | 506,559 |
Interest on loans with related parties |  |  | (2,030 | ) |  |  | (1,276 | ) |  |  | (3,634 | ) |  |  | (1,841 | )
(Reversal) Provision for net realizable value adjustment in inventory, net |  |  | (6,046 | ) |  |  | 4,464 |  |  |  | (36,296 | ) |  |  | 4,036 |
|  |  | 1,058,609 |  |  |  | 1,483,465 |  |  |  | 2,003,564 |  |  |  | 2,876,355 |
Changes in assets and liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Increase) Decrease in trade accounts receivable |  |  | (126,038 | ) |  |  | 221,690 |  |  |  | (309,921 | ) |  |  | (521,804 | )
Decrease (Increase) in inventories |  |  | 256,111 |  |  |  | (214,590 | ) |  |  | (548,940 | ) |  |  | (416,761 | )
Decrease in trade accounts payable |  |  | (580,501 | ) |  |  | (295,202 | ) |  |  | (611,673 | ) |  |  | (582,198 | )
Decrease (Increase) in other receivables |  |  | 189,780 |  |  |  | 1,998 |  |  |  | 185,477 |  |  |  | (39,418 | )
Increase (Decrease) in other payables |  |  | 86,116 |  |  |  | (339,693 | ) |  |  | (39,031 | ) |  |  | (465,863 | )
Dividends from associates and joint ventures |  |  | 11,805 |  |  |  | 7,773 |  |  |  | 11,805 |  |  |  | 10,933 |
Purchases of trading securities |  |  | (587,279 | ) |  |  | (131,625 | ) |  |  | (1,742,835 | ) |  |  | (424,016 | )
Proceeds from maturities and sales of trading securities |  |  | 292,033 |  |  |  | 342,487 |  |  |  | 2,980,706 |  |  |  | 500,068 |
Cash provided by operating activities |  |  | 600,636 |  |  |  | 1,076,303 |  |  |  | 1,929,152 |  |  |  | 937,296 |
Interest paid on loans and financing |  |  | (383,861 | ) |  |  | (351,657 | ) |  |  | (521,123 | ) |  |  | (523,667 | )
Interest paid on lease liabilities |  |  | (21,398 | ) |  |  | (21,074 | ) |  |  | (31,227 | ) |  |  | (42,316 | )
Income and social contribution taxes paid |  |  | (29,016 | ) |  |  | (159,491 | ) |  |  | (49,235 | ) |  |  | (183,896 | )
Net cash provided operating activities |  |  | 166,361 |  |  |  | 544,081 |  |  |  | 1,327,567 |  |  |  | 187,417 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchases of property, plant and equipment |  |  | (270,659 | ) |  |  | (423,741 | ) |  |  | (742,247 | ) |  |  | (728,273 | )
Proceeds from sales of property, plant and equipment, investments and other intangibles |  |  | 16,139 |  |  |  | 5,497 |  |  |  | 18,598 |  |  |  | 19,314 |
Purchases of other intangibles |  |  | (24,464 | ) |  |  | (26,025 | ) |  |  | (62,076 | ) |  |  | (35,088 | )
Advance for future investment in joint venture |  |  | - |  |  |  | (94,687 | ) |  |  | - |  |  |  | (94,687 | )
Capital increase in joint ventures |  |  | - |  |  |  | - |  |  |  | (42,782 | ) |  |  | - |
Net cash used in by investing activities |  |  | (278,984 | ) |  |  | (538,956 | ) |  |  | (828,507 | ) |  |  | (838,734 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dividends and interest on capital paid |  |  | - |  |  |  | (131,204 | ) |  |  | (70,483 | ) |  |  | (297,624 | )
Proceeds from loans and financing |  |  | 364,610 |  |  |  | 1,670,759 |  |  |  | 1,927,216 |  |  |  | 1,882,008 |
Repayment of loans and financing |  |  | (58,188 | ) |  |  | (1,715,922 | ) |  |  | (1,297,055 | ) |  |  | (1,956,462 | )
Leasing payment |  |  | (57,999 | ) |  |  | (34,648 | ) |  |  | (120,917 | ) |  |  | (66,431 | )
Intercompany loans, net |  |  | (33,735 | ) |  |  | 13,060 |  |  |  | (28,917 | ) |  |  | (29,498 | )
Net cash provided (used in) financing activities |  |  | 214,688 |  |  |  | (197,955 | ) |  |  | 409,844 |  |  |  | (468,007 | )
Exchange variation on cash and cash equivalents |  |  | 145,742 |  |  |  | 1,923 |  |  |  | 513,105 |  |  |  | (19,963 | )
Increase (Decrease) in cash and cash equivalents |  |  | 247,807 |  |  |  | (190,907 | ) |  |  | 1,422,009 |  |  |  | (1,139,287 | )
Cash and cash equivalents at beginning of period |  |  | 3,815,854 |  |  |  | 1,941,764 |  |  |  | 2,641,652 |  |  |  | 2,890,144 |
Cash and cash equivalents at end of period |  |  | 4,063,661 |  |  |  | 1,750,857 |  |  |  | 4,063,661 |  |  |  | 1,750,857 |

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