André Bier Gerdau Johannpeter - Group Chief Executive Officer, President, Director, Member of Disclosure Committee, Member of Strategy Committee, Member of Risk Committee and Member of Executive Committee André Pires de Oliveira Dias - Chief Financial Officer, Executive Vice President of Finance, Auditing & Investor Relations, Member of Executive Committee, Member of Disclosure Committee and Member of Risk Committee.

Thiago K.

Lofiego - BofA Merrill Lynch, Research Division Marcelo Aguiar - Goldman Sachs Group Inc., Research Division Ivano Westin - Crédit Suisse AG, Research Division André Pinheiro - Itaú Corretora de Valores S.A., Research Division Milton Sullyvan - Brasil Plural Corretora de Cambio, Titulose Valores Mobiliários S.A., Research Division Leonardo Correa - Banco BTG Pactual S.A., Research Division Alan Glezer - Bradesco S.A.

Corretora de Títulos e Valores Mobiliários, Research Division.

Good afternoon, and welcome to Gerdau's conference call to discuss the results for the third quarter of 2014.

[Operator Instructions] We would like to emphasize that any forward-looking statement 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. Here today are Mr. André Gerdau Johannpeter, Director, President and CEO of the company; and André Pires, CFO and IR officer. With no further ado, I would like to give the floor to Mr.

André Gerdau Johannpeter. You may proceed, sir..

distribution, agriculture, highway, civil construction, pipes and machines and equipment. With this new finishing line, we will be able to grow our share in other segments, such as auto parts, compressors, packaging and containers.

Now I will refer to the mill in Mexico, which should start operating at the end of this year with the beginning of the melt shop production. This initiative is being conducted through our joint venture, Gerdau Corsa. The new mill will have an annual installed capacity of 1 million tonnes of steel and 700,000 tonnes of rolled products.

The rolling mill should start production in early 2015. The plant will supply civil construction and the industry both in Mexico and also in the other countries of NAFTA. With that, I conclude the first part of my presentation. I'll give the floor to André Pires..

Thank you, André, and good afternoon, everyone. Now I will talk about the results and the performance of each of our BOs in the third quarter of 2014. And later, I will give you more details about the consolidated figures. And at the end, I will close by talking about our capital structure. Now looking at Slide 8.

For those of you who follow us on the web, I'm starting with Brazil. The uncertainty environment vis-à-vis the economic environment is also causing demands to go down, and this has affected our business.

By the end of Q3 of 2014, there was a reduction of 13% in shipments when compared to Q3 '13, a drop of 11% in the domestic market, especially in civil construction and industry. In terms of Q2 of 2014, the volume -- sales volume had an increase of 4.5% due to greater exports. In the domestic market, shipments were more stable.

However, our sales of long rolled products posted an increase of approximately 5% vis-à-vis Q2 of 2014, improving the product mix in this market. Looking at EBITDA in the third quarter of 2014. The absolute volume -- value posted a reduction of 37% in relation to Q3 of '13 due to lower sales volumes, causing lower dilution of fixed costs.

As a consequence, the EBITDA margin went from 23.5% to 16.5%. When we look at EBITDA of the third quarter of 2014 vis-à-vis Q2 of 2014, we noticed that the absolute value was very similar even though the margin was slightly lower.

In North America, the economic environment remains positive, and shipments grew 2.5% when we compare Q3 of 2014 to Q3 of 2013. This growth was due to better demand in the period, caused by the good performance in the industrial sector and also the recovery of nonresidential construction.

EBITDA in Q3 of 2014 increased 161% vis-à-vis Q3 of 2013, going from BRL 129 million to BRL 337 million. This increase is due to gains in metal spread and also the increase in volumes sold in the period of comparison. With that, the EBITDA margin went up to 9.1% in Q3 of 2014, which is an important recovery when we compare it to Q3 of 2013.

In Latin America, shipments in the third quarter of 2014 were down by 10% vis-à-vis Q3 of 2013 due to increases in the imports, especially imports from China and Turkey and also the lower pace of economic growth in the region. EBITDA in Q3 of 2014 was down vis-à-vis the Q3 of 2013 due to drops in the sales volumes already mentioned.

Now in terms of the second quarter of 2014, EBITDA remained stable. In our Specialty Steel BO, shipments in the third quarter of 2013 were stable vis-à-vis Q3 of 2013, but increase of shipments in our units abroad offset the lower demand in Brazil.

Now in terms of Q2 of 2014, there was a reduction of 5% in sales, mainly due to the seasonality period in Spain or the summer vacation in that location. The reduction of consolidated EBITDA in our Specialty Steels operation in Q3 of 2014 vis-à-vis 2013 occurred due to a larger stake of the units abroad in terms of our total shipments.

With that, EBITDA margin went down 13% in Q3 of 2013 to 11% in Q3 of 2014. In terms of the second quarter of 2014, both EBITDA and Specialty Steels BO remained stable. Now referring to Iron Ore BO.

Shipments in the third quarter of 2014 vis-à-vis third quarter of 2013 posted an increase of 85%, mainly due to an increase in the production capacity, which occurred as of September of 2013. In terms of the second quarter of 2014, increases in ore shipments were due to sales from the Ouro Branco unit.

EBITDA posted reduction of 80%, both in relation to Q3 of 2013 and Q2 of 2014, due to lower international prices associated to higher sales costs. Now moving on to Slide #9, and now referring to consolidated figures. EBITDA was BRL 1.224 billion in the third quarter of 2014, down by 13% when compared to the same period of the year before.

Now if we look at the bridge chart on the upper part of the slide, we can also notice that this reduction occurred due to lower volumes sold and higher costs, partially offset by higher net sales per tonne. Thus the EBITDA margin was down by -- from 13.5% in Q3 of 2013 to 11.4% in Q3 of 2014.

However, if we verify the accumulated and consolidated EBITDA in the first 9 months of 2014, there was a growth of 5.2% vis-à-vis the same period of the year before, with an EBITDA margin still remaining relatively stable.

It is important to highlight the recovery of North America, which has paid a more consistent contribution to the company's EBITDA.

In the bridge chart in the lower part of the slide, we can also notice that the consolidated net income in the third quarter of 2014 had a reduction vis-à-vis the third quarter of 2013, due to lower operating results and also a higher negative financial result in addition to all of the effects of our REFIS program over profits generated abroad amounting to a liquid amount of BRL 87 million in the third quarter.

In terms of dividends and based on the results obtained on the third quarter of 2013, the company will pay out BRL 16.3 million of dividends, through shareholders of Metalúrgica Gerdau S.A, the equivalent of BRL 0.04 per share and interest on equity of BRL 85.2 million to shareholders of Gerdau S.A.

The amounts will be paid on November 27 based on closing positions of November 17. Now moving on to Slide 10 and referring to indebtedness and liquidity of the company. Our gross debt on September 30 of 2014, was BRL 18.1 billion, higher when compared to June of 2014 due to the effect of the exchange rate variation.

Net of debt variation, growth -- the gross debt would have been stable. The weighted average cost of the debt was 6.5% a year, with an average amortization term of 7.2 years. Cash increase of BRL 708 million from June to September 2014 occurred mainly because of cash generation in the quarter and also due to exchange rate variation in the period.

With that, net debt over EBITDA ratio went to 2.7x. Now looking at Slide 11, and now referring more specifically to working capital.

And looking at the chart, we can see that variations of the absolute value of working capital in the last 5 quarters have fluctuated between BRL 9.3 billion and BRL 10.2 billion, maintaining a stable cash conversion cycle with variations between 80 and 85 days.

More particularly referring to the comparative analysis between September 2014 and June 2014, an increase in working capital of BRL 320 million contemplates the exchange rate variation, particularly over the working capital of companies abroad. Net of this variation, the cash effect was a reduction in working capital of BRL 277 million.

Before concluding, I would like to comment on some recent measure adopted to optimize our assets in addition to the sale of Gallatin, already mentioned by André. In September, we did a combination of the operations between INCA, a joint venture where we already had a stake in Dominican Republic, and METALDOM.

This combination seeks more efficiency gains and a higher competitiveness in the Caribbean and Central American region, in addition to ensuring the supply of steel products for the construction sector in the Dominican Republic.

Moreover, on September 30, Gerdau sold the assets of Forjanor, a forgery located in Spain, to High [ph] Group of Germany, concentrating, then, the focus of our production on specialty long in Europe. The proceeds of the sale of BRL 12 million is already recognized in our EBITDA from the Specialty Steel BO in the third quarter of 2014.

And now I would like to give the floor back to André for his final remarks..

civil construction, industry and automotive sectors. On the other hand, the prospects for economic growth is valid for the other Latin American countries at different levels. However, the region will continue to be impacted by high steel imports, especially imports from China.

The European economy, on the other hand, should continue to advance in its recovery process, as well as India, which presents an outlook of growth. Gerdau will continue to focus on adjusting its operations to the developments in the world steel industry, which is still impacted by overcapacity and, also, margin pressures.

This challenging landscape of the global market has not abated us to maximize our efficiency and seek for further reductions in operating costs as well as adjusting the level of CapEx in 2014, as I said before, which also includes mining activities. Now we will move on to our Q&A session. Thank you very much..

[Operator Instructions] Our first question comes from Thiago Lofiego from Merrill Lynch..

I have 2 questions. The first one refers to your BO in America.

Could you please refer to your margin sustainability in the U.S., whether it is possible for us to assume margins around 8% to 12% as being a sustainable margin, considering that there are some ups and downs in some quarters? And the second question is about scrap prices in Brazil, whether you could tell me a little bit about this scrap market, whether we could envision a gain in the metal spread in Brazil in the fourth quarter, considering these 2 variables of the steel price..

All right, Thiago. This is André Pires. Well, on North America, and referring to the sustainability of that margin, it's a bit difficult to give you a forecast for the next quarters because some factors must be taken into account.

On the positive side, we still see great consistency in the recovery of the economic growth in North America, particularly in the United States.

We also see an increase in the number of nonresidential constructions, if we get the information from that bullet, [ph] If the growth in the last 12 months until September is 8.7%, which shows consistency in this recovery process.

But by the same token, there is also the issue of the international price of longs in general, and also imports that still play an important role in the U.S. market. So it's an equation between a firm demand, but also a very aggressive offer of products coming into the U.S. market. And you must also factor in seasonality.

The price of scrap is stable, which improves the margin, but we have the seasonality impact of the winter season. Therefore, I think it's too soon to tell or to give you any outlook of consistency or speak about its sustainability capacity..

Still referring to the United States. If we were to talk to you about a year ago, your margin was close to 0, almost something like that. And we knew that you will get close to 10%, which is indeed what you delivered, and that's what happened.

So today, we can understand that what could have been done to improve your position in the market was done, so whatever increases will not be too large.

So are we close to a margin equilibrium?.

It's difficult to give you a precise answer, Thiago. In terms of our internal measures to improve efficiency gains and to promote cost reductions, this is something that we can continue to do, and we will do so. But it will depend on the level of imports and also the competition capacity of the U.S.

market vis-à-vis imported goods, and it also depends on the international prices. There is pressure coming from the international market, as André had referred to in his presentation, with this overcapacity in the global market, and this pushes down the -- on the supply side.

But we believe that if things remain the same, this margin could be consistent. But it's difficult now to make a projection and tell you how things will be in the next 3 quarters. I think this is the point. Now referring to scrap in Brazil, we've seen a stable movement, also, slightly down.

It's difficult to speak about a target for a spread in Brazil because when you calculate cost in Brazil, you have to factor some things in. But referring to the price of scrap, there hasn't been any specific pressure..

Our next question is from Marcelo Aguiar from Goldman Sachs..

My 2 questions are related to the strategic side of the business, and the question is addressed to André. If you look at the evolution of Gerdau's leverage, I'm seeing a very big effort in the last quarters. But your net debt over EBITDA level hasn't changed too much.

If you compare it to your other quarters, nothing changed despite everything that has been done in the last quarters.

So I just want to understand, what else the company could do so that we could see Gerdau generating a more relevant free cash flow? And I know that prices in the market cannot be controlled by you, but what is it necessary for us to see Gerdau with a net debt over EBITDA around 1.5 or something like that? And also, if you could tell me something about your CapEx for next year, it would be nice.

And my next question refers to something that has been mentioned by André in several other occasions related to this very bad moment in the overall steel market because the company has been carrying irrelevant assets in Latin America, which deteriorates the return on capital, and the situation tends to get worse because the markets are open to imported products.

I just want to understand up to what point Gerdau is comfortable in carrying over these assets in your balance sheet? Because I don't think that the global steel market will change anytime soon..

one was to leave an activity that it was not part of our core business; and also, we decided to focus on our balance sheet. This generated an important effect, and this effect will only be posted in the fourth quarter because the proceeds were only posted at the end of October, and certainly, this level will come down.

I think that we are doing our homework. And what I can also say is that another measure that the company adopted that was announced today is our CapEx review. We are reviewing the CapEx to about BRL 2.1 million this year, and this level should not change much next year. We've been very selective in terms of CapEx.

We're focusing on our balance sheet, optimizing our assets if there were other smaller transactions, like the sale of Forjanor, but I would say that we are focusing on our P&L to seek for the numbers that you refer to. And now about the general global steel scenario, I'll give the floor to André..

Marcelo, referring to the global steel landscape, what we see is that there is a lower demand, and data from world steel shows that there was a growth of 2% in the parent consumption, whereas IMF shows the general GDP at 4%, so it's growing less than GDP. This is just a reference number.

And we've seen the optimization of the steel industry in terms of capacity of around 75%, 76%, depending on the region; and also, the route to be integrated to scrap. In our case, it's around 70% to 75%. So this is a very challenging landscape, as I said before, and it will be so in the next few years.

And I agree with you in -- but this is the landscape we have to work with. But referring to Latin America, there are 9 countries in Latin America where we operate in joint ventures or partnerships, and every country is very unique. When you talk about carrying the assets, you have to be more specific in terms of what assets and what countries.

It's difficult to compete because of high steel imports. All I can say is EBITDA for Latin America from last year to this year in 9 months was up by 13%. So that was an improvement in the performance of Latin America, which demonstrates part of the work we did.

There are some other moves and one of them was a merger with METALDOM in the Dominican Republic, and this is the optimization to improve efficiency in the region of the Caribbean and Central America, and that's why we did that joint venture. These are just alternatives. Others refer to investing more, and also, optimizing assets.

But the result is better this year than the year before, and this is because of all of the work that we've been doing, and you have to look on a country-by-country basis..

Next question from Ivano Westin from Crédit Suisse..

Referring to the Brazilian demand or demand in Brazil, I think, André, you already referred to a very challenging landscape for next year. And if we look at the landscape, I think we can also add another competitor in terms of your longs mill.

Could you please tell me what is the volume or the shipment expectation year-on-year until 2015, whether the best scenario would be flat or whether there is more room to increase exports, so that by the end of the year in terms of Brazil consolidated figures, it will be flat year-on-year? And I think that you're already closing your budget for next year, and so this will be my first point.

The second, referring the mining. I think you already said that the landscape is challenging. A competitor of yours, a few days ago, talked about a possible reduction in the cost around $5 to $10. I would like you also to tell me whether you see some room for maneuver there in terms of expansion with this possible delay.

What about your volumes for the period 2015, 2017 and CapEx for the mining area?.

Ivano, this is André Pires. Thank you for your question. Well, about the landscape in Brazil, you know that we never give any guidance about what we believe that could be the growth in the market. In Brazil, steel has had a 1.5% growth from now into 2015, which is pretty much in keeping with what we see.

It's about 1% growth of GDP, is what people are talking about. So this number that Aço Brasil mentioned seems to be reasonable, but the landscape is still very cloudy. It's very hard to tell.

And depending on the exchanges rate variation, and then you mentioned something important, which is the issue of imports, we think that depending on how the exchange rate will vary, we will have more possibilities to export, and this could probably help us to increase our shipment.

This is an opportunity, but it still depends on the movement of the currency. But now, I'll ask André to talk about that mining..

Referring to mining, let's just recap. Today, our installed capacity is 11.5 million tonnes. In the expansion plan, there was announced -- is for in 2016, grow to 18 million tonnes; and by 2020, 24 million tonnes. This is the plan that is being reviewed, and we just said that we are reviewing that CapEx vis-à-vis the global landscape. This is for CapEx.

Now in terms of volume, it's very difficult to predict at the moment because it will depend on how much we will export or not and the profitability, the profitable margins. And that has to include several factors, one of them being the price of ore; but also logistics, internal movements; there is the port, ocean freight.

And we are looking at all the possibilities to see whether that is feasible, and this will impact volume. But what I would like to highlight is that mining is very important to our own supply in Ouro Branco.

With the drop in the price of ore, this has -- this will have an important impact in Ouro Branco's competitiveness, which we'll then be able to start importing slabs or selling slabs at a profit.

So the effect of coal and iron ore, which is right next door to our mill in Ouro Branco, has been very helpful because it has helped us to increase competitiveness. The volume next year will go to our mill, and then we will see whether we will grow export or do any exports or not..

I would just like to follow-up on a particular point.

When do you think that you will finish your CapEx review? And when will -- you will announce it to the market? And Pires, when you talk about steel imports, could you tell me about what would be a good level of exchange rates that would give you a more profitable position?.

Ivano, this is André Pires. Starting with mining CapEx, in fact, there is no date. The market is very dynamic, and you know it very well. We know that price variation happens in a very dynamic fashion. We are now constantly monitoring, but we do not know yet when we will make the decision to go on or to continue to review it.

So to answer your question, we do not have any particular date to announce it. And also, I would like to reinstate what André said. Our position is very comfortable. We don't have any major obligation, or we do not have any firmly developed business when it comes to ore exports or CapEx.

The CapEx at the moment is good enough to fulfill -- I mean, to supply to our needs. It caters to our needs. And we are not in a hurry to make any decision because we find ourselves in a comfortable situation. And at this profitable level, which is lower than last year, continues to give us a return -- a good return on equity.

Now speaking about exports, it's hard to say to how much. If you look at the current exchange rate, it is becoming more interesting. But it will depend on the international market. But at this level of exchange rate, we can see some good possibilities to export slabs and [indiscernible]..

Next question is from André Pinheiro from Itaú BBA..

I have 2 questions. We have heard in some other conference call from competitors that some of them are talking to the government to supervise and to look at imports of other materials, and this would be affecting the market.

Are you also engaged in these debates? Do you see any possibilities of seeing an increase in import taxes? And are you taking any measures to supply -- I mean, to say about the domestic market? And the second question is still talking about sales of non-core assets and the optimization of your asset base as you did with Gallatin more recently.

Do you see any further possibilities of doing anything else that -- I mean, or maybe any assets that could be sold? Or what would be the potential size of non-core assets?.

André, referring to imported products, at Aço Brasil we are doing some work with them with the ABNT or the institute of standards and norms.

We want to ensure that products that come into the country are certified and comply with the standards, and we've seen -- I mean, we work together with the customs authority, and we are helping them to monitor the import of products.

We have to verify whether they comply with the standards or maybe there is any alloy in the product that changes the composition. It changes sometimes slightly, but it changes the category. So this is something that we've been doing on a regular basis, and Aço Brasil is also participating in that.

In terms of exports, I don't have anything to tell you at the moment..

This is Pires. In relation to non-core assets, we don't have anything else from Gallatin. It's difficult to say whether there are other opportunities. Opportunities from now on of other operations similar to Forjanor, like I mentioned, they will always exist, and we are always looking.

There is nothing in the radar, but we are still focused on the optimization of the assets that we may have that are not necessarily linked to our core business. In the case of Gallatin, it was much bigger, and something of that magnitude, it's more difficult..

Next question is from Milton Sullyvan from Brazil Plural..

I have 2 questions. The first is related to the domestic market. The prices in the domestic market increased quarter-on-quarter. Could you tell us a little bit what could be expected -- or what could be understood in addition to the change in the mix? And how do you see prices evolving from now on? And the second question is on Specialty Steels.

We see that the truck market is not showing signs of recovery. And to that end, I would like to ask 2 things. First, how do you see the volumes in margins of Specialty Steels from now on? And whether you can tell me anything about the price negotiation with the automotive industry because you -- we've been hearing some news lately about that..

Milton, this is Pires. In terms of the price, this is basically change in the mix, lower sales of finished goods in the third quarter, and also, I talked about a 5% growth in finished longs. And this improved the mix, allowing the net sales per tonne increase. Well, we do not have any particular outlook, but we will continue to work to improve our mix.

I think your second question was about Specialty Steels, and I'll give the floor to André..

Milton, referring to the Specialty Steels, the numbers about trucks that you mentioned, and also vehicles, are so far very similar to what we've seen throughout the year with a decline vis-à-vis the year before because it was a year of the World Cup and election. So after this period, we hope that, next year, we should experience some growth.

We do not have any figures yet, but we've heard the government saying that there might be some incentives or lower taxes to boost the sales of vehicles and trucks, maybe, allowing for more credit measures that had an effect in the past. But then we see that there will weakened sales and then a decline.

So the forecast is 1% of GDP, GDP next year, which is relatively low, and this should have an impact on the automotive industry after the election, when the elections are over. But it's still too soon to tell whether there will be substantial changes. But we think that Brazil will resume growth going beyond 1%..

Next question from Leonardo Correa from BTG Pactual..

I have just some very particular questions, and the first refers to your business in the United States. Can you please comment on the metal spread level? When we look at the prices on the screen, scrap, there has been a stronger variation on recent prices of scrap. Some said that there were drops -- there will be drops of $20 to $30 in November.

But in the year, there was a decline of about $80 in the scrap price in the last few months. I just want to hear from you whether you see the landscape of metal spread increases, and what will be the level of the third quarter? And the second question is about capital allocation. We saw a reduction of BRL 300 million in your CapEx to BRL 2.1 billion.

So what should we expect for the next few years? In your speech, you seemed to be cautious in terms of the economic landscape in Brazil, low productivity. I just want to understand whether there is any change in the heavy plate project from now on. And another question refers to the ore business.

How to allocate the excess capacity that you have or your transfers to Ouro Branco, whether whatever is left? I mean, it could be allocated to the domestic market, and whether the domestic market will be able to accommodate all of that supply because the export market is still a bit complicated with the spot price below $80..

Leonardo, this is Pires. About North America, today, our -- the level of metal spread in the third quarter was about $425, $430 for short tonne, and you have to convert it to metrics.

And this -- the lowest, I mean, I think the lowest level occurred in the last few weeks, and there was always a delay in terms of the benefits that you have or you do not have whenever there is any price decline. But today, our metal spread is around this level. If you recall about a year ago, the level was below $400 per short tonnes.

It was about $380 and $390, so there has been an improvement in the metal spread in the last 12 months, which was a very significant improvement. Now I think André can refer to CapEx and the heavy plate..

Leonardo, about heavy plate that you mentioned, the project is still on, and by the second quarter of 2016, it will start to operate. Now referring to CapEx in amounts, we promoted our second review this year, which is BRL 2.1 billion, and I would say that next year, we should see something similar to that, maybe slightly above that.

But there is also the exchange rate effect. We talk about reals, but most of our CapEx is denominated in U.S. dollars because of the equipment from other countries. But I would say that it will be around this number, between BRL 2.1 billion, BRL 2.2 billion or BRL 2.3 billion. This is what we believe the CapEx would be.

And this is also related to 70% to 75% in optimization of assets, so we still have a lot of assets to be utilized. And there is also some strategic investments, one being heavy plate. We also announced that we will review our mining CapEx and everything will be reassessed.

The first thing refers to the review of the disbursement, and we will now verify what projects will continue and what will be approved next year. About mining, could you please repeat it? Because your question was not very clear. I think you were talking about domestic consumption and sales..

Yes. I just want to understand your strategy. Because when we break down Gerdau's cost in the export market, we see a level of cash cost deliver in China over $30. Therefore, I think that the profitability in the domestic market is much higher today considering this price level.

So I just want to know whether you have buyers to accommodate all of this material in the domestic market..

No, we do not have buyers to buy all of this volume. And great part of what we sell is export, and our focus with this price of ore is to supply to ourselves, so that we can be more competitive in our Ouro Branco mill, which is important to continue to export and also to offer billet to other markets.

We do not have a large enough domestic market to accommodate the entire volume..

[Operator Instructions] Next question from Alan Glezer, Bradesco BBI..

I have 2 questions. First about Latin America.

We've noted that net revenue per tonne in dollars was up by $47 per tonne quarter-on-quarter in the third quarter and -- so given the amount of imports that we've seen coming from China, how is it possible to increase the net sales per tonne that way? I understand that the cost per tonne was up just the same way and the margins were not improving.

But on the contrary, I just want to know what happened in the market that led to this increase in net sales per tonne, the way it happened. And the second question is about the strategy of selling slabs to the foreign market rather than the domestic market.

I just want to know whether you could please tell me the difference between the profitability margins of slabs and exports of iron ore. Can you give us something that allows us to differentiate these 2 strategies? So these are my questions..

Alan, this is André Pires. Well, first referring to Latin America. As André said earlier on, in Latin America, we are in 9 countries, and each country is very peculiar and very specific. In some instances, there are countries where inflation moves faster than the exchange rate we use to translate the results into our balance sheet.

Therefore, there might be distortions. That is a fact. So this is my answer in terms of Latin America. But now speaking about slabs and ore. We do not have any specific calculation that considering this price of ore is worth at selling slabs or if the level changes, it is more worth it to export ore.

But we just have to look at the opportunities where the exchange rate is favorable to export slabs and when the foreign market has a consistent and stable demand at good prices that allow us to have a positive margin, so this is what we consider in our decision-making process.

But we do not consider increasing exports of slabs just because there was a decrease in the price of ore..

Next question from Milton Sullyvan from Brasil Plural..

I have 2 other questions. First, going back to Latin America and looking at the global market. I would like to know whether you have any expectation concerning what we've just heard about a possible removal of tax incentives from China related to tax reimbursements. That's the first question.

The second question is even referring to the parity now, even with the exchange rate depreciation, and we see a dropping prices of steel in Turkey, how do you see this parity now? And how do you see the evolution of the Turkish steel prices from now on?.

Milton, this is André. Well, imports from China to Latin America and the rebate, which is a discount to import, that's one of the practices that we monitor not only in Brazil, but in the other countries of Latin America. And also, producers are constantly looking to see whether that is happening, and that has to be avoided.

So this is one of the things that we monitor. We have that also for iron ore for [Audio Gap] In terms of the parity of the exchange rate, well, it's difficult to talk about prices around the world.

You talked about Turkey -- but what is your question about risk rate? It does fluctuate according to the market, so we do not have any specific comments about that..

Now we conclude our Q&A session. I would like to give the floor to Mr. André Gerdau Johannpeter for his final remarks..

Well thank you, all, very much for your interest, for your questions. If you still have any remaining question that -- or if we didn't answer your questions, please refer to our IR team. And I would like to invite you to participate in the results for our fourth quarter on March 4, 2015. Thank you very much, and have a good day..

Gerdau's conference call is now over. I would like to thank you, all, very much for participating, and have a very pleasant afternoon..