Good morning, everyone, and thank you for waiting. Welcome to the video conference for the release of Gerdau's Q3 2022 results. I would like to point out that for those of you who need simultaneous translation, that this tool is available through the platform. Just click on the interpretation icon at the bottom of the screen and choose your preferred language, Portuguese or English. For those of you listening to the video conference in English, there is an option to mute the original audio in Portuguese by clicking on Mute Original Audio.
We would like to inform you that this video conference is being recorded and will be available on the company's IR website, where the complete material for the earnings release is available. You can also download the presentation using the chat icon. During the company's presentation, all participants will have their microphones disabled.
Following the presentation, we will begin the Q&A session. To ask questions, click on the Q&A icon at the bottom of your screen and type your question to get in line. If you wish, please indicate that you want to appear on video while asking your question, and we will enable your camera. Once your name is announced, a prompt to activate your microphone will appear on the screen, and then you must activate your microphone to ask your questions.
We recommend that you ask all of your questions at once. We wish to emphasize that the information contained in this presentation and any other statements that may be made during this video conference concerning Gerdau's business prospects, projections, and operating and financial goals are based on the beliefs and assumptions of the company's management as well as information currently available. Forward-looking statements are no guarantee of performance.
They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operating factors may affect Gerdau's future performance and lead to results that differ substantially from those expressed in such forward-looking statements. Here with us today are Gerdau's CEO, Gustavo Werneck, and the company's CFO and Head of Investor Relations, Rafael Japur. I will now turn the floor to Gustavo Werneck to initiate the presentation. You may proceed.
Renata, thank you so much for that introduction, and I would like to take this opportunity to say good afternoon to everyone. Also, I would like to welcome each one of you to Gerdau's video conference regarding the results for the Q3 of 2022, and I hope that you are all well and healthy.
As Renata said, also joining us today is our CFO, Rafael Japur. For both of us, it's always a pleasure to talk to you about our performance and answer questions at the end that may come up during our presentation. I will start by talking about the international scenario, the highlights of the overall results, and then I will detail the performance of our business operations in the quarter. Next, Japur will share some information about our financial performance. Finally, I will emphasize some points on our ESG agenda. At the end, we will both be available to talk to you about the issues you need us to elaborate further.
Before I go any further, I would like, once again, as I've been doing in other events, to give a special thanks to our thousands of employees in the countries where we operate for delivering the best nine months of Gerdau's 121 years of history. Last year, we had a historical record in terms of results. That was 2021. Once we compare the first nine months of 2022 to those of last year, we're better. I mean, we will be, I mean, close to last year's results. This is something that will depend on the results of the Q4 that has already begun. Therefore, I would like to once again thank all of our employees for their outstanding performance during this past nine months.
Now, going to slide two, we will start this video conference by talking about the microenvironment where Gerdau operates. I would like to start by saying that we continue to closely monitor the uncertainties in relation to the growth of the global economy and the impacts that inflationary scenario in Brazil, the United States, and the world may have in relation to the demand for steel in the international market. We also continue to monitor the possible slowdown in the Chinese market as a result of the restrictions imposed by the zero-COVID policy enforced by the Chinese government. In addition, what is also relevant, and we've been closely monitoring the impacts of the conflict between Russia and Ukraine on the global market, especially with respect to our case and the pressure on production costs and, in particular, energy costs.
Moving to the next two slides, here I briefly bring you some highlights that reflect the sound performance achieved by Gerdau in the Q3 . Later on, Japur will elaborate on our financial performance. We ended the Q3 in 2022 with an adjusted EBITDA of BRL 5.4 billion, with an adjusted EBITDA margin of 25.4%, the second highest in our history for the July-September period. This result, as you will see below, was driven by high levels of demand for steel from the construction and industrial sectors, and also record results in North America, which we'll elaborate on further on. Gerdau's net income totaled BRL 3 billion in the Q3 of this year, while net revenues reached BRL 21.2 billion. In turn, shipments of steel totaled 2.9 million metric tons in the period.
Gerdau's sound results reported this quarter allowed us to record in the first nine months of 2022, the best adjusted EBITDA in the company's history, totaling BRL 17.9 billion. This performance reflects the resilience of the company in the face of the uncertainties of the macroeconomic environment, but it's also the result of the transformation experienced by the company in recent years, which has turned Gerdau into a more agile and innovative organization, adding even more value to our stakeholders, and in particular, our shareholders and customers. Moving on to the next slide.
Not only we will talk about the financial highlights, but I would like to mention the approval by the Administrative Council for Economic Defense, CADE, of the joint venture between Gerdau and the Empresas Randon for the provision of leasing services for trucks, semi-trailers, and other transportation-related products, reinforcing Gerdau Next strategy of developing new businesses with the future of mobility in mind. This new company, which will be called Addiante, will be led by a new CEO, Flavio Leite, which has over 20 years of experience in the transportation and logistics industry.
Now in the next slides, I will talk a bit more about the highlights of each of our business operations and the outlook for the markets in which Gerdau operates. I'll start with the introduction that will then pop up some questions at the end. I would like to start by talking about North America.
Initially, I would like to highlight that the adjusted EBITDA of our North American BO totaled BRL 2.6 billion, with an adjusted margin of 32.9%, both historical records for a Q3 and above the margins achieved by our local competitors, confirming that our strategy and positioning in North America has been successful over the last few years, when we had, and you might recall, that our margins were below two digits. I would also like to comment that the metallic spread remains at a historically high level, and this is a trend we see going forward. Well, volumes remained at high levels in the Q3 , reflecting strong demand from the non-residential manufacturing and energy sectors. The outlook for the Q4 remains positive. Even in the midst of seasonality in the period, since our order backlog in the U.S.
Remains at normalized and positive levels. In view of this scenario, we will continue to operate our mills in the region at capacity utilization levels above 90%. We remain optimistic about the demand for steel in North America, especially from the construction sector. The Architecture Billings Index, which measures the activity of the non-residential construction sector in the country, and the ISM Manufacturing Purchasing Managers' Index (PMI), which monitors the performance of the manufacturing sector, for example, remain accommodated at positive levels above the 50-point line. In addition, data from the U.S. Census Bureau show that total spending on domestic non-residential construction reached a record high of almost $80 billion in August of this year. I would also stress the reshoring phenomenon that has continuously brought in new customer orders and the infrastructure investment package valued at $1.2 trillion.
Both should begin to generate additional steel demand of up to 5 million tons in the U.S. market through 2023 as states move forward with their projects. In this context, we continue investing in digital transformation and in improving the productivity and profitability of our units in North America, making our steel even more competitive and generating more value to our customers. For the next cycle, I would like to highlight the investments in the Whitby mill in Canada, whose new melt shop will start operating in the first half of next year, and the expansion of the product mix offer in the Jackson unit in Tennessee, meeting the new needs of our local customers.
Other points of attention for North America, which we've been monitoring closely, include labor shortages, which still remains an issue, inflation and interest rates, energy costs, the pace of the economy in general, and the logistical challenges of global value chains, which have impacted many organizations, not only Gerdau, but many other organizations in the region. Now moving on to slide 7. I will now talk about our special steel operation, and I would like to start by highlighting the financial aspects when we reported in this Q3 , adjusted EBITDA 17% higher than the same period of last year, driven by current profitability levels. Well, in the United States, the impact of the chip shortage in the light vehicle market has been decreasing, but logistical challenges and labor shortages have affected local production levels.
In any case, the production of light vehicles in the country should reach 14.4 million units, a volume much higher than the figures recorded in the last two years. For 2023, the expectation is that production will be above 50 million units, confirming the recovery of the light vehicle market compared to historical levels. With the recent approval by the U.S. Congress of the so-called CHIPS Act, there will be a significant localization in the United States over the next few years of the manufacture of semiconductors, definitely solving this problem that has been impacting the production of vehicles in recent years. In terms of heavy vehicles, the outlook remains positive, with truck production expected to total about 300,000 units this year and more than 320,000 units by 2023.
The oil and gas sector, in turn, continues to expect growth influenced by fuel prices in the international market. Rig counts should reach an average of 901 this year when compared to 603 last year. I would also like to highlight the approval of an additional investment of around BRL 200 million in our specialty steel mill in Monroe, Michigan, for the modernization and technological upgrade of the rolling mill as part of an investment plan of approximately BRL 2 billion in the unit, aimed at making it one of the most modern plants in the world.
With this new investment, Monroe will become one of the most technological SBQ bar-producing plants in the global market, with the goal to continue meeting the future needs of our customers and also to pursue solutions for the potential demand of the electric and hybrid car segment. Well, in turn, the special steel market in Brazil continues to be affected by the lack of semiconductors and other inputs.
There was a recovery in the light vehicles market in the country in the Q3 , whose production volume rose 34% year-over-year, according to ANFAVEA. For 2022, the production of light vehicles should grow around 4.4%, according to that same association. Meanwhile, the heavy vehicles market remains positive, with a 16% increase in production volume between July and September compared to the same period of last year, especially in the bus segment.
The agricultural machinery sector should advance 4% this year when compared to 2021 to about 100,000 units, reflecting the expectation of a record harvest in Brazil, also according to ANFAVEA. I would also emphasize that the sectors that consume specialty steels, especially auto parts, have shown to be very competitive in the global market, generating export opportunities starting from Brazil. I would also like to point out that we have recently started the operations of the new continuous casting of blooms and billets at the Pindamonhangaba mill in São Paulo. This equipment will allow the specialty steel unit in Pindamonhangaba to have a more automated process with better yield, resulting in the delivery of differentiated products and in an even higher level of quality to the demanding markets.
Also, this technological updating of the Pinda unit is increasingly aligned with the future prospects for a growing number of electric and hybrid vehicles in Brazil. Well, now I will move to slide number 8 and talk about the long and flat steel landscape in Brazil and the performance in the Q3 that reflects an accommodation of demand for steel from the different sectors in which we operate at healthy levels, with shipments of steel from our Brazilian business operation growing 2% between July and September when compared to the Q2 of this same year, which, in my view, is one of the most important comparisons to be made.
Steel consumption in the construction industry remains at high levels, which is reflected in the number of active construction sites in Brazil that reached a historical record in October once again.
I mentioned here other points that make us confident about the future of this sector. For instance, the FGV's Civil Construction Confidence Index reached its highest value in the last 6 years in September with 101.7 points. Furthermore, I would like to highlight that the analysis of the civil construction GDP for the Q2 of 2022 compared to the same period of 2021 shows a strong performance in the sector, growing 9.9% according to the latest survey conducted by the Brazilian Chamber of the Construction Industry. This reinforces the institution's projection of a 3.5% increase in the construction GDP for 2022. Now regarding retail sales, they remain flat, impacted by inflation and by the decline in the average Brazilian household income.
A positive point is that the Consumer Confidence Index should close 2022 posting an increase of 2.8% according to FGV data. I also emphasize the gradual resumption of investments in infrastructure, investments that are expected to reach more than 151 billion BRL by 2022, according to the BNDES. In addition, there is the demand for steel from the industrial sector that remains at a high level, reflecting the good performance of the agribusiness, capital goods, machinery and equipment, yellow line and energy segments. In terms of energy, it's also important to highlight what was recently published that Brazil, for example, exceeded 20 GW of installed capacity from solar sources, an increase of 44% between January and October 2022, placing photovoltaic energy as the third power source in the Brazilian electric matrix.
In addition, I would like to emphasize the launching of our new business platform in Brazil called Gerdau Mais. This is an important advance in our digital transformation journey since by following the customer journey, the platform will provide us with data and insights that will allow us to offer personalized services, generating even more shared value for our customers. Now I'll move to our next slide, and I'll talk about South America. Starting with Argentina, where the demand for steel from the construction, agribusiness, energy, and mining sectors remains strong, which has boosted sales in the local market. The Argentine construction sector grew 6.4% between January and August in a year-on-year comparison, according to the latest data released by the National Statistics Institute INDEC.
For 2022, the remainder of the year, the forecast remains positive, and the same scenario is repeated in the Uruguayan steel market. Peru, in turn, another important market for us, the demand for steel continues at good levels, driven by the construction industry, which resulted in a 6% increase in sales in the local market in the Q3 when compared to the previous quarter. The forecast for Peru's GDP remains positive, and there is an estimate that the country's GDP will grow by about 2% in 2022. This was just, you know, some of the highlights, and then we can further debate them later on. Now I'll turn the floor to Rafael Japur to talk about the general aspects of our business. Now I turn the floor to you.
Thank you, Gustavo. Good afternoon to all and everyone. It is a great pleasure to be here with you once again in our earnings conference call. I hope everybody is fine and healthy and safe. Let us talk about our financial performance for the quarter. Now we have the best first nine months of our track record, like Gustavo said very well during the highlights of the period. Let us talk about cash flow and working capital. Like Gustavo said, this quarter was generated an EBITDA of BRL 5.4 billion.
This is the second-best EBITDA for a Q3 in our history and confirms the resilience of our performance in different scenarios. We invested in this first part around BRL 1 million in working capital, very much in line with what we said in the previous quarter, and we invested BRL 1.1 billion in CapEx disbursement.
Let me give you more color on the investments that we made and that we're assessing and performing, and I'll be detailing this later on in the presentation. What about operating cash flow? Take into account what we had in costs and obligations for our debt and income tax paid. We have free cash flow of BRL 3.1 billion this quarter, equivalent to nearly 60% of EBITDA or 15% of our net revenue for the period transformed into free cash flow. During this quarter, if we take into account this BRL 1.2 billion that we paid in the Q3 related to dividends paid in the Q2 , plus BRL 600 million that we invested in share buyback of GGBR4, we have nearly 60% of our free cash flow of the quarter invested in return to shareholders.
Moving on to the chart below, now focusing more on working capital, we can see that basically we didn't have a lot of working capital used this quarter. It remained flat at a level very close that we had in the previous period. With the cash conversion cycle, which is measured as a function of revenues for each quarter, because we had a drop of 8%, like Gustavo said early in the presentation, we had an increase in the number of days, 64-70 days, but within a very comfortable level and taking into account the seasonality that we naturally have for the year in normal levels according to the company's track record.
Now, moving on to our investments and how we've been allocating capital in our CapEx. Like we said in the previous slide, this quarter, we had disbursement of BRL 1.1 billion CapEx.
Of this amount, BRL 400 million were invested in competitiveness projects, trying to increase our capacity to generate results over in this cash conversion cycle in the long run. For 2022, we follow the same projection of CapEx disbursement of BRL 4.5 billion. The chart below, we would like to take this opportunity of being with our investors and the markets in general to bring more color on the main initiatives that we've been performing, and which have already been approved by our board of directors, or which are being studied in-house. Naturally, they are in different stages of maturity. As you can see, the major focus behind these projects are in three categories.
First, ensure competitive access to raw materials in the long run, improve our production capacity or to cater to our customers' needs, and add increasingly more products or added value in our portfolio to our customers. In the earnings conference call of the Q4 of 2022, which will be in early 2023, we're going to go deeper into these initiatives, and we'll give you an update on the forecast of CapEx disbursement for year 2023. Now slide 13, let us address our cash position and indebtedness. This quarter, we reached the lowest level of net debt over EBITDA in our history at 0.16x. This stems from the deleverage process achieved in previous years and also the strong result generated within the first 9 months of year 2022, like Gustavo highlighted.
We closed the Q3 with a cash position that is very robust of BRL 8.6 billion, very close to what we had a year before, around 2% higher than the same period last year. We closed the Q3 with a gross debt of BRL 12.9 billion. This increase of around BRL 500 million is mostly explained by foreign exchange variation of 3.2%, taking into account a portion, a significant portion of our debt, which is denominated in dollars due to the bonds that we issued in the capital markets. It's important to highlight that the company continues to pursue this level of gross debt below BRL 12 billion, but not only to maintain, but also to reduce the portion of our debt, which is effectively denominated in dollars.
Considering this, we would like to remind you that in the coming days, now on November twenty-first, we're going to have the maturity of the fifteenth issuance of our debenture from 2019 with a principal amount of BRL 1.5 billion. With that, we'll basically go back to a level below BRL 12 billion of gross debt. The lower chart shows our debt profile with an average maturity term of 18 years and distributed with amortization over time and with a long-term profile. I also highlight that in this Q3 , we made use of the strong results that we've been posting and our solid cash position to renew our global credit line.
It used to be $800 million and now is $875 million, which further increases our resilience, our financial flexibility, and we make the most of this moment to extend the term. This line would be due in October 2024, and now it will be due in October 2027. We would like to thank our partners, our banks that allowed us to extend this term. I highlight that in the closing of this quarter, this line is absolutely operational and fully available and not withdrawn by Gerdau or by any of its subsidiaries. Moving now to slide number 14. Let us talk about return to our shareholders.
Owing to the significant cash generation in the first 9 months of the year, accruing more than BRL 9 billion, and taking into account the solid financial position, the board of directors of the company has a dividend payout and interest on capital of approximately BRL 3.6 billion. Just to round it up to BRL 3.15 per share to be paid to our shareholders on the 14th of 2022. At Metalurgica Gerdau S.A., we're also going to have interest on capital and dividends amounting to approximately BRL 517 million or BRL 0.50 per share. The payment of proceeds in Metalurgica Gerdau S.A. will happen on December 15. Both for Gerdau S.A. and Metalurgica Gerdau S.A., we will consider the position of the shares held now on December 2022.
With that, we highlight the payment of proceeds and accrued for the first nine months of the year. We declare almost BRL 5.8 billion as dividends at Gerdau, equivalent to more than 60% of the free cash flow generated over this period. Moving from dividends into our share buyback program, which was launched this May. In Gerdau S.A. we have 81% of the program performed, or more than 45 million share buyback for BRL 24.08. Take into account not only in the Q1 , but also up to the beginning of the quiet period on October twenty-fourth. With that, over the year-over-year 2022, we have nearly BRL 1.1 billion invested in share buyback. As for Metalurgica Gerdau, we performed nearly 70% of the program announced.
As a reminder, at Metalurgica it is greater than Gerdau S.A., accounting for 5% of preferred shares, and Metalurgica has 10% of free float of preferred shares at Metalurgica. Until the closing, before the quiet period, almost 70% of Metalurgica was performed or nearly 47 million shares of GOAU4, which were bought for an average price of BRL 10.36. As already announced in a material fact early on, the board of directors of Gerdau S.A. decided to cancel all GGBR4 shares in the share buyback and a lot of 1.7 billion common stock, which were already in the company in the program. As for Metalurgica Gerdau, it will also cancel all the shares in the share buyback program and also an additional lot of 6 million preferred stock, which were also at the company's treasury before the program started.
Taking into account share buyback and dividends, we go to the upper chart and we come for the last 12 months. If we put together everything we did when it comes to return to shareholders, we come to a level that is very significant of BRL 7 billion returned to our shareholders. Taking into account adjusted profit for the period, a payout of nearly 55% in our results, way above the 30% that were stated by our bylaws. In the lower part of this slide, there is a chart that we always like to show.
Showing how the combination of better results and ongoing reduction in indebtedness in recent years allowed us to have a very positive impact on the dividend yield growth for our securities, moving from 3.6% dividend yield in 2018 to 14.1% for the last twelve months. Thank you again for your attention. Now I turn the floor back to Gustavo, who will make comments on our ESG initiatives for the quarter, and I'll come back in the Q&A session. Over to you, Gustavo.
Thank you, Rafael Japur. Well, about the three final slides, I would like to comment some relevant aspects related to our ESG agenda. Well, starting with some piece of information that has been already disclosed, because in August, we received certification for Gerdau Summit, which is our JV with the Japanese Sumitomo Corporation and JSW for the supply of rolling mill rolls and parts for wind power generation as a B Corporation. As a result, Gerdau Summit became the first steel manufacturer in the world to become a B Corporation. The certification reflects our commitment to the B Movement Builders program and its ambition to certify all of our operations in all of the countries where we operate as a B Corporation by 2025.
As part of our sustainability agenda, the certification recognizes that Gerdau follows good sustainability practices and effectively connects our businesses with our purpose of empowering people who build the future, leaving a legacy for society. I should also mention that the certification as a B company is given by an independent international nonprofit organization called B Lab, represented in Brazil by Sistema B, which was able to verify in a very tangible and measurable way how Gerdau Summit has worked to build an even more sustainable, diverse, and inclusive business environment. Furthermore, I would like to mention that we received a certification from the World Steel Association for our reporting on greenhouse gases in line with the institutional agenda.
Through our participation in the Climate Action Program, we are included among the 15% of companies with the best performance in CO2 intensity, which is a result of our governance and investments in the improvement of environmental practices. We are the largest recycler of steel scrap in Latin America, and our greenhouse gas emissions rate is about half of the global average for the steel sector. As previously announced, we wanna go even further. This year, we committed to new targets to reach 8.83 tons of CO2 equivalent per ton of steel by 2031, and we aim at being carbon neutral by 2050. Finally, I would like to point out that in September this year, we were present at Rock in Rio Brazil 2022, being the official steel supplier of the festival.
We supplied 200 tons of 100% recyclable Gerdau steel for the construction of the largest world stage in the history of Rock in Rio, bringing the concept of sustainability, circular economy, and innovation, not only to the event, but to the entire Brazilian society. I would like to conclude by thanking all of you know, for listening to our remarks, and now we are available to take your questions and elaborate further on any point of greater interest to you. Now, Renata, I'll give the floor to you so you can help us organize this Q&A session.
Thank you, Werneck. Now we'll begin the question-and-answer session. As a reminder, to ask questions, please click on the Q&A icon at the bottom of the screen and write a question to enter the queue. If you want to ask using the video feature, please click on the Q&A icon so you can open your screen. Upon being announced, a request to unmute will appear on the screen. Please turn on your microphone to ask your question.
We kindly request that all questions be asked at once. Let us begin. We already have a couple of questions via chat. We have Leonardo Correa, analyst with BTG Pactual. Good afternoon, everyone. I have two questions. With regards to dividends at GOAU, we notice a dividend payout which is lower at GOAU vis-à-vis GGBR. I would like to understand the rationale behind this difference.
There is a second question, also from Correa, about trends of profitability in Brazil. He says, "We've come to a level that is lower this quarter in terms of EBITDA margin, around 18%. I would like to learn more about profitability trends for the coming quarters, considering the drop of raw materials prices and one-off adjustments of price in the domestic market."
Thank you, Renata. Leo, thank you for the questions. Let me answer in the sequence. First, about Metalurgica Gerdau S.A. dividends, okay? Hello, Leo. Excellent question. It gives me the chance to bring an important clarification about this recurring topic. There are many questions by analysts. Some reminders.
We opened the share buyback program because we strongly believe our shares are depreciated vis-à-vis the intrinsic value, and we keep on working on the share buyback, both at Gerdau S.A. and Metalurgica Gerdau S.A., which is larger at Metalurgica Gerdau S.A. compared to Gerdau S.A. Considering the cash at Metalurgica Gerdau S.A., if we do the math, we reasonably have today funds enough in Metalurgica Gerdau S.A. to conclude the buyback program, which is already open at Metaurgica Gerdau S.A. When we started the share buyback program, we started from historical levels of the intrinsic level of Metalurgica Gerdau S.A. vis-à-vis Gerdau S.A. From 24%-26%. Even though we perform a program which is twice the size of Metalurgica Gerdau S.A. vis-à-vis Gerdau S.A., we keep on having a discount which is very significant, around 20%.
The company's management doesn't consider to be adequate, considering the nature of Metalurgica Gerdau, which is a holding company, carries a single asset, which is Gerdau S.A. The intrinsic value of the participation of Metalurgica Gerdau in Gerdau S.A. is not a reason to have such a significant discount, considering that Metalurgica Gerdau has very low costs, very little expenses, basically no carryover costs to take this portion at Gerdau S.A. To summarize, if we take into account the level of price, we continue to consider adequate as a long-term investment to shareholders to allocate value to keep on having share buyback at Gerdau S.A., and it makes more sense to keep on buying back shares from Metalurgica Gerdau.
Part of the dividends that will be received at Metalurgica Gerdau from what is proposed by Gerdau S.A. to all its shareholders, this will be used over the coming quarters to follow the share buyback program of shares issued by Metalurgica Gerdau. I know it's a long answer, but I just wanted to make it very clear. I hope I've answered Leo's question. Gustavo, let's talk about profitability.
Thank you, Japur. Leo, about Brazil. Let us focus on the main points of the business, addressing Q3 onwards. Think about demand. Demand is very solid. It remains solid in the Q3 , and will keep on being solid, in our opinion, over 2023. The segment that has more difficulties now with a slight drop in our portfolio is retail, very much affected by the level of indebtedness of the family and household, and income generation.
There is some growth in infrastructure. Sanitation is an example of progress in Brazil, converted into demands for us right now. Demand from the industrial segment or agribusiness and also from construction in general, demand is very resilient. I also mentioned in my opening remarks one important indicator, which is the level of construction sites active in Brazil, and once again, a record in October. I keep on showing this indicator in our calls as something in very relevant for us for the resilience of this sector.
Demand in general in the domestic market is okay. We keep on being at this level, I would say, positive in the future. What about profitability level in the domestic market? They are also adequate. It's not by chance our import premium increased a lot. Prices in Brazil do not follow the drop in prices in the international market.
I would say that when it comes to profitability, this is okay, pretty okay, and will remain as such in the future. Now I come with the main points which explain the margins in Q3. These will be important drivers if we consider margins for the future. The first highlight is what just happened in Q3 about coal. Coal increased a lot in the Q1 and Q2 this year. This is purchase and transport to Brazil, and the costs happened in the Q3 . When it comes to the rising costs, this is happening owing to the coal. Coal prices remain very volatile in the world. In latest weeks, we had a rise in coal. We cannot tell exactly how the price will behave over 2023, but that's a driver that might explain higher margins or lower margins next year.
A second highlight happened in the Q2 , which is a maintenance shutdown in Ouro Branco. Ouro Branco, unlike other mills we have based on EAF and scrap, the life cycle is shorter, and some pieces of equipment are in maintenance, and we keep undergoing maintenance over the next five years.
We had maintenance of blast furnace number two, with results in the Q2 . Blast furnace is now up and running again. Maybe a factor that should bring more attention. It had an impact, and it may keep impacting positively these margins in Brazil. I'm referring to exports. Margins in the domestic market, like I said, remain very solid. However, exports are driving down, driving margins down. As we speak, we are preparing the operation for the coming quarters, including 2023, so we can keep on exporting despite lower margins.
We don't intend to have any demobilization of our capacity. It's not clear yet whether prices and international margins will remain at these levels. In the short term, there is an impact. We slightly reduced our export levels in the Q3 , around 22%, which was our traditional number, to 9% now. We keep on exporting a little, particularly for our sister companies, in order to have operational levels that will bring opportunities for exports in the future.
These are the drivers behind the margins achieved in the current quarter. To some extent, are the factors that will guide general margins of our operations in Brazil in the coming quarters. Just highlighting that in the domestic market only, margins remain pretty solid. We believe they'll keep on being solid because the main factors that contribute to these margins remain stable.
They will continue to be solid down the road. Overall speaking, Leo, these are our answers to your questions. I give you the floor back, Renata.
Thank you, Gustavo Werneck. Our next question from Daniel Sasson, Sell-side Analyst from Itaú BBA. Daniel asks for his video to be enabled. So Daniel, you can accept the authorization to go live on video. Hello, how are you? Can you hear me? Great. Thank you, Renata. Thank you, Rafael Japur and Gustavo Werneck for the presentation. My first question in terms of capital allocation is whether you could give me a little bit more detail about the way you arrived at that extraordinary dividend to be distributed now. You said that you don't wanna change the rule of 30% of buyback also because you want to have more flexibility throughout the cycles. What was behind that view?
I mean, do you have any view about gross debt for the end of this year or the end of next year that could probably put a ceiling in terms of a leverage target? Because, now in addition to that BRL 12 billion of gross debt, you, your leverage would be 1.1-1.2 times net debt over EBITDA. So, if you could please, give me a little bit more color. Now my second question relates to the U.S. market. You had a quarter where shipments were not as strong, but prices were strong.
Is this just a temporary dynamic because lower demand at the end, or was it something more deliberate when you look at your policy of value per volume, so that looking forward, you would really. It will really be okay to lose a little bit more so that you could still remain posting high profitability levels. Well, thank you, Daniel.
Hi, how are you, Daniel? Well, let's start with our capital structure. It's important that we make a distinction because we didn't do any extraordinary dividends because we didn't move forward on the reserves of the company. In 2022, we have more than BRL 10 billion reais of net profit. So when we look at net profit in our base, we are not advancing towards our reserves. So we are not using that to pay out dividends or even to execute our buyback program that is coming around the corner.
I mean, our philosophy or mindset is pretty much in keeping with what I said earlier on, which is to maintain the net debt over EBITDA level close to, 1.8x. Our cash, also considering the different countries where we operate different businesses and the need to be flexible and also considering our financial soundness, this would be around BRL 6 billion as well. Therefore, at the moment, we do not anticipate any structural change in our capital structure. This is not on the radar. I think we missed a little bit of the beginning of your question, so if I failed to answer your question completely, please let me know. Now I turn the floor over to Gustavo to talk about the North America part of your question.
Well, Daniel, in terms of volumes in the U.S., we had some maintenance downtime, and we had to use some windows of opportunities to take advantage , making some investments. We had to make some maintenance downtime to invest in our profitability. Demand remains very sound. The backlog today is lower when compared to 2021, but even though it's a very healthy backlog. Right now, and even looking towards 2023, we can operate at our full capacity.
But probably our bottleneck in terms of operating with our productive capacity in our rolling mills utilization over 95%. So the problem is labor. There was a slight improvement in July and August, but now we still suffer with scarcity of labor. We have to deal with that difficulty. Even though, we did not stop our productive capacity due to lack of people.
We haven't done that yet. If we look at the flats market in the U.S..., I mean, in Brazil, these are two different things. If we look at , longer periods, 10, 15, even 20 years, and if you look at the longs market in the US, the margins are higher and it's more stable in general, and it has less volatility when compared to the flats market. In addition, another thing that we should take into account, and then longs does not have capacity deliveries. I mean, there are three well-established suppliers. Each one of us have one-third of the market. There is no new entries of capacity. There are things that we are noticing in the short run and things that we anticipate that will probably happen in the mid-range.
This reshoring is something that is already happening and an important period for us. There's just one example that I mentioned during the presentation, but there are other things happening. The approval by the U.S. Congress of the CHIPS Act that will increase the productive capacity of chips in the U.S., and they are already demanding long steel. The infrastructure investment of $1.3 trillion, this has not yet been translated into demand. We haven't seen anything coming from that new act. I would say that in general, this is still in the executive phase in different U.S. states, and this could probably be materializing to stronger demand maybe in the first half of next year.
All in all, the longs market is much better prepared to deal with this inflationary scenario when compared to other markets in North America as well. The level metallic spread remains very consistent. Scrap right now is at lower prices and transportation due to that extreme drought in the Mississippi River. I mean, we do not rely too much on the Mississippi River to transport our scrap end products because we do that from our mill in Jackson, Tennessee. There are some logistical pressures that have an impact on the price of scrap. Even with lower scrap prices, the maintenance of long prices, the spreads are still at very high levels.
Therefore, all in all, our operation is very healthy in the U.S., not only if you look at the market, but everything that has been happening in the past five years in terms of our transformation. I remember that five years ago when I talked to you about that, when our margins were below two digits, the gap that we had in terms of operating costs and also in terms of updating, our mills. I mean, the gap has been closed. In general, speaking about the North American market, what I could tell you. It was just that. Okay. Thank you.
Thank you, Werneck and Japur. Next question, Gabriel Simões, Sell-Side Analyst with Goldman Sachs. He has a couple of questions. First question. We saw a very significant acceleration in dividends announced this quarter, in addition to fast performance of the buyback program. I would like to understand how you see the leverage of the company down the road.
You often speak of the target of BRL 12 billion as gross debt, and investors had in mind a target close to BRL 5 billion for net debt. Does it make sense to continue in the debt in these terms, or are you working with an optimum leverage level expected by year-end? What is the best way to consider this? Japur, Werneck, would you like to answer? There are other questions from Gabriel, and then I can ask you later. Maybe that's easier.
Okay, great. Hi, Gabriel.
Well, we don't see major changes when it comes to our philosophy about our balance sheet or our capital structure. The same applies to BRL 12 billion as gross debt, something around these numbers. We wouldn't like to have it downwards or upwards. We also have some tactics about debt rollover over time. As for dividends, they are a result of our capacity to generate profit and cash over time in a resilient basis. This is why we accelerated this quarter, because we have more visibility in our cash generation capacity until the end of the year, more than BRL 9 billion as free cash flow.
With regards to the leverage, we are not piloting the balance sheet to come to a position A or B when it comes to the year-end position. We have some obligations, some payments to be made.
There are some questions in the Q&A. We have debenture maturity that we're going to fully pay in April next year. We also have 2023 with a maturity, and the idea is to have it now. Owing to the high volatility of markets, of bonds, it doesn't seem the most adequate moment for a new issuance. Maybe we can have a short-term operation with the commercial bank. Our debt ratio today is pretty much concentrated in capital markets with a lot of room with commercial banks with slightly shorter lines, taking into account that the average term today is around eight years, which is way above the six years, which is the minimum for our target of our debt maturity term. I'll try to answer your question and also questions from other analysts. Renata, back to you.
Perfect. Gabriel has some questions here.
I'll pull all the questions. He says that the U.S. operation delivered increasingly strong numbers this quarter with a very strong margin. I think it would be cool for you to give us more color on the outlook for this segment. We used to speak of a margin, stable margin close to 10% or 20% or 12% for this business front. Does this level still make sense considering a normal level? If the answer is yes, when do you expect to see this normal phenomenon? He also made comments on. Well, he would like to understand how we think about investments in orders and expectations about the timeline for these investments to flow in the company's earnings results. I give the floor back to you. Well, I think this is what I answered to Daniel.
If we think about the expression normalization in a world that is not normal anymore, it makes no sense. Many things that will keep on happening in the world. I don't think it makes sense to talk about normalizing. I think it makes more sense to say that we are absolutely prepared as a company to grab all opportunities that are brought to us from the market. This is the transformation that we've been going through seven years. It didn't start yesterday. The company is very light, very agile. SG&A at historical lows this year, this is evidence. I don't know exactly what will happen over 2023 or what the world will bring us in terms of surprises.
If you focus on what we can see now in the short term or what we envisage about the margins for 10%-12%, today, they are not on our radar. We expect to work with higher margins. Like I said, we have demand backlog and possibilities, new orders in terms of new production capacities in the U.S. Our customers, the infrastructure package, and also the transformations performed in our plants. We strongly believe that we'll be working with margins that are way above this level in the coming quarters. There will be seasonality at the end of the year, not only in the U.S., but also in Brazil. Seasonality has been different after the pandemic.
Considering this, well, then we may go back to normal by year-end with collective or blanket vacations or maintenance shut down. Vacations, holidays, and this year, more specifically, the World Cup, which affects some markets. We have lower seasonality in December. I'd like to say that December, whatever happens when it comes to seasonality, this will be a decisive month. How close will we be to the historical level we achieved next or last year? We closed the first nine months of the year above historical year last year. Let's see November and December how close we will get to the results achieved in 2021. Overall speaking, when we consider North America. Maybe the resilience and optimism, this is what drives us now, and that's how we are getting ready to be on 2023. Back to you, Renata.
Next question, Thiago Lofiego, Bradesco BBI. He would like to use the camera. Tiago, please accept the camera enablement.
Can you hear me? Well, thank you. Thank you, Renata, Japur, and Werneck. I would like you to elaborate a bit more on the Brazil BD and looking at the market dynamic going forward. On the demand side, you already said, Werneck, that there is some seasonality. It's a natural seasonality of the business in the Q4 . I would just like to understand whether this drop in potential volume in the Q4 is within that normality or that seasonality thing, or you understand that it could be a bit different than the normal trend? Second question is whether you could tell me something about how costs will evolve in Brazil. We see that the prices of scrap were down substantially in the past few months. On the other hand, the coal prices in the market are going up.
What, how do you factor in this pricing dynamics? My other question, now looking at the company as a whole, not only Brazil, is there any maintenance CapEx that is unusual, probably out of your radar, that could be relevant, , coming forward in the next 2, 3 years? I'm saying that because we saw some of your competitors announcing unexpected CapEx, not only in the steel milling industry, but we've seen also in other industries, companies, reevaluating their maintenance CapEx. Is this a possibility that you see at Gerdau as well, not only in Brazil but also in your other BDs outside Brazil?
Okay, Thiago, thank you very much for all your important points. Seasonality is just normal, as you know, we all know for many, many years.
With the exception of the specialty steel markets, because probably there will be more inventory throughout the chain. With all of these downtimes , from car manufacturers throughout the past two years, it was difficult to maintain a continuous flow throughout the chain. This has its impact. I understand that this industry will rather work with a more stable flow in terms of working capital. I mean, higher working capital requirements. For specialty steels, we won't have so many downtimes as we usually have just to get prepared for the recovery in the market, especially in regard to , heavy trucks and buses. These are things that we've been talking about with our customers. I think seasonality will not apply to this particular case, but it depends on how you look at it.
You know, if you look at demand as being something positive. The cost of the mini mills have been quite stable, and somehow, we were able to maintain profitability. Of course, there are issues like increased energy prices and a decline in scrap prices. I mean, the cost of mini mills are very flat. There is nothing out of the radar. The only thing is coal, and this, is not something that we can control. The expectation now is, how prices of coal will perform going forward. The coal. There is some coal that we bought at lower prices that will have an impact in the next coming months. This peak that occurred in the past few weeks, we are not sure whether, how that price will behave going forward.
I think what will impact us at the Ouro Branco mill is the coal issue. In terms of CapEx, there are no surprises. I mean, I understand your comments because you are probably talking about maybe some larger greenfield plant. We do not have similar CapExes when compared to what you've been seeing in the market in general. What we have is the need to invest more in Ouro Branco, but that won't happen in only one year. This will cover a period of five, six, seven years.
We have to refurbish the blast furnace one, so there may be some, CapEx spending, but this is pretty much in line with our cash position. But now, in terms of new large capacities or maybe some very serious maintenance issue, none of that is in our radar. Well, great. Thank you.
I just have a very quick follow-up related to cost. In the Q4 , maybe we should consider that what is part of your cost.
I mean, you will not have any large cost pressure, especially coming from coal, and scrap prices are coming down. The net of your production costs, I mean, when you look at COGS in the Q4 , whether you anticipate something better or still flat. I mean, still very flat because the coal that we acquired is still being used in this quarter, and there will be still some seasonality and downtime. More specifically referring to coal, we will see lower costs, impacting, this throughout. But this is more in terms of COGS. Oh, Japur wants to add something.
I mean, when you look at the demand dynamics and downtime, I mean, we have some expectations that it may not be materialized, and this relates to a higher or lower decline of fixed costs.
The Q4 , I mean, this change in the level of operation may be something important if you think in terms of barrels per ton. Now, referring to CapEx, I would just like to say the opposite of what I said when I was presenting it. In the Q3 , BRL 1.1 billion that we spent in CapEx, I mean, BRL 400 million was invested in competitiveness and growth, and 70% of that amount was dedicated for maintenance. Still very much concentrating some of our operations in Brazil, like Ouro Branco. It's not something that will happen, that will change overnight. As Gustavo was saying, it will take a few years. I mean, we will continue doing what we've started doing last year when we increased significantly our CapEx investments in 2022 when compared to 2021.
Perfect. Thank you, Japur, and thank you, Rene.
Thank you.
Next question, Carlos de Alba, Sell-Side Analyst with Morgan Stanley.
Your comments in the press release read relatively optimistic on coming quarters in 2023. Yet your shipments have declined quarter-over-quarter, and global demand, including U.S. and Brazil, with a slight slowdown. Probably Brazil will also have a slowdown. How can we reconcile this? What do you expect in terms of working capital in the coming months? Is it correct to assume that only the investment in Whitby will add net steel volumes to Gerdau, with all other only improving product mix?
Thank you, Carlos. Let's break this question down, Japur and myself. Okay. We're very comfortable when it comes to demand, Carlos, not only in Brazil, but also in the U.S. Wherever we look, all the signs we read, all the clients we talk to, all the investments made, all the deals already closed, we keep on being very optimistic demand-wise for 2023. As we speak, we cannot precisely predict. However, we try to get prepared. Think about costs we don't manage. Well, we don't know the impact on our production. Maybe a clear example is coal, and to some extent, energy costs as well. To some extent, this is how we look at this. I don't consider demand specifically in our case.
For geographies where we are or our product mix in the U.S. and the way how we set our operations in Brazil, I don't think it should be a problem. Maybe the most important issue about volume or shipment is how much we will export from Brazil. As we speak, we are not dismantling any production capacity. We're not demobilizing any mill. We believe today there are possibilities, concrete possibilities early next year to see some recovery or resumption, and maybe we can have a more positive export margin favoring the average margin in Brazil. In terms of production capacity and shipment, this is what we see. Japur, anything to add?
Hi, Carlos, how are you?
Just adding the second part of the question about working capital. Considering maintenance, shutdown, and our normal operations, as usual, we expect over Q4, I'm not guarantee, but that's what we expect to see a cash release coming from working capital. A reduction in inventory and finished goods. We have maintenance shut down and we consider to start selling again. When it comes to investment CapEx, maybe we could consider the list on the slide, Carlos, about the proceeds and the expansion capacity that I mentioned. Well, not only Whitby that we understand to add capacity, because some of our operations, for example, Michigan and Monroe, we have investment to expand the casting operation. Today, we don't sell billets.
Blooms from this operation. There is some lack of balance between the rolling capacity and the melt shop. When we increase the rolling capacity, we have an addition, an effective addition in the volume to the market, because maybe today we don't have a market in North America which is relevant for billets or rounded billets coming from the Monroe operation. If you check the list of projects, I would say that the Ouro Branco coiled hot-rolled strips is more related to a change in mix rather than added capacity. Because in Ouro Branco will eventually bring more value to shareholders. Top of mind, there are other projects, nearly all of them, to a greater or lesser extent, will bring an increase in shipment by the company. Gustavo, anything to add?
Overall speaking, in North America, more specifically, we don't focus mainly on shipment growth in our plants. Maybe Midlothian is an exception. There will be a slight growth. But the focus on North America is competitiveness and catering to our customers' needs by expanding the product mix and becoming a one-stop shop in most of our mills. Maybe the most important example of investments is Jackson in Tennessee. We are expanding this important mill we have there in Tennessee to be very much focused on as being a meeting all our customers' needs. Putting it simply, I would say that this is how we intend to make progress in our investments in North America. Back to you, Renata.
Thank you. Our next question from Guilherme Rosito, a Sell-side Analyst from Bank of America.
Well, he would like you to give him an outlook about volumes for the second half in 2023 in Brazil, and as well as regarding prices. How is competition with imported volumes in Brazil?
Okay. Guilherme, imports in Brazil, it's quite flat. It has an 11% historical level. It was up a little bit in 2020 during the pandemic of 2021, and it reached 15%. This year it should be around 13%, and next year it should go back to historical levels of 11%. Still imports in Brazil, that's not a problem. Our outlook for volumes for this next quarter is slightly lower due to seasonality, the holidays and the World Cup. In January, we should resume to regular demand levels that we have experienced throughout the year.
For us, and still to reinstate the comment, for 2023, this will be a year where demand is not the main issue that we should manage. Profitability levels in the Brazilian domestic market are very stable and flat, I would say. We don't see major, I mean, large possibilities of growing profitability because of price issues. But we don't see any pressure right now for further reductions of our profitability level. In general, this is what I can tell you.
Thank you. Next question, Alejandra Andrade, Sell Side Analyst with JPMorgan Chase & Co. You discussed the payment of 2022 debentures. What are the plans for U.S. dollar bonds maturing in 2023?
Alejandra Andrade, how are you? We talked about debentures in the previous question, but we don't think it's a timely or a good moment for new bonds. We're interested in lowering our dollar-denominated debt close to $1.5 billion. Today we are around $1 billion. With maturity in 2023, in April next year. Getting to the level of debt that we want to see denominated in dollars to fully pay with cash and settle this issue. Thank you for your question.
Thank you, Rafael Japur. Thank you, Gustavo Werneck. Well, in case you have still any more questions, please send them through the Q&A icon of the platform, as there are no further questions that were posted through the platform.
In case you have any other questions or if you would like us to answer anything else, please send us your questions in writing or give us a call, and then we will get back to you because it will be a pleasure for us to get back to you. Now I turn the floor back to Werneck.
Thank you, Renata. I just have a few final remarks because we are constantly trying to increase the relationship we have with the market in general. Any point that probably was missed during this conference call, please let us know, because all of us, we will always be available to you because our intention is to be fully transparent and to give you all of the details about our operations. Thank you so much for joining us today. It's always a pleasure to talk to you.
I would like to take this opportunity to invite you to join us again in our next earnings release call for the Q4 and end of year of 2022, which will take place March 1, 2023. Thank you all very much. Please take care and have a great holiday season. Thank you very much.