L adies and gentlemen. Thank you for waiting. Welcome to the Usiminas conference call, in which we will discuss the results of Q1 of 2022. I am Leonardo Karam, General Manager of Investor Relations at Usiminas. To those who want to follow us in English, a free translation of the webcast presentation is available on the Usiminas IR website. We also have an interpreter for simultaneous translation. Please choose the sound channel on the icon at the bottom of your Zoom screen. All participants are currently on listen-only mode, and questions can be asked in writing in the Zoom Q&A section. This is the icon at the bottom of your screen. Participants who are listening in English will also be able to ask questions directly in this section. This conference call is being recorded and simultaneously broadcasted on Usiminas' YouTube channel.
Please note that this conference call is exclusive to investors and market analysts. Please identify yourself so that your question can be answered. For better interaction, please limit your questions to two questions per participant. We also request that questions from journalists be directed to Usiminas' media relations by phone, 313-499-8918, or by email, imprensa@usiminas.com. Before proceeding, we would like to clarify that overlooking statements made during this conference call regarding the company's business prospects as well as projections, operating and financial targets regarding its growth potential are forecast based on management's expectations regarding Usiminas' future. These expectations are highly dependent on the performance of the steel sector, the country's economic situation, and the situation of international markets, therefore, are subject to change. With us today is Usiminas' Executive Board, our President, Sergio Leite. The Vice President of Finance and Investor Relations, Alberto Ono. The Industrial VP, Américo Ferreira.
VP of Corporate Planning, Yoshiaki Shimada. VP of Technology and Quality, Kohei Kimura. Commercial VP, Miguel Homes. CEO of Mineração Usiminas, Carlos Hector Rezzonico. The Executive Director of Soluções Usiminas, Ascanio Merrighi. The Managing Director, Usiminas Mecânica, Fernando Mazzoni. The Legal Director, Bruno Paulino, and the Controllership Director, Julio Mendez Arroyo. Initially, Sergio will make his remarks, and subsequently, Alberto will present the results. Then questions in the Q&A session will be answered. Now I give the floor to Mr. Sergio. Mr. Sergio, you have the floor.
Thank you, Leonardo. Good morning to all of you, and thank you for participating in our Live to announce the results of Q1 of 2021 of Usiminas. Our results will be presented by Alberto. Please, today I would like to highlight where we're making progress regarding our 10 ESG targets that we presented to the market at the beginning of the year.
When we announce the results of 2021. We are working intensely and making progress. We signed a contract with Terna to produce photovoltaic energy. As of 2025, 20 MW in the solar potential of our concept that we signed a charter towards, toward association charter. That is our commitment towards carbon neutrality to reduce carbon emissions and to minimize the climate effects throughout the decades. Today, there is a special meaning in all of this, and I am very grateful to all of you because this is the last Live where I will participate. As of May 19, I will become the Chairman of the Board of Directors of Usiminas. First to note, I would like to thank all of you. We have created earnings result announcement system, first through the conference call in 2001 when I participated since the first edition.
We've had over 80 calls in these 20 years. For me, this is a very special moment because this is a moment where I'm accountable to our investors, to our shareholders. This is a moment of discussion as well. These are important discussions that approach the company's results are mainly protected. Very intelligent questions are always made, and the reports are an object to something from which we learn. This is my fourth change position in a career that this is a career of over 45 years. I've been a CEO. I've been the 12th CEO of the company, and as of May, I will be 11th Board members, chairman for Usiminas. For me, it has been important to participate with you in this special moment. Throughout a number of years, I participated directly in these things that involve commercial aspects of the company.
For me, this was very important. I would like to thank all of you, each one of you, for your presence. Everything that we've discussed throughout the past two years, everything that I have learned. In 2016, we took over the company in a critical moment. You followed up this moment intensively. You participated, and you also gave us support. In the beginning of this year, we presented the results of 2021 that have been the first best results in the past 60 years. I'm very happy to continue my career in this company as of now, I'll be the chairman of the board. Of course, I will miss participating in this special moment. That is the moment where we announce our earnings results. First and foremost, I would like to thank all of you for this very fruitful two year experience. Thank you very much for everything.
Now I would like to give the floor to Alberto, our future CEO. Alberto, I wish you a lot of success, and I'm absolutely sure that he will be very successful as leader of our company. He is a very competent professional with a solid background and with a lot of experience, and that will develop excellent things in our company. Now, Alberto, you can present the earnings results of Q1 2022. Thank you very much to all.
Good morning to everyone. Thank you for participating. I would like to thank Sergio for his kind words. Now let's go to our results of Q1 of 2022. The first slide. Okay. Steel unit sales. Our sales increased 7% in steel and in the domestic market, 10%. This is above the 860,000 tons. This is the best quarter.
Total volume, we were 1.1 million tons above. We can see a significant growth vis-à-vis Q4. Iron ore sales, on the other hand, here we can see that we had an operating problem because of climate, which hampered our operation during January. We had very strong rainfalls. These were the third rainfalls during the month of January, they hampered our operation. Also the ramp up of dry filtering. This also affected the production during the quarter. We still are maintaining our guidance throughout the year because we believe that we will recover the volumes in the upcoming quarters. Regarding the EBITDA on Q4 last year, we had non-recurring effects and accounted during this quarter. Here we have a drop of 27%. It seems significant.
Nonetheless, we will show you that during Q1 we do not have recurring effects and this is an operational figure that is BRL 1,560 billion in net profit, BRL 1,263 billion . I would like to note that during this quarter, we had the effect of the exchange rate. The real was appreciated 50%. I believe that this is an interesting figure. Now on with our next slide. Here you can see the past quarters, mainly here on the past quarter, the non-recurring effects of BRL 619 million. When we see Q1, we can see a drop of practically 15%, a margin of 20%. This is a lower margin than that of the past quarters, but still significant when you see the historic levels of the past five and six years. Our next slide. Here we can see our steel unit, the EBITDA of BRL 1,011 billion .
This is a 15% margin. This is below the past quarter, but it is still at a reasonable level when we analyze the past five years. Now the mining unit, although we were impacted by the volume production, the prices were favorable. Although there is a lower volume, we have a better EBITDA when we compare it to Q4 at BRL 300 million over exceeding the BRL 340 million. You can see the tax due to the asset is above 40%. Now our next slide. Here we have Soluções Usiminas, a recovery regarding the past quarter. We had a number of non-recurring effects that were negative, and discounting this, there has been an impressive, significant improvement from BRL 36 million-BRL 67 million. Our margins go to a level closer to the normal levels. That is a margin of around 3%.
It is not the high margins that we saw last year, that historically were the highest in this segment. Now when we see our next slide. Here we have other indicators, mainly working capital. There was a reasonable increase of BRL 900 million. But when we discount the tax, the debt or the taxes recoverable, this is almost BRL 1 billion, BRL 100 million. The makeup of the working capital, a significant part is because during Q1, there was significant drop in taxes to pay. This is because how you calculate and how you pay income taxes in the mining industry. First, you see the results and at the end of the year, you pay during the sequence.
Because of the significant record results of the mining unit, we had to pay a great number of taxes that were settled during Q1, and this diminished the amount of taxes that we would have to pay. This reduced our liability in working capital. This increases our working capital. Another point is there was an increase in accounts receivable that was around BRL 200 million. We also have a mining asset, but there was a global price effect. Now, in terms of steel inventories, you can see that in terms of steel volumes, there was a significant drop of 10% in terms of global inventories, and our level is very similar to Q1 of last year and of 60 days of turnover. So during the third first quarter it was high, and now we are at a level closer to normal levels. Now, next slide.
Here you can see our cash position and indebtedness. Our cash position is BRL 6.6 billion. Still strong. This is above our debt. Our debt is BRL 5.5 billion. So there was a drop because of the exchange effect. We have a negative net debt and a net cash of BRL 1 billion. Now our next slide, CapEx. As we've seen in the past year, Q1 is still starting up its CapEx, therefore the level is lower than the past quarter. But as we fulfilled last year's guidance, we will fulfill the guidance of this year geared towards steel unit. At last, our slide. You can see our follow-up regarding our ESG goals and with exception to one point, it is a bit delayed regarding what we have planned. All of the rest are according to our plan. I am not going to mention one by one.
You can read them all in our release, and you can read them in detail. But this is the new follow-up of our goals, and now we can proceed with our Q&A session.
Thank you, Alberto. Now we will go to our Q&A session. The first question is from Leonardo Correa, BTG Pactual, and Marcio, Goldman Sachs. Alberto, they want to know about the working capital. Leo asks, he would like you to elaborate on the working capital anticipation for the refurbishment of Blast Furnace 3, and Marcio asks about the commercial strategy to buy plates and for inventories. Alberto.
I'm going to talk about the Blast Furnace 3 and its preparation, and Leo will cover the commercial part. Regarding the scheduling strategy of Blast Furnace 3. As we have already mentioned, the shutdown is scheduled. That will be April 2023.
And what we want to have an inventory of plates between 600 tons and 700 tons. So during the shutdown, that will be 110 days. This can be used for, don't need to use in our rolling mill in Ipatinga. What we want, we will start this mainly by the end of the year. We will probably start this six months before the shutdown because of the logistic matters involved in all of this. This is how we are seeing this. I believe that in terms of working capital, well, this will be more affected during the last quarter of this year.
Marcio. As Alberto mentioned, according to our current plan, we have scheduled a shutdown of 110 days during the second quarter of 2023. This means that we will not produce 700,000 tons. Now, when we buy from third parties, depends on a number of variables.
It depends on the domestic demand. Another important variable would be the export business as well. We have to see the possibility during the period, the inventory level that we can have using our own plates. During the past years in Usiminas, we've developed good plate suppliers, national and international. Today, we have approved over 11 steel mills that fulfill our requirements in terms of quality and volume. In the past years, when we bought plates from local suppliers, represent 85%, and 15% are foreign suppliers. Remember, exports take 7 million tons a year. Last year, we bought 2.2 million tons, and we will add to this the necessary level of purchase during the shutdown. As Alberto said, our purchase for our inventory would start during the last quarter of 2023. Now, about price.
It is important to understand the impact of the conflict between Russia and Ukraine in this. Russia and Ukraine represent 5% of the steel production. You can say that this is not relevant, but they have relevant impact in certain markets. Russia and Ukraine account for one third of the worldwide plate trade and one fourth of European imports. What we have observed here is a great distortion and instability and uncertainties since the beginning of the conflict. We see international indicator of plate prices that are above what is normal. This is not sustainable throughout this period. After the disruption, the distortion was important. What we have seen in the past days is a normalization of supply and demand in plates.
We believe that we will see greater participation of China in the plate market and the Russian production, although it dropped since the beginning of the conflict, this is being absorbed by China and Turkey. We see a normalization of the plate market in the world, and we believe that the index will go back to normal. That has an impact in the price and the cost of steel mills worldwide.
Our next question from Leo Correa, once again from BTG Pactual. He wants to know about, what about the economics of business with the inflation of plate prices in the market, and if the Cubatão business would be unfeasible to work with this level of pricing.
Well, this is also associated to what Miguel mentioned. Speaking of Cubatão. Today, within our horizon, we are maintaining the Cubatão operations because they are feasible and profitable.
Now, of course, there was a price volatility, but as Miguel mentioned, we are going back to a normal level. In our case, in Cubatão, by and large, when we purchase plates, they are scheduled. Every time we buy a plate, it is more or less geared to service segments and clients with justified prices for. When you have volatility, perhaps we will have to wait and see what is going to happen. But as these things are going back to normal levels, we continue buying plates and we continue providing products to our customers. Up till the moment, nothing has emerged in our horizon that can enable the business. Now, there was stress points in the market, but we have to remember that the world has a major overcapacity of steel. When you have these imbalances, it takes some time.
Nonetheless, you go back to a balance period. It is important to mention that in this sense that when we analyze the plate exports from Ukraine and Russia, they represent about 1% of the Chinese production. In reality, the Chinese arbitrage in the market has low impact in production adjustments. China reduced the production in the first quarter, but we believe that March there will be a slight recovery, and these international markets will be. We analyze this impact, and the period of volatility this was we reanalyzed two businesses, and this is kind of marginal.
Now I am going to you. This goes from Daniel Sasson, Itaú, from Caio Ribeiro from BofA and Guilherme Rosito and Thiago Lofiego from Bradesco. I am going to try to. Regarding the guidance of volumes for the second quarter, this is a drop of 12%. Quarter on quarter, this is because the greatest difficulty to buy plates from third parties, or there's availability and there's more. Caio and Rosito ask if this is because of an anticipation, because of the increases, or if they believe that the real demand dropped. Thiago asks, what is the expectation of volumes for exports during the second quarter because guidance. He asks to explain this.
We evolved in a positive way throughout the quarter. Now, the data, they present an improvement of an important volume of the associations, and this is a growth of 17%-18% vis-à-vis February this year. This is aligned regarding March last year. We have seasonality. We have a weaker first quarter, and we can improve this in the domestic market improvement. We follow up the market.
We will follow up the sequential improvement that we expect for the consumption during the second quarter this year. The volatility of the slab market would allow us. We believe this would. Perhaps we will drop our export vis-à-vis the past two quarters and making sales mix very similar to what we had during the semester of 2021. Our guidance is focused on the drop of our exports because of the volatility of the slab price and the effect of the price of the plate and the steel prices. We will follow up the sequential improvement on the domestic market.
Thank you, Miguel. Next question. We also have Daniel Sasson from Itaú and Carlos de Alba, Morgan Stanley, asking for the Blast Furnace 2. Daniel Sasson asked about the return of the Blast Furnace 2, and how long will it take to ramp up the prices of plate, coal, and how will you resume this operation? Carlos de Alba wants to know why the delay on the Blast Furnace 2, and which are the problems with the coke plant. Why this reconnection of the blast furnace is conditioned and have not been decided yet. Alberto, please.
Daniel and Carlos, thank you for your questions. Number one, Blast Furnace 2. Regarding the Blast Furnace 2, it is a bit delayed because it took us more time than what we expected to carry out the retrofit of the equipment after the problems that presented last year, but nothing that will hamper. Therefore, you've seen that the capital amount has been changed.
It took some time to receive a number of components, and there were certain matters regarding the supply chain that also affected it. I can say that there are no major issues here. In addition to delays, we believe that it will be ready to become operational as of June. As we are assessing the scenario, as soon as it is available, would be coke. Currently, we're undergoing a period where there is less availability of our coke batteries. They are going through a maintenance and preservation cycle, therefore, we have lower production. With this, during Q1, we've had to use imported coke in the production of steel. The resumption of Blast Furnace 2 would force us to buy more coke in order to produce the additional steel volume. In our view, your ends will not meet interestingly. We are still waiting.
We are waiting for the recovery of this production and the coke plant. For the time being, we do not have a clear forecast. We are working with people of technology with lots of knowledge. We are focusing on this matter in order to resolve this rapidly, but we do not have a clear forecast when we will go back to our normal operational level. For the time being, we will have a coke deficit. We will have to go to the market. The resumption of Blast Furnace 2 would increase this deficit. In this equation, it does not make sense to do this because of the situation. We will continue working with Blast Furnace 2, Blast Furnace 3, as we have better visibility regarding the normal resumption of our coke plants.
Thank you, Alberto. Our next question from Daniel Sasson, Itaú. He wants to know about Blast Furnace 3, if you will delay next year's Blast Furnace 3.
I already answered. Yes, Yes, we continue with our scheduled maintenance. Nothing has changed.
Our next question from Carlos de Alba from Morgan Stanley. It is the SG&A. He said the SG&A expenses were higher and what drove this increase. If it was higher exports. If also the exports were lower than on Q4. What do you consider a sustainable level from here on?
I am going to answer the first part of the question. Miguel can answer the second part. Carlos, regarding the SG&A of Q1. Although the export volume was slightly lower than that of Q4, what happened was that in destination ports, there were bottlenecks. When you have modalities that include freight costs, you are damaged in the arrival. When you have bottlenecks and you have to wait for a ship to unload, this also increases it. We had bottlenecks in ports. We had logistics problems, and this affected Q1. Regarding sustainability, Miguel can talk about this.
As I said, during Q1, we expect a drop in exports because of reasons that we have mentioned, because of the volatility in the slab market and the gap between slab prices and finished products. For the second product, we will. We see different alternatives in terms of business focused on our traditional markets. What I mean is Europe and even markets like Argentina.
Thank you, Miguel . Alberto. Our next question will be about costs. Caio Ribeiro from Bank of America, Thiago Lofiego from Bradesco BBI , Marcio Farid from Goldman Sachs. They want you to elaborate on the costs during the second semester this year. When do you expect to see a relief in the plate cost of third party, and what are the coal prices that you expect in the upcoming quarters? Marcio also asks about coal. He says, "What do you expect regarding coal prices on second and third quarter?"
Regarding the cost for the next quarter, we do not give this guidance. What happens is the cost of reducers and coal on our side. This is, I am talking about production costs. These are still going up because we are consuming an inventory which we paid a high price because of the lead time. This will be offset by the plate, by the slabs that we negotiated before the conflict between Ukraine and Russia. These slabs were negotiated, and they will be at production cost during Q2. The high price of reducers, because of the low cost, they are going to balance themselves. The expectation, I would say for the time being, we may see a variation. This will be a stable cost production.
This is the expectation. Regarding the coal cost, as I mentioned, the costs are increasing because the acquisition costs that go to the inventories, that will also affect the production costs still go up. There is a certain inertia regarding our inventories. The expectation for the replenishment market from here on, we believe that they will accommodate. There has been a significant drop, but there has been a drop in the international coal prices. We want to see if this represents a trend, because it dropped from 600 - 550. We still consider this high when we compare it to historic levels, and this is our view today.
Our next question from Lucas Volta, is an individual. What about the readjustments of steel for April contracts, and how will this impact the future contracts? Marcio Farid asked about price. What about prices after the increase of the automobile industry in Brazil and if we will see this increase during the second quarter? Miguel. Thank you.
The negotiation contracts were signed by the end of March. These contracts are valid as of April 1st, and we will follow all these conditions as we do every year. Yes, we can expect the implementation as of April 1st, and the increase are aligned with what we expected and reflect the evolution of conditions and cost of raw material throughout the past 12 months.
We have to remind you that these are yearly contracts at fixed prices in BRL, and these contracts were 50%, 60%, and they will be implemented as of April 1st. Regarding the future impact, we don't announce future events. However, we can confirm that these increases will be applied on 80% of the auto industries, and 50% have been adjusted as of April 1st, and sales to the auto industry represent 1/3 of the total sales. Here you have the information to carry out your own calculations and your own forecasts.
Thank you, Miguel. Ricardo Monegaglia from Morgan Stanley wants to know about inventories. If you could elaborate on the commercial strategy to reduce the inventory. If you want to sell more production or buy more slabs. In reality, our target inventory level is according to our level, to our core activity.
Today we calculate at the end of Q1, we have a normal inventory in our plant, and there is a normal level of inventories in the market. When we see the results being announced this week, we can see a level of inventory of two months. two months from the associates we consider low as [inaudible] mentioned, and the result, our inventory level is around 58 days of turnover, and this is something that we consider reasonable for the activity level. Each one of our partners.
Miguel, the next question from Ricardo, he wants to know about prices, the level of steel prices during the last month regarding the average of that period.
If this pricing includes increases in price comparisons to the beginning of the year. The price of March was aligned with the average price of the quarter. We adjusted throughout the first quarter, but the prices of March are aligned with the first quarter. Because of the conflict between Russia and Ukraine, we have been suffering because of increased prices in freight, energy, raw material, and this will impact the prices of Q2 in addition to the auto industry contract that I already mentioned.
Thank you. Alberto, we have capital allocation. Edward from Bradesco wants you to talk about the allocation of capital and priority between CapEx, return to the shareholder, and liability management with some opportunities. Victor asks. He says that due to this capital structure with extended indebtedness, will there be extraordinary dividend payout? He probably wants to know the leverage of cash and the leverage that you consider ideal.
Edward, Victor. Regarding capital allocation, as we have already announced, there is no change regarding our strategy. The current policy of dividends continues. We pay out 25% of the net profit, and the priority of our cash generation is to maintain investment. As we mentioned, this year, we have a significant investment of BRL 2 billion to be carried out this year. In addition to this, the steel volume is reflected on our working capital. We also have inventory preparation for the refurbishment period of our furnace.
These inventories will consume a reasonable cash because of the increase of the working capital. At a first moment, you need resources in order to make up this inventory. Our priority today is CapEx and to finance the working capital with your own resources as possible throughout this maintenance period. After the maintenance period, we can discuss about what to do with an excess of cash. Right now we are focused on this.
Thank you, Alberto. Okay, now we've ended our Q&A session. Before giving the floor to Sergio, I would like to. Sergio, Alberto, we've received congratulations. Many people are saluting you. [inaudible] , "Sergio, thank you very much, and thank you for your partnership, success in the new challenge." Thiago would like to congratulate Sergio for his partnership throughout this year and to wish Alberto great luck and success in this new position. Marcio Farid says to Sergio and Alberto their new position. [inaudible] says and congratulates Sergio Leite for his excellent job. So I have conveyed all these messages. Mr. Leite, your final remarks.
Well, thank you very much, Leo. Thank you very much. Thank you very much for your greetings and your messages. As I've mentioned, it has been a great pleasure to share with you our quarters during the past 20 years and during the past 14 years I've been part of the executive management. I would like to thank you for your partnership. I would like to thank my colleagues during the past years, especially Alberto, Miguel, Shimada, Kimura, Américo, and everybody that works with me in the executive management. I would also like to thank and congratulate all the employees of Usiminas.
Today, we have 13,000 employees, 12,000 partners that work with us, especially due to what we've done in the past six years. Nothing would have been achieved without the dedication, commitment, and competency of each one of our employees. Thank you very much to each one of you. It was a pleasure to be with you. I continue in Usiminas as the chairman of the board of dir ectors. Thank you very much.
We thank you all. If you have any questions, our IR team is at your disposal.