Gerdau S.A.

1
Gerdau S.A.
Fourteenth Annual Latin America Conference
March 2006
2
Agenda

• Steel Sector
• Gerdau Group
• Operating and Financial Highlights

3
World Steel Supply and Demand
Finished Steel
15.3 over 2005
In million tons
18.6 over 2005
1,153
1,000
1,117
According to a WSD forecast for 2010, 97 of the
worlds production will be consumed.
942
830
698
690
632
772
641
655
603
1985
1990
1995
2000
2005F
2010F
Source IISI / World Steel Dynamics FForecast
4
Among the Leaders
Crude Steel Output 2004
In million tons
Mittal Steel (NET) 1
58.9

Arcelor (LUX) 2
46.9
32.4
Nippon Steel (JAP) 3
JFE Steel (JAP) 4
31.6
Posco (KOR) 5
30.2
Shangai Baosteel (CHI) 6
21.4
20.8
US Steel (USA) 7
Corus Group (UK) 8
19.0
Nucor (USA) 9
17.9
ThyssenKrupp (GER) 10
17.6
Riva Group (ITA) 11
16.7
Gerdau Group (BRA) 12
13.4
Gerdau should have an installed capacity of
approximately 21 million tons of crude steel per
year after the investment program in Brazil is
completed in 2007.
Sumitomo (JAP) 13
13.0
Includes ISG acquired by Mittal Steel in 2004.
Source IISI
5
Steel Sector 2005

• The worlds steel output reached 1.1 billion
  metric tons of crude steel in 2005, an increase
  of 5.9 compared to 2004. Crude steel production
  in China reached 349 million metric tons (31.5
  of the worlds steel output), an increase of
  24.6 compared to 2004.

World

• The North American crude steel output for 2005
  was 127 million metric tons, a decrease of 5.3
  compared to the previous year. In the USA, crude
  steel output reached 93.3 million metric tons in
  2005 from 99.7 million metric tons in 2004 (-
  6.4).

North America

• The South American crude steel output for 2005
  was down 1.2 at 45.3 million metric tons.
  Brazil is the largest producer, with 69.8 of the
  total output, followed by Argentina, with 11.9
  of the total output in the region.

South America

• In 2005, the crude steel output reached 31.6
  million metric tons, 3.9 less than in the
  previous year.
• Domestic sales of long steel products
  (including blooms and billets) in 2005 reached
  6.3 million metric tons, a decrease of 10.7
  compared to 2004.
• Exports of long steel products (including
  ingots, blooms and billets) totaled 4,3
  million metric tons in 2005 ( 25.6 YoY).
• In 2005, the long steel production decreased
  4.8 compared to 2004, retaking the levels
  of 2003.

Brazil
Source IBS and IISI
6
Brazil and the Global Steel Industry
Crude Steel Production 2005
In million tons
Total World Production 1,108 million tons China
accounted for 31.5 of the global steel
output Brazil accounted for 2.8 of the global
steel output
Italy
India
Brazil
China
Ukraine
USA
Japan
Russia
Germany
South Korea
Source IISI
7
Agenda

• Steel Sector
• Gerdau Group
• Operating and Financial Highlights

8
Philosophy
VISION
TO BE A WORLD-CLASSINTERNATIONAL STEEL COMPANY
MISSION
Gerdau is an organization focused on the steel
business with a mission to satisfy customers
needs and add value to shareholders, committed to
the fulfillment of people and to the sustainable
development of society
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Investment Considerations

• A low cost international steel company with
  operations in Brazil, Uruguay, Canada, Chile,
  Argentina, Colombia, Spain and the United States
• Substantial international profile foreign
  exchange generation through subsidiaries abroad
  and export sales amount approximately 67 of
  consolidated revenues in 2005
• Ranked 12th globally by steel output in 2004 with
  an output of 13.7MM tons (including strategic
  shareholdings)
• 2nd largest long steel producer in North America
  and largest long steel producer in the Americas
• Focused on the production of long steel products
  Gerdau operates 30 mills incorporating both
  integrated and mini mills with the latest
  technologies
• Relevant market share in every country with
  operations and diversified product range, with
  high value-added products
• Strong low cost strategy as a result of
  diversified production processes and multiple raw
  material sourcing
• Sound balance sheet (Gross Debt-to-EBITDA at
  approximately 1.6x in 2005) and strong cash
  generation
• Shares of Gerdau S.A. are currently traded at the
  São Paulo, New York and Madrid stock exchanges
• Shares of Metalúrgica Gerdau S.A. are traded at
  the São Paulo stock exchange
• Gerdau Ameristeels shares are traded at the New
  York and Toronto stock exchanges

10
100 Years in Business
THE 80s
1901

• Acquisition of three mills (Rio de Janeiro,
  Minas Gerais and Bahia)
• Construction of two new plants (Paraná and
  Ceará)
• Operations abroad begin (Uruguay and Canada)

• 1901 First operation nail factory

THROUGH THE 40s

• First steel mill acquisition Siderúrgica
  Riograndense (1948)

THE 50s
THE 90s

• Expansion of Siderúrgica Riograndense
• Construction of second Riograndenses mill

• Diversification into specialty steel
  acquisition of Piratini
• Expansion abroad acquisition of mills in
  Chile, Canada, Argentina and the USA
• Acquisition of second mill in Minas Gerais and
  rolling mill in São Paulo
• Shareholdings restructuring
• Acquisition of stake in Açominas

THE 60s

• Market share increase by the
• - Diversification and verticalization
• of product line
• - Structuring of distribution network
• (today more than 75 sales points)
• - Acquisition of mill in Pernambuco

THE NEW MILLENNIUM
THE 70s

• More acquisitions in the US
• Downstream expansion in North America
• Entering the European market
• Presence in São Paulo with a brand new steel
  mill

• Capacity expansion with acquisition of two
  mills (Alagoas and Paraná) construction of
  largest Gerdau mill (Rio de Janeiro)
• Diversification into reforestation

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Solid Track Record
16,372
In thousand tons
Potter Form Gate City RJ North
Star(USA) SACK(Chile)
18,658
TOTAL INVESTED (1981-2005) Brazil US 4.0
billion Debt North America US 1.4 billion
Debt South America US 468 million Debt
Araçariguama(Brazil) Sidenor (Spain)
11,076
7,696
ControllofAçominas(Brazil) CartersvilleDrawin
gCo-Steel (USA)
16,475
Diaco(Col.)
Ameristeel (USA) AZANew Plant(Chile) Additiona
lstake inAçominas(Brazil)
3,072
3,934
4,568
Cambridge(Canada) Usiba(Brazil)
Piratini(Brazil) AZA(Chile)
4,595
Stake inAçominas (Brazil)
2,611
Manitoba (Canada)
1,757
BarãodeCocais(Brazil)
Laisa - 1980(Uruguay)
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An International Company
Total Capacity (Includes Strategic Shareholdings)
18.7
million tons of crude steel
14.9
million tons of rolled steel products
Brazil
8.6 million tons of crude steel
5.3 million tons of rolled steel products
11 mills
11 fabrication shops
6 downstream operations and special sections
75 sales points and flat steel service centers
Abroad
10.1 million tons of crude steel
9.6 million tons of rolled steel products
19 mills
37 fabrication shops
15 downstream operations and special sections
Steel mills
Strategic Shareholding
12
13
Value Builder CompanyATKearney
Revenue Growth
30
Gerdau
Outokumpu
Acerinox
25
China Steel
Baoshan1)
Usinas
INI Steel
Nucor
Salzgitter
20
Ipsco
Rautaruukki
Tata
US Steel
15
Voest-Alpine
Smorgon
Industry average
10
Boehler-Uddeholm
Arcelor
SSAB
Corus
Ispat
JFE
5
SAIL
Harsco
Thyssenkrupp
Dofasco
CSN
Nippon Steel
Onesteel1)
Kobe
0
Wuhan Steel1)
Kennametal
RIVA1)
Carpenter
-5
Iscor
AK Steel
Stelco
Nisshin Steel
Haynes
Posco
Allegheny
Eregli Demir
-10
-35
-25
-15
-5
5
15
25
35
45
Industry average
Value Growth
Note 1) RIVA 98 02, Wuhan Steel Onesteel 00
03, Baoshan 01 03 Source ThyssenKrupp (segment),
Kobe (segment), RIVA, Haynes EBIT Growth
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Solid Market Share in Long Steel
NORTH AMERICA
BRAZIL
Other29
Barra Mansa5
Imports18
Gerdau 48
Commercial Metals7
Other 7
Aços Villares5
Nucor27
Gerdau Ameristeel19
Belgo35
MARKET SHARE
MAIN COMPETITORS
COUNTRY
CHILE
53
CAP Imports
URUGUAY
90
Imports
ARGENTINA
20
Acindar Bragado Zapla
COLOMBIA
37
Acerias Paz Del Rio
SPAIN
36
GSB
Specialty steel only
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Agenda

• Steel Sector
• Gerdau Group
• Operating and Financial Highlights

16
Shipments
In thousand tons
13,550
12,560
12,144
Brazil Domestic Market (25 in 2005)
9,109
Brazil Exports (20 in 2005)
7,302
7,411
South America (10 in 2005)
North America (45 in 2005)
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Strong Export Business
2005
NET REVENUE BREAKDOWN BY REGION
South America6
Brazil (Domestic Market) 34
North America47
Exports (from Brazil)13
EXPORT SHIPMENTS BY REGION
Africa8
Europe 11
Central America13
North America5
Asia44
South America 19
18
Margin Evolution
Gross Margin
EBITDA Margin
Brazil North America South America
19
Consolidated Financials
In US millions
2005
2003
2004


Balance Sheet Current assets Non-current
assets Fixed assets Total Current
liabilities Non-current liabilities Shareholders
equity Total
1,846 364 2,721 4,931 1,503 1,747 1,681 4,931
5,182 377 3,788 9,347 1,790 3,225 4,332 9,347
3,600 390 3,041 7,031 1,977 2,186 2,868 7,031
Income Statement Net revenue Gross
profit Operating income Net income EBITDA
4,627 1,139 397 434 929
7,383 2,353 1,678 1,219 2,092
9,077 2,446 1,727 1,386 2,098
26.9 23.1 1.6x 0.4x 27.8x
31.9 28.3 1.1x 0.8x 19.8x

Ratios Gross margin EBITDA margin Total debt /
EBITDA Net debt / EBITDA EBITDA/Net Financial
Expenses
24.6 20.1 2.3x 2.0x 5.0x
20
Indebtedness
In US million
COST OF DEBT IN DEC. 05 (per annum)
In US
Dec. 05
Brazil Domestic Currency Brazil Foreign
Currency Companies Abroad
32.5 5.9 7.3
DEBT AVERAGE LIFE 9.1 years
Includes 11.82 of 2005 FX
DEBT STRUCTURE
Companies Abroad31
Foreign Currency46
Domestic Currency23
21
Capital Expenditures
INVESTMENTS - 2005
In US millions
BRAZIL 568.8
ABROAD 289.2
North America 135.9
South America 153.3
TOTAL 858.0
Investment Program 2006 2008 US 3.8 billion
EVOLUTION OF INSTALLED CAPACITY
In thousand tons
Rolled Steel
Crude Steel
14
14
16,908
21,360
14,869
18,658
6
7
10,675
10,323
10,073
9,609
25
24
10,685
6,585
5,260
8,585
2006
2008
2006
2008
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Dividends Policy

• 30 of the adjusted net income (Pay-out)
• Dividend payments are being made on a quarterly
  basis

DIVIDENDS DISTRIBUTION
In US million
Metalúrgica Gerdau S.A. (GOAU4) Gerdau S.A.
(GGBR4)
DIVIDEND YIELD DIVIDEND YIELD DIVIDEND YIELD DIVIDEND YIELD DIVIDEND YIELD DIVIDEND YIELD DIVIDEND YIELD DIVIDEND YIELD
1999 2000 2001 2002 2003 2004 2005
GOAU4 6.0 7.9 17.0 11.3 6.2 7.8 6.1
GGBR4 3.6 6.1 6.8 6.8 3.9 6.1 4.6
Dividends related to each period, but not
necessarily paid in the same period.
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Outlook

• Brazil
• Greater economic growth in 2006 3 to 3.5
• Increase in volumes shipped in the domestic
  market - 5 to 6
• Strengthening of the civil construction sector
• Price stability in Brazilian currency
• Inventories adjusted
• Increase in government spending
• North America
• Consistent economic growth
• More investments in infrastructure (Highway
  Bill)
• Stability in production costs
• Stability in metal spread
• South America
• Consolidated economic growth
• Strengthening of the civil construction sector
• Demand is strong

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Safe Harbor Statement
This presentation can contain statements which
constitute forward-looking statements. Such
forward-looking statements are dependent on
estimates, data or methods that may be incorrect
or imprecise and that may be incapable of being
realized. These estimates also are subject to
risk, uncertainties and suppositions and include,
among other, overall economic, political and
commercial environment, in Brazil and in the
markets we are present in addition to government
regulations, present and future. Prospective
investors are cautioned that any such
forward-looking statements are not guarantees of
future performance and involve risks and
uncertainties. The Company does not undertake,
and specifically disclaims any obligation to
update any forward-looking statements, which
speak only as of the date made.
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Gerdau S.A.
www.gerdau.com.br inform_at_gerdau.com.br 55 51
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