GERDAU

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GERDAU
Morgan Stanley Basic Materials Conference
December 2005
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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 and the United States
• Substantial international profile foreign
  exchange generation through divisions abroad and
  export sales amount approximately 61 of
  consolidated revenues in 9M05
• Ranked 12th globally by steel output in 2004 with
  an output of 13.4m tons (includes one joint
  venture)
• 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 28 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 1.4x in 9M05) and strong cash
  generation
• Shares of Gerdau S.A. are currently traded at the
  São Paulo, New York and Madrid exchanges

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Shareholding Structure
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100 Years in Business
THROUGHOUT THE 40s
THE 80s

• 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
• First steel mill acquisition Siderúrgica
  Riograndense (1948)

THE 50s

• Expansion of Siderúrgica Riograndense
• Construction of second mill at Riograndense

THE 90s
THE 60s

• 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

• Market share increase by
• - Diversification and verticalization
• of product line
• - Structuring of distribution network
• (today more than 77 sales points)
• - Acquisition of mill in Pernambuco

THE 70s

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

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Solid Track Record
In thousand tons
THE NEW MILLENNIUM
16,830
Includes a pending transaction in Colombia

• Expansion abroad reverse takeover of Co-Steel
  and acquisition of North Star Mills
• Acquisition of stake in Açominas controller
  since 2002
• Strategic alliance in Colombia

Potter Form Gate City RJ North
Star(USA) SACK(Chile) DIACO
and SIDELPA(Colombia)
14,450
CartersvilleDrawingCo-Steel (USA)
7,696
Ameristeel (USA) AZANew Plant(Chile)
TOTAL INVESTED ABROAD (1981-2004) North America
US 1.3 billion Debt South America US 314
million Debt
CartersvilleMillOrrvileDrawing (USA)
SIPSA(Argentina)
4,595
3,934
3,072
Manitoba (Canada)
SIPAR(Arg.)
AZA(Chile)
1,757
Cambridge(Canada)
Laisa - 1980(Uruguay)
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An International Company
Total Capacity (Includes 1 Joint Venture)
16.8
million tons of crude steel
13.9
million tons of rolled steel products
Brazil
7.6 million tons of crude steel
4.8 million tons of rolled steel products
10 mills
11 fabrication shops
6 downstream operations and special sections
75 sales points and flat steel service centers
Abroad
Rolling mill
9.2 million tons of crude steel
Steel mills
9.1 million tons of rolled steel products
Joint venture
18 mills and 1 rolling mill
38 fabrication shops
15 downstream operations and special sections
1 joint venture
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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 (U.K.) 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
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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
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Growth Strategies

• LONG STEEL PRODUCTS (Brazil)
• Maintenance of market share
• Enhancement of current installed capacity
• New steel mill in São Paulo
• Continuous improvements
• SPECIALTY STEEL
• Growth in the domestic and export markets
• New mill in Rio de Janeiro
• New markets/regions
• AÇOMINAS (Ouro Branco mill)
• New 1.5 mm ton blast furnace
• Next phase 3 mm tons
• Growth platform for slabs, blooms and billets
• Export-oriented sales

• SOUTH AMERICA
• Maintenance of leadership in the long steel
  sector
• New markets
• NORTH AMERICA
• Efficiency and productivity gains (Gaps)
• Active role in the steel sector consolidation
  process
• NEW OPPORTUNITIES
• Mexico, Asia, South America
• Flat Steel
• Iron ore and pig iron

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Output Evolution
Brazil
North America
South America
10,621
10,274
9,045
6,933
5,968
5,836
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Annualized data
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Shipments
In thousand tons
13,581
12,560
12,144
Brazil Domestic Market
9,151
Brazil Exports
7,394
7,213
South America
North America
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Annualized data
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Strong Export Business
SHIPMENTS BY REGION
SHIPMENTS BY SEGMENT
Agricultural2
Europe11
2004
Asia34
Civil Construction41
Africa8
Industry57
South America 17
Central America15
North America15
Agricultural1
Africa8
9M05
Europe 11
Central America12
Civil Construction 37
North America4
Asia44
Industry62
South America 21
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Costs and Prices
Net Sales Revenue and Cost of Sales per ton
In US Dollars/ton
Brazil
755
718
733
747
707
681
546
511
494
500
492
449
425
443
Net Sales Revenue
444
402
374
338
Cost of Sales
310
299
311
289
1Q03
2Q03
3Q03
3Q04
4Q03
1Q04
2Q04
4Q04
1Q05
2Q05
3Q05
North America
South America
735
722
697
685
675
820
723
636
731
717
699
561
638
512
637
637
613
615
586
584
558
549
408
411
502
579
384
526
498
463
510
510
425
487
396
385
422
378
418
417
367
351
331
288
1Q03
2Q03
3Q03
3Q04
4Q03
1Q04
2Q04
1Q05
2Q05
4Q04
3Q05
4Q04
3Q05
2Q05
1Q03
2Q03
3Q03
3Q04
4Q03
1Q04
2Q04
1Q05
Net Sales Revenue
Cost of Sales
Net Sales Revenue
Cost of Sales
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Consolidated Financials
In US millions
9M05
2004
9M04


Income Statement Net revenue Gross
profit Operating income Net income EBITDA
5,143 1,666 1,151 870 1,492
7,383 2,353 1,678 1,219 2,092
7,362 1,996 1,424 1,132 1,743
Balance Sheet Current assets Non-current
assets Fixed assets Total Current
liabilities Non-current liabilities Shareholders
equity Total
3,600 390 3,041 7,031 1,977 2,186 2,868 7,031
2,954 273 2,662 5,889 1,654 1,827 2,407 5,888
5,152 365 3,794 9,311 1,698 3,267 4,346 9,311
27.1 23.7 1.4x 0.5x 23.3x
32.4 29.0 1.2x 0.8x 14.3x

Ratios Gross margin EBITDA margin Total debt /
EBITDA Net debt / EBITDA EBITDA/Net Financial
Expenses
31.9 28.3 1.1x 0.8x 19.8x
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Liquidity Management
Gerdau maintains a strong liquidity policy to
ensure that ample resources are available in the
case of a downturn in market conditions or any
deterioration of the sovereign environment

• Gerdaus liquidity policy
• Cash and liquid investments of at least 25 of
  total debt
• Gerdau export sales not more than 50 leveraged
  through export credit and receivable
  securitization
• Liquid funds are held in USD and Brazilian Reais
  both in offshore and onshore accounts

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Consolidated Debt Profile
In US millions
COST OF DEBT (per year) InR InUS
Brazil Domestic Currency 16.5 39.1
Foreign Currency FX 5.8 5.8
Companies Abroad - 7.3
Sep./05
GROSS DEBT
3,261
100
SHORT TERM
570
18
Domestic Currency
107

3
Foreign Currency
151


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Companies Abroad
312


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DEBT MATURITY 9.1 years
LONG TERM
2,691

82
Domestic Currency
691

21
Foreign Currency
1,328

41
DEBT STRUCTURE
Companies Abroad
672

20
Companies Abroad30
CASH CASH AND EQUIV.
2,111
100
Foreign Currency46
Domestic Currency
1,363

65
Foreign Currency
748

35
Domestic Currency24
NET DEBT
1,150

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Includes exchange and monetary variation in the
last 9 months
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Capital Expenditures
INVESTMENTS - 9M2005
In US millions
BRAZIL 410.4
ABROAD 248.2
North America 114.4
South Amerca 133.8
TOTAL 658.6
Investment Program 2005 2007 US 3.2 billion
EVOLUTION OF INSTALLED CAPACITY
In thousand tons
Crude Steel
Rolled Steel
28
21,450
19
15,490
16,380
12,970
11
9,730
8,880
8
8,800
8,240
11,720
55
40
6,610
7,580
4,730
2004
2004
2007
2007
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Safe Harbor Statement
Statements relative to business perspectives are
based on current expectations of future events
and trends that may affect our business. These
estimates 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.
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Gerdau S.A.
www.gerdau.com.br inform_at_gerdau.com.br 55 51
3323 2703