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Gerdau S.A.

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The North American crude steel output for 1Q2006 was 32.1 million metric tons, ... Shares of Metal rgica Gerdau S.A. are traded at the S o Paulo stock exchange ... – PowerPoint PPT presentation

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Title: Gerdau S.A.


1
Gerdau S.A.
Itaú First Annual Brazil Conference
May 2006
2
Agenda
  • Steel Sector
  • Gerdau Group
  • Operating and Financial Highlights

3
Steel Sector 1st Quarter 2006
  • The worlds steel output reached 284.5 million
    metric tons in the 1st quarter, a
    decrease of 1.15 compared to that of the forth
    quarter of 2005.

World
  • Total output in Brazil reached 7.2 million
    metric tons in the 1st quarter of 2006, a
    decrease of 9.8 compared to 4Q2005.
  • In the 1Q2006, the long steel production
    (including blooms and billets) remained in
    the same levels of the last period, reaching 2,7
    million metric tons.
  • Domestic sales of long steel products
    (including blooms and billets) in 1Q2006
    reached 1.7 million metric tons, an increase of
    9.1 compared to the quarter before.
  • Exports of long steel products (including
    ingots, blooms and billets) totaled 1.0
    million metric tons in the 1Q2006, compared to
    894 thousand metric tons in 4Q2005.

Brazil
  • The North American crude steel output for 1Q2006
    was 32.1 million metric tons, an increase of
    2.0 compared to the previous quarter.

North America
  • The South American crude steel output for the
    1Q06 was 10.6 million metric tons. Brazil is the
    largest producer, with 67.5 of the total output,
    followed by Argentina, with 12.8 of the total
    output in the region.

South America
Source IBS and IISI
4
Brazil and the Global Steel Industry
Crude Steel Production 1Q06
In million tons
Total World Production 285.2 million tons China
accounted for 32.3 of the global steel
output Brazil accounted for 2.5 of the global
steel output
India
Italy
Brazil
China
Japan
Ukraine
USA
Germany
Russia
South Korea
Source IISI
5
Agenda
  • Steel Sector
  • Gerdau Group
  • Operating and Financial Highlights

6
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
7
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 60 of
    consolidated revenues in the 1Q06
  • Ranked 14th globally by steel output in 2005 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 1.7x in 1Q06) 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

8
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
9
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)
10
An International Company
Total Capacity (Includes Strategic Shareholdings)
18.7
million tons of crude steel
14.9
million tons of rolled steel products
Brazil
9 million tons of crude steel
5.5 million tons of rolled steel products
11 mills
11 fabrication shops
6 downstream operations and special sections
74 sales points and flat steel service centers
Abroad
9.7 million tons of crude steel
9.3 million tons of rolled steel products
19 mills
38 fabrication shops
15 downstream operations and special sections
Steel mills
Strategic Shareholding
12
11
Solid Market Share in Long Steel
NORTH AMERICA
BRAZIL
Barra Mansa5
Other50
Gerdau 48
Mittal7
Other 7
Commercial Metals6
Aços Villares5
Gerdau Ameristeel15
Belgo35
Nucor22
MARKET SHARE
MAIN COMPETITORS
COUNTRY
CHILE
51
CAP Imports
URUGUAY
90
Imports
ARGENTINA
20
Acindar Bragado Zapla
COLOMBIA
37
Acerias Paz Del Rio
SPAIN
36
GSB
Specialty steel only
12
Agenda
  • Steel Sector
  • Gerdau Group
  • Operating and Financial Highlights

13
Shipments
In thousand tons
13,550
12,560
12,144
9,109
7,411
3,691
3,374
14
Strong Export Business
1Q06
NET REVENUE BREAKDOWN BY REGION
South America9
Europe3
Brazil (Domestic Market) 35
North America44
Exports (from Brazil)9
EXPORT SHIPMENTS BY REGION
Central America12
Africa13
Europe12
North America16
Asia22
South America 25
15
Margin Evolution
Gross Margin
Net Margin
EBITDA Margin
16
Consolidated Financials
In US millions
1Q06
1Q05
4Q05


Balance Sheet Current assets Non-current
assets Fixed assets Total Current
liabilities Non-current liabilities Shareholders
equity Total
3,725 409 3,075 7,209 1,742 2,307 3,160 7,209
5,684 503 4,432 10,619 1,976 3,628 5,015 10,619
5,182 377 3,788 9,347 1,790 3,225 4,332 9,347
Income Statement Net revenue Gross
profit Operating income Net income EBITDA
2,187 605 439 304 531
2,088 551 375 312 443
2,584 681 532 383 538
26.3 20.8 1.7x 0.5x
26.4 21.2 1.6x 0.4x

Ratios Gross margin EBITDA margin Total debt /
EBITDA Net debt / EBITDA
27.6 24.3 1.1x 0.7x
17
Indebtedness
In US million
COST OF DEBT IN MAR. 06 (per annum)
In US
Mar. 06
14.2 7.3 7.8
Brazil Domestic Currency Brazil Foreign
Currency Companies Abroad
DEBT AVERAGE LIFE 8.8 years
Includes (7.19) of 2006 FX
DEBT STRUCTURE
Companies Abroad29
Foreign Currency46
Domestic Currency25
18
Expansion Program 2006 - 2008
Investment Program 2006 2008 US 3.8 billion
2006 US 1.7 billion 2007 US 1.4
billion 2008 US 0.7 billion
NEW CAPACITY US 2.0 billion

MAINTENANCE US 1.8 billion
Brazil US 674 MM
North America US 977 MM
South America US 129 MM
INSTALLED CAPACITY EVOLUTION
Rolled Products
Crude Steel
In thousand tons
14
17
17,471
21,360
18,658
14,870
6
13
10,675
10,886
10,073
9,610
25
24
10,685
6,585
8,585
5,260
2006
2006
2008
2008
19
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.
20
Outlook
  • Brazil
  • Greater economic growth in 2006 around 3.5
  • Growing volumes Domestic market from 8 to 10
  • Strengthening of the civil construction sector
  • Price stability in Brazilian currency
  • Inventories adjusted
  • North America
  • Consistent economic growth
  • Greater investments in infrastructure
  • Production costs stability
  • Prices rising
  • Growing metallic spread
  • South America
  • Consolidated economic growth
  • Strengthening of the civil construction sector
  • Demand is strong

21
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.
22
Gerdau S.A.
www.gerdau.com.br inform_at_gerdau.com.br 55 51
3323 2703
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