Gerdau S.A.
Fourteenth Annual Latin America Conference
March 2006
1
Agenda
Steel Sector
Gerdau Group
Operating and Financial Highlights
2
World Steel – Supply and Demand
Finished Steel
+ 15.3%
over 2005
In million tons
1,153
1,000
830
632
603
1985
690
698
655
641
1990
1995
Production
Source: IISI / World Steel Dynamics
F=Forecast
1,117
According to a
WSD forecast for
2010, 97% of the
world’s
production will
be consumed.
942
772
2000
2005F
+ 18.6%
over 2005
2010F
Apparent Consumption
3
Among the Leaders
Crude Steel – Output 2004
In million tons
Mittal Steel (NET)
1
Arcelor (LUX)
2
58.9*
46.9
32.4
Nippon Steel (JAP) 3
JFE Steel (JAP)
4
Posco (KOR)
5
31.6
30.2
Shangai Baosteel (CHI) 6
21.4
20.8
US Steel (USA)
7
Corus Group (UK)
8
Nucor (USA)
9
17.9
ThyssenKrupp (GER) 10
17.6
Riva Group (ITA) 11
Gerdau Group (BRA) 12
Sumitomo (JAP) 13
19.0
16.7
13.4
13.0
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.
* Includes ISG acquired by Mittal Steel in 2004.
Source: IISI
4
South
America
North
America
World
Steel Sector – 2005
 The world’s 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 world’s steel output), an increase of 24.6%
compared to 2004.
 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%).
 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.
Brazil
 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.
Source: IBS and IISI
5
Brazil and the Global Steel Industry
Crude Steel Production – 2005
In million tons
349
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
113
93
66
Source: IISI
48
45
39
38
32
29
6
Agenda
Steel Sector
Gerdau Group
Operating and Financial Highlights
7
Philosophy
VISION
TO BE A WORLD-CLASS
INTERNATIONAL 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
8
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 Ameristeel’s shares are traded at the New York and Toronto stock
exchanges
9
100+ Years in Business
1901
 1901 – First operation: nail factory
THROUGH THE 40’s
 First steel mill acquisition –
Siderúrgica Riograndense (1948)
THE 50’s
 Expansion of Siderúrgica Riograndense
 Construction of second Riograndense’s
mill
THE 60’s
 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 70’s
 Capacity expansion with acquisition of
two mills (Alagoas and Paraná);
construction of largest Gerdau mill
(Rio de Janeiro)
 Diversification into reforestation
THE 80’s
 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)
THE 90’s
 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 NEW MILLENNIUM
 More acquisitions in the US
 Downstream expansion in North
America
 Entering the European market
 Presence in São Paulo with a brand
new steel mill
10
Solid Track Record
16,372
In thousand tons
Potter Form
Gate City & RJ
18,658
North Star
Araçariguama
(USA)
(Brazil)
SACK
Sidenor
(Chile)
(Spain)
TOTAL INVESTED (1981-2005):
Brazil = US$ 4.0 billion + Debt
North America = US$ 1.4 billion + Debt
South America = US$ 468 million + Debt
11,076
7,696
Controll
of
Açominas
(Brazil)
Ameristeel
(USA)
AZA
New Plant
(Chile)
6
2
00
5
00
4
Abroad – Crude Steel Installed Capacity
2
00
3
2
00
2
2
2
00
1
2
00
0
00
9
2
99
1
99
7
1
99
6
1
99
5
99
4
1
99
3
Brazil – Crude Steel Installed Capacity
8
Stake in
Açominas
(Brazil)
Manitoba
(Canada)
1
99
2
1
1
99
1
99
0
1
99
9
1
98
8
1
4,568
4,595
AZA
(Chile)
Diaco
(Col.)
Cartersville
Drawing
Co-Steel
(USA)
Additional
stake in
Açominas
(Brazil)
1
Piratini
(Brazil)
Usiba
Barão (Brazil)
de
Cocais
(Brazil)
98
7
1
1
98
6
Laisa - 1980
(Uruguay)
98
3,934
Cambridge
(Canada)
2,611
1,757
1
3,072
16,475
11
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
Steel mills
15 downstream operations and special
sections
Strategic Shareholding
12
12
Value Builder Company
ATKearney
Revenue
Growth
Growth portfolio
(CAGR 1999-2003)
benchmarked against
industry average
30%
Gerdau
Outokumpu
Acerinox
25%
Usinas
Salzgitter
20%
15%
Industry
average
China Steel
Baoshan1)
INI Steel
Nucor
Rautaruukki Ipsco
Tata
US Steel
Voest-Alpine
Smorgon
Boehler-Uddeholm
SSAB
Ispat
JFE
10%
5%
Arcelor
Corus
SAIL
Harsco
Thyssenkrupp
Dofasco
Nippon Steel
Kobe
0%
Carpenter
-5%
-10%
-35%
Iscor
Nisshin Steel
-25%
Onesteel1)
Wuhan Steel1)
Kennametal
RIVA1)
Haynes
CSN
AK Steel Stelco
Eregli DemirPosco Allegheny
-15%
-5%
5%
Note:
1) RIVA 98 02, Wuhan Steel & Onesteel 00 03, Baoshan 01 03
Source: ThyssenKrupp (segment), Kobe (segment), RIVA, Haynes:
EBIT Growth
Industry
average
15%
25%
35%
45%
Value Growth
13
Solid Market Share in Long Steel
NORTH AMERICA
BRAZIL
Barra Mansa
5%
Other
29%
Gerdau
48%
Imports
18%
Commercial
Metals
7%
Other 7%
Aços Villares
5%
Nucor
27%
Gerdau
Ameristeel
19%
Belgo
35%
COUNTRY
MARKET SHARE
CHILE
53%
CAP + Imports
URUGUAY
90%
Imports
ARGENTINA
20%
Acindar + Bragado + Zapla
COLOMBIA
37%
Acerias Paz Del Rio
SPAIN
36%*
GSB
* Specialty steel only
MAIN COMPETITORS
14
Agenda
Steel Sector
Gerdau Group
Operating and Financial Highlights
15
Shipments
In thousand tons
13,550
12,144
12,560
Brazil – Domestic Market (25% in 2005)
9,109
7,302
Brazil – Exports (20% in 2005)
7,411
South America (10% in 2005)
North America (45% in 2005)
2000
Billets,
blooms
& slabs
2001
2002
Merchant
bars
2003
Rebars
2004
Fabricated
steel
2005
Heavy
structural shapes
Wire-rod
Wires
Nails
16
Strong Export Business
2005
NET REVENUE
BREAKDOWN BY REGION
South America
6%
North America
47%
Brazil (Domestic Market)
34%
Exports (from Brazil)
13%
EXPORT SHIPMENTS BY
REGION
Europe 11%
Asia
44%
Africa
8%
Central America
13%
North America
5%
South America
19%
17
Margin Evolution
Gross Margin
50%
40%
30%
20%
37.1%
37.9%
27.1%
30.4%
12.6%
15.7%
10%
0%
2001
2002
2003
2004
2005
EBITDA Margin
40%
30%
20%
28.2%
31.4%
24.5%
21.6%
14.7%
10%
12.1%
0%
2001
Brazil
North America
2002
2003
2004
South America
2005
18
Consolidated Financials
In US$ millions
2003
2004
2005
Current assets
Non-current assets
Fixed assets
Total
1,846
364
2,721
4,931
3,600
390
3,041
7,031
5,182
377
3,788
9,347
Current liabilities
Non-current liabilities
Shareholders’ equity
Total
1,503
1,747
1,681
4,931
1,977
2,186
2,868
7,031
1,790
3,225
4,332
9,347
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
24.6%
20.1%
2.3x
2.0x
5.0x
31.9%
28.3%
1.1x
0.8x
19.8x
Balance Sheet
Income Statement
Net revenue
Gross profit
Operating income
Net income
EBITDA
Ratios
Gross margin
EBITDA margin
Total debt / EBITDA
Net debt / EBITDA
EBITDA/Net Financial Expenses
26.9%
23.1%
1.6x
0.4x
27.8x
19
Indebtedness
In US$ million
Dec. 05
GROSS DEBT
3,269
100%
SHORT TERM
Domestic Currency
Foreign Currency
Companies Abroad
568
17%
98
3%
149
4%
321
10%
LONG TERM
Domestic Currency
Foreign Currency
Companies Abroad
2,701
83%
640
20%
1,386
42%
675
21%
CASH & CASH AND EQUIV.
Domestic Currency
Foreign Currency
2,335
100%
1,379
59%
956
41%
NET DEBT
934
COST OF DEBT IN DEC. 05
(per annum)
In US$
Brazil – Domestic
Currency
32.5%*
Brazil – Foreign
Currency
5.9%
Companies Abroad
7.3%
DEBT AVERAGE LIFE
9.1 years
*Includes 11.82% of 2005 FX
DEBT STRUCTURE
Foreign
Currency
46%
Companies
Abroad
31%
Domestic
Currency
23%
20
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
Crude Steel
In thousand tons
+ 14%
18,658
10,073
8,585
2006
Brazil
+ 6%
+ 24%
21,360
10,675
Rolled Steel
+ 14%
14,869
+ 7%
9,609
10,685
5,260
2008
2006
Abroad
Brazil
+ 25%
16,908
10,323
6,585
2008
Abroad
21
Dividends Policy

30% of the adjusted net income (Pay-out)

Dividend payments are being made on a quarterly basis
DIVIDENDS DISTRIBUTION*
In US$ million
334
302
Metalúrgica Gerdau S.A. (GOAU4)
Gerdau S.A. (GGBR4)
153
153
118
30
55
1999
66
30
2000
53
81
71
42
2001
58
2002
2003
2004
2005
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.
22
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
Europe
 Consolidation of stake in Sidenor as of the 1Q06
23
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.
24
Gerdau S.A.
www.gerdau.com.br
inform@gerdau.com.br
+55 51 3323 2703
25