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Gerdau

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Ranked 14th globally by steel output for year 2005 with an output ... integrated and mini mills, with state of the art technology ... operation: nail factory ... – PowerPoint PPT presentation

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Title: Gerdau


1
Gerdau
March 2007
2
Highlights
  • One of the worlds lowest cost steel companies
  • Strong cost position as a result of diversified
    production processes and multiple raw material
    sourcing
  • Strong foreign currency generation
  • Large export base
  • International subsidiaries
  • Ranked 14th globally by steel output for year
    2005 with an output of 13.7m tons
  • Largest long steel producer in the Americas
  • 2nd largest long steel producer in North America
  • 32 steel units, integrated and mini mills, with
    state of the art technology
  • Relevant market share and diversified product
    range through downstream and service centers
  • Strong balance sheet, low leverage and strong
    cash generation
  • Gerdau S.A. shares are listed on the São Paulo,
    New York and Madrid Stock Exchanges

3
Agenda
  • Industry Overview
  • Group Overview
  • Operating and Financial Highlights

All data presented in US Dollar and in metric
tons, except when indicated
4
World Production
WORLD CRUDE STEEL PRODUCTION
In million tonnes
Production reached more than 1,2 billion tonnes
in 2006.
1,217
8.7
1,120
2005
2006
EVOLUTION OF WORLD CRUDE STEEL PRODUCTION
World
China
2º Oil Shock
Accelerated increase of China
USSR breakup
1º Oil Shock
Corresponds to 70 of the world production growth
from 2001 to 2006
Source IISI / IISI apud IBS
5
World Demand
FINISHED STEEL APPARENT DEMAND
In million tonnes
The world steel demand should increase 4.2 p.a.
from 2010 to 2015.
1,179
5.2
1,121
1,029
8.9
China
NAFTA
Japan
India
South America
FINISHED STEEL APPARENT DEMAND PER CAPITA (KG)
  • With increasing investments in infrastructure and
    civil construction, India should have grown 10
    in 2006.
  • Steel consumption in South America should have
    increased 12 in 2006.
  • Chinese steel consumption should experience a
    more moderate growth in 2007.

344
NAFTA
322
295
China
205
World
195
171
Brazil
110
102
e estimated
Source IISI
6
Brazil and the Global Steel Industry
Crude Steel Production 2006
In million tons
In million tonnes
Total World Production 1.2 billion tonnes China
represented 34.4 of the global steel
production Brazil represented 2.5 of the global
steel production
419
116
98
71
47
48
44
41
32
31
South Korea
Brazil
Italy
Ukraine
China
USA
Japan
Russia
Germany
India
Source IISI
7
Agenda
  • Industry Overview
  • Group Overview
  • Operating and Financial Highlights

All data presented in US Dollar and in metric
tons, except when indicated
8
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 70 sales points)
  • - Acquisition of mill in Pernambuco

THE NEW MILLENNIUM
THE 70s
  • Acquisition of four companies in the US
  • Acquisition of downstream units and fab shops
    in North America
  • Entering the European market
  • Construction of a steel mill in São Paulo
  • Capacity expansion with acquisition of two
    mills (Alagoas and Paraná) construction of
    largest Gerdau mill (Rio de Janeiro)
  • Diversification into reforestation

9
An International Company
CANADA
Total Capacity (Includes Strategic Shareholdings)
19.2
million tonnes of crude steel
17.0
million tonnes of rolled steel products
Brazil
9.2 million tonnes of crude steel
6.3 million tonnes of rolled steel products
11 steel units
12 fabrication shops
6 downstream operations
74 sales points and flat steel service centers
Abroad
10.0 million tonnes of crude steel
10.7 million tonnes of rolled steel products
21 steel units
44 fabrication shops
17 downstream operations
1 associated company 1 joint venture
10
Solid Track Record
In thousand tonnes
21,605
TOTAL INVESTED (1981 - 2006) Brazil US 5.2
billion Debt North America US 2.0 billion
Debt South America US 654 million
Debt Europe US 380 million Debt
Installed Capacity Expansion
19,230
Araçariguama(Brazil) Sidenor (Spain) Sheffield
(USA) Siderperú (Peru) GSB(Spain)
7,696
16,372
Ameristeel (USA) AZANew Plant(Chile) Additiona
lstake inAçominas(Brazil)
North Star(USA)
11,076
ControlofAçominas(Brazil) Co-Steel (USA)
16,709
3,072
Diaco(Colombia)
Cambridge(Canada) Usiba(Brazil)
3,934
4,568
4,595
Piratini(Brazil) AZA(Chile)
Stake inAçominas (Brazil)
Manitoba (Canada)
2,611
1,757
BarãodeCocais(Brazil)
Laisa - 1980(Uruguay)
2009e
Brazil Installed Capacity of Crude Steel
Abroad Installed capacity of Crude Steel
e estimated
Besides the mills acquired, as related above,
Gerdau acquired many fab shops in order to add
value to its products and offer services and
products to its clients according to their needs.
11
Among the Leaders Crude Steel Output 2005
In million tonnes
Rank
1
2
3
4
5
6
Gerdau should have an installed capacity of 21.6
million tonnes of crude steel per year after the
investment program in Brazil is completed in 2009.
7
8
9
10
11
12
13
14
GERDAU GROUP (BRA)
Source Metal Bulletin
12
Value Builder CompanyATKearney study
Growth portfolio (CAGR 2001-2005)benchmarked
against industry average
Revenue Growth
70
Eregli Demir Celik
60
Mittal
Severstal
Baoshan
Angang
Bluescope 03 05
50
Maanshan Iron Steel
Ipsco
Steel Dynamics
Gerdau
Nucor
Novolipetsk1)
40
Acerinox
Tata Steel
30
Usinas
Voestalpine
Industry Average
Onesteel
Tokyo Steel
Cap
Boehler-Uddeholm
US Steel
20
SSAB
Salzgitter
SAIL
Oregon Steel Mills
Hylsamex
10
HyundaiSteel
JFE 03 05
Rautaruukki
Corus
Neomax
Imsa
Worthington
0
Arcelor02 05
Nisshin Steel
AK Steel
Sumitomo
Thyssenkrupp1)
Nippon Steel
Carpenter Technology
-10
-40
10
60
110
Equity Value Growth
Industry Average
Notes 1) EBIT-growth Notes USINAS USIMINAS
ARCELOR Takeover MITTAL/ SERVERSTAAL The market
capitilization of Severstaal is 6.8 bn USD (same
as revenue, hence valued above the industry
multiple of 0,79) Source Thyssenkrupp steel
segment
13
Shipments
In thousand tonnes
100 increase in the last 6 years
14,819
13,550
12,560
12,144
South America (10 in 2006)
North America (45 in 2006)
9,109
7,411
Brazil Exports (16 in 2006)
Brazil Domestic Market (27 in 2006)
Europe (2 in 2006)
2001
2002
2003
2004
2005
2006
Billets, blooms slabs
Heavystructural shapes
Wires
Rebars
Wire-rod
Merchant bars
Fabricated steel
Nails
14
Markets
BRAZIL - 2006
Arcelor Brasil 37
Gerdau 47
Other 5
Barra Mansa5
VM do Brasil6
COUNTRY
MARKET SHARE
MAIN COMPETITORS
NORTH AMERICA
Nucor ArcelorMittal CMC
17
CHILE
44
CAP Imports
URUGUAY
83
Imports
ARGENTINA
19
Acindar Bragado Zapla
COLOMBIA
37
Acerias Paz Del Rio Imports
SPAIN
43
Aceralia Saarsthal
PERU
45
Aceros Arequipa Imports
Market share of rebars, profiles and
wire-rod. Market share of long products, it
doesnt include flat steel.
15
Growth Opportunities
  • LONG STEEL PRODUCTS (Brazil)
  • Maintenance of market share
  • Improvement of current installed capacity
  • SPECIALTY STEEL
  • Active role in the steel sector consolidation
    process
  • Search for new opportunities
  • AÇOMINAS (Ouro Branco mill)
  • New 1.5 MM ton blast furnace
  • Growth platform for slabs, blooms and billets
  • LATIN AMERICA
  • Maintenance of leadership in the long steel
    sector
  • New markets
  • NORTH AMERICA
  • Efficiency and productivity gains (Gaps)
  • Enhancement of leadership in the long steel
    sector through acquisitions

16
Outlook
  • BRAZIL
  • Growing volumes in the domestic market 6 to 8
    in 2007
  • Industrial and residential construction sectors
    revving up
  • Recovery of agricultural sector
  • Prices in reais stable
  • Costs relatively stable
  • NORTH AMERICA
  • Demand remains strong for rebars, merchant bars
    and profiles
  • Imports falling
  • Increase in supply of higher value added
    products
  • SOUTH AMERICA
  • Strong growth in the economy
  • Civil construction sector strengthening
  • Increase in public investments
  • Demand in line with economic growth
  • EUROPE
  • Demand continues strong

17
Agenda
  • Industry Overview
  • Group Overview
  • Operating and Financial Highlights

All data presented in US Dollar and in metric
tons, except when indicated
18
Exports
2006
Domestic Market 78
NET SALES BREAKDOWN BY REGION
Europe3
South America10
Brazil 41
North America46
Exports 22 (37 in tonnes)
EXPORTS BY REGION (IN TONNES)
Central America15
NorthAmerica16
Africa 9
Europe 8
South America 29
Asia23
19
Margins
GROSS MARGIN
40
Consolidated Brazil North America South
America
36
38
24
22
24
15
10
EBITDA MARGIN
38
31
28
19
21
15
13
10
Calculated by hard currency
20
Consolidated Financials
In US million
2004
2005
2006


3,600 3,431 7,031 1,977 2,186 580 2,288 7,031
2,402 769 1,633
5,182 4,165 9,347 1,790 3,225 896 3,436 9,347
3,269 2,335 934
BALANCE SHEET Current assets Non-current
assets Total Assets Current liabilities Non-curre
nt liabilities Minority Interest Shareholders
equity Total Liabilities and Shareholders
equity Total debt Cash Equivalents Net debt
6,573 6,022 12,595 2,570 4,070 1,294 4,661 12,5
95 4,240 2,791 1,449
INCOME STATEMENT Net revenue Gross
profit Operating income Net income EBITDA
10,999 3,038 2,055 1,633 2,502
9,148 2,517 1,727 1,387 2,169
7,383 2,353 1,678 1,219 2,092

20 1.7x 0.6x
36 1.1x 0.8x
18 1.5x 0.4x
RATIOS Net debt / Total capitalization Total
debt / EBITDA Net debt / EBITDA
21
Consolidated Debt Profile
December 2006
DEBT STRUCTURE
Companies Abroad 26
Foreign Currency 46
Domestic Currency 28
22
Consolidated Debt Amortization
In US million Dec./06
FINIMP 90 Perpetual Bond 600 Debentures 115
FINIMP 196 BNDES 134
CompaniesAbroad 401Debentures 111 FINIMP 82
Companies Abroad 207 FINIMP 147Pre-export 118
875
Companies Abroad 176
730
BNDES 112 FINIMP 109
Companies abroad 201
665
WorkingCapital 99
Debentures 110
FINIMP 24
447
BNDES 55
330
300
278
227
165
141
82
1Q07
2Q07
3Q07
4Q07
2009
2010
2011
2012
After 2013
2013
2008
SHORT TERM US 917
LONG TERM US 3,323
23
Investment Plan
INVESTMENT PLAN 2007 2009US 4.0 billion
ACTUAL 2006
In million US
In million US
Including acquisitions in the period.
INSTALLED CAPACITY EVOLUTION
In thousand metric tons
Crude Steel
Rolling Products
12
21,605
8
19,230
18,435
17,040
11,005
10
9,970
11,985
Abroad
12
10,680
Abroad
10,600
14
Brazil
9,260
1
Brazil
6,450
6,360
2009
2007
2007
2009
23
24
Stock Appreciation
  • Gerdau S.A.s shares are included in the
    following São Paulo stock exchange index
  • Corporate Sustainability Index ISE
  • Special Corporate Governance Stock Index IGC
  • Special Tag Along Stock Index ITAG
  • Bovespa Index - Ibovespa
  • Brazil Index 50 - IBrX 50
  • Industrial Sector Index INDX

25
Capital Market
DAILY AVERAGE VOLUME
In US million
90
80
70
60
50
40
30
20
10
Jan05
Mar05
May05
Jul05
Sep05
Nov05
Jan06
Mar06
May06
Jul06
Sep06
Nov06
Jan07
DIVIDENDS POLICY
  • 30 of the adjusted net income (Pay-out)
  • Dividend payments are being made on a quarterly
    basis
  • Dividends related to each period, but not
    necessarily paid in the same period.
  • Figures are in BR GAAP converted to US Dollar of
    R 2.138 (12/31/2006)

26
Disclaimer
This document 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.
27
Gerdau S.A.
www.gerdau.com.br inform_at_gerdau.com.br 55 51
3323 2703
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