FEBRUARY 05-07, 2001 RIO DE JANEIRO - BRAZIL “Brazil 2001” CEO’s Roundtable Conference UBS WARBURG
GERDAU Results Business Capital Markets Steel Industry Brazil
Steel Industry Brazil
Crude Steel Production 27.8 million metric tons in % * Does not included stake in Açominas source: IBS 04
Gerdau* is the largest long steel producer in Brazil. Output was 3.3 million metric tons in 2000, a 46% market share for long steel. Rolled Products Output 18.2 million metric tons in 2000 Long Rolled Products 6,969 Flat Rolled Products 11,212 In thousand metric tons Source: IBS 05 * Does not included stake in Açominas
Source: IBS Apparent Consumption 06 Million metric tons
Source: IBS GDP Contribution Steel Sector represents 1.8% of GDP % Exports 26% Domestic Market 74% GDP 2000 US$ 565 billion Steel Sector Turnover US$ 10 billion 2000 data estimated
20% Reduction 40% Rolling Mills 3% IS & Automation 4% Energy 4% Environmental 6% Continuous Casting 8% Melt Shops 15% Other Source: IBS Investments US$ 6.6 billion from 2000 to
GERDAU Results Business Capital Markets
Results 10 In R$ million
Net Revenue O Revenues generated abroad present gains when converted to Reais due to currency devaluation. (+6% for 4th quarter only) 11 In R$ million 3.6% 1,363 1,316 4Q003Q00
Gross Profit O Export prices in Açominas suffered some reduction vis-à-vis production cost. O Gross margin changed to 24.6% in 4th quarter from 25.6% in the 3th quarter. 12 In R$ million 0.3% Q004Q00
Net Financial Expenses O Impact of the exchange rate on the debt in U.S Dollars. 13 In R$ million 65.6% 4Q Q00
Equity Pick-up O Impact of the exchange rate on the net worth of the subsidiaries abroad. 14 In R$ million 188.2% 3Q Q00
Other Oper. Revenues O Negative goodwill amortization of investment in Açominas. 15 In R$ million 18.2% 3Q004Q
Non-operating Expenses/Revenues O Tax recovery in Açominas and SIPSA (REFIS & IVA). In R$ million 3Q004Q00 (2) 13 16
In R$ million 2 (8) 4Q00 3Q00 Income Tax & Social Contribution O Reversion of provision for Income Tax due to increase in financial expenses and payment of interest over capital stock. 17
Net Income O Increase in financial expenses and lower margins reduced net income. O Net margin in 4th quarter was 6.3%. 18 In R$ million 13.1% Q00 3Q00
Crude Steel Output 7.1 million metric tons in % over In 1,000 metric tons 1, , , , ,7021,8011,7561,808 BrazilNorth America South America 4Q00 3Q002Q001Q00
Rolled Products Output 5.9 million metric tons in % over 1999 In 1,000 metric tons ,4771,4841,482 1,409 1Q00 2Q003Q00 4Q00 BrazilNorth America South America 20
Gross Revenue R$ 6.2 billion in % over 1999 In R$ million Foreign Companies Exports Domestic Market 1,627 1,434 1,546 1,619 21
Domestic Market Foreign Companies Exports 1,833 1,714 1,756 1, Q002Q003Q004Q00 In 1,000 metric tons Sales Volume 7.2 million of metric tons in % over
EBITDA R$ 1.1 billion in % over 1999 In R$ million Abroad Brazil Q002Q00 4Q00 3Q
Indebtedness In US$ million w.a. cost 12.6% p.a. Short Term Long Term 1,661 1,592 1,6341, Mar 00Dec 00Jun 00Sep 00 Cash position Dec 00: US$ 360 MM, 58% in U.S. dollars 24
Debt Breakdown 25 AÇOMINAS 6% (proportional to 37% stake) EUROBONDS 14% ACC/PRE- EXPORT 7% DEBENTURES 7% BNDES 14% OTHERS 8% FOREIGN COMPANIES 44%
Ratios 26 EBITDA and financial expenses of last 12 months. JUN00SEP00MAR00DEC00 2.5x 2.3x 3.8x 3.5x 4.2x Net Debt EBITDA Net Financial Expenses 2.3x 2.7x
GERDAU Results Business Capital Markets
The Company 28 O 100 years of tradition focused in the production of steel in mini-mills and in the distribution of steel products. O Installed capacity of 8 million metric tons of crude steel. O 25 th largest world steel producer and best ranked Brazilian Company. O Largest Latin American long steel producer. O Distribution network with 63 sales points, 3 service centers for flat steel and 24 fab shops for civil construction.
The Focus Focus on long rolled steel and stake in flat and semi-finished products (slabs and billets) through Comercial Gerdau and Açominas. Common Long Rolled Products 67% Specialty Long Rolled Products 4% Flat Steel (Resale) 7% Semi-finished (slabs and billets) 12% Drawn Products 10% Breakdown of Sales 81% long steel products 29
* Minority Shareholdings * Sipar Aza Sipsa Laisa AmeriSteel Courtice MRM Açominas * GERDAU S.A. O 10 in Brazil O 9 abroad O 2 shareholdings 21 Plants 30
Goals BRAZIL O Maintain its leadership in the long steel market. O Increase supply by offering new products and services. ABROAD O Consolidate recent acquisitions and enhance synergies. Gerdau 46% Belgo 35% Others 19% Long Steel Market 31
Management O Stimulate empowerment and value pro-active attitude of associates. O Strive for excellence through variable compensation programs. 32
How to Add Value Enhance the Armafer (cut & bend) network in Brazil and of Fabrication Shops abroad. Advantages: O Enhance quality O Increase productivity O Reduce waste O Reduce working capital BRAZIL In operation Under construction USA 33
Sales O Distribution through the industrial units and Comercial Gerdau branches. O Sales team acting as consultants and presenting technological innovations to clients and posting orders through the web. BUSINESS-TO-BUSINESS O Proprietary sales site as an additional tool to service clients. 34
Investments US$ 220 million in Brazil Abroad CAPEX Total DEPRECIATION 1Q002Q003Q Q Depreciation figures based at the exchange rate on December 2000
In the last decade Gerdau invested US$ 150 million to ensure its ecoefficiency. Investments in dust collection systems were well over US$ 45 million and an additional US$ 11 million are scheduled for investments through Environment 36
GERDAU Results Business Capital Markets
In 1947 Gerdau lists for the first time at the Stock Exchange in Porto Alegre, in 1966 at the Bovespa and in 1999 at the NYSE. Gerdau S.A. is part of the Bovespa Index. Since 1977 Gerdau guarantees the payment of a minimum 30% dividends over adjusted net income (since % for preferred shares) O Has had an Investor Relations Dept. for more than 30 years. Gerdau Experience 38
O Gerdau promoted the restructuring of its subsidiaries in O In 1996, Gerdau began disclosing voluntarily its cash flow. O Endeavors to become a benchmark in early disclosure. O Bilingual conference calls on the web. Brazil 36% Others 39% USA 25% O 20,000 visits/month. O 10% visit the financial section. O 64% of visits to site are abroad. Site Gerdau Experience 39
Gerdau and Subsidiaries
Gerdau S.A In R$ million In thousand metric tons 41
Açominas - 37% In thousand metric tons 2000 In R$ million 42
Includes Stake of 38% in Sipar. In thousand metric tons 2000 In R$ million South America Except Brazil 43
North America In thousand metric tons 2000 In R$ million 44