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Gerdau S.A. UBS Brazil 2006 – Seventh Annual CEO Conference. March 2006. Steel Sector Gerdau Group Operating and Financial Highlights Capital Markets. Agenda. Production. Apparent Consumption. World Steel – Supply and Demand. Finished Steel. + 15.3% over 2005. In million tons.

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Gerdau S.A.

UBS Brazil 2006 – Seventh Annual CEO Conference

March 2006


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Steel Sector

Gerdau Group

Operating and Financial Highlights

Capital Markets

Agenda


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Production

Apparent Consumption

World Steel – Supply and Demand

Finished Steel

+ 15.3% over 2005

In million tons

+ 18.6% over 2005

1,153

1,000

1,117

According to a WSD forecast for 2010, 97% of the world’s production will be consumed.

942

830

698

690

632

772

655

641

603

1985

1990

1995

2000

2005F

2010F

Source: IISI / World Steel Dynamics

F=Forecast


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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 (UK) 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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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.

World

  • 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%).

North

America

  • 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.

South

America

  • 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.

Brazil

Source: IBS andIISI


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Brazil and the Global Steel Industry

Crude Steel Production – 2005

In million tons

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

Italy

India

Brazil

China

Ukraine

USA

Japan

Russia

Germany

South Korea

Source: IISI


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Steel Sector

Gerdau Group

Operating and Financial Highlights

Capital Markets

Agenda


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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, 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


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100+ Years in Business

1901

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)

  • 1901 – First operation: nail factory

THROUGH THE 40’s

  • First steel mill acquisition – Siderúrgica Riograndense (1948)

THE 50’s

THE 90’s

  • Expansion of Siderúrgica Riograndense

  • Construction of second Riograndense’s 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 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 NEW MILLENNIUM

THE 70’s

  • More acquisitions in the US

  • Downstream expansion in North America

  • Entering the European market

  • Presence in São Paulo with a brand new steel mill

  • Capacity expansion with acquisition of two mills (Alagoas and Paraná); construction of largest Gerdau mill (Rio de Janeiro)

  • Diversification into reforestation


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Solid Track Record

Brazil – Crude Steel Installed Capacity

Abroad – Crude Steel Installed Capacity

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)

CartersvilleDrawingCo-Steel

(USA)

16,475

Diaco(Col.)

Ameristeel

(USA)

AZANew Plant(Chile)

Additionalstake 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)


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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

15 downstream operations and special

sections

Steel mills

Strategic Shareholding

12


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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

SPAIN

36%*

GSB

* Specialty steel only


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Growth portfolio (CAGR 1999-2003)benchmarked against industry average

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

-10%

Eregli Demir

-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


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Steel Sector

Gerdau Group

Operating and Financial Highlights

Capital Markets

Agenda


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Shipments

Billets, blooms& slabs

Heavystructural shapes

Wires

Wire-rod

Rebars

Merchant bars

Nails

Fabricated steel

In thousand tons

13,550

12,560

12,144

South America (10% in 2005)

9,109

North America (45% in 2005)

7,411

7,302

Brazil – Exports (20% in 2005)

Brazil – Domestic Market (25% in 2005)


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Strong Export Business

2005

NET REVENUE BREAKDOWN BY REGION

South America6%

Brazil (Domestic Market) 34%

North America47%

Exports (from Brazil)13%

EXPORT SHIPMENTS BY REGION

Africa8%

Europe 11%

Central America13%

North America5%

Asia44%

South America 19%


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Margin Evolution

Gross Margin

EBITDA Margin

Brazil North America South America


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Costs and Prices

Net Revenue and Cost of Sales per ton

In US Dollars/ton

717

682

709

696

Brazil

673

646

626

518

486

469

475

467

426

423

420

408

404

Net Revenue

382

355

321

294

295

Cost of Sales

284

274

4Q05

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

North America

South America

822

779

756

710

694

677

686

681

646

663

624

635

609

605

605

557

521

518

501

486

477

477

638

616

549

403

580

388

564

549

544

484

528

484

511

463

486

464

459

400

397

396

354

361

333

348

314

273

3Q05

4Q04

3Q05

2Q05

4Q05

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

4Q05

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

1Q05

2Q05

Cost of Sales

Cost of Sales

Net Revenue

Net Revenue


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Consolidated Financials

In US$ millions

2005

2003

2004

Balance Sheet

Current assets

Non-current assets

Fixed assets

Total

Current liabilities

Non-current liabilities

Shareholders’ equity

Total

1,846

364

2,721

4,931

1,503

1,747

1,681

4,931

5,182

377

3,788

9,347

1,790

3,225

4,332

9,347

3,600

390

3,041

7,031

1,977

2,186

2,868

7,031

Income Statement

Net revenue

Gross profit

Operating income

Net income

EBITDA

4,627

1,139

397

434

929

9,077

2,446

1,727

1,386

2,098

7,383

2,353

1,678

1,219

2,092

26.9%

23.1%

1.6x

0.4x

27.8x

31.9%

28.3%

1.1x

0.8x

19.8x

Ratios

Gross margin

EBITDA margin

Total debt / EBITDA

Net debt / EBITDA

EBITDA/Net Financial Expenses

24.6%

20.1%

2.3x

2.0x

5.0x


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Liquidity Management

Gerdau maintains a policy of strong liquidity to ensure that resources are available in to face opportunities or downturns in market conditions

  • Gerdau’s 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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Indebtedness

In US$ million

COST OF DEBT IN DEC. 05

(per annum)

In US$

Dec. 05

Brazil – Domestic Currency

Brazil – Foreign Currency

Companies Abroad

32.5%*

5.9%

7.3%

DEBT AVERAGE LIFE 9.1 years

*Includes 11.82% of 2005 FX

DEBT STRUCTURE

Companies Abroad31%

Foreign Currency46%

Domestic Currency23%


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Consolidated Debt Amortization

In US$ millions – December/05

Bonds: 400

Perpetual:600

Debentures: 336

BNDES: 106

Debentures GNA: 97

Imports: 108

BNDES: 65

Pre-Export: 55

1,535

BNDES: 76

Imports: 87

Pre-Export: 113

Euro Commercial Paper: 200

BNDES: 48

409

364

326

242

231

162

1H06

2007

2010

AFTER 2010

2H06

2008

2009


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Capital Expenditures

Brazil

Brazil

Abroad

Abroad

INVESTMENTS - 2005

In US$ millions

Investment Program 2006 – 2008: US$ 3.8 billion

EVOLUTIONOFINSTALLED CAPACITY

In thousand tons

Rolled Steel

Crude Steel

+ 14%

+ 14%

16,908

21,360

14,869

18,658

+ 6%

+ 7%

10,675

10,323

10,073

9,609

+ 25%

+ 24%

10,685

6,585

5,260

8,585

2006

2006

2008

2008


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Steel Sector

Gerdau Group

Operating and Financial Highlights

Capital Markets

Agenda


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Listed Companies

Gerdau’s shares traded a daily volume of US$ 34.3 million during 2005

GERDAU S.A.

GGBR4 = R$ 51.85Market Cap = US$ 10.9 billion

METALÚRGICA GERDAU S.A.

GOAU4 = R$ 61.50Market Cap = US$ 3.6 billion

BOVESPASão Paulo

NYSE

New York

GERDAU S.A.

GGB = US$ 24.33

GERDAU AMERISTEEL CORP.

GNA = US$ 9.22

GERDAU AMERISTEEL CORP.

GNA.TO = Cdn$ 10.63Market Cap = Cdn$ 3.3 billion

TSEToronto

GERDAU S.A.

XGGB = € 19.95

LATIBEXMadrid

Stock prices in 03.17.2006


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Stock Liquidity

Monthly average volume

Monthly average volume

Monthly average # of trades

Monthly average # of trades

METALÚRGICA GERDAU S.A. AND GERDAU S.A. PREFERED SHARES ARE PART OF BOVESPA INDEX

METALÚRGICA GERDAU S.A.(GOAU4)

GERDAU S.A.(GGBR4)

In US$ million (Volume)

In number of trades

50% Stock bonus(GGBR e GOAU)

30% Stock bonus + 70% Split (GOAU)100% Stock bonus (GGBR)

1,500

25

1,200

20

GGBR4:

1,020 trades

US$ 17.6 MM

15

900

GGBR4:

595 trades

US$ 8.3 MM

600

10

GOAU4:

441 trades

US$ 7.1 MM

5

300

GOAU4:

162 trades

US$ 2.3 MM

0

Jan

06

Nov

04

Jan

05

Mar

05

May

05

Jul

05

Sep

05

Nov

05

Jan

04

Mar

04

May

04

Jul

04

Sep

04

Source: Economática


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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)

* Dividends related to each period, but not necessarily paid in the same period.


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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


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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.


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Gerdau S.A.

www.gerdau.com.br

[email protected]

+55 51 3323 2703


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