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GERDAU. Deutsche Bank - Investor Trip to Brazil. December 2005. Philosophy. VISION. TO BE A WORLD-CLASS INTERNATIONAL STEEL COMPANY. MISSION.

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Gerdau

GERDAU

Deutsche Bank - Investor Trip to Brazil

December 2005


Gerdau

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

2


Gerdau

Investment Considerations

  • A low cost international steel company with operations in Brazil, Uruguay, Canada, Chile, Argentina, Colombia and the United States

  • Substantial international profile – foreign exchange generation through divisions abroad and export sales amount approximately 61% of consolidated revenues in 9M05

  • Ranked 12th globally by steel output in 2004 with an output of 13.4m tons (includes one joint venture)

  • 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 28 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 1.4x in 9M05) and strong cash generation

  • Shares of Gerdau S.A. are currently traded at the São Paulo, New York and Madrid exchanges

3


Gerdau

MetalúrgicaGerdau S.A.

Banco

Gerdau S.A.

99%

44.8%

Gerdau S.A.

97.1%

89.3%

89.3%

89.3%

77.2%

89.3%

89.3%

22.8%

Gerdau

Açominas

S.A.

Gerdau

Aços Longos

S.A.

Gerdau

Aços Especiais

S.A.

Gerdau

Comercial de

Aços S.A.

Gerdau

Internacional

Empreend.

Ltda.

Seiva S.A.

Florestas e

Indústrias

Gerdau

América do Sul

Participações

S.A.

74.4%

Sipar

Aceros

S.A.

Gerdau

Ameristeel

Corporation

66.5%

100%

Gerdau

Laisa

S.A.

50%

Gerdau Chile

100%

Gallatin

Steel

57.1%

100%

Gerdau AZA S.A.

Gerdau Colômbia

Shareholding Structure

4


Gerdau

100+ Years in Business

THROUGHOUT THE 40’s

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

  • First steel mill acquisition – Siderúrgica Riograndense (1948)

THE 50’s

  • Expansion of Siderúrgica Riograndense

  • Construction of second mill at Riograndense

THE 90’s

THE 60’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

  • Market share increase by:

    • - Diversification and verticalization

    • of product line

    • - Structuring of distribution network

    • (today more than 77 sales points)

    • - Acquisition of mill in Pernambuco

THE 70’s

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

  • Diversification in reforestation

5


Gerdau

Solid Track Record

Brazil – Crude Steel Installed Capacity

Abroad – Crude Steel Installed Capacity

In thousand tons

THE NEW MILLENNIUM

16,830

Includes a pending

transaction in Colombia

  • Expansion abroad – reverse takeover of Co-Steel and acquisition of North Star Mills

  • Acquisition of stake in Açominas – controller since 2002

  • Strategic alliance in Colombia

Potter Form

Gate City & RJ

North Star(USA)

SACK(Chile)

DIACO and

SIDELPA(Colombia)

14,450

CartersvilleDrawingCo-Steel

(USA)

7,696

Ameristeel

(USA)

AZANew Plant(Chile)

TOTAL INVESTED ABROAD (1981-2004):

North America = US$ 1.3 billion + Debt

South America = US$ 314 million + Debt

CartersvilleMillOrrvileDrawing

(USA)

SIPSA(Argentina)

4,595

3,934

3,072

Manitoba

(Canada)

SIPAR(Arg.)

AZA(Chile)

1,757

Cambridge(Canada)

Laisa - 1980(Uruguay)

6


Gerdau

An International Company

Total Capacity (Includes 1 Joint Venture)

16.8

million tons of crude steel

13.9

million tons of rolled steel products

Brazil

7.6 million tons of crude steel

4.8 million tons of rolled steel products

10 mills

11 fabrication shops

6 downstream operations and special

sections

75 sales points and flat steel service centers

Abroad

Rolling mill

9.2 million tons of crude steel

Steel mills

9.1 million tons of rolled steel products

Joint venture

18 mills and 1 rolling mill

38 fabrication shops

15 downstream operations and special

sections

1 joint venture

7


Gerdau

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 (U.K.) 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

8


Gerdau

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

9


Growth strategies

Growth Strategies

  • LONG STEEL PRODUCTS (Brazil)

    • Maintenance of market share

    • Enhancement of current installed capacity

    • New steel mill in São Paulo

    • Continuous improvements

  • SPECIALTY STEEL

    • Growth in the domestic and export markets

    • New mill in Rio de Janeiro

    • New markets/regions

  • AÇOMINAS (Ouro Branco mill)

    • New 1.5 mm ton blast furnace

    • Next phase: +3 mm tons

    • Growthplatform for slabs, blooms and billets

    • Export-oriented sales

  • SOUTH AMERICA

    • Maintenance of leadership in the long steel sector

    • New markets

  • NORTH AMERICA

    • Efficiency and productivity gains (Gaps)

    • Active role in the steel sector consolidation process

  • NEW OPPORTUNITIES

    • Mexico, Asia, South America…

    • Flat Steel

    • Iron ore and pig iron

10


Gerdau

Shipments

Billets, blooms& slabs

Heavystructural shapes

Wires

Wire-rod

Rebars

Merchant bars

Nails

Fabricated steel

In thousand tons

13,581

12,560

12,144

Brazil – Domestic Market

9,151

Brazil – Exports

7,394

7,213

South America

North America

11

* Annualized data


Gerdau

Strong Export Business

SHIPMENTS BY REGION

SHIPMENTS BY SEGMENT

Agricultural2%

Europe11%

2004

Asia34%

Civil Construction41%

Africa8%

Industry57%

South America 17%

Central

America15%

North America15%

Agricultural1%

Africa8%

9M05

Europe 11%

Central America12%

Civil Construction 37%

North America4%

Asia44%

Industry62%

South America 21%

12


Gerdau

Costs and Prices

Net Sales Revenue and Cost of Sales per ton

In US Dollars/ton

Brazil

755

718

747

733

707

681

546

511

494

500

492

449

425

443

444

Net Sales Revenue

402

374

338

310

Cost of Sales

299

311

289

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

North America

South America

735

722

697

685

675

820

723

636

731

717

699

561

638

512

637

637

613

615

586

584

558

549

408

411

502

579

526

384

498

463

510

510

425

487

396

385

422

378

418

417

367

351

331

288

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

1Q05

2Q05

4Q04

3Q05

3Q05

2Q05

4Q04

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

1Q05

Net Sales Revenue

Cost of Sales

Net Sales Revenue

Cost of Sales

All data in BR GAAP converted by R$ 2.2222/US$

13


Gerdau

Consolidated Financials

In US$ millions

9M05

2004

9M04

Income Statement

Net revenue

Gross profit

Operating income

Net income

EBITDA

5,143

1,666

1,151

870

1,492

7,383

2,353

1,678

1,219

2,092

7,362

1,996

1,424

1,132

1,743

Balance Sheet

Current assets

Non-current assets

Fixed assets

Total

Current liabilities

Non-current liabilities

Shareholders’ equity

Total

3,600

390

3,041

7,031

1,977

2,186

2,868

7,031

5,152

365

3,794

9,311

1,698

3,267

4,346

9,311

2,954

273

2,662

5,889

1,654

1,827

2,407

5,888

27.1%

23.7%

1.4x

0.5x

23.3x

32.4%

29.0%

1.2x

0.8x

14.3x

Ratios

Gross margin

EBITDA margin

Total debt / EBITDA

Net debt / EBITDA

EBITDA/Net Financial Expenses

31.9%

28.3%

1.1x

0.8x

19.8x

14


Gerdau

Liquidity Management

Gerdau maintains a strong liquidity policy to ensure that ample resources are available in the case of a downturn in market conditions or any deterioration of the sovereign environment

  • 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

15


Gerdau

Consolidated Debt Profile

In US$ millions

Sep./05

GROSS DEBT

3,261

100%

SHORT TERM

570

18%

Domestic Currency

107

3%

Foreign Currency

151

5%

Companies Abroad

312

10%

DEBT MATURITY9.1 years

LONG TERM

2,691

82%

Domestic Currency

691

21%

Foreign Currency

1,328

41%

DEBT STRUCTURE

Companies Abroad

672

20%

Companies Abroad30%

CASH & CASH AND EQUIV.

2,111

100%

Foreign Currency46%

Domestic Currency

1,363

65%

Foreign Currency

748

35%

Domestic Currency24%

NET DEBT

1,150

16

* Includes exchange and monetary variation in the last 9 months


Gerdau

Schedule of Amortization

In US$ million

Pre-export = 639Debentures = 280

994

Comp. Abroad = 396Debentures = 75

Comp. Abroad = 136BNDES = 83Imports = 108

Pre-export = 113BNDES = 68Imports = 62

554

Comp. Abroad = 211

382

316

286

211

199

171

148

After

2011

2010

4Q05

1S06

2007

2008

2011

2S06

2009

17


Gerdau

Guaranteed Perpetual Senior Notes

Obs.: 1) The offering orders exceeded US$ 3.5 billion. 2) The geographic distribution of the offering was as follows: 46% Asian, 32% European, 20% U.S. and 2% Brazilian investors.

18


Gerdau

Euro Commercial Paper

Obs.: 1) This is the second issuance on a programme which started with US$ 100 mm in 2003. 2) Coupons of each issue: 2003 – 4.125% (275 bps above Libor of 1 year) 2004 – 3.125% (67.5 bps above Libor of 1 year) 2005 – 5.000% (45.5 bps above Libor of 1 year)

19


Gerdau

Capital Expenditures

BraZil

Brazil

Abroad

Abroad

INVESTMENTS - 9M2005

In US$ millions

Investment Program 2005 – 2007: US$ 3.2 billion

EVOLUTIONOFINSTALLED CAPACITY

In thousand tons

Crude Steel

Rolled Steel

+ 28%

21,450

+ 19%

15,490

16,380

12,970

+ 11%

9,730

8,880

+ 8%

8,240

8,800

11,720

+ 55%

+ 40%

6,610

7,580

4,730

2004

2004

2007

2007

20


Gerdau

Safe Harbor Statement

Statements relative to business perspectives are based on current expectations of future events and trends that may affect our business. These estimates 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.


Gerdau

Gerdau S.A.

www.gerdau.com.br

[email protected]

+55 51 3323 2703


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