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Disclaimer

Disclaimer

”This presentation may contain statements that express management’s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and CVRD cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian economy and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore business and its dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which CVRD operates. For additional information on factors that could cause CVRD’s actual results to differ from expectations reflected in forward-looking statements, please see CVRD’s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.”


Agenda

Agenda

  • Highlights

  • Delivering profitable growth

  • A good business outlook is supported by the long cycle


Disclaimer

Highlights


Highlights

Highlights

  • An outstanding performance.

  • Fundamentals better than they have been in many years. Current cycle is one of the strongest since late 19th century.

  • Good strategy execution is allowing us to explore growth opportunities wisely.

  • Disciplined capital management creates highly competitive growth platforms and high return on invested capital.

  • Powerful cash flow and good financial policy generate a healthier balance sheet.


Disclaimer

Delivering profitable growth


Sales in a strong growth path

Sales in a strong growth path

  • An all-time high revenue, US$ 2.3 billion, with qoq growth (12.5%) mostly driven by larger volumes (71%).

In 000’ tons

a

million of ntk


Disclaimer

Ferrous minerals accounted for 69% of revenues. China is an important growth driver, but accounts for only 11% of revenues

9M04 Gross Revenues: US$ 6.051 billion

By product

By geography


Iron ore and pellets shipments reached an all time high in 3q04

Iron ore and pellets shipments reached an all-time high in 3Q04

million tons

116.7

60.4

55.9

55.6

148.7

52.9

46.6

42.5

164.2

41.5

186.2

130.6

169.2

CAGR 00-04E = 9.7%


Cvrd railroads transported a record volume of general cargo for clients

CVRD railroads transported a record volume of general cargo for clients

Billion of ntk

CAGR 00-04E = 9.8%


Adjusted ebit reaches a new quarterly record

Adjusted EBIT reaches a new quarterly record


Operational excellence across the board

Operational excellence across-the-board

adjusted EBIT margin by business area


Disclaimer

An outstanding earnings performance among main metals and mining companies reporting quarterly

Market Capas of September 30, 2004 US$ billion

3Q04 Net EarningsUS$ million

Source: Bloomberg LP and company reports


Disclaimer

To stay at the lowest end of the industry cost curve is key to weather the downcycle and to leverage the upcycle

Net earnings

US$ million


Disclaimer

Despite the BRL appreciation against the USD, quarterly cash generation hits the one billion dollar mark. Ten quarters of consecutive growth

LTM adjusted(2) EBITDAUS$ billion


Disclaimer

Investments are changing CVRD profile: cash flow became much more powerful and generated from a more diversified set of sources

Sources of cash generation

1Q02 Adjusted EBITDA

3Q04 Adjusted EBITDA

US$ 397 million

US$ 1.007 billion


Disclaimer

Capex reached US$ 1.27 billion in the first nine months of 2004, with four major projects delivered

CAPEX 9M04

US$ 1.270 billion

Main projects

delivered

Pier III PDM

Carajás 70 Mt

Candonga

Sossego

Growth capex

US$ 798 million

On track

Fabrica Nova I

Carajás 85 Mt

Brucutu I

Fazendão

Itabira

Alunorte 4&5

Paragominas I

Taquari-Vassouras

Aimorés

Capim Branco I&II

Stay-in-business

capex

US$ 472 million


Capital allocation discipline and good strategy execution spearheaded constantly high performance

Capital allocation discipline and good strategy execution spearheaded constantly high performance

Return on invested capital

a

Annualized


Disclaimer

Powerful cash generation allows CVRD to finance growth initiatives and to meet shareholders’ dividend expectations

2004 dividend

US$ 0.68 per share

Dividend growth

2004/2003+15.7%

2003/2002+12.1%


Balance sheet is improving continuously

Balance sheet is improving continuously


Disclaimer

A good business outlook is

supported by the long cycle


After growing at 5 per year a 30 year high global economy recovery reached a mature stage

After growing at 5% per year, a 30-year high, global economy recovery reached a mature stage

Global PMI

Source: JPMorgan


Disclaimer

We expect global GDP growth rate to stay above long-term trend in the near future

Global GDP growth

%

CAGR 1970 - 2003 = 3.6%

Source: IMF and CVRD


Disclaimer

Some indicators are signalling that a Chinese soft landing is becoming more likely

Fixed asset investment

Bank credit

YoY%

YoY%

Source: CEIC


Disclaimer

China’s GDP growth is slowly cooling down. We expect growth rate to converge to 7% per year

GDP growth

YoY %

Source: CEIC and CVRD


Apparent steel consumption is forecast to continue to grow faster than global gdp

Apparent steel consumption is forecast to continue to grow faster than global GDP

CAGR 1974-94 = 0.0% - 1994-04E = 2.9%

CAGR 1974-94 = 7.9% - 1994-04E = 8.4%

Million tons

+5.1%

+7.6%

+10.3%

+12.9%

Source: IISI and CVRD


Global seaborne iron ore demand is expected to follow above long term trend growth

Global seaborne iron ore demand is expected to follow above long-term trend growth

Million tons

CAGR 1990-04E = 3.9%

CAGR 1990-04E = 20.7%

+5.9%

+10.8%

+15.4%

+31.8%

Source: CVRD


Disclaimer

Aluminum inventories are dwindling as global demand is growing at almost 10% per year

Source: IAI, LME, Comex and Bloomberg


We expect global aluminum market to remain in deficit in 2005

We expect global aluminum market to remain in deficit in 2005

000’ tons

Source: CRU and CVRD


Disclaimer

The outlook for the next 12 months is for continuing tightness in the alumina market

Source: Metal Bulletin, LME and Bloomberg


Copper inventories continue to be depleted low inventories give support to next year s prices

Copper inventories continue to be depleted. Low inventories give support to next year’s prices

Source: Bloomberg


Disclaimer

CVRD – A Global Leader

www.cvrd.com.br

e-mail: [email protected]


Appendix

Appendix

Reconciliation of non-GAAP information and comparable GAAP information

  • (1) Adjusted EBIT (US$ million)3Q032Q043Q04

  • Net operating revenues1,4321,9202,173

  • COGS(812)(912)(1,053)

  • SG&A expenses(74)(106)(112)

  • Research and development(22)(27)(36)

  • Other Operating Expenses(23)(43)(86)

  • Operating income (Adjusted EBIT)501832886

  • (2) Adjusted EBITDA (US$ million)

  • Reconciliation between adjusted EBITDA vs. operating cash flow

  • Operating Cash Flow4357001,107

  • Income tax (41)41285

  • Monetary and Foreign Exchange Losses44(46)41

  • Financial Expenses6260113

  • Net Working Capital 140221(436)

  • Others(10)(5)(103)

  • Adjusted EBITDA6309711,007


Appendix1

Appendix

Reconciliation of non-GAAP information and comparable GAAP information

  • (3) Gross Debt / LTM Adjusted EBITDA3Q032Q043Q04

  • Gross Debt / LTM Adjusted EBITDA (x) 2.151.551.34

  • Gross Debt / LTM Operating Cash Flow (x) 2.462.011.51

  • (4) LTM Adjusted EBITDA / LTM Interest Expense

  • LTM Adjusted EBITDA / LTM Interest Expenses (x)10.1512.9412.94

  • LTM Operating Profit / LTM Interest Expenses (X)8.0910.2610.64

  • (5) Gross Debt / Enterprise value

  • Gross Debt / Enterprise value (x) 0.240.220.16

  • Gross debt / Total assets (x)0.370.360.30

  • Enterprise Value = Market Capitalization + Net Debt


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