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Latin America Pulp & Paper / Metals & Mining Conference JP MORGAN. São Paulo, March 5 th , 2004. Steel Sector Gerdau S.A. Consolidated Stock Market. World Production Crude Steel. In million tons.

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Latin america pulp paper metals mining conference jp morgan

Latin America

Pulp & Paper / Metals & Mining Conference

JP MORGAN

São Paulo, March 5th, 2004


Latin america pulp paper metals mining conference jp morgan

Steel SectorGerdau S.A. Consolidated

Stock Market


Latin america pulp paper metals mining conference jp morgan

World Production

Crude Steel

In million tons

In 2003, the world produced945.1 million tonsof steel. Brazil contributed with 3.3% of this tonnage.

03

Sources: IISI


Latin america pulp paper metals mining conference jp morgan

Largest Producers

Crude Steel 2002

Production

Company

In million tons

(LUX)

(ENG)

(JAP)

(KOR)

(CHI)

Production

Company

(ENG)

(GER)

(ITA)

(JAP)

(USA)

(JAP)

(USA)

(JAP)

(BRA)

(ENG)

04

Source: IISI


Latin america pulp paper metals mining conference jp morgan

MERCHANT BARS PRICES

REBAR PRICES

PRICE INCREASE (LTM): +34%

PRICE INCREASE (LTM): +33%

STEEL SCRAP PRICES

PRICE INCREASE (LTM): +52%

North America

End-use demand is improving for all long steel products, although cost pressures remain the dominant influence on prices everywhere…

December shipments were up by 10% YoY. While one month of positive data is not enough to confirm that an upward trend in demand has set in, December´s growth marks a significant turnaround after one year of uninterrupted contraction.

05

Source: MEPS/Metal Bulletin


Latin america pulp paper metals mining conference jp morgan

Usiminas/Cosipa

8,624

8,449

Belgo/CST/Acesita (Arcelor)

Gerdau Açominas

6,976

CSN

5,318

Aços Villares

775

V&M do Brasil

551

Barra Mansa

421

MWL Brasil

36

Gerdau Açominas – 49.6%

3,894 thousand tons

V&M do Brasil - 6%

466 thousand tons

Aços Villares - 6%

456 thousand tons

Belgo (Arcelor) – 33.8%

2,654 thousand tons

Barra Mansa - 5%

385 thousand tons

Brazilian Steel Sector

2003

CRUDE STEEL PRODUCERS IN BRAZIL

In thousand tons

TOTAL 2003:

31,150 thousand tons

LONG STEEL PRODUCERS IN BRAZIL

TOTAL 2003:

7,855 thousand tons

Source: IBS

06


Latin america pulp paper metals mining conference jp morgan

Domestic Sales

Exports

Exports of Long Steel Products

9M2003 Brazil

In million tons

Domestic SalesSep.2003/2001- 11%

Monthly Average 517.2 thousand tons

Monthly Average 528.2 thousand tons

Monthly Average 461.5 thousand tons

700

600

500

Exports

Sep.2003/2001

+85%

400

300

Monthly Average 156.3 thousand

tons

Monthly Average 99.2 thousand tons

Monthly Average 84.4 thousand tons

200

100

2001

2002

2003

Exports of long steel products reached 2.2 million tons in 2003, an increase of 78% YoY.

Source: IBS

07


Latin america pulp paper metals mining conference jp morgan

Brazilian Steel Sector Competitiveness

EBITDA MARGIN - 2002

35%

In %

40

35

30

25

20

15

10

5

Brazil

Asia*

Japan

EU

North

America

Others

(World)

* Does not include Japan

  • Despite increases in the prices of main inputs, Brazil has the highest operating margin in the world.

  • The mills operate with up-to-date technology due to a permanent investment program.

Source: IBS

08


Latin america pulp paper metals mining conference jp morgan

Apparent Consumption

In million tons

Installed Capacity

Crude Steel Production

1994

95

96

97

98

99

00

01

02

03

04

05

06

2007

Investments in the Brazilian Steel Sector

INVESTMENT SCHEDULE

In US$ million

INSTALLED CAPACITY X PRODUCTION X APPARENT CONSUMPTION

Source: IBS

09


Latin america pulp paper metals mining conference jp morgan

Steel SectorGerdau S.A. Consolidated

Stock Market


Latin america pulp paper metals mining conference jp morgan

STRUCTURAL SHAPES

WIRES

WIRE-ROD

NAILS

Main Products

MERCHANTS AND STRUCTURALS

BILLETS

REBARS

FABRICATED STEEL

11


Latin america pulp paper metals mining conference jp morgan

Installed Capacity

In thousandtons

CRUDE STEEL

ROLLED PRODUCTS

Billets, slabs, blooms, merchant bars, rebars, wire rod, drawn products, welded wire meshes, structurals, nails, downstream products,fabricated steel products and specialty steel.

Gerdau Açominas7,3744,811

South510634

America

North6,5676,187

America

TOTAL14,451 11,632

Billets, merchant bars, rebars and wire rod.

Billets, merchant bars, rebars, wire rod, drawn products, welded meshes, nails, downstream products andfabricated steel products.

12


Latin america pulp paper metals mining conference jp morgan

Crude Steel

Rolled Products

Output Evolution

AVERAGE GROWTH RATE

1980 - 2003

Crude Steel 10.2% per year

Rolled Products 9.2% per year

Co-Steel

2002

Part. Açominas 1997

Usiba1989

Piratini1992

AmeriSteel

USA

1999

12.3 million

Pains1994

Sipsa Argentina1997

Barão de Cocais1988

CearenseGuaíra1982

9.0 million

Part.

Sipar

Argentina

1998

MRM

Canada

1995

Hime1985

Aza

Chile

1992

Courtice

Canada

1989

Laisa

Uruguay

1981

Açominas

(control)

2002

1980

1984

1988

1992

1996

2000

2003

  • 14th largest world steel producer according to the IISI.

  • Largest long steel producer in the Americas.

13


Latin america pulp paper metals mining conference jp morgan

Gerdau AmeriSteel Corp.

Gallatin Steel (1)

Gerdau

Açominas S.A.

AZA

Laisa

Sipar (2)

(1) Flat steel mill, 50% stake JV

(2) Rolling mill, 38% stake JV

Geographical Distribution

NORTH AMERICA

  • 10 mills and 1 strategic shareholding (Gallatin Steel)

  • 20 fabrication shops

  • 12 downstream operations and special sections

BRAZIL

  • 10 mills

  • 11 fabrication shops

  • 6 downstream operations and special sections

  • 73 sales points (Comercial Gerdau).

  • 5 service centers for flat steel (Comercial Gerdau).

SOUTH AMERICA

  • 2 mills and 1 strategic shareholding (Sipar)

  • 3 fabrication shops

14


Latin america pulp paper metals mining conference jp morgan

Competitive Edge

  • Focus on long steel products manufacturing and distribution

  • Market mill approach

  • Up-to-date technology

  • Competitive production costs

  • Diversified production processes

  • Multiple raw materials sourcing

  • Vertical and horizontal integration

  • Relevant market share in every country in which the Company has operations

  • Financial soundness and access to international capital markets

  • Confirmed experience in turning around distressed operations

15


Latin america pulp paper metals mining conference jp morgan

Results

In R$ million

16


Latin america pulp paper metals mining conference jp morgan

In R$ thousand

13,367

9,162

In R$ thousand

10,077

6,539

Main Variations

NET SALES

The great performance of exports in the period as well as the incorporation of the new North American units in October 2002 and the recovery of full productive capacity of Gerdau Açominas allowed for the 45.9% increase in net sales revenues.

COST OF GOODS SOLD

The increase of 54.1% YoY was due to the price increases in the main inputs of Gerdau such as scrap and pig iron in Brazil, and scrap, energy and natural gas in North America.

17


Latin america pulp paper metals mining conference jp morgan

In R$ thousand

1,212

1,002

In R$ thousand

141

(80)

Main Variations

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Operating expenses (SG&A) increased by 21% resulting mainly from the greater costs involved in exporting (port services and freight) and the increase in Gerdau Ameristeel's expenses.

PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION

As a consequence of the integration of the operating assets of Gerdau S.A. into Gerdau Açominas, the latter was able to create a positive income tax and social contribution provision, in the year , of R$ 140.9 million based on the recognition of R$ 333.7 million in tax credits resulting from fiscal losses.

18


Latin america pulp paper metals mining conference jp morgan

Results by Region

2003

19


Latin america pulp paper metals mining conference jp morgan

Sales Track Record

In 1,000 tons

3,156

3,123

TOTAL SHIPMENTS

2,889

2,976

99

109

101

107

South America

1,295

1,290

North America

1,284

1,271

Brazil (exports)

869

892

657

793

Brazil (domestic sales)

875

850

854

798

1Q03

2Q03

3Q03

4Q03

TOTAL SHIPMENTS IN 2003:

12,144 thousand tons (+32.7%)

20


Latin america pulp paper metals mining conference jp morgan

SouthAmerica

6%

Africa

3%

Africa

11%

South

America

6%

North

America

14%

Asia

52%

Asia

51%

North

America

9%

Europe

11%

Europe

12%

Central

America

11%

Central

America

11%

Exports

DESTINATION OF EXPORTS 2002

DESTINATION OF EXPORTS 2003

EXPORTS IN 2003: 3.2 MILLION TONS (+69.9%)

  • Export revenues US$ 787.3 (+125%)

  • Strong demand in the international markets

  • Very attractive prices

  • Average price increase of 30.9%

21


Latin america pulp paper metals mining conference jp morgan

Gerdau S.A.

South America

North America

Output

CRUDE STEEL

In 1,000 tons

3,123

3,166

2,968

3,085

94

85

83

85

1,250

1,254

1,321

1,195

TOTAL 2003:

12,343 thousand tons

(+30.7%)

1,688

1,679

1,790

1,818

ROLLED PRODUCTS

In 1,000 tons

2,366

2,299

2,246

2,135

107

90

90

92

1,241

1,197

1,216

1,122

TOTAL 2003:

9,045 thousand tons

(+30.5%)

921

1,018

940

1,012

22


Latin america pulp paper metals mining conference jp morgan

SENIOR SECURED CREDIT FACILITYUS$ 350 SENIOR UNSECURED NOTES US$ 405(June)

Total volume:US$ 755 mmBond portion swapped to floating: US$ 200 mm

Average cost:7.7%

Average term:6.6 years

SECURED EXPORT NOTES PROGRAM(September)

Total volume:US$ 400 mm

1st tranche:US$ 105 mm

Cost:7.37% p.y.

Term:7 years Grace period: 2 years

EURO-COMMERCIAL PAPER PROGRAM(October)

Total volume:US$ 300 mm

1st tranche:US$ 100 mm

Cost:4.125% p.y.

Term:1 year

* Considers the average SELIC interest rate

in 2003 (23% p.a.).

For 2004 the estimated rate is 15% p.a.

Indebtedness

In R$ million

23


Latin america pulp paper metals mining conference jp morgan

Gerdau Açominas

US$ 230 mm

North America

US$ 59 mm

South America

US$ 7 mm

Investments

2003

NEW WIRE-ROD MILL

Installed capacity: 550 thousand tons/year

Total investment:US$ 66 mm

TOTAL IN 2003: US$ 295 MM

FORECAST FOR 2004: US$ 300 MM

24


Latin america pulp paper metals mining conference jp morgan

Gerdau S.A.

Aço Minas Gerais S.A.

Açominas

Gerdau Açominas S.A.

+

=

Met. Gerdau S.A.

Gerdau S.A.

Brazil

North

America

South

America

Gerdau

Açominas S.A.

Gerdau Ameristeel

Gerdau AZA

Gerdau Laisa

Sipar

Operational Integration

  • Combination of strengths of both companies: greater competitiveness

  • Project developed in partnership between Gerdau and CEA (partner-contributor)

  • Headquarters in Ouro Branco - MG

NEW CORPORATE GOVERNANCE

25


Latin america pulp paper metals mining conference jp morgan

Outlook

  • Demand picking up in Brazil;

  • Declining trend in interest rates in Brazil;

  • Brazil’s economic and political stability results in an improved country risk;

  • International prices trend: stable to upward;

  • North American operations pursuing better results;

  • US economy recovering;

  • South American operations in very good shape and improving.

26


Latin america pulp paper metals mining conference jp morgan

Steel SectorGerdau S.A. Consolidated

Stock Market


Latin america pulp paper metals mining conference jp morgan

Metalúrgica Gerdau S.A.

Gerdau S.A.

Other Shareholders 36%

Other Shareholders 16%

Other Gerdau Companies 25%

Met. Gerdau and otherGerdau companies

52%

Foreign Inst. Investors 22%

Brazilian Inst. Investors 24%

Foreign Inst. Investors 15%

Brazilian Inst. Investors 10%

Gerdau Açominas S.A.

Gerdau

Group

92%

CEA Clube / Fund. Aços 4%

Other Shareholders 4%

Shareholders Structure

28


Latin america pulp paper metals mining conference jp morgan

METALÚRGICA GERDAU S.A.

GERDAU S.A.

In US$ million

In US$ million

117

216

101

40

199

75

195

53

91

89

88

71

171

64

30

29

150

28

55

49

1998

1998

1999

2000

2001

2002

1999

2000

2001*

2002

32.0%

33.1%

32.6%

52.5%

33.9%

32.8%

32.0%

32.8%

35.6%

34.9%

PAYOUT

16.4%

6.0%

7.9%

17.0%

12.4 %

11.7%

3.6%

6.1%

6.8 %

7.1%

YIELD

Adjusted Net Income

Dividends paid

Dividend Policy

  • Payout of 30% of the Adjusted Net Income.

  • Since March 2003, dividend payments are being made on a quarterly basis.

TOTAL AMOUNT PAID IN 2003 WAS R$ 172.1 MILLION.

TOTAL AMOUNT PAID IN 2003 WAS R$ 351.3 MILLION.

29

* Higher amount due to a one-time supplementary dividend payment.


Latin america pulp paper metals mining conference jp morgan

Stock Price Performance

USA (New York Stock Exchange)

Brazil (São Paulo Stock Exchange)

2003 > GGBR4: + 152% GOAU4 : + 161%

2004 > GGBR4: + 8% GOAU4 : + 16%

2003 > GGB: + 195%

2004 > GGB: + 11%

Canada (Toronto Stock Exchange)

2003 > GNA: +149%

2004 > GNA: - 3%

Source: Economática/Bloomberg

30


Latin america pulp paper metals mining conference jp morgan

GGBR4

+891.9%

GOAU4

+831.5%

GOAU4

+294.4%

GGBR4

+280.1%

GOAU4

+219.6%

GGBR4

+207.8%

Ibov+141.3%

Ibov+37.1%

Ibov-1.4%

1 YEAR

3 YEARS

5 YEARS

GGB + 212.3%

Dow Jones - 3.1%

USA (NYSE)

GGB + 198.3%

Dow Jones + 25.2%

Appreciation Chart

Returns in US$

BRAZIL (Bovespa)

31

Source: Economática December 31st, 2003


Latin america pulp paper metals mining conference jp morgan

www.gerdau.com.br

[email protected]

www.gerdau.com.br

[email protected]


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