1 Gerdau March 2007. 2 One of the world’s lowest cost steel companies Strong cost position as a result of diversified production processes and multiple.

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Presentation transcript:

1 Gerdau March 2007

2 One of the world’s lowest cost steel companies Strong cost position as a result of diversified production processes and multiple raw material sourcing Strong foreign currency generation Large export base International subsidiaries Ranked 14 th globally by steel output for year 2005 with an output of 13.7m tons Largest long steel producer in the Americas 2 nd largest long steel producer in North America 32 steel units, integrated and mini mills, with state of the art technology Relevant market share and diversified product range through downstream and service centers Strong balance sheet, low leverage and strong cash generation Gerdau S.A. shares are listed on the São Paulo, New York and Madrid Stock Exchanges Highlights

3 Industry Overview Group Overview Operating and Financial Highlights Agenda All data presented in US Dollar and in metric tons, except when indicated

4 1º Oil Shock World Production WORLD CRUDE STEEL PRODUCTION In million tonnes Source: IISI / IISI apud IBS EVOLUTION OF WORLD CRUDE STEEL PRODUCTION 2º Oil Shock USSR breakup Accelerated increase of China World China Corresponds to 70% of the world production growth from 2001 to ,120 1, % Production reached more than 1,2 billion tonnes in

5 World Demand 1,029 1,121 1,179 China NAFTA Japan India South America e: estimated Source: IISI 8.9% 5.2% FINISHED STEEL APPARENT DEMAND In million tonnes FINISHED STEEL APPARENT DEMAND PER CAPITA (KG) NAFTA China World Brazil  With increasing investments in infrastructure and civil construction, India should have grown 10% in  Steel consumption in South America should have increased 12% in  Chinese steel consumption should experience a more moderate growth in The world steel demand should increase 4.2% p.a. from 2010 to 2015.

6 Ukraine Crude Steel Production – 2006 Source: IISI Brazil and the Global Steel Industry In million tons In million tonnes China USA JapanRussia Germany Brazil India Italy Total World Production: 1.2 billion tonnes China represented 34.4% of the global steel production Brazil represented 2.5% of the global steel production South Korea

7 Industry Overview Group Overview Operating and Financial Highlights Agenda All data presented in US Dollar and in metric tons, except when indicated

8 THROUGH THE 40’s THE 60’s THE 50’s First steel mill acquisition – Siderúrgica Riograndense (1948) Expansion of Siderúrgica Riograndense Construction of second Riograndense’s mill Market share increase by the: - Diversification and verticalization of product line - Structuring of distribution network (today more than 70 sales points) - Acquisition of mill in Pernambuco 100+ Years in Business 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) THE 80’s THE 90’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 – First operation: nail factory Capacity expansion with acquisition of two mills (Alagoas and Paraná); construction of largest Gerdau mill (Rio de Janeiro) Diversification into reforestation THE 70’s THE NEW MILLENNIUM Acquisition of four companies in the US Acquisition of downstream units and fab shops in North America Entering the European market Construction of a steel mill in São Paulo

9 CANADA Brazil 9.2 million tonnes of crude steel 6.3 million tonnes of rolled steel products Abroad 10.0 million tonnes of crude steel 10.7 million tonnes of rolled steel products Total Capacity (Includes Strategic Shareholdings) 19.2 million tonnes of crude steel 17.0 million tonnes of rolled steel products 11 steel units 12 fabrication shops 6 downstream operations 74 sales points and flat steel service centers 21 steel units 44 fabrication shops 17 downstream operations 1 associated company 1 joint venture An International Company

10 Laisa (Uruguay) Piratini (Brazil) AZA (Chile) Ameristeel (USA) AZA New Plant (Chile) Additional stake in Açominas (Brazil) North Star (USA) Cambridge (Canada) Usiba (Brazil) Manitoba (Canada) Control of Açominas (Brazil) Co-Steel (USA) 1,757 3,072 3,934 4,595 7,696 11,076 16,372 Diaco (Colombia) 16,709 Barão de Cocais (Brazil) 2,611 Stake in Açominas (Brazil) 4,568 19,230 Araçariguama (Brazil) Sidenor (Spain) Sheffield (USA) Siderperú (Peru) GSB (Spain) Solid Track Record e: estimated In thousand tonnes 21,605 Installed Capacity Expansion Abroad – Installed capacity of Crude Steel Brazil – Installed Capacity of Crude Steel Besides the mills acquired, as related above, Gerdau acquired many fab shops in order to add value to its products and offer services and products to its clients according to their needs. 2009e TOTAL INVESTED ( ): Brazil = US$ 5.2 billion + Debt North America = US$ 2.0 billion + Debt South America = US$ 654 million + Debt Europe = US$ 380 million + Debt CAGR : 15% p.a.

11 Among the Leaders Crude Steel – Output 2005 Gerdau should have an installed capacity of 21.6 million tonnes of crude steel per year after the investment program in Brazil is completed in In million tonnes Source: Metal Bulletin 1 GERDAU GROUP (BRA) Rank

12 Value Builder Company ATKearney study Notes: 1) EBIT-growth Notes: USINAS = USIMINAS; ARCELOR Takeover MITTAL/ SERVERSTAAL: The market capitilization of Severstaal is 6.8 bn USD (same as revenue, hence valued above the industry multiple of 0,79) Source: Thyssenkrupp: steel segment Industry Average Revenue Growth Industry Average AK Steel Oregon Steel Mills Worthington Onesteel Hylsamex Neomax Cap Imsa Maanshan Iron Steel Eregli Demir Celik Angang Boehler-Uddeholm Steel Dynamics Carpenter Technology Nisshin Steel Hyundai Steel Tokyo Steel Bluescope Rautaruukki Acerinox Salzgitter Ipsco SSAB Voestalpine Corus Tata Steel Severstal US Steel SAIL Usinas Gerdau Baoshan Novolipetsk 1) Thyssenkrupp 1) Nucor Sumitomo Mittal JFE Nippon Steel Arcelor % 0% 10% 20% 30% 40% 50% 60% 70% -40%10%60%110% Equity Value Growth Growth portfolio (CAGR ) benchmarked against industry average

13 Shipments Billets, blooms & slabs Merchant bars Rebars Fabricated steel Heavy structural shapes Wire-rod Wires Nails Brazil – Domestic Market (27% in 2006) Brazil – Exports (16% in 2006) South America (10% in 2006) North America (45% in 2006) In thousand tonnes 7,411 9,109 12,560 12,144 13, Europe (2% in 2006) 100% increase in the last 6 years ,819

14 BRAZIL COUNTRY MARKET SHARE MAIN COMPETITORS Gerdau 47% Arcelor Brasil 37% Barra Mansa 5% Other 5% V&M do Brasil 6% CHILE * URUGUAY ARGENTINA 44% 19% 83% CAP + Imports Acindar + Bragado + Zapla Imports COLOMBIA37%Acerias Paz Del Rio + Imports * Market share of rebars, profiles and wire-rod. ** Market share of long products, it doesn’t include flat steel. NORTH AMERICA 17% Nucor + ArcelorMittal + CMC Markets PERU ** 45% Aceros Arequipa + Imports SPAIN 43% Aceralia + Saarsthal

15 LONG STEEL PRODUCTS (Brazil)  Maintenance of market share  Improvement of current installed capacity SPECIALTY STEEL  Active role in the steel sector consolidation process  Search for new opportunities AÇOMINAS (Ouro Branco mill)  New 1.5 MM ton blast furnace  Growth platform for slabs, blooms and billets Growth Opportunities LATIN AMERICA  Maintenance of leadership in the long steel sector  New markets NORTH AMERICA  Efficiency and productivity gains (Gaps)  Enhancement of leadership in the long steel sector through acquisitions

16 Outlook BRAZIL Growing volumes in the domestic market: 6 to 8% in 2007 Industrial and residential construction sectors revving up Recovery of agricultural sector Prices in reais stable Costs relatively stable NORTH AMERICA Demand remains strong for rebars, merchant bars and profiles Imports falling Increase in supply of higher value added products SOUTH AMERICA Strong growth in the economy Civil construction sector strengthening Increase in public investments Demand in line with economic growth EUROPE Demand continues strong Price increases Specialty steel sector performing well Growing market share

17 Industry Overview Group Overview Operating and Financial Highlights Agenda All data presented in US Dollar and in metric tons, except when indicated

18 EXPORTS BY REGION (IN TONNES) NET SALES BREAKDOWN BY REGION Exports Brazil 41% North America 46% Europe 3% South America 10% 2006 Asia 23% Central America 15% South America 29% North America 16% Africa 9% Europe 8% Domestic Market 78% Exports 22% (37% in tonnes)

19 Consolidated Brazil North America* South America* GROSS MARGIN EBITDA MARGIN Margins 24% 15% 36% 22% 10% 40% 38% 24% 13% 10% 15% 38% 19% 21% 28% 31% * Calculated by hard currency

20 Consolidated Financials In US$ million INCOME STATEMENT Net revenue Gross profit Operating income Net income EBITDA BALANCE SHEET Current assets Non-current assets Total Assets Current liabilities Non-current liabilities Minority Interest Shareholders’ equity Total Liabilities and Shareholder’s equity Total debt Cash & Equivalents Net debt RATIOS Net debt / Total capitalization Total debt / EBITDA Net debt / EBITDA 20% 1.7x 0.6x 3,600 3,431 7,031 1,977 2, ,288 7,031 2, ,633 36% 1.1x 0.8x 5,182 4,165 9,347 1,790 3, ,436 9,347 3,269 2, % 1.5x 0.4x ,999 3,038 2,055 1,633 2,502 6,573 6,022 12,595 2,570 4,070 1,294 4,661 12,595 4,240 2,791 1,449 7,383 2,353 1,678 1,219 2,092 9,148 2,517 1,727 1,387 2,169

21 DEBT STRUCTURE Domestic Currency 28% Foreign Currency 46% Companies Abroad 26% DEBT AVERAGE LIFE: 9 years and 2 months US$ MM GROSS DEBT4,240100% SHORT TERM91722% Domestic Currency2356% Foreign Currency2706% Companies Abroad41210% LONG TERM3,32378% Domestic Currency94022% Foreign Currency1,72340% Companies Abroad66016% CASH & CASH AND EQUIV.2,791100% Domestic Currency1,77364% Companies Abroad1,01836% NET DEBT1,449 COST OF DEBT (per annum) In US$ Brazil Domestic Currency 22.8% Foreign Currency7.3% Companies Abroad8.0% December 2006 Consolidated Debt Profile

22 FINIMP: 196 BNDES: 134 Debentures: 110 FINIMP: 24 In US$ million – Dec./06 Companies Abroad: 207 FINIMP: 147 Pre-export: 118 Working Capital: 99 Companies abroad: 201 Companies Abroad: 176 BNDES: 112 FINIMP: 109 BNDES: 55 1Q07 2Q07 3Q07 4Q SHORT TERM: US$ 917LONG TERM: US$ 3, Consolidated Debt Amortization 2013 After FINIMP: 90 Perpetual Bond: 600 Debentures: Companies Abroad: 401 Debentures: 111 FINIMP: 82

23 ACTUAL 2006* INVESTMENT PLAN 2007 – 2009: US$ 4.0 billion BRAZIL694.4 ABROAD1,308.2 North America537.6 South America255.5 Europe515.1 TOTAL2,002.6 In million US$ TOTAL BRAZIL ,0002,390 ABROAD ,610 North America South America Europe TOTAL1,4001,1001,5004,000 INSTALLED CAPACITY EVOLUTION Crude Steel Rolling Products In thousand metric tons Brazil Abroad Brazil Abroad + 12% ,260 9,970 11,005 10,600 19,230 21, % + 10% ,680 6,360 6,450 17,040 18, % + 12% + 8% 11,985 In million US$ Investment Plan * Including acquisitions in the period. 23

,600 1,400 1,200 1, Gerdau S.A. PN – GGBR4 Gerdau S.A. ADR – GGB Ibovespa Dow Jones Index 1,135% 669% 212% 21% Gerdau S.A.’s shares are included in the following São Paulo stock exchange index: Corporate Sustainability Index – ISE Special Corporate Governance Stock Index – IGC Special Tag Along Stock Index – ITAG Bovespa Index - Ibovespa Brazil Index 50 - IBrX 50 Industrial Sector Index – INDX Stock Appreciation

25 Capital Market 30% of the adjusted net income (Pay-out) Dividend payments are being made on a quarterly basis DIVIDENDS* US$ MMUS$ MMUS$ MMUS$ MMUS$ MM PAY-OUT 34.9%32.5%31.9%30.1%32.7% DIVIDEND YIELD 6.8%3.9%6.1%4.6%3.9% Dividends related to each period, but not necessarily paid in the same period. Figures are in BR GAAP converted to US Dollar of R$ (12/31/2006) DIVIDENDS POLICY Jan 05 Mar 05 May 05 Jul 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06 Jul 06 Sep 06 Nov 06 Jan In US$ million DAILY AVERAGE VOLUME GGBR4 (BOVESPA)GGB (NYSE) 2005 = US$ 11.5 MM 2006 = US$ 17.5 MM 2005 = US$ 11.5 MM 2006 = US$ 22.6 MM Gerdau S.A. PN – GGBR4 Gerdau S.A. ADR – GGB

26 Disclaimer This document 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.

Gerdau S.A.