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Steel Industry Brazil
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FEBRUARY 05-07, 2001 RIO DE JANEIRO - BRAZIL
“Brazil 2001”CEO’s Roundtable Conference
UBS WARBURG
GERDAU Results
BusinessCapital Markets
Steel IndustryBrazil
Steel IndustryBrazil
Crude Steel Production27.8 million metric tons in 2000
2000 %
* Does not included stake in Açominas
1st CSN 4,781 17.22nd CST 4,752 17.13th Usiminas 4,438 16.04th GERDAU * 3,493 12.65th Cosipa 2,746 9.96th Açominas 2,620 9.47th Belgo Mineira 2,571 9.38th Acesita 856 3.1
Other 1,494 5.4Total 27,751 100.0
source: IBS 04
Gerdau* is the largest long steel producer in Brazil. Output was 3.3 million metric tons in 2000, a 46% market share for long steel.
Rolled Products Output18.2 million metric tons in 2000
Long Rolled Products
6,969
Flat Rolled Products
11,212
In thousand metric tonsSource: IBS 05* Does not included stake in Açominas
Source: IBS
Apparent Consumption
06
Million metric tons
1997 1998 1999 2000 2001
15.3 14.5 14.115.8 16.5
18.0
2002
Source: IBS
GDP ContributionSteel Sector represents 1.8% of GDP
07
1.8%Exports
26%
DomesticMarket
74%
GDP 2000US$ 565 billion
Steel SectorTurnover
US$ 10 billion
2000 data estimated
20%Reduction
40%Rolling Mills
3%IS &
Automation
4% Energy
4% Environmental6% Continuous
Casting8%
Melt Shops
15%Other
Source: IBS
Investments
US$ 6.6 billion from 2000 to 2004
08
GERDAU Results
BusinessCapital Markets
Results
10
2000 3Q00 4Q00 4Q00/ 3QOO
Net Revenue 5,196 1,316 1,363 3.6%Cost of Sales (3,858) (979) (1,027) 4.9%Gross Profit 1,338 337 336 -0.3%Selling Expenses (220) (58) (61) 5.2%General and Adm. Expenses (398) (100) (105) 5.0%Net Financial Expenses (389) (96) (159) 65.6%Equity Pick-up 70 17 49 188.2%Other Operating Revenues 57 11 13 18.2%Operating Profit 458 111 73 -34.2%Non-Operating Expense/Revenue 7 (2) 13 -750.0%Statutory Participation (8) (2) (2) 0.0%Profit Before IT & SC 457 107 84 -21,5%Income Tax and Social Contribution (59) (8) 2 -125.0%Net Income 398 99 86 -13.1%
In R$ million
Net Revenue
Revenues generated abroad present gains when converted to Reais due to currency devaluation. (+6% for 4th quarter only)
11
In R$ million
3.6%
1,3631,316
4Q003Q00
Gross Profit Export prices in Açominas suffered some reduction vis-à-vis production cost.
Gross margin changed to 24.6% in 4th quarter from 25.6% in the 3th
quarter.12
In R$ million0.3%
336337
3Q00 4Q00
Net Financial Expenses
Impact of the exchange rate on the debt in U.S Dollars.
13
In R$ million
65.6%
4Q00
96
159
3Q00
Equity Pick-up
Impact of the exchange rate on the net worth of the subsidiaries abroad.
14
In R$ million
188.2%
3Q00
49
17
4Q00
Other Oper. Revenues
Negative goodwill amortization of investment in Açominas.
15
In R$ million 18.2%
3Q00 4Q00
11
13
Non-operating Expenses/Revenu
es Tax recovery in Açominas and SIPSA (REFIS & IVA).
In R$ million
3Q00 4Q00
(2)
13
16
In R$ million
2
(8)
4Q003Q00
Income Tax & Social Contribution
Reversion of provision for Income Tax due to increase in financial expenses and payment of interest over capital stock.
17
Net Income
Increase in financial expenses and lower margins reduced net income. Net margin in 4th quarter was 6.3%.
18
In R$ million
13.1%
99
86
4Q00
3Q00
Crude Steel Output7.1 million metric tons in 2000
+ 39.5% over 1999
19
In 1,000 metric tons
1,189
542
76
1,143
558
55
1,110
625
66
1,013
626
63
1,702 1,801 1,756 1,808
Brazil North America South America
4Q003Q002Q001Q00
Rolled Products Output5.9 million metric tons in 2000
+ 37% over 1999
In 1,000 metric tons
809
508
93
873
538
71
859
550
75
799
601
77
1,477 1,484 1,482 1,409
1Q00 2Q00 3Q00 4Q00
Brazil North America South America 20
Gross RevenueR$ 6.2 billion in 2000+ 53.8% over 1999
In R$ million
878
142
607
945
136
538
864
105
577
840
97
497
1Q00 2Q00 3Q00 4Q00
Foreign Companies
Exports
DomesticMarket
1,6271,434
1,546 1,619
21
Domestic Market
ForeignCompanies
Exports
1,8331,714 1,7561,906
957882838 870
342218 205 288
661669658 621
1Q00 2Q00 3Q00 4Q00
In 1,000 metric tons
Sales Volume 7.2 million of metric tons in 2000+ 41.5% over 1999
22
EBITDAR$ 1.1 billion in 2000+ 26.9% over 1999
In R$ million
Abroad
Brazil
261253282
264
1Q00 2Q00 4Q003Q00
209205
77 55
177
76
192
69
23
IndebtednessIn US$ million
w.a. cost12.6% p.a.
ShortTerm
LongTerm
1,6611,592
1,634 1, 629
879 880842 973
755 749750 688
Mar 00 Dec 00Jun 00 Sep 00
Cash position Dec 00: US$ 360 MM, 58% in U.S. dollars24
Debt Breakdown
25
AÇOMINAS6%
(proportional to 37% stake)
EUROBONDS14%
ACC/PRE- EXPORT
7%
DEBENTURES7%
BNDES14%
OTHERS8%
FOREIGN COMPANIES
44%
Ratios
26EBITDA and financial expenses of last 12 months.
JUN00 SEP00MAR00 DEC00
2.5x2.3x 2.3x
3.8x3.5x
4.2x
Net Debt
EBITDA
EBITDA Net
Financial Expenses
2.3x
2.7x
GERDAU Results
BusinessCapital Markets
The Company
28
100 years of tradition focused in the production of steel in mini-mills and in the distribution of steel products.
Installed capacity of 8 million metric tons of crude steel.
25th largest world steel producer and best ranked Brazilian Company.
Largest Latin American long steel producer. Distribution network with 63 sales points, 3 service centers for flat steel and 24 fab shops for civil construction.
The Focus
Focus on long rolled steel and stake in flat and semi-finished products (slabs and billets) through Comercial Gerdau and Açominas.
Common Long Rolled Products
67%
Specialty LongRolled Products
4%
Flat Steel (Resale)7%
Semi-finished (slabs and billets)
12%
Drawn Products10%
Breakdown of Sales
81% long steel products29
* Minority Shareholdings
* Sipar Aza
SipsaLaisa
AmeriSteel
CourticeMRM
Açominas *GERDAU S.A.
10 in Brazil 9 abroad 2 shareholdings
21 Plants
30
Goals
BRAZIL Maintain its leadership in the long steel market. Increase supply by offering
new products and services.ABROAD Consolidate recent acquisitions and enhance synergies.
Gerdau46%
Belgo35%
Others19%
Long Steel Market
31
Management
Stimulate empowerment and value pro-active attitude of associates.
Strive for excellence through variable compensation programs.
32
How to Add Value
Enhance the Armafer (cut & bend) network in Brazil and of Fabrication Shops abroad.
Advantages: Enhance quality Increase productivity Reduce waste Reduce working capital
BRAZILIn operation
Under construction
USA
33
Sales Distribution through the industrial units and Comercial Gerdau branches. Sales team acting as consultants and presenting technological innovations to clients and posting orders through the web.BUSINESS-TO-BUSINESS Proprietary sales site as an additional tool to service clients.
34
InvestmentsUS$ 220 million in 2000
35
BrazilAbroad
CAPEX
TotalDEPRECIATION
1Q00 2Q00 3Q00
42 41 40
191514
56 56 59
3746 44
4Q00
36
13
49 47
Depreciation figures based at the exchange rate on December 2000
In the last decade Gerdau invested US$ 150 million to ensure its ecoefficiency.
Investments in dust collection systems were well over US$ 45 million and an additional US$ 11 million are scheduled for investments through 2003.
Environment
36
GERDAU Results
BusinessCapital Markets
In 1947 Gerdau lists for the first time at the Stock Exchange in Porto Alegre, in 1966 at the Bovespa and in 1999 at the NYSE. Gerdau S.A. is part of the Bovespa Index. Since 1977 Gerdau guarantees the payment of a minimum 30% dividends over adjusted net income (since 1997 33% for preferred shares) Has had an Investor Relations Dept. for more than 30 years.
Gerdau Experience
38
Gerdau promoted the restructuring of its subsidiaries in 1995. In 1996, Gerdau began disclosing voluntarily its cash flow. Endeavors to become a benchmark in early
disclosure . Bilingual conference calls on the web.
Brazil36%
Others39%
USA25%
20,000 visits/month.10% visit the financial section. 64% of visits to site are abroad.
Site
Gerdau Experience
39
Gerdau and Subsidiaries
Gerdau S.A.
Net Revenue 2,797EBITDA 644Net Profit 393
Gross Margin 31.5%EBITDA Margin 23.0%
2000In R$ million
In thousand metric tons
CAPACITYCrude Steel 3,900Rolled Products 3,900
PRODUCTION 2000Crude Steel 3,493Rolled Products 3,265
41
Açominas - 37%
CAPACITYCrude Steel 1,000Rolled Products 110
PRODUCTION 2000Crude Steel 962Rolled Products 75
In thousand metric tons
2000
Net Revenue 364EBITDA 111Net Profit 74
Gross Margin 33.4%EBITDA Margin 30.6%
In R$ million
42
Includes Stake of 38% in Sipar.
CAPACITYCrude Steel 430Rolled Products 623
PRODUCTION 2000Crude Steel 260Rolled Products 316
In thousand metric tons
2000
Net Revenue 247EBITDA 50Net Profit 2
Gross Margin 26.7%EBITDA Margin 20.2%
In R$ million
South AmericaExcept Brazil
43
North America
CAPACITYCrude Steel 2,685Rolled Products 2,440
PRODUCTION 2000Crude Steel 2,351Rolled Products 2,197
In thousand metric tons
2000Net Revenue 1,800EBITDA 255Net Profit 22
Gross Margin 13.7%EBITDA Margin 14.2%
In R$ million
44
