Latin America Pulp & Paper / Metals & Mining Conference JP MORGAN

Latin America Pulp & Paper / Metals & Mining Conference

JP MORGAN

São Paulo, March 5th, 2004

Steel Sector

Gerdau S.A. Consolidated

Stock Market

2003 2002 Var. %

1 China 220.1 181.7 21.1%

2 Japan 110.5 107.7 2.6%

3 United States 91.4 92.2 -1.0%

4 Russia 61.3 58.6 4.7%

5 Korea 46.3 45.4 2.0%

6 Germany 44.8 45.0 -0.4%

7 Ukraine 36.7 34.1 7.8%

8 India 31.8 28.8 10.3%

9 Brazil 31.1 29.6 5.1%

10 I taly 26.7 26.0 3.0%

Others 244.4 236.7 3.3%

TOTAL 945.1 885.8 6.7%

World ProductionCrude Steel

In million tons

Sources: IISI

In 2003, the

world produced

945.1 million tons

of steel.

Brazil

contributed

with 3.3% of

this tonnage.

03

Largest ProducersCrude Steel 2002

Source: IISI

In million tonsProduction

1 Arcelor 44.0

2 LNM Group 34.8

3 Nippon Steel 29.8

4 POSCO 28.1

5 Shanghai Baosteel 19.1

6 Corus 16.8

7 Thyssen Krupp 16.4

8 NKK 15.2

Company

(LUX)

(ENG)

(JAP)

(KOR)

(CHI)

(ENG)

(GER)

(JAP)

9 Riva 15.0

10 US Steel 14.4

11 Kawasaki 13.7

12 Nucor 12.4

13 Sumitomo 11.8

14 Gerdau 11.5

15 SAIL 11.4

Company Production

(ITA)

(USA)

(JAP)

(USA)

(JAP)

(BRA)

(ENG)

04

North America

250

270

290

310

330

350

370

390

410

Jan-01 Jul-01 J an-02 Jul-02 J an-03 Jul-03 J an-04200

220

240

260

280

300

320

340

360

380

J an-01 J ul-01 J an-02 J ul-02 J an-03 J ul-03 J an-04

REBAR PRICESMERCHANT BARS PRICES

PRICE INCREASE (LTM): +33% PRICE INCREASE (LTM): +34%

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.

Source: MEPS/Metal Bulletin

STEEL SCRAP PRICES

50

70

90

110

130

150

170

190

210

230

Jan-01 Jul-01 J an-02 Jul-02 J an-03 Jul-03 J an-04

PRICE INCREASE (LTM): +52% 05

Brazilian Steel Sector2003

Belgo (Arcelor) – 33.8%2,654 thousand tons

Gerdau Açominas – 49.6%3,894 thousand tons

Barra Mansa - 5%385 thousand tons

Aços Villares - 6%456 thousand tons

V&M do Brasil - 6%466 thousand tons

LONG STEEL PRODUCERS IN BRAZIL

Source: IBS

CRUDE STEEL PRODUCERS IN BRAZIL

In thousand tonsUsiminas/Cosipa

Gerdau Açominas

Belgo/CST/Acesita (Arcelor)

CSN

Aços Villares

V&M do Brasil

Barra Mansa

8,624

6,976

8,449

5,318

775

551

421

MWL Brasil 36

06

TOTAL 2003: 7,855 thousand tons


Exports of Long Steel Products9M2003 Brazil

Source: IBS

Exports Domestic SalesExports of long steel products

reached 2.2 million tons in 2003, an increase

of 78% YoY.

In million tons

Domestic SalesSep.2003/2001

- 11%

ExportsSep.2003/2001

+85%

2001 2002 2003

Monthly Average 517.2 thousand tons

100

200

300

400

500

600

700Monthly Average

528.2 thousand tonsMonthly Average

461.5 thousand tons



Monthly Average 156.3 thousand

tons

07

Brazilian Steel Sector Competitiveness

Source: IBS

EBITDA MARGIN - 2002

Brazil Asia*

* Does not include Japan

Japan EU North America

Others (World)

In %

5

10

15

20

25

30

35

40

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.

35%

08

Investments in the Brazilian Steel Sector

Source: IBS

INVESTMENT SCHEDULE

2003 2004 2005 2006 2007 TOTAL

FLAT STEEL 613.4 694.0 854.4 351.5 117.9 2,631.3

LONG STEEL 290.3 276.2 281.2 185.9 180.1 1,213.8

SPECIALTY STEEL 72.8 58.5 50.4 38.1 32.3 252.1

TOTAL 976.5 1,028.8 1,186.0 575.4 330.4 4,097.1

In US$ million

30 31 29

33 33 34 34 35

40 40

3028 302826 25 25 26 26 25

28 27

31

2423222119181918161617

151313

0

10

20

30

40

50

20071994 95 96 97 98 99 00 01 02 03 04 05 06

In million tons

Apparent Consumption

Installed Capacity

Crude Steel Production

INSTALLED CAPACITY X PRODUCTION X APPARENT CONSUMPTION

09

Steel Sector


Stock Market

Main Products

BILLETSMERCHANTS AND STRUCTURALS REBARS FABRICATED STEEL

STRUCTURAL SHAPES WIRE-ROD WIRES NAILS

11

Gerdau Açominas 7,374 4,811

South 510 634America

North 6,567 6,187America

TOTAL 14,451 11,632

Billets, merchant bars, rebars, wire rod,

drawn products, welded meshes, nails,

downstream products and fabricated steel

products.

Installed Capacity

Billets, slabs, blooms, merchant bars,

rebars, wire rod, drawn products, welded

wire meshes, structurals, nails,

downstream products, fabricated steel

products and specialty steel.

Billets, merchant bars, rebars and wire rod.

CRUDE STEEL

ROLLED

PRODUCTS

12

In thousand tons

Output Evolution

AVERAGE GROWTH RATE

1980 - 2003Crude Steel 10.2% per year

Rolled Products 9.2% per year

14th largest world steel producer according to the IISI. Largest long steel producer in the Americas.

Crude Steel Rolled Products

12.3 million

9.0 million

AzaChile1992

MRMCanada1995

Part. Açominas

1997AmeriSteel

USA1999

CearenseGuaíra1982

LaisaUruguay

1981

Hime1985

Barão de Cocais1988

CourticeCanada1989

Usiba1989

Piratini1992

Pains1994

Sipsa Argentina

1997

Açominas(control)

2002

Co-Steel2002

20031980 1984 199619921988 2000

Part. Sipar

Argentina1998

13

Geographical Distribution

(2) Rolling mill, 38% stake JV

(1) Flat steel mill, 50% stake JV

SOUTH AMERICA

2 mills and 1 strategic shareholding (Sipar)

3 fabrication shops

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).

NORTH AMERICA

10 mills and 1 strategic shareholding (Gallatin Steel)

20 fabrication shops

12 downstream operations and special sections

Gerdau AmeriSteel Corp.

Sipar (2)

Laisa

GerdauAçominas S.A.

AZA

Gallatin Steel (1)

14

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

4Q2003 3Q2003 2003 2002

GROSS SALES REVENUE 4,169 4,132 15,783 11,144

Net Sales Revenue 3,516 3,494 13,367 9,162

Cost of Sales (2,648) (2,688) (10,077) (6,539)

Gross Profit 869 806 3,290 2,623

SG&A (364) (291) (1,212) (1,002)

Net Financial Expenses (156) (240) (647) (1,084)

Other Operating Results 16 3 15 16

Equity pick-up (14) 26 (299) 409

Operating Profit 350 304 1,147 962

Non-operating result 6 (4) (7) (50)

Provision for income tax and social contrib. 117 (50) 141 (80)

Other (13) (5) (26) (14)

Net Income 460 245 1,255 818

ResultsIn R$ million

16

Main Variations

COST OF GOODS SOLD

NET SALES

In R$ thousand

2002 2003

9,162

13,367

In R$ thousand

2002 2003

6,539

10,077

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.

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

2002 2003

1,0021,212

In R$ thousand

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Main Variations

2002 2003

(80)

141In R$ thousand

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.

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.

18

NORTH SOUTHBRAZIL AMERICA AMERICA TOTAL

In R$ million

Net Sales 7,307 5,570 490 13,367

Gross Profit 2,881 245 165 3,290

EBITDA 2,297 235 152 2,684

Net Income 1,210 (48) 93 1,255

In R$ / ton

Net Sales 1,109 1,084 1,178 1,101

Gross Profit 437 48 396 271

EBITDA 349 46 364 221

Net Income 184 (9) 225 103

In %

Gross Margin 39.4% 4.4% 33.6% 24.6%

EBITDA Margin 31.4% 4.2% 30.9% 20.1%

Net Margin 16.6% -0.9% 19.1% 9.4%

Results by Region2003

19

Sales Track Record

In 1,000 tons

1Q03 2Q03 3Q03

854 798 850

1,271 1,284

1,295

107 101109

657 793 869

2,889 2,976 3,156 TOTAL SHIPMENTS

Brazil (domestic sales)

Brazil (exports)

North America

South America

4Q03

875

1,290

99

892

3,123

TOTAL SHIPMENTS IN 2003:12,144 thousand tons (+32.7%)

20

ExportsDESTINATION OF EXPORTS 2002 DESTINATION OF EXPORTS 2003

Asia 52%

Africa 3%

SouthAmerica

6%

NorthAmerica

14%

Europe 11%

CentralAmerica

11%

Asia 51%

Africa 11%

SouthAmerica

6%

NorthAmerica

9%

Europe 12%

CentralAmerica

11%

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

ROLLED PRODUCTSIn 1,000 tons

1Q03 2Q03 3Q03 4Q03

1,012

1,197

90

940

1,216

90

921

1,122

92

2,2992,2462,135

1,018

1,241

107

2,366

Output

1Q03 2Q03 3Q03 4Q03

CRUDE STEEL

In 1,000 tons 3,1233,0852,968

1,790

1,250

83

1,679

1,321

85

1,688

1,195

85

3,166

1,818

1,254

94

Gerdau S.A. North America South America

22


(+30.5%)


(+30.7%)

TOTAL DEBT 6,263 100% 6,943 100%

SHORT TERM 2,417 39% 3,153 45%

Local currency (Brazil) 281 4% 736 10%

Foreign corrency 1,343 21% 1,576 23%

Companies abroad 794 13% 841 12%

LONG TERM 3,845 61% 3,791 55%


Foreign corrency 1,031 16% 1,047 15%

Companies abroad 2,097 33% 1,980 29%

CASH & EQUIVALENTS 1,017 100% 1,498 100%


Foreign corrency 587 58% 700 47%

NET DEBT 5,246 - 5,446 -

SEPT.03DEC.03

IndebtednessIn R$ million

HEDGE

Foreign currency 2,374

Swap operation 1,211

Cash & equiv. US$ 587

HEDGE / EXPOSURE 0,8X

SENIOR SECURED CREDIT FACILITYUS$ 350 SENIOR UNSECURED NOTES US$ 405(June)Total volume: US$ 755 mmBond portion swapped to floating: US$ 200 mmAverage cost: 7.7%Average term: 6.6 years

SECURED EXPORT NOTES PROGRAM (September)Total volume: US$ 400 mm 1st tranche: US$ 105 mmCost: 7.37% p.y.Term: 7 years Grace period: 2 years

EURO-COMMERCIAL PAPER PROGRAM(October)Total volume: US$ 300 mm1st tranche: US$ 100 mmCost: 4.125% p.y.Term: 1 year

23

DEBT COST

Brazil - R$ * 20%

Brazil - R$ + FX 6%

Companies abroad - US$ 6%

* Considers the average SELIC interest rate in 2003 (23% p.a.). For 2004 the estimated rate is 15% p.a.

Investments2003

Gerdau AçominasUS$ 230 mm

South AmericaUS$ 7 mm

North AmericaUS$ 59 mm

NEW WIRE-ROD MILL

Installed capacity:

550 thousand tons/year

Total investment:

US$ 66 mm

TOTAL IN 2003: US$ 295 MMFORECAST FOR 2004: US$ 300

MM 24

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

Gerdau Açominas S.A.Gerdau S.A. Aço Minas Gerais S.A.Açominas

NEW CORPORATE GOVERNANCE

Met. Gerdau S.A.

Gerdau Açominas S.A.

Brazil NorthAmerica

SouthAmerica

Gerdau Ameristeel

Gerdau AZA

Gerdau Laisa

Sipar

Gerdau S.A.

25

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.

Outlook

26

Steel Sector


Stock Market

Shareholders Structure

Metalúrgica Gerdau S.A.

Other Gerdau Companies 25%

Brazilian Inst. Investors 24%

Foreign Inst. Investors

15%

Other Shareholders

36%

Gerdau S.A.

Met. Gerdau and otherGerdau companies

52%

Brazilian Inst.

Investors 10%

Foreign Inst. Investors

22%

Other Shareholders

16%

Gerdau Açominas S.A.

GerdauGroup

92%

CEA Clube / Fund. Aços 4%

Other Shareholders 4%

28

Adjusted Net Income Dividends paid

Payout of 30% of the Adjusted Net Income.

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

Dividend Policy

1998

32.0% 33.1% 32.6% 52.5% 33.9% PAYOUT

YIELD16.4% 6.0% 7.9% 17.0% 12.4 %

32.8% 32.0% 32.8% 35.6% 34.9%

11.7% 3.6% 6.1% 6.8 % 7.1%

METALÚRGICA GERDAU S.A.In US$ million

GERDAU S.A.In US$ million

2000

8929

8828

1999

9130

2001*

10153

2002

11740

2001

19971

2000

19564

1999

17155

1998

15049

2002

21675

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

TOTAL AMOUNT PAID IN 2003 WAS R$ 172.1 MILLION.

TOTAL AMOUNT PAID IN 2003 WAS R$ 351.3 MILLION.

29

Stock Price Performance

Source: Economática/Bloomberg

USA (New York Stock Exchange)

Canada (Toronto Stock Exchange)

30

2003 > GGBR4: + 152% GOAU4 : + 161%2004 > GGBR4: + 8% GOAU4 : + 16%

2003 > GGB: + 195%2004 > GGB: + 11%

2003 > GNA: +149%2004 > GNA: - 3%

-

50

100

150

200

250

300

350

J anuary-03 J anuary-04

Base

10

0

GGBR4 GOAU4 IBOVESPA

-

50

100

150

200

250

300

350

J anuary-03 J anuary-04

Base

10

0

GGB DOW J ONES

-

50

100

150

200

250

January-03 January-04

Base

100

GNA S&P TXT índex

Brazil (São Paulo Stock Exchange)

Appreciation ChartReturns in US$

BRAZIL (Bovespa)

GGB + 198.3%

Dow Jones + 25.2%

GGB + 212.3%

Dow Jones - 3.1%

USA (NYSE)

GGBR4+891.9%

1 YEAR 3 YEARS 5 YEARS

GGBR4+207.8%

Ibov+141.3% Ibov

+37.1%Ibov-1.4%

GGBR4+280.1%GOAU4

+219.6%

GOAU4+831.5%

GOAU4+294.4%

Source: Economática December 31st, 200331

[email protected]

www.gerdau.com.br [email protected]

Documents

Latin America Pulp & Paper / Metals & Mining Conference JP MORGAN