Gerdau

1
Gerdau
January 2007
2
Highlights

• One of the worlds 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 14th globally by steel output for year
  2005 with an output of 13.7m tons
• Largest long steel producer in the Americas
• 2nd largest long steel producer in North America
• 32 mills, 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

3
Agenda

• Industry Overview
• Group Overview
• Operating and Financial Highlights

All data presented in US Dollar and in metric
tons, except when indicated
4
World Production
WORLD CRUDE STEEL PRODUCTION
In million tonnes
Production should reach 1,2 billion tonnes in
2006.
903
9.1
828
9M05
9M06
EVOLUTION OF WORLD CRUDE STEEL PRODUCTION
World
China
2º Oil Shock
Accelerated increase of China
USSR breakup
1º Oil Shock
Corresponds to 70 of the world production growth
from 2001 to 2005
Source IISI / IISI apud IBS
5
World Demand
FINISHED STEEL APPARENT DEMAND
In million tonnes
The world steel demand should increase 4.2 p.a.
from 2010 to 2015.
1,179
5.2
1,121
1,029
8.9
China
NAFTA
Japan
India
South America
FINISHED STEEL APPARENT DEMAND PER CAPITA (KG)

• With increasing investments in infrastructure and
  civil construction, India should grow 10 in
  2006.
• Steel consumption in South America should
  increase 12 in 2006.
• Chinese steel consumption should experience a
  more moderate growth in 2007.

344
NAFTA
322
295
China
205
World
195
171
Brazil
110
102
e estimated
Source IISI
6
Brazil and the Global Steel Industry
Crude Steel Production 2005
In million tons
In million tonnes
Total World Production 1.1 billion tonnes China
represented 31.4 of the global steel
production Brazil represented 2.8 of the global
steel production
South Korea
Brazil
China
USA
Japan
Russia
Germany
Ukraine
India
Italy
Source IISI
7
Agenda

• Industry Overview
• Group Overview
• Operating and Financial Highlights

All data presented in US Dollar and in metric
tons, except when indicated
8
100 Years in Business
THE 80s
1901

• 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)

• 1901 First operation nail factory

THROUGH THE 40s

• First steel mill acquisition Siderúrgica
  Riograndense (1948)

THE 50s
THE 90s

• Expansion of Siderúrgica Riograndense
• Construction of second Riograndenses mill

• 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

THE 60s

• 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

THE NEW MILLENNIUM
THE 70s

• 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

• Capacity expansion with acquisition of two
  mills (Alagoas and Paraná) construction of
  largest Gerdau mill (Rio de Janeiro)
• Diversification into reforestation

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An International Company
Total Capacity (Includes Strategic Shareholdings)
CANADA
19.2
million tonnes of crude steel
17.0
million tonnes of rolled steel products
Brazil
9.2 million tonnes of crude steel
6.3 million tonnes of rolled steel products
11 steel mills
12 fabrication shops
6 downstream operations
74 sales points and flat steel service centers
Abroad
10.0 million tonnes of crude steel
10.7 million tonnes of rolled steel products
21 steel mills
44 fabrication shops
17 downstream operations
2 strategic shareholdings
10
Solid Track Record
In thousand tonnes
21,605
TOTAL INVESTED (1981- Sep.2006) Brazil US 4.5
billion Debt North America US 1.8 billion
Debt South America US 590 million
Debt Europe US 235 million Debt
Installed Capacity Expansion
19,230
Araçariguama(Brazil) Sidenor (Spain) Sheffield
(USA) Siderperú (Peru) GSB(Spain)
7,696
16,372
CAGR 1996-2006 15 p.a.
Ameristeel (USA) AZANew Plant(Chile) Additiona
lstake inAçominas(Brazil)
North Star(USA)
11,076
ControlofAçominas(Brazil) Co-Steel (USA)
16,709
3,072
Diaco(Colombia)
Cambridge(Canada) Usiba(Brazil)
3,934
4,568
4,595
Piratini(Brazil) AZA(Chile)
Stake inAçominas (Brazil)
Manitoba (Canada)
2,611
1,757
BarãodeCocais(Brazil)
Laisa - 1980(Uruguay)
2009e
Brazil Installed Capacity of Crude Steel
Abroad Installed capacity of Crude Steel
e estimated
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.
11
Among the Leaders Crude Steel Output 2005
In million tonnes
Rank
1
2
3
4
5
6
Gerdau should have an installed capacity of 21.5
million tonnes of crude steel per year after the
investment program in Brazil is completed in 2009.
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8
9
10
11
12
13
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GERDAU GROUP (BRA)
Source Metal Bulletin
12
Value Builder CompanyATKearney study
Growth portfolio (CAGR 2001-2005)benchmarked
against industry average
Revenue Growth
70
Eregli Demir Celik
60
Mittal
Severstal
Baoshan
Angang
Bluescope 03 05
50
Maanshan Iron Steel
Ipsco
Steel Dynamics
Gerdau
Nucor
Novolipetsk1)
40
Acerinox
Tata Steel
30
Usinas
Voestalpine
Industry Average
Onesteel
Tokyo Steel
Cap
Boehler-Uddeholm
US Steel
20
SSAB
Salzgitter
SAIL
Oregon Steel Mills
Hylsamex
10
HyundaiSteel
JFE 03 05
Rautaruukki
Corus
Neomax
Imsa
Worthington
0
Arcelor02 05
Nisshin Steel
AK Steel
Sumitomo
Thyssenkrupp1)
Nippon Steel
Carpenter Technology
-10
-40
10
60
110
Equity Value Growth
Industry Average
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
13
Shipments
In thousand tonnes
83 increase in the last 5 years
13,550
South America (6 in 2005)
9.5
12,560
12,144
11,143
North America (47 in 2005)
10,181
9,109
Brazil Exports (21 in 2005)
7,411
Brazil Domestic Market (26 in 2005)
Europe
2001
2002
2003
2004
2005
9M05
9M06
Billets, blooms slabs
Heavystructural shapes
Wires
Rebars
Wire-rod
Merchant bars
Fabricated steel
Nails
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Markets
BRAZIL - 2005
Arcelor Brasil 36
Gerdau 48
Other 5
Barra Mansa5
VM do Brasil6
COUNTRY
MARKET SHARE
MAIN COMPETITORS
NORTH AMERICA
15
Nucor ArcelorMittal CMC
CHILE
51
CAP Imports
URUGUAY
84
Imports
ARGENTINA
20
Acindar Bragado Zapla
COLOMBIA
37
Acerias Paz Del Rio Imports
SPAIN
36
ArcelorMittal Imports
PERU
44
Aceros Arequipa Imports
Specialty steel only
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Growth Opportunities

• LONG STEEL PRODUCTS (Brazil)
• Maintenance of market share
• Improvement of current installed capacity
• São Paulo mill expansion
• 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

• 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

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Outlook

• Brazil
• Domestic volumes growing around 6 - 8 in 2007
• Strengthening of the housing and industrial
  sectors
• Price stability in local currency terms
• Relatively stable costs
• North America
• Solid demand for rebars and merchant bars
• Reduced level of imports
• Increase in supply of higher value added
  products
• South America
• Solid economic growth
• Strengthening of the civil construction sector
• Government spending
• Demand in line with economic growth
• Europe
• Good performance in the specialty steel business

17
Agenda

• Industry Overview
• Group Overview
• Operating and Financial Highlights

All data presented in US Dollar and in metric
tons, except when indicated
18
Exports
9M06
Domestic Market 79
NET SALES BREAKDOWN BY REGION
Europe3
South America10
Brazil 41
North America46
Exports 21 (35 in tonnes)
EXPORTS BY REGION (IN TONNES)
North America16
South America 27
Central America 15
Africa 9
Asia24
Europe 9
19
Margins
Gross Margin
42
Consolidated Brazil North America South
America
32
30
28
26
26
20
17
EBITDA Margin
33
23
26
21
21
21
19
17
Calculated by hard currency
20
Consolidated Financials
In US million
9M05
9M06
2004
2005


6,251 5,656 11,907 2,539 3,652 1,235 4,481 11,9
07 3,918 2,589 1,329
5,152 4,159 9,311 1,698 3,267 843 3,503 9,311
3,260 2,111 1,149
3,600 3,431 7,031 1,977 2,186 580 2,288 7,031
2,402 769 1,633
5,182 4,165 9,347 1,790 3,225 896 3,436 9,347
3,269 2,335 934
Balance Sheet Current assets Non-current
assets Total Assets Current liabilities Non-curre
nt liabilities Minority Interest Shareholders
equity Total Liabilities and Shareholders
equity Total debt Cash Equivalents Net debt
Income Statement Net revenue Gross
profit Operating income Net income EBITDA
7,362 1,996 1,424 1,132 1,743
8,088 2,289 1,610 1,237 1,900
9,077 2,446 1,727 1,387 2,098
7,383 2,353 1,678 1,219 2,092

21 1.4x 0.5x
19 1.6x 0.6x
36 1.1x 0.8x
18 1.6x 0.4x
Ratios Net debt / Total capitalization Total
debt / EBITDALTM Net debt / EBITDALTM
21
Consolidated Debt Profile
September 2006
US MM
GROSS DEBT 3,918 100

SHORT TERM 980 25
Domestic Currency 217 6
Foreign Currency 210 5
Companies Abroad 553 14

LONG TERM 2,938 75
Domestic Currency 758 19
Foreign Currency 1,574 40
Companies Abroad 606 16

CASH CASH AND EQUIV. 2,589 100
Domestic Currency 1,622 63
Companies Abroad 967 37

NET DEBT 1,329
COST OF DEBT (per annum) InUS
Brazil Domestic Currency 20.7
Foreign Currency 7.1
Companies Abroad 7.4
DEBT AVERAGE LIFE 8.8 YEARS
DEBT STRUCTURE
Companies Abroad 30
Foreign Currency 45
Domestic Currency 25
22
Consolidated Debt Amortization
In US million Sep/06
Companies Abroad 32 FINIMP 37 Perpetual Bond
600 Debentures 292
Pre-Exports 113 FINIMP 151 BNDES 99 Companies
Abroad 64 Securitization 41
1,014
BNDES 43 Companies Abroad 411 FINIMP
59 Debentures 55
Companies Abroad 110
Pre-Exports 55 BNDES 88 Securitization
44 FINIMP 139
Companies abroad 409
618
FINIMP 55
491
473
BNDES 67 FINIMP 85 Securitization 41
Companies Abroad 55 FINIMP 59
354
FINIMP 32
Pre-Exports 22
243
206
182
160
101
76
4Q06
1Q07
2Q07
3Q07
2008
2009
2010
2011
After 2012
2012
4Q07
SHORT TERM US 980
LONG TERM US 2,938
23
CAPEX 2007 - 2009
9M06
Investment Program 2007 2009 US 3.0 billion
In US million
In US million
BRAZIL 484.6
ABROAD 588.1
North America 270.6
South America 100.2
Europe 217.3
TOTAL 1,072.7
2007 2008 2009 Total

Brazil 806 691 517 2,014
Abroad 235 378 356 968
TOTAL 1,041 1,068 873 2,982
INSTALLED CAPACITY EVOLUTION
In thousand tonnes
Rolled Products
Crude Steel
12
12
21,605
19,035
19,230
17,040
10
11,005
9,970
12
11,985
10,680
Abroad
Abroad
10,600
14
9,260
11
Brazil
Brazil
7,050
6,360
2006
2009
2006
2009
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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.
25
Gerdau S.A.
www.gerdau.com.br inform_at_gerdau.com.br 55 51
3323 2703