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Investor Presentation
Heavy plate rolling mill starts operating in July at the Ouro Branco mill (MG)
Outlook
Gerdau Highlights
Agenda
2
Economic Outlook
3
Sources: FED, IMF and Focus
GDP Growth 2014 2015f 2016f
World 3.4% 3.1% 3.4%
US 2.4% 2.4% 2.2%
Brazil 0.1% -3.8% -3.7%
China 7.3% 6.9% 6.3%
Apparent steel use forecast moving sideways in 2016
4
Sources: World Steel Association (October) and Brazil Steel Institute*
Region / Country (in mmt and %)
2015f 2016f 15/14 16/15
World 1,513 1,523 -1.7% 0.7%
European Union 150 153 1.3% 2.2%
NAFTA 141 144 -2.7% 2.1%
Central & South America 45 46 -7.3% 2.0%
Brazil* 21 19 -16.7% -8.8%
Asia and Oceania 995 993 -2.1% -0.2%
China 686 672 -3.5% -2.0%
Steel capacity has been growing much faster than consumption…
5
Source: World Steel Association (April and October)
843
1.328
1.633 1.644
1.051
1.664
2.384 2.426
2000 2004 2008 2012 2016f
Apparent Crude Steel Use Capacity
751782
overcapacity
2015
336
In million metric tonnes
… and capacity utilization rate has reached lower historical levels
6
Source: World Steel Association
Jan-Feb/16 66%
In million metric tonnes
81%84%
88%90%
83%
72%
79%76%
70%
2000 2003 2006 2009 2012 2015
Chinese steel exports are affecting steel industry
7
+83%
In million metric tonnes
Exports 2016:
Jan.+Feb.: stability (-1%)
Feb.: -17% (8.1 Mmt)62
93
112
2013 2014 2015
Source: World Steel Association
Prices turning up over the last weeks
8
In US$/t
TurkeyChina
Source: Platts
507 440
334 248
330
573 567
454
326 381
jan/
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24 M
ar 1
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Rebar export
136
96
6041 57
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Iron Ore CFR China
331369
274
182227
jan/
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14
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US Scrap export
Outlook
Gerdau Highlights
Agenda
9
►Relevant level of direct
purchase and captive
scrap (50%)
►6.3 billion tonnes of iron
ore resources
– Self-sufficiency at
Ouro Branco mill
►Coke unit and coking
coal mines in Colombia
►Partial level of energy
self generation
Upstream
Vertically Integrated Operations
► Low cost structure
►Mini-mills and
integrated mills key to
low cost strategy
► Latest generation
technology
Steel
►Reinforcing steel
fabrication facilities (Fab
Shops)
►Drawn products
►Multi-product
distribution network
► Tailor-made added-
value approach (~40%
of sales to civil
construction)
Downstream
10
Brazil North America Special Steel
Ready-to-use products
► Housing
► Infrastructure
► Industry and commercial buildings
► Agricultural
► Exports
► Infrastructure
► Non-residential
► Industrial
► Automotive
► Shipbuilding
► Energy
Billets, blooms& slabs
Merchant bars Rebars
Fabricated steel
Heavystructural shapes Wire-rod
Wires
NailsSBQ
South America
► Housing
► Infrastructure
► Industry and commercial buildings
Broader portfolio products and geographic diversification
HRC Iron Ore
11
Wire
29% of Net Sales
35% of EBITDA
39% of Net Sales
35% of EBITDA
12% of Net Sales
12% of EBITDA
20% of Net Sales
18% of EBITDA
Focus in add value to our products
12
Technical Assistance Agreement
For the production of high quality steel plates to be supplied to the Americas, to the World
• Technical support to optimize Gerdau’s Plate Mill learning curve• High level supervision and training for our Steelmaking and Plate Mill
teams• Short cut to high-tech steel plates (includes development of new products
with JFE’s know-how, e.g. API X80 grade steel plates)
Main Benefits for
Gerdau
To support our State-of-the-Art Plate Mill facility at Ouro Branco Works (Brazil)
Capacity 1.1 mt/yearStart-up: July 2016
Digital Mill Araçariguama (SP)
Plate milEarlier entrance: July
Gerdau among the best
companies in Brazil in
leadership
development!
Strategic RoadmapNew partnerships in
wind power market
18 ideas implemented for
2 challenges addressed:
Processes simplification and
Working capital reduction
The Gerdau we
are creating
Transforming Gerdau to achieve our goals and share our success:
check out these great examples!
Gerdau Lean Delivery Systems in Special
Steel in North AmericaQuicker deliveries with optimized
logistic costs.
IT as a collaborative partner in North America BDTablets in the scrap yard,
GoPro cameras for maintenance
production, iPhone thermography capability
World-Class Steelmaker Ranking Gerdau is in 4th place
7.97.6
7.57.3
7.37.2
7.17.1
7.17.0
7.07.0
7.07.0
6.96.96.9
6.96.9
6.96.86.86.8
6.7
POSCONucor
Nippon SumitomoGerdau
SeverstalJSW Steel
NLMKJFE
HyundaiErdemir
CSNSDI
SAILVoestalpine
Tata SteelHadded
JindalArcelorMittalChina Steel
EvrazBaosteelFinarvedi
MMKTernium
23 factors analyzed, here are some examples:
• Profitability
• Value-added product mix
• Cost-cutting efforts
• Pricing power in home market
• Threat from nearby competitors
• Size
• Downstream business
• M&A, alliances and JV’s
• …
14
Source: World Steel Dynamics
Shipments '000 tonnes 16,970 17,869 -5.0%
Net Sales R$ MM 43,581 42,546 2.4%
SG&A R$ MM (2,582) (2,728) -5.4%
Adjusted EBITDA R$ MM 4,501 4,906 -8.3%
Adjusted EBITDA Margin % 10.3% 11.5% -
Adjusted Net Income R$ MM 684 1,190 -42.5%
Free Cash Flow R$ MM 3,021 1,933 56.3%
Unit ∆%2015 2014
Financial Highlights
15
EBITDA and EBITDA margin per BD
16
Geographic diversification reduces volatility in results
35.4%
Brazil BD
2,815
1,656
19.0%
12.8%
2014 2015
34.6%
North America BD
955
1,619 6.5%
9.4%
2014 2015
11.9%
SouthAmerica BD
476 557
9.4% 10.2%
2014 2015
18.1%
Special Steel BD
918 850
10.6% 9.6%
2014 2015
EBITDA (R$ million) EBITDA Margin (%) Participation of adjusted EBITDA per BD
Strong free cash flow despite challenging scenario
Cash effect on reduction in working capital of R$ 2.4 billion in 2015
17
Reduction of 35% on CAPEX in 2016
Main projects
� Construction of heavy plate rolling mill at Ouro Branco Unit in Brazil
� Construction of new melt shop in Argentina
� Startup of structural profiles mill in Mexico
3.1
2.6
2.3 2.3
1.5
2012 2013 2014 2015 2016 (F)
CAPEX Disbursements (R$ billion)
-35%
18
Long-Term Debt Amortization Schedule
Average Debt Term: 6.5 yearsAverage Debt Cost: 6.8%
R$ billionR$ billion
Debt & Leverage Ratio
Liquidity: R$ 6.9 billion cash + US$ 1.0 billion global working capital line
Debt under control, despite exchange variation impact
Net Debt/EBITDA ratio in U.S. dollar of 3.6x
4.6
1.5 1.0
3.9
4.7
0.2
2.4
3.5
2.3
2017 2018 2019 2020 2021 2022 2023 2024 2025andafter
19.523.3 22.6
27.6 26.5
5.8 5.8 5.7 6.7 6.9
3.1x
3.8x
2.4x3.2x
4.2x
2.1x 2.4x 2.6x 2.7
3.6x
Dec/14 Mar/15 Jun/15 Sep/15 Dec/15
Gross Debt Cash
Net debt/EBITDA (R$) Net debt/EBITDA (US$)
19
Extraordinary events in 2015
Results in 2015 affected by negative noncash impact of R$ 5.3 billion
20
Impairments
Goodwill - 1,520 354 1,125 2,999
Property, plant and equipment, net 835 - - 800 1,635
Investments - 362 - - 362
Write-off of deferred tax assets - - - 284 284
Total 835 1,882 354 2,209 5,280
Extraordinary events(R$ million)
Fiscal Year 2015
Brazil BDNorth America
BDSouth America
BDSpecial Steel
BDConsolidated
21
Closing Remarks
� Strong free cash flow generation of R$ 3.0 billion in 2015, supported by the
optimization of working capital.
� Positive highlights in 2015 include the strong presence in the North
American market and management efforts from our teams.
� Priorities for 2016:
� Free cash flow generation;
� Financial leverage reduction;
� Costs and SG&A reduction;
� CAPEX restriction (-35% in comparison with 2015);
� Optimize our assets profitability.
22
Closing Remarks
� Long-term initiatives:
� Streamlining operations and internal structures;
� Modernizing the corporate culture;
� and reassessing the potential profitability.
This presentation may contain forward-looking statements. These forward-looking
statements rely upon estimates, information or methods that may be incorrect or
inaccurate and may not actually occur. These estimates are also subject to risks,
uncertainties and assumptions, including, among others: general economic, political
and commercial conditions in Brazil and in the markets where we operate and existing
and future government regulations. Potential investors are hereby informed that these
estimates do not constitute a guarantee of future performance as they involve risks and
uncertainties. The Company does not undertake, and specifically denies, any obligation
to update any estimate, which only speak as of the date they are made.
Statement
23
