Gerdau S.A

1

Gerdau S.A.

March 2006

Fourteenth Annual Latin America Conference

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Agenda

Steel Sector

Gerdau Group

Operating and Financial Highlights

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World Steel – Supply and Demand

Source: IISI / World Steel DynamicsF=Forecast

Finished Steel

1985 1990 1995 2000 2005F 2010F

632

1,000

1,153

Production Apparent Consumption

690 698

830

1,117

942

772

641655603

+ 15.3% over 2005

+ 18.6% over 2005

According to a WSD forecast for 2010, 97% of the

world’s production will be consumed.

In million tons

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Crude Steel – Output 2004

Arcelor (LUX) 2

Mittal Steel (NET) 1

Nippon Steel (JAP) 3

JFE Steel (JAP) 4

Posco (KOR) 5

Shangai Baosteel (CHI) 6

US Steel (USA) 7

Corus Group (UK) 8

ThyssenKrupp (GER) 10

Riva Group (ITA) 11

Nucor (USA) 9

Gerdau Group (BRA) 12

Sumitomo (JAP) 13

46.9

58.9

32.4

31.6

30.2

21.4

20.8

19.0

17.9

17.6

16.7

13.4

13.0

Gerdau should have an installed capacity of

approximately 21 million tons of crude steel per year after the investment program in Brazil is completed in 2007.

Source: IISI

*

* Includes ISG acquired by Mittal Steel in 2004.

Among the Leaders

In million tons

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The North American crude steel output for 2005 was 127 million metric tons, a decrease of 5.3% compared to the previous year. In the USA, crude steel output reached 93.3 million metric tons in 2005 from 99.7 million metric

tons in 2004 (- 6.4%).

In 2005, the crude steel output reached 31.6 million metric tons, 3.9% less than in the previous year.

Domestic sales of long steel products (including blooms and billets) in 2005 reached 6.3 million metric tons, a decrease of 10.7% compared to 2004.

Exports of long steel products (including ingots, blooms and billets) totaled 4,3 million metric tons in 2005 (+ 25.6% YoY).

In 2005, the long steel production decreased 4.8% compared to 2004, retaking

the levels of 2003.

Source: IBS and IISI

Worl

d The world’s steel output reached 1.1 billion metric tons of crude steel in 2005, an increase of 5.9% compared to 2004. Crude steel production in China reached 349 million metric tons (31.5% of the world’s steel output), an increase of 24.6% compared to 2004.

Bra

zil

Nort

h

Am

eri

ca

Steel Sector – 2005S

ou

th

Am

eri

ca

The South American crude steel output for 2005 was down 1.2% at 45.3 million metric tons. Brazil is the largest producer, with 69.8% of the total output, followed by Argentina, with 11.9% of the total output in the region.

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Crude Steel Production – 2005

349

113

9366

48 45 39 3832 29

China

USAJapan

Russia

South K

orea

Germany

Ukrain

e

Brazil

India

Italy

Source: IISI

Brazil and the Global Steel Industry

In million tons

Total World Production: 1,108 million tons

China accounted for 31.5% of the global steel output

Brazil accounted for 2.8% of the global steel output

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Agenda

Steel Sector

Gerdau Group


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VISION

MISSION

TO BE A WORLD-CLASSINTERNATIONAL STEEL COMPANY

TO BE A WORLD-CLASSINTERNATIONAL STEEL COMPANY

Gerdau is an organization focused on the steel

business with a mission to satisfy customers` needs

and add value to shareholders, committed to the

fulfillment of people and to the sustainable

development of society

Philosophy

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A low cost international steel company with operations in Brazil, Uruguay, Canada, Chile, Argentina, Colombia, Spain and the United States

Substantial international profile – foreign exchange generation through subsidiaries abroad and export sales amount approximately 67% of consolidated revenues in 2005

Ranked 12th globally by steel output in 2004 with an output of 13.7MM tons (including strategic shareholdings)

2nd largest long steel producer in North America and largest long steel producer in the Americas

Focused on the production of long steel products Gerdau operates 30 mills incorporating both integrated and mini mills with the latest technologies

Relevant market share in every country with operations and diversified product range, with high value-added products

Strong low cost strategy as a result of diversified production processes and multiple raw material sourcing

Sound balance sheet (Gross Debt-to-EBITDA at approximately 1.6x in 2005) and strong cash generation

Shares of Gerdau S.A. are currently traded at the São Paulo, New York and Madrid stock exchanges

Shares of Metalúrgica Gerdau S.A. are traded at the São Paulo stock exchange

Gerdau Ameristeel’s shares are traded at the New York and Toronto stock exchanges

Investment Considerations

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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 75 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

1901 1901 – 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’sTHE NEW MILLENNIUM More acquisitions in the US Downstream expansion in North America Entering the European market Presence in São Paulo with a brand new steel mill

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1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Laisa - 1980(Uruguay)

Piratini(Brazil)

AZA(Chile)

Ameristeel(USA)

AZANew Plant

(Chile)

Additionalstake in

Açominas(Brazil)

Potter FormGate City & RJ

North Star(USA)

SACK(Chile)

Cambridge(Canada)

Usiba(Brazil)

Manitoba(Canada)

Controllof

Açominas(Brazil)

CartersvilleDrawingCo-Steel

(USA)

1,757

3,072 3,934

4,595

7,69611,076

16,372

Abroad – Crude Steel Installed Capacity

TOTAL INVESTED (1981-2005):Brazil = US$ 4.0 billion + Debt North America = US$ 1.4 billion + DebtSouth America = US$ 468 million + Debt

In thousand tons

Solid Track Record

Brazil – Crude Steel Installed Capacity

Diaco(Col.)

16,475

Barãode

Cocais(Brazil)

2,611Stake in

Açominas(Brazil)

4,568

18,658Araçariguama

(Brazil)

Sidenor (Spain)

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Brazil

8.6 million tons of crude steel

5.3 million tons of rolled steel products

Abroad



Total Capacity (Includes Strategic Shareholdings)



11 mills

11 fabrication shops

6 downstream operations and special sections

75 sales points and flat steel service centers

19 mills

37 fabrication shops

15 downstream operations and special sections

An International Company

Steel mills

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Strategic Shareholding

13

Value Builder CompanyATKearney

Value Growth

RevenueGrowth

Industryaverage

Industryaverage

StelcoHaynes

AK Steel

Smorgon

Carpenter

Salzgitter

Onesteel1)

Boehler-Uddeholm

INI SteelIpsco

Allegheny

Rautaruukki

Usinas

Ispat

Kennametal

SSAB

Voest-Alpine

Harsco

Nisshin Steel

Eregli Demir

Wuhan Steel1)Kobe

Dofasco

Iscor

Tata

RIVA1)

SAIL

Outokumpu

Corus

Gerdau

CSN

US Steel

Acerinox

Nucor

Thyssenkrupp

China Steel

Arcelor

Baoshan1)

Posco

JFE

Nippon Steel

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-35% -25% -15% -5% 5% 15% 25% 35% 45%

Note: 1) RIVA 98 02, Wuhan Steel & Onesteel 00 03, Baoshan 01 03Source: ThyssenKrupp (segment), Kobe (segment), RIVA, Haynes:

EBIT Growth

Growth portfolio (CAGR 1999-2003)

benchmarked against industry average

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BRAZIL

Gerdau 48%

Belgo35%

Barra Mansa5%

Other 7%

NORTH AMERICA

Nucor27%

Gerdau Ameristeel

19%

Commercial Metals

7%

Imports18%

Other29%

COUNTRY MARKET SHARE MAIN COMPETITORS

Solid Market Share in Long Steel

Aços Villares5%

CHILE

URUGUAY

ARGENTINA

53%

20%

90%

CAP + Imports

Acindar + Bragado + Zapla

Imports

COLOMBIA 37% Acerias Paz Del Rio

SPAIN 36%* GSB

* Specialty steel only

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Agenda

Steel Sector

Gerdau Group


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2000 2001 2002 2003 2004 2005

Shipments

Brazil – Domestic Market (25% in 2005)

Brazil – Exports (20% in 2005)

South America (10% in 2005)

North America (45% in 2005)

In thousand tons

7,302 7,411

9,109

12,56012,144

13,550

Billets, blooms& slabs

Merchant bars

Rebars Fabricated steel

Heavystructural shapes

Wire-rod Wires Nails

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Strong Export Business

Asia44%

Central America13%

South America 19%

North America5%

Africa8%

EXPORT SHIPMENTS BY REGION

Europe 11%

2005

NET REVENUE BREAKDOWN BY REGION

Brazil (Domestic Market) 34%

Exports (from Brazil)13%

North America47%

South America6%

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37.1%37.9%

12.6% 15.7%

27.1% 30.4%

0%

10%

20%

30%

40%

50%

2001 2002 2003 2004 2005

Margin Evolution

Brazil North America South America

Gross Margin

EBITDA Margin

31.4%28.2%

14.7%

12.1%

24.5%21.6%

0%

10%

20%

30%

40%

2001 2002 2003 2004 2005

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Consolidated FinancialsIn US$ millions

2003 2004

Income Statement

Net revenueGross profitOperating incomeNet incomeEBITDA

2005

4,6271,139

397434929

7,3832,3531,6781,2192,092

9,0772,4461,7271,3862,098

Balance Sheet

Current assetsNon-current assetsFixed assetsTotal

Current liabilitiesNon-current liabilitiesShareholders’ equityTotal

1,846364

2,7214,931

1,5031,7471,6814,931

3,600390

3,0417,031

1,9772,1862,8687,031

5,182377

3,7889,347

1,7903,2254,3329,347

Ratios

Gross marginEBITDA marginTotal debt / EBITDANet debt / EBITDAEBITDA/Net Financial Expenses

24.6%20.1%

2.3x2.0x5.0x

31.9%28.3%

1.1x0.8x

19.8x

26.9%23.1%

1.6x0.4x

27.8x

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Indebtedness

Dec. 05

In US$ million

GROSS DEBT 3,269 100%

SHORT TERM 568 17%

Domestic Currency 98 3%

Foreign Currency 149 4%

Companies Abroad 321 10%

LONG TERM 2,701 83%

Domestic Currency 640 20%

Foreign Currency 1,386 42%

Companies Abroad 675 21%

CASH & CASH AND EQUIV. 2,335 100%

Domestic Currency 1,379 59%

Foreign Currency 956 41%

NET DEBT 934

In US$COST OF DEBT IN DEC. 05 (per annum)

DEBT AVERAGE LIFE 9.1 years

Brazil – Domestic Currency

Brazil – Foreign Currency

Companies Abroad

32.5%*

5.9%

7.3%

DEBT STRUCTURE

Domestic Currency23%

Foreign Currency

46%

Companies Abroad31%

*Includes 11.82% of 2005 FX

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+ 14%

Capital Expenditures

INVESTMENTS - 2005INVESTMENTS - 2005

2006 2008

10,073

8,585

10,675

10,685

18,65821,360

+ 24%

+ 6%

EVOLUTION OF INSTALLED CAPACITY

Investment Program 2006 – 2008: US$ 3.8 billion Investment Program 2006 – 2008: US$ 3.8 billion

2006 2008

9,609

5,260 6,585

14,86916,908

+ 25%

+ 7%

+ 14%

Brazil Abroad Brazil Abroad

Crude Steel Rolled Steel

BRAZIL 568.8

ABROAD 289.2

North America 135.9

South America 153.3

TOTAL 858.0

In thousand tonsIn thousand tons

In US$ millions

10,323

22

30 3055 66

81

118

302334

153153

584253

71

1999 2000 2001 2002 2003 2004 2005

Dividends Policy

30% of the adjusted net income (Pay-out)

Dividend payments are being made on a quarterly basis

In US$ million

DIVIDEND YIELD

1999 2000 2001 2002 2003 2004 2005

GOAU4 6.0% 7.9% 17.0% 11.3% 6.2% 7.8% 6.1%

GGBR4 3.6% 6.1% 6.8% 6.8% 3.9% 6.1% 4.6%

DIVIDENDS DISTRIBUTION*DIVIDENDS DISTRIBUTION*

Metalúrgica Gerdau S.A. (GOAU4)

Gerdau S.A. (GGBR4)

* Dividends related to each period, but not necessarily paid in the same period.

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Outlook

Brazil Greater economic growth in 2006 – 3 to 3.5% Increase in volumes shipped in the domestic market - 5 to 6% Strengthening of the civil construction sector Price stability in Brazilian currency Inventories adjusted Increase in government spending

North America Consistent economic growth More investments in infrastructure (Highway Bill) Stability in production costs Stability in metal spread

South America Consolidated economic growth Strengthening of the civil construction sector Demand is strong

Europe Consolidation of stake in Sidenor as of the 1Q06

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Safe Harbor Statement

This presentation 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.

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www.gerdau.com.br

[email protected]

+55 51 3323 2703

Gerdau S.A.

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