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Gerdau S.A. Global Metals, Mining & Steel Conference. May 2006. Steel Sector Gerdau Group Operating and Financial Highlights. Agenda. Steel Sector – 1 st Quarter 2006. - PowerPoint PPT Presentation

Text of Gerdau S.A

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The North American crude steel output for 1Q2006 was 32.1 million metric tons,
an increase of 2.0% compared to the previous quarter.
Steel Sector – 1st Quarter 2006
Total output in Brazil reached 7.2 million metric tons in the 1st quarter of 2006, a decrease of 9.8% compared to 4Q2005.
In the 1Q2006, the long steel production (including blooms and billets) remained
in the same level’s of the last period, reaching 2,7 million metric tons.
Domestic sales of long steel products (including blooms and billets) in 1Q2006
reached 1.7 million metric tons, an increase of 9.1% compared to the quarter
before.
Exports of long steel products (including ingots, blooms and billets) totaled 1.0
million metric tons in the 1Q2006, compared to 894 thousand metric tons in
4Q2005.
World
The world’s steel output reached 284.5 million metric tons in the 1st quarter, a decrease of 1.15% compared to that of the forth quarter of 2005.
Brazil
North
America
South
America
The South American crude steel output for the 1Q06 was 10.6 million metric tons. Brazil is the largest producer, with 67.5% of the total output, followed by Argentina, with 12.8% of the total output in the region.
A produção mundial de aço no 1º trimestre foi 1,2% menor do que no quarto trimestre de 2005, com 284,5 million de toneladas. A China continuou a aumentar sua produção (XXX million de toneladas) e exportou ....
No Brasil, após um decepcionante 2005, começamos a ver o mercado recuperar-se. O setor de Construção Civil é o grande alavancador de crescimento, ajudado por diversos fatores, como a MP do Bem, inflação estável, maior nível de renda e empregos e menores taxas de juros. A agropecuária vem recuperando-se ainda de forma lenta (gripe aviária, aftosa, custo da safra, preço das commodities...). Já a indústria continua em crescimento sustentado.
A redução do IPI foi repassada imediatamente para o preço do produto (-5%), mantendo-se a mesma margem de contribuição. As distribuidoras, porém, somente repassaram esta redução no final do trimestre, devido à existência de estoques comprados à alíquota antiga.
No mercado internacional, a demanda está bastante aquecida na América do Norte e na América Latina e estável na Europa. Com a recuperação das vendas domésticas, o volume exportado deve ficar em linha com o realizado no ano passado, porém caindo proporcionalmente em relação ao total de entregas.
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In million tons
China accounted for 32.3% of the global steel output
Brazil accounted for 2.5% of the global steel output
Gráf2
China
Japão
INTERNATIONAL 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
*
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 60% of consolidated revenues in the 1Q06
Ranked 14th globally by steel output in 2005 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 1.7x in 1Q06) 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
-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 03
Source: ThyssenKrupp (segment), Kobe (segment), RIVA, Haynes: EBIT Growth
Growth portfolio
(CAGR 1999-2003)
North America = US$ 1.4 billion + Debt
South America = US$ 468 million + Debt
In thousand tons
Solid Track Record
Gráf1
1986
1986
1987
1987
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1998
1999
1999
2000
2000
2001
2001
2002
2002
2003
2003
2004
2004
2005
2005
2006
2006
Brasil
5.5 million tons of rolled steel products
Abroad
9.3 million tons of rolled steel products
Total Capacity
14.9
11 mills
sections
19 mills
sections
Aços Villares
PIB
Population
Italy
1.2
-5.2
2003
2003
Apparent Demand
Population
2004
2004e
2004
2003
2003
PIB
Population
Italy
1.2
-5.2
2003
2003
Apparent Demand
Population
2004
2004e
2004
2003
2003
Brazil – Exports (17% in 1Q06)
South America (9% in 1Q06)
North America (45% in 1Q06)
Europe (2% in 1Q06)
Brazil (Domestic Market) 35%
Consolidated
Cost of sales remained stable compared to net revenue and gross margin stayed at the same levels as in the fourth quarter of 2005.
EBITDA in the quarter reached R$ 1.2 billion (R$ 1.0 billion in the fourth quarter of 2005), and the consolidated EBITDA margin remained at 21%.
Net profit in the first quarter reached R$ 832.5 million, 14% greater than that of the fourth quarter while net margin stayed at 15%.
Gráf7
1Q05
1Q05
1Q05
1Q05
2Q05
2Q05
2Q05
2Q05
3Q05
3Q05
3Q05
3Q05
4Q05
4Q05
4Q05
4Q05
1Q06
1Q06
1Q06
1Q06
0.208
0.073
0.165
0.139
0.266
0.06
0.121
0.164
0.276
0.049
0.107
0.159
0.205
0.093
0.154
0.149
0.225
0.079
0.132
0.148
resultados
(per annum)
Brazil – Domestic Currency
Brazil – Foreign Currency
*Includes (7.19%) of 2006 FX
Of the main indicators that help monitor the Gerdau companies’ indebtedness, the Gross debt/EBITDA was a meager 1.6X. Net debt can, theoretically, be settled in less than 5 months of operating cash generation. EBITDA, compared to net financial expenses excluding monetary and FX variations, provides an interest coverage ratio of 21X.
Debt’s average life remains greater than 9 years.
On December 31st, cash and cash equivalents totaled R$ 5.5 billion, of which R$ 2.2 billion (41.0%) were pegged to foreign currencies, mainly to the US dollar.
Plan1
Mar/05
NEW CAPACITY
Dividend payments are being made on a quarterly basis
In US$ million
Gerdau S.A. (GGBR4)
* Dividends related to each period, but not necessarily paid in the same period.
DIVIDEND YIELD
1998
1999
2000
2001
2002
2003
2004
2005
Growing volumes – Domestic market from 8 to 10%
Strengthening of the civil construction sector
Price stability in Brazilian currency
Inventories adjusted
North America
Demand is strong
Consolidation of the specialty steel operations at Sidenor
The general outlook for international markets for long common steel is positive. This is the result of the balance between supply and demand and inventory levels around the world. Global discipline is yet another factor that has contributed to maintain competitive environment stable.
In Brazil there are indications that the worst is over and that the country will take off in 2006 at a pace that should lead to economic recovery. From the domestic market’s perspective with interest rates falling and perhaps an increase in government spending, the economy may show some confidence. Civil construction is already signaling recovery and may play a relevant role in economic growth. We should see recovery also in the industrial sector such as agricultural equipment and power transmission towers.
It’s worthy
The US GDP should continue to grow at healthy rates and the highway bill, along with the reconstruction efforts in the Gulf area should maintain demand for rebars, merchant bars and profiles strong.
In broad terms, it is fair to assume that the world economy will experience a favorable environment in 2006.
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Safe Harbor Statement
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