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GERDAU

GERDAU. Morgan Stanley Basic Materials Conference. December 2005. Philosophy. VISION. TO BE A WORLD-CLASS INTERNATIONAL STEEL COMPANY. MISSION.

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GERDAU

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  1. GERDAU Morgan Stanley Basic Materials Conference December 2005

  2. Philosophy VISION TO BE A WORLD-CLASSINTERNATIONAL STEEL COMPANY MISSION 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 2

  3. Investment Considerations • A low cost international steel company with operations in Brazil, Uruguay, Canada, Chile, Argentina, Colombia and the United States • Substantial international profile – foreign exchange generation through divisions abroad and export sales amount approximately 61% of consolidated revenues in 9M05 • Ranked 12th globally by steel output in 2004 with an output of 13.4m tons (includes one joint venture) • 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 28 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 1.4x in 9M05) and strong cash generation • Shares of Gerdau S.A. are currently traded at the São Paulo, New York and Madrid exchanges 3

  4. MetalúrgicaGerdau S.A. Banco Gerdau S.A. 99% 44.8% Gerdau S.A. 97.1% 89.3% 89.3% 89.3% 77.2% 89.3% 89.3% 22.8% Gerdau Açominas S.A. Gerdau Aços Longos S.A. Gerdau Aços Especiais S.A. Gerdau Comercial de Aços S.A. Gerdau Internacional Empreend. Ltda. Seiva S.A. Florestas e Indústrias Gerdau América do Sul Participações S.A. 74.4% Sipar Aceros S.A. Gerdau Ameristeel Corporation 66.5% 100% Gerdau Laisa S.A. 50% Gerdau Chile 100% Gallatin Steel 57.1% 100% Gerdau AZA S.A. Gerdau Colômbia Shareholding Structure 4

  5. 100+ Years in Business THROUGHOUT THE 40’s THE 80’s • 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 • First steel mill acquisition – Siderúrgica Riograndense (1948) THE 50’s • Expansion of Siderúrgica Riograndense • Construction of second mill at Riograndense THE 90’s THE 60’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 • Market share increase by: • - Diversification and verticalization • of product line • - Structuring of distribution network • (today more than 77 sales points) • - Acquisition of mill in Pernambuco THE 70’s • Capacity expansion with acquisition of two mills (Alagoas and Paraná) and construction of largest mill (Rio de Janeiro) • Diversification in reforestation 5

  6. Solid Track Record Brazil – Crude Steel Installed Capacity Abroad – Crude Steel Installed Capacity In thousand tons THE NEW MILLENNIUM 16,830 Includes a pending transaction in Colombia • Expansion abroad – reverse takeover of Co-Steel and acquisition of North Star Mills • Acquisition of stake in Açominas – controller since 2002 • Strategic alliance in Colombia Potter Form Gate City & RJ North Star(USA) SACK(Chile) DIACO and SIDELPA(Colombia) 14,450 CartersvilleDrawingCo-Steel (USA) 7,696 Ameristeel (USA) AZANew Plant(Chile) TOTAL INVESTED ABROAD (1981-2004): North America = US$ 1.3 billion + Debt South America = US$ 314 million + Debt CartersvilleMillOrrvileDrawing (USA) SIPSA(Argentina) 4,595 3,934 3,072 Manitoba (Canada) SIPAR(Arg.) AZA(Chile) 1,757 Cambridge(Canada) Laisa - 1980(Uruguay) 6

  7. An International Company Total Capacity (Includes 1 Joint Venture) 16.8 million tons of crude steel 13.9 million tons of rolled steel products Brazil 7.6 million tons of crude steel 4.8 million tons of rolled steel products 10 mills 11 fabrication shops 6 downstream operations and special sections 75 sales points and flat steel service centers Abroad Rolling mill 9.2 million tons of crude steel Steel mills 9.1 million tons of rolled steel products Joint venture 18 mills and 1 rolling mill 38 fabrication shops 15 downstream operations and special sections 1 joint venture 7

  8. Among the Leaders Crude Steel – Output 2004 In million tons Mittal Steel (NET) 1 58.9 * Arcelor (LUX) 2 46.9 32.4 Nippon Steel (JAP) 3 JFE Steel (JAP) 4 31.6 Posco (KOR) 5 30.2 Shangai Baosteel (CHI) 6 21.4 20.8 US Steel (USA) 7 Corus Group (U.K.) 8 19.0 Nucor (USA) 9 17.9 ThyssenKrupp (GER) 10 17.6 Riva Group (ITA) 11 16.7 Gerdau Group (BRA) 12 13.4 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. Sumitomo (JAP) 13 13.0 * Includes ISG acquired by Mittal Steel in 2004. Source: IISI 8

  9. Solid Market Share in Long Steel NORTH AMERICA BRAZIL Other29% Barra Mansa5% Imports18% Gerdau 48% Commercial Metals7% Other 7% Aços Villares5% Nucor27% Gerdau Ameristeel19% Belgo35% MARKET SHARE MAIN COMPETITORS COUNTRY CHILE 53% CAP + Imports URUGUAY 90% Imports ARGENTINA 20% Acindar + Bragado + Zapla COLOMBIA 37% Acerias Paz Del Rio 9

  10. Growth Strategies • LONG STEEL PRODUCTS (Brazil) • Maintenance of market share • Enhancement of current installed capacity • New steel mill in São Paulo • Continuous improvements • SPECIALTY STEEL • Growth in the domestic and export markets • New mill in Rio de Janeiro • New markets/regions • AÇOMINAS (Ouro Branco mill) • New 1.5 mm ton blast furnace • Next phase: +3 mm tons • Growthplatform for slabs, blooms and billets • Export-oriented sales • SOUTH AMERICA • Maintenance of leadership in the long steel sector • New markets • NORTH AMERICA • Efficiency and productivity gains (Gaps) • Active role in the steel sector consolidation process • NEW OPPORTUNITIES • Mexico, Asia, South America… • Flat Steel • Iron ore and pig iron 10

  11. 13,676 13,448 CRUDE STEEL 12,343 In thousand tons 9,441 7,251 7,065 ROLLEDPRODUCTS In thousand tons Output Evolution Brazil North America South America 10,621 10,274 9,045 6,933 5,968 5,836 11 * Annualized data

  12. Shipments Billets, blooms& slabs Heavystructural shapes Wires Wire-rod Rebars Merchant bars Nails Fabricated steel In thousand tons 13,581 12,560 12,144 Brazil – Domestic Market 9,151 Brazil – Exports 7,394 7,213 South America North America 12 * Annualized data

  13. Strong Export Business SHIPMENTS BY REGION SHIPMENTS BY SEGMENT Agricultural2% Europe11% 2004 Asia34% Civil Construction41% Africa8% Industry57% South America 17% Central America15% North America15% Agricultural1% Africa8% 9M05 Europe 11% Central America12% Civil Construction 37% North America4% Asia44% Industry62% South America 21% 13

  14. Costs and Prices Net Sales Revenue and Cost of Sales per ton In US Dollars/ton Brazil 755 718 747 733 707 681 546 511 494 500 492 449 425 443 444 Net Sales Revenue 402 374 338 310 Cost of Sales 299 311 289 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 North America South America 735 722 697 685 675 820 723 636 731 717 699 561 638 512 637 637 613 615 586 584 558 549 408 411 502 579 526 384 498 463 510 510 425 487 396 385 422 378 418 417 367 351 331 288 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 1Q05 2Q05 4Q04 3Q05 3Q05 2Q05 4Q04 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 1Q05 Net Sales Revenue Cost of Sales Net Sales Revenue Cost of Sales 14

  15. Consolidated Financials In US$ millions 9M05 2004 9M04 Income Statement Net revenue Gross profit Operating income Net income EBITDA 5,143 1,666 1,151 870 1,492 7,383 2,353 1,678 1,219 2,092 7,362 1,996 1,424 1,132 1,743 Balance Sheet Current assets Non-current assets Fixed assets Total Current liabilities Non-current liabilities Shareholders’ equity Total 3,600 390 3,041 7,031 1,977 2,186 2,868 7,031 5,152 365 3,794 9,311 1,698 3,267 4,346 9,311 2,954 273 2,662 5,889 1,654 1,827 2,407 5,888 27.1% 23.7% 1.4x 0.5x 23.3x 32.4% 29.0% 1.2x 0.8x 14.3x Ratios Gross margin EBITDA margin Total debt / EBITDA Net debt / EBITDA EBITDA/Net Financial Expenses 31.9% 28.3% 1.1x 0.8x 19.8x 15

  16. Liquidity Management Gerdau maintains a strong liquidity policy to ensure that ample resources are available in the case of a downturn in market conditions or any deterioration of the sovereign environment • Gerdau’s liquidity policy • Cash and liquid investments of at least 25% of total debt • Gerdau export sales not more than 50% leveraged through export credit and receivable securitization • Liquid funds are held in USD and Brazilian Reais both in offshore and onshore accounts 16

  17. Consolidated Debt Profile In US$ millions Sep./05 GROSS DEBT 3,261 100% SHORT TERM 570 18% Domestic Currency 107 3% Foreign Currency 151 5% Companies Abroad 312 10% DEBT MATURITY 9.1 years LONG TERM 2,691 82% Domestic Currency 691 21% Foreign Currency 1,328 41% DEBT STRUCTURE Companies Abroad 672 20% Companies Abroad30% CASH & CASH AND EQUIV. 2,111 100% Foreign Currency46% Domestic Currency 1,363 65% Foreign Currency 748 35% Domestic Currency24% NET DEBT 1,150 17 * Includes exchange and monetary variation in the last 9 months

  18. Capital Expenditures BraZil Brazil Abroad Abroad INVESTMENTS - 9M2005 In US$ millions Investment Program 2005 – 2007: US$ 3.2 billion EVOLUTIONOFINSTALLED CAPACITY In thousand tons Crude Steel Rolled Steel + 28% 21,450 + 19% 15,490 16,380 12,970 + 11% 9,730 8,880 + 8% 8,240 8,800 11,720 + 55% + 40% 6,610 7,580 4,730 2004 2004 2007 2007 18

  19. Safe Harbor Statement Statements relative to business perspectives are based on current expectations of future events and trends that may affect our business. These estimates 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.

  20. Gerdau S.A. www.gerdau.com.br inform@gerdau.com.br +55 51 3323 2703

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