Transcript Slide 1

Gerdau
March 2007
1
Highlights
 One of the world’s 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
2
Agenda
Industry Overview
Group Overview
Operating and Financial Highlights
All data presented in US Dollar and in metric tons, except when indicated
3
World Production
WORLD CRUDE STEEL PRODUCTION
In million tonnes
1,120
2005
Production reached
more than 1,2 billion
tonnes in 2006.
1,217
2006
EVOLUTION OF WORLD CRUDE STEEL PRODUCTION
1400
1200
World
1000
China
800
600
2º Oil Shock
1º Oil Shock
USSR breakup
Accelerated
increase of
China
400
200
Corresponds to 70%
of the world
production growth
from 2001 to 2006
0
1950 1960 1970 1980 1990 1996 1998 2000 2002 2004 2006
Source: IISI / IISI apud IBS
4
World Demand
FINISHED STEEL APPARENT DEMAND
In million tonnes
1,029
1,121
1,179
The world steel demand should increase 4.2% p.a.
from 2010 to 2015.
China
NAFTA
Japan
India
South America
2005
2006e
2007e
With increasing investments in infrastructure
and civil construction, India should have grown
FINISHED STEEL APPARENT
DEMAND PER CAPITA (KG)
10% in 2006.
Steel consumption in South America should have
increased 12% in 2006.
Chinese steel consumption should experience a
more moderate growth in 2007.
344
Source: IISI
322
295
China
205
171
102
2004
e: estimated
NAFTA
World
195
Brazil
110
2005
2006e
2007e
5
Brazil and the Global Steel Industry
Crude Steel Production – 2006
In million tons
In million tonnes
Total World Production: 1.2 billion tonnes
China represented 34.4% of the global steel production
Brazil represented 2.5% of the global steel production
419
116
China
Source: IISI
Japan
98
USA
71
Russia
48
47
44
41
32
31
South
Korea
Germany
India
Ukraine
Italy
Brazil
6
Agenda
Industry Overview
Group Overview
Operating and Financial Highlights
All data presented in US Dollar and in metric tons, except when indicated
7
100+ Years in Business
1901
 1901 – First operation: nail factory
THROUGH THE 40’s
 First steel mill acquisition –
Siderúrgica Riograndense (1948)
THE 50’s
 Expansion of Siderúrgica Riograndense
 Construction of second Riograndense’s
mill
THE 60’s
 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 70’s
 Capacity expansion with acquisition of
two mills (Alagoas and Paraná);
construction of largest Gerdau mill
(Rio de Janeiro)
 Diversification into reforestation
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)
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
THE NEW MILLENNIUM
 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
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An International Company
CANADA
Total Capacity
(Includes Strategic Shareholdings)
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
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Solid Track Record
In thousand tonnes
21,605
TOTAL INVESTED (1981 - 2006):
Brazil = US$ 5.2 billion + Debt
North America = US$ 2.0 billion + Debt
South America = US$ 654 million + Debt
Europe = US$ 380 million + Debt
Installed
Capacity
Expansion
19,230
Brazil – Installed Capacity of Crude Steel
16,709
e
08
2
0
06
0
2
2
0
05
Diaco
(Colombia)
04
03
0
2
0
0
2
0
2
1
02
Co-Steel
(USA)
01
Additional
stake in
Açominas
(Brazil)
00
Control
of
Açominas
(Brazil)
99
98
9
97
1
9
96
9
1
95
9
1
94
9
1
93
9
1
92
9
1
91
9
1
90
9
Stake in
Açominas
(Brazil)
Manitoba
(Canada)
AZA
(Chile)
1
89
4,568
4,595
1
Piratini
(Brazil)
9
1
88
9
1
87
9
1
86
Usiba
(Brazil)
Barão
de
Cocais
(Brazil)
Laisa - 1980
(Uruguay)
9
3,934
2,611
1,757
1
Cambridge
(Canada)
AZA
New Plant
(Chile)
9
3,072
11,076
0
Ameristeel
(USA)
2
CAGR 1996-2006: 15% p.a.
2
7,696
Araçariguama
(Brazil)
Sidenor
(Spain)
Sheffield
(USA)
16,372
North Star
Siderperú
(Peru)
(USA)
GSB
(Spain)
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.
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Among the Leaders
Crude Steel – Output 2005
In million tonnes
Rank
1
Mittal Steel (UK)
2
Arcelor (LUX)
3
Nippon Steel (JAP)
4
Posco (COR)
5
JFE Steel (JAP)
6
Shanghai Baosteel (CHI)
7
US Steel (EUA)
8
Nucor (EUA)
18.5
9
Corus Group (UK)
18.2
10
Riva Group (ITA)
11
ThyssenKrupp (ALE)
12
Severstal (RUS)
13
EvrazHolding (RUS)
14
GERDAU
GROUP
Gerdau
Group(BRA)
(BRA)
Source: Metal Bulletin
49.9
46.7
32.9
31.4
29.6
22.7
19.3
Gerdau should have an installed
capacity of 21.6 million tonnes
of crude steel per year after the
investment program in Brazil is
completed in 2009.
17.5
16.6
15.2
13.9
13.7
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Value Builder Company
ATKearney study
Growth portfolio
(CAGR 2001-2005)
benchmarked against industry average
Revenue Growth
70%
Eregli
60% Demir Celik
Baoshan
50%
Angang
Maanshan Iron Steel
Steel Dynamics
Bluescope 03 05
Ipsco
Gerdau
Nucor
40%
Novolipetsk1)
Acerinox
Tata Steel
30%
Industry
Average
Usinas
Voestalpine
Onesteel
US Steel
SSAB
20%
10%
0%
Tokyo Steel
Cap
Boehler-Uddeholm
Salzgitter
SAIL
Oregon
Steel MillsHylsamex
Hyundai
Steel
JFE 03 05 Rautaruukki
Corus
Worthington
Arcelor
02 05 AK Steel
-10%
-40%
Mittal
Severstal
Imsa
Nisshin Steel
Thyssenkrupp1)
Nippon Steel
Carpenter Technology
10%
Neomax
Sumitomo
Industry
Average
60%
110%
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
Equity Value
Growth
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Shipments
In thousand tonnes
12,144 12,560
13,550
14,819
South America (10% in 2006)
North America (45% in 2006)
9,109
7,411
Brazil – Exports (16% in 2006)
Brazil – Domestic Market (27% in 2006)
Europe (2% in 2006)
2001
Billets,
blooms
& slabs
2002
2003
Merchant
bars
2004
Rebars
2005
2006
Fabricated
steel
Heavy
structural shapes
Wire-rod
Wires
Nails
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Markets
BRAZIL - 2005
Arcelor Brasil
36%
Other 5%
Barra Mansa
5%
V&M do Brasil
6%
Gerdau
48%
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
43%
Aceralia + Saarsthal
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
LATIN AMERICA
 Maintenance of leadership in
the long steel sector
 New markets
 São Paulo mill expansion
SPECIALTY STEEL
 Active role in the steel sector
consolidation process
 Search for new opportunities
NORTH AMERICA
 Efficiency and productivity
gains (Gaps)
 Enhancement of leadership in
the long steel sector through
AÇOMINAS (Ouro Branco mill)
acquisitions
 New 1.5 MM ton blast furnace
 Growth platform for slabs, blooms
and billets
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Outlook
Brazil





Growing volumes in the domestic market: 6 to 8% in 2007
Industrial and residential construction sectors revving up
Recovery of agricultural sector
Prices in reais stable
Costs relatively stable
North America
 Demand remains strong for rebars, merchant bars and profiles
 Imports falling
 Increase in supply of higher value added products
South America




Strong growth in the economy
Civil construction sector strengthening
Increase in public investments
Demand in line with economic growth
Europe




Demand continues strong
Price increases
Specialty steel sector performing well
Growing market share
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Agenda
Industry Overview
Group Overview
Operating and Financial Highlights
All data presented in US Dollar and in metric tons, except when indicated
17
Exports
2006
Domestic
Market
78%
NET SALES BREAKDOWN
BY REGION
South America
10%
North
America
46%
Europe
3%
Brazil
41%
Exports
22%
(37% in tonnes)
EXPORTS BY REGION
(IN TONNES)
Central America
15%
North
America
Africa
16%
9%
Europe
8%
Asia
23%
South
America
29%
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Margins
Gross Margin
50%
40%
40%
36%
38%
Consolidated
Brazil
30%
20% 24%
24%
22%
North America*
15%
South America*
10%
10%
0%
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06
EBITDA Margin
42%
38%
36%
30%
31%
28%
21%
19%
15%
13%
24%
18%
12%
6%
10%
0%
* Calculated by hard currency
1Q04
2Q04 3Q04 4Q04
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06
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Consolidated Financials
In US$ million
2004
2005
2006
Balance Sheet
Current assets
Non-current assets
Total Assets
3,600
3,431
7,031
5,182
4,165
9,347
6,573
6,022
12,595
Current liabilities
Non-current liabilities
Minority Interest
Shareholders’ equity
Total Liabilities and Shareholder’s equity
1,977
2,186
580
2,288
7,031
1,790
3,225
896
3,436
9,347
2,570
4,070
1,294
4,661
12,595
Total debt
Cash & Equivalents
Net debt
2,402
769
1,633
3,269
2,335
934
4,240
2,791
1,449
7,383
2,353
1,678
1,219
2,092
9,148
2,517
1,727
1,387
2,169
10,999
3,038
2,055
1,633
2,502
36%
1.1x
0.8x
18%
1.5x
0.4x
20%
1.7x
0.6x
Income Statement
Net revenue
Gross profit
Operating income
Net income
EBITDA
Ratios
Net debt / Total capitalization
Total debt / EBITDA
Net debt / EBITDA
20
Consolidated Debt Profile
December 2006
US$ MM
GROSS DEBT
4,240
100%
SHORT TERM
917
22%
Domestic Currency
235
6%
Foreign Currency
270
6%
Companies Abroad
412
10%
3,323
78%
940
22%
1,723
40%
660
16%
CASH & CASH AND EQUIV.
2,791
100%
Domestic Currency
1,773
64%
Companies Abroad
1,018
36%
NET DEBT
1,449
LONG TERM
Domestic Currency
Foreign Currency
Companies Abroad
COST OF DEBT
(per annum)
Brazil
Domestic Currency
In
US$
22.8%
Foreign Currency
7.3%
Companies Abroad
8.0%
DEBT AVERAGE LIFE:
9 years and 2 months
DEBT STRUCTURE
Companies
Abroad
26%
Foreign
Currency
46%
Domestic
Currency
28%
21
Consolidated Debt Amortization
In US$ million – Dec./06
FINIMP: 90
Perpetual Bond: 600
Debentures: 115
FINIMP: 196
BNDES: 134
Companies
Abroad: 401
Debentures: 111
FINIMP: 82
Companies
Abroad: 207
FINIMP: 147
Pre-export: 118
Companies
Abroad: 176
Companies
abroad: 201
BNDES: 112
FINIMP: 109
665
875
730
Working
Capital: 99
FINIMP: 24
Debentures: 110
447
BNDES: 55
330
300
278
227
141
82
1Q07
2Q07
3Q07
4Q07
SHORT TERM: US$ 917
2008
2009
2010
2011
2012
165
2013
After
2013
LONG TERM: US$ 3,323
22
Investment Plan
INVESTMENT PLAN 2007 – 2009:
US$ 4.0 billion
ACTUAL 2006*
In million US$
In million US$
BRAZIL
2007
2008
2009
TOTAL
BRAZIL
820
570
1,000
2,390
ABROAD
580
530
500
1,610
North America
260
360
315
935
South America
260
125
142
527
Europe
60
45
43
148
TOTAL
1,400
1,100
1,500
4,000
694.4
ABROAD
1,308.2
North America
537.6
South America
255.5
Europe
515.1
TOTAL
2,002.6
* Including acquisitions in the period.
INSTALLED CAPACITY EVOLUTION
In thousand metric tons
Crude Steel
+ 12%
19,230
9,970
9,260
2007
+ 10%
Rolling Products
21,605
+ 8%
17,040
11,005
Abroad
+ 14%
10,680
10,600
Brazil
2009
6,360
2007
+ 12%
+ 1%
18,435
11,985
Abroad
Brazil
6,450
2009
23
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 forwardlooking 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.
24
Gerdau S.A.
www.gerdau.com.br
[email protected]
+55 51 3323 2703
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