Transcript www.gerdau.com.br

Gerdau Group
SMITH BARNEY’s
13th Annual
Latin America
Conference
New York, March 15-16, 2005
Steel Sector
Gerdau S.A. Consolidated
Consolidated Figures
Capital Markets
All data presented in R$ and in metric tons, except when indicated
World Output
Crude Steel
In million tons
300
The world production of crude steel surpassed the
1 billion ton mark in 2004, an increase of 8.9% over
the previous year. The growth average has been
4.6% year over year if China were not included.
+23.2%
250
200
150
+2.0%
100
+5.6%
+4.6%
50
+2.6% +3.5%
+4.9% +5.7% +2.7%
+5.3%
Source: IISI
2004
2003
Italy
India
Brazil
Ukraine
Germany
South
Korea
Russia
USA
Japan
China
0
3
World Top Producers
Crude Steel
COMPANY
OUTPUT
2003
RANKING
2002
1 Arcelor (LUX)
42,8
1
2 Nippon Steel (JAP)
31,8
2
3 LNM Group (NED)
31,1
4
4 JFE Group (JAP)
29,8
nd
5 Posco (KOR)
29,7
3
6 Shanghai Baosteel (CHI)
19,9
5
7 Corus Group (U.K.)
18,9
7
In million tons
Mittal Steel
(Ispat, LNM and ISG) will be
the biggest world steel
company with 60 million tons
of installed capacity.
COMPANY
After the investment program
in Brazil is completed in
2007, Gerdau will have an
installed capacity of 21
million tons of crude steel
per year.
Source: Metal Bulletin
OUTPUT
2003
RANKING
2002
8 US Steel (USA)
17.9
10
9 Thyssen Krupp Steel (GER)
17.0
6
10 Riva Group (ITA)
15.7
9
11 Nucor (USA)
15.8
12
12 Sumitomo Metal (JAP)
13.3
13
13 Sail (IND)
12.4
14
14 Grupo Gerdau (BRA)
12.3
19
15 Evraz Holding (RUS)
12.1
nd
4
Steel Sector
Gerdau S.A. Consolidated
Consolidated Figures
Capital Markets
Units Distribution
NORTH AMERICA
 14 mills and 1 strategic shareholding
(Gallatin Steel)
 29 fabrication shops
 13 downstream operations and special
sections
Gerdau Ameristeel Corp.
Gallatin Steel*
BRAZIL
Gerdau
Açominas S.A.
SOUTH AMERICA
 4 sales points
 11 fabrication shops
 8 downstream
operations and special
sections
 2 mills and 1
strategic
shareholding
(Sipar)
 4 fabrication
shops
 10 mills
Aza
Laisa
Sipar**
 75 sales points
(Comercial Gerdau) and
flat steel service centers
* Flat steel mill, 50% stake JV
** Rolling mill, 38% stake JV
6
Installed Capacity
December 2004
In thousand tons
CRUDE
STEEL
SLABS,
BLOOMS &
BILLETS
ROLLED
PRODUCTS
MAIN PRODUCTS
Billets, slabs, blooms, merchant
bars, rebars, wire rod, drawn
BRAZIL
7,580
2,610
4,730
products, welded wire mesh,
structurals, nails, downstream
products, fabricated steel products
and specialty steel.
SOUTH
AMERICA
NORTH
AMERICA
TOTAL
510
-
610
Billets, merchant bars, rebars and
wire rod.
Billets, merchant bars, rebars,
wire rod, drawn products, welded
mesh, nails, downstream
products, fabricated steel
products, flat steel products and
grinding balls.
8,290
-
7,630
16,380
2,610
12,970
7
Output Evolution
CRUDE STEEL
13,448
14,000
In thousand tons
12,343
12,000
9,441
10,000
Utilization rate:
8,000
• Abroad: 83.9%
7,065
7,251
2000
2001
6,000
• Brazil: 96.2%
4,000
2,000
0
ROLLED PRODUCTS
2002
2003
2004
In thousand tons
11.000
10,274
Brazil
Abroad
9,045
8.800
6,933
6.600
5,836
5,968
Utilization rate:
• Abroad: 83.7%
4.400
• Brazil: 91.7%
2.200
0
2000
2001
2002
2003
2004
8
Shipments
In thousand tons
In R$/ ton
13,000
12,144
12,560
1,800
1,560
1,500
10,400
9,151
7,800
7,213
7,394
1,101
1,200
1,001
900
796
5,200
720
600
2,600
300
0
2000
2001
Brazil
2002
Abroad
2003
2004
Average price
(Net sales (R$)/ton)
9
Exports
2003
2004
SOUTH
AMERICA
15%
ASIA
51%
SOUTH
AMERICA
6%
NORTH
AMERICA
15%
ASIA
34%
NORTH
AMERICA
9%
CENTRAL
AMERICA
11%
AFRICA
11%
EUROPE
12%
CENTRAL
AMERICA
17%
AFRICA
8%
EUROPE
11%
EXPORTS 2004
• Shipments from Brazil reached 2.7 million tons in 2004
• Revenues generated by exports reached US$ 1.1 billion in 2004
• Average price 57.9% greater than in 2003 (in US$)
10
Financials
2004
2003
GROSS SALES REVENUE
23,408
15,783
Net sales revenue
19,597
13,367
(13,352)
(10,077)
In R$ million
Cost of sales
Gross profit
6,245
3,290
(1,459)
(1,212)
Net Financial expenses
(176)
(647)
Other operating income
188
SG&A
Equity pick-up
Operating profit
Non-operating expense
Profit before taxes
Provision for income tax
Other
Net Profit for the period
(343)
4,455
(25)
4,430
(1,154)
(41)
3,235
15
MAIN VARIATIONS (YoY):
NET SALES REVENUE +46.6%
- Better prices in the international market;
- Recovery of the domestic demand;
- Consolidation of the units acquired in 2004.
NET FINANCIAL EXPENSES -72.8%
- Increase in financial investments of the cash
generated in the period;
(299)
1,147
(8)
1,139
141
(26)
1,254
OTHER OPERATING INCOME +1,153.3%
- Favorable outcome of a legal suite
due to the improper collection of PIS.
EQUITY PICK UP +14.7%
- FX variation over investments abroad;
- Fiscal incentives reserves;
- Goodwill amortization.
11
Results by Region
2004
In R$ million
Gross Revenue
BRAZIL
NORTH
SOUTH
AMERICA
AMERICA
2004
2003
Var. %
12,914
9,453
1,040
23,407
15,783
48%
Net Revenue
9,976
8,857
764
19,597
13,367
47%
Gross Profit
4,307
1,662
276
6,245
3,290
90%
EBITDA
3,705
1,597
251
5,553
2,683
107%
Net Income
2,165
896
174
3,235
1,255
158%
Gross Revenue
1,948
1,747
1,996
1,864
1,300
43%
Net Revenue
1,505
1,637
1,466
1,560
1,101
42%
Gross Profit
650
307
530
497
271
83%
EBITDA
559
295
482
442
221
100%
Net Income
327
166
334
258
103
150%
Gross Margin
43%
19%
36%
32%
25%
EBITDA Margin
37%
18%
33%
28%
20%
Net Margin
22%
10%
23%
17%
9%
In R$/Ton
In %
12
Evolution of Results
NET REVENUE
EBITDA
US$ million
US$ million
1,830
1,705
1,844
582
552
486
1,435
992
1Q03
1,055
2Q03
1,195
1,217
304
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
GROSS MARGIN
50%
40%
225
230
229
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
EBITDA MARGIN
43.6%
42.0%
34.1%
50%
40%
35.8%
30%
32.1%
36.2%
30.3%
30%
14.9%
20%
10%
210
20%
10%
2.9%
25.3%
13.5%
3.6%
0%
0%
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Brazil
North America
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
South America
13
Indebtedness
In R$ million
2004
GROSS DEBT
6,377
100%
2003
COST OF DEBT (per annum)
6,263
Brazil - Domestic currency
Brazil – Foreign currency
1,972
31%
2,418
Domestic currency
202
3%
281
Foreign currency
705
11%
1,343
1,065
17%
794
SHORT TERM
Companies abroad
Companies abroad
15.2%
FX+4.4%
7.2%
HEDGE
In R$ million
4,405
69%
3,845
Domestic currency
1,211
19%
717
Foreign currency
1,653
26%
1,031
Exports
2,904
Companies abroad
1,541
24%
2,097
Cash in US$
1,393
2,042
100%
1,017
TOTAL HEDGE
4,522
Domestic currency
649
32%
430
Companies abroad
1,393
68%
587
LONG TERM
CASH & CASH EQUIV.
NET DEBT
4,335
5,246
Foreign currency debt
Swap operations
COVERAGE RATIO
DEBT AVERAGE LIFE
2,358
225
1.9x
4.1 years
14
Capital Expenditures
CAPEX 2005 - 2007: US$ 3.2 billion
In US$ million
Rolling mill start up in São Paulo
Improvements in Colombia
Melt shop start up in São Paulo
Acquisition of stakes in Colombia
Improvements at Piratini
Improvements at Cosigua
1,400
1,200
North Star Assets (USA)
Investments in São Paulo
Acquisition of stakes in
Colombia
1,260
1,140
New blast furnace in Ouro Branco
Improvements at Brazilian mills
New Specialty Steel mill in Rio
1,000
800
772
770
600
400
200
2004
Brazil
2005
Abroad
2006
2007
Scheduled
15
Main Investments
TOTAL INVESTMENT: US$ 3.2 BILLION
Brazil:
Expansion: US$ 1,620 mm
Abroad:
Update: US$ 800 mm
Update: US$ 750 mm
INSTALLED CAPACITY
CRUDE STEEL
Brazil
Abroad
Consolidated
Current: 7,580 k tons
Current: 8,800 k tons
Current : 16,380 k tons
New: 11,720 k tons
New: 9,230 k tons
New: 20,950 k tons
Brazil
Abroad
Consolidated
Current : 4,730 k tons
Current : 8,240 k tons
Current : 12,970 k tons
New: 6,610 k tons
New: 8,880 k tons
New: 15,490 k tons
ROLLED PRODUCTS
16
Outlook
 In general terms, the expectation is that 2005 will be similar to 2004 both in
Brazil and abroad.
 Increase in cost of coking coal and iron ore brings repercussions to the steel
products international prices.
 In the short term there is a decline in scrap and pig iron prices.
 In Brazil the trend is to see margins in the 1Q05 at the same levels as those of
the 4Q04.
 In the 1Q05, volumes in Brazil seasonally low, compensated by exports.
 In Brazil GDP should grow around 4% leading to an increase in the demand
for steel products.
 Investments in infrastructure in Brazil are expected to grow sharply in 2005.
 The increase in interest rates in North America brings uncertainties.
 The role of China.
17
Steel Sector
Gerdau S.A. Consolidated
Consolidated Figures
Capital Markets
Stock Performance
GOAU4 – METALÚRGICA GERDAU S.A.
250
Metalúrgica Gerdau S.A.
+116%
Ibovespa
200
GGBR4 – GERDAU S.A.
200
150
150
+28%
+77%
Gerdau S.A.
Ibovespa
+28%
100
100
50
50
0
Jan-04
Market Cap: US$ 2.0 bi
Apr-04
Jul-04
Oct-04
Jan-05
GGB – GERDAU S.A. ADRs
200
150
Market Cap: US$ 5.6 bi
Apr-04
Jul-04
Oct-04
Jan-05
GNA – GERDAU AMERISTEEL CORP.
+86%
ADRs - Gerdau S.A.
0
Jan-04
200
+84%
Gerdau Ameristeel Corp.
Dow Jones
150
S&P TSX
+20%
+4%
100
100
50
50
0
Jan-04
Market Cap: US$ 4.5 bi
Apr-04
Jul-04
Oct-04
Jan-05
0
Jan-04
Market Cap: US$ 2.6 bi
Apr-04
Source: Economática/Bloomberg - Period: 01.01.2004 to 03.03.2005 (Base 100).
Jul-04
Oct-04
Jan-05
19
Stock Liquidity
Bovespa
GERDAU (GGBR4)
Monthly daily volume
METALÚRGICA GERDAU (GOAU4)
Monthly daily volume
Monthly daily average # of trades
Monthly daily average # of trades
In US$ million
(Volume)
In number
of trades
1,500
GGBR4:
1,420 Trades
21
30% Stock bonus + 70% Split (GOAU)
100% Stock bonus (GGBR)
US$ 21.1mm
18
1,200
15
900
12
GGBR4:
492 Trades
US$ 5.4mm
GOAU4:
9
600
GOAU4:
6
384 trades
300
US$ 5.7mm
3
109 trades
US$ 1.6mm
Source: Economática
Dec
03
Jan Feb Mar
04 04
04
Apr May Jun
04
04 04
Jul
04
Aug
04
Sep Oct Nov Dec Jan
04 04
04 04 05
Feb
05
20
Stock Liquidity
GNA
LIQUIDITY OF SHARES:
Monthly daily average 9M04:
GNA.TO = Trades: 217 thousand shares/day
GNA.TO = Volume: US$ 871 thousand/day
Monthly daily average since 10.18.2004:
GNA.TO + NY= : 1,057 mil thousand/day
GNA.TO + NY = Volume: US$ 5.9 million/day
SHARE APPRECIATION FROM 10.18.2004 TO 03.03.2005:
GNA.TO
+ 47%
200
150
150
100
100
50
50
18-Oct-04
21-Nov-04
25-Dec-04
Source: Bloomberg – Base 100
28-Jan-05
3-Mar-05
GNA
+ 48%
200
18-Oct-04
21-Nov-04
25-Dec-04
28-Jan-05
3-Mar-05
21
www.gerdau.com.br
[email protected]
+55 (51) 3323 2703