Conference Call on 2 nd Quarter 2007 Results GERDAU S.A. CONSOLIDATED

Transcription

1 Conference Call on 2 nd Quarter 2007 Results GERDAU S.A. CONSOLIDATED André Gerdau Johannpeter President & CEO Osvaldo B. Schirmer Executive VP & CFO Director of Investor Relations August

2 Steel Market 2 nd quarter World Demand: Demand for steel products continued strong due to worldwide economic growth. According to the IISI, apparent demand for steel products for 2007 and 2008 should grow at about 6% annually, reaching 1.2 billion tonnes per year. Production: World output of crude steel grew 3.8% in 2Q07 compared with 1Q07, influenced principally by China which ramped up production by 7.6%, and output in the USA and Canada, which reported growth of 6.5% in the period. Prices: Prices remain firm on the international market due to good demand and high costs of raw materials. Costs: Following a sharp rise in the 1 st quarter, scrap prices declined in the 2 nd but volatility should continue. Iron ore prices saw an increase of 9.5% early on in the year. Maritime freight costs remain very high despite the increase in the ocean-going fleet in Sources: IISI (International Iron & Steel Institute) /MEPS 02

3 Gerdau 2 nd quarter Performance Brazil Strong domestic demand driven by the industrial and civil construction sector Stable international prices, but export margins squeezed due to appreciation of the Real Trends towards higher prices in the market for scrap and other inputs Rising specialty steel prices OUTLOOK Domestic demand will continue to grow especially in the civil construction and industrial sectors which have the largest customers Prices should remain firm in the domestic market In the international market, prices should track raw material price volatility and the sustainability of demand in the different regions of the world High maritime freight charges 03

4 Gerdau 2 nd quarter Performance North America Investments in infrastructure and industrial and commercial construction have continued to grow at a good pace Good demand from the industrial sector Reduction in sales due to anticipated buying in 1Q07 Scrap prices lower Margins at good levels Contribution of the residential construction segment to GNA s sales is limited OUTLOOK Demand continues intense Product price volatility is a function of scrap prices Higher operating costs due to maintenance downtime Metal spread stands at record levels 04

5 Gerdau 2 nd quarter Performance Latin America Demand continues strong in the majority of countries Higher costs Consolidation of the companies acquired in the quarter (Mexico, Venezuela and the Dominican Republic) OUTLOOK Economies reporting solid growth Investments in infrastructure and good demand from the civil construction sector High costs Stable prices 05

6 Gerdau 2 nd quarter Performance Europe Strong demand from the automotive industry Scrap prices stable Other costs stabilized at high levels OUTLOOK Seasonal impacts in 3Q07 (annual August vacation period in Spain) Demand continues strong Stable prices Good performance from the specialty steel sector 06

7 Gerdau 2 nd quarter highlights CHAPARRAL STEEL (USA) ACQUISITION AGREEMENT Value: US$ 4.22 billion (US$ per share) Description of the asset: Chaparral is the second largest manufacturer of structural steel in North America as well as being a leading producer of steel bars. It operates two mini mills in Midlothian, Texas, and Dinwiddie County, Virginia Installed capacity: 2.5 million tonnes of crude steel and 2.4 million tonnes of rolled products Synergies: more than US$ 55 million (before tax) up to the end of 2008 Form of payment: cash, following approval of Chaparral s shareholders and other procedures inherent to concluding the business, as well as regulatory authority. Financial Structuring: Gerdau Ameristeel will issue shares to ensure a prudent level of capitalization and a solid balance sheet. It will also take on a term loan. Gerdau S.A. will subscribe its part of the equity offering by using its cash position combined with a long-term bond offer. 07

8 Gerdau 2 nd quarter highlights Strategic alliance with INCA, a rolling mill in the Dominican Republic. Acquisition of the assets of Valley Placers through the Pacific Coast Steel joint venture. Valley Placers is a company specialized in the delivery and assembly of steel products, located in Las Vegas, Nevada. Acquisition of SIZUCA Siderúrgica Zuliana, a mini mill headquartered in Ciudad Ojeda, Venezuela. Joint venture with the Kalyani Group of India for operating a steel plant in Tadipatri in the south of the state of Andhra Pradesh. Gerdau Ameristeel signed new labor contracts with the United Steelworkers at five of its units. The new contracts are effective for three to five years. Gerdau is rated investment grade by Standard & Poor s. 08

9 Investments 2 nd Quarter INVESTMENTS - (US$ million) 2Q07 1Q07 1H07 Brazil Abroad North America Latin America Europe TOTAL IN FIXED ASSETS Acquisitions North America Latin America TOTAL IN ACQUISITIONS TOTAL ,112.6 Investments in fixed assets amounted to US$ 327 million in 2Q07. - Increased installed capacity at the Ouro Branco Mill. New blast furnace is expected to be commissioned in October. - Expansion in the capacity of the melt shop at the Jacksonville unit Florida, USA (May/07) - Improvements for increasing productivity at various units in Brazil and overseas Three acquisitions in the steel-making category were concluded in the 2 nd quarter at a total investment of US$ 145 million. 09

10 Investment Plan Actual Capacity New Capacity Variation TOTAL - In thousand tonnes Crude Steel 20,110 1,500 1, , % Rolled Products 17, ,390 19, % TOTAL - In US$ million 1,400 1,100 1,500 4,000 Of the amount to be invested over the next three years, about 40% will be allocated to maintenance and operational improvements (replacement of depreciation) and the remaining 60% for expanding installed capacity. The main features of the investment plan for the next three years are: Gerdau Açominas enhancement of installed capacity and improvements in several areas of the mill; Electric energy Caçu and Barra dos Coqueiros hydroelectric power complex in the southeast region of the state of Goiás; Technological modernization and improvements (depreciation of US$ 500 million/year). In Mexico, investments in progress will result in more installed capacity from Investments in Colombia and in Peru will increase steel and rolled products output over the next two years. 10

11 Gerdau The Big Picture GROSS SALES REVENUE: R$ 7.8 billion + 4% compared to 1 st quarter/2007 (46% Brazil / 54% Abroad) EBITDA: R$ 1.4 billion + 4% against 1 st quarter/2007 (50% Brazil / 50% Abroad) NET PROFIT: R$ 856 million slight fall (1.5%) compared with 1 st quarter/2007 (50% Brazil / 50% Abroad) SALES: 4.1 million tonnes in line with 1 st quarter/2007 sales (40% Brazil / 60% Abroad) EXPORTS: thousand tonnes 7% lower in relation to exports for the 1 st quarter/

12 Gerdau Performance 2 nd Quarter Brazil SHIPMENTS In thousands of tonnes 1,475 1,504 1,673 1,591 1,630 Exports Domestic Market MARGINS 45% 42.5% 40% 35% 35.3% 34.0% Gross Margin 30% 26.2% EBITDA Margin 25% 20% 12

13 Gerdau Performance 2 nd Quarter North America SHIPMENTS In thousands of tonnes 1,849 1,714 1,507 1,933 1,759 MARGINS* 24% 20% 16% 19.6% 16.6% 19.5% 17.8% 12% * Brazilian GAAP 8% Gro ss M argin EB IT D A M argin 13

14 Gerdau Performance 2 nd Quarter Latin America SHIPMENTS In thousands of tonnes MARGINS* 30% 25% 20% 27.4% 22.0% 23.9% 17.8% 15% * Brazilian GAAP 10% Gro ss M argin EB IT D A M argin 14

15 Gerdau Performance 2 nd Quarter Europe SHIPMENTS In thousands of tonnes MARGINS* 30% 25.6% 25% 22.4% 20% 15% 17.3% 18.9% * Brazilian GAAP 10% Gro ss M argin EB IT D A M argin 15

16 Gerdau Performance - Consolidated In million R$ 2Q07 1Q07 2Q06 1H07 1H06 GROSS SALES REVENUE 7,820 7,507 6,864 15,327 13,481 Net sales revenue 6,714 6,487 5,901 13,201 11,515 Gross Profit 1,753 1,640 1,705 3,393 3,184 SG&A (585) (528) (530) (1,114) (1,092) Net Financial Result (18) Other Operating Results Equity pick-up (225) (184) 12 (410) (185) Operating Profit 1,147 1,146 1,192 2,294 2,347 Non-operating Result (4) (2) 15 (6) 26 Provision for income tax (284) (271) (225) (555) (554) Other (3) (4) (6) (8) (11) Net profit ,725 1,808 SHIPMENTS In thousand tonnes 4,093 4,099 MARGINS 3,748 3,710 3,675 30% 28.9% 26.1% 25% 20% 24.0% 21.3% 15% 10% Gross Margin EBITDA Margin 16

17 Indebtedness Em million R$ Jun.07 Mar.07 GROSS DEBT 8, % 8,675 COST OF DEBT (per annum) In R$ In US$ SHORT TERM 1,943 22% 1,677 Brazil Domestic cur. 10.1% 22.2% Domestic Currency 828 9% 536 Foreign Currency 492 6% 490 Companies Abroad 623 7% 651 Brazil Foreign cur. Companies Abroad FX + 6.6% - 6.6% 8.0% LONG TERM 6,711 78% 6,998 Domestic Currency 1,988 23% 2,014 Foreign Currency 3,265 38% 3,638 Companies Abroad 1,458 17% 1,346 CASH & CASH EQUIV. 4, % 5,238 Domestic Currency 2,550 51% 3,084 Foreign Currency 2,404 49% 2,154 NET DEBT 3,700 3,437 AVER. DEBT MATURITY : 8 years 1 month RATIOS Gross Debt/EBITDA* 1.6x Net Debt/EBITDA* 0.7x Net debt/net Capitalization 21.0% * Last twelve months 17

18 Disclaimer 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. Contact: (51)