Investor Presentation

Transcription

1 Investor Presentation

2 Outlook Gerdau Highlights 2

3 Better outlook for steel consumption Region / Country (in mt and %) 2017f 17/16 World 1, % European Union % NAFTA % USA % Central & South America % Brazil % Asia and Oceania 1, % Source: World Steel Association 3

4 GDP growth Inflation below the target PPI Investment Partnership Program FGTS R$ 44 billion Interest rate sharply reduction Job generation Political Scenario increasing uncertainty Agenda reform Ceiling on public spending Labor Social security Tax 4

5 Stock market Tax rate Focus to reduce from 38% to 15% Deregulation GDP growth Fight unfair imports Rebar Wire rod Section 232 Job generation Consumer confidence Infrastructure additional US$ 1.0 trillion (10y) 5

6 World steel capacity utilization rate improved 6 Source: World Steel Association

7 GDP growth FAI 7M17: +8.3% Prices Strong price in domestic market Capacity closures 2016: 60 Mt All induction furnaces ~120 Mt 2017: 50 Mt Steel exports reduction 5M17: -53% in long steel Steel industry Consolidation Partnership with steel-users Steel Consumption 7M17: +10.9% y-o-y 7

8 China steel exports decreased significantly In million metric tons *January to August of 2017 annualized Source: World Steel Association 8

9 Rebar margin in Chinese domestic market is in good shape In US$/t 9 Source: Platts Margins were updated until September, 15

10 Better price in the international steel market In US$/t Turkey China 10 Source: Platts Prices were updated until September, 15

11 Outlook Gerdau Highlights 11

12 YEARS Profile 116 OF EXPERIENCE LEADING IN THE PRODUCTION OF LONG IN THE AMERICAS STEEL ONE OF THE MAIN SPECIAL STEEL SUPPLIER OF THE WORLD LARGEST RECYCLER OF LATIN AMERICA: 12 MILLION TONS SHARES LISTED ON ON THE SÃO PAULO NY AND MADRID: + 120,000 SHAREHOLDERS OPERATIONS IN FLAT STEEL PIONEER IN THE IMPLEMENTATION OF DIGITAL INNOVATION 12

13 Player with dominant presence and broad product portfolio India Billets, blooms & slabs Rebars Merchant bars & light shapes Structural shapes USA & Canada Dominican Republic Mexico Colombia Peru Venezuela Brazil Wires Wire rod Ready-to-use products Nails Chile Uruguay Steel Units Argentina Associated Companies SBQ HRC Heavy plates Iron Ore 13

14 Geographic diversification Housing Brazil North America South America Special Steel Infrastructure Housing Automotive Infrastructure Non-residential Infrastructure Shipbuilding Industrial and commercial buildings Agriculture Industrial Industrial and commercial buildings Energy Exports 32% of Net Sales 40% of Net Sales 12% of Net Sales 16% of Net Sales 43% of EBITDA 19% of EBITDA 14% of EBITDA 24% of EBITDA *Net sales and EBITDA in the last 12 months 14

15 Vertically integrated operations Upstream Steel Downstream Relevant level of direct purchase and captive scrap (50%) 6.3 billion tons of iron ore resources Self-sufficiency at Ouro Branco mill Partial level of energy self generation Low cost structure Mini-mills and integrated mills key to low cost strategy Latest generation technology Reinforcing steel fabrication facilities (Fab Shops) Drawn products Multi-product distribution network Tailor-made added-value approach (~40% of sales to civil construction) 15

16 The Gerdau we are creating Roadmap Economic value: R$ 2.8 billion since 2014 New partnership in wind power market Digital Innovation Digital mill GE partnership Uber for heavy truck Use of drones Culture modernization New Ideas Leaders as role model People Development Committees Partnership with startups and innovative companies to think different 16

17 Roadmap: economic value of R$ 2.8 billion Divestments Sold operation in Spain and Guatemala Sold a mill and coal assets in Colombia : R$ 1.1 bi 2016: R$ 1.3 bi 1H17: R$ 0.4 bi JVs in Dominican Republic and Colombia Sold a mill, downstream operations and real state assets in US Strategic alliances Partnership to produce forged parts for the Wind power industry Technical assistance agreement 17

18 EBITDA margin in 2Q17 improved compared to 2Q16 and 1Q17 Unit 2Q17 2Q16 Δ% 1Q17 Δ% Shipments '000 ton 3,707 4,240-13% 3,591 3% Net Sales R$ million Cost of Goods Sold R$ million SG&A R$ million EBITDA* R$ million 9,166 10,249-11% 8,459 8% (8,229) (9,165) -10% (7,805) 5% (420) (578) -27% (439) -4% 1,120 1,201-7% % EBITDA Margin % 12.2% 11.7% 10.1% Net Income* R$ million Free Cash Flow R$ million % (34) % (227) 18 * Adjusted by extraordinary events

19 Geographic diversification reduces volatility EBITDA and EBITDA margin per BD EBITDA (R$ million) EBITDA Margin (%) Participation of adjusted EBITDA per BD 19

20 Strong reduction in SG&A, corresponding to 4.6% of net sales in 2Q17 SG&A R$ million and in % of Net Sales Working Capital R$ billions and Days 2Q17 4.6% Reduction of cash conversion cycle to 77 days 20

21 Selectivity in CAPEX CAPEX Disbursements (R$ billion) 1H17 CAPEX by Business Division CAPEX in 1H17 was R$ 432 million, focused on productivity improvement and maintenance 21

22 R$ 1.6 billion of FCF generation in the last twelve months Evolution of Free Cash Flow (R$ million) 2Q17 Free Cash Flow (R$ million) Free cash flow of R$ 241 million generated in 2Q17 22

23 Deleveraging of R$ 1.2 billion on Net Debt y-o-y Debt & Leverage Ratio R$ billion Debt Amortization Schedule R$ billion Average Debt Cost: 6.9% Average Debt Term: 5.5 years Net debt/ebitda stable at 3.6x, despite the unfavorable exchange variation. 23 Graph 1: EBITDA in the last 12 months Graph 2: 2017 Bond

24 Closing Remarks High productivity CAPEX selectivity Free Cash Flow generation Deleverage Shareholder return Roadmap execution 24

25 Statement This presentation may contain forward-looking statements. These forward-looking statements rely upon estimates, information or methods that may be incorrect or inaccurate and may not actually occur. These estimates are also subject to risks, uncertainties and assumptions, including, among others: general economic, political and commercial conditions in Brazil and in the markets where we operate and existing and future government regulations. Potential investors are hereby informed that these estimates do not constitute a guarantee of future performance as they involve risks and uncertainties. The Company does not undertake, and specifically denies, any obligation to update any estimate, which only speak as of the date they are made. 25

26 Thank you!