Exports Exports from Brazil totaled 1.4 million metric tons in the first half of This volume generated revenues of US$ million.

Transcription

1 Porto Alegre, August 2, 06 GERDAU S.A. CONSOLIDATED First Half 06 Results Brazilian Corporate Law Highlights Net Profit The consolidated net profit for the first six months of 06 reached R$ 1.8 billion, 6.2% greater than in the same period in the previous year. Net margin increased from 15.1% up to 15.7%. This improvement is due mainly to the performance of the companies abroad. In North America, net profit totaled R$ million, and in South America, except for Brazil, R$ 1.9 million, presenting a growth of 30.8% and 55.6%, respectively. The Brazilian operations had a net profit of R$ 1.2 billion and, in Spain, the profit corresponding to the % stake owned by Gerdau was R$ 46.2 million, in the first semester of 06. Sales Revenues The consolidated gross revenue reached R$ 13.5 billion in the first six months, 0.7% greater than that of the same period in 05. Gross revenues at the Brazilian operations reached R$ 6.1 billion, 45.6% of the consolidated figure. North America contributed with R$ 5.8 billion, 43.0% of the total. The companies in Uruguay, Chile, Argentina and Colombia produced a net profit of R$ 1.1 billion, 8.2% of the consolidated profit and the stake in the Spanish company added another R$ million, 3.2% of the total. Revenues generated abroad and added to that of exports from the units in Brazil represented 60.8% of the consolidated gross revenue of the first half of 06. Exports Exports from Brazil totaled 1.4 million metric tons in the first half of 06. This volume generated revenues of US$ million. EBITDA EBITDA (gross profit minus SG&A plus depreciation and amortization) for the first half of the year reached R$ 2.6 billion and the margin was 22.4%. Output Output of crude steel (slabs blooms and billets) in the first six months of 06 totaled 7.7 million metric tons, 10.4% more than in the same period of 05. The output of rolled products reached 6.3 million metric tons, an increase of 17.4% over the first semester of the previous year. Main data 1S06 1S05 Variation Output (1,000 t) Crude Steel (Slabs, blooms and billets) Rolled products 7,721 6,288 6,994 5, % 17.4% Shipments (1,000 t) 7,4 6, % Gross sales revenue 13,481 13, % Net sales revenue 11,515 11, % EBITDA 2,584 2,728 (5.3%) EBTDA 2,941 2, % Net Profit 1,808 1, % Shareholders Equity 11,612 9, % Total assets 24,845 18, % Gross margin 27.7% 27.3% EBITDA margin 22.4% 24.2% Net margin 15.7% 15.1% Net profit/shareholders Equity % 39.9% Net debt / Net capitalization 19.6% 25.6% Net debt / EBITDA² 0.6x 0.6x 1) Last 12 months net profit over shareholders equity. 2) EBITDA of last 12 months. 1

2 Acquisitions Empresa Siderúrgica del Perú S.A.A. - Siderperú (Chimbote, Peru). - Won the bid in a public auction on June 28, A long and flat steel producer with sales of approximately 360 thousand metric tons of finished products. Siderperú operates a blast furnace, a direct reduction unit and a melt shop with two electric arc furnaces and two LD converters and three rolling mills. Approximately % of sales are flat steel and the remaining 80% by long steel. - The investment made for the acquisition of 50% plus one share of the capital stock totaled US$ 60.6 million, in addition to assuming debt of approximately US$ 102 million. Sheffield Steel Corporation (Sand Springs, Oklahoma-USA). - Conclusion of the purchasing process: June 12, Mini-mill producer of long steel mainly rebars and merchant bars with an installed capacity of approximately 600 thousand metric tons per annum. The Company operates a melt shop and a rolling mill in Sand Springs, Oklahoma, a rolling mill in Joliet, Illinois, and three downstream operations in Kansas City and Sand Springs. - Investments of US$ 187 million, of which US$ 103 million in cash and US$ 84 million in debt and long term liabilities. Risk Rating On June 29, Fitch Ratings increased its rating of the perpetual bond issued in September last year, and for the 10 year bond on standby to be placed. Fitch s rating went from BB+ to BBB-, an investment grade rating for these two operations. At the same time, Gerdau Açominas, one of the guarantors of the above mentioned operations, also got an investment grade rating BBB-. This was a consequence of Gerdau Açominas being the issuer of Secured Export Notes. The other operating units are not rated because they have no public placements. Gerdau S.A. (corporate) had its rating for foreign currency unchanged staying at the current BB+ (stable). Dividends Second quarter 06. Payment on August 24, 06. Base Date: shares held on August 14 (ex-dividend on August 15). Metalúrgica Gerdau S.A. will pay R$ 99.4 million (R$ 0.54 per share based on 184,000,676 shares). Gerdau S.A. will pay R$ million (R$ 0.35 per share based on 662,469,053 shares). Accumulated year-to-date: - Metalúrgica Gerdau S.A.: R$ million, and a yield to shareholders (dividends per share/stock quote on July 31 st ) of 5.0%. - Gerdau S.A.: R$ million, with a yield to shareholders of 3.6%. Stock Buyback Program From May 26 through July 24. To be held in treasury as funding for the Companies Long Term Incentive Program or for future cancellation. Utilization of Profit Reserves. Metalúrgica Gerdau S.A. purchased 958,300 preferred shares, 63.9% of the total announced. Gerdau S.A. purchased 2,358,700 preferred shares, 78.6% of the total announced. Anefac-Fipecafi-Serasa Award Gerdau has been a top 10 nominee for the seventh consecutive year for the Anefac- Fipecafi-Serasa Award Transparency Trophy for the best accounting reports in 05. Eligible for the award are all companies based in Brazil and selected among the top 500 largest and best private companies in the fields of commerce, industry and services, except for financial services in addition to the top 50 state-owned companies. The evaluation criteria include: quality and degree of information, disclosure, adherence to accounting principles, layout, readability, concision, clarity and the disclosure of information not legally required such as cash flow statement, value added, EBITDA and Social Balance. 2

3 Output and Sales Second Quarter 06 Performance Gerdau S.A. - Consolidated The output of crude steel in the second quarter reached 4.0 million metric tons, 7.4% greater than that of the first quarter. The output year-to-date reached 7.7 million metric tons, an increase of 10.4% compared to the first half of 05. In rolled products, the output of the second quarter reached 3.2 million metric tons, surpassing by 6.4% the volume of the first three months this year. The output from January through June totaled 6.3 million, 17.4% greater than that of the same period in 05. The chart and table below present the evolution of volumes produced in every region Gerdau has operations. Output (1,000 metric tons) 2Q06 1Q06 Variation 1S06 1S05 Variation Crude Steel (slabs, blooms and billets) Brazil 1,868 1, % 3,605 3, % North America 1,789 1, % 3,461 3, % South America % % Europe % Total 3,999 3, % 7,721 6, % Rolled Products Brazil 1,178 1, % 2,283 1, % North America 1,690 1, % 3,275 3, % South America % % Europe % Total 3,242 3, % 6,288 5, % Output of Crude Steel (Slabs, blooms and billets) (1,000 metric tons) Output of Rolled Products (1,000 metric tons) 3,512 3,482 3,264 3,422 3,722 3,999 2,667 2,687 2,612 2,8 3,046 3,242 Brazil Abroad Brazil Abroad Consolidated shipments reached 3.8 million metric tons in the second quarter this year, 1.7% greater than those of the first quarter. The highlight of the period is the sustained strong demand abroad, especially in North America. Consolidated Shipments ¹ (1,000 metric tons) 2Q06 1Q06 Variation 1S06 1S05 Variation Brazil Domestic market (0.8%) 1,952 1, % Exports (19.8%) 1,130 1,517 (25.5%) Total 1,475 1,607 (8.2%) 3,082 3,260 (5.4%) Abroad North America 1,849 1, % 3,5 3, % South America % % Europe % Total 2,276 2, % 4,358 3, % Consolidated Total 3,751 3, % 7,4 6, % 1 Excluding shipments to subsidiaries 3

4 In Brazil, in spite of the negative impact of holidays in April and the World Soccer Cup in June that slowed down the economic activity in the country, the demand in the civil construction and other long steel consumer segments lead to domestic sales staying practically unchanged in the second quarter, compared to those of the first quarter this year. 3,374 Consolidated Shipments 1 (1,000 metric tons) 3,416 3,390 3,370 3,689 3,751 Exports, excluding shipments to subsidiaries, totaled thousand metric tons in the quarter, 19.8% lower than those of the first quarter. This reduction is a result of the appreciation of the Brazilian currency and due to the strike of customs officers in the period. Domestic Market Exports Abroad 1 Excluding shipments to subsidiaries Including shipments to subsidiaries, exports totaled thousand metric tons, generating revenues US$ million in the second quarter. Results The consolidated sales revenues reached R$ 5.9 billion in the second quarter of 06, 5.1% greater than those of the first quarter. This performance is the result of the increase in tonnage shipped, especially in North America and to the increase in prices in the international markets. Operations abroad added to exports from Brazil contributed with 68.0% to the second quarter s 06 consolidated net revenues. Net Sales Revenue 2Q06 1Q06 Variation 1S06 1S05 Variation Brazil 2,167 2,479 (12.6%) 4,646 5,334 (12.9%) North America 3,013 2, % 5,472 5, % South America % % Europe % Total 5,901 5, % 11,515 11, % The lower cost of sales as a result of investments to improve the operational productivity and the gains in margins from exports and operations in North America were decisive for the improvement in the gross margin from 26.3%, in the first quarter, to 28.9%, in the second quarter of 06. Gross profit reached R$ 1.7 billion in the second quarter, 15,3% greater than that of the first three months of the current year. Net Sales Revenue per Ton (R$ per metric ton) Gross Margin (%) ,827 1,768 1,678 1,630 1,469 1, % 29.5% 27.6% 15.6% 42.5% 28.9% 27.4% 19,6% 1000 Brazil North America South America 5 0 Brazil North America South America Consolidated Note: Prices on the chart are influenced by the eventual change in product mix and FX variations. 4

5 Cost of Sales and G&A totaled R$ million, in the second quarter, 5.6% greater than those of the first quarter. With regards to net revenue, there was a 1 percentage point reduction. G&A in the second quarter includes: a) the reversal of R$ 16.2 million accrued in the previous quarter and pertaining to royalties for the use of the brand name Gerdau, which was revoked and announced in a press release published on May 9 th, and b) the increase in expenses at Gerdau Ameristeel of R$ 30.0 million relative to the provision for investments in environment and costs pertaining to the Stock Appreciation Rights. EBITDA (gross profit minus SG&A plus depreciation and amortization) for the second quarter reached R$ 1.4 billion, 21.0% greater than that of the first quarter. Margin (EBITDA divided by net revenue) was 24.0% compared to.8% in the previous quarter, an increase explained by the same reasons mentioned above. EBITDA EBITDA Margin (%) 1,415 1,415 1,313 1,145 1,169 1, % 25.2% 34.9% 24.0% 24.3% 22.0% 14.2% 16.6% Brazil North America South America Europe Note: EBITDA, in reais, of companies abroad is influenced by FX variations in the period. Brazil South America North America Consolidated EBITDA 2Q06 1Q06 Variation 1S06 1S05 Variation Brazil % 1,2 1,801 (22.2%) North America % % South America % % Europe % Total 1,415 1, % 2,584 2,728 (5.3%) Net financial expenses (financial expenses minus financial income) totaled R$ 18.0 million in the second quarter. This total includes expenses of R$ 4.1 million basically interest on debt and revenues from financial investments of R$ million. EBTDA 2Q06 1Q06 Variation 1S06 1S05 Variation Gross profit 1,705 1, % 3,184 3, % Cost of sales (133) (125) 6.4% (258) (244) 5.7% General/administrative (397) (437) (9.1%) (834) (5) 60.4% expenses Depreciation & amortization (4.8%) % EBITDA 1,415 1, % 2,584 2,728 (5.3%) Net financial expenses (excluding FX and monetary (28) (192) - variations) FX and monetary variations (95.9%) % EBTDA 1,397 1,544 (9.5%) 2,941 2, % The Other operating Income line accrued, in the second quarter, R$ 23.2 million, most of which results from Gerdau S.A. s favorable verdict on a case of improper tax collection of PIS/COFINS, based on Law Equity pick-up was positive by R$ 12.1 million in the quarter. This total results from the depreciation of the real vis-à-vis the Euro, fiscal incentive reserves and positive and negative goodwill amortized in the period. 5

6 Net profit for the second quarter was R$ million, 17.3% greater than that of the first quarter. Net margin increased from 14.8%, in the first quarter, to 16.5%, in the second quarter. Net profit 2Q06 1Q06 Variation 1S06 1S05 Variation Brazil % 1,171 1,266 (7.5%) North America % % South America (7.9%) % Europe % Total % 1,808 1, % Investments Investments in fixed assets in the second quarter reached US$ million, destined, mostly, to the enhancement of installed capacity in several units in Brazil and abroad. Investments accumulated year-to-date totaled US$ million. On June 12 the acquisition process of Sheffield Steel Corporation, in Sand Springs, Oklahoma was concluded. Sheffield is a long steel mini-mill. It produces mainly rebars and merchants and has a nominal capacity of approximately 600 thousand metric tons per annum. The company operates one melt shop and one rolling mill at the Sand Springs, Oklahoma plant, and a rolling mill in Joliet, Illinois, and three downstream units in Kansas City and Sand Springs. The investment in the acquisition totaled US$ 187 million, of which US$ 103 million in cash and US$ 84 million in debt and long term liabilities. Investments (US$ million) 2Q06 1Q06 1S06 Brazil Abroad North America South America Europe Total ,089.0 Note: 1) Includes acquisitions in the period. 2) Includes debt of the acquired companies in the period. On June 28 th, Gerdau won the public auction for Empresa Siderúrgica del Perú S.A.A. Siderperú, located in the city of Chimbote, Peru. The company produces long and flat steel and has annual sales of approximately 360 thousand metric tons of finished products. Siderperú operates one blast furnace, one direct reduction unit, a melt shop with two electric arc furnaces and two LD converters and three rolling mills. Approximately % of sales are flat steel and 80% long steel. The investment for the acquisition of 50% plus one share of the capital stock was US$ 60.6 million, in addition to the assumption of a debt of approximately US$ 102 million. Investments per Region (2 nd quarter, 06) North America 43.4% South America 36.0% Brazil.6% Indebtedness Net debt on June 30 th (loans and financing plus debentures minus cash and cash equivalents and equity) was R$ 2.8 billion, 14.9% greater than that on March 31 st. This is mainly due to the consolidation of Sheffield (USA), to the loan made for the acquisition of Siderperú (Peru) and to FX contract advancements in the second quarter of the current year. Where gross debt is concerned (loans, financing plus debentures), 27.2% were short term (R$ 2.4 billion) and 72.8% long term (R$ 6.3 billion). 6

7 On June 30 th, gross debt was 22.6% in Brazilian currency, 45.1% in foreign currency in Brazil and 32.3% in other currencies as contracted by subsidiaries abroad. The main debt indicators of the Gerdau companies were as follows at the end of June: Ratios Net debt / Total net capitalization 19.3% 18.1% 25.6% EBITDA 1 / Net financial expenses 1 (excluding FX and monetary variations) 41.1x -.2x Gross Debt / EBITDA 1 1.8x 1.7x 1.0x Net Debt / EBITDA 1 0.6x 0.5x 0.6x 1 Last twelve months On June 30 th cash and cash equivalents totaled R$ 5.9 billion, of which R$ 2.2 billion (37.7%) were indexed to foreign currencies, namely the US dollar. Indebtedness Short term Domestic Currency - Brazil Foreign Currency - Brazil Companies Abroad 1, Total 2,354 1,454 1,307 Long Term Domestic Currency - Brazil 1,511 1,717 1,460 Foreign Currency - Brazil 3,275 3,276 1,528 Companies Abroad 1,521 1,504 1,476 Total 6,307 6,497 4,464 Gross Debt 8,661 7,951 5,771 Cash & Cash Equivalents 5,890 5,539 2,627 Net Debt 2,771 2,412 3,144 The long term debt amortization schedule, including debentures, on June 30 th was as follows: Year R$ million and after 3,537 Total 6,307 7

8 Non-consolidated Data Metalúrgica Gerdau S.A. Second quarter 06 Dividends - Payment on August 24 th 06 based on stock holdings on August 14 th (ex-dividend on August 15 th ). - Shareholders will be paid R$ 99.4 million (R$ 0.54 per share). - Accumulated year-to-date: R$ million, producing a yield to shareholders (dividends per share/stock quote on July 31 st ) of 5.0%. Period Dividends Per share (R$) Number of shares (million) Payment Date 1 st quarter /25/06 2 nd quarter /24/06 Total Stock Buyback Program - From May 26 th through July 24 th. - Acquired for treasury and future cancellation. - Existing Profit Reserves funded the Program. - Number of preferred shares acquired 958,300, 63.9% of the total allowance. Stock Liquidity - Trading with Metalúrgica Gerdau S.A. (GOAU) shares at São Paulo Stock Exchange moved R$ 2.3 billion in the first semester of 06, 66.0% more than in the same period in The average daily trading of preferred shares was R$ 17.3 million (R$ 9.7 million in the first half of 05). - The number of trades increased 34.7% in the period, reaching 76,018 compared to 56,445 in the first half of The number of shares traded reached 47.9 million in the first semester compared to 28.8 million in the same period in 05 (+66.0%). BOVESPA (Base 100) GOAU4 Ibovespa - jun-05 sep-05 dec-05 mar-06 jun-06 Results - Metalúrgica Gerdau S.A. had a net profit of R$ million in the second quarter of 06, equivalent to R$ 1.89 per share. - This profit came mostly from equity pick-up from investments in subsidiaries and affiliated companies and was 3.2% greater than that of the first quarter of 06. Shareholders equity as of June 30 th, 06, was R$ 4.4 billion, representing a net worth per share of R$ Gerdau S.A. Second quarter 06 Dividends - Payment on August 24 th 06 based on stock holdings on August 14 th (ex-dividend on August 15 th ). - Shareholders will be paid R$ million (R$ 0.35 per share). - Accumulated year-to-date: R$ million, producing a yield to shareholders (dividends per share/stock quote on July 31 st ) of 3.6%. 8

9 Period Dividends Per share (R$) Number of shares (million) Payment Date 1 st quarter /25/06 2 nd quarter /24/06 Total Stock Buyback Program - From May 26 th through July 24 th. - Acquired for treasury and to fund stock option programs or future cancellation. - Existing Profit Reserves funded the Program. - Number of preferred shares acquired 2,358,700, 78.6% of the total allowance. Stock Liquidity - São Paulo Stock Exchange - Trading with Gerdau S.A. (GGBR) shares at São Paulo Stock Exchange moved R$ 6.2 billion in the first semester of 06, 32.1% more than in the same period in The average daily trading of preferred shares was R$ 44.3 million (R$ 33.8 million in the first semester of 05). There were 196,199 trades, a 12.8% increase (173,935 in the first six months of 05). The number of shares traded reached million in the semester, 15.3% greater than that of the same period in New York Stock Exchange (NYSE) The Gerdau S.A. (GGB) ADRs moved US$ 3.6 billion in the first half of 06, an amount 175.4% greater than the same period in 05. The daily average was US$ 28.5 million compared to US$ 10.3 million. There were 3.1 million shares traded in the first semester (94.0 million in the first semester of 05). - Madrid Stock Exchange (Latibex) There were 1.1 million preferred shares of Gerdau S.A. (XGGB) traded during the first semester of 06, 38.8% more than in the same months of 05. This trading activity moved financial resources of 16.2 million in the first six months of this year compared to the 8.1 million of the same period last year. From July 05 to June 06, the evolution of stock quotes of preferred shares at the São Paulo Stock Exchange and New York were as follows: BOVESPA (Base 100) NYSE (Base 100) GGBR4 Ibovespa - jun-05 sep-05 dec-05 mar-06 jun Gerdau S.A. ADRs Dow Jones - jun-05 sep-05 dec-05 mar-06 jun-06 Results - Gerdau S.A. produced a net profit of R$ million in the second quarter of 06, equivalent to R$ 1. per share. - This profit came mostly from equity pick-up from investments in subsidiaries and affiliated companies and was 17.1% greater than that of the first quarter of 06. Shareholders equity as of June 30 th, 06, was R$ 9.3 billion, representing a net worth per share of R$ per share. 9

10 Gerdau Ameristeel Corporation The Company paid a US$ 0.02 per share dividend on June 2 nd, based on shareholdings on May 18 th. On September 1 st, dividends of US$ 0.02 per share will be paid based on shareholdings on August 17 th. Stock Liquidity - Toronto Stock Exchange Gerdau Ameristeel (GNA.TO) shares moved Cdn$ million in the first half of 06, 39.4% more than in the same period of 05. The daily average trade was of Cdn$ 4.8 million. There were 62.5 million shares traded (62.3 million in the same period in the previous year). - New York Stock Exchange (NYSE) Trading of Gerdau Ameristeel (GNA) shares totaled US$ million in the first half of 06, 180.1% more than in the same period in 05. The daily trading average was US$ 4.2 million. There were 60.1 million shares traded (32.5 million in the same period in the previous year). The evolution of stock quotes, from July 05 through June 06, at the Toronto Stock Exchange and New York was as follows: TORONTO STOCK EXCHANGE (Base 100) NYSE (Base 100) Gerdau Ameristeel Corp. TS 300 Index jun-05 sep-05 dec-05 mar-06 jun Gerdau Ameristeel Corp. Dow Jones - jun-05 sep-05 dec-05 mar-06 jun-06 Results - Net revenues, adjusted to Brazilian GAAP, totaled R$ 3.0 billion in the second quarter of 06, 22.6% greater than that of the first quarter of 06. This improvement in revenues resulted from the increase in shipments and in the average price in the period. - Also adjusted to Brazilian GAAP, EBITDA totaled R$ million in the period between April and June this year. EBITDA improved 31.2% over that of the first three months this year. EBITDA margin improved from 15.5% to 16.6%. - Net profit reached R$ million, in the second quarter, compared to R$ million, in the first quarter of 06. MANAGEMENT 10

11 GERDAU S.A. - Consolidated BALANCE SHEET Corporate Law - R$ thousands Jun. 06 Mar. 06 TOTAL ASSETS 24,845,189 23,067,947 Current assets 13,309,7 12,346,547 Cash and cash & equivalents 1,328,115 1,227,582 Trade accounts receivable 2,644,257 2,373,062 Taxes recoverable 330, ,238 Short-term investments 4,502,449 4,252,446 Inventories 4,073,013 3,777,117 Deferred income tax & other 431, ,102 Long-term receivables 1,267,760 1,093,263 Deferred income tax and Other 1,267,760 1,093,263 Permanent assets 10,267,689 9,628,137 Investments 355, ,252 Fixed assets 9,839,332 9,3,147 Deferred 72,425 65,738 Corporate Law - R$ thousands Jun. 06 Mar. 06 TOTAL LIABILITIES 24,845,189 23,067,947 Current liabilities 5,507,658 4,291,674 Loans and Financing 2,129,656 1,453,053 Debentures 224,443 1,690 Trade accounts payable 1,970,7 1,673,397 Taxes payable 3, ,831 Deferred income tax & other 842, ,703 Long-term liabilities 7,725,726 7,881,284 Loans and Financing 5,511,051 5,431,091 Debentures 795,585 1,065,644 Deferred income tax & other 1,419,090 1,384,549 Minority Shareholders 2,326,706 2,163,522 Shareholders' equity 9,285,099 8,731,467 Capital stock 7,810,453 5,6,969 Capital reserves 376, ,794 Profit reserves 41,029 2,467,689 Retained earnings 1,056, ,015 11

12 GERDAU S.A. - Consolidated FINANCIAL STATEMENT Corporate Law - R$ thousands 2Q06 1Q06 2Q05 1S06 1S05 GROSS SALES REVENUE 6,864,110 6,616,947 6,454,187 13,481,057 13,382,982 Deductions of gross revenue (962,842) (1,002,959) (1,018,811) (1,965,801) (2,115,701) Net sales revenue 5,901,268 5,613,988 5,435,376 11,515,256 11,267,281 Cost of sales (4,196,304) (4,135,314) (3,977,012) (8,331,618) (8,196,852) Gross profit 1,704,964 1,478,674 1,458,364 3,183,638 3,070,429 Selling expenses (132,749) (124,787) (126,385) (257,536) (243,728) General and administrative expenses (397,607) (436,957) (227,589) (834,564) (5,218) Financial income 186, ,808 15, ,943 76,696 Financial expenses (4,098) 75, ,507 (128,498) (77,336) Other operating income (expenses), net 23,168 60,546 2,709 83,714 70,289 Equity pick-up 12,130 (197,228) (244,648) (185,098) (222,194) Operating profit 1,191,943 1,154, ,775 2,346,599 2,153,938 Non-operating income (expenses), net 14,814 11, ,341 26, ,513 Profit before taxes/participation 1,6,757 1,166,502 1,290,116 2,373,259 2,459,451 Provision for income tax (231,380) (258,368) (275,533) (489,748) (575,927) Deferred income tax 6,452 (70,528) (116,034) (64,076) (167,485) Statutory participation (5,891) (5,150) (5,901) (11,041) (12,894) Net Profit for the period 975, , ,648 1,808,394 1,703,145 Controlling Shareholders 796, , ,610 1,476,192 1,438,424 Minority Shareholders 179, , , ,2 264,721 GERDAU S.A. - Consolidated CASH FLOW Corporate Law - R$ thousands 2Q06 1Q06 2Q05 1S06 1S05 NET INCOME 975, , ,648 1,808,394 1,703,145 Equity pick up (12,130) 197, , , ,194 Provision for credit risk 4,944 7,859 (1,180) 12,803 (7,788) Gain/Loss in fixed asset disposal (10,925) (11,479) 642 (22,4) 600 Gain/Loss in disposal/incorporation of investment (3,571) (144) (305,931) (3,715) (305,931) Monetary and exchange rate variation (1) (3,968) (237,210) (198,296) (241,178) (160,071) Depreciation and amortization 2, ,223 8, , ,580 Income tax 12, ,734 (425) 116, ,492 Interest paid 5, , , , ,255 Contingencies/legal deposits (11,605) 22,450 (12,321) 10,845 (11,804) Changes in trade account receivable (192,221) (334,439) 111,588 (526,660) 138,210 Changes in inventories (164,377) 312,266 (45,815) 147,889 (107,699) Changes in trade accounts payable 244,007 (61,719) (92,8) 182,288 (193,410) Other accounts in operating activities (116,300) (59,715) 42,731 (176,015) 104,3 Net cash provided by operating activities 1,168,245 1,179, ,691 2,348,130 2,167,093 Fixed assets acquisitons/ disposals (576,308) (498,032) (433,244) (1,074,3) (827,388) Deferred charges (1,797) (3,343) (14,232) (5,1) (14,095) Investments acquisitions/ disposals (419,706) (435,966) 287 (855,672) 18 Cash (applied to) investing activities (997,811) (937,341) (447,189) (1,935,152) (841,465) Fixed assets suppliers 19,815 (5,616) (21,528) 14,199 (52,664) Debentures (90,224) (,046) (2,494) (130,270) 10,791 Proceeds from fixed assets financing 361,346 1,081, ,252 1,442, ,612 Payments of fixed assets financing 157,670 (771,598) (283,269) (613,928) (657,884) Interest paid for financing (1,192) (130,665) (107,773) (250,857) (214,984) Inter companies loans (41,901) 2,381 (6,006) (39,5) (2,816) Capital increase/treasury stock (7,951) 17, ,396 9,538 5,057 Dividend/ interest & statutory particip, payment (230,578) (382,143) (259,657) (612,721) (593,076) Cash provided by (applied to) financing activities 47,985 (228,701) 16,921 (180,716) (522,964) Net change in cash 218,419 13, , , ,664 Cash balance At the beginning of the period 5,480,028 2,627,131 2,326,286 5,464,694 2,041,968 Effect of exchange rate changes on cash 9,267 (165,592) (229,846) (156,325) (223,472) Opening balance of incorporated companies for the year 122, ,083 (732) 289,933 5,971 At the end of the period 5,830,564 5,480,028 2,627,131 5,830,564 2,627,131 Cash composition Short-term investments 4,502,449 4,252,446 2,6,856 4,502,449 2,6,856 Cash & cash equivalents 1,328,115 1,227,582 2,275 1,328,115 2,275 (1) Includes gain/loss on derivative instruments This press release 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. 12