V Foro LATIBEX Latinoamerica en Euros

Transcription

1 V Foro LATIBEX Latinoamerica en Euros Madrid, November 19-21, 2003

2 Steel Sector Gerdau S.A. Consolidated Capital Market

3 World Production Crude Steel In 1,000 tons 9M2003 9M2002 Var. % In 2002, the 1 1 China 159,6 131,2 21,6% world produced2 2 Japan 82,5 79,7 3,5% 887 million tons of steel. 3 3 United States 68,1 69,0-1,3% Brazil 4 4 Russia 45,9 43,7 5,1% contributed with 3.4% of 5 5 Korea 34,2 33,6 1,8% this tonnage. 6 6 Germany 33,5 33,8-0,9% 7 The forecast for 7 Ukraine 27,5 25,2 8,8% 2003 indicates 8 8 India 23,5 21,3 10,6% a world output 9 of 952 million tons 9 Brazil 23,4 21,8 7,3% and 31 million in10 10 Italy 19,9 19,3 3,0% Brazil. Others 182,9 176,1 3,9% TOTAL 700,9 654,7 7,1% Sources: IISI and MEPS 03

4 Largest Producers Crude Steel 2002 Company Production 1 Arcelor (LUX) 44.0 In million tons 2 LNM Group (ENG) Nippon Steel (JAP) POSCO (KOR) Shangai Baosteel (CHI) Corus 16.8 (ENG) 7 Thyssen Krupp 16.4 (GER) Company Production 8 NKK (JAP) Riva (ITA) US Steel (USA) Kawasaki (JAP) Nucor (USA) Sumitomo 11.8 (JAP) 14 Gerdau (BRA) SAIL (ENG)

5 World Economy GDP growth 2000 to 2004E 2000: base zero E Local currency 2003E US$ bi 2004E US$ bi Var. % 34% China 1,372 1,497 9% 27% Ukraine % 22% Russia % 10% Canada % 9% USA 10,875 11,437 5% 8% Brazil % E 2004E China: GDP growth may put pressure on world prices for inputs and finished steel products. CIS and Baltic Countries: accelerated growth between E. Greater domestic consumption may reduce subsidized steel exports. Brazil: positive outlook. The IMF estimates a 3% growth in Source: IMF 05

6 China MONTHLY CONSUMPTION X LONG STEEL PRICES million tons US$/ton Jan 01 Jun 01 Jan 02 Jun 02 Jan 03 Jun The increase in apparent consumption in long products in China affects positively the prices of these steel products, such as merchants and rebar, in the international market. Merchants International Prices Rebar International Prices Long Steel Apparent Consumption in China STEEL MONTHLY OUTPUT X SCRAP PRICES million tons US$/ton The increase in steel production in China puts pressure on costs of main inputs in the international market. Scrap export price (Rotterdam - FOB) Scrap price in USA Long Steel production in China Jan 01 Jun 01 Jan 02 Jun 02 Jan 03 Jun 03 Sources: MEPS, WSD, IISI, USGS and Metal Bulletin. 06

7 CIS and Baltic Countries LONG STEEL APPARENT CONSUMPTION E In million tons Between 2001 and 2008E, apparent 2.7 consumption should increase by 56.6% in the CIS and Baltic Countries reducing subsidized exports Russia Ukraine Others LONG STEEL PRODUCTION E In million tons Output is not expected to follow the increase in consumption, generating the need to import steel products affecting positively international prices Russia Ukraine Others Sources: WSD and BCG Analysis 07

8 North America LONG STEEL AVERAGE PRICES LAST 12 MONTHS PRICES US$/TON REBAR Shipments should be at the same levels of the last 12 months. Supply and demand remain in balance. Section 201 helped curb imports PRICES US$/TON MERCHANTS Shipments should be in the same range of Imports and exports remain unchanged at the same levels of the lasts 12 months /01 1/02 6/02 9/02 1/03 6/03 9/ /01 1/02 6/02 9/02 1/03 6/03 9/03 USA/Chicago US$/ton SCRAP Scrap prices increased almost 25% during 3Q2003 due to increases in internal and external demand. Exports continue to grow and scrap prices delivered to the Asian markets vary from US$ 180 to US$ 200 per ton Sources: MEPS/ American Metal Market 08

9 Brazilian Steel Sector 2002 CRUDE STEEL PRODUCERS IN BRAZIL In thousand tons 9M2003 Usiminas/Cosipa Belgo/CST/Acesita (Arcelor) 8,447 8,439 6,486 6,443 Gerdau/Açominas CSN 5,107 5,999 5,158 3,968 Aços Villares V&M do Brasil Barra Mansa LONG STEEL PRODUCERS IN BRAZIL In thousand tons 9M2003 Gerdau/Açominas 48% 3,687 thousand tons Gerdau/ Açominas 2,876 Belgo/CST/Acesita (Arcelor) 2,002 Belgo/CST/Acesita (Arcelor) - 36% 2,735 thousand tons Source: IBS V&M do Brasil - 6% 442 thousand tons Aços Villares - 5% 421 thousand tons Barra Mansa - 5% 367 thousand tons 09 V&M do Brasil 342 Aços Villares 350 Barra Mansa 278 TOTAL 5,848

10 Long Steel Exports in Brazil In thousand tons Monthly Average thousand tons Monthly Average thousand tons Monthly Average thousand tons Domestic Sales 2003/ % Monthly Average 84.4 thousand tons Monthly Average 99.2 thousand tons Monthly Average 156,3 thousand tons M2003 Exports 2003/ % Long steel exports may overcome the 2.0 mm ton in 2003 (+72%) Source: IBS Exports Internal Sales 10

11 Brazilian Steel Competitiveness PRICE INCREASES FOR INPUTS FOR BRAZILIAN STEEL PRODUCTION IN 2002 RAW MATERIAL Increase (%) Iron Ore 40.8% Metallurgic Coal (imported) 88.0% Coke 128.0% Aço-carbono' scrap 158.0% Pig Iron 95.8% Ferro-chromium 42.9% Ferro-silico 32.4% Ferro-manganese 39.5% Nickel 112.1% Molybdenum trioxide 153.3% Casting powder 77.9% Carburantes 61.9% Electrodes 55.3% Fuel Oil 94.0% GLP 116.0% EBITDA MARGIN % Brazil Asia* * excludes Japan 35% Japan US North World American Total In spite of increases in input prices, Brazil is the country which presents the highest operating margin in the world. Mills operate with up-to-date technology due to a continuous investment program. Source: IBS 11

12 Steel Sector Investments in Brazil PAYMENT SCHEDULE In US$ million TOTAL FLAT ROLLED STEEL ,631.3 LONG STEEL ,213.8 SPECIAL SECTION TOTAL , , ,097.1 CAPACITY X OUTPUT X APPARENT CONSUMPTION 50 In million tons Installed Capacity Crude Steel Production Apparent Consumption in Brazil realized forecast Source: IBS 12

13 Forecasts Output (thousand tons) Crude Steel Rolled Products Flat Rolled Products Long Steel Semi-finished for sales Internal Sales* (thousand tons) Flat Rolled Products Long Steel 2003 estimated Var. % 2003/ , % 21, % 13, % 7, % 8, % 14, % 9, % 5, % 2004 estimated Var. % 2004/ , % 23, % 14, % 8, % 7, % 16, % 9, % 6, % Comércio Exterior (thousand tons) Exports (10 3 t) (US$ billion) Imports (10 3 t) (US$ billion) 13, % % % , % % % % Apparent Consumption * (thousand tons) Flat Rolled Products Long Steel 15, % 9, % 6, % 17, % 10, % 7, % Gross Sales (R$ billion) % % Source: IBS * Excludes semi-finished products shipped to the Steel Sector 13

14 Steel Sector Gerdau S.A. Consolidated Capital Markets

15 Main Products 15 BILLETS MERCHANTS AND STRUCTURAL REBARS FABRICATED STEEL STRUCTURAL SHAPES WIRE-ROD WIRES NAILS

16 Installed Capacity 16 CRUDE STEEL ROLLED PRODUCTS Gerdau S.A 4,374 4,071 Billets, merchant bars, rebars, wire rod, drawn products, welded wire meshes, nails, downstream products, fabricated steel products and specialty steel. Açominas 3, ,610 Billets, merchant bars, rebars, slabs, blooms, profiles and structurals. South America North 6,567 6,187 America Billets, merchant bars, rebars and wire rod. Billets, merchant bars, rebars, wire rod, drawn products, welded meshes, nails, downstream products and fabricated steel products. TOTAL 14,451 14,251

17 Output Evolution 17 AVERAGE GROWTH RATE Crude Steel 10.2% year Rolled Products 9.2% year Laisa Uruguay 1981 Cearense Guaíra 1982 Hime 1985 Barão de Cocais 1988 Usiba 1989 Courtice Canada 1989 Piratini 1992 Aza Chile 1992 Pains 1994 MRM Canada 1995 Part. Açominas 1997 AmeriSteel USA 1999 Sipsa Argentina 1997 Part. Sipar Argentina 1998 Co-Steel 2002 Açominas (control) 2002 CRUDE STEEL 12 million ton ROLLED PRODUCTS 9 million ton th largest world steel producer according to the IISI and the best ranked Brazilian company. Largest long steel producer in the Americas. 2003* * 9 months annualized

18 Geographical Distribution 18 NORTH AMERICA 10 mills and 1 strategic shareholding (Gallatin Steel) 14 fabrication shops 12 downstream operations and special sections Gerdau AmeriSteel Corp. Gallatin Steel (1) BRAZIL 10 mills 9 fabrication shops 5 downstream operations and special sections SOUTH AMERICA Gerdau S.A. 73 sales points (Comercial Gerdau). 2 mills and 1 strategic shareholding (Sipar) AZA Laisa Açominas 5 service centers for flat steel (Comercial Gerdau). 3 fabrication shops Sipar (2) (1) Flat steel mill, 50% owned JV (2) Rolling mill, 38% owned JV

19 Competitive Edge Focus on long steel products manufacturing and distribution Market mill approach Up-to-date technology Competitive production costs Diversified production processes Multiple raw materials sourcing Vertical and horizontal integration Relevant market share in every country in which the company has operations Financial soundness and access to international capital markets Confirmed experience in turning around distressed operations 19

20 Results 20 In R$ million 3Q2003 2Q2003 9M2003 9M2002 GROSS SALES REVENUE 4,132 3,558 11,614 8,062 Net Sales Revenue 3,494 3,030 9,851 6,595 Cost of Sales (2,688) (2,246) (7,429) (4,717) Gross Profit ,422 1,878 SG&A (291) (276) (848) (729) Net Financial Expenses (240) (141) (490) (1,141) Other Operating Results 2 (4) (1) 101 Equity pick-up 26 (222) (285) 588 Operating Profit Non-operating result (4) (9) (14) (28) Provision for income tax and social contrib. (50) (37) Statutory participation (4) (4) (13) (9) Net Income Controlling Shareholders Minority Shareholders (0)

21 Main Variations In R$ million +3,030 +3,494 NET SALES REVENUE 6% growth in shipments. 2Q2003 3Q2003 Greater revenue (expressed in reais) of results from operations abroad due to the 1.8% devaluation of the real vis-à-vis the US dollar. In R$ million -2,246 2Q2003-2,688 3Q2003 COST OF SALES Scheduled stoppages for technological updates in North America cost 8.2 million. Four mills affected by the outage in August in North America. Greater revenue (expressed in reais) of results from operations abroad due to the 1.8% devaluation of the real vis-àvis the US dollar 21

22 Main Variations 22 In R$ million Q Q2003 NET INCOME EXPENSES Effect of the 1.8% devaluation of the real vis-à-vis the US dollar in the quarter. If monetary and FX variations are excluded, net financial expenses of the third quarter are R$ 161 million. 3Q2003 Financial Expenses 281 Monetary and FX variations 85 Fin. Expenses without Variations 196 Financial Revenues 41 Monetary and FX variations 6 Fin. Revenues without Variations 35 Net Financial Expenses 240 Monetary and FX variations 79 Net Financial Expenses 161 (without variations)

23 Main Variations 23 In R$ million EQUITY PICK-UP 2Q Q2003 Equity pick up was positive in the third quarter this year as a result of the FX impact over investments abroad In R$ million PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION 134 2Q2003 3Q In the 3Q2003 were no relevant facts, whereas in 2Q2003 the full accrual of R$ million of deferred fiscal assets based on fiscal losses and a negative social contribution by its subsidiary Açominas in that period was accounted.

24 Results by Region 3Q2003 In R$ million NORTH SOUTH BRAZIL AMERICA AMERICA TOTAL Net Sales 1,933 1, ,494 Gross Profit EBITDA Net Income 254 (30) R$ / ton Net Sales 1,094 1,117 1,216 1,107 Gross Profit EBITDA Net Income 144 (23) % Gross Margin 36.8% 3.7% 33.2% 23.0% EBITDA Margin 30.3% 3.4% 30.5% 19.2% Net Margin 13.1% -2.0% 17.4% 7.0% 24

25 Sales Track Record In 1,000 tons 2,121 1,983 2,314 2,733 2,889 2,976 3,156 TOTAL SHIPMENTS ,067 1,271 1,284 1, , Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 Demand in Chile and Argentina improving. Growth after 4Q2002 due to the merger with Co-Steel. Higher sales during Increasing exports since 3Q2003. Counterbalancing the reduction of domestic sales. International prices and US dollar attractive to exports. Resumption of domestic sales in the 3Q2003. Positive trend for 4Q2003. South America Calpers stoppage at Açominas blast furnace Full Consolidation of Co-Steel in North America North America Brazilian Exports Brazil (Domestic Sales) 25

26 Brazilian Exports 26 DESTINATION OF EXPORTS 9M2002 DESTINATION OF EXPORTS 9M2003 North America 13% South America 8% Africa 3% Asia 54% South America 9% Africa 11% Asia 46% Europe 8% Central America 14% North America 10% Europe 12% Central America 12% Exports from Brazil increased 81% in 9M2003 compared to 9M2002. Europe, Africa and South America are buying to buy more steel products. Gerdau S.A. negotiates its exports through trading companies, whereas Açominas delivers its products directly to the end consumer.

27 Output CRUDE STEEL In 1,000 tons 2, , , M2003 ACUMULATED 9M2003 ANNUALIZED INSTALLED CAPACITY UTILIZATION % 1,195 1,321 1,250 3,766 5,021 76% ,203 2,937 98% ,050 2,954 3,939 90% 1Q03 2Q03 3Q03 ROLLED PRODUCTS In 1,000 tons 2,135 2,246 2,299 9,176 12,234 85% 9M2003 ACUMULATED 9M2003 ANNUALIZED INSTALLED CAPACITY UTILIZATION % 92 1,122 1,216 1,197 3,535 4,713 76% % ,590 3,453 85% 1Q03 2Q03 3Q03 6,680 8,906 77% Gerdau S.A. Açominas North America South America 27

28 Indebtedness 28 In R$ million DEC.02 SEPT.03 TOTAL DEBT 7, % 6, % SHORT TERM 3,708 52% 3,153 45% Local currency (Brazil) 481 7% % Foreign corrency 1,639 23% 1,576 23% Companies abroad 1,588 22% % LONG TERM 3,460 48% 3,791 55% Local currency (Brazil) 1,096 15% % Foreign corrency % 1,047 15% Companies abroad 1,466 20% 1,981 29% CASH & EQUIVALENTS 1, % 1, % Local currency (Brazil) % % Foreign corrency % % NET DEBT 5,737-5,446 - HEDGE Local currency Swap operation Cash & equi. US$ 700 HEDGE / EXPORSURE 1.2X TOTAL DEBT REDUCTION AND MATURITY EXTENTION SENIOR SECURED CREDIT FACILITY US$ 350 SENIOR UNSECURED NOTES US$ 450 (June) Total volume: US$ 755 mm Average cost: 7.7% Average term: 6.6 years SECURED EXPORT NOTES PROGRAM (September) Total volume: US$ 400 mm 1 st tranche: US$ 105 mm Cost: 7.37% p.a. Term: 7 years Grace period: 2 years EURO-COMMERCIAL PAPER PROGRAM (October) Total volume: US$ 300 mm 1 st tranche: US$ 100 mm Cost: 4.125% p.a. Term: 1 year DEBT COST Brazil - R$ 21% Brazil - R$ + FX 6% Companies abroad - US$ 7%

29 Debt Breakdown SHORT TERM R$ 3.2 billion Companies abroad (US$) 27% Açominas (US$) 16% BNDES (R$) 3% Working Capital(R$) 6% Others 1% Açominas (R$) 3% Working Capital (R$) 11% Import loans (US$) 11% Debentures (R$) 10% Eurobonds (US$) 12% Companies abroad 51% LONG TERM R$ 3.8 billion Açominas (US$) 7% BNDES (R$) 7% Others 3% Açominas (R$) 4% Debentures (R$) 7% ACC/Pre-Export (US$) 13% Working Capital (US$) 6% Import loans(us$) 1% 29

30 Amortization Flow 30 Secured Export Notes Program Senior Secured Credit Facility Senior Unsecured Notes In R$ million 2,500 2,000 Debentures 336 Banco do Brasil 151 Eurobonds Interest 21 2,337 1,500 1,417 Eurobonds 380 Banco do Brasil 49 1, Q03 1Q04 2Q04 3Q04 4Q After 2007

31 Investments 9M Gerdau S.A. US$ 71.7 mm Investments in Environment US$ 38,2 mm in 2002 North America US$ 40.5 mm SCHEDULED STOPPAGES FOR TECHNOLOGICAL UPDATE IN 6 MILLS IN THE 3Q2003. Açominas US$ 89.3 mm South America US$ 4.7 mm NEW WIRE-ROD MILL Installed capacity: 550 thousand tons/year Beginning of the tests at the end of November 2003 Total investment: US$ 75 mm TOTAL 9M2003: US$ mm

32 Operational Integration 32 Merger of power of both companies: higher competitiveness Project developed in partnership between Gerdau e CEA (partner-contributor) Headquarter in Ouro Branco - MG Gerdau S.A. Aço Minas Gerais S.A. Açominas Gerdau Açominas S.A. NEW CORPORATE GOVERNANCE Met. Gerdau S.A. Gerdau S.A. Brazil Gerdau Açominas S.A. North America Gerdau Ameristeel South America Gerdau AZA Gerdau Laisa Sipar

33 Outlook 33 Demand pick up in Brazil; Declining trend in interest rates in Brazil; Brazil s economic and political stability results in a better country risk; Social Security Reform under way; International prices trend: stable to upward; North American operations pursuing better results; US economy recovering, but slowly; South American operations in very good shape and improving.

34 Steel Sector Gerdau S.A. Consolidated Capital Market

35 Shareholders Structure September METALÚRGICA GERDAU S.A. Gerdau Controlling Group 25% Brazilian Inst. Investors 24% Other investors 34% Foreign Inst. Investors 17% GERDAU S.A. Brazilian Inst. Investors 11% Foreign Inst. Investors 21% Other investors 16% Gerdau Companies 52%

36 Dividend Policy 36 Payout of 30% of the Adjusted Net Income. Since March 2003, dividend payments are being made on a quarterly basis. METALÚRGICA GERDAU S.A. GERDAU S.A. In US$ million In US$ million * % 33.1% 32.6% 52.5% 33.9% PAYOUT 32.8% 32.0% 32.8% 35.6% 34.9% 16.4% 6.0% 7.9% 17.0% 12.4 % YIELD 11.7% 3.6% 6.1% 6.8 % 7.1% Adjusted Net Income Dividends paid * Higher amount due to a one-time supplementary dividend payment.

37 Stock Price Performance 37 BRAZIL (Bovespa) Gerdau S.A. GGBR4 Met. Gerdau S.A GOAU4 Ibovespa USA (NYSE) Gerdau S.A GGB Dow Jones Source: Economática Period: Jan 2 nd, 2001 to Oct 31 st, 2003 (Base 100)

38 Appreciation Chart Returns in US$ GOAU4 +629% BRAZIL (Bovespa) GGBR4 +505% GGBR4 +123% GOAU4 +174% Ibov +125% GGBR4 +129% GOAU4 +135% Ibov -19% Ibov +7% 1 YEAR 3 YEARS 5 YEARS USA (NYSE) GGB + 109% Dow Jones + 17% GGB + 84% Dow Jones - 11% GGB +340% Dow Jones + 0.3% Source: Economática - October 31 st,

39 Liquidity R$ 1,000 Number of transactions 14, , , , , , , /02 Jan.02 04/02 Apr.02 07/02 Jul.02 10/02 Oct.02 01/03 Jan.03 04/03 Apr.03 07/03 Jul.03 10/03 Oct.03 GERDAU S.A. (GGBR4) Avg / Daily Dollar trading volume Avg / Daily number of transactions Source : Economática METALÚRGICA GERDAU S.A. (GOAU4) Avg / Daily Dollar trading volume Avg / Daily number of transactions 39

40 Comparative Data GERDAU BELGO CSN USIMINAS NUCOR STEEL DYNAMICS Market Capitalization (US$ mm) ,159 1,359 2,951 1,720 4, Avg / Daily Trad. Vol. (US$ thousand) , ,505 3,815 ND ND Enterprise Value - EV (US$ mm) - note 1 3,936 1,407 3,626 3,560 4,207 1,252 EBITDA annualized (US$ mm) - note ,060 1, EV/EBITDA annualized ( X ) Stock Price (US$) Net Income (US$ mm) - note Market Cap./EBITDA annualized ( X ) Note 1: Gerdau, Nucor and Steel Dynamics: on Belgo, CSN and Usiminas: on Note 2: Gerdau: 9M2003 annualized Belgo, CSN and Usiminas: 6M2003 annualized Nucor and Steel Dynamics: TTM (Trailing Twelve Months) Note 3: Gerdau, Nucor and Steel Dynamics: 9M2003 Belgo, CSN and Usiminas: 6M Belgo and CSN data in lots of thousand shares FX : US$ 1.00 = R$ : US$ 1.00 = R$ : US$ 1.00 = R$ EV = Market Capital + Net Debt Source : Economática, Yahoo Finance, Bloomberg and company websites 40

41 Gerdau s Value 41 Satisfied CUSTOMERS Accomplished PEOPLE SAFE Work Environment QUALITY in everything we do SOLIDITY and SECURITY COMMITMENT to all stakeholders PROFIT as a measure of performance

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