1Q08 1
Agenda Global View Usiminas Investments J. Mendes Financials Corporate Governance and Social Responsability 2
Agenda Global View Usiminas Investments J. Mendes Financials Corporate Governance and Social Responsability 3
Steel Consumption - World (million t) Substantial growth in the past few years, mainly coming from China... Other USA/Canada LATAM Europe China 974 259 210 52 126 1,323 1,242 1,139 1,079 428 384 297 353 1,414 477 246 255 260 225 220 75 64 71 60 59 147 135 153 141 146 327 350 372 395 428 456 2003 2004 2005 2006 2007P 2008F Source: IISI - 2008 4
World Steel Production Brazil is the 9th largest producer... 489.2 2007 (million t.) 120.2 98.2 72.4 53.1 51.6 48.6 42.8 33.8 31.5 China Japan USA Russia India S. Korea Germany Ukraine Brazil Italy Source: International Iron and Steel Institute - IISI - 2008 5
Cost competitiveness Brazil has the lowest production cost in the world Production Cost USD / ton (Slabs Nov. 2007) 408 415 421 432 442 445 370 387 342 348 299 303 464 410 6 Brazil Australia India Mexico CIS Canada USA Integ Eastern Europe China USA Mini Western Europe South Korea (Integ) Japan Global Average Source: WSD, Nov. 2007
Agenda Global View Usiminas Investments J. Mendes Financials Corporate Governance and Social Responsability 7
Brazilian Steel Production Usiminas System is the 36th largest producer in the world and 1st flat steel producer in Latin America ArcelorMittal 30.3% Top Brazilian Steel Producers - 2007 (33.8 million ton = Brazil s crude steel production) Others 6.7% Usiminas 25.7% Major Producers 2007 (crude steel production - million t.) 1 - Arcelor Mittal 2 - Nippon Steel 3 - JFE 4 - Posco 5 - Baosteel 6 - Tata Steel 7 - Jiangsu Shagang 34.5 33.8 32.8 28.6 26.5 22.9 116.4 8 - Tangshan 22.8 9 - US Steel 20.5 CSN 15.8% Gerdau 21.5% 10 - Wuhan 20.2 36 - USIMINAS 8.7 Source: IBS - 2008 and Metal Bulletin - 2008 8
Shareholder Structure Excellence of the main shareholders i Board of Directors from solid Brazilian and foreign groups i Long-term commitment i Excellence and experience of management Total Capital December, 2007 Voting Capital December, 2007 ON s - 49.8% PN s - 50.2% ON s Control Group 31.9% Votorantim / Camargo Corrêa Group 11.5% Nippon Group 12.3% Usiminas Pensions Fund 5.0% Previ 5.2% Free Float 12.9% VALE 2.9% Free Float 50.2% Control Group 63.9% Votorantim / Camargo Corrêa Group 23.1% Usiminas Pensions Fund 10.1% Nippon Group 24.7% VALE 5.9% Previ 10.4% Free Float 25.8% 9
Investments Other relevant assets Steel business Ternium - Usiminas Stake: 14.25% of total capital - Controlled by Techint Group - Annual shipments: ~ 12 million tons - Latin America s leader in finished steel shipments - Revenues: US$ 8.2 billion - EBITDA: US$ 2.2 billion *FY/2007 100% 70% 61% 30% 60% Capacity:~2 million (E) Capacity.:~4 million (E) Capacity.:~3 million (E) Capacity:~4 million (E) Products: Flat Products: Flat & Long Products: Flat Products: Flat & Long www.ternium.com for additional information 10
Investments Other relevant assets Railroad - Shareholder participation: 20% of voting capital and participation in control group - Revenues (Gross): R$ 2.5 billion - EBITDA: R$ 1.0 billion - Debt (net): R$ 326.6 million - Products: 126.3 million tons transported in 2007 (general cargo) *FY/2007 www.mrs.com.br for additional information 11
Usiminas is strategically located BAHIA MINAS GERAIS Belo Horizonte Usiminas Headquarters Ipatinga Plant Itabira CVRD ESPÍRITO SANTO Port of Praia Mole Vitória RAILROAD HIGHWAY SÃO PAULO São Paulo Cubatão Plant Santos Cosipa Port Sepetiba Port RIO DE JANEIRO Rio de Janeiro ATLANTIC OCEAN Close to main markets 2 ports Railroad (MRS) 12
13 SAIL Usiminas Tata Steel Novolipetsk Magnitogorsk Evraz Group China Steel Angang Sumitomo Metal SSAB Salzgitter AG Gerdau S.A. Nucor POSCO JFE Holdings Mechel OAO Severstal Wuhan Steel Rautaruukki Oyj Nippon Steel Azovstal Baosteel Arcelor Mittal Voestalpine AG United States Steel Nisshin Steel Maanshan Steel Bengang Steel Tangshan Panzhihua Hunan Valin Handan Steel BlueScope Thyssen Krupp Anyang CSN Laigang Baotou Steel Beijing Shougang Erdemir Kobe Steel AK Steel Cost competitiveness High quality, value-added products (from slabs to coated products) Among the lowest cost producers in the world 60 Operating Profit Margins % - 2006 50 40 30 20 10 0 Source: Integer Research, 2007
Products Complete product lines: from slabs to coated products Capacity (tonnage/year) Ipatinga Plant Cubatão Plant Major consumers Uncoated Slab 5,000,000 4,500,000 Heavy plate 1,000,000 1,000,000 Hot coil 3,550,000 2,100,000 Cold coil 2,500,000 1,200,000 Rolling mills. Pipelines, pressure vessels, shipbuilding, general structures. Agricultural machinery, pipe and tube, chassis, gas cylinders, containers, general structures. Auto industry, household appliances, packaging. Electrogalvanized coil 360,000 - Auto industry, household appliances. Coated Hot dip galvanized coil 480,000 - Auto industry, household appliances, civil construction. 14
Sales (million ton. ) Domestic market is a priority 7,722 7,710 8,062 7,348 7,945 7,990 30% 31% 28% 33% 23% 33% 77% 70% 69% 72% 67% 67% 1,886 19% 81% 2002 2003 2004 2005 2006 2007 1Q08 Domestic Market Foreign Market As of March, 2008 15
Sales Domestic Market (Volume: 1.532 million t. - 1Q08) Combination of market leadership and diversified customer base reduces market risk Chile 11% Argentina 16% Germany 5% Bolivia 3% Indonesia 4% Others 12% Others 10% Packaging 1% Household Appliances 2% Industrial Equipment 9% Elect- Equipment 4% Distributors 23% Pipelines 6% Small Diam. Tubes 8% Autoparts 18% Auto Industry 13% Civil Construction 6% Taiwan 9% USA 11% International Market (Volume: 0.354 million t. - 1Q08) As of March, 2008 South Korea 11% Mexico 6% Spain 12% Diversified geographic sales 16
Market Share Domestic Market (%) - 1Q08 Combination of market leadership and diversified customer base reduces market risk Flat Steel TOTAL Auto Industry Autoparts Small Diam. Tubes 48% 53% 58% 39% 52% 47% 42% 61% Pipelines 86% 14% Household Appliances 33% 67% Elect. Equipment 71% 29% Shipbuilding Civil Construction 34% 100% 66% Packaging 12% 88% Distributors 40% 60% 0,0% 20,0% 40,0% 60,0% 80,0% 100,0% Ipatinga and Cubatão Plants Others 48% Market share * As of March, 2008 * Flat Steel market: Usiminas System, CSN, Acesita and Arcelor Brasil. 17
Brazil s outlook - 2008 i Flat steel demand is expected to exceed 9% Vehicle production may reach 3.240 million (Anfavea - Jan/08) Industrial segment should outperform, growth to exceed 10% Civil Construction growing activities Flat Steel Demand (1,000 t.) Vehicle Production (1,000 vehicles) 8,576 8,908 10,109 9,229 9,902 +18% 11,669 12,750 +9% 1,793 1,828 2,210 3,240 2,973 2,528 2,611 +9% +14% 2002 2003 2004 2005 2006 2007 2008E 2002 2003 2004 2005 2006 2007 2008E Source: IBS / Usiminas / Anfavea (Jan/08) 18
Investments & Technology Commitment to the best technology Partnership with Nippon Steel assures access to state-of-the-art technology in steel production, including high value-added products 6 th Technology Transfer Agreement with Nippon Steel, valid until 2009 425 received patents, of which 23 are international 150 researchers Usiminas sells US$ 2 for each US$ 1 of acquired technology. 19
Agenda Global View Usiminas Investments J. Mendes Financials Corporate Governance and Social Responsability 20
Major Projects Ongoing and new investments Expansion 2008-2012 2013-2015 (1) (2) (3) Ipatinga Plant Cubatão Plant To be defined Ipatinga Mill Expansion (+3.2 million tons/yr) * Revamping of Cont. Casting Machine nr.3 (+325,000 tons/yr) 3.0 million tons/yr in the Company s installed capacity Revamping of Hot Rolling Mill (+150,000 tons/yr) Revamping of Heavy Plate Mill Mix Improvement (+500,000 tons/yr) New Galvanizing line (+500,000 tons/yr) New Steel Shop (+5.0 million tons/yr) New Coke Plant Cost Reduction (+750,000 tons/yr) New Power Plant (60MW) Technology Updating Program Environmental Protection Program Total Investment: New Hot Rolling Mill (+2.3 million tons/yr) Dredging of Cubatão Port Canal New Power Plant (75 MW) Top Blowing Turbine (12 MW) Technology Updating Program Environmental Protection Program US$ 5.2 billion US$ 2.0 billion US$ 2.7 billion * Note: It includes new Raw Material Yards, Sinter Plant, Coke Plant, Power Plant, Blast Furnace, Continuous Casting Machine and utilities. 21
Agenda Global View Usiminas Investments J. Mendes Financials Corporate Governance and Social Responsability 22
J. Mendes brief overview J. Mendes is the last sizeable mining asset available in the Quadrilátero Ferrífero, a major iron ore province in Brazil The acquired company is comprised of four mining sites with total expected resources of 2.7 to 3.0 Bt and expected reserves of 1.1 to 1.8 Bt Somisa Global/Camargos J Mendes Pau de Vinho Expected mine useful life of at least 25 years Expected iron content between 46 and 48% Current production level at roughly 6 MMt/year 23
Relative location of J Mendes J. Mendes mines are close to existing railway lines (MRS 28km and FCA 15km), with access to the ports of Cosipa and Sepetiba Brazil (Minas Gerais) Belo Horizonte Ipatinga Plant (Espírito Santo) J Mendes mines Tubarão Praia Mole (São Paulo) (Rio de Janeiro) Cubatão Plant São Paulo Cosipa Port Sepetiba RJ Port FCA EFVM MRS 24
What was the acquisition price? Usiminas acquired J. Mendes with a phased cash disbursement schedule Upfront payment of US$ 925 MM Subsequent payments over the next two years, subject to confirmation of reserves size and iron content (drilling audit process) Maximum total disbursement is limited to US$ 1,900 MM (for example, in case of minimum proven reserves of 1.4Bt with at least 47% of iron content) No additional cash will be paid for proven reserves in excess of 1.4Bt 2.1 Acquisition Price (as a function of proved reserves through drilling audit) Effective Price to be Paid (US$ B) 1.9 1.7 1.5 1.3 1.1 Maximum price to be paid is US$ 1.9 B for 1.4Bt of reserves 0.9 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 Proven Reserves (Bt) (assumption: 47% of ore content) 25
What is the production plan? Iron ore production capacity will be expanded to 29.2 MMt/year in two stages First stage increase in current production from 6 MMt/year to 13 MMt/year with marginal capex commitments - (Estimated US$ 150 MM) Second stage increase production to 29.2 MMt/year from 2013 on with the addition of a new production plant - (Estimated US$ 600 MM) With a 29.2 MMt/y production rate, the mine should operate for at least 25 years Opportunities to speed-up production ramp-up under evaluation Expected Production Ramp-up (MMt) Start-up of new plant 29 29 16 16 New Plant 5 6 9 9 11 13 13 2008 2009 2010 2011 2012 2013 LT Drilling phase Ramp-up phase Steady-state production phase 26
What is the commercialization plan? With the mine expansion plan, Usiminas will be fully hedged against iron ore price fluctuations Cosipa plant expected to be mostly supplied by J. Mendes through MRS Although Ipatinga is not logistically positioned to be supplied by J. Mendes, it will be fully hedged against iron ore prices fluctuations Production excess to be sold on contracts/spot basis almost 60% of the total production will be exported through Sepetiba and Cubatão Macro-Volume Distribution Cosipa (84% of the iron ore needs after expansion) 10.3 (MMt) 1 J. Mendes (iron ore production) 29.2 (MMt) Supply Other (Domestic Market) 2.2 (MMt) Iron Ore Exports 16.7 (MMt) Hedge (1) besides receiving 10.3 MMt from J. Mendes, Cosipa will also receive an additional 2.0 MMt from other suppliers Cosipa (16% of the iron ore needs after expansion) 2.0 (MMt) Usiminas (iron ore consumption after expansion) 12.8 (MMt) 27
How was the financing structured? Usiminas secured financing to maintain current liquidity levels Usiminas has a firm commitment from an international first class bank, HSBC, to finance such acquisition - Bridge Facility: US$800 MM - Revolving Facility: US$700 MM for a period of 2 years of drawdowns Usiminas investment grade rating kept by rating agencies From a margin volatility standpoint, the acquisition of J. Mendes would further improve Usiminas' business profile by creating a natural hedge for its iron ore costs... Usiminas Ratings Unaffected By Acquisition Negotiations We expect Usiminas to maintain a very conservative financial strategy and credit measures for the rating category, despite the acquisitions. Fitch views the potential acquisition positively from a business perspective, as Usiminas will become less reliant on higher cost third-party sources for the iron ore used in the production of steel 28
Agenda Global View Usiminas Investments J. Mendes Financials Corporate Governance and Social Responsability 29
Consolidated Ebitda Investment return and market conditions have allowed consistent cash generation US$ Million 46% 42% 31% 35% 32% 35% 35% 1,922 2,269 35% 36% 35% 2,010 2,581 530 734 657 831 999 721 AVG. R$/US$ 1999 1.81 2000 1.83 2001 2.35 2002 2.92 2003 3.07 2004 2.93 2005 2.44 2006 2.18 2007 1.95 1Q08 1.74 Ebitda Ebitda Margin As of March, 2008 30
Consolidated Debt Maturity Debt has an adequate maturity profile Stand by Facility - US$ 300 million Long 79% US$ 1,973 M TERM Short 21% US$ 512 M CURRENCY Local 40% 2,098 Foreign 60% Swap CDI 5% US$ Million 212 433 160 225 243 240 25 26 215 9 487 As of March, 2008 Cash 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 on Note: Principal Values 31
Total Net Debt And have made it possible to considerably reduce debt US$ Million Net Debt Net Debt / Ebitda 4,000 3,000 3.1 2,491 2.3 2,334 0.7 0.4 0.2-0.2 0.1 2,000 1,000 0 R$/US$ 2002 3.53 2003 2.89 1,317 2004 2.65 860 2005 2.34 355 2006 2.14 (537) 2007 1.77 387 1Q08 1.75 As of March, 2008 32
Financial Highlights Consolidated Figures March 31/08 Dec 31/07 Dec 31/06 Dec 31/05 Dec 31/04 Crude Steel Produc. (thsd t) 1,990 8,675 8,770 8,661 8,951 Sales (thsd t) 1,886 7,990 7,945 7,348 8,062 Net sales (US$ million) 2,044 7,131 5,709 5,354 4,197 EBITDA (US$ million) 721 2,581 2,010 2,269 1,922 Net Profit (US$ million) 372 1,607 1,156 1,609 1,033 Gross Debt (US$ million) 2,485 1,693 1,628 1,685 2,033 Net Debt / EBITDA 0.1 (0.2) 0.2 0.4 0.7 EBITDA / Interest 16.5 20.0 16.9 11.8 11.3 33
Agenda Global View Usiminas Investments J. Mendes Financials Corporate Governance and Social Responsability 34
Investments in Social Responsibility Environmental Protection - More than R$ 2 billion invested in Ipatinga and Cubatão plants since 1992. - Usiminas and Cosipa were the 2 nd and 3 rd steel companies in the world to be certified with ISO 14001. - Fresh water recirculation rate above 93%. - Green belt in Ipatinga area is 10 times above recommended level (World Health Organization). Community - More than R$ 139 million invested in cultural activities in the last fifteen years (tax incentives), involving 3 thousand artists and 200 thousand spectators. - Construction of its 2 nd hospital, one of three in Brazil accredited by ONA (National Accreditation Organization), through USIMINAS Foundation, which is self sustaining. Both hospitals provide healthcare to a region with 600 thousand inhabitants. - Investment in education through São Francisco Xavier School, maintained by USIMINAS foundation, teaching more than 3 thousand children and young people. - The city of Ipatinga holds a high standard of human development, as defined by the UN - United Nations. 35
Declarations relative to business perspectives of the Company, operating and financial results and projections, and references to the growth of the Company, constitute mere forecasts and were based on Management s expectations in relation to future performance. These expectations are highly dependent on market behavior, of Brazil s economic situation, on the industry and on international markets, and are therefore subject to change. www.usiminas.com.br ADR Level I Investor Relations: Bruno Seno Fusaro (Head of IR) Luciana Valadares dos Santos Matheus Perdigão Rosa brunofusaro@usiminas.com.br lsantos@usiminas.com.br mprosa@usiminas.com.br Tel.: + 55-31-3499-8772 Tel.: + 55-31-3499-8619 Tel.: + 55-31-3499-8056 Fax: + 55-31-3499-9357 Diogo Dias Gonçalves Gilson Rodrigues Bentes dgoncalves@usiminas.com.br Cosipa (São Paulo Office) Tel.: + 55-31-3499-8710 gilson@cosipa.com.br Tel.: + 55-11-5070-8980 36