4Q2010 Conference Call Gerdau S.A. Consolidated IFRS André Gerdau Johannpeter President and CEO Osvaldo B. Schirmer Vice-President and IRO March 3, 2011 1
Global Context 2010 vs. 2009 Growth of 15% in world steel production to 1.4 billion tonnes; China accounted for 44% of world steel production, with 627 million tonnes; Performance was mainly driven by growth in emerging economies and the gradual recovery of developed economies. Source: worldsteel 2
Gerdau Highlights Unit 2010 2009 % 4Q10 4Q09 % SHIPMENTS Million tonnes 17.4 14.0 +24% 4.5 3.7 +23% NET SALES R$ million 31,393 26,540 +18% 7,800 6,363 +23% EBITDA R$ million 5,201 3,815 +36% 815 1,246-35% NET INCOME R$ million 2,457 1,005 +144% 420 643-35% DIVIDENDS Metalúrgica Gerdau S.A. Gerdau S.A. R$ million 264 630 173 362 37 90 107 256 CAPEX R$ million 1,289 1,379 537 276 3
Outlook WORLD World GDP forecast to grow 4.4% in 2011; Steel consumption estimated to grow by 5% in 2011 to 1.3 billion tonnes. BRAZIL GDP forecast to grow 4.6% in 2011; Steel consumption estimated to increase 6% in 2011 to 28 million tonnes; Construction sector: construction GDP forecast to expand by 6% in 2011; Industry: GDP in this sector should grow 5% in 2011. Source: worldsteel, IMF, Central Bank of Brazil and Brazilian Steel Institute. 4
Outlook NORTH AMERICA Gradual recovery in economic activity; U.S. GDP forecast to grow 3% in 2011; Growth of 9% in steel consumption in 2011 to 86 million tonnes. LATIN AMERICA GDP growth estimated at 4.3% in 2011; Steel consumption forecast to grow 8% in 2011 to 37 million tonnes. SPECIALTY STEEL United States: vehicle production forecast to grow 10% in 2011 to 13,4 million units; Brazil: vehicle production in 2010 was 3,6 million and the production forecast for 2011 is 3,7 million units; Spain: forecast to grow 2% the vehicle production in 2011, to 19,6 million units. Source: worldsteel, IMF, Latin American Iron and Steel Institute, ANFAVEA, ACEA 5
Investments R$ 10.8 billion investment plan for 2011 to 2015: Investment Plan - Main Projects Brazil BO Location Rolling additional capacity (1,000 tonnes) Start-up Expansion of the structural profile rolling mill at Ouro Branco-MG Brazil 160 2011 Flat steel rolling mill (heavy plates and coiled hot-rolled strips) at Ouro Branco-MG Brazil 1,900 2012 Expansion of mining capacity to 7 million tonnes Brazil - 2012 Fabrication units and ready-to-use steel product units Brazil - 2012 Wire rod and rebar rolling mill in Santa Cruz-RJ 1 Brazil 600 2013 North America BO Reheating furnace at Calvert City USA - 2012 Latin America BO Port facilities (for coal and coke shipments) Colombia - 2012 Specialty Steel BO New continuous slab casting with capacity expansion at the melt shop USA 200 2012 Specialty steel and rebar rolling mill, sintering and energy generation 2 India 300 2012 Specialty steel rolling mill Brazil 500 2012 1 In order to supply this rolling mill Gerdau will expand its melt shop with 600,000 tonnes crude steel capacity in its Santa Cruz-RJ mill. 2 Capacity is not included in consolidated figures, since it is a joint venture Additionally the Company has the following investments on its plan: Brazil: In the phase 2 will have an additional 500,000 tonnes rolling capacity in Santa Cruz-RJ; Peru: Melt shop modernization and improvement of port logistic, as well the technological improvement on environmental protection at this unit; United States: dedusting system at Tamco melt shop. 6
Closing Remarks Positive outlook for 2011: - Growing demand; - Recovery in prices due to cost pressures. Gerdau s Commitment: - Continuous efforts to increase operating margins; - Investments to expand product offering and increase internal iron ore production. 7
Performance of Gerdau Consolidated Em R$ milhões 4Q10 4Q09 % 3Q10 NET SALES 7,800 6,363 23% 8,190 Cost of Sales (6,851) (5,084) 35% (6,840) SG&A (629) (516) 22% (612) Other Operating income and expenses 34 50-32% 49 Impairment of assets reversal and restructuring cost 336 - - - Equity in earnings of unconsolidated companies (15) 6 - (6) Financial Result, Net (184) (131) 40% - Income and Social contribution taxes (71) (45) 58% (172) NET INCOME 420 643-35% 609 EBITDA 815 1,246-35% 1,265 SHIPMENTS ( 000 tonnes) 4,513 3,670 23% 4,415 EBITDA - In R$ million 1,437 1,246 (1,767) (113) 50 (38) 815 EBITDA Conference Call March 3, 4Q09 2011 Net Sales Costs of sales SG&A Depreciation Others EBITDA 4Q10 8
Performance of Gerdau Brazil BO 1 SHIPMENTS ( 000 tonnes) 1,413 23% 77% 1,635 26% 74% 1,811 41% 59% 4Q09 3Q10 4Q10 Exports Domestic Market NET SALES, EBITDA (R$ million) & EBITDA MARGIN (%) 2,777 30% 833 3,244 20% 654 3,048 383 4Q09 3Q10 4Q10 Net Sales EBITDA EBITDA Margin 13% Note1: Includes all operations in Brazil, except specialty steel. 9
Performance of Gerdau North America BO 1 SHIPMENTS 2 ( 000 tonnes) NET SALES 2, EBITDA (R$ million) & EBITDA MARGIN (%) 1,506 1,442 2,332 2,188 1,206 1,653 4Q09 3Q10 4Q10 7% 8% 6% 120 196 136 4Q09 3Q10 4Q10 Note 1: Includes all operations in North America, except Mexico and specialty steel. Note 2: Excludes data from associated and shared controlled companies. Net Sales EBITDA EBITDA Margin 10
Performance of Gerdau Latin America BO 1 SHIPMENTS 2 ( 000 tonnes) 483 565 565 NET SALES 2, EBITDA (R$ million) & EBITDA MARGIN (%) 650 919 8% 863 6% 4% 29 72 48 4Q09 3Q10 4Q10 Note 1: Includes all operations in Latin America, except Brazil. Note 2: Excludes data from associated and shared controlled companies. 4Q09 3Q10 4Q10 Net Sales EBITDA EBITDA Margin 11
Performance of Gerdau Specialty Steel BO 1 568 SHIPMENTS 2 ( 000 tonnes) 709 695 4Q09 3Q10 4Q10 Note 1: Includes all Specialty Steel operations in Brazil, Spain and USA. Note 2: Excludes data from associated and shared controlled companies. NET SALES, EBITDA (R$ million) & EBITDA MARGIN (%) 1,283 21% 264 1,695 1,701 20% 343 248 4Q09 3Q10 4Q10 15% Net Sales EBITDA EBITDA Margin 12
Indebtedness and Liquidity R$ million Dec. 09 Sep. 10 Dec. 10 Local currency 2,845 3,353 3,326 Foreign currency 5,465 4,965 5,825 Subsidiaries abroad 6,211 5,988 5,519 GROSS DEBT 14,521 14,306 14,670 Financial investments 4,819 1,677 2,204 COST OF DEBT Local currency: 8.0% Foreign currency: 5.7% + Forex Companies abroad: 4.2% NET DEBT 9,702 12,629 12,466 Capital Market* 51% DEBT BREAKDOWN Commercial Banks 30% * Includes debentures and bonds issued BNDES 13% Exports Credit Agencies 6% Working Capital (R$ billion) Cash Conversion Cicle* (days) WORKING CAPITAL 6.6 dec/09 sep/10 dec/10 * Working capital divided by daily net sales in the quarter. 13 94 8.7 8.2 96 94 13
Indebtedness and Liquidity DEBT/EBITDA AMORTIZATION SCHEDULE R$ billion 14.5 3.8x 14.3 14.7 2.5x 2.5x 2.2x 2.8x 2.4x 1Q11 2Q11 3Q11 4Q11 0.8 0.4 0.2 0.3 7.2 4.8 1.7 2.2 Dec.09 Sep.10 Dec.10 Gross Debt (R$ billion) Cash (R$ billion) 3.1 Net Debt/EBITDA (1) Gross Debt/EBITDA (1) 1.7 1.6 0.8 0.3 2011 2012 2013 2014 2015 After (1) EBITDA in last 12 months Debt Average Term: 5.3 years 14
2010 Highlights Acquisition of additional interest in Cleary Holdings; Acquisition of minority interests in Gerdau Ameristeel; 10-year, US$ 1.25 billion bond issue; Acquisition of TAMCO; Merger of Aços Villares S.A. by Gerdau S.A. 15
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. Contact information: +55 (51) 3323 2703 inform@gerdau.com.br www.gerdau.com Earnings Conference Call 11.05.2010 16