jp morgan 2002 latin america equity conference november 4-5, 2002 gerdau
TRANSCRIPT
JP MORGAN2002 Latin America Equity Conference
November 4-5, 2002
Gerdau
GERDAU S.A. - CONSOLIDATED
Açominas
Gerdau Ameristeel
Corporate Governance
Capital Markets
* All tonnage expressed in metric tons
R$ million
FINANCIAL STATEMENTS
Gerdau S.A. - Consolidated
Net sales
Cost of sales
Gross profit
SG&A
Other operational revenues
Net financial expenses
Equity pick-up
Operating profit
Non-operational rev./ expenses
Income tax and social contribution
Statutory participation
Net income
Depreciation and amortizations
EBITDA
3Q02 2Q02 9M02 9M01
2,958 1,978 6,596 4,589
(2,137) (1,419) (4,718) (3,343)
821 559 1,878 1,246
(302) (233) (729) (537)
52 50 101 0
(730) (286) (1,141) (584)
492 109 588 312
333 199 697 437
(18) 2 (28) (6)
15 (26) (37) (54)
(3) (5) (9) (7)
327 170 623 370
163 113 385 304
682 439 1,534 1,013
03
Brazil North America South America
R$ million
4Q01 1Q02 2Q02 3Q02
Net Revenue
1,3001,659
1,978
2,958
Ebitda
4Q01 1Q02 2Q02 3Q02
R$ million
297
412439
682
Gross Margin
4Q01 1Q02 2Q02 3Q02
42%
34%
13%
Ebitda Margin
4Q01 1Q02 2Q02 3Q02
34%
28%
11%
04
INDEBTEDNESSR$ million
Cost of Debt Sep.02 Dec.01
Brazil - in R$ 13.6% 15.2%Brazil - in US$ + FX 9.4% 7.7%Abroad 4.4% 6.5%
HEDGE
Gerdau S.A. Consolidated Sep.02 Dec.01
TOTAL DEBT 7,107.3 4,166.8
SHORT TERM 3,969.7 2,106.7
Domestic currency 108.3 471.3
Foreign currency 1,699.6 642.8
Companies abroad 2,161.8 992.6
LONG TERM 3,137.6 2,060.1
Domestic currency 1,128.2 665.2
Foreign currency 916.0 793.0
Companies abroad 1,093.4 601.9
CASH & EQUIVALENTS 1,962.8 1,012.8
Domestic currency 631.9 416.5
Foreign currency - -
Companies abroad 1,330.9 596.3
NET DEBT 5,144.5 3,154.0
TOTAL DEBT
Domestic currencyForeign currencyAbroad
FX EXPOSURE
Foreign currency debt
Swap operationsCash & equivalents in US$TOTAL HEDGE
HEDGE/ EXPOSURE
100%
17%37%46%
R$ bi
2.6
1.81.33.1
1.2x
05
DEBT BREAKDOWN
Short termR$ 4.0 BILLION
Long termR$ 3.1 BILLION
Companies abroad
R$ 2,162 mmOther - R$ 34 mm
BNDES – R$ 91 mm
Bank loan – R$ 149 mm
Import loan – R$ 281 mm
Pre-export /ACC – R$ 411 mm
Açominas (US$)
R$ 842 mm
Companies abroadR$ 1,093 mm
DebenturesR$ 534 mm
EurobondsR$ 289 mm
BNDESR$ 286 mm
Açominas (R$) - R$ 223 mm
Bank loan - R$ 186 mm
Import loan - R$ 172 mm
Açominas (R$) - R$ 156 mm
Pre-export - R$ 114 mm
Other - R$ 85 mm
06
RATIOS
Gerdau S.A. Consolidaded Sep.02 Dec.01
Total debt/ Total capitalization 64.5% 51.6%
Net debt/ Total capitalization 56.8% 44.6%
Total debt/ EBITDA* 3.9X 3.2X
Net debt/ EBITDA* 2.8X 2.4X
Ebitda/ Net financial expenses 4.8X 5.7X(minus monetary & exchange rate var.)
EV/ EBITDA* 4.1X 4.3X
* Last 12 months
07
Crude Steel Output1,000 tons
4Q01 1Q02 2Q02 3Q02
1,430
542
77
1,496
662
69
1,181
687
72
1,614
646
74
2,049 2,227 1,940 2,334
Rolled Products Output1,000 tons
4Q01 1Q02 2Q02 3Q02
832
526
84
798
612
71
877
633
81
961
621
84
1,442 1,481 1,591 1,666
South AmericaNorth AmericaBrazil
4Q01 1Q02 2Q02 3Q02
Sales
1,000 tons
1,352
521
90
1,412
625
87
1,212
695
75
1,581
647
841,963
2,124 1,982 2,312
South America
North America
Brazil
08
Gerdau S.A. - Consolidated
AÇOMINAS
Gerdau Ameristeel
Corporate Governance
Capital Markets
09
EVOLUTION OF STAKE IN AÇOMINAS
37% 54% 79%
17% ECONÔMICO
US$ 180mm
25% NATSTEEL
US$ 212mm
Stake before BrazilianCentral Bank Auction
Natsteel buyoutBrazilian Central Bank Auction
SEP.00 DEC.01 SEP.02
10
FINANCIAL STATEMENTS
Açominas 3Q02 2Q02
Net sales 351 173
Cost of sales (228) (125)
Gross profit 123 48
SG&A (29) (23)
Other operational rev./ expenses 41 43
Net financial expenses (130) (130)
Equity pick-up 2 1
Operating profit 7 (61)
Income tax and social contribution (3) 18
Net income 4 (43)
Depreciation and amortizations 26 15
EBITDA 161 83
9M02 9M01
819 711
(583) (509)
236 202
(80) (69)
79 (16)
(271) (226)
4 3
(32) (106)
20 -
(12) (106)
68 55
304 172
R$ million
11
OUTPUT & SHIPMENTSOutputRevamping of blast furnace of Açominas
2Q02 3Q021Q024Q01
2Q02 3Q021Q024Q01
331
184
515
102
156
258462
159
621
397
120
517Domestic market
Exports
Shipments
3Q2002 (1,000 tons)
Crude steel 651
Rolled products 69
1,000 tons
1,000 tons
12
Gerdau S.A. - Consolidated
Açominas
GERDAU AMERISTEEL
Corporate Governance
Capital Markets
SYNERGIES
Minority shareholders retain a 33% interest in Gerdau Ameristeel and Gerdau
S.A. owns 67% of the new company.
With 11 mill locations, Gerdau Ameristeel is geographically positioned to
service
long product costumers and is integrated with 29 downstream steel
fabricating
and specialty product business, increasing profit margins and reducing the
volatility of earnings.
Listed in the Toronto Stock Exchange under the ticker symbol GNA.
Gerdau AmeriSteel is the 3rd largest steel producer and the 2nd largest long
steel producer in North America.
Estimate of US$ 23 million in near-term cost savings.
The Board is comprised of a majority of outside, independent directors: 8 from
Co-Steel, including 7 independent directors and 5 Gerdau directors.
CO-STEEL + GERDAU NORTH AMERICA = GERDAU AMERISTEEL
14
* Jointventure 50% owned.
INSTALLED CAPACITY & OUTPUT
Merchant bars and rebarMerchant bars, rebar and structuralRebar and wire-rodRebarMerchant bars and structurals
Special sectionsMerchant bars and rebar
Merchant bars, rebar and stucturals
Wire-rodMerchant and rebarFlat products
Products
UTILIZATION – 9 MONTHS 2002: 77%
1,000 tons
UnitsCrude steel
Rolled products
Crude steel
Rolled products
Charlotte, NC 417 363 231 227Jackson, TN 607 544 341 311Jacksonville, FL 580 558 425 422Knoxville, TN 413 454 283 282Cartersville, GA 780 544 261 197
Selkirk, MB (MRM) 349 299 227 216Courtice, ON (Courtice) 326 295 228 212
Whitby, ON (Lasco) 871 998 449 435
Perth Amboy, NJ (Raritan) 816 907 426 475Sayreville, NJ 726 544 455 332Gallatin County, KY* 680 680 449 496
Total 6,565 6,186 3,775 3,605
Installed Capacity Production 9M02
15
PRODUCT MIX - 2001
Co-Steel Gerdau North America
Gerdau AmeriSteel
Wire Rod29%Flat Rolled
28%
Bars21%
Rebars18%
Other4%
Wire Rod2%
Special Sections8%
Fab Shops24%
Rebars32%
Bars34%
Fab Shops14%
Flat Rolled14%
Wire Rod15%
Special Sections4%
Bars28%
Rebars25%
16
RESULTS – PRO FORMA
Gerdau Ameristeel 3Q02 9M02
SHIPMENTS (1,000 tons)
Mill finished steel 1,164 3,572
Fabricated steel products 157 465
INCOME STATEMENT (US$mm)
Net Sales 442 1,285
Operating profit 22 63
Net income 12 22
EBITDA 46 133
BALANCE SHEET (US$mm)
Net working capital 330
Cash 15Debt 633Book Value 541
17
Gerdau S.A. - Consolidated
Açominas
Gerdau Ameristeel
CORPORATE GOVERNANCE
Capital Markets
Increase managerial capacity
Objectives
Meet demand resulting from increased
competitiveness in the international market.
Ensure the succession process to avoid the loss of accumulated knowledge.
CORPORATE STRUCTURE
Increase transparency for shareholders and capital market.
19
CORPORATE GOVERNANCE
Processes
Board
ExecutiveCommitee
Business Operations
Clients
Estrategy Commitee
Excellence Commitee
20
BOARD
General Business Orientation
Jorge Gerdau Johannpeter
Germano Gerdau Johannpeter
Klaus Gerdau Johannpeter
Frederico Gerdau Johannpeter
Carlos Petry
Affonso Celso Pastore
Oscar Bernardes
Expedito Luz
André Lara Resende
Chairman of the Board
Vice President
Vice President
Vice President
Board Member
Board Member
Board Member
Secretary
Board Member
21
EXECUTIVE COMMITEE
JORGE GERDAU JOHANNPETER – Strategic planning “Group & Operations” – Public &
community relations
FREDERICO GERDAU JOHANNPETER – Support and guidance to accounting &
auditing – Holding – Legal – Gerdau Forestry.
CARLOS JOÃO PETRY – Personnel – Logistics & Freight - Supplies
ANDRÉ JOHANNPETER – North America – Global Information Systems
CLÁUDIO JOHANNPETER – Long Steel Brazil – Specialty steels - Industrial
OSVALDO SCHIRMER – Finance – Investor Relations – Argentina, Chile and Uruguay –
Banco Gerdau
PAULO VASCONCELLOS – Açominas – Marketing & Sales – Management of quality and
technology – Metallic Input
EXPEDITO LUZ – Secretary
22
Gerdau S.A. - Consolidated
Açominas
Gerdau Ameristeel
Corporate Governance
CAPITAL MARKETS
COMPARATIVE DATABRAZIL
GERDAU CSN CST USIMINAS BELGO
942.7 747.9 456.5 307.8 614.7
0.5 0.4 0.3 0.5 0.2
1,263.6 1,896.0 545.6 1,041.0 117.0
2.9 5.9 4.0 7.2 0.9
2,318.0 2,193.5 1,106.0 2,690.7 905.2
571.4 494.6 255.7 459.4 251.1
4.1 4.4 4.3 5.9 3.6
8.3 10.4 9.0 1.4 90.9
240.0 (100.3) 51.7 (18.9) 90.6
7.4 19.0 32.4 4.3 93.4
1.1 0.5 0.3 0.3 1.0
1.6 1.5 1.8 0.7 2.5
Market Cap.(US$mm)
Free float
Trading volume LTM (US$mm)
Trading volume/ Float (X)
Enterprise value 2002E - EV (US$mm)
EBITDA 2002E (US$mm)
EV/ EBITDA (X)
Price (1,000 shares - US$)*
Net income 2002E (US$mm)
Book value. 2002E (1,000 shares - US$)*
Price / Book Value
Price/ Cash flow (X)
24
* Except Usiminas
Source: Economática, BBA and street estimates
R$ to US$ on 10/28/02: 1:3.7406
R$ to US$ estimate: 1: 3.5000
COMPARATIVE DATANORTH AMERICA
* EBITDA and net income annualized.
* * Based on sep/02, except US Steel (jun/02)
Dofasco figures converted from Cd$ to US$ at 1:1.5868
Source: Bloomberg and company websites
NUCOR US STEEL AK STEEL DOFASCO S. DYNAMICS
3,276.8 1,256.6 761.7 1,427.1 626.7
1.0 1.0 0.9 nd 0.6
na na na na na
na na na na na
3,336.2 3,442.0 1,945.1 2,488.8 1,152.7
607.0 358.0 389.5 413.4 197.9
5.5 9.6 5.0 6.0 5.8
41.9 12.3 7.1 19.0 13.2
158.9 141.3 (16.9) 144.9 64.7
29.3 26.2 9.5 12.1 10.5
1.4 0.5 0.7 1.6 1.3
5.4 3.5 2.0 3.5 3.2
Market Cap. (US$mm)
Free float
Trading volume LTM (US$mm)
Trading volume/ Float (X)
Enterprise value 2002 - EV (US$mm)
EBITDA 2002* (US$mm)
EV/ EBITDA (X)
Price (per share US$)
Net income2002* (US$mm)
Book value 2002** (per share US$)
Price / Book value
Price/ Cash flow (X)
25
COMPARATIVE DATAOTHER
Market Cap. (US$mm)
Free float
Trading volume LTM (US$mm)
Trading volume/ Float (X)
Enterprise value 2002 - EV (US$mm)
EBITDA 2002* (US$mm)
EV/ EBITDA (X)
Price (per share US$)
Net income2002* (US$mm)
Book value 2002** (per share US$)
Price / Book value
Price/ Cash flow (X)
* EBITDA and net income annualized.
** Based on jun/02
Corus figures converted from £$ to US$ at 1:0.6516
Arcelor figures converted from Euro to US$ at 1:1.0107
Posco figures converted from w$ to US$ at 1:1.230
Source: Bloomberg and company websites
POSCO CORUS ARCELOR
8,652.3 2,103.4 5,807.0
na na na
na na na
na na na
15,106.1 3,933.8 na
2,357.0 239.4 1,743.3
6.4 16.4 na
92.5 67.4 10.9
594.7 (727.4) 219.6
115.2 1,429.6 198.3
0.8 0.0 0.1
3.7 8.8 3.3
26
DIVIDEND1st half 2002 MET. GERDAU S.A. GERDAU S.A.
Dividends R$ 36.0 million R$ 79.9 million
Net income R$ 296.4 million R$ 295.4 million
METALÚRGICA GERDAU S.A.
Dividends Net income
GERDAU S.A.
• The payout in the 1st half is an advancement of the full year´s dividend. • The 2nd half dividend completes the minimum dividend payout as stated in the by-laws of the Company.
2000 200119991998
190
353 393464
59
98125
164
2000 200119991998
122
207 218253
123575434
27
LIQUIDITY – GERDAU SHARES
Trading volume
NYSE Bovespa
US$ million
20001999 2001 LTM
250
10
423 282
54
82
140
484
700
500
300
100
28
