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Gerdau

Gerdau. January 2007. Highlights. One of the world’s lowest cost steel companies Strong cost position as a result of diversified production processes and multiple raw material sourcing Strong foreign currency generation Large export base International subsidiaries

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Gerdau

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  1. Gerdau January 2007

  2. Highlights • One of the world’s lowest cost steel companies • Strong cost position as a result of diversified production processes and multiple raw material sourcing • Strong foreign currency generation • Large export base • International subsidiaries • Ranked 14th globally by steel output for year 2005 with an output of 13.7m tons • Largest long steel producer in the Americas • 2nd largest long steel producer in North America • 32 mills, integrated and mini mills, with state of the art technology • Relevant market share and diversified product range through downstream and service centers • Strong balance sheet, low leverage and strong cash generation • Gerdau S.A. shares are listed on the São Paulo, New York and Madrid Stock Exchanges

  3. Industry Overview Group Overview Operating and Financial Highlights Agenda All data presented in US Dollar and in metric tons, except when indicated

  4. World Production • WORLD CRUDE STEEL PRODUCTION In million tonnes Production should reach 1,2 billion tonnes in 2006. 903 9.1% 828 9M06 9M05 EVOLUTION OF WORLD CRUDE STEEL PRODUCTION World China 2º Oil Shock Accelerated increase of China USSR breakup 1º Oil Shock Corresponds to 70% of the world production growth from 2001 to 2005 Source: IISI / IISI apud IBS

  5. World Demand FINISHED STEEL APPARENT DEMAND In million tonnes The world steel demand should increase 4.2% p.a. from 2010 to 2015. 1,179 5.2% 1,121 1,029 8.9% China NAFTA Japan India South America FINISHED STEEL APPARENTDEMAND PER CAPITA (KG) • With increasing investments in infrastructure and civil construction, India should grow 10% in 2006. • Steel consumption in South America should increase 12% in 2006. • Chinese steel consumption should experience a more moderate growth in 2007. 344 NAFTA 322 295 China 205 World 195 171 Brazil 110 102 e: estimated Source: IISI

  6. Brazil and the Global Steel Industry Crude Steel Production – 2005 In million tons In million tonnes Total World Production: 1.1 billion tonnes China represented 31.4% of the global steel production Brazil represented 2.8% of the global steel production South Korea Brazil Italy Germany Ukraine India USA Japan Russia China Source: IISI

  7. Industry Overview Group Overview Operating and Financial Highlights Agenda All data presented in US Dollar and in metric tons, except when indicated

  8. 100+ Years in Business 1901 THE 80’s • Acquisition of three mills (Rio de Janeiro, Minas Gerais and Bahia) • Construction of two new plants (Paraná and Ceará) • Operations abroad begin (Uruguay and Canada) • 1901 – First operation: nail factory THROUGH THE 40’s • First steel mill acquisition – Siderúrgica Riograndense (1948) THE 50’s THE 90’s • Expansion of Siderúrgica Riograndense • Construction of second Riograndense’s mill • Diversification into specialty steel – acquisition of Piratini • Expansion abroad – acquisition of mills in Chile, Canada, Argentina and the USA • Acquisition of second mill in Minas Gerais and rolling mill in São Paulo • Shareholdings restructuring • Acquisition of stake in Açominas THE 60’s • Market share increase by the: - Diversification and verticalization of product line - Structuring of distribution network (today more than 70 sales points) - Acquisition of mill in Pernambuco THE NEW MILLENNIUM THE 70’s • Acquisition of four companies in the US • Acquisition of downstream units and fab shops in North America • Entering the European market • Construction of a steel mill in São Paulo • Capacity expansion with acquisition of two mills (Alagoas and Paraná); construction of largest Gerdau mill (Rio de Janeiro) • Diversification into reforestation

  9. An International Company Total Capacity (Includes Strategic Shareholdings) CANADA 19.2 million tonnes of crude steel 17.0 million tonnes of rolled steel products Brazil 9.2 million tonnes of crude steel 6.3 million tonnes of rolled steel products 11 steel mills 12 fabrication shops 6 downstream operations 74 sales points and flat steel service centers Abroad 10.0 million tonnes of crude steel 10.7 million tonnes of rolled steel products 21 steel mills 44 fabrication shops 17 downstream operations 2 strategic shareholdings

  10. Solid Track Record In thousand tonnes 21,605 TOTAL INVESTED (1981- Sep.2006): Brazil = US$ 4.5 billion + Debt North America = US$ 1.8 billion + Debt South America = US$ 590 million + Debt Europe = US$ 235 million + Debt Installed Capacity Expansion 19,230 Araçariguama(Brazil) Sidenor (Spain) Sheffield (USA) Siderperú (Peru) GSB(Spain) 7,696 16,372 Ameristeel (USA) AZANew Plant(Chile) Additionalstake inAçominas(Brazil) North Star(USA) 11,076 ControlofAçominas(Brazil) Co-Steel (USA) 16,709 3,072 Diaco(Colombia) Cambridge(Canada) Usiba(Brazil) 3,934 4,568 4,595 Piratini(Brazil) AZA(Chile) Stake inAçominas (Brazil) Manitoba (Canada) 2,611 1,757 BarãodeCocais(Brazil) Laisa - 1980(Uruguay) 2009e Brazil – Installed Capacity of Crude Steel Abroad – Installed capacity of Crude Steel e: estimated Besides the mills acquired, as related above, Gerdau acquired many fab shops in order to add value to its products and offer services and products to its clients according to their needs.

  11. Among the Leaders Crude Steel – Output 2005 In million tonnes Rank 1 2 3 4 5 6 Gerdau should have an installed capacity of 21.5 million tonnes of crude steel per year after the investment program in Brazil is completed in 2009. 7 8 9 10 11 12 13 14 GERDAU GROUP (BRA) Source: Metal Bulletin

  12. Value Builder CompanyATKearney study Growth portfolio (CAGR 2001-2005)benchmarked against industry average Revenue Growth 70% Eregli Demir Celik 60% Mittal Severstal Baoshan Bluescope 03 05 Angang 50% Maanshan Iron Steel Ipsco Steel Dynamics Gerdau Nucor Novolipetsk1) 40% Acerinox Tata Steel 30% Usinas Voestalpine Industry Average Onesteel Tokyo Steel Cap Boehler-Uddeholm 20% US Steel SSAB Salzgitter SAIL Oregon Steel Mills Hylsamex 10% HyundaiSteel JFE 03 05 Rautaruukki Corus Neomax Imsa Worthington 0% Arcelor02 05 Nisshin Steel Sumitomo AK Steel Thyssenkrupp1) Nippon Steel Carpenter Technology -10% -40% 10% 60% 110% Equity Value Growth Industry Average Notes: 1) EBIT-growth Notes: USINAS = USIMINAS; ARCELOR Takeover MITTAL/ SERVERSTAAL: The market capitilization of Severstaal is 6.8 bn USD (same as revenue, hence valued above the industry multiple of 0,79) Source: Thyssenkrupp: steel segment

  13. Shipments In thousand tonnes 83% increase in the last 5 years 13,550 South America (6% in 2005) + 9.5% 12,560 12,144 11,143 North America (47% in 2005) 10,181 9,109 Brazil – Exports (21% in 2005) 7,411 Brazil – Domestic Market (26% in 2005) Europe 2001 2002 2003 2004 2005 9M05 9M06 Billets, blooms& slabs Heavystructural shapes Wires Wire-rod Rebars Merchant bars Nails Fabricated steel

  14. Markets BRAZIL - 2005 Arcelor Brasil 36% Gerdau 48% Other 5% Barra Mansa5% V&M do Brasil6% MARKET SHARE COUNTRY MAIN COMPETITORS NORTH AMERICA Nucor + ArcelorMittal + CMC 15% CHILE 51% CAP + Imports URUGUAY 84% Imports ARGENTINA 20% Acindar + Bragado + Zapla COLOMBIA 37% Acerias Paz Del Rio + Imports SPAIN 36% ArcelorMittal + Imports PERU ~44% Aceros Arequipa + Imports * Specialty steel only

  15. Growth Opportunities LONG STEEL PRODUCTS (Brazil) • Maintenance of market share • Improvement of current installed capacity • São Paulo mill expansion SPECIALTY STEEL • Active role in the steel sector consolidation process • Search for new opportunities AÇOMINAS (Ouro Branco mill) • New 1.5 MM ton blast furnace • Growth platform for slabs, blooms and billets LATIN AMERICA • Maintenance of leadership in the long steel sector • New markets NORTH AMERICA • Efficiency and productivity gains (Gaps) • Enhancement of leadership in the long steel sector through acquisitions

  16. Outlook Brazil • Domestic volumes growing around 6 - 8% in 2007 • Strengthening of the housing and industrial sectors • Price stability in local currency terms • Relatively stable costs North America • Solid demand for rebars and merchant bars • Reduced level of imports • Increase in supply of higher value added products South America • Solid economic growth • Strengthening of the civil construction sector • Government spending • Demand in line with economic growth Europe • Good performance in the specialty steel business • Growing market share

  17. Industry Overview Group Overview Operating and Financial Highlights Agenda All data presented in US Dollar and in metric tons, except when indicated

  18. Exports 9M06 Domestic Market 79% NET SALES BREAKDOWN BY REGION Europe3% South America10% Brazil 41% North America46% Exports 21% (35% in tonnes) EXPORTS BY REGION (IN TONNES) North America16% South America 27% Central America 15% Africa 9% Asia24% Europe 9%

  19. Margins Gross Margin 42% Consolidated Brazil North America* South America* 32% 30% 28% 26% 26% 20% 17% EBITDA Margin 33% 23% 26% 21% 21% 21% 19% 17% * Calculated by hard currency

  20. Consolidated Financials In US$ million 9M06 9M05 2004 2005 6,251 5,656 11,907 2,539 3,652 1,235 4,481 11,907 3,918 2,589 1,329 5,152 4,159 9,311 1,698 3,267 843 3,503 9,311 3,260 2,111 1,149 5,182 4,165 9,347 1,790 3,225 896 3,436 9,347 3,269 2,335 934 3,600 3,431 7,031 1,977 2,186 580 2,288 7,031 2,402 769 1,633 Balance Sheet Current assets Non-current assets Total Assets Current liabilities Non-current liabilities Minority Interest Shareholders’ equity Total Liabilities and Shareholder’s equity Total debt Cash & Equivalents Net debt Income Statement Net revenue Gross profit Operating income Net income EBITDA 7,362 1,996 1,424 1,132 1,743 8,088 2,289 1,610 1,237 1,900 9,077 2,446 1,727 1,387 2,098 7,383 2,353 1,678 1,219 2,092 21% 1.4x 0.5x 19% 1.6x 0.6x 36% 1.1x 0.8x 18% 1.6x 0.4x Ratios Net debt / Total capitalization Total debt / EBITDALTM Net debt / EBITDALTM

  21. Consolidated Debt Profile September 2006 DEBT STRUCTURE Companies Abroad 30% Foreign Currency 45% Domestic Currency 25%

  22. Consolidated Debt Amortization In US$ million – Sep/06 Companies Abroad: 32 FINIMP: 37 Perpetual Bond: 600 Debentures: 292 Pre-Exports: 113 FINIMP: 151 BNDES: 99 Companies Abroad: 64 Securitization: 41 1,014 BNDES: 43 Companies Abroad: 411 FINIMP: 59 Debentures: 55 Companies Abroad: 110 Pre-Exports: 55 BNDES: 88 Securitization: 44 FINIMP: 139 Companies abroad: 409 618 FINIMP: 55 491 473 BNDES: 67 FINIMP: 85 Securitization: 41 Companies Abroad: 55 FINIMP: 59 354 FINIMP: 32 Pre-Exports: 22 243 206 182 160 101 76 After 2012 2010 1Q07 3Q07 2008 2009 2011 4Q06 2Q07 4Q07 2012 SHORT TERM: US$ 980 LONG TERM: US$ 2,938

  23. CAPEX 2007 - 2009 9M06 Investment Program 2007 – 2009: US$ 3.0 billion In US$ million In US$ million INSTALLED CAPACITY EVOLUTION In thousand tonnes Rolled Products Crude Steel + 12% + 12% 21,605 19,035 19,230 17,040 + 10% 11,005 9,970 + 12% 11,985 10,680 Abroad Abroad 10,600 + 14% 9,260 + 11% Brazil Brazil 7,050 6,360 2006 2009 2006 2009

  24. Disclaimer This document 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.

  25. Gerdau S.A. www.gerdau.com.br inform@gerdau.com.br +55 51 3323 2703

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