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Twelfth Annual Latin America Conference

Twelfth Annual Latin America Conference. New York, March 23 - 24, 2004. Steel Sector Gerdau S.A. Consolidated Stock Market. World Production Crude Steel. In million tons. In 2003, the world produced 945.1 million tons of steel. Brazil contributed with 3.3% of this tonnage. 03.

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Twelfth Annual Latin America Conference

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  1. Twelfth Annual Latin America Conference New York, March 23 - 24, 2004

  2. Steel SectorGerdau S.A. Consolidated Stock Market

  3. World Production Crude Steel In million tons In 2003, the world produced945.1 million tonsof steel. Brazil contributed with 3.3% of this tonnage. 03 Sources: IISI

  4. Production Company (ITA) (USA) (JAP) (USA) (JAP) (BRA) (ENG) Largest Producers Crude Steel 2002 Production Company In million tons (LUX) (ENG) (JAP) (KOR) (CHI) (ENG) (GER) (JAP) 04 Source: IISI

  5. MERCHANT BARS PRICES REBAR PRICES PRICE INCREASE (LTM): +34% PRICE INCREASE (LTM): +33% STEEL SCRAP PRICES PRICE INCREASE (LTM): +52% North America End-use demand is improving for all long steel products, although cost pressures remain the dominant influence on prices everywhere… December shipments were up by 10% YoY. While one month of positive data is not enough to confirm that an upward trend in demand has set in, December´s growth marks a significant turnaround after one year of uninterrupted contraction. 05 Source: MEPS/Metal Bulletin

  6. Usiminas/Cosipa 8,624 8,449 Belgo/CST/Acesita (Arcelor) Gerdau Açominas 6,976 CSN 5,318 Aços Villares 775 V&M do Brasil 551 Barra Mansa 421 MWL Brasil 36 Gerdau Açominas – 49.6% 3,894 thousand tons V&M do Brasil - 6% 466 thousand tons Aços Villares - 6% 456 thousand tons Belgo (Arcelor) – 33.8% 2,654 thousand tons Barra Mansa - 5% 385 thousand tons Overview Brazilian Steel Sector - 2003 CRUDE STEEL PRODUCERS IN BRAZIL In thousand tons TOTAL 2003: 31,150 thousand tons LONG STEEL PRODUCERS IN BRAZIL TOTAL 2003: 7,855 thousand tons 06 Source: IBS

  7. Domestic Sales Exports Exports of Long Steel Products Brazilian Steel Sector - 9M2003 Inmillion tons Domestic SalesSep.2003/2001- 11% Monthly Average 517.2 thousand tons Monthly Average 528.2 thousand tons Monthly Average 461.5 thousand tons 700 600 500 Exports Sep.2003/2001 +85% 400 300 Monthly Average 156.3 thousand tons Monthly Average 99.2 thousand tons Monthly Average 84.4 thousand tons 200 100 2001 2002 2003 Exports of long steel products reached 2.2 million tons in 2003, an increase of 78% YoY. 07 Source: IBS

  8. Competitiveness Brazilian Steel Sector EBITDA MARGIN - 2002 35% In % 40 35 30 25 20 15 10 5 Brazil Asia* Japan EU North America Others (World) * Does not include Japan • Despite increases in the prices of main inputs, Brazil has the highest operating margin in the world. • The mills operate with up-to-date technology due to a permanent investment program. 08 Source: IBS

  9. Apparent Consumption In million tons Installed Capacity Crude Steel Production 1994 95 96 97 98 99 00 01 02 03 04 05 06 2007 Investments Brazilian Steel Sector INVESTMENT SCHEDULE In US$ million INSTALLED CAPACITY X PRODUCTION X APPARENT CONSUMPTION 09 Source: IBS

  10. Steel SectorGerdau S.A. Consolidated Stock Market

  11. STRUCTURAL SHAPES WIRES WIRE-ROD NAILS Main Products MERCHANTS AND STRUCTURALS BILLETS REBARS FABRICATED STEEL 11

  12. Installed Capacity In thousandtons CRUDE STEEL ROLLED PRODUCTS Billets, slabs, blooms, merchant bars, rebars, wire rod, drawn products, welded wire meshes, structurals, nails, downstream products,fabricated steel products and specialty steel. Gerdau Açominas 7,374 4,811 South 510 634 America North 6,567 6,187 America TOTAL 14,451 11,632 Billets, merchant bars, rebars and wire rod. Billets, merchant bars, rebars, wire rod, drawn products, welded meshes, nails, downstream products andfabricated steel products. 12

  13. Crude Steel Rolled Products Output Evolution AVERAGE GROWTH RATE 1980 - 2003 Crude Steel 10.2% per year Rolled Products 9.2% per year Co-Steel 2002 Part. Açominas 1997 Usiba1989 Piratini1992 AmeriSteel USA 1999 12.3 million Pains1994 Sipsa Argentina1997 Barão de Cocais1988 CearenseGuaíra1982 9.0 million Part. Sipar Argentina 1998 MRM Canada 1995 Hime1985 Aza Chile 1992 Courtice Canada 1989 Laisa Uruguay 1981 Açominas (control) 2002 1980 1984 1988 1992 1996 2000 2003 • 14th largest world steel producer according to the IISI. • Largest long steel producer in the Americas. 13

  14. Gerdau AmeriSteel Corp. Gallatin Steel (1) Gerdau Açominas S.A. AZA Laisa Sipar (2) (1) Flat steel mill, 50% stake JV (2) Rolling mill, 38% stake JV Geographical Distribution NORTH AMERICA • 10 mills and 1 strategic shareholding (Gallatin Steel) • 20 fabrication shops • 12 downstream operations and special sections BRAZIL • 10 mills • 11 fabrication shops • 6 downstream operations and special sections • 73 sales points (Comercial Gerdau). • 5 service centers for flat steel (Comercial Gerdau). SOUTH AMERICA • 2 mills and 1 strategic shareholding (Sipar) • 3 fabrication shops 14

  15. 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 15

  16. Results In R$ million 16

  17. In R$ thousand 13,367 9,162 In R$ thousand 10,077 6,539 Main Variations NET SALES The great performance of exports in the period as well as the incorporation of the new North American units in October 2002 and the recovery of full productive capacity of Gerdau Açominas allowed for the 45.9% increase in net sales revenues. COST OF GOODS SOLD The increase of 54.1% YoY was due to the price increases in the main inputs of Gerdau such as scrap and pig iron in Brazil, and scrap, energy and natural gas in North America. 17

  18. In R$ thousand 1,212 1,002 In R$ thousand 141 (80) Main Variations SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Operating expenses (SG&A) increased by 21% resulting mainly from the greater costs involved in exporting (port services and freight) and the increase in Gerdau Ameristeel's expenses. PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION As a consequence of the integration of the operating assets of Gerdau S.A. into Gerdau Açominas, the latter was able to create a positive income tax and social contribution provision, in the year , of R$ 140.9 million based on the recognition of R$ 333.7 million in tax credits resulting from fiscal losses. 18

  19. Results by Region 2003 19

  20. Sales Track Record In 1,000 tons 3,156 3,123 TOTAL SHIPMENTS 2,889 2,976 99 109 101 107 South America 1,295 1,290 North America 1,284 1,271 Brazil (exports) 869 892 657 793 Brazil (domestic sales) 875 850 854 798 1Q03 2Q03 3Q03 4Q03 TOTAL SHIPMENTS IN 2003: 12,144 thousand tons (+32.7%) 20

  21. SouthAmerica 6% Africa 3% Africa 11% South America 6% North America 14% Asia 52% Asia 51% North America 9% Europe 11% Europe 12% Central America 14% Central America 11% Exports DESTINATION OF EXPORTS 2002 DESTINATION OF EXPORTS 2003 EXPORTS IN 2003: 3.2 MILLION TONS (+69.9%) • Export revenues US$ 787.3 (+125%) • Strong demand in the international markets • Very attractive prices • Average price increase of 30.9% 21

  22. Gerdau S.A. South America North America Output CRUDE STEEL In 1,000 tons 3,123 3,166 2,968 3,085 94 85 83 85 1,250 1,254 1,321 1,195 TOTAL 2003: 12,343 thousand tons (+30.7%) 1,688 1,679 1,790 1,818 ROLLED PRODUCTS In 1,000 tons 2,366 2,299 2,246 2,135 107 90 90 92 1,241 1,197 1,216 1,122 TOTAL 2003: 9,045 thousand tons (+30.5%) 921 1,018 940 1,012 22

  23. Indebtedness DEC 2003 SEP 2003 SENIOR SECURED CREDIT FACILITYUS$ 350/SENIOR UNSECURED NOTES US$ 405(June) Total volume: US$ 755 mmBond portion swapped to floating: US$ 200 mm Average cost: 7.7% Average term: 6.6 years SECURED EXPORT NOTES PROGRAM(September) Total volume: US$ 400 mm 1st tranche: US$ 105 mm Cost: 7.37% p.y. Term: 7 years Grace period: 2 years EURO-COMMERCIAL PAPER PROGRAM(October) Total volume: US$ 300 mm 1st tranche: US$ 100 mm Cost: 4.125% p.y. Term: 1 year GROSS DEBT 6,262.5 6,943.7 Short Term 2,417.4 3,153.2 Local Currency 280.8 735.7 Foreign Currency 1,342.7 1,576.0 Companies Abroad 793.8 841.5 Long Term 3,845.1 3,790.5 Local Currency 717.2 762.9 Foreign Currency 1,030.7 1,047.2 Companies Abroad 2,097.3 1,980.4 CASH & EQUIV. 1,017.0 1,497.6 Local Currency 429.9 797.9 Companies Abroad 587.1 699.7 NET DEBT 5,245.5 5,446.1 In R$ million 23

  24. Gerdau Açominas US$ 230 mm North America US$ 59 mm South America US$ 7 mm Investments 2003 NEW WIRE-ROD MILL Installed capacity: 550 thousand tons/year Total investment:US$ 66 mm TOTAL IN 2003: US$ 295 MM FORECAST FOR 2004: US$ 300 MM 24

  25. Gerdau S.A. Aço Minas Gerais S.A. Açominas Gerdau Açominas S.A. + = Met. Gerdau S.A. Gerdau S.A. Brazil North America South America Gerdau Açominas S.A. Gerdau Ameristeel Gerdau AZA Gerdau Laisa Sipar Operational Integration • Combination of strengths of both companies: greater competitiveness • Project developed in partnership between Gerdau and CEA (partner-contributor) • Headquarters in Ouro Branco - MG NEW CORPORATE GOVERNANCE 25

  26. Outlook • Stronger demand in Brazil (domestic market); • Lower interest rates in Brazil expected for the end of the year; • Economic stability in Brazil and uncertainty in the political scenario; • International prices trend: stable to upwards; • North American operations pursuing better results; • US economy recovering; • South American operations in very good shape and improving. 26

  27. Steel SectorGerdau S.A. Consolidated Stock Market

  28. Metalúrgica Gerdau S.A. Gerdau S.A. Other Shareholders 36% Other Shareholders 16% Other Gerdau Companies 25% Met. Gerdau and otherGerdau companies 52% Foreign Inst. Investors 22% Brazilian Inst. Investors 24% Foreign Inst. Investors 15% Brazilian Inst. Investors 10% Gerdau Açominas S.A. Gerdau Group 92% CEA Clube / Fund. Aços 4% Other Shareholders 4% Shareholders Structure 28

  29. METALÚRGICA GERDAU S.A. GERDAU S.A. In US$ million In US$ million 374 122 189 216 60 199 117 171 195 75 101 89 91 64 71 40 55 53 30 29 32.2% 32.8% 35.7% 34.7% 32.5% 31.5% 33.0% 32.6% 52.5% 34.2% PAY OUT 6.2 % 3.6% 6.1% 6.8% 7.1 % 3.9% 6.0% 7.9% 17.0% 12.4 % YIELD Dividends paid Adjusted Net Income Dividend Policy • Payout of 30% of the Adjusted Net Income. • Since March 2003, dividend payments are being made on a quarterly basis. In 2001, Met. Gerdau paid a higher amount due to a one-time supplementary dividend payment. 29

  30. Stock Price Performance USA (New York Stock Exchange) Brazil (São Paulo Stock Exchange) 2003 > GGBR4: + 152% GOAU4 : + 161% 2004 > GGBR4: + 8% GOAU4 : + 16% 2003 > GGB: + 195% 2004 > GGB: + 11% Canada (Toronto Stock Exchange) 2003 > GNA: +149% 2004 > GNA: - 3% Period: 01.01.2003 to 03.01.2004 Source: Economática/Bloomberg 30

  31. USA (NYSE) Metalúrgica Gerdau S.A. GGB +223% GGB +221% Gerdau S.A. Ibovespa Gerdau - ADR Dow Jones DOW +36% DOW 9% GGB na DOW +0.3% Appreciation Chart In US$ BRAZIL (Bovespa) GOAU+1,322% GGBR4+1,047% GOAU4 +295% GOAU4+349% GGBR4+293% GGBR4+242% IBOV+175% IBOV+67% IBOV-3% Source: Economática Base: 03.05.2004 Dividend-adjusted 31

  32. Comparative Chart Belgo figures are referred to Sep. 2003 results (annualized) EV = Market Cap. + Net Debt 32 Source: Economática and company websites

  33. www.gerdau.com.br inform@gerdau.com.br www.gerdau.com.br inform@gerdau.com.br

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