EX-99.1 2 a05-14340_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Porto Alegre, August 3, 2005

 

 

 

 

 

GERDAU S.A. – CONSOLIDATED

 

 

 


First Semester 2005 Results
Brazilian Corporate Law

 

Conference Calls

August 3rd, 2005

Portuguese: 12 PM (EST)

English: 2:00 PM (EST)

 

To participate:

•                  Portuguese:

In Brazil: 0800 770.4544 or

11 4613.0501

other countries: +5511 46134525

 

•                  English:
In the US: 1 800 860.2442
from Brazil: 0800 770.4544 or

 11 4613.0502

other countries: +1 412 858.4600

 

•                  Internet: www.gerdau.com.br/ing/ri

 

Ticker symbols

Gerdau S.A.

Bovespa: GGBR3 and GGBR4

NYSE: GGB

Latibex: XGGB

 

Metalúrgica Gerdau S.A.

Bovespa: GOAU3 and GOAU4

 

Gerdau Ameristeel Corp.

Toronto: GNA.TO

NYSE: GNA

 

Shares Outstanding

 

 

August 3rd, 2005

 

 

Gerdau S.A.

 

 

Common:

154,404,672

 

 

Preferred:

287,557,361

 

 

 

441,962,033

 

 

 

 

 

Metalúrgica Gerdau S.A.

 

 

Common:

  41,584,395

 

 

Preferred:

  81,721,590

 

 

 

123,305,985

 

 

 

Gerdau Ameristeel Corp.

Common: 304,287,528

 

Crude steel output reached 7.0 million metric tons in the semester and grew 5.4% compared to the same period in 2004.

 

Gross revenues reached R$ 13.4 billion in six months, 18.6% higher than that of the first semester of 2004. Of this total, 61.8% comes from exports and companies abroad.

 

Exports remain strong reaching US$ 628.1 million through June this year, 23.3% more than in the first semester of last year.

 

EBITDA (operational cash generation) increases 5.0% in six months compared to the same period in 2004. The total reached R$ 2.7 billion and margin 24.2%.

 

Net profit reached R$ 1.7 billion in the semester, 31.0% above the results for the same period in 2004. Net margin reached 15.1% compared to 13.7%.

 

Shareholders of the Brazilian listed Gerdau companies will be paid second quarter dividends on August 24th, 2005. Metalúrgica Gerdau S.A. will pay R$ 0.79 per share, and Gerdau S.A. R$ 0.48 per share.

 

Investor Relations

 

Phone: +55 51 3323.2703

E-mail: inform@gerdau.com.br

 

Additional information

 

This document and complementary information are available at our site at www.gerdau.com.br/ing/ri.

 

Highlights

 

•                  Net Profit – Consolidated net profit for the first six months of the year reached R$ 1.7 billion, 31.0% greater than that of the same period in 2004, when it reached R$ 1.3 billion. This result includes R$ 222,2 million in negative equity pick up resulting mostly from the devaluation of investments abroad, an FX revenue of R$ 233.6 million from debt denominated in foreign currencies in Brazil and R$ 305.8 million from the gains obtained with the incorporation of a subsidiary. Net profit for the Brazilian operations was R$ 1.3 billion, 55.3% more than in the first semester of 2004. In North America net profit reached R$ 359.4 million compared to R$ 394.6 million in the previous year. In the South American operations, ex-Brazil, net profit reached R$ 77.7 million compared to R$ 90.7 million in the period from January through June 2004. Consolidated net margin went from 13.7% to 15.1%.

 

•                  Revenues – Consolidated revenue reached R$ 13.4 billion in the first semester of 2005, presenting a growth of 18.6% over the same period in 2004. Factors that contributed to these revenues were the consolidation of the new North American units (North Star Steel) and the better performance of the Brazilian operations. The Brazilian operations contributed with 52.0% of this total (R$ 7.0 billion), companies in North America with 43.3% (R$ 5.8 billion) and those in Chile, Uruguay and Argentina with the remaining 4.7% (R$ 623.1 million). Gross revenues of the units abroad added to that of the Brazilian exports represented 61.8% of total consolidated sales in this first half of 2005.

 

•                  Exports – Shipments from Brazil to foreign customers totaled 1.5 million metric tons in the first six months of the current year, compared to 1.4 million metric tons in the same period in 2004 (+11.9%). These sales generated revenues of US$ 628.1 million, 23.3% greater than that of the first semester of 2004.

 

•                  EBITDA – Operating cash generation represented by EBITDA (gross profit minus cost of sales, general and administrative plus depreciation and amortization) was R$ 2.7 billion. This amount represents an increase of 5% compared to the figure for the same period in 2004, and EBITDA margin of 24.2%.

 

•                  Output – Output of slabs, blooms and billets in the first half of 2005 increased 5.4% compared to the same period in the previous year reaching 7.0 million metric tons. Output of rolled products reached 5.3 million metric tons, 5.9% greater than that of the first semester of 2004.

 


 

 

Main Data

 

1S2005

 

1S2004

 

Variation

 

Output (1,000 t)

 

7,001

 

6,641

 

5.4

%

Slabs, blooms and billets Rolled products

 

5,346

 

5,051

 

5.9

%

 

 

 

 

 

 

 

 

Shipments (1,000 t)

 

6,753

 

6,283

 

7.5

%

 

 

 

 

 

 

 

 

Gross sales revenue (R$ million)

 

13,382

 

11,280

 

18.6

%

Net sales revenue (R$ million)

 

11,267

 

9,472

 

19.0

%

EBITDA (R$ million)

 

2,728

 

2,599

 

5.0

%

EBTDA (R$ million)

 

2,727

 

2,216

 

23.1

%

Net profit (R$ million)

 

1,703

 

1,301

 

30.0

%

 

 

 

 

 

 

 

 

Shareholders’ Equity (R$ million)

 

9,121

 

5,884

 

55.0

%

Total assets (R$ million)

 

18,801

 

16,270

 

15.6

%

 

 

 

 

 

 

 

 

Gross margin

 

27.2

%

30.4

%

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

24.2

%

27.4

%

 

 

Net margin

 

15.1

%

13.7

%

 

 

 

 

 

 

 

 

 

 

Net profit/Shareholders’ Equity (ROE)(1)

 

39.9

%

34.1

%

 

 

 

 

 

 

 

 

 

 

Net Debt / Net total capitalization

 

25.6

%

45.7

%

 

 

Net debt / EBITDA(2)

 

0.6

x 

1.3

x 

 

 

 

(1)          Last 12 months net profit over shareholders’ equity.

(2)          Last 12 months EBITDA.

 

•                  Second quarter dividends – Shareholders of the Brazilian Gerdau listed companies will be paid second quarter dividends on August 24th based on their holdings at the 15th of that month. Metalúrgica Gerdau S.A. will pay R$ 97.4 million (R$ 0.79 per share), and Gerdau S.A. R$ 212.1 million (R$ 0.48 per share). Dividend payment accumulated for the year totaled R$ 186.5 million at Metalúrgica Gerdau S.A., and R$ 411.3 million at Gerdau S.A. The dividend yield (dividends per share of the last four quarters divided by the stock quote) is of 12.2% and of 8.9% per annum, respectively, calculated based on stock quotes of July 29th, 2005.

 

•                  Gerdau initiates share buy back program – Metalúrgica Gerdau S.A. and Gerdau S.A. were authorized by their Boards to buy back their stock for future cancellation in the period from May 31st through July 29th. These purchases were made with existing profit reserves. Metalúrgica Gerdau S.A. bought back 424.2 thousand preferred shares and Gerdau S.A., 740.2 thousand preferred shares. These operations were conducted at the stock exchanges at market prices through brokerage firms hired for this specific purpose.

 

•                  Gerdau Ameristeel reinforces its corporate governance structure in search of competitiveness – Gerdau Ameristeel’s Board of Directors announced on June 1st, that it had appointed Mr. Phillip Casey chairman in addition to his current responsibilities as the CEO through the month of January 2006. The Board also approved the appointment of Mr. Mario Longhi to the position of president of the Company and to the Board as a director in due time. He will take over as CEO in January 2006. Mr. Mario Longhi is now part of Gerdau Ameristeel following an international career of twenty-three years as a member of the executive team at Alcoa, a world benchmark in the aluminum industry. Phillip Casey, being appointed chairman of the Board of Directors takes responsibilities as a strategic player in conducting the growth plans for the Company and where corporate governance issues are concerned.

 

•                  Activities at the Beaumont, Texas, unit halted —Gerdau Ameristeel has decided to bring to a stop the productive activities at its Beaumont, Texas unit as of May 26th, 2005. This situation will remain until a consensus for that mill’s collective work contract is reached.  The Company has reached out for this legal expedient in order to put an end to the uncertainties resulting from the lack of a collective work contract and to provoke a positive reaction from the United Steelworkers of America – USWA with

 

 

2


 

regards to the proposal presented by the Company to the union’s negotiating committee in May 9th, 2005.

 

3


 

Operational and Corporate Reorganization

 

Gerdau is conducting an important investment program in South America. It has recently enhanced its geographical reach with a strategic alliance in Colombia, in addition to continuing to invest heavily in Brazil. Investments under way amount to US$ 1.5 billion, which should be concluded by 2007. Additionally, other US$ 900 million are being detailed.

 

This increase in activities in the region along with strategic, managerial and operational challenges leads the Company to reorganize its subsidiaries. This reorganization will contribute in a decisive manner to the development of alternatives for the future growth of Gerdau.

 

With this reorganization the Company expects to obtain greater strategic advantages in South America, and greater managerial and operational efficiency through the specialization of the different units and operations. The effort will be concentrated in its main competencies by means of a focused approach, the attaining of critical mass within each operation along with operating synergies.

 

This reorganization became feasible as a result of changes in Brazilian tax laws at the end of 2004. The main change was the elimination of the cumulative effect of social contributions (PIS and COFINS). This compounding of taxes forced companies to structure themselves vertically, from a corporate law point of view. This vertical integration had to be done in order to eliminate inefficiencies resulting from the cumulative system. Without this tax hurdle, Gerdau may now restructure its businesses in a more efficient way.

 

The Board of Directors of Gerdau S.A. met in December 3rd, 2004 and authorized the implementation of the reorganization program in companies in South America as the ensuing steps to the two-year old program initiated in Brazil with the integration of the operational activities of Gerdau S.A. with those of Aço Minas Gerais S.A. - Açominas, from which resulted Gerdau Açominas S.A.

 

The first step of this process, on December 29th, was the capitalization of the holding Gerdau Participações S.A. with stock from Gerdau Açominas S.A. and part of the capital of Gerdau Internacional Empreendimentos Ltda., owned by Gerdau S.A. These stakes are representative of Gerdau Internacional Empreendimentos Ltda., direct and indirect participation in the capital stock of the companies Gerdau Chile Inversiones Ltda., Gerdau Laisa S.A. and Sipar Aceros S.A., as already disclosed.

 

To complete a sequence of corporate operations, the shareholders of Gerdau Açominas S.A. approved, on July 29th, the breaking up and the incorporation of company net assets into the following companies: GERDAU AÇOS LONGOS S.A., GERDAU AÇOS ESPECIAIS S.A. and GERDAU COMERCIAL DE AÇOS S.A. These companies will be focused and operate in long common steels, specialty long steels and the selling of steel products in general. GERDAU AÇOMINAS S.A., headquartered in Ouro Branco, Minas Gerais, will remain focused mainly in the production of slabs, blooms and billets for export. Additionally, GERDAU AMÉRICA DO SUL PARTICIPAÇÕES S.A. was created to overlook the operations in the other South American operations (except for Brazil). With these new companies, the corporate structure will be as follows:

 

4


 

 

As a consequence of this corporate restructuring, each Gerdau Açominas S.A. shareholder, the company that previously controlled all Brazilian-based operations, now has a stake in each of the five companies mentioned previously, which will remain non-public corporations.

 

The chart below presents some of the data for the new companies resulting from the reorganization just concluded. The data are relative to June 30th, 2005:

 

 

 

Gerdau
Açominas
S.A.

 

Gerdau 
Aços Longos
 S.A.

 

Gerdau 
Aços
Especiais
S.A.

 

Gerdau 
Comercial de
Aços S.A.

 

Gerdau 
América do
Sul Partic.
 S.A.

 

Output (1,000 t)*

 

1,441

 

1,911

 

196

 

—

 

228

 

Shareholders’ Equity (R$ thousand)

 

3,228,571

 

2,207,922

 

379,204

 

517,836

 

625,183

 

Total assets (R$ thousand)

 

5,194,717

 

4,200,342

 

571,556

 

660,600

 

625,183

 

 

* January through June 2005

 

Gerdau’s corporate governance will remain unchanged with its Board of Directors responsible for the general guidance of business and the Gerdau Executive Committee responsible for the overall operations.

 

Shareholders of the public companies in Brazil and abroad are not affected in any way by the reorganization. They will continue to hold their stakes in the corresponding companies along with all their rights. In line with the guidelines regarding strategic directives of profitability and growth, Gerdau’s historical commitment is to generate value for the shareholder and the reorganization reflects this objective. The reorganization will make it easier to understand each business segment, will offer greater transparency and will increase the efficiency and the effectiveness of the administrative processes.

 

Shareholders of Gerdau Açominas S.A., Gerdau Aços Longos S.A., Gerdau Aços Especiais S.A., Gerdau Comercial de Aços S.A. and Gerdau América do Sul Participações S.A. will be entitled to opt to be part of the entire steel business of the Group, including those in North America in addition to getting liquidity for their stakes. Gerdau will offer these shareholders the option to swap their shares for common and preferred stock of Gerdau S.A., owned by Metalúrgica Gerdau S.A.

 

5


 

Second Quarter 2005 Performance

Gerdau S.A. - Consolidated

 

Output and Sales

 

The output of slabs, blooms and billets at the Gerdau companies remained at about the same levels of the two first quarters of the year reaching approximately 3.5 million metric tons in each period.  Units in Brazil contributed with 50.4% in the second quarter’s volume while the North American operations contributed with 46.4% and South America with the remaining 3.2%. In the semester, output increased 5.4% compared to the same period in the previous year, reaching 7.0 million metric tons due to, in part, to the incorporation of the new units in North America in November 2004 (North Star Steel).

 

Output
(1,000 metric tons)

 

2Q05

 

1Q05

 

Variation

 

1S05

 

1S04

 

Variation

 

Crude Steel (slabs, blooms and billets)

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

 

1,757.3

 

1,791.3

 

(1.9

)%

3,548.6

 

3,576.6

 

(0.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

1,618.0

 

1,606.3

 

0.7

%

3,224.3

 

2,871.5

 

12.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South America

 

113.0

 

115.4

 

(2.1

)%

228.4

 

192.4

 

18.7

%

Total

 

3,488.3

 

3,513.0

 

(0.7

)%

7,001.3

 

6,640.5

 

5.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rolled Products

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

 

991.0

 

968.4

 

2.3

%

1,959.4

 

2,120.8

 

(7.6

)%

North America

 

1,567.6

 

1,568.4

 

—

 

3,136.0

 

2,703.3

 

16.0

%

South America

 

123.5

 

127.3

 

(3.0

)%

250.8

 

226.6

 

10.7

%

Total

 

2,682.1

 

2,664.1

 

0.7

%

5,346.2

 

5,050.7

 

5.9

%

 

•                  Output of rolled products reached 2.7 million metric tons in the second quarter, 0.7% greater than the volume produced in the first quarter. Output in Brazil reached 991.0 thousand metric tons (+2.3%), a reflex of the slight recovery in the civil construction sector’s demand. Meanwhile in North America, output remained at the same levels in the two quarters reaching 1.6 million metric tons in each period. In South America (except Brazil), output was of 123.5 thousand metric tons, 4 thousand tons less than in the first quarter.

 

6


 

 

Output of Blooms, slabs and billets

(1,000 metric tons)

Output of Rolled Products

(1,000 metric tons)

 

•                  Consolidated sales reached 3.4 million metric tons in the second quarter this year, 1.3% greater than the volume shipped in the first quarter. Gerdau Açominas, responsible for the operations in Brazil, presented an increase of 5.3%, helped by exports. In North America, shipments were 3.0% lower in the quarter, as a result of the smaller demand for wire rod and flat steel. In the South American countries (except Brazil) sales increased 4.6%, a consequence of the improvement in demand in Argentina and Uruguay. Volumes shipped in the semester increased 7.5% compared to the same period last year, reaching 6.8 million metric tons, due to a great extent to the new units incorporated in November 2004 in North America.

 

Shipments
(1,000 metric tons)

 

2Q05

 

1Q05

 

Variation

 

1S05

 

1S04

 

Variation

 

Brazil

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic market

 

876.8

 

865.8

 

1.3

%

1,742.6

 

1,963.9

 

(11.3

)%

Exports

 

795.5

 

721.8

 

10.2

%

1,517.3

 

1,355.7

 

11.9

%

Total

 

1,672.3

 

1,587.6

 

5.3

%

3,259.9

 

3,319.6

 

(1.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Abroad

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

1,582.7

 

1,631.6

 

(3.0

)%

3,214.3

 

2,723.2

 

18.0

%

South America

 

142.2

 

136.0

 

4.6

%

278.2

 

239.9

 

16.0

%

Total

 

1,724.9

 

1,767.6

 

(2.4

)%

3,492.5

 

2,963.1

 

17.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total

 

3,397.2

 

3,355.2

 

1.3

%

6,752.4

 

6,282.7

 

7.5

%

 

•                  Shipments abroad totaled 795.5 thousand metric tons in the second quarter, contributing with 47.6% of total sales in Brazil. These shipments generated net revenues of US$ 349.0 million in the period and accumulated US$ 628.1 million in the first semester this year.

 

7


 

Shipments

(1,000 metric tons)

Shipments by Product Line

(% over 2Q05 metric tons)

 

•                  Tonnage shipped from units abroad added to exports from Brazil represented 74.2% of the consolidated volume of the second quarter of 2005.

 

Results

 

•                  Consolidated net revenues reached R$ 5.4 billion in the second quarter this year, 6.8% less than in the first quarter. In spite of the increase of 1.3% in volumes shipped, revenues generated in US dollars, when converted into reais, reflect the appreciation of the Brazilian currency, reducing the totals expressed in reais. The Brazilian operations contributed with R$ 2.7 billion to the quarter’s net revenues, that is, 49.1% of the total amount. The business in North America generated net revenues of R$ 2.5 billion and units in South America R$ 258.7 million, 46.1% and 4.8%, respectively, of consolidated net revenues.

 

•                  Companies abroad and the Brazilian operations exports, together, contributed with 66.9% to total net revenues in the second quarter of 2005.

 

Net Sales Revenue
(R$ millions)

 

2Q05

 

1Q05

 

Variation

 

1S05

 

1S04

 

Variation

 

Brazil

 

2,669.4

 

2,664.7

 

0.2

%

5,334.1

 

4,530.7

 

17.7

%

North America

 

2,507.3

 

2,884.6

 

(13.1

)%

5,391.9

 

4,594.1

 

17.4

%

South America

 

258.7

 

282.6

 

(8.5

)%

541.3

 

347.2

 

55.9

%

Total

 

5,435.4

 

5,831.9

 

(6.8

)%

11,267.3

 

9,472.0

 

19.0

%

 

•                  Gross margin was 26.8% in the second quarter this year showing a relative stability in cost of goods sold compared to that of the first quarter when gross margin was 27.6%. Gross profit reached R$ 1.5 billion in the months of April through June, 9.5% less than that of the first three months of 2005, suffering the same FX impact that net revenues suffered.

 

8


 

Net Sales Revenue per ton

(R$ per metric ton)

Gross Margin

(%)

 

 

 

Obs.: Prices indicated above are influenced by product mix changes and by FX variations in the period.

 

EBITDA
(R$ millions)

 

2Q05

 

1Q05

 

Variation

 

1S05

 

1S04

 

Variation

 

Brazil

 

867.2

 

933.8

 

(7.1

)%

1,801.0

 

1,648.1

 

9.3

%

North America

 

386.1

 

409.9

 

(5.8

)%

796.0

 

817.5

 

(2.6

)%

South America

 

59.8

 

71.3

 

(16.1

)%

131.1

 

133.1

 

(1.5

)%

Total

 

1,313.1

 

1,415.0

 

(7.2

)%

2,728.1

 

2,598.7

 

5.0

%

 

•                  EBITDA in the second quarter reached R$ 1.3 billion (R$ 1.4 billion in the first quarter), maintaining the EBITDA margin at the same levels of the previous quarter, at 24.2%.

 

EBITDA

(R$ millions)

EBITDA Margin

(%)

 

Obs.: The EBITDA of companies abroad are influenced by FX  variations

 

•                  Net financial expenses excluding FX and monetary variations totaled R$ 110.8 million in the quarter compared to R$ 81.0 million in the previous quarter. If taken into consideration revenues from FX variation (R$ 230.3 million) and monetary (R$ 2.8 million), Gerdau had financial revenues in its consolidated second quarter balance sheet of (financial expenses minus financial revenues) of R$ 122.3 million.

 

9


 

EBTDA
(R$ millions)

 

2Q05

 

1Q05

 

Variation

 

1S05

 

1S04

 

Variation

 

Gross profit

 

1,458.4

 

1,612.1

 

(9.5

)%

3,070.5

 

2,883.5

 

6.5

%

Cost of sales

 

(126.4

)

(117.4

)

7.7

%

(243.8

)

(214.7

)

13.5

%

General/administrative expenses

 

(227.6

)

(292.6

)

(22.2

)%

(520.2

)

(482.3

)

7.9

%

Depreciation & amortization

 

208.7

 

212.9

 

(2.0

)%

421.6

 

412.2

 

2.3

%

EBITDA

 

1,313.1

 

1,415.0

 

(7.2

)%

2,728.1

 

2,598.7

 

5.0

%

Net financial expenses (excluding FX and monetary variations)

 

(110.8

)

(81.0

)

36.8

%

(191.8

)

(190.7

)

0.6

%

FX and monetary variations

 

233.1

 

(42.0

)

—

 

191.2

 

(192.3

)

—

 

EBTDA

 

1,435.4

 

1,292.0

 

11.1

%

2,727.5

 

2,215.7

 

23.1

%

 

•                  The result of equity pickup was negative by R$ 244.6 million in the quarter. This total reflects significant FX variations on investments abroad, fiscal incentive reserves as well as on goodwill amortization in the period.

 

•                  This second quarter there was a R$ 305.8 million income accounted for as Other Non-operating revenues and results from the benefits incurred with the incorporation of Gerdau Participações by Gerdau Açominas S.A., on May 9th.

 

•                  Net profit for the second quarter reached R$ 892.6 million, 10.1% more than that of the first quarter. Net margin increased to 13.9%, in the first three months of the year, to 16.4%, in the second quarter.

 

Net profit
(R$ millions)

 

2Q05

 

1Q05

 

Variation

 

1S05

 

1S04

 

Variation

 

Brazil

 

711.2

 

554.8

 

28.2

%

1,266.0

 

815.3

 

55.3

%

North America

 

150.2

 

209.2

 

(28.2

)%

359.4

 

394.6

 

(8.9

)%

South America

 

31.2

 

46.5

 

(32.9

)%

77.7

 

90.7

 

(14.3

)%

Total

 

892.6

 

810.5

 

10.1

%

1,703.1

 

1,300.6

 

31.0

%

 

Investments

 

•                  The second quarter of this year saw investments of US$ 190.0 million, mostly for the construction of the new steel mill in Araçariguama, São Paulo, and for the increase in the installed capacity of the mill in Ouro Branco, Minas Gerais. For the year, the accumulated investment totaled US$ 364.0 million.

 

Investments
(US$ millions)

 

2Q05

 

1Q05

 

1S05

 

Brazil

 

139.4

 

139.9

 

279.3

 

Gerdau Açominas

 

134.7

 

139.2

 

273.9

 

Other

 

4.7

 

0.7

 

5.4

 

 

 

 

 

 

 

 

 

Abroad

 

50.6

 

34.1

 

84.7

 

North America

 

40.4

 

31.6

 

72.0

 

South America

 

10.2

 

2.5

 

12.7

 

 

 

 

 

 

 

 

 

Total

 

190.0

 

174.0

 

364.0

 

 

•                  Investments made by region in the second quarter are as follows:

 

10


 

Investments per Region

(% distribution of 2Q05 investments)

 

Indebtedness

 

•                  Net debt at June 30th was R$ 3.1 billion, 22.8% lower than that at March 31st, 2005, reflecting the appreciation of the Brazilian currency vis-à-vis the US dollar and a positive cash generation for the period.

 

•                  Of the total gross debt, 22.7% was short term (R$ 1.3 billion) and the remaining 77.3% long term (R$ 4.5 billion).

 

•                  Among the main indicators that limit the indebtedness of the Gerdau companies, the gross debt to EBITDA ratio in the last twelve months was 1.0x. That same EBITDA when compared to net financial expenses and excluding FX and monetary variations was 20.2x.

 

•                  At the end of June, the main indicators related to indebtedness were as follows:

 

Ratios

 

06.30.2005

 

03.31.2005

 

06.30.2004

 

Net debt / Total net capitalization

 

25.6

%

32.6

%

45.7

%

EBITDA(1) / Net financial expenses(1)
(excluding FX and monetary variations)

 

20.2x

 

23.4x

 

8.4x

 

Gross Debt / EBITDA(1)

 

1.0x

 

1.1x

 

1.6x

 

Net Debt / EBITDA(1)

 

0.6x

 

0.7x

 

1.3x

 

 

(1) – Last twelve months

 

•                  On June 30th, cash and cash equivalents totaled R$ 2.6 billion, of which R$ 1.4 billion (51.6%) were indexed to a foreign currency, mainly the US dollar.

 

Indebtedness
(R$ millions)

 

06.30.2005

 

03.31.2005

 

06.30.2004

 

Short term

 

 

 

 

 

 

 

Domestic Currency - Brazil

 

206.3

 

205.8

 

190.6

 

Foreign Currency - Brazil

 

473.0

 

640.9

 

1,127.6

 

Companies Abroad

 

628.3

 

765.0

 

904.5

 

Total

 

1,307.6

 

1,611.7

 

2,222.7

 

 

 

 

 

 

 

 

 

Long Term

 

 

 

 

 

 

 

Domestic Currency - Brazil

 

1,459.7

 

1,405.6

 

702.4

 

Foreign Currency - Brazil

 

1,528.5

 

1,679.5

 

1,887.2

 

Companies Abroad

 

1,475.6

 

1,700.9

 

1,634.5

 

Total

 

4,463.8

 

4,786.0

 

4,224.1

 

 

 

 

 

 

 

 

 

Gross Debt

 

5,771.4

 

6,397.7

 

6,446.8

 

Cash & Cash Equivalents

 

2,627.1

 

2,326.3

 

1,490.1

 

Net Debt

 

3,144.3

 

4,071.4

 

4,956.7

 

 

11


 

•                  The long term payment schedule, at June 30th, debentures included, was as follows:

 

Year

 

R$ millions

 

2006

 

279.3

 

2007

 

848.1

 

2008

 

672.3

 

2009

 

410.5

 

2010

 

279.8

 

After 2010

 

1,973.8

 

Total

 

4,463.8

 

 

Corporate Governance

 

•                  The new Securities and Exchange Commission (SEC) regulation added new requirements that foreign listed companies have to comply with to trade in US stock exchanges. To adapt to these new regulations, Gerdau S.A., which has its shares traded at the New York Stock Exchange, has been adopting measures to consolidate and improve risk management practices in its operations. The Integrated Risk Management initiative reinforces the good corporate governance practices at the Company. Additionally, it establishes formally the planning and the definition of responsibilities in the risk, management, internal audit and other areas involved. In parallel, Gerdau S.A. shareholders at a General Shareholders’ meeting held on April, 28th this year approved the changes in the by-laws concerning the Board of Auditors, adapting it to the requirements of the US law in lieu of the Board of Auditors. With these changes implemented, the Board of Auditors at Gerdau S.A. will now exist permanently with its own statute and a financial specialist.

 

12


 

Non-consolidated data

 

Metalúrgica Gerdau S.A.

 

•      Second quarter dividends will be paid on August 24th based on positions held at August 15th. The total being paid is R$ 97.4 million, representing R$ 0.79 per share. Taking into account the compensation paid to shareholders in the last four quarters, the dividend yield (dividend per share divided by the share’s price) is 12.2% per annum calculated on the stock quote of R$ 32,30 per share, recorded on July 29th, 2005.

 

Period

 

Dividends
(R$ millions)

 

Per share
(R$)

 

Number of
shares
(million)

 

Payment
Data

 

1o quarter

 

89.1

 

0.72

 

123.7

 

05/24/05

 

2o quarter

 

97.4

 

0.79

 

123.3

 

08/24/05

 

Total

 

186.5

 

1.51

 

123.3

 

—

 

 

•                  At Bovespa, Metalúrgica Gerdau S.A. (GOAU) shares presented an important liquidity increase in the first semester of 2005, compared to the same period in the previous year. There were 56.445 trades in the first half of the year (+120.0%), with 28.8 million shares traded (+76.9%). These transactions moved R$ 1.4 billion, 49.9% more than in the first semester of 2004. From January through June, trading with preferred shares reached a daily average trading of R$ 9.6 million compared to R$ 6.7 million in the same period in 2004.

 

•                  From July 2004 to June 2005, the evolution of preferred shares at the São Paulo Stock Exchange was as follows:

 

BOVESPA

(Base 100)

 

 

 

•                  Metalúrgica Gerdau S.A. had a net profit of R$ 342.4 million (R$ 2.77 per share) in the second quarter, 2005, 9.8% greater than that of the first quarter. This profit was the result of, essentially, investments in subsidiaries and affiliates which generated an equity pickup of R$ 341.5 million in the months of April through June.

 

13


 

•                  The company’s shareholders’ equity on June 30th, 2005 was R$ 3.5 billion, representing a shareholders’ equity per share of R$ 28.49.

 

Gerdau S.A.

 

•                  Second quarter 2005 dividends will be paid on August 24th, and calculated based on holdings at August 15th. The total to be paid is R$ 212.1 million (R$ 0.48 per share). Considering the compensation to shareholders in the last four quarters, the dividend yield (dividend per share divided by the share’s price) is 8.9% per annum and calculated based on a stock quote of R$ 24,90 per share, as recorded on July 29th, 2005.

 

Period

 

Dividends
(R$ millions)

 

Per share
(R$)

 

Number of
shares
(million)

 

Payment
Data

 

1o quarter

 

199.2

 

0.45

 

442.7

 

05/24/05

 

2o quarter

 

212.1

 

0.48

 

442.0

 

08/24/05

 

Total

 

411.3

 

0.93

 

442.0

 

—

 

 

•                  At the São Paulo Stock Exchange there were 140.0 million Gerdau S.A. (GGBR) shares traded in 173.935 deals during the first semester of 2005, presenting an increase of 171.9% and 101.2%, respectively, over the same period in 2004. These trades moved financial resources totaling R$ 4.7 billion (+86.9%). From January through June, trades with preferred shares presented a daily average trading volume of R$ 33.5 million, 71.7% greater than that of the same months in 2004.

 

•                  Gerdau S.A. (GGB) level 2 ADRs traded at the New York Stock Exchange (NYSE), moved US$ 1.3 billion in the first semester of 2005, an amount 182.3% greater than that of the same period in 2004 and equivalent to an average daily trading of US$ 10.5 million. There were 94.0 million shares traded, 243.8% more than in 2004.

 

•                  From July 2004 through June 2005, stock quotes of preferred shares at the São Paulo Stock Exchange and at the New York Stock Exchange was as follows:

 

BOVESPA

(Base 100)

NYSE

(Base 100)

 

14


 

•                  At the Latibex (Madrid Stock Exchange), the Gerdau S.A. (XGGB) shares moved € 8.1 million during the first semester of 2005, 244.6% more than in the same period in the previous year. There were 811.6 thousand shares traded, 371.2% more than in the months of January through June 2004.

 

•                  Gerdau S.A. had a net profit of R$ 743.6 million in the second quarter (R$ 1.68 per share) compared to R$ 694.8 million in the first quarter. This profit comes from basically equity pick up from investments in subsidiaries and affiliated companies, and the income generated with the incorporation of Gerdau Participações S.A. by Gerdau Açominas S.A., completed on May 9th, 2005.

 

•                  At June 30th, shareholders’ equity was R$ 7.3 billion, equivalent to R$ 16.51 per share.

 

Gerdau Açominas S.A.

 

•                  The company produced 1.8 million metric tons of slabs, blooms and billets during the second quarter this year, a volume 1.9% lower than that of the period between January and March. Output of rolled products reached 991.0 thousand metric tons, 2.3% more than in the first quarter.

 

•                  Shipments totaled 1.7 million metric tons in the months of April through June, 5.3% greater than that of the first quarter. Exports increased reaching 795.5 thousand metric tons, 10.2% above the volume exported in the first quarter. Shipments to other countries contributed with 47.6% of total sales the company had in the quarter and generated revenues of US$ 349.0 million.

 

•                  Gross revenues reached R$ 3.5 billion in the second quarter this year, 1.8% greater than that of the first quarter. This reflected mostly the increase of 9.7% in the average dollar for export. Net revenues reached R$ 2.7 billion, 2.2% more than in the first three months of the year.

 

•                  With the increase in exports throughout the first six months of the year, the percentage contribution of these sales to net revenues increased to 32.7% in the second quarter, up from 29.3% in the first quarter. In this manner, the appreciation of the Brazilian currency vis-à-vis the US dollar throughout the second quarter and the stability in dollar denominated costs in both periods resulted in a lower gross margin, going from 40.2% down to 36.6%.

 

•                  EBITDA in the second quarter reached R$ 845.1 million, 8.7% lower than that of the first quarter. Due to factors already mentioned above, the EBITDA margin fell from 34.9%, in the first quarter, to 31.2%, in the second quarter.

 

•                  Net profit in the quarter reached R$ 565.2 million, 11.5% greater than that of the months of January through March this year. Net margin stayed at 20.9% in the period.

 

•                  Based on the result for the period, shareholders will be paid R$ 237.4 million in dividends, on August 24th, relative to the second quarter. This total represents R$ 1.32 per share held at August 15th.

 

•                  At June 30th, shareholders’ equity was R$ 7.0 billion, equivalent to a shareholders’ equity of R$ 38.69 per share.

 

15


 

Gerdau Ameristeel Corporation

 

•                  From January through June this year, Gerdau Ameristeel (GNA.TO) shares, traded at the Toronto Stock Exchange, moved Cdn$ 439.3 million, amount 238.9% greater than that of the same months in 2004. There were 62.3 million shares traded in the period presenting an increase of 136.7%. The average daily volume traded surpassed Cdn$ 1.0 million, in the first semester of 2004, to reach Cdn$ 3.5 million, in the first semester of 2005.

 

•                  At the New York Stock Exchange (NYSE), the company shares (GNA) moved US$ 187.4 million throughout the first semester of 2005, a daily average of US$ 1.5 million. There were 32.5 million shares traded in the period.

 

•                  The evolution of the stock quotes at the Toronto Stock Exchange in the twelve month period from July 2004 to June 2005 is expressed in the chart below. At the New York Stock Exchange, the chart represents the evolution from October 2004 onward, when the stock began trading at this exchange:

 

TORONTO STOCK EXCHANGE

(Base 100)

NYSE

(Base 100)

 

•      According to Brazilian accounting rules (Brazilian GAAP), net revenues at Gerdau Ameristeel in the second quarter of 2005 reached R$ 2.5 billion, 13.1% lower than that of the first quarter. Although revenues in North America, in US dollars, were the same, this total, when converted into reais, reflects the appreciation of the real vis-à-vis the US dollar in the period.

 

•      EBITDA also adjusted to Brazilian GAAP, reached R$ 386.1 million in the quarter. This amount was 5.8% lower than that of the first quarter this year due to the same reasons that net revenues were reduced. EBITDA margin went from 14.2%, in the first quarter, to 15.4% in the second.

 

•      On the second quarter, net profit reached R$ 150.2 million, presenting a net margin of 6.0% in the period.

 

16


 

MANAGEMENT

 

GERDAU S.A. - Consolidated

BALANCE SHEET

 

Corporate Law - R$ thousands

 

Jun. 2005

 

Mar. 2005

 

TOTAL ASSETS

 

18,800,578

 

19,221,501

 

Current assets

 

9,703,021

 

9,931,457

 

Cash and cash & equivalents

 

220,275

 

292,256

 

Trade accounts receivable

 

2,365,677

 

2,606,374

 

Taxes recoverable

 

229,648

 

209,102

 

Temporary cash investments

 

2,406,856

 

2,034,030

 

Inventories

 

4,067,084

 

4,335,309

 

Deferred income tax & other

 

413,481

 

454,386

 

Long-term receivables

 

1,007,523

 

1,091,380

 

A/R with related parties

 

2,244

 

—

 

Taxes recoverable

 

146,791

 

142,673

 

Judicial deposits and other

 

169,768

 

187,945

 

Deferred income tax

 

527,579

 

577,705

 

Advance payment for acquisition of invest.

 

161,141

 

183,057

 

Permanent assets

 

8,090,034

 

8,198,664

 

Investments

 

58,586

 

64,413

 

Fixed assets

 

7,991,818

 

8,101,625

 

Deferred

 

39,630

 

32,626

 

 

Corporate Law - R$ thousands

 

Jun. 2005

 

Mar. 2005

 

TOTAL LIABILITIES

 

18,800,578

 

19,221,501

 

Current liabilities

 

4,013,661

 

4,645,400

 

Loans and Financing

 

1,304,987

 

1,604,231

 

Debentures

 

2,597

 

7,462

 

Trade accounts payable

 

1,694,436

 

1,933,444

 

Taxes payable

 

341,081

 

516,477

 

Dividends payable

 

—

 

—

 

A/P with related parties

 

—

 

2,616

 

Deferred income tax & other

 

670,560

 

581,170

 

Long-term liabilities

 

5,666,312

 

6,150,314

 

Loans and Financing

 

3,488,382

 

3,823,797

 

Debentures

 

975,411

 

962,167

 

Deferred income tax & other

 

1,202,519

 

1,364,350

 

Minority Shareholders

 

1,820,179

 

1,657,117

 

Shareholders' equity

 

7,300,426

 

6,768,670

 

Capital stock

 

5,206,969

 

3,471,312

 

Capital reserves

 

376,672

 

376,672

 

Profit reserves

 

477,576

 

2,225,872

 

Retained earnings

 

1,239,209

 

694,814

 

 

17


 

GERDAU S.A. - Consolidated

FINANCIAL STATEMENT

 

Corporate Law - R$ thousands

 

2Q2005

 

1Q2005

 

2Q2004

 

6M2005

 

6M2004

 

GROSS SALES REVENUE

 

6,454,187

 

6,928,795

 

6,306,775

 

13,382,982

 

11,279,701

 

Deductions of gross revenue

 

(1,018,811

)

(1,096,890

)

(1,007,759

)

(2,115,701

)

(1,807,679

)

Net sales revenue

 

5,435,376

 

5,831,905

 

5,299,016

 

11,267,281

 

9,472,022

 

Cost of sales

 

(3,977,012

)

(4,219,840

)

(3,432,740

)

(8,196,852

)

(6,588,478

)

Gross profit

 

1,458,364

 

1,612,065

 

1,866,276

 

3,070,429

 

2,883,544

 

Operating result

 

(473,589

)

(442,902

)

(644,483

)

(916,491

)

(1,069,092

)

Selling expenses

 

(126,385

)

(117,343

)

(117,588

)

(243,728

)

(214,670

)

General and administrative expenses

 

(227,589

)

(292,629

)

(273,837

)

(520,218

)

(482,289

)

Financial income

 

15,817

 

60,879

 

64,662

 

76,696

 

110,198

 

Financial expenses

 

106,507

 

(183,843

)

(294,072

)

(77,336

)

(493,183

)

Other operating income (expenses), net

 

2,709

 

67,580

 

(3,526

)

70,289

 

14,021

 

Equity pick-up

 

(244,648

)

22,454

 

(20,122

)

(222,194

)

(3,169

)

Operating profit

 

984,775

 

1,169,163

 

1,221,793

 

2,153,938

 

1,814,452

 

Non-operating income (expenses), net

 

305,341

 

172

 

6,776

 

305,513

 

(2,742

)

Profit before taxes/participation

 

1,290,116

 

1,169,335

 

1,228,569

 

2,459,451

 

1,811,710

 

Provision for income tax

 

(275,533

)

(300,394

)

(219,683

)

(575,927

)

(333,058

)

Deferred income tax

 

(116,034

)

(51,451

)

(128,372

)

(167,485

)

(163,008

)

Statutory participation

 

(5,901

)

(6,993

)

(7,184

)

(12,894

)

(15,019

)

Net Profit for the period

 

892,648

 

810,497

 

873,330

 

1,703,145

 

1,300,625

 

Controlling Shareholders

 

743,610

 

694,814

 

742,803

 

1,438,424

 

1,124,762

 

Minority Shareholders

 

149,038

 

115,683

 

130,527

 

264,721

 

175,863

 

 

 

METALÚRGICA GERDAU S.A. - Consolidated

CASH FLOW

 

Corporate Law - R$ thousands

 

2Q2005

 

1Q2005

 

2Q2004

 

6M2005

 

6M2004

 

NET INCOME

 

899,493

 

809,668

 

868,443

 

1,709,161

 

1,290,952

 

Equity pick up

 

248,789

 

(10,538

)

20,101

 

238,251

 

3,148

 

Provision for credit risk

 

(1,112

)

(6,457

)

5,507

 

(7,569

)

8,139

 

Gain/Loss in fixed asset disposal

 

642

 

(42

)

4,464

 

600

 

9,738

 

Gain/Loss in disposal/incorporation of investment

 

(305,931

)

—

 

3,561

 

(305,931

)

3,598

 

Monetary and exchange variation

 

(197,181

)

39,351

 

149,354

 

(157,830

)

205,781

 

Depreciation and amortization

 

208,694

 

212,963

 

240,685

 

421,657

 

412,259

 

Income tax

 

6,250

 

119,900

 

167,292

 

126,150

 

256,451

 

Interest paid

 

105,618

 

100,637

 

111,576

 

206,255

 

238,297

 

Contingencies/legal deposits

 

(12,608

)

553

 

7,098

 

(12,055

)

14,759

 

Changes in trade account receivable

 

117,608

 

29,401

 

(462,029

)

147,009

 

(846,652

)

Changes in inventories

 

(45,815

)

(61,884

)

(262,642

)

(107,699

)

(448,709

)

Changes in trade accounts payable

 

(92,227

)

(92,794

)

(32,536

)

(185,021

)

315,032

 

Other accounts in operating activities

 

45,422

 

55,518

 

162,869

 

100,940

 

97,217

 

Net cash provided by operating activities

 

977,642

 

1,196,276

 

983,743

 

2,173,918

 

1,560,010

 

Fixed assets acquisitions/ disposals

 

(439,302

)

(388,086

)

(267,673

)

(827,388

)

(487,124

)

Deferred charges

 

(8,175

)

(5,921

)

(3,678

)

(14,096

)

(6,315

)

Investments acquisitions/ disposals

 

289

 

(31,872

)

(9

)

(31,583

)

(12

)

Cash (applied to) investing activities

 

(447,188

)

(425,879

)

(271,360

)

(873,067

)

(493,451

)

Fixed assets suppliers

 

(21,529

)

(31,135

)

3,626

 

(52,664

)

(1,611

)

Working capital financing

 

(181,503

)

(184,824

)

(210,100

)

(366,327

)

66,499

 

Debentures

 

(2,494

)

92,905

 

(21,961

)

90,411

 

13,578

 

Proceeds from fixed assets financing

 

160,252

 

287,360

 

148,708

 

447,612

 

193,196

 

Payments of fixed assets financing

 

(103,846

)

(225,370

)

(154,903

)

(329,216

)

(383,860

)

Interest paid for financing

 

(108,611

)

(110,032

)

(82,754

)

(218,643

)

(220,330

)

Inter companies loans

 

(778

)

(747

)

7,785

 

(1,525

)

18,417

 

Capital increase/Treasury stock

 

528,775

 

2,661

 

567

 

531,436

 

(40,343

)

Dividend/ interest & statutory particip, payment

 

(258,208

)

(355,645

)

(105,509

)

(613,853

)

(302,467

)

Cash provided by (applied to) financing activities

 

12,058

 

(524,827

)

(414,541

)

(512,769

)

(656,921

)

Net change in cash

 

542,512

 

245,570

 

297,842

 

788,082

 

409,638

 

Cash balance

 

 

 

 

 

 

 

 

 

 

 

At the beginning of the period

 

2,262,592

 

2,003,945

 

1,131,525

 

2,003,945

 

1,015,726

 

Effect of exchange rate changes on cash

 

(229,846

)

6,374

 

59,295

 

(223,472

)

63,298

 

Opening balance of incorporated companies for the year

 

(731

)

6,703

 

 

 

5,972

 

—

 

At the end of the period

 

2,574,527

 

2,262,592

 

1,488,662

 

2,574,527

 

1,488,662

 

Cash composition

 

 

 

 

 

 

 

 

 

 

 

Temporary cash investments

 

2,349,420

 

1,966,608

 

1,281,286

 

2,349,420

 

1,281,286

 

Cash

 

225,107

 

295,984

 

207,376

 

225,107

 

207,376

 

 

18