EX-99.2 3 a06-11443_1ex99d2.htm EX-99

Exhibit 99.2

 

Porto Alegre, May 3, 2006

GERDAU S.A. – CONSOLIDATED

First Quarter 2006 Results

Brazilian Corporate Law

 

Conference Calls

May 3rd, 2006

 

Portuguese: 1:30PM (Brasília)
English: 3:00PM (Brasília)

 

To listen in:

• Portuguese: (password: GERDAU)

From Brazil: 0800 702.5666 or 11 2101.1490

 

Other countries:  +55 11 2101.1490

 

• English (password: 7280228)

From the USA: (888) 802.8578 or (973) 633.1010

 

From Brazil: 0800 891.3951 or +1 (973) 633.1010

 

Other countries: +1 (973) 633.1010

 

• Internet: www.gerdau.com.br/ri

 

Market Capitalization on March 31st, 2006

 

Gerdau S.A.

Bovespa: US$ 10.0 billion

 

Metalúrgica Gerdau S.A.

Bovespa: US$ 3.4 billion

 

Gerdau Ameristeel Corp.

Toronto: US$ 3.3 billion

 

Shares outstanding on March 31st, 2006

 

Gerdau S.A.

Bovespa: GGBR3 and GGBR4,

NYSE: GGB and Latibex: XGGB

ON: 154,404,672

PN: 288,748,257 443,152,929

 

Metalúrgica Gerdau S.A.

Bovespa: GOAU3 and GOAU4

ON:  41,584,395

PN: 81,721,590 123,305,985

 

Gerdau Ameristeel Corp.

Toronto: GNA.TO and NYSE: GNA

ON: 304,730,706

 

Crude steel output hits new record high for the quarter with 3.7 million tons in the period. Current rhythm indicates output of 15 million tons for the year.

 

Highlights

•

Net Profit

 

•

Consolidated net profit for the first quarter of 2006 reached R$832.5 million, 2.7% greater than that of the same period in 2005, when it reached the mark of R$810.5 million. Net margin increased from 13.9% to 14.8%.

 

•

The Brazilian operations had a net profit of R$557.0 million, 0.4% greater than that of the first quarter of 2005. Net profit in the North American operations was R$195.4 million compared to R$209.2 million, and in South America (excluding Brazil) R$63.1 million, 35.7% greater than that of the period of January through March 2005. In Spain, where Gerdau now consolidates Corporación Sidenor, the profit corresponding to the 40% stake in the Company was R$17.0 million for the quarter.

 

•

Gross Revenues

 

•

The consolidated gross revenue for the first quarter reached R$6.6 billion, 4.5% lower than that of the same period in 2005.

 

•

The cause of this reduction was in part a result of the drop in taxes on steel products for the civil construction sector in the domestic market and the appreciation of the Brazilian currency in the period. The negative impact of the devaluation was felt in revenues generated in US dollars both from exports and operations abroad when converted into reais.

 

•

The Brazilian operations generated revenues of R$3.3 billion, 49.2% of the consolidated revenues. Revenues at the units in North America reached R$2.6 billion, 39.6% of the total, while companies in Uruguay, Chile, Argentina and Colombia contributed with R$536.1 million, 8.1% of the consolidated figure, and the stake in the Spanish company added another R$204.8 million, 3.1% of the total.

 

•

Revenues from operations abroad added to the revenues generated by exports from Brazil represented 59.7% of the consolidated revenue of the first quarter of 2006.

 

•

Exports

 

•

The improvements in the domestic demand throughout the quarter led to the adjustment of exports in order to better cater to the needs of the domestic market.

 

•

Excluding shipments to subsidiaries, exports reached 627.1 thousand tons in the first quarter of 2006, 13.1% lower than in the first quarter of 2005.

 

•

Adding back the exports to subsidiaries abroad, exports maintained a good rhythm in the quarter. Volumes exported reached 736.1 thousand tons, and generated revenues of US$286.6 million.

 

•

EBITDA

 

•

EBITDA (gross profit minus SG&A plus depreciation and amortization) in the first quarter this year reached R$1.2 billion and EBITDA margin (EBITDA divided by net revenue) was 20.8% compared to 24.3% in the first quarter of the previous year.

 

1


 

Net Profit reaches R$ 832 million in the quarter, 2.7% greater than that of the same period in the previous year. Net margin reaches 14,9%.

 

Revenues generated by exports added to shipments of companies abroad totaled R$ 4.0 billion and represent 59.7% of consolidated figures.

 

Operating cash generation (EBITDA) reaches R$ 1.2 billion and EBITDA margin 20.8% in the period.

 

Metalúrgica Gerdau S.A. and Gerdau S.A shareholders will be paid dividends for the first quarter on May 25th, 2006.

 

Stock Dividend of 50% granted in April expects to increase liquidity and increase access to investors with the reduction of the minimum trading volume (minimum lot).

 

Business expansion in the United States continues with the acquisition of three units in the first three months of the year.

 

•             Output

•             The output of crude steel (slabs, blooms and billets) totaled 3.7 million tons in the quarter, surpassing the tonnage of the same period in 2005 by 5.8%.

 

•             Output of rolled products reached 3.0 million tons, 14.1% more than in the first quarter of the previous year.

 

Main data

 

1Q06

 

1Q05

 

Variation

 

Output (1,000 t)

 

 

 

 

 

 

 

Crude Steel (Slabs, blooms and billets) Rolled products

 

3,717

 

3,512

 

5.8

%

 

 

3,043

 

2,667

 

14.1

%

Shipments (1,000 t)

 

3,691

 

3,374

 

9.4

%

Gross sales revenue (R$million)

 

6,617

 

6,929

 

(4.5

)%

Net sales revenue (R$million)

 

5,614

 

5,832

 

(3.7

)%

EBITDA (R$million)

 

1,169

 

1,415

 

(17.4

)%

EBTDA (R$million)

 

1,544

 

1,292

 

19.5

%

Net profit (R$million)

 

832

 

810

 

2.7

%

 

 

 

 

 

 

 

 

Shareholders’ Equity (R$million)

 

10,895

 

8,426

 

29.3

%

Total assets (R$million)

 

23,068

 

19,222

 

20.0

%

 

 

 

 

 

 

 

 

Gross margin

 

26.3

%

27.6

%

 

 

EBITDA margin

 

20.8

%

24.3

%

 

 

Net margin

 

14.8

%

13.9

%

 

 

 

 

 

 

 

 

 

 

Net profit/Shareholders’ Equity(1)

 

30.0

%

42.9

%

 

 

 

 

 

 

 

 

 

 

Net debt / Net capitalization

 

17.8

%

32.6

%

 

 

Net debt / EBITDA(2)

 

0.5x

 

0.7x

 

 

 

 

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

2) EBITDA of last 12 months.

 

•                  Interest on Capital Stock

•                  First quarter 2006.

•                  Payment on May 25th, 2006.

•                  Based on shares held on May 15th (ex-interest on May 16).

•                  Metalúrgica Gerdau S.A. will pay R$ 96.2 million (R$ 0.52 per share – based on 184.958.976 shares).

•                  Gerdau S.A. will pay R$ 199.4 million (R$ 0.30 per share – based on 664.729.393 shares).

 

•                  Stock Dividend

•                  Date of approval: March 31st, 2006.

•                  50% in Metalúrgica Gerdau S.A. and 50% in Gerdau S.A., the result of the incorporation of Reserves and Profits for a total of R$ 1.2 billion and of R$ 2.6 billion, respectively.

•                  Cost attributed to new shares: R$ 20.01 for Metalúrgica Gerdau S.A. shares and R$ 11.70 for those of Gerdau S.A.

•                  Based on stock holdings on April 12th (ex-stock dividend on April 13).

•                  Metalúrgica Gerdau S.A. went from 124.8 million shares issued to 187.1 million.

•                  Gerdau S.A. went from 445.1 million shares issued to 667.6 million.

 

•                  Acquisitions in the USA

•                  Callaway Building Products (Knoxville, Tennessee).

• March 14th, 2006.

• A supplier of cut-and-bent concrete reinforcing bars (rebars) for the civil construction sector.

 

2


 

Melt shop at the São Paulo mill is inaugurated and the start up of the rolling mill is expected in the second quarter this year

 

Investidor Relations

Tel.: +55 51 3323.2703

E-mail: inform@gerdau.com.br

 

Addicional Information

 

This document and complementary information concerning the first quarter are available at our site www.gerdau.com.br/ri.

 

•             Fargo Iron and Metal Company (Fargo, North Dakota).

•   March 23rd, 2006.

•   Storage and scrap processing facility and service provider to industries and civil construction companies.

 

•             Sheffield Steel Corporation (Sand Springs, Oklahoma).

•             April 5th, 2006.

•             Mini-mill, producer of long steel, namely rebars and merchant bars. It has a nominal capacity of approximately 600 thousand tons per annum. The company operates a melt shop and a rolling mill in Sand Springs, Oklahoma, a rolling mill in Joliet, Illinois, and three downstream operations in Kansas City and Sand Springs.

•             Investment of approximately US$ 94 million, and a net debt and long term liabilities of approximately US$ 94 million for a total of US$ 188 million.

•             Acquisition should be concluded in the second quarter 2006.

 

•                  Gerdau inaugurates new mini-mill

•            Date of inauguration: March 9th, 2006.

•            Location: Araçariguama, State of São Paulo.

•            Investment made: R$ 500 million (R$ 90 million for environmental protection of the atmosphere, waters and soil.

•            Installed Capacity: 900 thousand tons of crude steel per year.

•  The second quarter of 2006 will see the start up of a rolling mill with an annual installed capacity of 600 thousand tons of rebars.

 

•               Corporate Governance

•             Gerdau has taken another step forward in perfecting its corporate governance this year.

•    In complying with the new corporate law, the minority shareholders of Gerdau S.A. elected a representative to the Board of Directors on April 27th.

 

3


 

First Quarter 2006 Performance

Gerdau S.A. - Consolidated

 

Output and Sales

 

•   The output of crude steel (slabs, blooms and billets) totaled 3.7 million tons in the quarter of 2006, 8.6% greater than the volume produced in the fourth quarter of 2005.

 

•      Output of rolled products reached 3.0 million tons in the quarter surpassing by 7.1% the volume of the last three months of 2005.

 

•      In the chart and tables below we present the evolution in output volumes for each region where Gerdau has operations.

 

Output 
(1,000 metric tons)

 

1Q06

 

1Q05

 

Variation
1Q06/1Q05

 

4Q05

 

Variation
 1Q06/4Q05

 

Crude Steel (slabs, blooms and billets)

 

 

 

 

 

 

 

 

 

 

 

Brazil

 

1,732

 

1,790

 

(3.3

)%

1,696

 

2.1

%

North America

 

1,672

 

1,606

 

4.1

%

1,532

 

9.2

%

South America

 

242

 

116

 

110.2

%

194

 

24.7

%

Europe

 

71

 

—

 

—

 

—

 

—

 

Total

 

3,717

 

3,512

 

5.8

%

3,422

 

8.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Rolled Products

 

 

 

 

 

 

 

 

 

 

 

Brazil

 

1,102

 

973

 

13.3

%

1,040

 

6.0

%

North America

 

1,585

 

1,568

 

1.0

%

1,533

 

3.4

%

South America

 

287

 

126

 

127.6

%

267

 

7.4

%

Europe

 

69

 

—

 

—

 

—

 

—

 

Total

 

3,043

 

2,667

 

14.1

%

2,840

 

7.1

%

 

Output of Crude Steel (Slabs, blooms and billets)
(1,000 metric tons)

 

 

Output of Rolled Products
(1,000 metric tons)

 

 

•      Consolidated sales in the first quarter of the year accumulated 3.7 million tons, 9.5% greater than those of the fourth quarter of 2005. The highlight of the period goes to the recovery of demand in the Brazilian domestic market, and in North America.

 

4


 

Consolidated Shipments(1)
(1,000 metric tons)

 

1Q06

 

1Q05

 

Variation
1Q06/1Q05

 

4Q05

 

Variation
1Q06/4Q05

 

Brazil

 

 

 

 

 

 

 

 

 

 

 

Domestic market

 

980

 

866

 

13.2

%

854

 

14.8

%

Exports

 

627

 

722

 

(13.1

)%

680

 

(7.8

)%

Total

 

1,607

 

1,588

 

1.3

%

1,534

 

4.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Abroad

 

 

 

 

 

 

 

 

 

 

 

North America

 

1,671

 

1,631

 

2.4

%

1,505

 

11.0

%

South America

 

335

 

155

 

116.7

%

331

 

1.4

%

Europe

 

78

 

—

 

—

 

—

 

—

 

Total

 

2,084

 

1,786

 

16.6

%

1,836

 

13.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total

 

3,691

 

3,374

 

9.4

%

3,370

 

9.5

%

 

(1)                     Excluding shipments to subsidiaries

 

•             In Brazil, the improvements in demand throughout the first quarter, especially in civil construction, allowed for a growth of 14.8% in sales to clients in the country (980.4 thousand tons).

 

•             With this performance, exports minus shipments to subsidiaries abroad reached 627.1 thousand tons, 7.8% lower than those of the fourth quarter of 2005.

 

•             Including shipments to subsidiaries abroad, exports remained at a strong pace in the quarter. Volumes shipped reached 736.1 thousand tons and generated revenues of US$ 286.6 million.

 

Consolidated Shipments

(1,000 metric tons)

 

 

•      In consolidated terms, sales volumes of units abroad added to exports out of Brazil represented 73.4% of the consolidated volume for the first quarter of 2006.

 

Results

 

•      Consolidated Net Revenues for the first quarter of 2006 reached R$ 5.6 billion, 14.9% greater than that of the fourth quarter of 2005. This performance is the result of the increase in shipments, especially in Brazil and in North America, and the consolidation of the 40% of the results generated at Corporación Sidenor, Spain.

 

•      The Gerdau companies abroad and the exports from Brazil contributed with 65.1% to consolidated net revenues of the first quarter of 2006.

 

Net Sales Revenue
(R$ millions)

 

1Q06

 

1Q05

 

Variation
1Q06/1Q05

 

4Q05

 

Variation
1Q06/4Q05

 

Brazil

 

2,479

 

2,665

 

(7.0

)%

2,247

 

10.3

%

North America

 

2,459

 

2,884

 

(14.8

)%

2,238

 

9.9

%

South America

 

477

 

283

 

68.8

%

401

 

18.9

%

Europe

 

199

 

—

 

—

 

—

 

—

 

Total

 

5,614

 

5,832

 

(3.7

)%

4,886

 

14.9

%

 

5


 

•      Gross Profit reached R$ 1.5 billion in the first quarter. This allowed for a gross margin of 26.3% in the period remaining at the same levels as in the fourth quarter of the previous year. In South America – except Brazil – the reduction in margins is explained in part by the increase in scrap prices in some regions. In consolidated terms, however, the improvement in margins in North America fully compensated this increase in scrap costs.

 

Net Sales Revenue per Ton

(R$ per metric ton)

Note: Prices on the chart are influenced by the eventual change in product mix and FX variations.

 

Gross Margin

(%)

 

•      SG&A totaled R$ 561.7 million in the first quarter of 2006, 22.8% greater than those of the fourth quarter 2005. Cost of sales in particular presented a reduction of 12.6%, as a result of the decrease in exports which generated fewer expenses with port fees. SG&A suffered an increase of 38.8%, basically for three reasons: a) increase in the cost of long term incentives for Gerdau Ameristeel employees to the amount of R$ 55.4 million; b) consolidation of 40% of Corporación Sidenor, Spain, for a total of R$ 21.6 million; c) increase of R$ 16.2 million in royalties for the use of the Gerdau brand name, the result of a recent appraisal of the value that the brand adds to the business conducted by a company that is the international reference in evaluating brands and defining licensing fees.

 

EBITDA
(R$ millions)

 

1Q06

 

1Q05

 

Variation
1Q06/1Q05

 

4Q05

 

Variation
1Q06/4Q05

 

Brazil

 

646

 

934

 

(30.8

)%

603

 

7.1

%

North America

 

382

 

410

 

(6.8

)%

334

 

14.4

%

South America

 

108

 

71

 

52.1

%

99

 

9.1

%

Europe

 

33

 

—

 

—

 

—

 

—

 

Total

 

1,169

 

1,415

 

(17.4

)%

1,036

 

12.8

%

 

•      EBITDA (gross profit minus SG&A plus depreciation and amortization) in the first quarter this year reached R$ 1.2 billion, 12.8% greater than that in the last quarter of 2005. EBITDA margin (EBITDA divided by net revenues) 20.8%, staying at levels comparable to those of the fourth quarter of last year.

 

6


 

EBITDA

(R$ millions)

Note: EBITDA, in reais, of companies abroad is influenced by FXX variations in the period.

 

EBITDA Margin

(%)

 

·      From January through March the financial results (financial expenses minus financial revenues) was positive R$ 374.4 million. Excluding results from foreign exchange variations due to the appreciation of the real vis-à-vis the US dollar in the period regarding indebtedness in foreign currency (R$ 242.5 million) and with monetary variations (R$ 3.2 million), net financial income totaled R$ 128.7 million in the quarter.

 

EBTDA
(R$ millions)

 

1Q06

 

1Q05

 

Variation
1Q06/1Q05

 

4Q05

 

Variation
1Q06/4Q05

 

Gross profit

 

1,479

 

1,612

 

(8.3

)%

1,289

 

14.7

%

Cost of sales

 

(125

)

(117

)

6.3

%

(143

)

(12.6

)%

General/administrative expenses

 

(437

)

(293

)

49.3

%

(315

)

38.8

%

Depreciation & amortization

 

252

 

213

 

18.5

%

205

 

23.2

%

EBITDA

 

1,169

 

1,415

 

(17.4

)%

1,036

 

12.8

%

Net financial expenses (excluding FX and monetary variations)

 

129

 

(88

)

—

 

(10

)

 

 

FX and monetary variations

 

246

 

(35

)

—

 

(209

)

 

 

EBTDA

 

1,544

 

1,292

 

19.5

%

817

 

89.0

%

 

•      This first quarter, the Other Operating Revenues line accrued R$ 60.5 million, the result of mainly the final verdict in a legal suit based on Decree-laws 2.445/88 e 2.449/88, favorable to Gerdau, on the improper collection of PIS taxes from Gerdau Açominas S.A.

 

•      The appreciation of the real vis-à-vis the US dollar in the quarter had a negative impact on investments Gerdau has abroad. This resulted in a negative equity pick up of R$ 197.2 million in the quarter. This total includes fiscal incentives and goodwill amortized in the period.

 

•      Net profit for the first quarter of 2006 reached R$ 832.5 million, 14.0% greater than that of the fourth quarter of 2005. Net margin remained at the same 15.0% in both quarters.

 

7


 

Net profit
(R$ millions)

 

1Q06

 

1Q05

 

Variation
1Q06/1Q05

 

4Q05

 

Variation
1Q06/4Q05

 

Brazil

 

557

 

555

 

0.4

%

461

 

20.7

%

North America

 

195

 

209

 

(6.6

)%

207

 

(5.6

)%

South America

 

63

 

46

 

35.7

%

62

 

2.1

%

Europe

 

17

 

—

 

—

 

—

 

—

 

Total

 

832

 

810

 

2.7

%

730

 

14.0

%

 

Investments

 

•      Investments in the quarter totaled US$ 223.1 million, destined mostly to the increase of installed capacity in several units in Brazil and abroad.

 

•      It is worthwhile mentioning that in the month of March the assets of two industrial units were acquired in the United States. The first one was Callaway Building Products, in Knoxville, Tennessee, a supplier of civil construction cut and bent reinforcing concrete bars. The second was Fargo Iron and Metal Company, located in Fargo, North Dakota, a storage and scrap processing facility and service provider to industries and civil construction companies.

 

•      On April 5, Gerdau signed a purchase agreement for the acquisition of Sheffield Steel Corporation, of Sand Springs, Oklahoma, in the USA.

•      Sheffield is a mini-mill producer of long common steel, namely concrete reinforcing bars and merchant bars. It has one melt shop and one rolling mill in Sand Springs, Oklahoma, one rolling mill in Joliet, Illinois, and three transformation units in Kansas City and Sand Springs.

•      The cost of the operation was estimated in US$ 104 million, plus a net debt and some long term liabilities for a total of about US$ 84 million for a total of US$ 188 million.

 

•      The acquisition should be finalized in the second quarter of 2006.                 

 

Investments per Region

(1º trimestre de 2006)

 

 

•      The acquisition of the 40% stake in Corporación Sidenor, the largest long specialty steel producer, forged parts and foundry in Spain and one of the major producers of forged parts by stamping in that country, was completed on January 11, 2006. The investment totaled € 185.3 million.

 

Indebtedness

 

•      Net Debt (loans and financing plus debentures minus cash and cash equivalents), on March 31st, 2006, was R$ 2.4 billion, 10.3% greater than that of December 31st, de 2005, due to the consolidation of 40% of the operations in Spain.

 

•      Of total debt (loans, financing and debentures, 18.3% were short term (R$ 1.4 billion) and 81.7% long term (R$ 6.5 billion).

 

•      On March 31st, gross debt was composed of 24.7% in local currency, 46.2% in foreign currency contracted from Brazil and 29.1% in other currencies contracted by different foreign subsidiaries.

 

8


 

•      The main Gerdau companies’ indebtedness indicators at the end of March were the following:

 

Ratios

 

03.31.2006

 

03.31.2005

 

12.31.2005

 

Net debt / Total net capitalization

 

17,8

%

32.6

%

17.7

%

Gross Debt / EBITDA(1)

 

1.7x

 

1.1x

 

1.6x

 

Net Debt / EBITDA(1)

 

0.5x

 

0.7x

 

0.4x

 

 

(1)          1 – Last twelve months

 

•      On March 31st, cash and cash equivalents totaled R$ 5.5 billion, of which R$ 2.2 billion (38.9%) were indexed to foreign currencies, mainly the US dollar.

 

Indebtedness
(R$ millions)

 

03.31.2006

 

03.31.2005

 

12.31.2005

 

Short term

 

 

 

 

 

 

 

Domestic Currency - Brazil

 

245

 

206

 

228

 

Foreign Currency - Brazil

 

400

 

641

 

350

 

Companies Abroad

 

809

 

765

 

752

 

Total

 

1,454

 

1,612

 

1,330

 

 

 

 

 

 

 

 

 

Long Term

 

 

 

 

 

 

 

Domestic Currency - Brazil

 

1,717

 

1,406

 

1,497

 

Foreign Currency - Brazil

 

3,276

 

1,679

 

3,245

 

Companies Abroad

 

1,504

 

1,701

 

1,579

 

Total

 

6,497

 

4,786

 

6,321

 

 

 

 

 

 

 

 

 

Gross Debt

 

7,951

 

6,398

 

7,651

 

Cash & Cash Equivalents

 

5,539

 

2,326

 

5,465

 

Net Debt

 

2,412

 

4,072

 

2,186

 

 

•      The amortization schedule for the long term debt, including debentures, on March 31st, was as follows:

 

Year

 

R$ millions

 

2007

 

1,016

 

2008

 

857

 

2009

 

571

 

2010

 

526

 

2011 and after

 

3,527

 

Total

 

6,497

 

 

9


 

Non-consolidated Data

 

Metalúrgica Gerdau S.A.

 

•      First Quarter 2006 Interest on Capital Stock

•                        Payment on May 25th, based on shareholdings on May 15th.

•                        Shareholders will be paid R$ 96.2 million (R$ 0.52 per share).

•                        Dividend Yield (dividend per share last four quarters/stock quote on April 28th) of 4.7%.

 

•      Stock Dividend

•                        Date of approval: March 31st, 2006.

•                        Stock dividend of 50%, as a result of the capitalization of Profit Reserves of R$ 1.2 billion.

•                        Nominal cost of new shares issued: R$ 20.01 per share.

•                        Based on shareholdings on April 12th (ex-stock dividend on April 13th).

•                        Shares outstanding increased from 124.8 million to 187.1 million.

 

•      Stock Liquidity

•      Trading with Metalúrgica Gerdau S.A. (GOAU) shares, at the São Paulo Stock Exchange, moved R$ 1.1 billion in the first quarter, 38.6% more than in the same period in 2005.

•      The average daily financial trading volume of preferred shares was R$ 16.2 million (R$ 11.0 million in the first quarter of 2005).

•      The number of trades increased 24,2%, reaching 32,816 compared to 26,430 in the first months of 2005.

•       The number of shares traded in the quarter reached 19.1 million in the quarter compared to 12.3 million in the same period in 2005 (+56.0%).

 

BOVESPA (Base 100)

 

•      Results

•      Metalúrgica Gerdau S.A. recorded a net profit of R$ 337.2 million in the first quarter of 2006, equivalent to R$ 2.73 per share.

•      This profit, essentially the result of equity pick up from investments in subsidiaries, was 13.2% greater than that of the last quarter of 2005.

 

•      On March 31st, 2006, the shareholders’ equity in the company was R$ 4.2 billion, representing a net worth of R$ 34.03 per share.

 

Gerdau S.A.

 

•      First Quarter 2006 Interest on Capital Stock

•      Payment on May 25th, based on shareholdings on May 15th.

•      Shareholders will be paid R$ 199.4 million (R$ 0.30 per share).

•      Dividend Yield (dividend per share last four quarters/stock quote on April 28th) of 3.3%.

 

•      Stock Dividend

•      Date of approval: March 31st, 2006.

•      Stock dividend of 50%, as a result of the capitalization of Profit Reserves of R$ 2.6 billion.

•      Nominal cost of new shares issued: R$ 11.70 per share.

 

10


 

• Based on shareholdings on April 12th (ex-stock dividend on April 13th).

• Shares outstanding increased from 445.1 million to 667.6 million.

 

•  Stock Liquidity

•  São Paulo Stock Exchange

Trading with Gerdau S.A. (GGBR) shares moved R$ 2.7 billion in the first quarter of 2006, a volume similar to that of the first quarter of 2005.  The average daily financial volume of preferred shares was R$ 39.7 million (R$ 39.6 million in the first quarter of 2005).   There were 79,032 trades, a reduction of 8.8% (86,677 in the first three months of 2005).  Number of shares traded in the quarter was 59.8 million, practically the same as in the same period in 2005.

 

•  New York Stock Exchange (NYSE)

Trading in Gerdau S.A. (GGB) ADRs totaled US$ 1.5 billion in the first quarter of 2006, volume 105.1% greater than that of the same period in 2005.  The average daily trading was of US$ 23.7 million compared to US$ 11.8 million.  Shares traded totaled 68.9 million (40.5 million in the same period in the previous year).

 

•  adrid Stock Exchange (Latibex)

Gerdau S.A. (XGGB) traded 21.6 thousand preferred shares in the first quarter of 2006, 58.8% greater than the volumes traded in 2005. These trades moved financial resources of € 384.1 thousand in the first three months of this year compared to € 182.8 thousand in the same period of the previous year.

 

•  From April 2005 to March 2006, the evolution of stock quotes at the São Paulo Stock Excahnge and at the New York Stock Exchange were as follows:

 

BOVESPA
(Base 100)

NYSE
(Base 100)

 

•  Results

•  Gerdau S.A. produced a net profit of R$ 680.0 million in the first quarter of 2006. This is equivalent to R$ 1.53 per share.

•  This profit results mostly from the equity pick from investments in subsidiaries and was 5.9% greater than those of the last quarter of 2005.

 

•  On March 31st, 2006, shareholders’ equity at the company was R$ 8.7 billion, representing a shareholders’ equity of R$ 19.70 per share.

 

11


 

Gerdau Ameristeel Corporation

 

•  As already has been happening since the first quarter of 2005, the company will pay quarterly dividends, on June 2nd, of US$ 0.02 per share to shareholdings held on May 18th.

 

•  Stock Liquidity:

Toronto Stock Exchange

•  Gerdau Ameristeel (GNA.TO) shares moved Cdn$ 297.5 million in the first quarter of 2006, 23.0% greater than in the same period in 2005. The average daily trading was of Cdn$ 4.6 million.  Shares traded totaled 33.3 million (30.8 million in the same period of the previous year).

 

•  New York Stock Exchange (NYSE)

Gerdau Ameristeel (GNA) shares moved US$ 214.1 million in the first quarter of 2006, 93.9% greater than in the same period in 2005. The average daily trading was of US$ 3.5 million. Shares traded: 26.7 million (17.2 million in the same period last year).

 

•  From April 2005 to March 2006, the evolution of stock quotes at the Toronto Stock Exchange and at the New York Stock Exchange was as follows:

 

BOLSA DE VALORES DE TORONTO
(Base 100)

NYSE
(Base 100)

 

•  Results

•  Net revenues adjusted to Brazilian GAAP was R$ 2.5 billion in the first quarter of 2006, 9.9% above that of the fourth quarter of 2005. Increased volumes shipped and of the average selling price in the period contributed to this growth.

•  EBITDA, also adjusted to Brazilian GAAP, reached R$ 381.9 million in the period between January and March of the ongoing year. This was 14.2% greater than in the fourth quarter of 2005. EBITDA margin went from 14.9% to 15.5%.

•  Net profit reached R$ 195.4 million in the first compared to 207.1 million in the fourth quarter of 2005.

 

12


 

MANAGEMENT

 

GERDAU S.A. - Consolidated

BALANCE SHEET

 

Corporate Law - R$ thousands

 

Mar. 2006

 

Dec. 2005

 

TOTAL ASSETS

 

23,067,947

 

21,879,186

 

Current assets

 

12,346,547

 

12,129,178

 

Cash and cash & equivalents

 

1,227,582

 

271,399

 

Trade accounts receivable

 

2,373,062

 

2,059,806

 

Taxes recoverable

 

277,238

 

199,764

 

Temporary cash investments

 

4,252,446

 

5,193,295

 

Inventories

 

3,777,117

 

4,018,629

 

Deferred income tax & other

 

439,102

 

386,285

 

Long-term receivables

 

1,093,263

 

882,798

 

Deferred income tax and Other

 

1,093,263

 

882,798

 

Permanent assets

 

9,628,137

 

8,867,210

 

Investments

 

359,252

 

112,668

 

Fixed assets

 

9,203,147

 

8,693,501

 

Deferred

 

65,738

 

61,041

 

 

Corporate Law - R$ thousands

 

Mar. 2006

 

Dec. 2005

 

TOTAL LIABILITIES

 

23,067,947

 

21,879,186

 

Current liabilities

 

4,291,674

 

4,189,108

 

Loans and Financing

 

1,453,053

 

1,327,248

 

Debentures

 

1,690

 

2,719

 

Trade accounts payable

 

1,673,397

 

1,675,464

 

Taxes payable

 

455,831

 

306,067

 

Dividends/interest on capital stock payable

 

—

 

208,774

 

Deferred income tax & other

 

707,703

 

668,836

 

Long-term liabilities

 

7,881,284

 

7,549,558

 

Loans and Financing

 

5,431,091

 

5,352,420

 

Debentures

 

1,065,644

 

969,043

 

Deferred income tax & other

 

1,384,549

 

1,228,095

 

Minority Shareholders

 

2,163,522

 

2,098,334

 

Shareholders’ equity

 

8,731,467

 

8,042,186

 

Capital stock

 

5,206,969

 

5,206,969

 

Capital reserves

 

376,794

 

376,684

 

Profit reserves

 

2,467,689

 

2,458,533

 

Retained earnings

 

680,015

 

—

 

 

13


 

GERDAU S .A. - Consolidated

FINANCIAL STATEMENT

 

Corporate Law - R$ thousands

 

1Q2006

 

4Q2005

 

1Q2005

 

GROSS SALES REVENUE

 

6,616,947

 

5,935,277

 

6,928,795

 

Deductions of gross revenue

 

(1,002,959

)

(1,048,970

)

(1,096,890

)

Net sales revenue

 

5,613,988

 

4,886,307

 

5,831,905

 

Cost of sales

 

(4,135,314

)

(3,597,056

)

(4,219,840

)

Gross p rofit

 

1,478,674

 

1,289,251

 

1,612,065

 

Selling expenses

 

(124,787

)

(142,735

)

(117,343

)

General and administrative expenses

 

(436,957

)

(314,717

)

(292,629

)

Financial income

 

298,808

 

207,775

 

60,879

 

Financial exp enses

 

75,600

 

(427,344

)

(183,843

)

Other operating income (expenses), net

 

60,546

 

69,607

 

67,580

 

Equity pick-up

 

(197,228

)

195,924

 

22,454

 

O p eratin g p rofit

 

1,154,656

 

877,761

 

1,169,163

 

Non-operating income (expenses), net

 

11,846

 

(7,098

)

172

 

Profit before taxes/ participation

 

1,166,502

 

870,663

 

1,169,335

 

Provision for income tax

 

(258,368

)

(150,088

)

(300,394

)

Deferred income tax

 

(70,528

)

18,458

 

(51,451

)

Statutory participation

 

(5,150

)

(8,538

)

(6,993

)

Net Profit for the period

 

832,456

 

730,495

 

810,497

 

Controllin g Shareholders

 

680,015

 

642,399

 

694,814

 

Minority Shareholders

 

152,441

 

88,096

 

115,683

 

 

GERDAU S .A. - Consolidated

CASH FLOW

 

Corporate Law - R$ thousands

 

1Q2006

 

4Q2005

 

1Q2005

 

NET INCOME

 

832,456

 

730,495

 

810,497

 

Equity pick up

 

197,228

 

(195,924

)

(22,454

)

Provision for credit risk

 

7,859

 

(6,984

)

(6,608

)

Gain/Loss in fixed asset disposal

 

(11,479

)

4,674

 

(42

)

Gain/Loss in disposal/incorporation of investment

 

(144

)

(1

)

—

 

Monetary and exchange rate variation (1)

 

(237,210

)

273,661

 

38,225

 

Depreciation and amortization

 

252,223

 

204,701

 

212,924

 

Income tax

 

103,734

 

(70,900

)

135,917

 

Interest paid

 

156,375

 

157,479

 

111,301

 

Contingencies/legal deposits

 

22,450

 

(51,248

)

517

 

Changes in trade account receivable

 

(334,439

)

348,402

 

26,622

 

Changes in inventories

 

312,266

 

(26,702

)

(61,884

)

Changes in trade accounts payable

 

(61,719

)

101,893

 

(101,202

)

Other accounts in operating activities

 

(59,715

)

(20,581

)

61,589

 

Net cash provided by operating activities

 

1,179,885

 

1,448,965

 

1,205,402

 

Fixed assets acquisitons/ disposals

 

(498,032

)

(480,425

)

(394,144

)

Deferred charges

 

(3,343

)

(5,287

)

137

 

Investments acquisitions/ disposals

 

(435,966

)

18,632

 

(269

)

Cash (applied to) investing activities

 

(937,341

)

(467,080

)

(394,276

)

Fixed assets suppliers

 

(5,616

)

(1,904

)

(31,136

)

Debentures

 

(40,046

)

(80,990

)

13,285

 

Proceeds from fixed assets financing

 

1,081,497

 

165,664

 

287,360

 

Payments of fixed assets financing

 

(771,598

)

(77,664

)

(374,615

)

Interest paid for financing

 

(130,665

)

(128,626

)

(107,211

)

Inter companies loans

 

2,381

 

22,151

 

3,190

 

Capital increase/Treasury stock

 

17,489

 

(3,305

)

2,661

 

Dividend/ interest & statutory particip, payment

 

(382,143

)

(237,872

)

(333,419

)

Cash provided by (applied to) financing activities

 

(228,701

)

(342,546

)

(539,885

)

Net change in cash

 

13,843

 

639,339

 

271,241

 

Cash balance

 

 

 

 

 

 

 

At the beginning of the period

 

5,464,694

 

4,691,684

 

2,041,968

 

Effect of exchange rate changes on cash

 

(165,592

)

129,630

 

6,374

 

Opening balance of incorporated companies for the year

 

167,083

 

4,040

 

6,703

 

At the end of the period

 

5,480,028

 

5,464,693

 

2,326,286

 

Cash composition

 

 

 

 

 

 

 

Cash & cash equivalents

 

4,252,446

 

4,279,199

 

2,034,030

 

Cash

 

1,227,582

 

1,185,495

 

292,256

 

 

(1) Includes gain/loss on derivative instruments

 

This press release 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.

 

14