Gerdau S.a. · BMFBOVESPA:GGBR3
Gerdau — Investor Day (October 2024)
55 slides from Gerdau's investor day presentation, Oct 4, 2024
Slide 1: Gerdau Investor Day 2024
GERDAU Investor Day 2024
Slide 2: Agenda
AGENDA OPENING BRAZIL BD SOUTH AMERICA BD NORTH AMERICA BD SPECIAL STEEL BD FINANCIAL MANAGEMENT TAKEAWAYS Q&A
Slide 3: For Each Challenge, Our Best Version
FOR EACH CHALLENGE, OUR BEST VERSION 3
Slide 4: Safety Is Our Value, Quality Is Our Business, Efficiency Is Our Progress
SAFETY IS OUR VALUE QUALITY IS OUR BUSINESS EFFICIENCY IS OUR PROGRESS 4
Slide 5: And Our Future Lies in People
AND OUR FUTURE LIES IN PEOPLE Rômulo Jesuíno da Silva Ouro Branco Unit 5
Slide 6: Brazil BD
GERDAU Investor uN 2024 BRAZIL BD GUSTAVO WERNECK GERDAU Shape the future
Slide 7: Unfair Import of Steel Is the Biggest Sectoral Problem in Brazil
8,8% 11,5% 10,5% 10,3% 9,1% 15,3% 13,3% 18,3% 18,3% IN THE FIRST 8 MONTHS OF 2024: THE UNFAIR IMPORT OF STEEL IS THE BIGGEST SECTORAL PROBLEM IN BRAZIL BRAZIL BD 7 Penetration rate: 18.3% Average monthly imports: ~390kt (~73% above the historical average¹) Import volume:~3.1 Mt (~76% above the histo
Slide 8: Positive Outlook for Most Segments in Which We Operate
BRAZIL BD 8 POSITIVE OUTLOOK FOR MOST OF THE SEGMENTS IN WHICH WE OPERATE SECTORAL TREND FOR 2024/2025 Source: 1 Tendências – IBGE – (Latest Projection in Aug/24) | 2 Tendências – IBGE – (Latest Projection in Aug/24) | 3 Tendências – IBGE/Conab – (Latest Projection in Aug/24) | 4 Tendências - FGV -
Slide 9: Complete Portfolio of Products and Solutions for Clients and Partners
COMPLETE PORTFOLIO OF PRODUCTS AND SOLUTIONS FOR OUR CLIENTS AND PARTNERS BRAZIL BD 9 Bars and Structurals Industrial Welds and Wires Wire Rod Flat Steel (Hot Rolled Coils and Plates) Structurals Agro Line Reels Nails Finished Products Rebar Downstream Start of flat steel operations in Ouro Branco L
Slide 10: Complete Portfolio of Products and Solutions for Clients and Partners
10 Industry Agro Structurals Downstream Rebar Finished Products GG70: High-strength rebar New Oval Wire Customized Flat Steel for Oil & Gas and Wind Gerdau Mais Copper Free MIG Welding Wire Benchmark for better building solutions and technology, enabling a new level of productivity and sustainabilit
Slide 11: Comercial Gerdau Nationwide Presence
Latin America’s largest steel distributor, with a broad portfolio of products and services for our clients and partners. With value propositions for each segment, it is a benchmark of the ease of doing business: always focusing on clients, adding value to the chain and stakeholders. BRAZIL BD COMERC
Slide 12: Strong Discipline in Costs and Pursuit of Greater Efficiency
STRONG DISCIPLINE IN COSTS AND CONTINUOUS PURSUIT OF GREATER EFFICIENCY 12 ~R$1.0 billion/year Costs and expenses in 2023 Gains in 1H24 Gains in 2H24(e) Annualized Gains (1H+2H) Costs and expenses 2025 (e)1 Controllable costs and expenses (R$ million) * * ¹ It does not consider possible impacts of v
Slide 13: Digital Solutions to Maximize Efficiency of Industrial Processes
DIGITAL SOLUTIONS TO MAXIMIZE THE EFFICIENCY OF INDUSTRIAL PROCESSES 13 Expert Systems: R$ 200 – 300 M Digital Twins: R$ 100 – 200 M − Focused applications by stage of the production process; − Dynamic (metallurgical) models supporting daily operational decision-making; − Objective: to enhance the p
Slide 14: Hot-Rolled Coil Production Expansion at Ouro Branco Unit
HOT-ROLLED COIL PRODUCTION EXPANSION AT OURO BRANCO UNIT 14 Growth in value-added products: +35 p.p. 47% 19% 11% 29% 30% 30% 24% 51% 58% 2015 2016 - 2024 2025 Breakdown of Ouro Branco’s capacity Semi-Finished Steel Finished Long Steel Finished Flat Steel 1 After the investment matures. New Coil Ware
Slide 15: New Ore Treatment Plant
NEW ORE TREATMENT PLANT 15 5.52 Mtpa of high-grade ore (65%); CAPEX of R$3.2 billion between 2023 and 2026; 40 years of certified reserves; Ramp up in 12 months, ensuring the goal of 75% of verticalization in the first year Project 50% complete and all critical equipment acquired ~60,000 tonnes of C
Slide 16: Gerdau Investor Day (video)
GERDAU Investor 22! VIDEO UTM Il
Slide 17: North America BD
NORTH AMERICA BD CHIA YUAN WANG
Slide 18: Products and Services to Add More Value to Our Customers
18 PRODUCTS AND SERVICES TO ADD MORE VALUE TO OUR CUSTOMERS Structure and competitive advantages Capacity of 5,400 MT of crude steel, 100% scrap-based 10 industrial plants, operating in the US and Canada, and joint ventures in Mexico. Lowest CO2 emitter in the North American steel production chain O
Slide 19: High-Performance Business in North America
19 HIGH-PERFORMANCE BUSINESS IN NORTH AMERICA Long steel products are expected to benefit the most from macro-trends; Product portfolio consisted of profitable and less volatile mix of products; Organic CAPEX focused on: − Capacity increase and cost efficiency; − Incremental product portfolio growth
Slide 20: North American Markets Are Stabilizing
20 NORTH AMERICAN MARKETS ARE STABILIZING 2,1% 2,5% 2,9% 1,8% 2,5% 3,0% 2,5% -2,2% 5,8% 1,9% 2,5% 2,6% 1,9% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024e 2025e U.S. GDP (YoY change) ABI Leading Construction Indicator ISM Leading Manufacturing Indicator 40 50 60 70 2020 2021 2022 2023
Slide 21: However, Fundamentals Are Strong
21 HOWEVER, FUNDAMENTALS ARE STRONG… Reshoring trends of domestic manufacturing Reshoring and advancement of domestic chips production CHIPS and Science Act Supporting highway and general infrastructure spending IIJA Map of Megatrend projects including renewable energy Source: US Census Bureau: Cons
Slide 22: Balanced Exposure to Different End-Markets
22 BALANCED EXPOSURE TO DIFFERENT END-MARKETS… Manufacturing and Energy Following overall economic activity Non-Residential Construction Maintaining higher level of activity Market Activity Source: internal data NORTH AMERICA BD Renewable Energy Mobile Homes Railroad Components Oil & Gas Agricultura
Slide 23: Well Positioned to Supply Growing Sectors
Gerdau product applications in markets of growth: …WELL POSITIONED TO SUPPLY GROWING SECTORS 23 Infrastructure Rebar Piling Rebar Beams Merchants Piling Data Centers and Manufacturing Plants Structural frame (beams) Joists (merchants) Foundation (rebar and piling) 23 Renewable Energy Posts (beams) F
Slide 24: Strategic Capex Driving Additional Revenue
24 STRATEGIC CAPEX DRIVING ADDITIONAL REVENUE Petersburg (VA) & Midlothian (TX) Enabled us to produce heavier Wide Flange Beam sections increasing our offerings to the market Petersburg (VA) Enabled us to produce more piling including new sizes to meet market demand Midlothian (TX) & Cartersville (G
Slide 25: North America BD Transformation Journey
NORTH AMERICA BD 25 TRANSFORMATION JOURNEY 2021 Petersburg, VA Cartersville, GA 2023 Whitby, ON Downstream - Midlothian Heat Treat Processing 2026 Midlothian, TX (Phase 3) 2025 Midlothian, TX (Phase 2) Downstream – Solar Product Mix Evolution Merchant Bar & Structural Rebar 2017 40% 60% 2024 Jackson
Slide 26: Low Emission Footprint
26 LOW EMISSION FOOTPRINT Top 3 lowest emission producing mills of Structural steel in the U.S. In North America, all facilities are scrap-based Our steel has greater than 96% recycled content 98% of the water reused Gerdau is the first steel company in North America to achieve B Corp certification
Slide 27: Special Steel BD
SPECIAL STEEL BD RAFAEL JAPUR
Slide 28: Solid Portfolio and Delivery of Solutions
SBQ Wires Wire Rod Forged Bars Blanks Rolled Bars SOLID PORTFOLIO AND DELIVERY OF SOLUTIONS APPLICATIONS Parts for the final produt METAL SCRAP RENEWABLE ELECTRICITY MATRIX AND FERROUS SCRAP AS A RAW MATERIAL SPECIFIC PRODUCTS AND APPLICATIONS ~100% OF SHIPMENTS MAKE TO ORDER 28 Transmission Engine
Slide 29: Market Segments
MARKET SEGMENTS AUTO LIGHT VEHICLES HEAVY VEHICLES BUSES MOTORCYCLES AGRICULTURE AGRICULTURAL MACHINERY CONSTRUCTION MACHINERY WIND TOWERS OIL AND GAS CONSTRUCTION ENERGY MINING OTHER MILLS TRAINS AND RAILROADS ROLLING MILL 29
Slide 30: Diversification and Excellence in Serving Various Markets
DIVERSIFICATION AND EXCELLENCE in serving various markets consolidate Gerdau as a leading in SBQ ¹ Deliveries considering the final segment of steel consumption. | ² Distribution supplies all the segments shown in the graph. SBQ Deliveries by Category¹ 30 We are the largest SBQ producer in the Ameri
Slide 31: Market Overview
MARKET OVERVIEW BRAZIL U.S. Estimates 2024 2030 2024 2030 Automobile production Units (Million) 2.4 3.4 15.9 17.0 Battery electric vehicles % - 6.4% 8.8% 32.2% Hybrid vehicles % 2.2% 11.0% 16.6% 24.1% Pick ups + SUVs % 56.0% 65.0% 82.0% 87.0% Total SBQ¹ Demand Tonnes (Million) 0.9 1.2 4.2 5.0 ¹ U.S.
Slide 32: Capex Continuous Casting in Pindamonhangaba
32 CAPEX CONTINUOUS CASTING IN PINDAMONHANGABA A benchmark for technology and modernity: higher quality steel and energy efficiency in operations Commitment and interest of the chain in the new production route; Metal yield gains and CO2e reduction of over 10% in rolling mill 1; Jan – Jun/24 - Incre
Slide 33: Capex Monroe
33 CAPEX MONROE Most modern SBQ unit in North America Investment Melt Shop 2020-21 + Cold-end 2024-25 R$750M Capacity increase +195Kt/year¹ Productivity and sustainability gains² Melt shop: production increase from 64 to 83 t/hour; ~15% in conversion costs³; Clean steel production: from 1K to 55Kt/y
Slide 34: Ongoing Commitment to Sustainability
ONGOING COMMITMENT TO SUSTAINABILITY Pursuit of HIGHER VALUE-ADDED SOLUTIONS to create more SUSTAINABLE products and consistently reduce greenhouse gas emissions Project HYDROGEN IN MONROE DECARBONIZATION STUDY FOCUSED ON RESEARCH ON HYDROGEN USE TO REPLACE NATURAL GAS The first test in the North Am
Slide 35: South America BD
SOUTH AMERICA BD MARIANA DUTRA
Slide 36: Strategic Competitiveness Adapted to Local Markets
36 STRATEGIC COMPETITIVENESS ADAPTED TO LOCAL MARKETS 377 680 450 240 85 80 Crude Steel Rolled Steel 100% OF LONG STEEL PRODUCTION BASED ON SCRAP METAL Sale of equity interests in JVs Diaco S.A. and Gerdau Metaldom Corp US$325 million 912 1,000 Capacity (Mt/year) Siderperu, was one of the first comp
Slide 37: Market Overview
37 MARKET OVERVIEW Source: ¹ Central Reserve Bank of Peru - Aug/24. ² Argentine Steel Chamber - Aug/24; ³ Transaction GDP growth recovery in 2024 and greater political stability. Recovery in civil construction, industry, mining, infrastructure, and public works. Reducing inflation is at the cornerst
Slide 38: Financial Management
FINANCIAL MANAGEMENT RAFAEL JAPUR
Slide 39: Resilient Results Throughout the Cycle
39 RESILIENT RESULTS THROUGHOUT THE CYCLE Indebtedness Net Debt (R$ million) Net Debt/Adjusted EBITDA 2,72x 4,24x 3,49x 2,98x 1,71x 1,67x 1,25x 0,30x 0,33x 0,40x EBITDA Net Income EBITDA (R$ million) EBITDA Margin Adjusted Net Income (R$ million) Earnings per share (R$) 4.906 4.501 4.049 4.321 6.657
Slide 40: Liquidity & Indebtedness
40 LIQUIDITY & INDEBTEDNESS 0.53x R$12.5 bn 7.2 years Net Debt/EBITDA Gross Debt Average Term 106.7% o CDI p.a. R$6.6 bn Average Cost (BRL) Cash and Cash Equivalents 5.5% p.a. Average Cost (USD) GROSS DEBT < R$12 BILLION AVERAGE TERM > 6 YEARS NET DEBT/EBITDA ≤ 1.5X FINANCIAL POLICY RATINGS Bbb STAB
Slide 41: Bonds & Debentures Fixed Income Opportunities
41 BONDS & DEBENTURES FIXED INCOME OPPORTUNITIES GERDAU YTM VS. 10Y U.S. TREASURY 1. 2029-2031 bonds from the following peers: Nucor, Steel Dynamics, ArcelorMittal, CMC, Vale, CSN, Suzano, JBS; Source: Bloomberg. Local and offshore Fixed Income portfolio Low volatility amidst market fluctuations Ave
Slide 42: Capital Allocation
42 CAPITAL ALLOCATION 1. Total shareholder returns, adjusted for shareholder payments. // 2. Shareholder payments / Parent Company’s net income after booking the reserves set forth in the Bylaws. DILIGENT FINANCIAL MANAGEMENT AND INTELLIGENT VALUE CREATION FOR SHAREHOLDERS CONTINUOUS EFFORTS Solid r
Slide 43: Strategic Capex 2Q24
NORTH AMERICA SPECIAL STEEL BRAZIL TOTAL 43 STRATEGIC CAPEX — 2Q24 5.595 6.305 Midlothian Capacity Rolling Mills Capacity (PTB, CTV and JKS)1 Meltshop Capacity Whitby Monroe Roadmap New Continuous Casting Pinda Forestry Base Expansion New Scrap Processing Susteinable Iron Ore Program (MFe) 700 350 1
Slide 44: Strategic Capex Update: Disbursement Schedule
44 (R$ Million, cumulative) DISBURSEMENT SCHEDULE HIGHLIGHTS Updated view, clear of completed projects Incorporation of Downstream Projects in North America Adjustment to forestry investments due to the idling of Barão de Cocais and Sete Lagoas (Biomass Route) NORTH AMERICA SPECIAL STEEL BRAZIL TOTA
Slide 45: Strategic Capex: Gains from Growth and Competitiveness
NORTH AMERICA SPECIAL STEEL BRAZIL 45 STRATEGIC CAPEX Gains from business growth and competitiveness ¹ After investments mature. / ² PTB: Petersburg | CVT: Cartersville | JKS: Jackson / 3 Project awaiting a stoppage to install final equipments. Completed projects — Potential EBITDA of R$1,450 millio
Slide 46: Shareholder Returns
46 SHAREHOLDER RETURNS Consistent, elevated payout Consistent execution of the share buyback program LONG-TERM VALUE CREATION Dividends (R$ thousand) Share Buyback (R$ thousand) Payout % SHARE BUYBACK PROGRAM Up to August 1st, 2025 426 439 180 136 1.008 356 715 5.355 7.156 2.641 841 33,2% -9,6% -6,2
Slide 47: Revaluation Potential: Sum of the Parts vs. Peers
47 REVALUATION POTENTIAL: SUM OF THE PARTS VS. PEERS BASED ON 2Q24 LTM EBITDA (US$ million) 1. Brazilian peers: Ternium, CSN, and Usiminas | U.S. peers: CMC, Steel Dynamics, and Nucor | Latam peers: Ternium | Special Steel peers: Metallus. 2.Considers US$52 million in eliminations and adjustments. 3
Slide 48: Sustainability
SUSTAINABILITY RAFAEL JAPUR
Slide 49: Gerdau and Low-Carbon Economy Outstanding Position
49 GERDAU AND LOW-CARBON ECONOMY OUTSTANDING POSITION According to the Transition Pathway Initiative (TPI), Gerdau is in line with the Paris Agreement and better-positioned than the other companies in the sector. tCO2eq/t steel 2020 Minimal Maximum Average of pairs 0.43 0.93 1.43 1.89 2.34 2023 0.41
Slide 50: On the Path to Meeting Our Commitment and Beyond
50 ON THE PATH TO MEETING OUR COMMITMENT AND BEYOND Higher operational energy efficiency Greater use of scrap Expanded forest base and renewable energy sources Investment in new technologies and open innovation 1 2 3 4 0,93 0,82 0,72 0,40 0,05 0,03 0,03 0,10 0,32 2020 Energy and operational efficien
Slide 51: Takeaways
GERDAU Investor Day 2024 \ TAKEAWAYS GUSTAVO WERNECK GERDAU
Slide 52: Our Plans for the Next Years
OUR PLANS FOR THE NEXT 100 YEARS… Culture aligned with our purpose Efficient management of our assets Competitiveness through assets with greater long-term potential Increasingly technological, innovative and sustainable solutions Investments in the decarbonization of our processes Actions to build
Slide 53: Gerdau Investor Day 2024
GERDAU Investor Day 2024 GERDAU
Slide 54: Gerdau S.A.
GERDAU S.A. Selo Assiduidade APIME 4 cae
Slide 55: For more information on Investor Relations
ri.gerdau.com For more information on Investor Relations: Follow Gerdau on social media.