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The policy at Gerdau is to grow without losing profitability,
generating added value for our shareholders
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Dear Shareholders,
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The Gerdau Group's 100th year was marked by substantial investments that took it to new heights among the world's largest steel producers. Gerdau's market position was strengthened as it acquired control of Açominas and further expanded its North American presence with a fifth mill in the United States. These investments are part of an integrated international strategy, boosting Gerdau's steel-making capacity to 11 million metric tons per year at the end of 2001.
The increase in the shareholding at Açominas brings great competitive advantages, due to the production flexibility and privileged location of the mill, and represents solid support both for current deals and for future international expansion. The addition of the Cartersville mill in the United States complements Gerdau's North American product lines, especially in the area of structural profiles.
These investments mean more than a simple increase in production capacity: they represent the integration of highly qualified teams of professionals.
The year was marked by a difficult macroeconomic climate, bringing new challenges and demanding great efforts from the business community.
Instability in the international steel market, in the face of global overproduction and increased protectionism from the United States, resulted in price fluctuations and in losses for large parts of the industry. On the other hand, the signs of recovery in the North American economy point to the possibility of a new period of increasing demand for steel.
The impact of the terrorist attacks of September 11, of the energy crisis in Brazil, and of the economic situation in Argentina all demanded rapid changes to Gerdau's operations, as we adapted to new market realities. Worthy of note is the effort made by Brazilian companies, government and society to overcome the difficulties created by the need to ration electricity. This nationwide movement surpassed everyone's expectations, and confirmed the belief that difficulties enhance creativity and foster achievement.
We believe that the current situation in Argentina will be reversed in the medium to long term. The Gerdau Group's Argentinean investments represented 2% of its total assets in 2001, and over the year these operations adjusted their production to the local demand.
In Brazil, Gerdau was able to surpass its production targets, as infrastructure investments and growing demand for low-income housing and from the manufacturing industry increased the consumption of steel products.
The consolidated balance sheet again shows record performance, achieved through increased productivity, reduced operating costs, and the conversion of revenues from US dollars into Brazilian reais. The full consolidation of Açominas as of November also contributed to the group's improved performance. From January through December, net profit grew to R$ 551 million, even taking into account losses in the Argentinean operations as a result of the devaluation of the Argentinean peso against the US dollar and the real. In this year, global sales revenue increased to R$ 7.1 billion, and EBITDA to R$ 1.3 billion.
The Gerdau Group's centennial celebrations represented a consolidation of its corporate culture, which has been built on ethical values since 1901. These principles have always guided the company in building for the future. They are reflected in our customer service, in the search for continual technological modernization in the steel mills and in the preservation of the environment, in our efforts to generate added value for our shareholders, in the professional growth of our employees, and in the development of the communities in which we operate.
In these 100 years of activity, Gerdau has grown with the belief that it must always be prepared to deal with any economic situation, constantly seeking to increase productivity and efficiency, which are fundamental to our continued growth. As part of this philosophy, it is important to highlight that our professionals have already embraced the use of the principles of Total Quality and the development of Six Sigma methodologies, key elements to improve our operating performance.
Once more, the Gerdau Group would like to express its gratitude for the confidence shown by customers, suppliers, governments, shareholders, investors and communities. We would especially like to thank our 16,000 employees, for their daily commitment to forming a team of professionals specialized in the management of steel.
Jorge Gerdau Johannpeter
President
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