RESULTS

   The Gerdau Group had a consolidated net profit of R$ 821 million in 2002, 49% higher than the R$ 550.9 million recorded in the previous year. The main factors responsible for this growth were the expansion of demand in Brazil, increased exports and the effect of the exchange rate on operations in the United States, Canada, Chile, Argentina and Uruguay.

   The net margin for the same period was reduced from 9.36% to 8.96% as a result of the exchange rate impact on financial expenses.

   The listed companies in Brazil, Metalúrgica Gerdau S.A. and Gerdau S.A., distributed a total of R$ 452.4 million in interest on capital stock and dividends, 88.2% more than in 2001. Of this total, R$ 186.5 million went to shareholders of Metalúrgica Gerdau S.A. and R$ 265.9 million to those of Gerdau S.A. These payments represented a yield of 16.6% and 7.1%, respectively, on preferred shares traded on the stock market.


Dividends and interest on capital stock per one thousand shares (in Brazilian reais)

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   The distribution policy for dividends or interest on capital stock determines a minimum of 30% of adjusted net profit for each fiscal period. As of the beginning of 2003, the values formerly distributed per semester are now paid quarterly.

   EBITDA – earnings before interest, taxes, depreciation and amortization – totaled R$ 2.1 billion, 64% higher than in 2001. The EBITDA margin grew from 21.78% to 22.95%.

   Gross profit increased by almost R$ 1 billion to a total of R$ 2.6 billion, a growth of 58.6%. During the year, cost-cutting and productivity measures compensated for the increase in prices of certain raw materials – mainly scrap and pig iron – and allowed for a gross margin of 28.63%, compared to 28.08% in 2001.

   Net revenue grew 55.6% to R$ 9.2 billion, up from R$ 5.9 billion. Gross sales increased at around the same rate, up 57.3% to R$ 11.1 billion.

CONSOLIDATED GROSS SALES REVENUE

R$ 11,1 billion

Brazil Canada and United States Argentina, Chile and Uruguay

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   Net operating cash flow was up 36.6% to R$ 1.6 billion. This represents 17.7% of net sales revenue, compared to 20.1% in the previous year.

   The devaluation of the Brazilian real vis-à-vis the US dollar had a strong impact on US dollar-denominated debts contracted in Brazil and not covered by hedges, resulting in additional financial expenses of R$ 607.1 million. On the other hand, the same exchange rate variation, added to the merger of the North American operations, generated an increase of R$ 447.5 million on investments outside Brazil. In consolidated terms, the exchange rate effect on assets and liabilities resulted in a net loss of R$ 159.6 million.

  Açominas ended the fiscal year with its third consecutive net profit, a feat not achieved since it started operating, back in 1986. The result was, in fact, R$ 62.7 million (32.7% less than in the previous year), mainly because of an accident that occurred in the blast furnace cowper in March. Both the equipment and the lost profits were covered by an insurance policy with an indemnity limit of US$ 850 million. Work with the insurers is continuing as expected, and an advance of R$ 62 million has been received from IRB – Brasil Resseguros.