Good afternoon, and welcome to Gerdau’s conference call to discuss the results for the fourth quarter of 2014. All participants will be in a listen-only mode during the conference presentation. Later on, we’ll hold a Q&A session. [Operator Instructions] We would like to emphasize that any forward-looking statements made during this conference call related to Gerdau’s business outlook, projections and financial and operating goals are mere assumptions based on management’s expectations related to the future of the company. Even though Gerdau believes that its comments are based on reasonable assumptions, there is no guarantee that future events will not affect this evaluation. Today with us are Mr. André Gerdau Johannpeter, Director, President and CEO; and Mr. André Pires, VP and IR officer. With no further ado, I would like to turn the floor to Mr. André Gerdau Johannpeter. Please Mr. Andre.

Good afternoon everyone. Welcome to our conference call for Gerdau’s results. We’ll start with an overview of the overall landscape for the steel industry. Then we’ll talk about Gerdau’s performance in the 12 months of 2014 and then the fourth quarter of the year. After that, we will give you some details on investments for 2015. It’s important to stress that we will analyze the performance, our consolidated results of 2014 and 4Q ’14 vis-à-vis the same period of the prior year. After that, André Pires will present Gerdau’s financial performance and then we will be available for your questions. For those of you that are following us on the Internet on the slide 2, we are going to talk about steel in 2014. We have faced significant challenges in the world and overcapacity of around 690 million tonnes of steel and a weaker steel demand in markets like Brazil and other countries in Latin America causing a high volatility in our results. In Brazil, there was low economic growth in 2014, which have impacted the market such as civil construction and manufacturing and the auto sector. According to the [indiscernible] the brand consumption of steel in the country in 2014 was the lowest since 2009 amounting 24.6 million tonnes, 6.8% down. In Latin America except for Brazil, the steel industry was affected not only by slowdown in the economy, but also by the increase in the steel imports according to the Latin American Steel Association, Alacero, Latin America is the second region with the largest volume of steel import from China, second only to South Korea and the American market results to steel demand was more or higher vis-à-vis 2013 with highlights the manufacturing and non-residential construction sector, but we remained concerned about the high imported steel inflow just…

Thank you, André. Good afternoon, everyone. I will start on slide number six, for those of you that are following us on the webcast and I’ll talk about the results and annual consolidated performance. And then I will talk about each business operations and now the presentation talking about capital structure and a consolidated adjusted EBITDA and adjusted EBITDA margin for 2014 were rather stable, regardless of low number of shipments. That stability was namely due to the positive effect of the exchange rate variation in the period of foreign operations and exports from Brazil. Here is important to highlight the rebound of North America BO, which has contributed to a consistent EBITDA, offsetting the lower EBITDA in Brazil BO. Now turning to slide number seven, and talking about the fourth quarter of 2014. I’m starting with Brazil. We see the uncertainty about the economic scenario is called lower demand which is impacting our business in 4Q, ’14, shipments dropped 3% vis-à-vis 4Q, ’13, and the internal markets had a drop of 4% especially in civil construction and manufacturing. In comparison to 3Q ’14, sales volume grew 5% with increased exports, 31% higher in the period because of the improvement in the international market as semi-centered product and also a quicker devaluation of Real, and always in the EBITDA for the fourth quarter of ’14, the absolute amount was down 13% vis-à-vis 4Q ’13. And a reminder that in the last quarter of ’13 there were earnings from sale of real state amounting BRL98.6 million, net of this fact EBITDA and EBITDA margin were stable and the comparison for both period. Vis-à-vis 3Q ’14 EBITDA was up 26% in 4Q ’14 and the margin increase is from 16.5% to 20.3%. Thanks to greater fixed cost solutions with exports increase and…

Thank you, Pires. To conclude, I would like to say that 2014 was a very challenging year for Gerdau and the steel Industry, mainly due to the installed over capacity worldwide and also to the lower demand in relevant market, especially Brazil and other Latin American countries. This will give you an idea that the use of installed capacity of the steel industry in the world is increasing on an yearly basis, it has reached 91%, its peak in 2008, and then the following year, the average was 75% to 80% and in January of this year, it has reached 72% of use in the industry. These are data from the World Steel Association. On the other hand we were able to minimize the effects of this scenario in Brazil’s operating performance. We have improved the performance of our operations, under a difficult landscape, we have divested from non-strategic assets, for instance the interest in Gallatin Steel and keeping selective when investing in fixed assets. Regardless to lower net income in 2014, our management efforts can be seen by our adjusted EBITDA levels stable vis-à-vis the prior period. About the factor perspective, we expect that the world steel industry will keep on facing this low consumption growth and installed over capacity. In other countries where we operate, we believe this develops the markets, offer a positive scenario, the economy in the U.S. should grow in 2015, looking to consumption in the country. The expansion of non-residential segment should continue given increasing private investments in the U.S. increase sectors, investments should be moderate in line with the modest growth of financing available in the public sector. But the continuous increase of imported steel inflow will keep on pressing margins and results of companies in the industry. Brazil’s perspective for 2015 is…

Ladies and gentlemen, we will now start the Q&A session. [Operator Instructions] Our first question comes from Milton Sullyvan, Brasil Plural.

Good afternoon, thank you. I have two questions, first about Brazil operation, can you tell us what we could expect in terms of cost ahead, statistically and strategically speaking, what kind of production we can see from Minais? What kind of impact we should expect and second question is steel on cost, can you tell us a little bit about the scrap price, what kind of price we should expect for scrap in Brazil, considering you already have some discount in specialty steel and if there are any pressure because of prices abroad? Thank you. André Pires: Hello, Milton, this is André Pires. Thank you for your question. About, let me see if I well understood your first question, is there are more opportunity to send our production to Ouro Branco in Minais, yes, this has been our strategy and we have been successful in it. I believe this strategy has proven to be efficient when we look at the EBITDA margin of Gerdau operation in 4Q ’14, so the scenario is still favorable, iron ore has not increased from that area today and so I think we could manufacture steel using our Ouro Branco mill. About the scrap price, it has been stable. It’s not as much related to the international price, but obviously there is no high pressure right now and the price in the last month has been rather stable. Thank you.

Our next question comes from Carlos De Alba, Morgan Stanley.

Yeah, good morning. Thank you very much. First question has to do with working capital. Year on year the comparing December 2014 versus December 2013, the cash conversion cycle increased about three days. And I wonder if you can comment how do you see the conversion cycle in 2015, how much money do you think you can generate from either controlling or hopefully reducing the cycle. And the second question, also, on Iron Ore, how much volumes of Iron Ore do you expect to produce in 2015? And if you can give us a sense of the split between internal use or consume Iron Ore in Ouro Branco and how much would you be able to export? If you have any commitments to export, that would be very useful. And just finally, I guess that under the current scenario of iron ore prices and the expansion on the iron ore business is off the table, right. Just to confirm that? Thank you. André Pires: Well, let me translate Carlos question, he is asking about working capital and the cash conversion cycle because there was an increase of 3 days of the – in the cash conversion cycle in 2014 and what is our expectation for 2015. How much we could optimize in terms of working capital for 2015, the following question is about Iron Ore and I will turn to Andre. Now let’s talk about working capital. Really we have started 2014 with a better expectation in terms of production volume, our shipments volume for 2013 happened in the year there was a drop of 4% and the shipment volume in the year, therefore the adjustments in the working capital has not been a factor enough as we’d like it to be in 2014. And that’s why conversion cycle was three days higher than the closing of 2013. For 2015, we do not have a forecast but arguably we are working with a realistic expectation in terms of the delivery or the shipments were consolidated once we are working in the long-term objective of bringing the cash conversion cycle to lower than 80 days, again in closer to 75 days. This is our long-term goal, we don’t have a short-term goal for that yeah, but you can all the way we are working we believe that in the long-term we will be able to bring down the cash conversion cycle to low 80 days. Now let me turn to Andre and he will talk about the iron ore.

Okay. The question was about the Iron Ore and about production, how much is going to be Ouro Branco export and trend of expansion is that it is going to continue or is that under analysis. We are not going to disclose information about volumes right now. But 80% to 90% of what is going to be manufactured – is going to be used by Ouro Branco mill, our focus is iron ore to be used in Ouro mill. We might have some shipments if that is achievable, but right now we are concentrated in taking our production to Ouro Branco and we do not intend to grow export. About the expansion project, we are reassessing it, as we said, we don’t have any further information to provide you right now. Once again our focus is to bring production of Iron Ore to supply in Ouro mill. And we do not have any commitment as we have commitments in terms of railways, ports. No, we don’t have anything that gives us flexibility to decide what we need to do, ahead when we wish to do I, if the scenario changes. But if nothing happens we will keep on supplying to Ouro Branco that helps us very much in the competitiveness of that mill.

Thank you.

Our next question comes from Leonardo Correa, BTG Pactual.

Good afternoon, everyone and thank you. My first question is about the streamlining of assets. We had seen efforts from [indiscernible] Brazil closing capacity of higher cost of less than one and they have been providing good results. We see cost controls in Brazil, but if I think globally considering the impairment that you’ve done in Latin America, what can we expect, do you still have vital capacity abroad, anything relevant, I would just like to understand if there is anything similar to what you have done in Brazil. If you were studying if you were considering anything especially in Latin America and United States, that was my first question. And my second question is still about the U.S., of course there was a negative impact on the volumes and the quarter-on-quarter with seasonal, but it might have been some cost impact and might have been, but I just would like to understand we are counting some numbers here and it looks like maybe you have some non-recurring cost in North America. I just want to make sure this one is understand is that make sense, do you have anything non-recurring in cost in the U.S., these are my two questions. Thank you. André Pires: Hello, Leonardo, this is André Pires. About the streamlining of assets as you are, really in the second half of the last year we’ve tried to optimize our assets in Brazil focusing on the last competitive operations in terms of cost and efficiency and this is still our goal, not only in Brazil, but also when we look at our global footprint. So we are still focusing on that and we do not have any specific plan anything to disclose, but we do have to take that into consideration depending on the scenario, we might take another measures in that sense, not only in Brazil, but also in other areas. In North America, there is nothing non-recurring in the fourth quarter, what happened was the lower volume. Therefore, there was a lower illusion of fixed cost, but why we ended up having a higher cost so also important to say is that when we compared to the fourth quarter of 2014 – in the fourth quarter of 2013, we still have equity from Gallatin, we don’t have that anymore, that was something relevant, so this might be an explanation, something that may have drawn your attention.

Okay, thank you very much.

Our next question comes from Roy Yackulic from Merrill Lynch.

Thank you. In the CapEx budget for next year, our estimate BRL1.9 billion, how sensitive is that is to FX, how much of it is U.S dollar denominated, and does that include any iron ore CapEx? And then my second question is regarding, I guess, the construction industry in Brazil. There was an article out today that 2014 and 2015 are supposed to be the worst years for the construction industry since 1992. Now, I think construction declined about 6% in 2014. what are the expectations for 2015? And then, in addition, the auto sales are supposed to decline 10%. So, are we looking for a pretty bad domestic year in Brazil? André Pires: This is André Pires. Thank you for your question, [indiscernible]. First question is about the CapEx estimate for 2015 of BRL1.9 billion and the question is how sensitive is that CapEx is to affect and if we are here considering anything for mining within that figure. André will talk about the construction sector in Brazil and also the auto sector which was the second question, but let’s start like with FX, the sensitiveness to FX, but there are a lot of investments made here in Brazil, investments in which we are at our final stage. I’ll give you an example you know it very well and it’s the construction of our heavy plate rolling plants. We are in the assembly phase already that investments is totally made in reais, equipment is already bought. We have investments in Latin America countries that end up being impacted by the same factor that real is impacted, because these currencies are also depreciating. So there is sensitiveness, but it’s not as high. That’s why we are talking about figures in reais, because with exchange rate and volatility difficult to have…

Our next question comes from André Pinheiro, Itaú de Valores. André Pinheiro: Good afternoon, everyone. I have two questions. First, considering the negotiation of the exchange rate and we have seen at the stronger amount of end of the year or is that we expect for the sales mix for the first quarter Gerdau should we see more export and the mix and how would be expect that to project from now on. And the second question is about the metal spread in the U.S. How do you see that end of the any of the year and what do you expect to see the metal spread progressing from now on we see more in product – imported products coming in and the steel price going down worldwide and how is that going to impact the metal spread?

Good afternoon, André, about the FX and the export mix. Now from the third quarter to the fourth quarter growth already any growth in exports and this should be a trend for this first quarter of 15 in growth. And despite of drop of price worldwide, the depreciation increasing that related in the world. So become more competitive provide say the trend is to increases export. It’s difficult to mention figures but we have increased that already from the first, third quarter to the fourth quarter from the first quarter to the second quarter [indiscernible] we have seen, also some part of export of real product there already. About the matter of spread and here is André Pires, it is still there even with recent price reductions in the U.S. about 420 or 430 per short ton. Of course when there is a price drop, the first effect is a margin reduction then and later on it tends to normalized this drop in the scrap that so is the average I believe for the metal spread should be stable in 2015 vis-à-vis 2014, we do not believe that the import pressure in the U.S. is going to go down. We believe more important products are going to go in, the consensus of the several agencies that estimate of around non-residential construction they say that there should be a growth of 7.7% and 8.2% in 2016. So the demand should be consistent and imported products should keep on going in and there is another driver here that helps this high import, which is a dollar that is strengthening, so we believe the metal spread should be consistent to what it was in 2014 around 420 per short ton. Thank you.

Our next question is from Christina Ronac, HSBC.

Hi, thank you. Can you remind me if you hedge your U.S. dollar bonds into Real? And then, follow-up on that, I have calculated you had about $5 billion of bonds, and I think you record that on your balance sheet at BRL12 billion. Is that fair?

The question was about our bonds, our dollar that as they had to real and if I’m not mistaken the second question, is about what we have issued BRL5 billion in bonds in our balance sheet is to let me clarity detail here. The first answer to your question is that no, we do not have an effective hedge vis-à-vis our dollar that to reais, what we use that the net investment hedge methodology which is allowed by the IFRS. By using this methodology seems to me you have dollar investments due to our operations in the U.S. We find the bond issues to finance investments in the U.S. By doing that, the exchange rates, the cost do not impact on our P&L, our results and they go straight to our equity. So that’s why you do not see a major FX variation in our income statement because that goes – that transfers to our equity, so what you see in terms of exchange variations are some in that, but we have in foreign currencies maybe a dollar operation or some stable accounts that are in dollars and they are subject to the FX variation, but there are small. About the debt of our bonds here in dollar, there are around $4 billion and basically we have $1 billion for our American operations and $4 billion to the Brazilian operation. So those would total the $5 billion that you mentioned that is equivalent to BRL13 billion in our balance sheet.

Thank you.

Next question is from Marcelo Aguiar, Goldman Sachs.

Thank you. Good afternoon everyone. My first question is about your exposure to heavy construction sector. Can you remind me what is the mix? If we analyze the long steel sales, what’s your retail exposure? What is your exposure for residential industry, heavy construction, so that we can have an idea of the fluctuations of your domestic shipments for 2015? And my second question is Brazilian companies will have cost pressure this year due to inflation, energy costs, and so on. I would like to understand from the energy and the power – what is your exposure considering all these changes in terms of taxes and tariffs that the government is going to launch in the next year? So, there is going to be an increase in costs with electric power and analyzing the exchange rate at three, would you have an opportunity to rework on prices in Brazil? André Pires: Hello, Marcelo, this is André Pires. Now let me remind you of our mix, what is a small consumption that represents basically 40% of long steel was goes to production, 40% is a small and the other 60% are distributors to residential, commercial and infrastructure and you talk about heavy construction, I think you are talking about increased structure, so that represents 20% of 60%, so 12% in the last years. It has represented even more with the increased structure awards, pre-World Cup also with the concessions that we had in the last year that infrastructure is around 12% usually, but now is that 15% of course depending on what happens related to infrastructure and construction that might have an impact. That’s’ a small consumption is more stable, it tends to fluctuate more even with favorable situation, so that is just to repeat construction, 60% of those 60%, 40%…

Thank you.

Our next question is from Alex Hacking, Citibank.

Hi, good afternoon, thank you for the question. My question is on your balance sheet. Obviously, we know that a weaker real is going to increase your gross debt, all things being equal. How do you see the net debt to EBITDA ratio evolving in 2015? I know that you’ve always looked at 2.5 as sort of a ceiling there. Is that something that you think is realistic? And then, the second part of the question will be are there any other asset sales that you are considering or a possible similar to what we saw with Gallatin Steel this year? Thank you. André Pires: This is André Pires. Alex’s question is about the balance sheet and the impact of the exchange depreciation in the increase of our debt and how would – how we would have the net debt EBITDA ratio. And the second question has to do with asset sales such as we have done with Gallatin last year. So about the first question, obviously in a depreciation environment – real depreciation as we have a high percentage of debt in dollars, yes, that has an impact in our net debt EBITDA ratio and also gross debt. But do not forget, 70% of our shipments are in dollars. So we do have a snapshot impact of the balance sheet depending on where – which moment is the snapshot is taking, but the economic impact is limited, this is affected, we have a natural hedge once again 60% of our shipments right now are in dollars, considering our North America operations, parts of North American for specialty steels and also exports leaving Brazil. We still have the objective of working with the net sales EBITDA ratio of 2.5 times, at least this is still a goal for us. It’s also obviously it depends on where the exchange rate is going to go. We should remind you that we have other leverages that we have been using, André in his speech talk about our CapEx expectation this year that is below what it has been in 2014. And remember when we started 2014, we expected a CapEx in reais was higher BRL2.9 billion, so we are also working with investment funds that are very selective. And once again, working capital there was already a question about this. I believe that we can do more with working capital. We have a significant reduction in 2013. 2014, the reduction was not a significant as we expected, but yeah there is an opportunity to working capital. About asset sales, we don’t have anything in the pipeline, but we are always analyzing as we always study any possibilities. We’re always reviewing our portfolio and should we understand there is an interesting opportunity we should consider it as a possibility.

Thank you.

Our next question comes from Mr. Thiago Lofiego of Merrill Lynch.

Good afternoon. Thank you for the call. I have two questions. First, about costs, can you tell us a little bit more in the fourth quarter there was a sound performance in Brazil BO, also mean as especially and I would like to understand if this is recurring or, is it specific to the quarter? And under that scope of cost cutting, what do you expect for 2015 to optimize your cost base? Second question, about infrastructure market in the U.S., can you tell us how that market is going? We know that this is very important for you. And I would like to hear more about it. We know that non-residential is there also. But if you could talk about infrastructure, I would appreciate. Thank you. André Pires: Hello Thiago, this is André Pires. So first about Brazilian cost and all the initiatives who have been taking. We have started a plan along the second half of 2014, we already mentioned in the call there was asset optimization, we closed some unit. And initiatives we are working into adjust our structure to the business reality not only in Brazil, but globally as well. So there is nothing non-recurring in the fourth quarter. We believe this is part of a plan of the strategy that is an ongoing one and we will keep on working a very much concentrated on cost as well as in SG&A. So these are topics in our balance sheet that we’ll really be important in the next year, it’s not only in Brazil, but also in next operations. Infrastructure in the U.S., yes, this is one of the tripods of the American recovery that is still slower than the others. We have three areas, residential construction, industrial constructions and infrastructure. The industry was for non-residential is now growing stronger in the last two years and the infrastructure is little bit slower, thank you.

André, can you tell you what is the – can you give us a range for cost cutting potential? André Pires: No, we do not have a goal or if you hear that we could give you. This depends upon initiatives we take on a daily basis. Thank you.

Our next question is from Renan Criscio from Credit Suisse.

Good afternoon everyone. Thank you for your presentation. Two questions, first, about specialty steels, we saw a significant improvement, and I would like to know if possible can you let us know where that improvement came from? You had an increase in 10% in the EBITDA. And the second question is about mining. Would the exchange rate depreciation, the drop of freight price, what is the iron ore from delivered to China? At what level of price you changed to sell or to sell here more or to export more? André Pires: Hello, Renan, this is André Pires. About specialty steel, in fact the better result is the EBITDA growth vis-à-vis the same quarter of the prior year is basically thanks to our North American operation that offset the drop in Brazil and also thanks to our same European operations and India has a role to play there. But the negative – India’s negative results has decreased a lot, so there was a share of these three elements, North America, Europe and India. Now let me turn to André for the other question. André Bier: Well, the iron ore before the drop in price, we are working with breakeven figures of $80 to $85 and then the iron ore went to $60 to $65 as we have seen and it was not possible anymore. It is very difficult to give you today a new breakeven figure because there are four or five factors that impact there. First, our OPACs and in the mine logistics costs, internal costs too low to the railroad, to the port prices and then the sea freight. We see that all those shares of cost have dropped and are adjusting themselves, but not to the point of being able to export as of our own price range. Now we are still assessing then analyzing everything and we would just resume those operations if they become profitable. Our focus once again is internal supply to Ouro Branco because that has helped us a lot in terms of competitiveness, in terms of cost, and integrated relative data in Ouro Branco.

That is clear. Thank you very much.

Our next question is from Alan Glezer, Bradesco BBI.

Good afternoon everyone. I have two questions, first about energy group, we were seeing that realized prices and the sales per ton 2% quarter-on-quarter in the fourth quarter. Is there any effect there of mix change because you closed some plants in Brazil. Did you have any pressure in the mix change that brought the price down or is this a policy of price reduction in the quarter. If you could take this opportunity to explain the price of exported steel and the domestic price for steel, I think it would be interesting. And second is about like on BO, I understand imports are a problem, but the volume has grown 3% on the fourth quarter, and the margin is above 7%, so what is the trend for 2015, do you see more pressure that could change the dynamics. These are my two questions, thank you. André Bier: Hello, Alan, this is Andre Pires. About your first question, about the parts per ton, it has to do with mix effect, as I said before, we have more export, therefore we have different prices, lower margins, and some situations, and at the same time, we have greater dilution effective cost, and that helped us. So basically, this is mixed, there is no reduction policy or this one does having happened along the fourth quarter of last year. About the import, we don’t like to talk about Uranium because that depends on special details on the product, where it comes from and so on, but it’s obvious that in an environment where we have Real depreciated vis-à-vis the dollar, it is less competitive for the imported product when the Real is depreciated. Then when Real is appreciated, I’d say that import today has lower competitiveness because of Real depreciation and also due to volatility that makes predictability difficult for the end quarter. Now Andre is going to talk about Latin America.

About Latin America you mentioned the volumes are near, there was a reduction there, but now in the third and fourth quarter, they are stable with some growth in the fourth quarter. Actually, in Latin America, 2014 was a difficult year due to the economic growth, and 2015 will be so, but just like in Brazil where each country is a little bit different, but in all these countries currency is depreciating vis-à-vis the dollars there for the competitiveness increases in terms of imported products and that generates more volumes. So we foresee a possibility there you know like down for some gains on volume expansion due to this or things that has higher competitiveness because of the exchange rate and countries such as Peru, Chile and Colombia, that are suffering just as Brazil with the depreciation of the currency, that helps the steel sector and the whole chain. So there is a possibility for like LATAM in 2015. So growing a little bit in volume with lower imports, but once again that is going to depend on international markets price when but that depends also on the exchange conversion.

A follow-up please about the realized price, and I mentioned Real per ton in Brazil BO, I was talking about shipments in the domestic market. The volume for the domestic market, can you tell us anything about the product mix sold into the domestic market, has that changed in the quarter, and because of that you know this would explain the change in the cost.

Yes in fact, when I thought I was not specific, but if we analyze the domestic markets, there was a higher share of semi-centers here, that’s why we see that small drop in the net sales per ton, this is a mix and they at least have more semi-centers product.

Thank you very much.

Right now we conclude the Q&A session. I’d like to turn the floor to Mr. Andre Gerdau Johannpeter for his final remarks.

Thank you very much for your participation. Thank you for your questions. Should you have any questions or if we were not able to address any of them, our IR team is available, and I’d like to invite you for our conference call on May 6 to discuss the results for the first quarter of 2015.

Today’s conference call is concluded. Thank you for your participation, and you have a nice afternoon.