Good afternoon, and welcome to Gerdau's conference call about the results for the Fourth Quarter and year of 2015. [Operator Instructions] We would like to emphasize that any forward-looking statements that might be made during this 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. Here today are Mr. Andre Gerdau Johannpeter, Director, President, and CEO of the company; and Harley Scardoelli, Executive Finance Vice President. With no further ado, I would like to give the floor to Mr. Andre Gerdau Johannpeter. You may proceed.

Thank you. Good afternoon everyone and welcome Gerdau’s conference call. Firstly, I would like to see that we host year-end earnings release conference call of March 1 to today in order to analyze the case records involving Gerdau and thus amounting its operations to reinstate our position on this topic, we’ll read the official communicate that many of you already received. First of all, Gerdau has pending proceeding file with the Administrative Council taxable car and has always used the services of external firms strictly to obtain the best possible technical advice. Contrary to media reports this is not a matter of tax evasion, false statement or a mission to exclude eventual tax issued, but it’s a fraction of legitimate use of the right of Gerdau company’s expressed by laws and precedence. The financial information related to ongoing proceedings that have been disclosed in the explanatory notes of the company’s financial statement. All agreements with these external firms and also other contracts and agreements with service vendors that Gerdau has entered into with service providers included positive terms absolute compliance with laws, breech of which calls for immediate termination there on. No money was paid or passed on to external firms in this specific case and agreements were resented when the names of service providers, investigators were reported in the press for suspected illegal activity. The company never gave any authorization for its name to be used in the ledge unlawful negotiation and it strongly repudiates any action taken for this purpose. Thus Gerdau as a company that has been in the market for 115 years, we iterate that it has a strict ethical standard for its feelings with public agencies and reaffirms that it is and it has always been at the disposal of competent authority to provide any…

Thank you, Andre and good afternoon to you all. Now, I’ll like to refer to Slide number 6 of the presentation that will talk about the results and performance of each business operation in the fourth quarter of 2015 and next I’ll give you more details on the consolidated figures. I’ll conclude talking about the extraordinary events of the quarter. So turning to Brazil and starting with Brazil, the environment of uncertainties in the economic landscape has caused us to have lower demand and this has affected our business. This has also caused a drop in shipments of steel in the fourth quarter of 2015, when compared to the same period of the year before. On the other hand exports presented an increase in relation to the fourth quarter of 2014 due to opportunities in the international market coupled with a favorable exchange rate. Looking at EBITDA in the fourth quarter of 2015, the absolute value was down by 74% when compared to the fourth quarter of 2014 due to lower dilution of fixed cost and a worst market mix. In addition, all the cost related production stoppage also impacted EBITDA, 110 million end of fourth quarter of 2015, which will also affect the EBITDA margin that went from 19.1% in the fourth quarter 2014 to 6% to 9% in the fourth quarter of 2015. Not considering the effects of production stoppages, the EBITDA margin in the fourth quarter of 2015 would be above 10%. Now speaking about North America, the economic environment remains positive, however the growing pressure from imported products resulted in a sales reduction of 3.4% when we compare to the fourth quarter of 2014 to the fourth quarter of 2014. EBITDA in the fourth quarter of 2015 was 395 million, when compared to 202 million in…

Thank you, Scardoelli. To conclude I would like to reinstate that Gerdau’s results in 2015 was heavily influenced by non-recurring items though non-cash. However, our strong presence in the North America market and management efforts of our teams were crucial to reduce the impacts from the difficult moments faced by the steel sector, both in Brazil and in the world. One highlight of 2015 was the successful public offering and the Metalurgica Gerdau S.A which represented a capitalization of R$900 million to amortize debt and also improve liquidity. For 2016, our priorities will continue to be free cash flow generation, cost reduction, CapEx restriction and financial leverage reduction in view of the current challenging global landscape. However, we will continue to work to grow market value and also to identify opportunities in markets with high added value products as demonstrated by the startup of the heavy plate rolling mill in Brazil amongst other initiatives. By this end token [ph] we are also working with long term strategic view to transform Gerdau in order to face future market challenges. This involves extensive work ranging from streamlining operations and internal structures with modernization of the corporate culture and reassessment of the potential profitability of asset. With that we conclude the presentation and we are available to take your questions. Thank you very much.

Ladies and gentlemen, we will now initiate our Q&A session. [Operator Instructions] Our first question comes from [indiscernible] from Bank of America.

[Interpreted] Good afternoon everyone and thank you for the question. My first question about your capital structure more particularly related to the debt, is that considering the maturity for 2017 almost R$4 million. Do we have any renegotiation strategy to renegotiate the debt or this is not yet our priority? And along the same lines do you any more, any other strategy in terms of potential sale of assets and what would be the expected amount of stemming from the strategy?

Thank you, this is Harley speaking. In terms of leverage and I missed to say something important about 2017, the depreciation of Real of 2015 had a very strong impact in our debt. And the productive impact stemming from about would be sell throughout times. So if the dollar goes back a bit, the trend is that, our leverage position will improve. A second point has to do with our free cash management and this is still our priority for 2017. So, during our presentation we said that we are working very hard to reduce investments about 35% in Real in terms of reduction for 2016. So if something had to be done in terms of working capital all of these efforts together with a dollar position or maybe with lower depreciation we may see that the deleveraging of the company in 2016. Now, referring to our debt that matures in 2017 about half of that will mature in October 2017 and there are several alternatives to deal with that maturity. We may refinance and I think that today the market is bit more restricted but by 2017 until then I mean we have enough time to deal with that matter. The other part of that debt our short-term ranging from working capital beyond debt and all of those should be refinanced so this is not a problem in terms of rolling over the debts.

Now, this is Andre referring to the sale of assets. As of last year we already announced that we are evaluating profitability of the assets, we don’t have anything yet to announce. But we are looking into several alternatives and that could be joint-venture partial or total sale or partial sale striking down or probably some probably that are not profitable but there are several alternatives than we are looking into all of them. So maybe throughout the year there might be in and out, but currently we have nothing to say. But once again I say that we are working very hard looking at all other different possibilities and checking the best possible scenarios. Thank you.

Our next question is from Ivano Westin from Credit Suisse.

[Interpreted] Good afternoon, Andre and Harley and thank you. First of all I would like you to elaborate on the Brazil BO, especially related to shipment in 2016 and what kind of mix you expect to have in domestic and foreign market and price clarity. And if you allow me, I would like you to comment on North America and what is the outlook of price in the region. There was an article saying that you should increase prices in the US by $30 per rebar by the end of April could you please you not tell me something about the price variation.

This is Harley, first of all in terms of Bristol BO it is important to say that in the fourth quarter 15 our cost was impacted due to be talked about that before, but the bulk of that impact was felt in the fourth quarter there is still very little you know fracture to be sell further on we see a very challenging situation in those domestic market so we stopped because we did not want to deter the production and inventory. I mean Brazil has a very volatile market and I think this is one thing to be said about the Brazil BO. About the North America BO, it’s almost the opposite basics in the US is still good. We see some good sign without speaking specifically about someone of things here and there rest assured then when we say the market is gaining momentum all players in the market try to recover metals spread, but North America is the market that always starts the year with a bit seasonality.

[Interpreted] Perfect thank you I would just like to revisit one point and the Brazil they’ll could you speak about exports numbers and indicated estimated export volumes throughout the year please.

It is complicated to make any prediction because there is a lot of volatility issues related to the exchange rate and so we make decisions as opportunities come along. Ouro Branco is very competitive because of our own our production, but there is still a lot of volatility in the exchange rate and we have to monitor price evolution in the market very closely. The outlook is good but we have to monitor on a case by case basis. Thank you very much.

Our next question is from Leonardo Correa from BTG Pactual.

[Interpreted] Hello and good afternoon. My first question refers to working capital and it's addressed to Harley. You had a strong result in working capital and this has been a concept noted in other quarters of 2015. I have a question about the sustainability I have heard some comments in the press that you still have some room in terms of working capital. So, you mean that we will continue to see a drop of inventories in that same magnitude or what kind of expectation in terms of working capital we could have for 2016 in terms of results? My second question is on CapEx. I think a lot of people worked with R$8 billion for the year but all of a sudden you are coming with 1.5 CapEx. Well, your Maintenance CapEx particularly abroad. So how do you classify this number, is this close to maintenance CapEx or way below maintenance? Is it sustainable? Can you sustain a similar level into the future or this is just a one off situation in view of the very challenging landscape. Thank you.

Good afternoon Leonardo, this is Harley. I would speak about working capital, which is your first question. First of all working capital in that operation, this year we worked very strongly. And this is something very important in terms of cash generation, I mean the reduction of working capital. And we were very disciplined in that regard. We still believe that there is still some room for further improvement and this is probably related to efficiency. So we are putting together many initiatives that will probably allow us to gain a few more days. Possibly we will not be in that same amount from 2015, but there's still some room for further improvement, we have to be very careful, but there is still some room. If we take the BOs like Brazil and North America as we have several mills scattered in the country. We have to be to have working capital in a more optimized fashion and we may have further benefits in terms of more reduction. There's still some gains to be captured maybe not as much as what we had in 2015 but some.

This is Andre, Leonardo. On CapEx, I know that the number was below expectation R$1.5 billion. And this is due to three to four things. Number one, all of the large investments that we had are now getting close to the end - there was a heavy plate rolling in Ouro Branco, mill shop in Argentina and the mil in Mexico that already started up. So with that we have room for reduction. And the second point is that the exchange rate factor. May be the third factor that I should mention is that probably we are reaching a new CapEx level in view of the current challenging landscape. If we look at utilization is around 65% to 70%. So there is almost no CapEx to increase production and we have excess production to supply to the market. So there is nothing new that will be large enough to cause any impact. In dollar terms $300 million [ph], $400 million dollars is that what we have for this year and the following years. In reality we did profited, we said 1.5 billion.

[Interpreted] That's fine. Thank you.

Next question, from Marcos Assumpcao from Itau BBA. You pay proceed sir

[Interpreted] Good afternoon. First question, it's on South America. I would like to understand the sustainability of the margin from this business. It was very strong in the fourth quarter. The second question referred to the possible sale of assets and liquidity increase what will be the main destination of these proceeds, bonus payment and payment of debt or increase in dividend payout or something like that? And as a follow up, Harley said that the first quarter, the domestic market in Brazil, it's a very challenging market so the two quarter is approaching an end. Could you please indicate how much for sales are coming down year-on-year?

This is Harley, in terms of South America there are a few things to be considered. This region has been feeling the pressure of prices for quite some time. So this is not new and they are trying to optimize their cost than they've been doing that for some time. There is also the fact that all of operations not only in South America but certainly South America margins have also played a role in SG&A. There was a reduction, if we exclude of the exchange rate effect year-on -year was 5%, but if we look BO for BO it will be closer to 14%, so all of these factors have produced those results especially if you consider Argentina Colombia and Peru. This is something to be said about South America. Now, referring to the second part of your question and in terms of liquidity for investments, our cash position we are focusing on reducing our net debt. Everybody looks at the net debt and this will give us more flexibility to pay debt whenever we think it's more convenient and according to the market situation or we can either improve our cash position, but our intent is to reduce net debt with the proceeds coming from that liquidity event. The last point related to Brazil and the first quarter of this year is very challenging. In the first quarter of last year 2015 our mix was much better. We had stronger delivery from Brazil. And this is not the case in this first quarter this one thing to be said about Brazil and I would just like to add one more thing in terms of liquidity we talked about working capital. I would just like to add something to my previous answer, saying that we do see some space for further reductions in working capital with seasonality working capital tends to increase in the beginning of the year and then this trend is reversed as the year end. Operations will consume a bit more working capital and then from the second half of the year onwards there will be a reduction in working capital.

[Interpreted] Okay, thank you very much.

Our next question from Osmar Camilo from HSBC

[Interpreted] Good afternoon everyone. In terms of all of the impairments of R$6.3 billion even though I agree with you, that this has no cash effect. But call my attention is that most of these write offs occurred in North American specialty steels BO. And most or half - more than half of these impairments were goodwill and this may impact the future profitability of these businesses. So could you probably tell us what is your expectation for these two BOs, particularly North America, which is a BO that is very significant and it has helped mitigate the performance of Brazil. What assumptions were used in the impairment task related to margins, demands, for instance the every top margin of the North America BO, which is close to 10% in the impairment test? I believe that this margin was not around 10%. Considering that we had this amount of write off of goodwill, which is not reversible. Even though - now even if the economy improves you will not see the reversion of that. Could you please clarify that? Thank you.

Good afternoon Osmar, this is Harley speaking. One important aspect well I have a few comments related to the specialty steel for Brazil and North American specialty steel in that separate and factory impact in North America. Both operations specialty steels in North America, their goodwill position especially in Chapparal in North America and [indiscernible] in the US in specialty steel, this goodwill, which is generated in dollars had a strong impact in terms of growth because of the depreciation of the Real. According to our position on September 5th we had more than 40% increases in goodwill mainly due to the exchange rate factor. In terms of discount of cash flow we also utilized more conceptual interest rates because we know that at year end interest rates will be impacted by higher volatility everywhere. If there is an increase in interest rates and this also impacts our numbers and at the end which is what led the company to be more cautious when it carried out its accounting right off. You have no cash impact so this right off was very cautious because of a higher interest rate and also because of the exchange rate impact on goodwill.

[Interpreted] Now about the EBITDA margin in North America, 10% is a goal that you think can be sustainable or you think in terms of working with a lower level.

We don't usually give any guidance on that. But we have to - the rest assured we have to utilize a longer term number in this calculation is very complex. So that's why I don't want to give you any guidance. Thank you

Our next question comes from Alan Glezer from Bradesco Bank.

[Interpreted] Good afternoon I have two questions. The first is about the North America BO. We know there is an interesting recovery coming from non-residential construction in the US and sometimes in areas where Gerdau has a very good presence - very strong presence. What is your expectation for 2016 to take advantage of this non-residential growth considering the increase of steel imports in 2016? So how do you see this opportunity regarding [ph] imports this is my question number one. My second question relates to the specialty steel. We also noticed a significant decrease of 300 basis points in the margin in the fourth quarter. How much of this margin compression came from worsening of the original situation. We see an increasing participation from Europe and India. Therefore I want to know whether you can quantify how much of that comes from the regional deterioration from specialty steels. So this is - these are my two questions. Thank you.

Alan. I was in the midst of my answer. So I do apologize to those of you who are listening let me just answer again. The first part of your question refers to opportunities to take advantage of this growth in the US. In fact we do believe that our geographic positions and in the West Coast and in the Midwest gives us a very good position and this gives us lots of the opportunity to take advantage of the growth coming from the non-residential construction market. So I confirm that we see opportunity and after considering an increase in imports in this markets. Another point to highlight is that in the infrastructure market we already see some signs of recovery and even without saying anything about how long it will take for this market to fully recover. This is a market that benefits from local production as we have in that market and I think on North America, these are the most relevant points. The second part of your question about specialty steels and the mix, this has nothing to do with India. India is growing and it has posted good growth. But this is more related to our North America BO, then where we noticed certain deterioration of margin, due to the oil and gas industry in the US.

Our next question is in English from Roy Yackulic from Bank of America Merrill Lynch. Mr. Roy, you may proceed.

Well I'm sorry, thanks. Can you tell me how much the iron ore EBITDA was and what would be the Brazil EBITDA margin be excluding iron ore.

Great question. First about the EBITDA margin, in our iron ore operation and what will be the margin in Brazil excluding this iron ore business. Our mining operation, I mean there in Brazil the other results are presented in a consolidated fashion. So we do not disclose just the mining business separately because the business is already contemplated in the consolidated number.

So will you tell me how much iron ore EBITDA was for that part of Brazil or not.

So you are referring to the EBITDA numbers in absolute terms of that operation. We do not disclose that figure separately.

Okay. You used to; it was helpful, thank you.

It is true, we used to. But since last year it has been consolidated in the Brazil BO.

Okay, thanks.

Our next question also in English is from Tatiana from HSBC.

Hi, guys thank you so much for hosting the call, I have few questions. My first question is it would be very helpful if you could provide your current availability on the revolving credit facility and my second question is that I understood that if I understand you correctly you mentioned that without reduction stoppages in Brazil your consolidated EBITDA margins would have been more than 10%. So please confirm that, if I understood that correctly and in my follow up questions with that is whether you had production stoppages in Brazil so far this year and also whether you expect them to take place in 2016 overall. Thank you so much.

Your first question was about the availability of our credit line for working capital and how much that we still have available. The second question was about the effect of the production stoppage of Brazil BO and whether I can confirm the numbers without the stoppages and the last question was whether the effect of the stoppages will still be felt throughout 2016. Well our working capital line has very dynamic changes. One among the basis of total line is $1 billion. And we already use about $300 million, meaning that we still have about $700 million available to that credit line. We can withdraw the money anytime we want. Now answering your second question, yes I would like to confirm that once we exclude the effect of the Brazilian margin, the margin will be above 10% in the fourth quarter of 2015. Now part of your question, if I understood correctly is that most of the costs incurred while production stoppages where already posted last year, so start the year without this effect. So we have given the year with a very challenging landscape.

Our next question is from Gabrielle Curtis from Banco Do Brasil.

[Interpreted] Good afternoon everyone. One of the priorities for 2016 is cost reduction, so in what operations would we able to notice further cost reductions, this year or throughout the year.

Good afternoon Gabrielle. In terms of cost reduction, we are constantly making efforts to reduce cost and I know they are talking time, we know that it is also depends on production levels and volumes produced throughout the year and they are certainly also depends on the market in Brazil. We have lower visibility due to the volatility of the market and the current macro-economic landscape but nevertheless we have a strong focus on cost reduction. We were able to promote a very strong reduction in cost and SG&A. But this is also depends on volumes which is very difficult to predict today. Thank you.

Now we conclude the Q&A session. I would like to give the floor back to Mr. Andre Gerdau Johannpeter for his final remarks.