2004 Gerdau Annual Report

Steel to shape the world
2004 Annual Report

Steel to
shape the world
The Gerdau Group manufactures steel to turn dreams into
reality. Like the dream born in 1901, through the entrepreneurial
spirit of German immigrant João Gerdau, who founded what is
now the 13th largest steel company in the world.
A dream currently shared by 24,000 people powered by the
conviction that it is possible to overcome limits, generate
sustainable development and improve the quality of life. This
transformation capacity is in the people, in the steelmaking
process and in the use of steel.
Steel that is found in houses, buildings, bridges, vehicles, roads,
airports, telephone and electricity towers, dams and countless
other applications, making the world a better place.

Steel Mills – 26
Downstream Operations – 21
Fabricated Reinforcing Steel Facilities – 44
Flat Steel Service Facilities – 6
Comercial Gerdau Retail Stores – 69
Scrap Collection and Processing Units – 24
Solid Pig Iron Production Units – 2
Iron Ore Extraction Areas – 3
Private Port Terminals – 2
Equity Investments – 2

Profile
Brazil
The Gerdau mills in Brazil produced 54.2% of the total steel
output of the Gerdau Group in 2004 , the equivalent to
7.3 million metric tons. The Brazilian facilities include six market
mills (which buy raw materials, mainly iron scrap, in the same
region where they sell their products), four integrated mills,
eight downstream operations and 11 fabricated reinforcing
steel facilities. For raw material procurement/purchasing,
the Group has eight scrap collection and processing units,
two industrial facilities for the production of solid pig iron
and iron ore reserves. It also owns two port terminals, in the
states of Espírito Santo and Bahia. One advantage to Gerdau
customers is Comercial Gerdau, a distributor of long and flat
steel, with 69 retail stores in the main economic hubs and six
facilities that provide thermal cutting services for flat steel.
United States
The U.S. facilities accounted for 33% of Gerdau steel
production in 2004. Gerdau Ameristeel operates 11 steel
mills in the U.S. and a joint venture that produces long steel,
Gallatin Steel. Gerdau Ameristeel also encompasses the
operations in Canada and features 29 fabricated reinforcing
steel facilities, 10 downstream operations and nine scrap
collection and processing units. These figures include
important assets acquired in 2004, such as North Star Steel
units and the Gate City, RJ Rebar and Potter Form & Tie
fabricated reinforcing steel facilities pro-rated to the date
when they were acquired.
Canada
A leader in the long steel market, Gerdau Ameristeel produced
1.3 million metric tons of steel in 2004. It owns three mills in
the provinces of Ontario and Manitoba, which are focused
on the civil construction and industrial sectors. Furthermore,
it holds a 50% stake in two elevator guide units and in one
industrial facility that manufactures superlight I beams.
Gerdau Ameristeel also operates seven units specializing in
the collection and processing of scrap, its main raw material.
Chile
Gerdau AZA produced 371,000 metric tons of steel in 2004.
It operates two mills, in Colina and Renca, each catering to a
specific economic segment, civil construction and industry,
respectively. To add value to its products, the Gerdau Group
relies on Armacero to supply welded mesh and fabricated
rebar for civil construction. In addition, fabricated reinforcing
steel facilities are operated by Matco. Also part of the Group
are Aceros Cox, a distributor specializing in the industrial
segment, and Sack, another major distribution channel.
Uruguay
Located in the capital city Montevideo, Gerdau Laisa
produced 58,000 metric tons of steel in 2004. The facility
supplements its product line with items manufactured in
the Group’s Brazilian mills to fully meet customer demand.
Laisa focuses on the civil construction segment and its main
product is fabricated rebar.
Gross Revenues - R$ 23.4 billion
BRAZIL
CANADA AND
THE UNITED STATES
ARGENTINA, CHILE
AND URUGUAY
4.4%
40.4% 55.2%
Consolidated Sales - 12.6 million metric tons
Look up the location of Gerdau facilities in the Americas.
Argentina
The Gerdau Group leads the management of the Sipar
rolling mill, located in the province of Santa Fé. The Group
has a 38.2% equity investment in Sipar. The unit’s output
reached 214,000 metric tons of rolled products in 2004. As
a result, the company has become one of the main suppliers
in the long steel segment. Sipar provides superior quality
services to customers through Siderco, a distributor of
steel products and supplier of fabricated rebar for the civil
construction sector.
BRAZIL
CANADA AND
THE UNITED STATES
ARGENTINA, CHILE
AND URUGUAY
4.1%
43.1%
52.8%

2004 Annual Report
Highlights
The most important events of 2004
Consolidated numbers
Economic, environmental and social performance
Message from the chairman
Impressive performance in 2004 and positive perspectives for 2005
Strategic vision
Conviction that growth will continue in the Americas
Corporate governance
Management model aligned with the world’s best market practices
04
04
06
08
10
Business
Increased demand for steel drives results
Finance
Capital Markets
Production
Sales and Markets
Investments
Social
Commitment to the development of employees and communities
People and Teams
Community
The environment
Ecoefficient practices to protect the air, water and soil
Environmental Management System
Environmental Performance
Education for the Environment
Steel production
Find out how steel is produced at Gerdau facilities
Timeline
More than 100 years of history
Glossary
Definitions for technical terms employed in the report
Financial statements
Detailed information on financial performance
18
20
24
30
34
40
44
46
51
56
58
59
62
64
66
68
70

Highlights
The most important events of 2004
Net income reaches R$ 3.3 billion, a growth of 165.8%, and gross revenues reach R$ 23.4 billion,
48.3% higher than in 2003.
In the United States, the acquisition of North Star Steel assets in late 2004 consolidates the
strategy of increasing the geographic reach of sales into the U.S. Midwest. The US$ 308 million
deal encompasses four long steel producing mills, two scrap collection and processing units,
three wire rod processing facilities and a producer of grinding balls for the mining industry.
The expansion in South America is also noteworthy, with the establishment of a strategic
alliance in Colombia in December, when the Group signed an agreement to acquire 59.8% of
the assets of Grupo Diaco, with an annual output capacity of 460,000 metric tons of steel.
The highlight in Brazil is the construction of two new mills and the expansion of the Ouro
Branco unit, in the state of Minas Gerais. The investment program in Brazil may reach
US$ 2.4 billion by 2007. The new industrial facility in the state of São Paulo and the new specialty
Consolidated Numbers
Economic, environmental and social performance
Metalúrgica Gerdau S.A.
Dividends (R$ per share)
Gerdau S.A.
Dividends (R$ per share)
Metalúrgica Gerdau S.A.
Dividend Yield (%)
2004
5.22
2004
2.91
2004
7.8
2003
2002
2.07
1.68
2003
2002
1.19
0.90
2003
2002
6.2
12.4
2001
1.48
2001
0.58
2001*
17.0
2000
0.68
2000
0.44
2000
7.9
0.00 1.00 2.00 3.00 4.00 5.00 6.00
Amounts are adjusted to payments and calculated based on
the current number of outstanding shares.
Dividends paid on preferred shares.
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50
Amounts are adjusted to payments and calculated based on
the current number of outstanding shares.
Dividends paid on preferred shares.
0 2 4 6 8 10 12 14 16 18
* Supplementary, non-recurring dividend.
Dividend yield is the ratio between the dividend paid per
share and the share price on the last day of the year.
Metalúrgica Gerdau S.A.
Average Annual Market Value (million R$)
Gerdau S.A.
Average Annual Market Value (million R$)
Metalúrgica Gerdau S.A. Consolidated
Return on Equity (%)
2004
3,691
2004
10,876
2004
48.5
2003
2002
692
1,329
2003
2002
4,638
2,789
2003
2002
29.2
27.5
2001
413
2001
1,600
2001
19.1
2000
478
2000
1,835
2000
18.8
0 1,000 2,000 3,000 4,000 5,000
Market value is calculated as share price multiplied by the
number of shares outstanding in the period.
0
2,000 4,000 6,000 8,000 10,000 12,000 14,000
Market value is calculated as share price multiplied by the
number of shares outstanding in the period.
0 10 20 30 40 50 60
Return on equity (ROE) is the ratio between consolidated net income
and consolidated equity.

04 05 h i g h l i g h t s
steel facility in the state of Rio de Janeiro focus on the Brazilian market, whereas the Ouro
Branco unit supplies the international market.
The environmental management policy gains momentum with US$ 25 million invested in the
upgrade of air, water and soil protection technologies.
The two publicly traded companies in Brazil – Metalúrgica Gerdau S.A. and Gerdau S.A. –
distribute R$ 433.9 million (+152.1%) and R$ 858.8 million (+144.5%), respectively, to shareholders
in 2004. In addition, Gerdau Ameristeel, responsible for North American operations, begins
paying dividends in the beginning of 2005, for an initial distribution of R$ 16.2 million.
Social projects in the fields of formal education, scientific research, the arts, entrepreneurship,
volunteer work, total quality, health, sports and community services receive investments of
R$ 36.5 million.
2004
2003
2002
2001
2000
Gerdau S.A.
Dividend Yield (%)
3.9
6.1
6.1
Dividend yield is the ratio between the dividend paid per share
and the share price on the last day of the year.
7.1
6.8
0 1 2 3 4 5 6 7 8
Social Responsibility (million R$) 2004 2003
Total investment in social projects 36.5 22.5
Formal education 4.4 2.8
Education for entrepreneurship 3.8 1.9
Education for scientific research 1.5 1.4
Education for total quality 2.3 2.6
Education for volunteer work 0.4 0.2
The arts 18.7 10.9
Health 3.0 1.1
Sports 1.0 0.8
Community action 0.6 0.1
Other 0.8 0.7
2004
2003
2002
2001
2000
Gerdau S.A. Consolidated
Return on Equity (%)
17.3
16.6
24.3
27.5
46.6
0 10 20 30 40 50
Return on equity (ROE) is the ratio between consolidated net income
and consolidated equity.
Environmental Management 2004 2003
Reuse of industrial water 96.7 96.0
(% of total consumption)
Emission of greenhouse gasses 550 n.a.*
(kg of co 2 per metric ton of
steel produced)
Use of by-products internally or in other 66.0 n.a.*
sectors of the economy
(% of total volume generated)
*Not available.
Exchange Rate
Year R$ =US$
2004 2.6544 1.00
2003 2.8892 1.00
2002 3.5333 1.00

Message from
the Chairman
An excellent year for steelmaking
World steel consumption reached its highest peak ever in 2004. Global production
topped the billion metric ton mark, boosted mainly by the growth in demand in China
and the United States. As a result, the average dollar price of steel exported by Gerdau
from Brazil rose 62.4%. Prices increased primarily due to rising raw material costs – in
many cases by over 50% – and maritime freight charges. In this context, the Gerdau
Group’s net income totaled R$ 3.3 billion, up 165.8% from the previous fiscal year, with
gross revenues up 48.3% to R$ 23.4 billion.
Meeting the growing demands of the market
Throughout the year, the Gerdau Group increased production to ensure that it could
fully meet its customers’ needs and expanded its presence in major markets in the
Americas.
Four mills were acquired from North Star Steel in the United States for US$ 308 million,
of which US$ 181 million consisted of working capital. The investment expanded the
company’s geographical coverage toward the Midwestern U.S. and added 1.6 million
metric tons to the Group’s annual installed capacity.
A strategic alliance was established in Colombia to gradually take over control of the
Diaco Group, which has a production capacity of 460,000 metric tons of steel per year.
This initiative will allow the Gerdau Group to reach a position of leadership in that
national market. The initial investment in this project was US$ 68.5 million.
Low indebtedness allows for new investments
The Gerdau Group’s production capacity has doubled in five years to 16.4 million metric
tons per year, and should reach 21 million metric tons by 2007, with the investment of
US$ 3.2 billion in the construction, expansion and modernization of the Group’s industrial
facilities. Of this total, US$ 2.4 billion will be invested in Brazil, where annual production
capacity will grow over 50%, from 7.6 to 11.7 million metric tons. Units in other countries
in the Americas will receive US$ 800 million during the same period.
The investment program will be based on cash generation and on the leverage allowed
by the Group’s current financial position. Operating cash generation (EBITDA) of
R$ 5.5 billion has allowed a significant reduction of debt levels. At the end of 2004,
net debt was just 0.7 times EBITDA, well below the limit of 2.5 times determined by
the Group’s policy. In addition, the net interest paid-per-metric- ton-sold was R$ 22.36,
approximately half that of the previous fiscal year.
Strategic investment decisions are based on the principle of balancing growth and
profitability. For this reason, annual dollar returns of at least 15% on capital invested are
always required of the Group’s acquisition and expansion projects. This goal has been
consistently achieved for both acquisitions and industrial plant expansions after the
investments mature.

06 07 MESsage
Commitment to economic, social and environmental sustainability
Balancing economic, social and environmental demands is part of the Group’s values. With
this vision, the Group works to continue offering growing dividends each year. The Gerdau
companies in Brazil have a policy of distributing 30% of adjusted net income each year. The
absolute value of dividends has yielded shareholders an average of 6% per year for Gerdau S.A.
and 10.3% for Metalúrgica Gerdau S.A. since 2000.
In the social area, community development is supported through a range of projects aimed
mainly at sharing knowledge, optimizing the ability of people to transform their own world and
creating a culture of personal development and learning in and around all the units. In total,
the Group takes part in more than one hundred initiatives to help improve the quality of life in
our communities.
The environmental aim is to reach increasingly demanding levels of ecoefficiency. All the steel
mills are undergoing international ISO 14001 certification. A total of US$ 25 million was invested
in 2004 to upgrade air, water and soil protection equipment and to promote programs that
encourage environmental awareness among our employees and communities.
A positive perspective for 2005
The current international conditions indicate a continued high level of steel consumption in
2005, with prices tending to stabilize. The price of steel in international markets is directly linked
to raw material volumes, with iron ore and coal as the defining factors. These components are
also strongly influenced by international freight costs. We believe that there is no possibility of
a significant increase in the supply of these raw materials in the next two years.
Another important consideration is “inefficient steel,” or steel produced at non-competitive
costs or with government subsidies. This has been a recurring theme in the debates at the
International Iron and Steel Institute (IISI) since before the global steel boom of the last few
years, and is under negotiation in the Organization for Economic Co-operation and Development
(OECD). The belief is that, as new, more competitive production capacity comes on line, the
inefficient mills will leave the market. In this context, the Gerdau Group strives to be a worldclass
company with a long-term vision.
Thank you
The results presented in this report were only possible because of the commitment and
responsibility of each of our employees, the work of our teams and their daily attitude of
servicing the needs of the market. The Gerdau Group also thanks its investors, shareholders,
suppliers, communities and especially its customers.
Jorge Gerdau Johannpeter
Chairman

Strategic Vision
Conviction that growth will continue in
the Americas
From the extreme south of the Americas to the plains of
Canada: this is where the Gerdau Group intends to build its
growth, focused on the long steel sector.
The Gerdau Group has the strategic vision of being a worldclass
international steel company. Guided by this goal, the
Group strives to consolidate its place as a major player
in this field of steelmaking. As a result of the logistical
requirements of its products, Gerdau understands that it
is more important to have a significant market share in
the Americas than to have production capacity scattered
around the world.
Since the 1980s, the Group has invested in internationalization,
expanding its operations in South and North America to
become the largest producer of long steel in the region. Its
growth policy is guided by investment in assets that add
value and significant returns for shareholders and that
allow the Group to continue its growth, always committed
to its characteristic levels of financial security.
In comparison with the markets where it operates, the
Gerdau Group has achieved outstanding performance for
its mills, through their logistical criteria, proximity to raw
materials and management in line with international best
practices.
This performance is based on the efficiency of our teams,
which have contributed decisively to the expansion of the
business, so that the Gerdau Group can continue to achieve
improved positions in regional markets over the coming
years.

08 09 S T R AT e G I C v i s i o n
The Gerdau Group is a world-class company
Throughout its history, the Gerdau Group has
developed the skill of boosting productivity in the
companies of which it takes control, especially
through the sharing of best management practices
and investment in the technological upgrade of
industrial installations. This can be seen in the
turnaround of results at the units that became
Gerdau Ameristeel Cambridge (Canada), Gerdau
AZA (Chile), Gerdau Aços Especiais Piratini (Brazil),
Gerdau Usiba (Brazil) and Gerdau Açominas – Ouro
Branco (Brazil).
Gerdau is now among the world-class companies of
the international steel sector, according to a study
by World Steel Dynamics, a major steel consultancy
group. Gerdau stands out for its profitability in the
fiscal periods from 2000 to 2004, its environmental
and safety record, its success in alliances, mergers,
acquisitions and joint ventures, and its performance
in the capital market over the last three years.
GERDAU AMERISTEEL CAMBRIDGE, CANADA (ABOVE), AND GERDAU AÇOMINAS – OURO BRANCO,
STATE OF MINAS GERAIS, BRAZIL (BELOW): POSITIVE RESULTS

Corporate
Governance
Management model aligned with the world’s best market practices
Governance structure
The Gerdau Group’s corporate governance structure is based on a Board of Directors, an
Executive Committee – which is assisted by a Strategy Committee and Excellence Committees
and coordinates the work of the Officers – and a Board of Auditors.
The Board of Directors is comprised of eight members whose primary responsibility is to
develop the Gerdau Group corporate strategy. This includes defining the direction of the
business, acceptable levels of risk and growth policies. The Board has three independent
members who, through their external insights and experience, help lead the decision-making
process.
Board meetings are held at least four times a year. The Group’s Executive Officers are invited
to present and discuss strategic issues relevant to their areas of operation to provide the
independent Board members with a better understanding of the Group’s operations and
market conditions.
Business management is the responsibility of the Officers, through an Executive Committee
that coordinates the daily business operations and acts as a liaison between operations and
the Board of Directors. There are five business operations, defined according to product line
and/or geographical location of the units: Gerdau Long Steel (Brazil), Gerdau Specialty Steel
(Brazil), Gerdau Açominas – Ouro Branco (Brazil), Gerdau Ameristeel (Canada and the United
States) and Gerdau South America (Argentina, Chile and Uruguay).
Each of the nine Executive Committee members – a president and eight vice presidents – is
responsible for specific processes and/or business operations. The processes are: sales and
marketing, industrial, logistics and transportation, raw materials, procurement, operational
planning, human resources and organizational development, finance and investor relations,
accounting and audit, legal, management technology, planning and strategic management,
business development, information technology, and corporate communications.
To assist the Board of Directors in the planning of the Group’s strategy, the Strategy Committee
includes Executive Committee members and the officers in charge of the main operations. The
Excellence Committees provide support to the business operations and functional processes
by encouraging debate and exchanging best practices.
The Board of Auditors was created five years ago at the two publicly traded companies in Brazil
and includes representatives elected by minority shareholders. Among other responsibilities,

10 11 corporate GOVernance
they are in charge of monitoring the actions of the Board of Directors and controlling the
accounting operations of both companies.
The corporate governance structure at the Gerdau Group follows the model below:
Strategy Committee
Excellence Committees
Board of Directors
Officers
Executive Committee
Business Operations
Board of Auditors
Functional Processes
Gerdau Long
Steel Brazil
Gerdau
Specialty Steel
Gerdau Açominas
– Ouro Branco
Gerdau
Ameristeel
Gerdau
South America
Gerdau companies
“Gerdau Group” refers to all the companies that form the Gerdau economic group and that
are controlled by the same shareholders.
The two publicly traded companies controlled by the Group in Brazil – Gerdau S.A. and
Metalúrgica Gerdau S.A. – are part of the level 1 corporate governance program of the São
Paulo Stock Exchange (Bovespa). This program establishes a set of standards for trading in
capital markets, such as the level of transparency in the disclosure of information and the
number of shares in the hands of minority shareholders.
Gerdau Açominas S.A. is a non-public company that is responsible for the Group’s steelmaking
operations in Brazil. However, it is committed to upholding the same reporting standards
as those of the publicly traded companies. Gerdau Açominas S.A. has a six-member Board
of Directors. One of these members is appointed by the Açominas employee stockholding
association (Clube de Participação Acionária dos Empregados da Açominas – CEA). The Board
members hold quarterly meetings. The management of Gerdau Açominas is carried out
through an Executive Committee that coordinates three business operations: Gerdau Long
Steel, Gerdau Specialty Steel and Gerdau Açominas – Ouro Branco.
In North America, the Gerdau Ameristeel Corporation was created in October 2002 through a
merger between the Gerdau Group’s operations in the region and those of Co-Steel. The Gerdau
Ameristeel Board of Directors is comprised of nine members, five of them independent. The
Board holds quarterly meetings. Gerdau Ameristeel created committees focused on specific
areas: audit, human resources, corporate governance, safety, health and the environment.

Board of Directors. From left to right: Oscar de Paula Bernardes Neto, Board Member; Germano H. Gerdau Johannpeter, Vice Chairman;
Jorge Gerdau Johannpeter, Chairman; Klaus Gerdau Johannpeter, Vice Chairman; André de Lara Resende, Board Member;
Carlos J. Petry, Vice Chairman; Frederico C. Gerdau Johannpeter, Vice Chairman; Affonso Celso Pastore, Board Member

12 13 corporate GOVernance
Business management is under the responsibility of an Executive Committee that operates
based on industrial process and/or geographic region.
In Argentina, Chile and Uruguay, governance is the responsibility of Operating Committees,
which report to the Gerdau Executive Committee.
Shareholders’ meetings
Once a year, the general shareholders’ meeting brings together the shareholders of the
Group’s companies to analyze and approve financial statements and management reports,
decide on the allocation of net income, confirm or supplement the distribution of dividends
or interest on capital stock, and elect Board of Directors and Board of Auditors members.
Additional shareholders’ meetings may be scheduled to deal with specific topics not covered
in the general meetings and which require approval by shareholders.
At Gerdau Ameristeel, the structure is similar to that described above with an annual
shareholder meeting and special shareholder meetings. However, these meetings have
specific agendas and are adapted to the business and legal systems of North America.
Relationship with independent auditors
The policy ruling the hiring of independent auditors for services not related to external audits
is based on the following: auditors should not audit their own work, carry out management
functions on behalf of the client, or promote the client’s interests. These guidelines are
followed by Gerdau’s publicly traded companies for the hiring of independent auditors and
services not related to external audits, in accordance with security and exchange commission
regulations.
Risk management
The Gerdau Group is developing actions to improve risk management practices in its
operations. Integrated risk management is an initiative that fosters best corporate governance
practices, formalizes risk planning and defines the responsibilities of areas such as process
management, internal audit and other relevant areas. The implementation of an integrated
system translates into safer monitoring of potential risks and existing controls in each
business process.
The integrated Risk Management project, which is overseen by the Board of Auditors, is
based on internationally recognized methodologies that comply with the United States

Sarbanes-Oxley Act. This law improves the disclosure of information and the commitment
of management to internal controls and must be followed by foreign companies listed on
United States stock exchanges. Both Gerdau S.A. and Gerdau Ameristeel must comply with
the legal requirements, including those issued by the United States Securities and Exchange
Commission (SEC), the regulating government body for the capital markets in the United
States. For foreign companies with stocks traded in the North American market, the deadline
for compliance with the provisions of the Sarbanes-Oxley Act is July 15, 2006. At the Gerdau
Group, the process will be completed in 2005.
These initiatives will ensure the development of the Group’s corporate governance and
risk management processes, improve safety for the operations and increase the quality of
information disclosure and financial reports to the capital markets. They will also ensure that
international requirements are met.
Operational and administrative restructuring
Since December 2004, the Gerdau Group has been working to restructure its companies in
Brazil and other South American countries. The importance of this work is underscored by the
plan to increase the Group’s presence in South America (see Investments section). Through
restructuring, we hope to obtain greater strategic advantages and improve the operating and
management efficiency in South America. For that, efforts will be focused on the specialization
of different units and business operations. This will be a decisive step in the development of
alternatives for the future growth of the Gerdau Group.
On December 3, 2004, the Board of Directors at Gerdau S.A. authorized the implementation
of corporate restructuring measures for the Group’s companies in Brazil and other Latin
American countries in continuation of a process that began two years earlier with the merger
between Gerdau S.A. and Aço Minas Gerais S.A. – Açominas. This restructuring resulted in the
creation of Gerdau Açominas S.A. in Brazil.
On December 29, the first step in the restructuring process was taken when the dormant
holding of Gerdau Participações S.A. was capitalized with the shares of Gerdau Açominas S.A.
and a portion of the shares of Gerdau Internacional Empreendimentos Ltda. held by Gerdau
S.A., representing 91.5% and 22.8%, respectively of the capital stock for those companies.
The shares transferred to Gerdau Participações S.A. correspond to the direct or indirect
participating interest of Gerdau Internacional Empreendimentos Ltda. in the capital stock of
Gerdau Chile Inversiones Ltda., Gerdau Laisa S.A. and Sipar Aceros S.A.
With the support of independent consultants, management is currently finalizing studies
to establish the definitive shareholding structure. The restructuring involves the creation of
distinct companies, one for each business operation, involving the operations in Brazil and
other South American countries. The new companies will have different operational focuses,
such as: long steel, specialty steel, slabs, blooms and billets and distribution services. The
new companies will be created after the conclusion of studies and approval by the Board of
Directors and shareholders of the companies involved.

14 15 corporate GOVernance
The shareholders of publicly traded companies in Brazil and abroad will not be affected by
the restructuring. Shareholders will keep their current position and their rights and values
will be preserved.
Currently, the structure of the companies that are part of the Gerdau Group 1 is as follows 2 :
Metalúrgica Gerdau S.A.
99.0%
Banco Gerdau S.A.
Gerdau S.A.
44.8% (75.8% of voting shares)
100.0%
97.1%
72.1%
22.8%
Gerdau
Participações S.A.
91.5%
Seiva S.A.
Florestas e Indústrias
Gerdau Internacional
Empreendimentos Ltda.
Gerdau Açominas S.A.
66.5%
Gerdau Ameristeel
Corporation
100.0%
Gerdau Chile
Inversiones Ltda.
Gerdau Ameristeel US Inc.
100.0%
100.0%
Gerdau Laisa S.A.
Gerdau Ameristeel
MRM Special Sections Inc.
100.0%
38.2%
Sipar Aceros S.A.
Gerdau Ameristeel
Perth Amboy Inc.
100.0%
Gerdau Ameristeel
Sayreville Inc.
Gallatin Steel Company
100.0%
50.0%
1. Metalúrgica Gerdau stands for all the
operations included in its consolidated financial
statements.
2. Minus minority interests.

Board of Directors
Chairman
Jorge Gerdau Johannpeter
Vice Chairmen
Germano H. Gerdau Johannpeter
Klaus Gerdau Johannpeter
Frederico C. Gerdau Johannpeter
Carlos J. Petry
Board Members
Affonso Celso Pastore
André de Lara Resende
Oscar de Paula Bernardes Neto
Secretary General
Expedito Luz
Gerdau Executive Committee
President
Jorge Gerdau Johannpeter
Vice Presidents
Frederico C. Gerdau Johannpeter
Senior Vice President
Carlos J. Petry
Senior Vice President
André B. Gerdau Johannpeter
Claudio Gerdau Johannpeter
Domingos Somma
Filipe Affonso Ferreira
Osvaldo B. Schirmer
Ricardo Gehrke
Secretary General
Expedito Luz
Board of Auditors
Metalúrgica Gerdau S.A.
Carlos Roberto Schroder
Domingos Matias Urroz Lopes
Mário Magalhães de Sousa
Substitutes
Pedro Floriano Hoerde
Ruben Rohde
Valmir Pedro Rossi
Gerdau S.A.
José Antônio Cruz de Módena
Peter Wilm Rosenfeld
José Bernardo de Medeiros Neto
Substitutes
Rudolfo Teodoro Tanscheit
Tranquilo Paravizi
Brazil
Gerdau Açominas S.A.
Board of Directors
Chairman
Jorge Gerdau Johannpeter
Vice Chairmen
Germano H. Gerdau Johannpeter
Klaus Gerdau Johannpeter
Frederico C. Gerdau Johannpeter
Carlos J. Petry
Board Member
Marco Antônio Pepino
Substitutes
Claudio Gerdau Johannpeter
Expedito Luz
Osvaldo B. Schirmer
Ruy Lopes Filho
Guilherme Rocha Murgel de Rezende
Secretary General
Expedito Luz
Officers
President
Jorge Gerdau Johannpeter
Vice Presidents
Frederico C. Gerdau Johannpeter
Senior Vice President
André B. Gerdau Johannpeter
Claudio Gerdau Johannpeter
Osvaldo B. Schirmer
Business Operations
Gerdau Long Steel Brazil
Ricardo Gehrke
Executive Vice President
Business Operations
Gerdau Açominas – Ouro Branco
Luiz André Rico Vicente
Executive Vice President
Business Operations
Gerdau Specialty Steel
Cláudio Mattos Zambrano
Executive Director

16 17 corporate GOVernance
Executive Officers
Alfredo Huallem
André Felipe G. Reinaux
André Pires de Oliveira Dias
Cláudio Mattos Zambrano
Dirceu Tarcisio Togni
Érico Teodoro Sommer
Expedito Luz
Fladimir B. Lopes Gauto
Francesco S. Merlini
Francisco Deppermann Fortes
Geraldo Toffanello
Gerson Marcos Venzon
Guilherme C. Gerdau Johannpeter
Heitor L. B. Bergamini
João A. de Lima
João Carlos Salin Gonçalves
Joaquim de Souza Gomes
Joaquim G. Bauer
José Maurício Werneck Guimarães da Silva
Julio Carlos Lhamby Prato
Luiz Alberto Morsoletto (in memoriam)
Luiz Augusto Polacchini
Manoel Vitor Mendonça Filho
Moacir Curi Meneguzzi
Nestor Mundstock
Omar de Oliveira Fantoni
Paulo Ricardo Tomazelli
Paulo Roberto Perlott Ramos
Ruy Lopes Filho
Sirleu José Protti
Tadeu Petterle
Canada and the United States
Gerdau Ameristeel Corp.
Board of Directors
Chairman
Jorge Gerdau Johannpeter
Board Members
Arthur Scace
André B. Gerdau Johannpeter
Frederico C. Gerdau Johannpeter
Joseph J. Heffernan
J. Spencer Lanthier
Kenneth W. Harrigan
Michael D. Sopko
Phillip E. Casey
Officers
President and CEO
Phillip E. Casey
Vice President and COO
André B. Gerdau Johannpeter
Vice Presidents
Andre Beaudry
Anthony S. Read
Arlan Piepho
Carl Czarnik
Donald R. Shumake
Edward C. Woodrow
Glen A. Beeby
Gregory Bott
James S. Rogers
Jerry Goodwald
J. Neal McCullohs
Mark Quiring
Matthew C. Yeatman
Michael Christy
Michael Mueller
Paulo Fernando Bins de Vasconcellos
Robert L. Bullard
Robert Thompson
Roger Paiva
Tom J. Landa - CFO
Wilburn G. Manuel
William E. Rider
Yuan Wang
Chile
Gerdau Aza S.A.
Hermann Von Mühlenbrock S.
General Manager
Uruguay
Gerdau Laisa S.A.
José Pedro Sintas García
Executive Director
Equity Investment
Argentina
Sipar Aceros S.A.
Amaury Cordeiro de Oliveira
Executive Director

Business
Increased demand for steel drives results
Finance
Results
Indebtedness
Financial operations
Capital Markets
Publicly traded companies in Brazil
Publicly traded company in Canada
Relationship with shareholders, investors and analysts
Production
Brazil
Argentina, Chile and Uruguay
Canada and the United States
Sales and Markets
Brazil
Argentina, Chile and Uruguay
Canada and the United States
Investments
Main initiatives in 2004
Investment program for the coming years
20
24
30
34
40

Finance
Impressive performance in 2004
Results
In 2004, the Gerdau Group’s gross revenues grew 48.3% from R$ 15.8 billion in 2003,
reaching R$ 23.4 billion. Increased international steel consumption was boosted
mainly by the economic growth of China and the United States. This scenario elevated
international steel prices. For the Gerdau Group, the average dollar value per metric
ton exported from Brazil increased 62.4%. In addition, the improved performance of
South American operations, the consolidation of the new industrial units in North
America and the recovery of economic growth in Brazil contributed significantly to
the positive consolidated performance. As a result of this favorable scenario, net sales
increased 46.6% to R$ 19.6 billion. Consolidated net income was R$ 3.3 billion, up from
R$ 1.3 billion in the previous year – an increase of 165.8%.
Net margins (ratio between net income and net sales revenue) grew to 17.1% in 2004
from 9.4% in 2003, and gross margins increased 7.3 percentage points to 31.9%.
Operating expenses (sales, general and administrative) represented 7.7% of net sales
revenue in 2004 against 9.4% in 2003, and totaled R$ 1.5 billion.
EBITDA (earnings before interest, taxes, depreciation and amortization) increased
108.4%, reaching R$ 5.5 billion.
Net financial expenses (financial expenses minus financial revenues), excluding
foreign exchange effects and monetary variations, totaled R$ 253.1 million. Considering
foreign exchange revenues of R$ 119.2 million and monetary variation expenses of
R$ 14.5 million, the interest paid in the year was R$ 148.4 million.
In 2004, the Group’s investments outside Brazil, converted into Brazilian currency,
reflected the 8.1% devaluation of the U.S. dollar in relation to the real. The foreign
exchange effect is accounted for in the equity pick-up line of the balance sheet, which
also includes, among others, amortization of goodwill in the period. As a result, a
negative balance of R$ 344.6 million was recorded for equity pick-up in 2004.
Indebtedness
Net debt (gross debt minus cash and cash equivalents and short-term investments)
was reduced by 22.4% from R$ 5.3 billion to R$ 4.1 billion. The average life of debt
increased from 2.6 to 4.2 years in 2004.
Gross debt in 2004 was R$ 6.1 billion compared to R$ 6.3 billion in 2003 (a reduction
of 3%). Short-term debt also decreased by 17.6% to R$ 2 billion. Long-term debt was
R$ 4.1 billion (+6.4%), which reflects the lengthening of debt maturity and translates
into higher flexibility for business management. From the total debt, 18.6% is in
Brazilian currency, 38.7% is pegged to the U.S. dollar, and the remaining 42.7% comes
from the Group’s operations outside Brazil.

20 21 f i n a n c e
Even with the acquisition of new assets in 2004, the net interest (financial
expenses minus financial revenue, excluding currency exchange variation)
per metric ton sold was R$ 22.36, almost half the amount recorded in the
previous year. This indicates that the Gerdau Group’s expansion did not
compromise profitability or operating performance during the year.
In December, the balance of cash, cash equivalents and financial
investments was R$ 2 billion, of which 69.5% (R$ 1.4 billion) was indexed
to the U.S. dollar. The financial resources invested in 2004 almost doubled
in relation to 2003, reflecting a growth in cash generation.
The strong generation of operating cash (EBITDA) resulted in improved
debt payment capacity and availability to undertake new commitments to
expand the business. In 2004, the ratio between net debt and EBITDA was
0.7, well below the limit of 2.5 established in the Group’s indebtedness
policy.
Net Sales Revenue in 2004
(million R$)
13,367
7,307
5,570
19,597
9,976
8,857
+46.6%
+36.5%
+59.0%
Financial operations
In June, Gerdau Açominas S.A., the company responsible for the Group’s
steel operations in Brazil placed the second tranche of its Export Receivable
Notes program. This was important to lengthen the company’s debt
profile. The operation yielded US$ 128 million with maturity in eight years
and an annual interest rate of 7.321%. The transaction was completed in
parallel with a derivative instrument (US Treasury Lock), which reduced
the effective cost to 6.798% per year.
In October, a US$ 110 million operation in euro commercial papers, with
maturity on October 12, 2005 and annual interest of 3%, was concluded.
In December, Gerdau Açominas S.A. obtained a US$ 240 million loan to
upgrade the Ouro Branco mill (state of Minas Gerais) as part of the plant’s
expansion project. The guarantee for the operation was given by Nippon
Export and Investment Insurance (NEXI), a credit agency associated
with the Japanese government. The NEXI guarantee covers 97.5% of the
political risk and 95% of the commercial risk. That means that both the
risks related to the Brazilian policy for payments sent to foreign countries
(political risk) and the risks related to compliance with commitments
undertaken by the company (commercial risk) are covered. The total term
for this loan is seven years, including two years of grace and five years for
amortization. The operation, called an untied loan, is unique in that it is
not linked to the origin of the equipment supplied. In addition, the loan
does not require any additional guarantee from the company and there is
no link with imports or receivables from exports.
BRAZIL
490 764 +55.9%
2003
2004
CANADA AND
THE UNITED STATES
ARGENTINA, CHILE
AND URUGUAY
Net Income in 2004 - R$ 3.3 Billion
BRAZIL
CANADA AND
THE UNITED STATES
ARGENTINA, CHILE
AND URUGUAY
5.2%
26.8%
68.0%

Financial Indicators 2004 1 2003
Firm value 2 /EBITDA 3 3.3x 5.4x
Net debt/EBITDA 0.7x 2.0x
Net debt/Total capitalization 34.2% 52.1%
EBITDA/Net financial expenses 4 21.8x 5.2x
Net income/Net equity 42.5% 26.0%
1. The improvement of indicators is due to the positive performance in 2004 which is reflected, for example, in the increase in EBITDA and net income as well as in the reduction
of net debt and net financial expenses.
2. Firm value: market value less net debt (Gerdau S.A. Consolidated).
3. EBITDA: earnings before interest, taxes, depreciation and amortization.
4. Net financial expenses: financial expenses minus financial revenue, excluded foreign exchange effects and monetary variation.
Distribution of Value-added
Metalúrgica Gerdau S.A. Consolidated
Total: R$ 10 billion
Distribution of Value-added
Metalúrgica Gerdau S.A. Consolidated
Governments: R$ 4.1 billion
GOVERNMENTS
EMPLOYEES
FUNDING
INSTITUTIONS
SHAREHOLDERS
REINVESTMENT
OF PROFIT
9.6%
4.0%
23.7%
21.8%
40.9%
FEDERAL TAXES AND
CONTRIBUTIONS
FEDERAL SOCIAL
OBLIGATIONS
STATE TAXES AND
CONTRIBUTIONS
MUNICIPAL TAXES
AND CONTRIBUTIONS
7.1%
0.9%
27.0%
65.0%
Distribution of Value-added
Metalúrgica Gerdau S.A. Consolidated
Employees: R$ 2.2 billion
SALARIES
BENEFITS
TRAINING
PROFIT SHARING
1.3%
17.6%
12.9%
68.2%
One century of profits
For more than 100 years the Gerdau Group has believed that growth and profitability must be balanced. Our
results are the ultimate proof that we follow this policy. Throughout its history, the Gerdau Group has always
recorded positive results, even in adverse economic scenarios. Ethical values, well trained employees, professional
management, financial seriousness, industrial and commercial competitiveness – all have been at the foundation of
a solid and safe expansion. Today, the Gerdau Group works to retain its position as one of the most profitable and
efficient steelmakers in the world.

22 23 f i n a n c e
Consolidated Cash Flow
Metalúrgica Gerdau S.A.
(in thousand R$)
Company
Consolidated
2004 2003 2004 2003
NET INCOME FOR YEAR 1,437,075 575,179 3,341,097 1,256,874
EQUITY PICKUP (1,342,842) (610,001) 344,628 281,240
PROVISION FOR CREDIT RISK - - 7,647 20,618
GAIN IN FIXED ASSET DISPOSAL - - 9,058 10,056
GAIN/LOSS IN LIQUIDATION OF INVESTMENTS (170,953) (1,445) (164,058) (1,556)
MONETARY AND EXCHANGE VARIATION 5,198 5,563 (94,087) 136,349
DEPRECIATION AND AMORTIZATION 145 149 766,819 605,045
INCOME TAX AND SOCIAL SECURITY CONTRIBUTION 47,393 8,420 505,551 (441,456)
INTEREST ON DEBT 778 14 412,152 593,308
CONTINGENCIES/LEGAL ESCROW (940) 18 4,351 562
CHANGES IN TRADE ACCOUNTS RECEIVABLE - - (720,363) (167,134)
CHANGES IN INVENTORIES - - (1,402,408) (207,267)
CHANGES IN CONTRACTORS 58 (27) 477,292 187,227
OTHER ACCOUNTS IN OPERATING ACTIVITIES (33,737) 8,656 (100,288) 74,557
Net cash provided by operating activities (57,825) (13,474) 3,387,391 2,348,423
FIXED ASSETS ACQUISITION/DISPOSAL - - (1,173,491) (873,039)
DEFERRED CHARGES - - (18,006) (7,246)
INVESTMENTS ACQUISITION/DISPOSAL 155,144 5,097 362,905 (67,005)
ACQUISITION OF ASSETS - - (924,457) -
PROCEEDS FROM DIVIDENDS/INTEREST ON CAPITAL STOCK 351,884 185,108 - -
Cash applied to investments 507,028 190,205 (1,753,049) (947,290)
FIXED ASSETS SUPPLIERS - - 144,573 2,196
WORKING CAPITAL FINANCING (7,778) (7,015) (133,006) (334,804)
DEBENTURES (586) (423) 85,305 (347,456)
PROCEEDS FROM FIXED ASSETS FINANCING - - 762,766 454,989
PAYMENTS OF FIXED ASSETS FINANCING - - (677,357) (541,308)
PAYMENT OF INTEREST ON FINANCING - - (379,801) (414,409)
INTER-COMPANY LOANS 2,839 (2,506) 35,944 (16,937)
CAPITAL INCREASE/TREASURY STOCK (14,441) (7,049) 451,704 (24,151)
PAYMENT OF DIVIDENDS/INTEREST ON CAPITAL STOCK AND STATUTORY PARTICIPATIONS (358,623) (198,413) (853,710) (423,399)
Net cash provided by financial activities (378,589) (215,406) (563,582) (1,645,279)
Change in cash balance 70,614 (38,675) 1,070,760 (244,146)
Cash Balance
AT THE BEGINNING OF THE PERIOD 25,186 63,861 1,015,726 1,420,236
UPDATE OF INITIAL CASH BALANCE - - (82,541) (173,736)
INITIAL BALANCE OF COMPANIES CONSOLIDATED IN THE YEAR - - - 13,372
AT THE END OF THE PERIOD 95,800 25,186 2,003,945 1,015,726

Capital Markets
Outstanding return for shareholders
The Gerdau Group is committed to cost-effective growth that does not compromise future
profitability for shareholders. The company works to guarantee the continuity of its business.
In the past five years, the absolute annual yield of dividends has been on average 6% for
Gerdau S.A. shareholders and 10.3% for Metalúrgica Gerdau S.A. shareholders. Additionally,
the Group seeks to enhance the liquidity of its shares by adopting new corporate governance
practices and by joining important stock exchanges around the world. In 2004, for example,
Gerdau Ameristeel, the company responsible for the Group’s operations in North America, was
listed on the New York Stock Exchange (NYSE). Through these actions, we have established a
strong relationship with our 89.2 thousand shareholders, partners in the construction of the
company’s future.
Publicly traded companies in Brazil
Metalúrgica Gerdau S.A. and Gerdau S.A. distributed a stock bonus to shareholders in 2004.
This initiative translated into an increase in the number of shares available and therefore
created more opportunities for access to the stock. The operation resulted from the issuing of
new shares to incorporate R$ 1.7 billion in reserves to the capital stock of Gerdau S.A. and
R$ 384.0 million to the capital stock of Metalúrgica Gerdau S.A.
The number of Gerdau S.A. shares was doubled to 296.7 million. The number of Metalúrgica
Gerdau S.A. shares was also doubled to 83.2 million (30% distributed as bonus and 70% by
stock split). At the end, each investor had more shares, reflecting the percent increase of each
company.
In December, Gerdau placed a public offering to sell common shares from its two publicly
traded companies in Brazil. The aim was to increase liquidity and appreciation of these
shares in the capital market. The auction offered 10.1% of the common shares of Metalúrgica
Gerdau S.A. and 10% of the common shares of Gerdau S.A., the equivalent of 2.8 million and
10.3 million shares, respectively. The Metalúrgica Gerdau S.A. shares belonged to Gersul
GERDAU AMERISTEEL RINGS THE
OPENING BELL AT THE NEW YORK STOCK
EXCHANGE (NYSE). FROM LEFT TO RIGHT:
NOREEN CULHANE, NYSE EXECUTIVE
VICE PRESIDENT; ANDRÉ JOHANNPETER,
GERDAU AMERISTEEL VICE PRESIDENT
AND COO; ROBERT BRITZ, NYSE PRESIDENT
AND CO-COO; PHILLIP CASEY, GERDAU
AMERISTEEL PRESIDENT AND CEO; TOM
LANDA, GERDAU AMERISTEEL VICE
PRESIDENT AND CFO; AND OSVALDO
SCHIRMER, GERDAU GROUP FINANCIAL
EXECUTIVE VICE PRESIDENT AND INVESTOR
RELATIONS DIRECTOR
SOURCE: nyse

24 25 capital markets
Empreendimentos Imobiliários Ltda., the Group’s controlling block holding
company. The Gerdau S.A. shares belonged to Metalúrgica Gerdau S.A. and Santa
Felicidade Comércio, Importação e Exportação de Produtos Siderúrgicos Ltda., a
fully owned subsidiary of Metalúrgica Gerdau S.A. The operation resulted in the
sale of 1.4 million Metalúrgica Gerdau S.A. shares (equivalent to R$ 75.1 million)
and 10.3 million Gerdau S.A. shares (R$ 412.1 million).
During 2004, payments made to the shareholders of Metalúrgica Gerdau S.A.
totaled R$ 433.9 million (+ 152.1%), and R$ 858.8 million (+ 144.5%) to the
shareholders of Gerdau S.A. This represents a dividend yield (on December
31) of 7.8% for Metalúrgica Gerdau S.A. and 6.1% for Gerdau S.A. In 2004, the
appreciation of shares corresponded to 122.7% and 66.2%, respectively.
Payment of dividends and interest on capital stock is based on the net income
for the year. At Metalúrgica Gerdau S.A., net income reached R$ 1.4 billion
(R$ 17.42 per share) and at Gerdau S.A., R$ 2.8 billion (R$ 9.59 per share).
The volume of Metalúrgica Gerdau S.A. shares traded increased 260.4% at the
São Paulo Stock Exchange, reaching R$ 2.1 billion. There were 63,200 trades, up
195.1% over the previous year. The average daily trading increased from
R$ 2.2 million in 2003 to R$ 7.2 million.
In 2004, the trading volume for Gerdau S.A. shares at the São Paulo Stock
Exchange was R$ 7.2 billion, the equivalent of 224,000 trades. This was an
increase of 185.2% and 116.2%, respectively. Consequently, the average daily
trading reached R$ 25.9 million, against R$ 9.8 million in the previous year.
The trading of Gerdau S.A. American Depository Receipts (ADRs) on the New
York Stock Exchange totaled US$ 1.3 billion, equivalent to a daily average of
US$ 5.1 million. At the Madrid Stock Exchange (Latibex), the company’s shares
were traded daily for a volume of € 6.2 million.
Performance of Metalúrgica Gerdau S.A. Shares in Brazil (GOUA4)
800
700
600
500
400
300
200
100
JAN-00
JAN-01 JAN-02 JAN-03 JAN-04
METALÚRGICA GERDAU S.A.
IBOVESPA
Dollar-deflated data / Basis 100 / Source: Economática

Performance of Gerdau S.A. Shares in Brazil (GGBR4)
800
700
600
500
400
300
200
100
JAN-00
JAN-01 JAN-02 JAN-03 JAN-04
GERDAU S.A.
IBOVESPA
Dollar-deflated data / Basis 100 / Source: Economática
Performance of Gerdau S.A. ADRs in the U.S.A. (GGB)
800
700
600
500
400
300
200
100
JAN-00
JAN-01 JAN-02 JAN-03 JAN-04
GERDAU S.A. ADRS
DOW JONES
Dollar-deflated data / Basis 100 / Source: Economática
Performance of Gerdau Ameristeel Corp. Shares in Canada (GNA)
300
250
200
150
100
50
OCT-02 OCT-03 OCT-04
GERDAU AMERISTEEL CORP.
TS300 INDEX
Quotes start October 28 2002 / Data in Cdn$ / Basis 100 / Source: Bloomberg

26 27 capital markets
Publicly traded company in Canada
The debut of Gerdau Ameristeel on the New York Stock Exchange (NYSE) in 2004 translated into a new level
of liquidity for its shares. Starting in October, when trading of Ameristeel stock at the NYSE began, until
the end of December, trading volume reached US$ 107.5 million, representing an average daily volume of
US$ 2.6 million. In addition, the listing in the U.S. increased the trading volume on the Toronto Stock Exchange,
where Gerdau Ameristeel has been listed since 2002. In the first nine months of 2004, the average daily
trading volume on the Toronto Stock Exchange was US$ 871,000. Taking into consideration the trades at the
NYSE, this volume reached US$ 5.9 million in the last quarter.
Gerdau Ameristeel is the second Gerdau Group company listed on the main world financial center. Gerdau
S.A., one of the Group’s publicly traded companies in Brazil, was listed in 1999.
Gerdau Ameristeel carried out two capital increase operations in 2004. In April, 26.8 million common shares
were purchased by Gerdau Ameristeel’s parent company, Gerdau S.A., for Cdn$ 4.90 per share, for a total of
US$ 100 million, generating resources for equipment financing, working capital, and debt payment.
In November, Gerdau Ameristeel issued a public offering of 78.8 million common shares to raise
US$ 370 million. This was the Company’s first international fund raising effort through the issuance of new
shares. The aim of the operation was to secure funds for the acquisition of North Star Steel assets, increase
the shareholder base in the United States and increase the liquidity of shares.
After these operations, Gerdau S.A. had increased its stake in Gerdau Ameristeel to 66.5%.
The company’s net revenues, adjusted to Brazilian accounting practices, reached R$ 8.9 billion in 2004,
with a profit of R$ 896.3 million. As a result, the Board of Directors decided for the quarterly payment
of dividends to shareholders starting in 2005. In March, individuals holding shares on February 16, 2005,
received US$ 0.02 per share in dividends. This amount refers to the first quarter of 2005, and totals
US$ 6.1 million.
Relationship with shareholders, investors and analysts
The Gerdau Group’s relationship with shareholders, investors and analysts is guided by disclosure and
fast response to market demands. In 2004, six meetings were held with Apimec, the Association of
Market Analysts and Investment Brokers. The meetings, broadcast in real time through the Internet and
available for replay until the end of the quarter, attracted 870 people. Gerdau’s investor relations team
held 280 individual meetings with market professionals in Brazil, North America and Europe. It organized
eight conference calls to discuss quarterly results in both Portuguese and English, attracting over 800
participants.
Total Shareholder Return (Steel Companies) - 1997 to 2004 (%)
METALÚRGICA GERDAU
GERDAU
BELGO
1,016.0
CSN
782.0
USIMINAS
236.0
COMMERCIAL METALS
170.0
NUCOR
105.0
STEEL DYNAMICS
98.0
1,513.0
1,605.0
Total shareholder return reflects the
dollar increase in the value of shares for
the period indicated, assuming that the
dividends distributed were reinvested in
shares of the same company.
Source: Bloomberg and Economática
Period from December 31 1996 to
December 31 2004

Shareholder Base
The geographic distribution of the Gerdau Group shareholder base in 2004 was as follows:
%
Metalúrgica Gerdau S.A. Gerdau S.A. Gerdau Ameristeel Corp.
BRAZIL 89.2 77.2 66.5
NORTH AMERICA 8.7 18.5 33.5
EUROPE 1.3 3.4 -
OTHER 0.8 0.9 -
100.0 100.0 100.0
*Source: Shareholder records from the custodian bank and São Paulo Stock Exchange. All holders of ADRs are considered to be North-American.
The Brazilian Securities and Exchange Commission was duly informed of equity investments representing more than 5% of the voting stock.
Number of Shares
The total number of Metalúrgica Gerdau S.A. shares on December 31, 2004 was 82,486,790 (27,722,930 common shares and 54,763,860 preferred
shares). At Gerdau S.A., the total number of shares on the same date was 295,134,822 (102,936,448 common shares and 192,198,374 preferred
shares). Gerdau Ameristeel Corp. had 304,028,122 common shares on December 31, 2004.
Stock Quotes
São Paulo Stock Exchange (Bovespa)
Metalúrgica Gerdau S.A.
Gerdau S.A.
R$ 2004 2003 2002 2001 2000 2004 2003 2002 2001 2000
HIGH 67.40 30.41 11.58 6.18 6.97 51.34 29.02 12.01 7.28 8.14
LOW 29.54 10.48 5.93 3.86 4.29 24.29 10.09 6.87 3.88 4.01
YEAR-END 67.40 30.27 11.58 5.70 5.19 47.50 28.57 11.35 6.53 5.09
In million R$
Market cap 5,559.6 2,684.1 1,131.1 664.5 679.6 14,018.9 8,887.6 3,751.1 2,308.9 1,939.8
Dividend-adjusted. Source: Economática
New York Stock Exchange (Nyse)
Gerdau S.A. - ADR
In US$ 2004 2003 2002 2001 2000
HIGH 18.20 10.23 5.39 4.50 5.96
LOW 7.96 3.11 2.65 1.80 3.03
YEAR-END 18.00 10.11 3.42 3.74 3.27
In million US$
Market cap 5,340.7 2,755.3 1,013.8 1,102.0 964.7
Source: Bloomberg
Madrid Stock Exchange (Latibex)
Gerdau S.A. - DR
In € 2004 2003 2002* 2001 2000
HIGH 19.95 16.77 7.32 - -
LOW 7.21 5.73 6.42 - -
YEAR-END 13.06 16.77 6.90 - -
In million €
Market cap 2,530.7 1,624.8 - - -
*Starting December 2nd 2002. Source: Bloomberg

28 29 capital markets
Toronto Stock Exchange
Gerdau Ameristeel Corp.
In Cdn$ 2004 2003 2002* 2001 2000
HIGH 8.35 4.76 3.30 - -
LOW 4.15 1.39 1.87 - -
YEAR-END 8.08 4.69 2.31 - -
In million Cdn$
Market cap 2,384.9 929.0 457.6 - -
*Starting October 28 2002. Source: Bloomberg
Indicators per Share
Metalúrgica Gerdau S.A.
Gerdau S.A.
In million R$ 2004 2003 2002 2001 2000 2004 2003 2002 2001 2000
DIVIDEND PAID 434 172 140 123 57 859 351 266 164 125
NET INCOME 1,437 575 434 253 218 2,831 1,137 799 464 393
ADJUSTED NET
INCOME 1,365 546 412 234 174 2,690 1,080 763 461 382
%
PAY-OUT 31.8 31.5 34.0 52.6 32.8 31.9 32.5 34.9 35.6 32.5
YIELD 7.8 6.2 12.4 17.0 7.9 6.1 3.9 7.1 6.8 6.1
In R$
EARNINGS PER SHARE 17.42 13.88 20.87 12.18 10.48 9.59 7.68 7.00 4.09 3.46
Equity value
per share 35.90 47.58 75.80 63.90 55.71 20.58 27.89 28.86 23.66 20.84
*Includes the payment of a supplementary non-recurring dividend.
Gerdau shares have been traded in units since 2003. Previous data refer to lots of one thousand shares.
Pay-out: Dividend divided by annual adjusted net income.
Yield: Per share dividend divided by non-dividend adjusted price of share on the last day of the year.
Long-term relationship with shareholders
Generate value for shareholders. This has been our philosophy for decades. Since 1977, the Gerdau Group’s publicly traded
companies in Brazil have been distributing at least 30% of the yearly adjusted net income as dividends or interest on
capital stock.
In 2002, the Group extended the tag-along right to minority common and preferred shareholders, that is, the right to
receive 100% of the amount paid to the shares of the control group in case the control on the company is sold.

Steel Output
(thousand metric tons)
12,343
6,976
5,020
13,448
7,284
5,736
+9.0%
+4.4%
+14.3%
Production
Growing efficiency levels
Achieve world-class operating levels and strive for maximum
industrial process efficiency. Following this principle, the
Gerdau Group is constantly allocating resources toward the
technological upgrading of its steel mills, employee training,
cost reduction and increased workplace safety.
BRAZIL
428
347 +23.5%
2003
2004
CANADA AND
THE UNITED STATES
Output of Rolled Product
(thousand metric tons)
BRAZIL
9,045
3,890
4,776
379
2003
10,274
4,339
5,451
484
2004
CANADA AND
THE UNITED STATES
CHILE AND
URUGUAY
+13.6%
+11.5%
+14.2%
+27.9%
ARGENTINA, CHILE
AND URUGUAY
Brazil
Long steel
Gerdau mills produced 10.2% more steel than in the previous
year. Melt shops and rolling mills also increased their
operational efficiency. In 2004, there was an improvement
of more than 20% in the number of billets that are rolled
between rolling errors. The Group is also currently performing
the technological upgrading of its drawing mills, which will
allow for a productivity gain of 27% when the units reach
their planned operational performance.
Specialty steel
The specialty steel segment, directed primarily at the
automotive industry, also reported a positive performance
for the year. Productivity increased 15.5%; the output of rolled
products grew 19.4%, and of forged products, 16.5%. The new
electric furnace at Gerdau Aços Especiais Piratini (state of
Rio Grande do Sul) began operating at the beginning of the
year, increasing the unit’s melt shop capacity.

30 31 p r o d u c t i o n
From scrap to steel
GERDAU DIVINÓPOLIS (STATE OF
MINAS GERAIS) SCRAP YARD
Each year, the Gerdau Group recycles nearly 11 million metric tons of scrap to produce steel. As a result,
it is one of the largest recyclers in the world. For society, the use of scrap in the steelmaking process
represents an important contribution to improve quality of life. It reduces the volume of material disposed
of in landfills and generates jobs through an extensive chain of small and medium-sized entrepreneurs
dedicated to this activity.
For the Gerdau Group, the use of iron scrap means an optimized production process, increased productivity
and reduced energy consumption and operating costs.

Improved efficiency
EMPLOYEES GATHERED IN EMBU DAS ARTES
(STATE OF SÃO PAULO) FOR THE 1 ST QUALITY
IMPROVEMENT STORY CONTEST
More than 200 employees from Gerdau units in Brazil participated in the 1 st National Meeting
of Quality Improvement Story Teams in July 2004. The purpose of the event was to recognize the
projects that improved production, safety, and quality.
The 15 teams that took part in the meeting were chosen among 767 Quality Improvement Story
Teams from all over the country. At the event, a judging commission formed by employees from
different areas of the Gerdau Group elected the three groups that most stood out among the
participants.
Gerdau Cearense (state of Ceará), for example, was able to increase the daily operating hours of its
rolling mill equipment by 4.4%, a figure that represents an additional production day per month.
A project at Gerdau Aços Especiais Piratini (Rio Grande do Sul) resulted in a 65% reduction in the
amount of material wasted during the rolling process. Gerdau Açonorte (Pernambuco) increased
the daily operating hours of the equipment used for nail production by 5%.
The goal for 2005 is to hold an international meeting with representatives from all the Gerdau
Group units in North and South America.

32 33 p r o d u c t i o n
Gerdau Açominas – Ouro Branco
In 2004, the Ouro Branco mill produced 3.0 million metric tons of
liquid steel, maintaining its 2003 performance by continuously
striving for operational regularity in the various production stages.
This work philosophy allowed the steel mill to make important
advances which resulted in higher productivity and product quality
as well as the enhanced safety of people and equipment.
The mill also recorded a 22.5% growth in the output of structural
shapes to meet increased demand. In 2004, it began to produce
wire rod – 186,000 metric tons destined for the industrial sector.
Argentina, Chile and Uruguay
In Uruguay, Gerdau Laisa reached record figures in 2004. The mill
increased its output of billets to 58,000 metric tons (+ 24%) and of
rolled products to 48,000 metric tons (+17%). It also surpassed its
goal to reduce losses at the rolling mill.
The output at Gerdau AZA in Chile grew 23.4% compared to the
previous year, reaching a total of 371,000 metric tons. The rolling
mills at Renca and Colina also reported increased productivity.
In Argentina, the output of rolled products at Sipar grew 17.7%
compared to 2003. The overall industrial productivity grew 40%
(ton/man/year).
Canada and the United States
The 14 steel mills belonging to Gerdau Ameristeel, the company
responsible for operations in Canada and the United States,
established goals to improve efficiency and reduce costs in 2004.
Electricity consumption in the furnaces dropped 4.3% in relation
to 2003, a significant achievement that helped counterbalance the
increased cost of the input during the year.

Sales and Markets
Capacity to meet growing market demands
Physical Sales by Geographic Region
(thousand metric tons)
BRAZIL
12,144
6,587
5,141
416
2003
12,561
2004
CANADA AND
THE UNITED STATES
Physical Sales by Product Line
12.6 million metric tons
SLABS, BLOOMS AND BILLETS
COMMON LONG ROLLED
PRODUCTS
SPECIAL ROLLED PRODUCTS
DRAWN PRODUCTS
FLAT STEEL
6,630
520
+3.4%
+0.6%
5,411 +5.3%
6.3% 7.9%
3.0%
18.2%
64.6%
+25.0%
ARGENTINA, CHILE
AND URUGUAY
The Gerdau Group participates in the life of millions of people. Rebar, bars,
profiles, wire rod, wires and a range of other steel products are transformed
into houses, buildings, bridges, roads, airports, automobiles, transmission
towers and household appliances. The Group also participates in rural
life, producing steel for fences and farming machinery and equipment,
among other applications.
In 2004, the recovery of the international market and an increase in
demand in the countries where the Gerdau units are located led to an
increase in sales performance. The Gerdau Group sold 12.6 million metric
tons during the year, representing a 3.4% increase compared to the
previous year.
Brazil
The steelmaking industry benefited from a strong demand in the Brazilian
economy. The Gross Domestic Product (GDP) increased 5.2%, leveraged by
the growth of civil construction, industry and agriculture.
As a result, the national market absorbed 18.3 million metric tons of
steel. From this total, 3.9 million were sold by the Gerdau Group – an
increase of 15% in relation to 2003. To meet domestic market needs, the
Group redirected a portion of the volume normally exported from Brazil.
International sales dropped 14.4% in relation to 2003 to a total of
2.7 million metric tons. Despite this result, shipments to 72 countries
during the year represented 41.5% of the overall sales of the facilities in
Brazil, generating a revenue of US$ 1.1 billion, a figure 39% higher than
that of the previous year. This performance in the international market is
also related to Gerdau’s strategy of serving distinct markets, safeguarding
its units from the protectionist measures currently effective in certain
countries.
In the civil construction sector, the domestic demand for products such as
Gerdau rebar, reinforcing mesh and truss frames increased 12.7% during
the year. Gerdau products were used in major construction projects:
the Recife airport (state of Pernambuco), the Congonhas airport (São
Paulo), the Irapé hydroelectric power station (Minas Gerais) and the Iberê
Camargo museum (Rio Grande do Sul), among others. The Gerdau Group’s
top seller in Brazil – the GG 50 rebar – is destined for civil construction.
Since 1992, the Gerdau brand has been imprinted onto the rebar, which
is certified by the National Institute of Metrology, Standardization and
Industrial Quality (Inmetro). The certification, based on best international

34 35 sales an d mar kets
practices, guarantees the quality of the steel.
The Group also provides special services to go along with its products, delivering fabricated
rebar based on each customer’s specific needs. In this way, the steel arrives at the construction
site ready for use. The deliveries are made in identified lots that streamline the verification of
receipt, storage and use. The service increases the productivity and quality of the structures
while also eliminating steel losses in structural frames, which can be as high as 15% in
conventional practices (see box “Suited to the customer’s taste”).
In the industrial sector, the demand for Gerdau products – wire rod, wires, bars, profiles,
angles and welded products – grew 11.6%. In 2004, angle bars and profiles of certain gauges
were also imprinted with the Gerdau brand for the first time, allowing the customer to verify
the quality of the product at sales outlets. This practice will be extended to other types of
profiles during 2005.
The Group was able to fully meet the demands of its specialty steel customers, despite the
significant growth of the automotive industry and the rise in auto parts exports. It increased
Suited to the customer’s taste
The Gerdau Group develops custom-made solutions
for its civil construction customers in the Americas.
The fabricated reinforcing steel facilities, for
example, use automated technology that increases
productivity by approximately 30% in the assembly
of readymade reinforcing structures, eliminates
losses from surplus and reduces final construction
costs. With this solution, rebar is delivered at
the construction site ready for use based on the
customer’s specific structural plan. Deliveries can be
based on a timetable established by the construction
company, allowing for a higher level of organization
at the construction sites and enhancing the safety
of users. The Gerdau Group already has 44 units
specializing in this service in Brazil, Argentina, Chile,
the United States and Uruguay.
FABRICATED REINFORCING STEEL FACILITY IN THE
UNITED STATES (ABOVE) AND THE INAUGURATION OF
THE SANTA CATARINA UNIT (TO THE RIGHT)

its delivery volume by 22.6% and destined 98% of all production to the domestic market.
Through these and other actions, the Gerdau Group has increasingly reinforced its participation
in international production chains – Gerdau steel is currently used in vehicles manufactured
by the major assemblers worldwide (see box “Cars drive innovation”).
In Brazil, there was a 4.7% increase in the sale of products for the agricultural sector compared
to 2003, including wire, wire rope, posts and other items.
Based on the current scenario, GDP growth in 2005 should surpass that of 2004 by 3.7%,
which will have a positive impact on domestic steel consumption.
Cars drive innovation
The Gerdau Group keeps up to speed with the innovations in the automotive
industry. Gerdau Aços Especiais Piratini (state of Rio Grande do Sul), for example,
has one of the most modern laboratories in Latin America for the development of
steel products, with equipment that allows technicians to simulate production and
forming processes and analyze the degree of steel purity in detail.
With these resources, it is possible to develop the improvements to better serve
our customers. In fact, it is through the very partnership with consumers that
Gerdau is able to create innovations in products and processes. Sales, marketing
and technical support teams verify customer needs by maintaining constant
contact with auto parts manufacturers and assemblers. The suggestions are then
forwarded to the engineers in the research and development area, who work with
customers to create and test new solutions. The Group also establishes partnerships
with universities and research centers, as well as technology transfer agreements
with consultants and other specialty steel producers in Europe and Asia who are
internationally recognized in the sector. Over 40 innovations have been placed on
the market during the past four years as a result of this work.
It is for this reason that the Gerdau Group is increasingly present in international
production chains. Today, its steel is found in vehicles made by Mercedes-Benz,
Caterpillar, Toyota, General Motors, Ford, Fiat, Volvo, Scania, Honda and Volkswagen,
among others, both in Brazil and abroad.
THE GERDAU AÇOS ESPECIAIS PIRATINI (STATE
OF RIO GRANDE DO SUL) LABORATORY: ONE
OF THE MOST MODERN IN LATIN AMERICA, IT
FEATURES ULTRASOUND EQUIPMENT (ABOVE) AND
THERMOMECHANICAL SIMULATORS (TO THE RIGHT)

36 37 sales an d mar kets
Support operations for steelmaking in brazil
COMERCIAL GERDAU
The largest steel distributor in Brazil, Comercial Gerdau sells the most complete line of Gerdau
long steel products along with flat steel products manufactured by other steel companies in
the country. In 2004, it serviced over 155,000 customers for a gross revenue of R$ 2.1 billion,
representing a growth of more than 30% compared to the previous year.
Comercial Gerdau currently operates 69 retail stores that cover the entire market. More
than products, it provides the market with solutions such as the fabricated reinforcing steel
facilities located outside construction sites that rigorously follow the structural design
specifications of each project.
The company offers an entire line of products through its six flat steel distribution facilities,
including roofs, sheets, strips and structural shapes, among others, in addition to plasma, laser
and oxy-cutting systems – state-of-the-art thermal cutting technologies designed primarily
for industry and metallic construction.
Banco Gerdau
Banco Gerdau (Gerdau Bank) is a financial institution that operates with the Group’s business
in Brazil. The institution began operations in 1994 as a multiple bank with the mission of
developing financial products and services that increase the business success and satisfaction
of customers and suppliers. The bank has granted over R$ 4 billion in loans during its 10 years
of operations.
In 2004 , it assisted 1,240 customers. The volume of financing granted grew from
R$ 514.7 million in 2003 to R$ 735.0 million, representing a 42.8% increase. The bank’s assets
portfolio increased from R$ 79.5 million to R$ 135 million. The sum managed by the bank in
the form of fixed income investment funds reached a total of R$ 1.6 billion, 44.6% higher than
in 2003.
Gerdau Florestal
Gerdau Florestal owns 144 thousand hectares of pine and eucalyptus forests.
With 24,000 hectares of pine plantations in the states of Santa Catarina and Mato Grosso do
Sul, Gerdau Florestal sold 1.6 million cubic meters of timber in 2004, maintaining the same
volume as that of the previous year.
It also dedicates 120,000 hectares to eucalyptus forests. In 2004 , Gerdau Florestal planted
15 million seedlings on 13,600 hectares, the main highlight of the US$ 11.5 million investment
plan implemented during the year. The unit also completed the expansion of the seedling
nursery, increasing its production capacity from 15 million seedlings per year to 20 million and
guaranteeing Gerdau Florestal self-sufficiency in highly productive genetic material.
Gerdau Florestal also develops the Forest Farmer Program. Since 1998, small rural landowners
have been encouraged to grow eucalyptus trees, receiving seedlings, raw materials and
technical support. Currently, 777 farmers participate in the project, caring for a planted area

THE CONSTRUCTION OF THE
LEE ROY SELMON EXPRESSWAY
IN TAMPA, FLORIDA EMPLOYS
GERDAU STEEL
of over 12,200 hectares. In 2004 alone, they planted more than 1,500 hectares. It
is estimated that another 7,000 hectares will be incorporated into the program
by 2007.
Argentina, Chile and Uruguay
The units in Argentina, Chile and Uruguay recorded a growth in sales, thanks to
the expansion of their domestic markets. They were responsible for the sale of
520,400 metric tons of steel products during the year, 25% more than in 2003.
The increase is due to the economic growth currently taking place in the three
countries, which drove sales up in various sectors such as civil construction and
industry.
The 9% increase in GDP in Argentina in 2004 reflected the country’s economic
recovery, which was also observed during the previous year. This good phase
had positive repercussions on the steelmaking market, increasing the demand
for steel in civil construction and industry. The Sipar rolling mill, in which the
Gerdau Group has a 38.2% equity investment, increased its sales volume by 16.6%
to 218,800 metric tons. The prospects for the upcoming year are also optimistic,
with an estimated 6% increase in GDP and a gradual recovery of infrastructure
projects and industrial activity.
The Chilean economy grew 6% in 2004 and maintained a sustainable pace of
growth. In the steelmaking market, the highlight was the rebar, with a 36.9%
increase in sales due to investments in infrastructure – especially in the country’s
urban road network – and housing constructions. In 2005, it is expected that the

38 39 sales an d mar kets
GDP growth rate will remain the same as that of 2004, reflecting a positive
prospect for the Chilean industry. This may increase the sales of the wire rod and
shapes produced by Gerdau AZA.
In 2004, Uruguay achieved important economic growth with a 12% increase in
its GDP. This recovery had a positive impact on the purchasing power of the
population, which enjoyed an average salary increase of 10.7%. Consequently,
there was a significant increase in the sale of products by Gerdau Laisa, the
Group’s unit in the country. The main highlight was the 21% increase in the sale
of rebar – a product used in civil construction – in relation to 2003. For 2005, the
Group expects to increase its sales in the national and international markets
based on the country’s economic growth, estimated at 5% of the GDP, and its
solid export performance.
Canada and the United States
The year 2004 was a positive one for the North American economy. The United
States and Canada registered economic growth of 4.4% and 2.8%, respectively,
in relation to the previous year. Gerdau Ameristeel, the Group’s company in the
region, felt the effects of this growth. The high demand for steel, combined with
low import volumes, led to an increase in both the pressure to meet domestic
market needs and margins during most of the year. The fourth quarter marked
a return to a more typical pattern of demand, with a rise in imports and larger
inventories. Nevertheless, all of the North American operations together
recorded a 5.3% growth in the volume of physical sales in comparison to 2003,
with a total of 5.4 million metric tons of steel.
Although the demand was strong in all economic segments in 2004, wire rod
and civil construction products benefited most from this trend. The year was
marked by new ventures in the shopping center and commercial building sector.
The housing sector also reported growth. For example, in the fourth quarter of
2004 alone, investments in housing grew 6% in the United States and 1.7% in
Canada.
Industry in the United States is also experiencing a positive phase. In 2004
companies invested more to keep up with economic growth, leading to the
acquisition of capital goods from North American and foreign suppliers. This
industrial growth meant a higher demand for Gerdau products.
It is projected that the U.S. economy will continue to grow in 2005, although at
a slower pace. The market projection is that the GDP will grow at an annual rate

Investments
Growing profitability and productivity
Increase the competitiveness of our operations and reduce
risks in the different markets where we operate. This is the goal
of our investments: generating value. Each year, the company
invests in increasing the installed capacity of its units and
supplying customers with products that follow rigorous technical
specifications and present superior quality. Because it operates in a
capital-intensive sector, the Group invests heavily in the expansion
of its units and in the acquisition of new assets with medium to
long-term maturity. For this reason, the Group’s decisions are
guided by the conviction that the investments it makes should not
only generate profitability in line with the Group’s historical levels,
but should also result in growing productivity.
Main initiatives in 2004
Gerdau invested a total of US$ 771.7 million in 2004, 161.9% more
than in the previous year. One of the main strategic advances made
by the Group was the purchase of the steelmaking assets of North
Star Steel from Cargill Incorporated for US$ 308 million. With this
investment, the geographic coverage of Gerdau Ameristeel – the
company responsible for the Group’s operations in North America
– expanded into the Midwestern United States. Gerdau’s annual
installed capacity in the region increased by 26.2% for a total of
8.3 million metric tons, and by 23.3% for rolled products for a total
of 7.6 million metric tons.
Investments by Region in 2004 - US$ 771.7 million
BRAZIL
CANADA AND
THE UNITED STATES 42.2%
56.5%
ARGENTINA, CHILE
AND URUGUAY
1.3%

40 41 i n v e s tm e n t s
The purchase included four long steel mills in the states
of Minnesota, Iowa, Kentucky and Texas. It also included
three wire rod processing plants in Texas and Tennessee,
in addition to a unit that produces grinding balls for the
mining industry in Minnesota and two scrap collection and
processing units located in Iowa and Minnesota.
Throughout the year, Gerdau Ameristeel also increased the
supply of products with higher value added by acquiring 12
fabricated reinforcing steel facilities in the United States. Of
these, six were owned by Potter Form & Tie Co. and another
six by Gate City Steel and RJ Rebar. The investment created
synergy with the North Star Steel industrial plants due to
the proximity of the units.
In South America, the Gerdau Group entered into yet another
country: Colombia. It formed a strategic alliance to become
the controlling shareholder of the Diaco Group in a process
of staggered acquisition of the shares held by the Mayagüez
Group and The Latinamerican Enterprise Steel Holding. The
transaction involved two steel mills – a profile and rebar
producer and a specialty steel producer – three rolling
units and a fabricated reinforcing steel facility. The initial
investment for this project was US$ 68.5 million. In 2005,
the Gerdau Group will become the owner of 59.8% of the
Diaco Group’s capital stock, making it the largest long steel
producer in Colombia. In addition, the Gerdau units in Chile,
Uruguay and Argentina received US$ 10.3 million to upgrade
their facilities.
The Group invested US$ 325.6 million in Brazil in 2004.
Nearly a third of this value, US$ 100.2 million, was used to
expand the Ouro Branco mill (state of Minas Gerais). The
Group also invested US$ 77.9 million in the construction
of the Gerdau São Paulo (state of São Paulo) mill. Another
highlight was the modernization of Gerdau Cosigua (Rio de
Janeiro), involving investments of US$ 21.0 million.
THE NORTH STAR STEEL MILL IN CALVERT CITY, KENTUCKY, U.S.A.,
JOINED THE GERDAU GROUP AT THE END OF 2004
THE TUTA UNIT, A SHAPE AND REBAR PRODUCER IN COLOMBIA,
IS ONE OF THE INDUSTRIAL PLANTS IN THE ALLIANCE WITH THE
DIACO GROUP

Investment program for the coming years
The Gerdau Group will invest US$ 3.2 billion in the Americas through 2007.
The largest part, equal to US$ 2.4 billion, is planned for operations in Brazil.
The Group’s installed steel production capacity in Brazil will grow by 4.1 million
metric tons (+55%) over a three-year period, from 7.6 million metric tons to
11.7 million metric tons per year.
The units in North America will receive US$ 740 million and the facilities located
in Argentina, Chile and Uruguay, US$ 60 million.
Key projects in Brazil
Gerdau São Paulo (state of São Paulo): The construction of the new rebar
production unit for civil construction is in its final phase (see box “Countdown
in São Paulo”).
Gerdau Aços Especiais Rio (state of Rio de Janeiro): A new specialty steel mill will
be constructed and is scheduled to start operations in 2007. Designed to serve
the automotive industry, it will have an annual installed capacity of 800,000
metric tons of steel and 500,000 metric tons of rolled products.
Gerdau Açominas – Ouro Branco (state of Minas Gerais): The annual capacity
of the mill will increase from 3 million metric tons to 4.5 million metric tons in
2007. The Ouro Branco investment program also includes an additional phase
for expansion of this facility. The studies relating to this second phase will begin
after the conclusion of the current investment.
Gerdau Usiba (state of Bahia): By 2007, the investment program will expand
the mill’s annual capacity to approximately 640,000 metric tons per year. The
program also involves an increase in the rolling mill capacity during the period.
Gerdau Aços Especiais Piratini (Rio Grande do Sul): The production capacity of
rolled products for the automotive industry will increase from 390,000 metric
tons per year to 500,000 metric tons per year before the end of 2005.
Gerdau Cearense (state of Ceará): A 50% increase in the annual production
of rolled products, from 100,000 metric tons to 150,000 metric tons, will be
achieved ahead of schedule in 2005. Increasing productivity in the industrial
area and the quality of products destined for civil construction and industry is
part of the investment program.
Gerdau Riograndense (Rio Grande do Sul): In 2006, improvements in the melt
shop processes will create an additional production capacity of 60,000 metric
tons of steel per year, reaching approximately 560,000 metric tons.

42 43 i n v e s tm e n t s
Countdown in São Paulo
CONSTRUCTION WORK AT THE
STEEL MILL IN ARAÇARIGUAMA
(STATE OF SÃO PAULO)
The Gerdau Group steel mill in São Paulo is set to start operations in July 2005. The rolling
phase, when steel is transformed into the final product, is scheduled to begin in 2006. The
R$ 750 million investment will be applied in two stages. The first, which is scheduled for
completion in two years, involves an investment of R$ 500 million. In the second stage,
R$ 250 million will be invested.
Located in Araçariguama – 50 kilometers away from the capital of São Paulo – the unit
will have a total annual installed capacity of 1.3 million metric tons of steel and 1.2 million
metric tons of rebar for the civil construction sector. In the first phase, the melt shop will
have an annual installed capacity of 900,000 metric tons of steel, while the rolling mill
will have an annual installed capacity of 600,000 metric tons of rebar. The concept of
ecoefficiency was a highlight of the project with the installation of the most modern
technologies to protect the water, air and soil.

Social
Commitment to the development of
employees and communities
People and Teams
People management
Attracting talent
Training and development
Total workplace safety
Benefits
Career management and succession
Organizational climate
Community
Social highlights
46
51

People and Teams
Teams that add value to the business
More than 24,000 people work for the Gerdau Group. Regardless
of nationality, they work together toward the same objective and
strategy: consolidate the Gerdau Group as an international, worldclass
company.
They share values and knowledge by combining technical, industrial
and commercial expertise and integrating the best aspects of each
business operation.
They also search the market for the most efficient examples of
management, performing global benchmarking research, even in
other sectors of the economy. All of these actions are designed
to add value to the business through teams and leaders who are
committed to outstanding performance. We know, however, that
this is not a short term job. We therefore continuously invest in the
development of our professionals, in attracting talent and in the
quality of life of employees and their families.
People management
To keep people motivated, the Gerdau Group challenges its
employees to surpass limits and become the leaders of change. The
goals are established by teams and managers together, reinforcing
the spirit of team work and the feeling that each individual is
responsible for results (see box “Participative management”).
Outstanding performance is recognized and rewarded through
various compensation programs based on results.
Another important tool used to increase motivation is internal
communication, which encourages the involvement of people
in the Group’s challenges and the feeling of belonging to the
organization. These practices favor the construction of a long-term
bond based on mutual respect.
Attracting talent
The Gerdau Group works continuously to develop future leaders
and attract talents from the market. The emphasis on developing
leaders is reflected in its program for interns and trainees. Over
1,200 youth work side-by-side with experienced professionals
absorbing new knowledge and quickly becoming prepared to take
on new responsibilities.

46 47 People and teams
The Group also searches for developed professionals that can contribute
immediately to the business. Another important program is strategic
recruiting, which Gerdau uses to seek senior level professionals to fill
strategic positions.
Distribution by Region - 24,148 Employees
BRAZIL
Training and development
The Gerdau Group has a specific leadership program that is designed
to improve the efficiency of team management and achieve world-class
performance. One of the subjects addressed is coaching, which develops
each team’s potential to achieve superior results.
CANADA AND
THE UNITED STATES
ARGENTINA, CHILE
AND URUGUAY
3.7%
29.8%
66.5%
The Group also offers full scholarships for MBA and MS programs at the
world’s top educational institutions. Another way of expanding the global
vision of its employees is through intellectual and cultural exchange
within Group operations. This program fosters the Gerdau culture and
Participative management
The Gerdau Group has developed programs to encourage self-management
among employees for nearly 10 years. Through the Operator-Focused
Management Program, the professionals themselves are responsible for
the performance of their cells (teams organized by process in the industrial
operation). The program gives operators greater autonomy and also reduces
hierarchical levels, while increasing the transparency of communication.
Cell management is shared with operators. As part of an annual rotation
process, they take on the control of processes such as safety, maintenance,
environment and costs in addition to the continued exercise of their normal
daily activities. In Brazil, approximately 30% of the industrial unit employees
perform this type of role. In this way, the leaders can more effectively
perform their important function of managing and developing teams.
By receiving more information and participating in the management of
their cell, operators are encouraged to suggest improvements. This process
is happening in all Gerdau units. These are simple proposals that reduce
costs. Take the example of Gerdau Riograndense (state of Rio Grande do
Sul). Based on the suggestion of an employee, the unit was able to reduce
the use of a raw material and achieve an annual saving of R$ 100,000.
With participative management, the teams become more autonomous,
responsible, proactive and knowledgeable of the processes. The results
are reflected in the Gerdau Group performance and in the satisfaction of
employees, who are able to manage their own professional success.
GERDAU CEARENSE (STATE OF CEARÁ) EMPLOYEES
PARTICIPATE IN THE SELF-MANAGEMENT PROGRAM

7
5
3
1
Workplace Safety
(total frequency rate*)
4.4 4.1
2003 2004
* Accident frequency rates with time loss per
million man hours worked (includes employees
and service providers).
the best practices adopted at the different units (see box “A bridge between
the Americas”). Each year, Gerdau Group employees undertake missions to learn
management practices by visiting different units. In addition, more than 40
professionals work outside their country of origin.
Total workplace safety
For the Gerdau Group, no emergency situation, production requirement or result
can justify safety risks for our employees or service providers. It is for this reason
that the Total Safety System exists. It involves a strict set of practices that are
currently shared by all units and it operates on three major fronts:
1. Development of the Zero Accident culture by engaging the leadership and
involving all professionals. This work is performed through continuous awareness
raising, training and team involvement.
2. Use of safety management methodologies to benchmark against international
standards: The methodology is based on the structuring of a system that
guarantees the safety of people through preventive actions. Dozens of practices
are evaluated using this system, ranging from leadership and administration
to critical task analysis and procedures, preparation for emergencies, individual
protection equipment, health control, industrial hygiene and even off job safety.
A bridge between the Americas
The Gerdau Group constructed bridges of knowledge connecting
the employees of its units in the Americas. Each year, different
groups of professionals exchange experiences with colleagues
from other countries, seeking to learn about new cultures, improve
management practices and achieve increased operational results.
It is an opportunity to learn about the Gerdau Management
System and its practical application. It also works as an internal
benchmarking method, since the group visits help facilitate dialogue
between employees, who learn to speak the same management
language and adopt similar practices.
These employees, in turn, share information within their own
units (the multiplier effect). The exchange is an opportunity to
internationalize professionals, who are able to have contact with
the different cultures and practices adopted by their colleagues in
other countries.
U.S. EMPLOYEES VISIT A UNIT IN BRAZIL

48 49 People and teams
3. Investment in new protection materials and industrial equipment in addition
to the modernization of existing equipment.
All of this work is audited periodically by an external consulting firm and
internal teams. Both evaluate the strong points and areas for improvement
in the system, and each unit elaborates action plans, thereby promoting the
continuous improvement of safety practices.
Benefits
The Gerdau Group benefits program is designed to contribute to the quality of
life of employees and their families. It is adjusted based on the local markets,
laws and business operations.
Career management and succession
The Gerdau Group encourages the professional growth of employees in the
organization, preparing them to occupy strategic positions by means of
development programs. Individual development plans are designed together
with the professionals, with goals and the evaluation of results to help employees
achieve their professional aspirations and meet operational demands.
We take pride
Pride to work for the Gerdau Group. This is the feeling that
inspires the majority of employees from all units. The 370
professionals that work in Chile for Gerdau AZA are among
the most satisfied to work for the Group. The perception
was confirmed by an opinion poll performed in 2004. Over
92% of all employees said they were happy to be working at
the unit. The favorability index, which counts the number
of positive results in relation to the total number of poll
questions, was also impressive: 79.7%. The rate is the highest
among all operations in the Americas. In the poll, employees
emphasized factors such as safety, work stability and good
relations with the leadership and other colleagues, in
addition to the availability of training.
AN EMPLOYEE’S CHILD VISITS GERDAU AZA IN CHILE

Organizational climate
Each year, the Gerdau Group performs an opinion poll with employees to evaluate whether
people management practices are meeting the expectations of professionals and generating
the desired results. In 2004, over 85.5% of the professionals in the Americas participated in
the poll, and 79.9% stated that they were happy to be working for the Gerdau Group (see box
Staff 2004 2003
EMPLOYEES 24,148 20,160
OUTSOURCING 9,468 8,852
TRAINEES AND INTERNS 1,241 908
DEPENDENTS 41,259 36,517
NUMBER OF WOMEN WHO WORK AT THE COMPANY 1,657 N.A. 1
% OF LEADERSHIP POSITIONS OCCUPIED BY WOMEN 10.9 N.A. 1
% OF EMPLOYEES OVER 45 YEARS OLD 29.0 32.1
AVERAGE TIME WITH THE COMPANY (IN YEARS) 12.0 10.2
Training and development 2004 2003
INVESTMENTS (MILLION R$) 28.0 22.7
TOTAL NUMBER OF TRAINING HOURS (MILLION) 2 1.5 N.A. 1
NUMBER OF TRAINING HOURS PER EMPLOYEE 2 89 N.A. 1
Workplace safety 2004 2003
INVESTMENTS (MILLION R$) 16.2 11.2
Benefits 2004 2003
MEALS (MILLION R$) 33.4 24.3
TRANSPORTATION (MILLION R$) 33.7 24.6
PROFIT SHARING (MILLION R$) 283.6 249.4
HEALTH (MILLION R$) 161.7 100.8
PRIVATE PENSIONS (MILLION R$) 96.1 46.6
1. Not available
2. Does not include Gerdau Ameristeel data

50 51 c o m m u n i t y
JUNIOR ACHIEVEMENT
PARTICIPANTS: AN
INTERNATIONAL PROJECT
SUPPORTED BY THE GERDAU
GROUP THAT TEACHES
ENTREPRENEURIAL PRACTICES
TO MORE THAN 4 MILLION
YOUTH AROUND THE WORLD
Community
Building a more just world
The sustainability of the Gerdau Group is not only found in its
business management, the efficiency of its employees and in the
protection of the environment but it also extends beyond the
walls of its facilities, because business success is directly linked
to the development of communities. It is for this reason that
the Gerdau Group supports social initiatives in all the countries
where it operates. They are projects that primarily encourage the
dissemination of knowledge, maximizing the ability of people to
transform and generating an environment of growth near the
Gerdau Group facilities.
This focus on social action translates into more than 100 programs
supported by the Gerdau Group. In 2004, these programs involved
R$ 36.5 million in resources and benefited more than 6.5 million
people in the Americas. Since 2005, the management of these
initiatives was handed over to a dedicated structure: the Gerdau
Institute. The Gerdau Institute was created to consolidate the
Group’s policies and guidelines in the area of social responsibility
and coordinate projects that contribute even further to improving
quality of life. It also seeks to engage and encourage partnerships
with other public and private organizations in an effort to optimize
resources and multiply the results of social actions. The institute
promotes volunteer work among its employees, encouraging their
commitment to solving society’s challenges.
The Gerdau Group also makes investments to ensure that the
projects become self-sustainable, both from a financial point of
view and in terms of management capacity. This requires satisfied
people with a good quality of life both inside and outside the
company.

Social highlights
Some activities developed in 2004
A fund for social action
In Brazil, an initiative of the Gerdau Group has served as a
model for other companies, entities and governments: the
Gerdau Professionals Pro-Childhood Fund, a project that
raises the awareness of employees about donating resources
to charitable entities, focused on assisting underprivileged
youth. Created five years ago, the fund raises resources
through tax-deductible donations. Employees use an
Intranet system to select how much they want to contribute
and to which project. Last year alone, the fund received over
R$ 4.6 million in donations, with contributions from both
the Group and its employees. The funds were used to directly
assist approximately 19,000 children and adolescents from
101 Brazilian entities located in 34 cities. The Pro-Childhood
Movement was one of them. It is a non-profit organization
that uses art and education to promote the inclusion of 810
needy boys and girls from the Metropolitan Region of Recife
(state of Pernambuco).
THE GERDAU PROFESSIONALS PRO-CHILDHOOD FUND
CONTRIBUTES TO THE SOCIAL INCLUSION OF BOYS
AND GIRLS IN RECIFE (STATE OF PERNAMBUCO)
The recipe that works
The Prato Popular program brings meals and social
engagement to needy communities in Brazil. At the end
of 2003, the Gerdau Group started its first low-income
restaurant in the State of Rio Grande do Sul near the Gerdau
Riograndense mill. Since then, two other restaurants have
been opened to the public, one in the city of Charqueadas
(state of Rio Grande do Sul) and another in Maracanaú
(Ceará). Some 3,500 people have access to the meals
subsidized by the Group with the initiative. Besides a
balanced meal, the communities assisted began to use the
space as a community center that offers courses and lectures
with themes of social interest (such as alcoholism and drugs)
as well as hairdressing and dental hygiene sessions.
THE PRATO POPULAR RESTAURANT ASSISTS SOME
3,500 PEOPLE IN BRAZIL

52 53 c o m m u n i t y
Champions of the future
Gerdau AZA is committed to the future of sports in Chile.
To encourage the development of champions, the Group
grants one scholarship each year to a talented athlete with
low income. The candidates are chosen by a team comprised
of athletes, specialized technicians and sports journalists.
The selection criteria are technical skill, the level of the
tournaments competed in, results obtained in competitions
during the year, family income and school performance.
Last year, 42 athletes competed for a scholarship of over
R$ 20,000 to fund their training during the year. The resources
are used to improve the quality of the athlete’s training,
meals, transportation and study. The award can be extended
for one more year if the athlete is successful in his or her
competitions. This was the case of the Judo fighter Erwin
Guzmán Pino, who won the 2004 scholarship and will have
it extended through 2005.
JUDO FIGHTER ERWIN GUZMÁN PINO RECEIVES THE
GERDAU AZA SCHOLARSHIP IN CHILE
Holding hands with the community
The social priority of Sipar, the rolling mill located in
Argentina, is to work together with the institutions and
population of Pérez, a city of 22,000 people. The Gerdau Group
currently has a 38.2% equity investment in Sipar. Among the
unit’s community actions, we highlight its support for public
service providers, such as the police and firefighters, and City
Hall, in addition to the maintenance of a public square and
cycle lane. The company also contributes to the development
of local schools and charitable entities, such as the Red Cross,
Liga de Ayuda contra el Cáncer (League in the Fight Against
Cancer - Lalcec), Ilar, an institution created to rehabilitate
people with special needs and Asociación Rosarina de Lucha
contra la Poliomelitis (Association in the Fight Against
Poliomyelitis - ARLPI).
SIPAR, IN ARGENTINA, INTEGRATES
EMPLOYEES, FAMILY MEMBERS AND THE
COMMUNITY OF PÉREZ

From work to school
Gerdau Laisa brings the philosophy of total quality to the
schools of Uruguay. The 5S at School project promotes
environmental management improvements at the six
teaching institutions located near the mill. The efforts are
focused on the fifth and sixth grade classes, with children
between the ages of 10 and 11. In 2004, 540 boys and girls
attended lectures on industry, quality and 5S. They received
the booklets “5S at School” and “5S in the Backpack” and
learned to put the organizational rules of this management
tool to practice. Gerdau Laisa also contributes to improving
the infrastructure of the schools involved, an activity that
benefits 4,200 students.
URUGUAYAN STUDENTS RECEIVE BACKPACKS FROM THE
5S AT SCHOOL PROGRAM PROMOTED BY GERDAU LAISA
Children with wings
NIÑOS CON ALAS BRINGS NEEDY CHILDREN FROM
URUGUAY A NEW PERSPECTIVE ON LIFE
Niños con Alas (Children with Wings) is a program that
transforms the lives of low income children in Uruguay. The
project is organized by a non-governmental organization
with the same name that since 2001 has received the
support of Gerdau Laisa, a mill located in the capital city
of Montevideo. With the program, individuals and private
companies sponsor children for a period of six years, offering
them a brighter future. The sponsored children receive
balanced meals and high quality education in a private
teaching institution and participate in extracurricular
activities such as foreign language classes and sports. In
addition to receiving school materials and a uniform, they
also receive a yearly tuition from Gerdau Laisa, which appoints
an employee to follow the child’s progress. This professional
delivers the donations and also takes the sponsored child
to see movies, plays, and have fun in amusement parks. The
program helps rescue the citizenship of school-aged boys
and girls, giving them the best development opportunities.

54 55 c o m m u n i t y
House of hope
The home of Maria Andrews and her five children is made
of Gerdau Ameristeel material and the effort of Cartersville
unit employees in the United States. The U.S. citizen is one
of the individuals who received aid through the Habitat
for Humanity program, which provides job opportunities
and housing to families experiencing financial difficulties.
Gerdau Ameristeel, in addition to construction tools and
materials, provides volunteer work of nearly 50 employees
who dedicated more than 1,000 hours of their free time
to the project. Many of these individuals spent less time
with their own families so that Maria Andrews and her
children would have a home by Christmas, 2004. They
were able to deliver a four-bedroom house at half the
cost of a conventional project. The savings were possible
through the use of materials donated by sponsors, such as
Gerdau Ameristeel, and through the volunteer labor of the
Cartersville steel mill employees. The North American units
stand out for their community work. Last year alone, more
than 2,000 Gerdau employees became involved in social
initiatives in Canada and the United States.
VOLUNTEER WORK ENGAGES GERDAU AMERISTEEL
CARTERSVILLE EMPLOYEES IN THE UNITED STATES
Running for life
Gerdau Ameristeel employees in Cambridge, Canada, made
running a doubly healthy habit. In addition to their own personal
development, the employees are also fostering the health of the
community. In Canada, various campaigns promote physical
activities as fundraising events for hospitals and cancer prevention
foundations. Roxane Beyette, quality control coordinator at the
Gerdau Ameristeel Cambridge mill, participated in the Weekend to
End Breast Cancer in September 2004. Besides walking 60 kilometers
(about 37 miles), Beyette and her mother Kathy cultivated seasonings
and made candies, which were sold before the walk at locally-held
parties. Beyette earned Cdn$ 2,000 with the initiative. Bruno Manella,
another Gerdau employee, was even more creative: he had his hair
cut off in order to raise money for the campaign. He auctioned off
the opportunity to cut his hair to his colleagues. With initiatives such
as this one, more than 4,500 participants raised Cdn$ 14.7 million for
the prevention and treatment of breast cancer. A team from the unit
also participated in “Run for the Cure,” a different campaign. The
event occurs at the same time in 40 different Canadian cities and
benefits the Canadian Breast Cancer Foundation.
ROXANE BEYETTE (TO THE RIGHT),
QUALITY CONTROL COORDINATOR AT
GERDAU AMERISTEEL CAMBRIDGE IN
CANADA AND HER MOTHER KATHY
WORKED HARD IN THE CAMPAIGN TO
FIGHT BREAST CANCER

The
Environment
Ecoefficient practices to protect
the air, water and soil
Environmental Management System
Environmental Performance
Raw materials
Water
Air
Soil
Energy
Biodiversity
Education for the Environment
58
59
62

Environmental
Management System
Gerdau units follow world-recognized
standards
Protect the environment with future generations in mind. This is
a daily concern for the Gerdau Group, which produces thousands
of metric tons of steel per year with a commitment to reducing
the environmental impact of its operations. It is also expressed
in its environmental policy, elaborated based on the international
ISO 14001 standard and enforced by its 24,000 employees.
The environmental management system involves the analysis of
over 13,000 industrial processes along the entire production line,
from raw material collection to steel distribution. It translates
the principles of the Gerdau Group into well-defined rules and
objectives that enable the analysis of air, water and soil protection
Distribution of Investment in the Environment by
Geographic Region - US$ 25 million in 2004
BRAZIL
10.3%
CANADA AND
THE UNITED STATES
CHILE AND URUGUAY
31.8%
57.9%
Distribution of Investment in the Environment by
Subject - US$ 25 million in 2004
AIR
WATER
SOIL
ISO 14001
VARIOUS
2.5%
3.6%
20.2%
14.0% 59.7%

58 59 environmental management
measures – fundamental for the continued achievement of increased
ecoefficiency rates. This monitoring gives the Group a detailed view of
the impacts that each activity has on nature – no matter how small – and
allows it to develop projects to improve the performance of the units.
The environmental management system also directly engages employees
by encouraging them to send suggestions via the Intranet, thereby
increasing their commitment to the results obtained.
Environmental
Performance
Technologies ensure outstanding performance
Raw materials
Reuse is currently one of the best ways of guaranteeing the sustainability
of our planet. For the Gerdau Group, this is more than a principle because
recycling is actually part of the business: approximately 65% of the
production in the Americas requires iron scrap. The recycling effort is also
present at the end of the industrial process – 66.2% of the by-products
generated are reused by other economic segments, reducing the use of
natural resources.
Water
The Gerdau Group does its part to preserve water resources. Currently,
96.7% of processed water from its units is reused, drastically reducing
the need for collection. This rate results from a set of important practices,
especially recirculation. This process collects the industrial water and
recycles it in the production process. This means that only 3.3% of the
water used in steel production is collected from the rivers. This collection
is necessary because approximately 1.8% of the water used evaporates
and 1.5% returns to the rivers after being treated inside the mills.
Another initiative involves the capture of rain water through rainwater
collection systems that are currently being modernized or expanded.
SYSTEMS FOR PROCESS WATER TREATMENT AND RECIRCULATION
ARE PRESENT IN ALL GERDAU STEEL MILLS
By-product Disposal
3.8 million metric tons
REUSED
BY-PRODUCTS 1
2.5 MILLION
NON RE-USED
BY-PRODUCTS 2
1.3 MILLION
33.8%
66.2%
1. Secondary products of the industrial process reused or recycled either
internally or externally.
2. Secondary products of the industrial process stored in deposits specifically
designed for this purpose.

In 2004, the Gerdau Group invested US$ 3.5 million in actions
designed to preserve water resources.
Water Consumption - 1.5 billion m 3
CAPTURED WATER
3.3%
RECIRCULATED
WATER
96.7%
Air
Maintaining air quality is a Gerdau Group priority. In 2004, it
was the area that most received investments (US$ 14.9 million),
ranging from the technological upgrading of dust filtration
systems to improvements in the melt shop furnaces, also designed
to improve air quality. The dust removal systems are technologies
developed to efficiently capture the solid particles emitted during
the steel production process and are based on world-recognized
best practices. Another measure is the use of natural gas as a
substitute for oil in heating processes. This effort is in line with the
Kyoto Protocol as it reduces greenhouse gas emissions. The Group’s
carbonic gas emission rate per metric ton of steel produced was
550 kilograms, as determined by the IPCC Guidelines for National
Greenhouse Gas Inventories, a world reference for the indicator.
The number represents the average consolidated emission rate of
the Gerdau Group – including market and integrated mills. That
means that the Group’s average is much lower than the worldwide
average of 1.6 tons for the sector, according to 2003 data supplied
by the International Iron and Steel Institute (IISI).
Soil
Care for the soil is also a concern for the Gerdau Group, involving
continuous investments in improving storage conditions that
translate into increasingly safer practices for raw material, product
and by-product stocking.

60 61 environmental performance
Energy
The steelmaking sector is known for its intensive use of energy. For this reason,
the management of this resource is a permanent concern. Although the Group’s
total energy consumption has grown, the specific consumption necessary for the
production of steel fell, showing increased efficiency in the use of this input.
Energy Consumption 2004
7
5
3
Electricity Consumption
(million MWh)
6.4
7.0
OXYGEN (in Nm 3 ) 794,654,254
NATURAL GAS (in Nm 3 ) 662,312,728
DIESEL FUEL (in l) 6,246,022
LUBRICANTS AND GREASES (kg) 1 2,656,484
1. Does not include data from Gerdau Ameristeel and Gerdau AZA.
1
2003 2004
Biodiversity
The maintenance of green belts around the steel mills represents a commitment
to nature and to the quality of life of the community. The Gerdau Group dedicates
8,000 hectares of its total area of 16,900 hectares for the preservation of green
areas. Of this total, 5,500 hectares are set apart for the preservation of native
forest to protect the local ecosystems.
700
500
300
Specific Consumption of Electricity
(KWh per metric ton of steel produced)
541.7 522.5
100
2003 2004
Chilean students receive the recycling scrap! guide
The first school guide on scrap recycling was published
in Chile in 2004 by Gerdau AZA together with the nongovernmental
organization Casa de la Paz (House for
Peace). The material is directed at elementary and high
school teachers and is designed to promote the inclusion
of the topic into different curriculum subjects. In addition
to information about the steelmaking sector, in which
scrap is a major raw material, the guide proposes a series
of activities to be developed in the classroom: teachers
and students can have a hands-on experience about the
importance of scrap recycling for the preservation of the
environment. What’s more, Gerdau AZA sets an example by
producing 100% of its steel from scrap.
The 1,500 copies of the guide’s first edition were given out
in less than three months. The material was distributed at
various schools in the Metropolitan Region of Santiago and
forwarded to the National Environmental Commission and
environmental organizations. The next edition is currently
being prepared for distribution in 2005.
BOOKLET TEACHES ELEMENTARY AND HIGH SCHOOL STUDENTS IN CHILE ABOUT RECYCLING

Education for
the Environment
Encouraging ecological awareness
Care with the water, air, soil and green areas depends on
the awareness of employees and the community. This is
why environmental education actions are fundamental
for preserving natural resources and have been receiving
increasing attention. In 2004, more than 50,000 people,
including employees, service providers and community
members participated in events such as lectures and courses
designed to encourage the preservation of nature.
The Group increased the number of employee training hours
in the environment more than eight fold in relation to the
previous year. For the external public, the Group increased
the number of training hours by 26.1%. In all, Gerdau Group
professionals and the community had over 300,000 hours of
training in ways to preserve the environment.
Promoting awareness on environmental issues is also a
way of encouraging the sustainable development of the
regions where the Gerdau Group has units and establishing
a commitment with customers, shareholders, suppliers and
the community.
100
70
40
10
Hours of Environmental
Training - Employees
(thousand hours)
9
80
2003 2004
250
200
150
100
50
Hours of Environmental
Training - Community
(thousand hours)
177
224
2003 2004

62 63 education FOR THE environment
ISO 14001 mobilizes employees
The Gerdau Group has a priority goal in environmental management: to
obtain the ISO 14001 certification for its 26 steel mills. The mission involves
employees from various units in the Americas. Gerdau AZA in Chile and
Gerdau Ameristeel Cambridge in Canada already have been awarded this
recognition of good environmental practices. In Brazil, Gerdau Açominas
– Ouro Branco (state of Minas Gerais), Gerdau Cosigua (Rio de Janeiro)
and Gerdau Aços Especiais Piratini (Rio Grande do Sul) have obtained the
certification. These three units account for more than 60% of the Group’s
capacity in the country.
The ISO 14001 standard was created to help companies identify, prioritize
and manage environmental risks as part of their daily practices. To obtain
this recognition, the Gerdau Group implemented the Campaign for ISO
14001 Certification in Brazil to encourage employees, service providers
and partner companies from the units to improve their environmental
management practices.
COUNTER-CLOCKWISE: OBTAINING THE CERTIFICATION IS A
SOURCE OF PRIDE FOR EMPLOYEES FROM GERDAU COSIGUA
(STATE OF RIO DE JANEIRO), GERDAU AÇOMINAS – OURO
BRANCO (MINAS GERAIS) AND GERDAU AÇOS ESPECIAIS
PIRATINI (RIO GRANDE DO SUL)

Steel Production
Find out how steel is produced at Gerdau facilities
Integrated
Mills
Iron Ore Blast Furnace Converter
Ladle
Market
Mills
Steel
Scrap
Electric Arc
Furnace
Ladle Furnace
Pig Iron
Nail
Machine
Drawn
Wire
Drawing
Unit
Welding
Manufacturing
Process
Galvanizing
Unit
Nails
Welding Wires
and Wires for Electrodes
Barbed
Wire
Oval-Shaped
Wire
Galvanized
Wire
CA-60
Rebar
Annealed
Wire

64 65 steel production
Raw Material
Melt Shop
Rolling
Drawing
Nail Factory
Gerdau Products
Ladle
Billets
Reheating
Furnace
Continuous
Caster
Wire Rod
Laying
Head
Finishing
Unit
Rolling
Mill
Cooling
Bed
Ribbed Reinforcing
Mesh
Structural
Profiles
Bars and GG 50
Profiles
Rebar

Timeline
More than 100 years of history
German immigrant João
Gerdau and his son Hugo
found the first Gerdau
Group unit, the Pontas de
Paris Nail Factory in the
city of Porto Alegre in the
state of Rio Grande do Sul.
Curt Johannpeter, Hugo’s
son-in-law, leads Gerdau
through a decisive stage
in the expansion of the
company’s business. In
1947, Gerdau becomes a
limited liability company
listed on the Porto Alegre
Stock Exchange.
The Group develops
its culture of social
responsibility, creating
the Gerdau Foundation
with programs in
the areas of health,
education, housing and
social assistance for
employees and their
family members.
Gerdau heads toward
the northeastern region
of Brazil, initiating steel
production in the state
of Pernambuco with the
Açonorte mill.
1901
1946
1963
1969
1907
1948
1967
1971
The business started by João
Gerdau is divided into two
independent companies:
Hugo directs the Pontas
de Paris Nail Factory and
his brother, Walter, takes
charge of the furniture
manufacturing business,
Móveis Gerdau, also located
in Porto Alegre. Later on, in
1930, the two brothers take
part in the creation of the
Manufacturing Industry
Center of Rio Grande do
Sul (CINFA), which later
becomes the Federation of
Industries of Rio Grande do
Sul (FIERGS).
The Gerdau Group
enters the steelmaking
business with the
Group’s Riograndense
steel mill in Porto Alegre.
The Riograndense
mill pioneers the
technological concept
of the market mill,
employing scrap metal
as raw material and
focusing operations
on regional marketing
and sales, and more
competitive operating
costs.
The company’s
expansion route
reaches the
southeastern region
of Brazil with the
acquisition of the
São Judas Tadeu wire
factory, a nail and wire
manufacturer in the
state of São Paulo.
Construction of the
Cosigua mill begins
in the city of Rio de
Janeiro as part of a
joint venture with
the German group
August Thyssen
Huette. This is
also the year in
which the Gerdau
Group enters the
steel distribution
business with the
first Comercial
Gerdau store in São
Paulo.

66 67 t i m e l i n e
The Gerdau
Group’s process of
internationalization
begins with the
acquisition of the
Laisa steel mill in
Uruguay.
The Group acquires
control of the AZA steel
mill in Chile, currently
Gerdau AZA. The Group
launches the GG 50 rebar,
the first in the country to
bear a brand name and a
guarantee of quality.
Gerdau starts to produce
steel in the United States
with the acquisition
of Ameristeel. In the
same year, the shares of
Gerdau S.A., one of the
Group’s public companies
in Brazil, are listed on the
New York Stock Exchange
(NYSE).
The Group merges
its North American
operations with Co-Steel.
The move results in
the creation of Gerdau
Ameristeel, with 11 steel
mills and 29 steel service
facilities.
1980 1992
1999
2002
1989
1998
2001
2004
International growth
advances into North
America with the
acquisition of Courtice
Steel, currently Gerdau
Ameristeel Cambridge,
located in the province
of Ontario (Canada). In
1995, Gerdau strengthens
its position in Canada
by acquiring a second
industrial plant, MRM
Steel, in the province of
Manitoba.
In Argentina, Gerdau
becomes a shareholder
of the Sipar Aceros S.A.
rolling mill.
The Gerdau Group
completes 100 years of
activity, reaching the
8.4 million metric ton
mark for steel production
capacity and R$ 551 million
in net income.
Year of expansion
in the Americas. The
highlight in Brazil is the
construction of two new
mills and the expansion
of the Ouro Branco unit,
in the state of Minas
Gerais. In Colombia, it
becomes a shareholder
of the Diaco and Del
Pacífico mills. In North
America, Gerdau acquires
the assets of North Star
Steel. Gerdau Ameristeel
shares are listed on the
NYSE.

Glossary
Definitions for technical terms employed
in the report
A
ADRs
ADRs, or American Depositary
Receipts, are securities issued in
the U.S. capital market to represent
shares of non-U.S. companies. These
securities were created to give
foreign companies access to the
North American capital market.
Amortization
Accounting procedure by which
the original cost value of an
asset with limited life or of an
intangible asset is gradually
written off as expense, reducing
the value of the asset. In the case
of fixed assets, the term used is
“depreciation” and for goods such
as natural resources, “exhaustion.”
Assets
Any goods with commercial or
exchange value belonging to a
society, institution or individual.
B
Bars and profiles
Product category encompassing
shapes used to manufacture diverse
products such as agricultural
machinery and equipment,
furniture, steel grating, etc.
Benchmark
Standard of excellence.
Billet
Steel section (usually square)
resulting from continuous casting
or rolling of larger sections. Used
as material for the production
of long steel products.
Blast furnace
A large steel stack lined with
refractory brick used in integrated
steel mills to produce pig iron.
By-product
Desirable or undesirable secondary
product of the industrial process.
C
Coke
A raw material used in the blast
furnace to produce pig iron.
Coke is produced from charcoal
through a process known as
coking. Coking removes the
volatile components of charcoal.
Common share
Security representing the smallest
portion of capital stock in a
corporation, providing voting rights.
Continuous casting
Process during which liquid steel
is solidified. Steel may be cast
into various shapes and gauges to
produce billets, slabs or blooms.
Controlling block
Ownership by a shareholder or
group of shareholders of the largest
portion of shares with voting
rights in a company, which entails
the power of decision-making.
Corporate governance
System by which corporations
are managed and supervised,
involving the relationship between
shareholders/quota holders, board
of directors, executive board,
independent auditors and fiscal
council. Good corporate governance
practices are aimed at increasing
the value of a company’s shares,
facilitating the access of companies
to capital resources and contributing
to their continuity (Brazilian Institute
for Corporate Governance definition).
D
Dividend
Amount distributed to shareholders
in cash for each share.
Drawing
Cold process by which wire rod
is transformed into wire.
Dust removal
A highly efficient system for
filtering the tiny solid particles
resulting from steelmaking.
E
EBITDA
Earnings Before Interest, Taxes,
Depreciation and Amortization.
It is calculated as gross profit
minus sales, general and
administrative expenses,
depreciation and amortization.
Ecoefficiency
Capacity to carry out processes
with the least negative impact
on the environment.
Electric arc furnace
Furnace used to manufacture
steel primarily from steel scrap.
Employs electricity through an
electric arc to melt raw materials.
Equity pickup
Realization of equity changes in a
controlled or subsidiary company in
the results of the parent company.
Euro commercial paper
Short or medium term securities
that are issued by companies in
international financial markets.
F
Flat rolled steel
Product category including
products such as plates and strips.
Flat steel is used in the exterior
of cars, home appliances, etc.
G
Galvanized steel
Steel coated with a thin layer of zinc
that provides resistance against
corrosion for use in applications
exposed to the environment, such as
automotive parts, cans and fencing.
GGB
Ticker symbol for Gerdau S.A. ADRs
on the New York Stock Exchange.
GGBR4
Ticker symbol for Gerdau S.A.
preferred shares on the São
Paulo Stock Exchange.
GNA
Ticker symbol for Gerdau
Ameristeel shares on the
New York Stock Exchange.
GOAU4
Symbol for Metalúrgica Gerdau
S.A. preferred shares on the
São Paulo Stock Exchange.
Gross debt
Amount referring to bank loans
plus issued debentures.
Gross margin
Equivalent to gross income
divided by net sales revenues.
Gross margin is expressed as
a percentage representing the
amounts of net sales revenues
that produced gross income.
Gross revenues
Total sales before cost of
materials and services.
I
Indebtedness
Composition of long and short
term debt resulting from
loans and debentures.
Integrated mill
A mill employing iron ore to
manufacture steel. It is usually
comprised of a pellet mill and
coking unit, a blast furnace,
melt shop and rolling mill.
L
Ladle furnace
Furnace that receives the liquid
steel produced at the electric arc
furnace for chemical refining.
Level 1 Corporate Governance,
Bovespa
Set of conduct rules for companies,
managers and controlling
shareholders, which contribute
to the appreciation of shares and
other assets issued by a company.
Level 1 Companies are committed to
improving disclosure to the market
and shareholding dispersion.

68 69 G L O S S a r y
Liquidity
Ability of an asset to be
converted into cash quickly.
Long steel
Steel product in which one
dimension (length) is predominant.
Includes bars, profiles, wire rod,
rebar, structural shapes and wires.
The line of long steel products
is Gerdau’s main product line.
M
Majority shareholder
Individual or group holding a
sufficient number of voting
shares to control a company.
Market mills
Steel mills focused on purchasing
raw material and selling their
production in the same region
in which they are installed.
Melt shop
In a steel mill, the location where
steel is actually produced.
Minority shareholder
Individual or group holding a
number of shares that is not
sufficient to control the company.
N
Net debt
Gross debt minus cash and
financial applications.
Net income
Profit after taxes and
minority participations.
Net margin
Equivalent to net income
divided by net sales revenues.
Net margin is expressed as a
percentage representing the
amounts of net sales revenues
that produced net income.
Net sales revenue
Gross revenues minus sales
taxes, freight and discounts.
O
Oxy-cutting
Cutting method for metallic
parts. It is used to cut scrap
and billets or slabs in the
continuous casting process.
P
Pellet
Small iron ore body, usually spherical,
used as input in the blast furnace.
Pig iron
Produced in the blast furnace,
pig iron results from the
chemical reduction of iron
ore with charcoal or coke.
Preferred share
Security representing the
smallest portion of capital
stock in a corporation, providing
privileges in terms of dividend
distribution and reimbursement
of capital in case of dissolution.
In general, preferred stock holders
do not have voting rights.
Productivity
Ratio between what is produced
and the necessary resources for
production. In the steel industry, one
of the most widely used productivity
indicators is ton/man/year (t/m/y).
Publicly traded company
Company whose shares are
registered with the Securities
and Exchange Commission,
distributed among a certain
number of shareholders and
negotiable in stock exchanges
or over-the-counter market.
R
Rebar
A steel rod with ridges for use
in reinforced concrete.
Receivables
Accounts receivable less bad debts.
Recycling
Process through which iron scrap
is re-used to produce steel.
Ribbed reinforcing mesh
Grid frame made of ribbed rebar used
in the construction of concrete slabs.
ROE
Return on Equity. ROE is the ratio
between net income and net
equity. It reflects shareholder
return on investment.
Rolled product
Product resulting from the rolling
process, in which raw material
is successively compressed
until acquiring the desired
shape and dimensions.
Rolling
Cold or hot mechanical process
that changes the cross-sectional
dimensions or shape of steel
produced in the melt shop.
Rolling block
Rolling equipment, including a set
of cages assembled as a single
structure, used in the high-speed
production of high quality wire rod.
S
Sarbanes-Oxley
A law enacted by the U.S.
Congress to protect investors from
accounting fraud in corporations.
The rules and regulations of the
Sarbanes-Oxley Act amend and
supplement the preexisting laws
ruling publicly traded companies.
Scrap
Iron material that is reprocessed
for steel production.
Shareholders’ equity
Shareholders’ net worth capital
invested in a company.
Slab
A steel product that serves as
the basis for the production
of plates and strips.
Specialty long steel
Long steel produced with specific
physical characteristics required
for special applications, such
as in the automotive, oil, tools
and machinery industries.
Steel
An iron alloy with carbon content
not more than 1.5%, which may
also contain other elements that
alter the physical properties.
Stock bonus
Shares of stock given to current
shareholders in addition to
dividends. May also be a security
that entitles to the subscription of
new shares issued by a company
within the limit of capital increase
authorized in the by-laws.
Structural shapes
Category of steel product
including I and H beams and
wide flange beams. Used in
buildings, industrial installations,
bridge reinforcements, etc.
Sustainability
Sustainability (or sustainable
development) is the balance between
economic, environmental and social
aspects to avoid compromising
the future growth of a company.
T
Total quality
Management methodology
in which quality is viewed as
synonymous with the satisfaction
of a company’s stakeholders:
customers, employees, shareholders,
suppliers and the community.
W
Wire rod
Round steel product obtained
from the rolling process. Wire rod
is usually drawn and used in the
production of wire, screws and nails.

2004
Financial
Statements
Detailed information on financial performance
Metalúrgica Gerdau S.A.
Gerdau S.A.
Gerdau Açominas S.A.
72
108
144

Metalúrgica Gerdau S.A.
Balance Sheet at December 31
(In thousands of reais)
Assets Company Consolidated
2004 2003 2004 2003
Current Assets
Cash and cash equivalents ........................................................... note 5 95,800 25,186 2,003,945 1,015,726
Trade accounts receivable ............................................................. note 6 - - 2,564,192 1,561,083
Inventories................................................................................... note 7 - - 4,236,642 2,336,598
Tax credits................................................................................... note 8 11,247 16,113 251,858 137,810
Deferred income tax and social contribution on net income.............. note 9 - - 329,797 117,106
Dividends receivable..................................................................... 120,508 62,086 - -
Other accounts receivable ............................................................. 3,801 4,095 267,058 264,504
Total current assets......................................................................... 231,356 107,480 9,653,492 5,432,827
Long-term Receivables
Related parties............................................................................. note 21 - 3,390 1,231 30,509
Eletrobrás loans............................................................................ 372 372 10,584 10,584
Deposit for future investment in subsidiaries................................... note 4 - - 182,158 -
Deferred income tax and social contribution on net income.............. note 9 9,702 10,830 623,722 812,105
Compulsory deposits and other...................................................... note 10 2,817 3,553 245,391 228,287
Total long-term receivables............................................................ 12,891 18,145 1,063,086 1,081,485
Permanent Assets
Investments ................................................................................. note 11 3,018,021 2,029,479 112,547 463,224
Fixed assets.................................................................................. note 12 1,593 1,738 7,928,973 7,380,838
Deferred charges.......................................................................... note 13 - - 33,858 20,467
Total permanent assets.................................................................... 3,019,614 2,031,217 8,075,378 7,864,529
Total assets......................................................................................... 3,263,861 2,156,842 18,791,956 14,378,841
The accompanying notes are an integral part of these financial statements.

72 73
METALÚRGICA GERDAU S.A.
Liabilities and Shareholder’s Equity Company Consolidated
2004 2003 2004 2003
Current Liabilities
Trade accounts payable.................................................................. 63 4 1,921,424 1,191,065
Financing..................................................................................... note 14 - - 2,027,865 2,461,299
Debentures................................................................................... note 15 - 624 2,986 3,651
Taxes and contributions payable.................................................... note 18 2,247 3,537 391,185 178,442
Related parties............................................................................. note 21 266 - - -
Deferred income tax and social contribution on net income.............. note 9 - - 180,166 35,721
Salaries payable............................................................................ 4,218 7,364 259,919 156,289
Dividends payable......................................................................... note 23 158,374 73,524 338,972 165,722
Other accounts payable................................................................. 10,630 9,037 222,741 231,854
Total current liabilities.................................................................... 175,798 94,090 5,345,258 4,424,043
Long-term Liabilities
Financing..................................................................................... note 14 - - 3,490,374 3,396,085
Debentures................................................................................... note 15 - - 573,504 423,956
Provision for contingencies............................................................ note 20 664 1,800 240,964 223,015
Deferred income tax and social contribution on net income.............. note 9 85,540 44,315 699,119 532,263
Post-employment benefits.............................................................. note 22 - - 294,478 278,870
Other accounts payable................................................................. 40,825 44,541 292,664 263,689
Total long-term liabilities............................................................... 127,029 90,656 5,591,103 5,117,878
Minority Interest.................................................................... - - 4,894,561 2,864,824
Shareholders’ Equity
Capital......................................................................................... note 23 1,664,000 1,280,000 1,664,000 1,280,000
Capital reserves............................................................................ 10,842 10,659 10,842 10,659
Revenue reserves.......................................................................... 1,285,632 680,877 1,285,632 680,877
Retained earnings......................................................................... 560 560 560 560
Total shareholders’ equity.............................................................. 2,961,034 1,972,096 2,961,034 1,972,096
Shareholders’ Equity Including Minority Interest.................................. - - 7,855,595 4,836,920
Total liabilities and shareholders’ equity.................................... 3,263,861 2,156,842 18,791,956 14,378,841
The accompanying notes are an integral part of these financial statements.

Statement of Income
Years Ended December 31
(In thousands of reais)
Company
Consolidated
2004 2003 2004 2003
GROSS SALES REVENUES................................................................... note 26 - - 23,407,573 15,782,967
Taxes on sales............................................................................... - - (2,456,568) (1,427,585)
Freight and discounts..................................................................... - - (1,353,743) (988,421)
___________ ___________ ___________ ___________
Net Sales Revenues........................................................ - - 19,597,262 13,366,961
COST OF SALES AND/OR SERVICES RENDERED.................................... - - (13,352,238) (10,076,740)
___________ ___________ ___________ ___________
GROSS PROFIT...................................................................... - - 6,245,024 3,290,221
SELLING EXPENSES........................................................................... - - (455,175) (448,131)
FINANCIAL INCOME.......................................................................... note 17 10,239 11,900 249,261 86,754
FINANCIAL EXPENSES....................................................................... note 17 (6,852) (5,616) (397,642) (708,130)
GENERAL AND ADMINISTRATIVE EXPENSES
Management fees.......................................................................... (3,168) (2,957) (50,654) (35,256)
General expenses........................................................................... (28,891) (27,036) (1,000,299) (769,245)
EQUITY IN THE EARNINGS (LOSSES) OF SUBSIDIARIES
AND ASSOCIATED COMPANIES...................................................... note 11 1,342,842 610,001 (344,628) (281,240)
OTHER OPERATING INCOME (EXPENSES), NET.................................... 96 367 191,043 17,208
___________ ___________ ___________ ___________
Operating Profit........................................................... 1,314,266 586,659 4,436,930 1,152,181
NON-OPERATING INCOME (EXPENSES), NET....................................... 170,953 1,445 144,102 (6,162)
___________ ___________ ___________ ___________
Profit Before Taxes and Profit Sharing......................... 1,485,219 588,104 4,581,032 1,146,019
PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION
ON NET INCOME.......................................................................... note 9
Current......................................................................................... (2,624) (3,305) (957,000) (314,614)
Deferred........................................................................................ (42,352) (6,663) (238,405) 454,470
MANAGEMENT PROFIT SHARING....................................................... note 24a (3,168) (2,957) (44,530) (29,001)
___________ ___________ ___________ ___________
Net Income Before Minority Interest........................ 1,437,075 575,179 3,341,097 1,256,874
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
MINORITY INTEREST......................................................................... ___________ (1,904,022) ___________ (681,695)
NET INCOME FOR THE YEAR................................................. ___________ 1,437,075 ___________ 575,179
Net income per share - R$......................................................... ___________
17.42 ___________
13.88
Net equity per share - R$.......................................................... ___________
35.90 ___________
47.58
The accompanying notes are an integral part of these financial statements.

74 75
METALÚRGICA GERDAU S.A.
Statement of Changes in Financial Position
Years Ended December 31
(In thousands of reais)
Company
Consolidated
Financial Resources Were Provided By
Operations:
2004 2003 2004 2003
Net income for the year............................................................ 1,437,075 575,179 3,341,097 1,256,874
Expenses (income) not affecting working capital
Depreciation and amortization.............................................. 145 149 766,819 605,045
Cost of permanent asset disposals........................................ 79,158 8,771 360,815 42,201
Equity in the (earnings) losses of subsidiaries and associated
companies...................................................................... note 11 (1,342,842) (610,001) 344,628 281,240
Gain on sale of shares by subsidiary...................................... note 11 (125,969) - - -
Foreign exchange effects on working capital of
foreign companies........................................................... - - (86,946) (120,202)
Monetary variations on long-term debt.................................. 3,707 4,653 (131,822) (11,085)
Third parties:
Monetary variations on long-term receivables....................... - - (526) (5,107)
___________ ___________ ___________ ___________
From operations.............................................................. 51,274 (21,249) 4,594,065 2,048,966
___________ ___________ ___________ ___________
Capital increase........................................................................ - - 493,181 -
Treasury shares........................................................................ note 23 (14,441) (7,049) (41,477) (24,152)
Increase (decrease) in long-term liabilities.................................. 32,666 (2,334) 768,045 675,463
Contributions to capital reserves ............................................... 183 - 16,246 66,302
Working capital of consolidated companies................................ - - - 53,198
Working capital - purchase of assets......................................... - - 669,446 -
Dividends not included in income for the year............................. 404,325 173,643 - 459
Total funds provided..................................................... 474,007 143,011 6,499,506 2,820,236
Financial Resources Were Used for
Investments ................................................................................. 3,214 5,119 41,619 80,402
Purchase of assets........................................................................ - - 924,457 -
Fixed assets.................................................................................. - - 1,262,707 843,462
Deferred charges.......................................................................... - - 18,654 7,246
Increase (decrease) in long-term receivables................................... (5,254) 576 (13,500) 518,612
Dividends/interest on equity ......................................................... note 23 433,879 172,100 966,119 354,015
Total funds used............................................................. 431,839 177,795 3,200,056 1,803,737
Changes in Working Capital ..................................... 42,168 (34,784) 3,299,450 1,016,499
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Working capital............................................................................
At the beginning of the year...................................................... 13,390 48,174 1,008,784 (7,715)
At the end of the year............................................................... 55,558 13,390 4,308,234 1,008,784
___________ ___________ ___________ ___________
Changes in Working Capital ............................ 42,168 (34,784) 3,299,450 1,016,499
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
The accompanying notes are an integral part of these financial statements.

Statement of Changes
in Shareholders’ Equity
(In thousands of reais)
Capital reserves Revenue reserves
Premium Investments Total
on issue and working Retained shareholders’
Capital of shares Other Total Legal capital Total earnings equity
At December 31, 2002 640,000 8,686 1,973 10,659 79,181 845,666 924,847 560 1,576,066
Net income for the year - - - - - - - 575,179 575,179
Capital increase through
capitalization of reserve note 23 640,000 - - - - (640,000) (640,000) - -
Treasury shares note 23 - - - - - (7,049) (7,049) - (7,049)
Distribution proposed for
the Annual General Meeting
Legal reserve note 23 - - - - 28,759 - 28,759 (28,759) -
Reserve for investments
and working capital - - - - - 374,320 374,320 (374,320) -
Dividends/interest on equity note 23 - - - - - - - (172,100) (172,100)
At December 31, 2003 1,280,000 8,686 1,973 10,659 107,940 572,937 680,877 560 1,972,096
Net income for the year - - - - - - - 1,437,075 1,437,075
Capital increase note 23 384,000 - - - - (384,000) (384,000) - -
Investment incentives - - 183 183 - - - - 183
Treasury shares note 23 - - - - - (14,441) (14,441) - (14,441)
Distribution proposed for
the Annual General Meeting
Legal reserve note 23 - - - - 71,855 - 71,855 (71,855) -
Reserve for investments
and working capital - - - - - 931,341 931,341 (931,341) -
Dividends/interest
on equity note 23 - - - - - - - (433,879) (433,879)
At December 31, 2004 1,664,000 8,686 2,156 10,842 179,795 1,105,837 1,285,632 560 2,961,034
The accompanying notes are an integral part of these financial statements.

76 77
METALÚRGICA GERDAU S.A.
Statement of Cash Flows
Years Ended December 31
(In thousands of reais)
Company
Consolidated
2004 2003 2004 2003
Net income for the year..................................................................... 1,437,075 575,179 3,341,097 1,256,874
Equity in the (earnings) losses of subsidiaries and associated companies.. note 11 (1,342,842) (610,001) 344,628 281,240
Provision for credit risks.................................................................... - - 7,647 20,618
Gain on disposal of fixed assets......................................................... - - 9,058 10,056
Gain (loss) on disposal of investments................................................ (170,953) (1,445) (164,058) (1,556)
Monetary and exchange variations..................................................... 5,198 5,563 (94,087) 136,349
Depreciation and amortization........................................................... 145 149 766,819 605,045
Income tax and social contribution on net income............................... 47,393 8,420 505,551 (441,456)
Interest on debt................................................................................ 778 14 412,152 593,308
Contingencies/judicial deposits ......................................................... (940) 18 4,351 562
Changes in trade accounts receivable................................................. - - (720,363) (167,134)
Changes in inventories...................................................................... - - (1,402,408) (207,267)
Changes in trade accounts payable..................................................... 58 (27) 477,292 187,227
Other operating activity accounts....................................................... (33,737) 8,656 (100,288) 74,557
___________ ___________ ___________ ___________
Net cash provided by (used in) operating activities.......................... (57,825) (13,474) 3,387,391 2,348,423
___________ ___________ ___________ ___________
Acquisition/disposal of fixed assets.................................................... - - (1,173,491) (873,039)
Increase in deferred charges.............................................................. - - (18,006) (7,246)
Acquisition/disposal of investments.................................................... 155,144 5,097 362,905 (67,005)
Purchase of assets............................................................................ - - (924,457) -
Receipt of dividends/interest on equity .............................................. 351,884 185,108 - -
___________ ___________ ___________ ___________
Net cash provided by (used in) investing activities........................... 507,028 190,205 (1,753,049) (947,290)
___________ ___________ ___________ ___________
Suppliers of fixed assets.................................................................... - - 144,573 2,196
Working capital financing.................................................................. (7,778) (7,015) (133,006) (334,804)
Debentures ..................................................................................... (586) (423) 85,305 (347,456)
Permanent asset financing................................................................. - - 762,766 454,989
Payment of permanent asset financing................................................ - - (677,357) (541,308)
Payment of financing interest............................................................. - - (379,801) (414,409)
Loans with related parties ................................................................. 2,839 (2,506) 35,944 (16,937)
Capital increase/treasury shares......................................................... note 23 (14,441) (7,049) 451,704 (24,151)
Payment of dividends/interest on equity and profit sharing............... (358,623) (198,413) (853,710) (423,399)
___________ ___________ ___________ ___________
Net cash used in financing activities............................................... (378,589) (215,406) (563,582) (1,645,279)
___________ ___________ ___________ ___________
Changes in cash and cash equivalents............................................ 70,614 (38,675) 1,070,760 (244,146)
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Cash and cash equivalents
At the beginning of the year.......................................................... note 5 25,186 63,861 1,015,726 1,420,236
Restatement of opening balance.................................................... - - (82,541) (173,736)
Opening balance of consolidated companies for the year................. - - - 13,372
At the end of the year................................................................... note 5 95,800 25,186 2,003,945 1,015,726

Notes to the Financial Statements
at December 31, 2004 and 2003
(All amounts in thousands of reais unless otherwise indicated)
1 - Operations
Metalúrgica Gerdau S.A. is a holding company in the Gerdau Group, which is principally dedicated to the production of common and special
steel and to the sale of general steel products (flat and long), in plants located in Brazil, Uruguay, Chile, Canada, Argentina and the United
States of America.
The Gerdau Group has an installed capacity of 16.4 million tons of crude steel per year, basically producing steel in electrical furnaces, from
scrap and pig iron purchased, for the most part, in the region near each plant (mini-mill concept). Gerdau also operates plants which are
capable of producing steel from iron ore (through blast furnaces and direct reduction) and has a unit used exclusively to produce special
steels. It is the largest scrap recycling group in Latin America and is among the largest in the world.
The industrial sector is the most important market, including manufacturers of consumer goods such as vehicles and household and
commercial equipment that basically use profiled steel in various available specifications. The next most important market is the civil
construction sector, which demands a high volume of rebars and wires for concrete. There are also numerous customers for nails, staples
and wires, commonly used in the agribusiness sector.
2 - Presentation of the Financial Statements
The financial statements have been prepared and are presented in accordance with accounting practices adopted in Brazil, which are based
on the provisions of Brazilian Corporate Law, together with the rules established by the Brazilian Securities Commission (CVM).
A statement of cash flows (company and consolidated), prepared under the indirect method, is being presented as supplementary information
in order to provide additional information.
3 - Significant Accounting Practices
a) Cash and cash equivalents - financial investments are recorded at cost plus income accrued up to the balance sheet date, applying the
interest rates agreed with the financial institutions, and do not exceed market value;
b) Trade accounts receivable - are stated at realizable values, and accounts receivable from foreign customers are adjusted based on the
exchange rates effective at the balance sheet date. The provision for credit risks is calculated based on a credit risk analysis, which includes
the history of losses, the individual situation of each customer and the economic group to which they belong, the collateral and guarantees
and the legal advisors’ opinion, and is considered sufficient to cover eventual losses on realization;
c) Inventories - are stated at the lower of market value and average production or purchase cost;
d) Investments in subsidiary and associated companies - are recorded on the equity method of accounting. The equity in the earnings or loss
is recorded in an income statement account;
e) Fixed assets - are recorded at cost, net of depreciation. Depreciation is calculated on the straight-line basis, at the rates stated in Note
12, which take into consideration the estimated useful lives of the assets. Interest on financing obtained to finance construction in progress
is added to the cost of the constructions;
f) Deferred charges - amortization is calculated on the straight-line basis at rates determined based on the production of the implemented
projects in relation to their installed capacities;
g) Financing - are stated at the contract value plus the contracted charges, including interest and monetary or foreign exchange variations.
Swap contracts, which are linked to the loan agreements, are classified together with the related loans;
h) Income tax and social contribution on net income - current and deferred income tax and social contribution on net income are calculated
in conformity with current legislation;
i) Other current and long-term assets and liabilities - are recorded at their realizable amounts (assets) and at their known or estimated
amounts plus accrued charges and indexation adjustments (liabilities), when applicable;
j) Related parties - loan agreements between Brazilian companies are restated by the weighted average interest rate for market funding.
The agreements with foreign companies are restated by charges (LIBOR plus 3% p.a.) plus foreign exchange variation. Sales and purchases
of inputs and products are made under terms and conditions similar to those of unrelated third parties;
k) Determination of the results of operations - the results of operations are determined on the accrual basis of accounting;
l) Use of estimates - the preparation of financial statements requires estimates to record certain assets, liabilities and other transactions.
The Company’s financial statements therefore include various estimates related to the useful lives of fixed assets, provisions necessary for
contingent liabilities, for income tax and other similar matters. Actual results may differ from those estimated;
m) Environmental investments - expenses related to compliance with environmental regulations are considered as cost of production or
capitalized when incurred; and
n) Translation of foreign currency balances - asset and liability balances of transactions in foreign currency are translated to local currency
(R$) at the foreign exchange rate in effect at the balance sheet date (2004 - US$ 1.00 = R$ 2.6544 and 2003 - US$ 1.00 = R$ 2.8892).

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METALÚRGICA GERDAU S.A.
4 - Consolidated Financial Statements
a) The consolidated financial statements at December 31, 2004 include the accounts of Metalúrgica Gerdau S.A. and the directly or indirectly
controlled subsidiaries listed below:
Percentage Shareholders’
Consolidated company ownership equity
Gerdau S.A...................................................................................................................................................................... 100 6,073,856
Gerdau Participações S.A.................................................................................................................................................. 100 4,887,726
Gerdau Açominas S.A....................................................................................................................................................... 100 4,766,046
Gerdau Ameristeel Corporation and subsidiaries*............................................................................................................... 100 3,622,636
Gerdau Internacional Empreendimentos Ltda. - Grupo Gerdau............................................................................................. 100 2,785,282
Gerdau GTL Spain S.L....................................................................................................................................................... 100 2,761,750
Gerdau Steel Inc. ............................................................................................................................................................ 100 2,351,341
Axol S.A.......................................................................................................................................................................... 100 476,156
Gerdau Chile Inversiones Ltda........................................................................................................................................... 100 476,126
Indústria Del Acero S.A. - Indac......................................................................................................................................... 100 476,063
Gerdau Aza S.A. ............................................................................................................................................................. 100 421,401
Santa Felicidade Com. Imp. e Exp. de Produtos Siderúrgicos Ltda......................................................................................... 100 388,298
Seiva S.A. - Florestas e Indústrias...................................................................................................................................... 100 202,143
Itaguaí Com. Imp. e Exp. Ltda. ......................................................................................................................................... 100 193,964
Sipar Aceros S.A. ............................................................................................................................................................ 38 78,037
Margusa - Maranhão Gusa S.A. ........................................................................................................................................ 100 73,714
Gerdau Laisa S.A. ............................................................................................................................................................ 100 51,897
Aramac S.A. ................................................................................................................................................................... 100 49,355
GTL Equity Investments Corp. ........................................................................................................................................... 100 49,286
Banco Gerdau S.A............................................................................................................................................................ 100 33,618
Açominas Com. Imp. Exp. S.A. - Açotrading........................................................................................................................ 100 22,583
Florestal Rio Largo Ltda.................................................................................................................................................... 100 18,174
Aceros Cox Comercial S.A................................................................................................................................................. 100 10,110
Gerdau Açominas Overseas Ltda. ..................................................................................................................................... 100 7,914
Florestal Itacambira S.A.................................................................................................................................................... 100 7,650
Siderco S.A...................................................................................................................................................................... 38 6,958
GTL Financial Corp........................................................................................................................................................... 100 4,931
GTL Trade Finance Inc. .................................................................................................................................................... 100 27
Dona Francisca Energética S.A. ........................................................................................................................................ 52 (16,350)
*Subsidiaries:
Gerdau Ameristeel MRM Special Sections Inc. (100%), Gerdau USA Inc. (100%), Ameristeel Bright Bar Inc. (100%), Gerdau Ameristeel US Inc. (100%), Gerdau Ameristeel Perth Amboy
Inc. (100%), Gallatin Steel Company (50%) e Gerdau Ameristeel Sayreville Inc. (100%).
b) The more significant accounting practices used in preparing the consolidated financial statements are as follows:
I) Metalúrgica Gerdau S.A. and its subsidiaries adopt consistent practices to record their operations and value their assets and liabilities. The
financial statements of foreign subsidiaries were translated using the exchange rate in effect at the balance sheet date and were adjusted
to conform with accounting practices adopted in Brazil;
II) Asset, liability and income statement balances arising from transactions between consolidated companies have been eliminated; and
III) Holdings of minority shareholders in subsidiaries are shown separately.
c) During the year, the following transactions occurred:
I) On February 16, 2004, the subsidiary Gerdau Ameristeel Corporation signed a sale and purchase agreement for the acquisition of all assets
of Potter Form & Tie Co., headquartered in Belvidere, Illinois, in the United States of America. The acquisition price was US$ 11 million,
equivalent to R$ 31,995 on that date;
II) On April 16, 2004, the subsidiary Gerdau S.A., through its indirect subsidiary Gerdau Steel Inc., acquired 26,800,000 shares of Gerdau
Ameristeel Corporation through a capital increase of Cdn$ 131 million, equivalent to R$ 283,937 on that date. After this transaction, Gerdau
S.A. held, indirectly, 72% of Gerdau Ameristeel Corporation;

III) The Extraordinary General Meeting of shareholders of the subsidiary Gerdau S.A. held on June 30, 2004 approved the merger of the
subsidiary GTL Brasil Ltda., without the issue of new shares. The net assets transferred to Gerdau S.A. as a result of the merger, are as
follows:
Assets
Current assets.................................................................................................................................................................................................................... 534
____________
Long-term receivables......................................................................................................................................................................................................... 8
____________
Permanent assets
Investments
Seiva S.A. - Florestas e Indústrias................................................................................................................................................................................... 17,883
Gerdau Açominas S.A.................................................................................................................................................................................................... 333,257
(-) Negative goodwill - Gerdau Açominas S.A.................................................................................................................................................................. ____________ (280,882)
Total permanent assets................................................................................................................................................................................................................ ____________
70,258
Total assets................................................................................................................................................................................................................................... ____________
70,800
Liabilities
Current liabilities................................................................................................................................................................................................................ 1,495
Long-term liabilities............................................................................................................................................................................................................ ____________ 4,591
Total liabilities..................................................................................................................................................................................................... ____________
6,086
Total net assets.................................................................................................................................................................................................... ____________
64,714
IV) On October 15, 2004, the subsidiary Gerdau S.A. announced to the market that the indirect subsidiary Gerdau Ameristeel Corporation
obtained the confirmation of its registration with the Canadian securities regulatory authorities for the public offer of 70 million common
shares. Gerdau S.A., through its subsidiary Gerdau Steel Inc., acquired 35,000,000 and 4,381,000 common shares on October 20, 2004 and
November 18, 2004, respectively, in the total amount of US$ 185 million, equivalent to R$ 528,787 on those dates. The transaction initially was
a capital increase in Gerdau Steel Inc., through the issue of 817,969 common shares. Subsequently, on December 28, 2004, Gerdau S.A. paid
up capital in Gerdau Internacional Empreendimentos Ltda. (the company that holds the investments abroad) through the transfer of 817,969
common shares of Gerdau Steel Inc. in the amount of R$ 499,430. Following this transaction, Metalúrgica Gerdau S.A. held, indirectly, 66.5%
of Gerdau Ameristeel Corporation.
V) On October 28, 2004, the subsidiary Gerdau S.A., through its indirect subsidiary Gerdau Ameristeel Corporation, announced the signature
of a sale and purchase agreement for the acquisition of the assets of Gate City Steel Inc. and RJ Rebar Inc. (cutting and folding of rebars,
with and without epoxy covering), headquartered in Indianapolis, Indiana, in the United States of America. The acquisition price was US$ 16
million (R$ 42,470 at December 31, 2004);
VI) On October 29, 2004, the subsidiary Armafer Serviços de Construção Ltda. was merged by the subsidiary Gerdau Açominas S.A., and the
net assets of R$ 44,744 were recorded, replacing the investment account, without capital increase. The objectives of the transaction were to
reduce administrative expenses and improve operating synergy;
VII) On November 1, 2004, the subsidiary Gerdau S.A., through its indirect subsidiary Gerdau Ameristeel Corporation, purchased the fixed
assets and working capital of four mills producing long steel, three processing units of wire rods and one producer of steel grinding balls for
the mining industry owned by North Star Steel, announced on September 9, 2004. The price paid for these assets was US$ 266 million (R$
706,070 at December 31, 2004), in cash. Gerdau Ameristeel Corporation also paid an additional US$ 52 million (R$ 138,029 at December 31,
2004) as an adjustment in the purchase price due to fluctuations in working capital up to the transaction date;
VIII) On December 23, 2004, the Gerdau Group reached an agreement with the Mayaguez Group and The Latinamerican Enterprise Steel
Holding, majority shareholders of Diaco S.A., the largest Colombian producer of steel and rebars, and Siderúrgica del Pacífico S.A. - Sidelpa,
the only producer of special steel in that country, for the scheduled acquisition of their holdings in these companies. Initially, US$ 69 million
(R$ 182,158 at December 31, 2004) were invested, recorded as “deposit for future investment in subsidiaries” in long-term receivables. The
Mayagüez Group, which will remain as a Diaco shareholder for a maximum eight-year period, formed a strategic partnership with the
Gerdau Group for the development of the Colombian steel industry; and
IX) On December 3, 2004, the Board of Directors of the subsidiary Gerdau S.A. authorized the company’s management to implement corporate
restructuring measures to obtain greater strategic advantages, as well as greater operating and management efficiency, arising from the
specialization and location of the different business units and areas of the Gerdau Group. The efforts will be concentrated in the main
activities, focused operations and gain of critical mass within each of the activity areas. Also, this restructuring will consider solutions for the
Group’s future growth. On December 29, 2004, the first act of this process was completed, with the capital increase of the holding company
Gerdau Participações S.A. through the shares held in Gerdau Açominas S.A. and part of the quotas in Gerdau Internacional Empreendimentos
Ltda.. held by Gerdau S.A., representing, respectively, 91.5% and 22.8% of those companies’ capital. The capital of Gerdau Participações S.A.
was also increased by the direct and indirect investments held by Gerdau Internacional Empreendimentos Ltda. in Gerdau Chile Inversiones
Ltda., Gerdau Laisa S.A. and Sipar Aceros S.A. The final corporate restructuring model has not yet been finished and will be implemented as
the management proposals are approved by the Board of Directors. Accordingly, additional measures should be implemented during this
year and they will be advised, as soon as they occur.

80 81
METALÚRGICA GERDAU S.A.
d) The financial statements of the jointly-owned subsidiary Dona Francisca Energética S.A., and the jointly-owned indirect subsidiaries
Gallatin Steel Company and Sipar Aceros S.A., were consolidated proportionally based on the direct or indirect interest of the parent company
in the capital of these subsidiaries.
The amounts of the financial statements of these companies are shown as follows:
Dona Francisca Gallatin Sipar Aceros S.A.
Energética S.A.
______________________
Steel Company
______________________
Consolidado *
_____________________
2004 2003 2004 2003 2004 2003
Assets
Current assets........................................................................ 116,627 111,782 586,106 290,036 144,251 85,185
Long-term receivables............................................................. 128,427 129,889 - - - 2,863
Permanent assets.................................................................... __________ 180,984 __________ 191,728 __________ 612,762 __________ 736,223 __________ 18,929 __________ 19,109
Total assets...................................................................... __________
426,038 __________
433,399 __________
1,198,868 __________
1,026,259 __________
163,180 __________
107,157
Liabilities
Current liabilities.................................................................... 29,381 28,522 131,580 152,134 80,787 40,252
Long-term liabilities................................................................ 413,006 423,722 54,190 230,651 4,356 4,212
Shareholders’ equity................................................................ (16,349) (18,845) 1,013,098 643,474 78,037 62,693
__________ __________ __________ __________ __________ __________
Total liabilities........................................................................ 426,038 433,399 1,198,868 1,026,259 163,180 107,157
__________ __________ __________ __________ __________ __________
__________ __________ __________ __________ __________ __________
Statement of operations
Gross sales revenues............................................................... 44,987 37,189 2,384,065 1,260,130 437,864 296,651
Sales deductions..................................................................... (2,207) (3,952) (11,215) (14,157) (87,259) (62,398)
__________ __________ __________ __________ __________ __________
Net sales revenues.................................................................. 42,780 33,237 2,372,850 1,245,973 350,605 234,253
Cost of sales........................................................................... (19,424) (19,520) (1,626,650) (1,194,150) (285,566) (188,139)
__________ __________ __________ __________ __________ __________
Gross profit............................................................................ 23,356 13,717 746,200 51,823 65,039 46,114
Selling expenses..................................................................... - - (6,224) (5,336) (4,987) (2,259)
General and administrative expenses........................................ (2,110) (2,251) (45,010) (33,376) (19,876) (12,762)
Other financial income (expenses)............................................ (17,882) (20,743) (14,030) (22,620) (8,101) 2,681
Other operating income (expenses)........................................... - - - - (76) (3,346)
__________ __________ __________ __________ __________ __________
Operating profit (loss)............................................................. 3,364 (9,277) 680,936 (9,509) 31,999 30,428
Non-operating income (expenses), net...................................... 380 3,790 10,225 (1,367) 759 (2,889)
Provision for income tax and social contribution........................ (1,249) 1,871 (797) - (10,188) (7,425)
__________ __________ __________ __________ __________ __________
Net income (loss) for the year............................................................ 2,495 (3,616) 690,364 (10,876) 22,570 20,114
__________ __________ __________ __________ __________ __________
__________ __________ __________ __________ __________ __________
* includes the subsidiary Siderco
e) The Company and its direct and indirect subsidiaries have goodwill and negative goodwill balances, which are being amortized as the
assets that generated them are realized or based on the realization of the projected future income, limited to ten years, as follows:
Amortization
period Company Consolidated
Goodwill included in the investments accounts
Balance at December 31, 2003............................................................................................. - 432,077
(+) Goodwill recorded in the period...................................................................................... 1,502 308,899
(-) Reversal of goodwill based on the adjustment in purchase price (Margusa - Maranhão Gusa S.A.) - (5,258)
(-) Write-off of goodwill as a result of the merger of the subsidiary GTL Brasil........................... - (280,882)
(-) Foreign exchange adjustment .......................................................................................... - (36,361)
(-) Amortization for the year................................................................................................ up to 10 years ______________ (1,502) __________________ (365,621)
Balance at December 31, 2004 (based on expectation of future profitability)............................ - 52,854
Analysis of the goodwill by
Margusa - Maranhão Gusa S.A........................................................................................ - 24,728
Dona Francisca Energética S.A......................................................................................... - 19,512
Armacero Industrial y Comercial Ltda............................................................................... - 457
Distribuidora Matco S.A.................................................................................................. - 6,066
Salomon Sack S.A.......................................................................................................... ______________- __________________ 2,091
- 52,854

Amortization
period Company Consolidated
Goodwill included in the fixed asset accounts
Balance at December 31, 2003...................................................................................................... - 239,740
(-) Foreign exchange adjustment.................................................................................................... - (14,860)
(-) Amortization for the year.......................................................................................................... up to 10 years ______________- __________________ (79,921)
Balance at December 31, 2004 (based on undervaluation of assets)................................................. - 144,959
The goodwill mainly resulted from the assets of the subsidiary Gerdau Ameristeel US Inc.
Negative goodwill included in the fixed asset accounts
Balance at December 31, 2003...................................................................................................... - (272,130)
(-) Amortization for the year.......................................................................................................... ______________- __________________ 28,853
Balance at December 31, 2004 (based on overvaluation of assets)................................................... up to 10 years - (243,277)
The negative goodwill arises from the assets of the subsidiary Gerdau Açominas S.A.
The goodwill recorded in the investment accounts, calculated on the subsidiary Gerdau Ameristeel US Inc., were reviewed in respect of their
amortization period and projected profitability. The remaining balance was amortized in accordance with accounting practices adopted in
Brazil, and based on the current scenario and performance of the subsidiary Gerdau Ameristeel Corporation.
The equity accounting loss in the consolidated statement of income refers, basically, to the effect of the devaluation of the U.S. dollar on the
foreign investments, to goodwill amortization for the year and to the tax incentive reserves arising from the reduction of income tax on the
exploitation profit of the subsidiaries Gerdau Açominas S.A. and Margusa - Maranhão Gusa S.A., both located in the Northeastern region of
Brazil, as well as to benefits arising from state tax financing.
5 - Cash and Cash Equivalents
Company
Consolidated
_______________________________ ______________________________
2004 2003 2004 2003
Cash and banks................................................................................................ 98 23 337,767 125,596
Financial investment fund.................................................................................. - - 527,102 326,551
Fixed income securities...................................................................................... 95,702 25,163 1,101,388 364,116
Equities............................................................................................................ - - 37,688 199,463
_____________ _____________ _____________ _____________
95,800 25,186 2,003,945 1,015,726
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
Of the existing balance, R$ 1,004,550 - consolidated (R$ 518,315 - consolidated in 2003) refers to investments in U.S. dollars.
6 - Trade Accounts Receivable
Consolidated
_____________________________
2004 2003
Customers in Brazil...................................................................................................................................................................... 880,557 568,968
Brazilian exports receivable.......................................................................................................................................................... 543,954 235,442
Receivables from customers of overseas companies........................................................................................................................ 1,232,095 835,212
Provision for credit risks............................................................................................................................................................... ____________ (92,414) ____________ (78,539)
____________
2,564,192 ____________
1,561,083

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METALÚRGICA GERDAU S.A.
7 - Inventories
Consolidated
_________________________________
2004 2003
Finished products......................................................................................................................................................................... 1,728,652 868,147
Work in process........................................................................................................................................................................... 679,167 323,373
Raw materials.............................................................................................................................................................................. 1,112,467 586,311
Storeroom materials..................................................................................................................................................................... 649,892 517,010
Advances to suppliers................................................................................................................................................................... ____________ 66,464 ____________ 41,757
____________
4,236,642 ____________
2,336,598
The inventories are covered against fire and overflow. Coverage is determined based on the amounts and the risks involved.
8 - Tax Credits
Company
Consolidated
______________________________ ________________________________
2004 2003 2004 2003
Value-Added Tax on Sales and Services (ICMS).................................................... 9 9 99,819 90,820
Social Contribution on Revenues (COFINS) to offset............................................. - - 56,302 -
Social Integration Program (PIS) to offset............................................................ - - 36,730 4,759
Excise Tax (IPI) ................................................................................................. - - 3,310 6,358
Income tax and social contribution on net income............................................... 11,232 16,076 46,396 30,435
Tax on Added Value (IVA).................................................................................. - - 1,861 487
Other............................................................................................................... 6 28 7,440 4,951
_____________ _____________ _____________ _____________
11,247 16,113 251,858 137,810
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
9 - Income Tax and Social Contribution on Net Income
a) Analysis of the income tax and social contribution expense:
Profit before income tax and social contribution, after statutory
Company
__________________________________________________________________________________________
2004 2003
__________________________________________ _________________________________________
IR CS Total IR CS Total
profit sharing..................................................................... 1,482,051 1,482,051 1,482,051 585,147 585,147 585,147
Statutory rates ...................................................................... 25% 9% 34% 25% 9% 34%
Income tax and social contribution expense at statutory rates... (370,513) (133,385) (503,898) (146,287) (52,663) (198,950)
Tax effects on:
- equity in earnings (losses) ................................................ 335,711 120,856 456,567 152,500 54,900 207,400
- interest on equity............................................................. (685) (247) (932) 46 17 63
- permanent differences (net) ............................................. 2,297 990 3,287 (13,801) (4,680) (18,481)
___________ ___________ ___________ ___________ ___________ ___________
Income tax and social contribution expense............................. (33,190) (11,786) (44,976) (7,542) (2,426) (9,968)
___________ ___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________ ___________
Current.............................................................................. (2,070) (554) (2,624) (2,575) (730) (3,305)
Deferred............................................................................ (31,120) (11,232) (42,352) (4,967) (1,696) (6,663)
IR - Corporate income tax.
CS - Social contribution on net income.

Profit before income tax and social contribution, after statutory
Consolidated
__________________________________________________________________________________________
2004 2003
__________________________________________ _________________________________________
IR CS Total IR CS Total
profit sharing..................................................................... 4,536,502 4,536,502 4,536,502 1,117,018 1,117,018 1,117,018
Statutory rates....................................................................... 25% 9% 34% 25% 9% 34%
Income tax and social contribution expenses at statutory rates.. (1,134,126) (408,285) (1,542,411) (279,255) (100,532) (379,787)
Tax effects on:
- tax rate difference for foreign companies........................... (96,019) 91,649 (4,370) 38,906 (14,169) 24,737
- equity in earnings (losses)................................................. (86,157) (31,017) (117,174) (70,310) (25,312) (95,622)
- interest on equity............................................................. 90,350 32,526 122,876 88,569 31,885 120,454
- foreign exchange effect.................................................... 29,731 2,676 32,407 72,863 26,231 99,094
- recovery of deferred tax assets.......................................... 270,770 48,109 318,879 305,724 117,027 422,751
- permanent differences (net).............................................. (34,333) 28,721 (5,612) (38,028) (13,743) (51,771)
___________ ___________ ___________ ___________ ___________ ___________
Income tax and social contribution expense............................. (959,784) (235,621) (1,195,405) 118,469 21,387 139,856
___________ ___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________ ___________
Current.............................................................................. (789,638) (167,362) (957,000) (240,313) (74,301) (314,614)
Deferred............................................................................ (170,146) (68,259) (238,405) 358,782 95,688 454,470
IR - Corporate income tax.
CS - Social contribution on net income.
b) Analysis of the deferred income tax and social contribution assets and liabilities, at statutory rates:
Assets
_________________________________________________________________________________________________________________________
Company
Consolidated
___________________________________________________________ ____________________________________________________________
2004 2003 2004 2003
____________________________ _____________________________ _____________________________ _____________________________
IR CS TOTAL IR CS TOTAL IR CS TOTAL IR CS TOTAL
Income tax losses.................... 3,572 - 3,572 4,499 - 4,499 431,440 - 431,440 462,096 - 462,096
Social contribution losses........ - 5,023 5,023 - 5,260 5,260 - 69,255 69,255 - 94,826 94,826
Provision for contingencies...... 117 42 159 345 124 469 48,846 17,465 66,311 41,133 14,680 55,813
Benefits to employees............. - - - - - - 101,474 - 101,474 95,839 - 95,839
Commissions/other.................. - - - - - - 156,345 2,343 158,688 80,178 1,492 81,670
Amortized goodwill................. 948 - 948 602 - 602 7,391 2,319 9,710 9,696 3,274 12,970
Provision for losses................. ________- ________- ________- ________- ________- ________- ________ 87,595 ________ 29,046 ________ 116,641 ________ 94,462 ________ 31,535 ________ 125,997
________ 4,637 ________ 5,065 ________ 9,702 ________ 5,446 ________ 5,384 ________ 10,830 ________ 833,091 ________ 120,428 ________ 953,519 ________ 783,404 ________ 145,807 ________ 929,211
Current.................................. - - - - - - 271,204 58,593 329,797 90,981 26,125 117,106
Long-term.............................. 4,637 5,065 9,702 5,446 5,384 10,830 561,887 61,835 623,722 692,423 119,682 812,105
Liabilities
_________________________________________________________________________________________________________________________
Company
Consolidated
___________________________________________________________ ____________________________________________________________
2004 2003 2004 2003
____________________________ _____________________________ _____________________________ _____________________________
IR CS TOTAL IR CS TOTAL IR CS TOTAL IR CS TOTAL
Accelerated depreciation......... - - - - - - 576,176 823 576,999 426,751 854 427,605
Amortized negative goodwill/
deferred capital gain.......... 68,903 16,637 85,540 38,590 5,725 44,315 121,116 31,265 152,381 98,263 22,326 120,589
Inflationary/exchange effect..... ________- ________- ________- ________- ________- ________- ________ 115,934 ________ 33,971 ________ 149,905 ________ 19,790 ________- ________ 19,790
________ 68,903 ________ 16,637 ________ 85,540 ________ 38,590 ________ 5,725 ________ 44,315 ________ 813,226 ________ 66,059 ________ 879,285 ________ 544,804 ________ 23,180 ________ 567,984
Current.................................. - - - - - - 146,195 33,971 180,166 35,721 - 35,721
Long-term.............................. 68,903 16,637 85,540 38,590 5,725 44,315 667,031 32,088 699,119 509,083 23,180 532,263

84 85
METALÚRGICA GERDAU S.A.
The tax benefits recognized on income tax and social contribution loss carryforwards, as well as on the provision for losses, both in the
Company and consolidated, are supported by projections of future taxable income adjusted to present values, based on technical feasibility
studies, approved by management. These studies, which consider the history of the Company’s and its subsidiaries’ profitability and the
maintenance of the current profitability in the future, permitted the recognition of an additional benefit for the year of R$ 318,879
(R$ 422,751 - 2003) in subsidiaries, whose estimated recovery is shown in item “c” below. Other credits, based on temporary differences,
mainly tax contingencies, were maintained according to their estimate of realization.
c) Estimated recovery of deferred income tax and social contribution assets:
Company
__________________________________
Consolidated
__________________________________
2004 2003 2004 2003
Up to 2004....................................................................................................... - - 329,797 117,106
2005................................................................................................................ - 4,967 65,829 134,554
2006................................................................................................................ - 2,161 65,120 126,773
2007................................................................................................................ - 1,784 86,693 128,414
2008................................................................................................................ 4,297 1,918 132,680 151,321
2009................................................................................................................ 5,405 - 173,548 91,669
2010 to 2012................................................................................................... - - 99,852 145,083
2013 to 2014................................................................................................... - - - 34,291
_____________ _____________ _____________ _____________
9,702 10,830 953,519 929,211
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
10 - Compulsory Deposits and Other
Company
__________________________________
Consolidated
__________________________________
2004 2003 2004 2003
Compulsory deposits......................................................................................... 318 - 30,767 16,421
Receivables under contract................................................................................ 2,397 2,895 49,893 43,223
ICMS credits on purchases of fixed assets........................................................... - - 72,581 56,270
Income tax incentives........................................................................................ 102 145 10,230 10,314
Prepaid expenses.............................................................................................. - - - 3,036
Assets not for use............................................................................................. - - 45,779 52,614
Prepaid financial expenses and others................................................................ - 513 36,141 46,409
_____________ _____________ _____________ _____________
2,817 3,553 245,391 228,287
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________

11 - Investments
Company
__________________________________________________________________________________________________________________________________________________________
2004 2003
____________________________________________________________________________________________________________________________________________ ____________
Subsidiaries Other Total Total
_______________________________________________________________________________________________________________ ____________ ___________ ____________
Santa Felicidade
Banco GLAM Com. Imp. Exp.
Gerdau S.A. Gerdau S.A. Participações S.A. Prod. Sid. Ltda. Other
_______________________________ ______________ ____________________ __________________ ________________
Investment Goodwill Investment Investment Investment Investment
Opening balance............................................... 1,820,152 - 28,216 106 179,356 134 1,515 2,029,479 1,596,773
Merger/capitalization..................................... - - - (23,396) 23,396 - - - -
Acquisition.................................................... 745 - - - - - 967 1,712 5,119
Goodwill on acquisition of investment............. - 1,502 - - - - - 1,502 -
Sale.............................................................. (76,837) - - - - (116) (2,205) (79,158) (8,771)
Equity in earnings (losses) 1 ............................. 1,228,992 (1,502) 8,625 23,290 83,383 54 - 1,342,842 610,001
Gain on sale of shares by 2 .............................. - - - - 125,969 - - 125,969 -
Dividends/interest on equity........................... _______________ (376,947) _______________ - ______________ (3,564) ____________________ - __________________ (23,806) ________________ (8) _____________ - ____________ (404,325) ____________ (173,643)
Closing balance................................................ _______________
2,596,105 _______________
- ______________
33,277 ____________________
- __________________
388,298 ________________
64 _____________
277 ____________
3,018,021 ____________
2,029,479
Capital............................................................. 3,471,312 - 21,700 - 550,893
Adjusted shareholders’ equity............................ 6,073,856 - 33,618 - 388,298
Net income for the year..................................... 2,831,339 - 8,695 23,291 106,665
Percentage of Interest (%)................................. 42,75% - 99,00% - 100,00%
Common shares/quotas held.............................. 77,975,404 - 1,352,676 - 550,892,935
Preferred shares held ........................................ 48,875,508 - 1,352,676 - -
1 Includes amortization of goodwill.
2 Gain arising from the sale of shares by the subsidiary Santa Felicidade Com. Imp. Exp. Prod. Sid. Ltda. due to the Public Offer of Shares of Gerdau S.A.

86 87
METALÚRGICA GERDAU S.A.
Consolidated
__________________________________________________________________________________
2004 2003
____________________________________________________________ ______________
Investment Goodwill Total Total
Gerdau Ameristeel US Inc......................................................................... - - - 281,870
Gerdau Ameristeel Corporation.................................................................. - - - 80,470
Margusa - Maranhão Gusa S.A.................................................................. - 24,728 24,728 43,564
Dona Francisca Energética S.A................................................................... - 19,512 19,512 21,951
Armacero Industrial y Comercial Ltda.......................................................... 9,871 457 10,328 10,321
Distribuidora Matco S.A. 1 ......................................................................... 12,400 6,066 18,466 -
Salomon Sack S.A. 1 .................................................................................. 17,873 2,091 19,964 -
Corporate joint ventures............................................................................ 10,036 - 10,036 9,984
Other....................................................................................................... 9,513 - 9,513 15,064
____________________ ____________ ___________ ______________
1
Companies purchased by the indirect subsidiary Industria del Aceros S.A. - Indac.
59,693 52,854 112,547 463,224
____________________ ____________ ___________ ______________
____________________ ____________ ___________ ______________
12 - Fixed Assets
Company
___________________________________________________________________________________________
2004 2003
________________________________________________ ____________
Anual
Accumulated
depreciation
depreciation
rate % Cost and depletion Net Net
Land, buildings and structures................................................... 0 to 4 4,918 (3,325) 1,593 1,738
____________ _________________ ____________ ____________
4,918 (3,325) 1,593 1,738
____________ _________________ ____________ ____________
____________ _________________ ____________ ____________
Consolidated
___________________________________________________________________________________________
2004 2003
________________________________________________ ____________
Anual
Accumulated
depreciation
depreciation
rate % Cost and depletion Net Net
Land, buildings and structures................................................... 0 to 10 3,315,650 (1,083,206) 2,232,444 2,303,169
Machinery, equipment and installations...................................... 5 to 10 7,965,817 (3,639,334) 4,326,483 4,085,090
Furniture and fixtures................................................................ 5 to 10 110,487 (69,690) 40,797 38,005
Vehicles................................................................................... 20 to 33 41,678 (31,112) 10,566 12,369
Electronic data equipment/rights/licenses.................................... 20 to 33 284,837 (188,113) 96,724 94,112
Construction in progress............................................................ - 1,065,583 - 1,065,583 718,810
Forestation/reforestation........................................................... Plano de corte 207,431 (51,055) 156,376 129,283
____________ _________________ ____________ ____________
12,991,483 (5,062,510) 7,928,973 7,380,838
____________ _________________ ____________ ____________
____________ _________________ ____________ ____________
a) Insured amounts - the assets are insured against fire, electrical damage and explosion. The coverage is determined based on the risks
involved. The plants of the North American subsidiaries and the Ouro Branco plant of the subsidiary Gerdau Açominas S.A. have coverage for
loss of profits.
b) Capitalization of interest and financial charges - R$ 2,021 was capitalized during the year - consolidated, (R$ (14,711) consolidated
in 2003).
c) Guarantees offered - fixed assets were pledged as collateral for loans and financing in the amount of R$ 688,034 - consolidated (R$ 539,724
consolidated in 2003).

d) Summary of changes in fixed assets:
Company
__________________________________
Consolidated
__________________________________
2004 2003 2004 2003
Balance at the beginning of the year.................................................................. 1,738 1,888 7,380,838 7,581,144
(+) Purchases/sales in the year........................................................................... - - 1,167,022 830,871
(-) Depreciation and depletion in cost of sales..................................................... - - (692,609) (538,286)
(-) Depreciation and depletion in administrative expenses.................................... (145) (150) (69,594) (61,806)
(+) Companies consolidated in the year.............................................................. - - - 289,055
(-) Revaluation reversal..................................................................................... - - - (365,347)
(+) Purchase of North Star and others................................................................ - - 267,948 -
(-) Foreign exchange effect on foreign fixed assets.............................................. _____________- _____________- _____________ (124,632) _____________ (354,793)
Balance at the end of the year........................................................................... _____________
1,593 _____________
1,738 _____________
7,928,973 _____________
7,380,838
13 - Deferred Charges
Consolidated deferred charges comprise pre-operating expenses in the construction of a power plant, as well as reforestation, research,
development and restructuring projects.
14 - Financing
Financing are represented as follows:
Anual
Consolidated
___________________________________
charges 2004 2003
CURRENT
Working capital financing (R$)............................................................................................................ 8.00% to 14.00% 60,642 95,388
Fixed asset financing (R$)................................................................................................................... 12.00% - 3,054
Investment financing (R$)................................................................................................................... CDI 4,500 4,500
Investment financing (US$)................................................................................................................. US$ 133,955 45,649
Working capital financing (US$).......................................................................................................... 1.36% to 10.50% 1,085,418 1,341,746
Fixed asset financing and others (US$)................................................................................................ US$ - 8,692
Working capital financing (Clp$)......................................................................................................... 0.23% to 0.32% 31,905 30,025
Working capital financing (PA$).......................................................................................................... 4.25% to 10.00% 19,956 -
Current portion of long-term financing................................................................................................ ______________ 691,489 ______________ 932,245
LONG-TERM
2,027,865 2,461,299
Working capital financing (R$)............................................................................................................ 10.02% 28,215 3,812
Fixed asset financing and others (R$).................................................................................................. 4.00% to 9.90% 657,720 627,727
Investment financing (R$)................................................................................................................... IGPM + 8.5% 29,045 35,019
Fixed asset financing and others (US$)................................................................................................ 1.74% to 9.97% 762,338 761,288
Working capital financing (US$).......................................................................................................... 2.95% to 10.75% 2,473,200 2,643,325
Investment financing (US$)................................................................................................................. 4.04% 182,943 -
Working capital financing (Cdn$)........................................................................................................ 2.00% to 3.25% - 164,974
Fixed assets financing (Cdn$).............................................................................................................. 2.00% to 3.25% 3,485 3,837
Working capital financing (Clp$)......................................................................................................... 0.29% to 0.43% 16,254 29,952
Fixed assets financing (Clp$)............................................................................................................... 0.26% to 0.43% 27,000 58,396
Fixed assets financing (PA$)............................................................................................................... 4.25% to 10.00% 1,663 -
(-) Current portion............................................................................................................................. ______________ (691,489) ______________ (932,245)
______________ 3,490,374 ______________ 3,396,085
Total financing................................................................................................................................... ______________
5,518,239 ______________
5,857,384
CDI - Certificate of Interbank Deposit interest rate.
IGPM - General Market Price Index.
Summarized by currency:
Consolidated
___________________________________
2004 2003
Brazilian real (R$)............................................................................................................................................................. 780,122 769,500
U.S. dollar (US$)............................................................................................................................................................... 4,637,854 4,800,700
Canadian dollar (Cdn$)..................................................................................................................................................... 3,485 168,811
Argentine peso (PA$)........................................................................................................................................................ 21,619 -
Chilean peso (Clp$)........................................................................................................................................................... ______________ 75,159 ______________ 118,373
______________
5,518,239 ______________
5,857,384

88 89
METALÚRGICA GERDAU S.A.
The schedule for payment of the long-term portion of financing is as follows:
Consolidated
In 2006........................................................................................................................................................................................................ 527,860
In 2007........................................................................................................................................................................................................ 563,896
In 2008........................................................................................................................................................................................................ 565,035
In 2009........................................................................................................................................................................................................ 323,109
In 2010........................................................................................................................................................................................................ 210,048
After 2010.................................................................................................................................................................................................... __________________ 1,300,426
__________________
3,490,374
a) Events during the year
On June 3, 2004, the placement of the second tranche, of US$ 128 million (equivalent to R$ 339,763 at December 31, 2004) of a US$ 400 million
Export Notes Receivable program (equivalent to R$ 1,061,760 at December 31, 2004) was concluded. This joint program between Gerdau S.A.
and Gerdau Açominas S.A. has an interest rate of 7.321% p.a., maturity in April 2012, a grace period of two years and quarterly amortization
as from July 2006.
b) Guarantees
The loans contracted under the FINAME/BNDES program are guaranteed by the financed assets, in the amount of R$ 180,109. The other loans
are guaranteed by sureties from the controlling shareholders, on which the subsidiary pays a fee of 1% p.a. on the amount guaranteed.
c) Covenants
In replacement of the tangible guarantees usually required, the loans are being contracted with certain financial covenants, as follows:
I) Consolidated interest coverage ratio - measures the debt service payment capacity in relation to EBITDA (Earnings before Interest, Taxes,
Depreciation and Amortization);
II) Consolidated leverage ratio - measures the debt coverage capacity in relation to EBITDA;
III) Required Minimum Net Worth - measures the minimum net worth required in financial agreements; and
IV) Current Ratio (current liquidity ratio) - measures the capacity to comply with short-term obligations.
All the covenants mentioned above are calculated on a consolidated basis, except for item IV which refers to the Company itself, and have
been observed. The penalty for non-compliance is the prepayment of the contracts.
d) Credit lines
The North American subsidiaries have a credit line in the amount of US$ 350 million, equivalent to R$ 929,040 at the balance sheet date,
falling due in June 2008, which can be drawn in U.S. dollars (at the LIBOR rate plus interest between 2.25% and 2.75% p.a. or US Prime/FED
Funds plus interest of 0.5% p.a.) or in Canadian dollars (at the Bankers Acceptance (BA) rate plus interest between 2.35% and 2.85% p.a. or
Canadian Prime plus interest of 1.00% p.a.). The distribution of this credit line among the companies is made in proportion to the working
capital of each North American subsidiary.
The subsidiary Gerdau Aza S.A. has a credit line for working capital amounting to Clp$ 28 billion, equivalent to R$ 133,582 at the balance sheet
date, bearing interest of 3.90% p.a., and a credit line for fixed assets in the amount of Clp$ 6 billion, equivalent to R$ 28,625 at the balance
sheet date, bearing interest of 4.50% p.a.
15- Debentures
General Number Anual
_________________________________
Issue meeting Issue In portifolio Maturity rate 2004 2003
3 rd .............................................. 09.21.1999 9,170 - 07.01.2004 TJLP + 4% _________- _________ 624
Company................................... _________
- _________
624
Current portion - consolidated.... - 624
Gerdau S.A.
3 rd - A e B................................... 05.27.1982 144,000 52,946 06.01.2011 CDI 156,387 73,508
7 th .............................................. 07.14.1982 68,400 6,500 07.01.2012 CDI 121,068 21,628
8 th .............................................. 11.11.1982 179,964 65,811 05.02.2013 CDI 145,878 83,566
9 th .............................................. 06.10.1983 125,640 38,234 09.01.2014 CDI 170,954 29,927
11 th - A and B.............................. 06.29.1990 150,000 97,044 06.01.2020 CDI 98,189 19,249
13 th ............................................ 11.23.2001 30,000 30,000 11.01.2008 CDI less 2% - -
Gerdau Ameristeel Corp................ 04.23.1997 125,000 - 04.30.2007 6.50% 232,618 226,021
Debentures held by consolidated
subsidiaries............................... (252,982) (26,916)
Debentures held by the Company.. _________ (95,622) _________-
Total Consolidated................... _________
576,490 _________
427,607
Current portion - consolidated.... 2,986 3,651
Long-term portion- consolidated. 573,504 423,956

The Extraordinary General Meeting of shareholders held on April 30, 2004 approved the cancellation of the 1st issue (7,100 debentures),
which were held in treasury.
The Extraordinary General Meeting (EGM) of the subsidiary Gerdau S.A. held on April 29, 2004 approved the cancellation of the 4th issue
(42,000 debentures) and 10th issue debentures (6,450 debentures), which were held in treasury.
The same EGM approved the split of the following debenture issues: 3rd (classes A and B), 7th, 8th, 9th and 11th issues (classes A and B). On
July 1, 2004, three new debentures were issued for each existing debenture, thus changing their nominal value.
The Extraordinary General Meeting of the subsidiary Seiva S.A. - Florestas e Indústrias held on April 30, 2004 approved the cancellation of the
1st issue debentures, series A and B (12,000 debentures), which were held in treasury.
The Board of Directors’ Meeting of the subsidiary Gerdau S.A. held on October 14, 2004 approved the fixed remuneration of the 13th issue
debentures at the CDI interest rate less 2% p.a., during the period from November 1, 2004 to October 31, 2005.
The debentures of Gerdau Ameristeel Corporation are convertible into common shares of that subsidiary, up to their maturity date.
The controlling shareholders hold, directly or indirectly, R$ 181,965 at December 31, 2004 (R$ 63,216 in 2003) of the outstanding debentures.
16 - Financial Instruments
a) General comments - Metalúrgica Gerdau S.A. and its subsidiaries enter into transactions involving financial instruments, the risks of
which are managed through financial positions and exposure limit controls. All instruments are fully recorded in the books of account and
mainly relate to the instruments listed below:
- financial investments - are recorded at their market value as of the balance sheet date and are explained and presented in Note 5;
- investments - are explained and presented in Note 11;
- related parties - are explained and presented in Note 21;
- financing - are explained and presented in Note 14;
- debentures - are explained and presented in Note 15; and
- financial derivatives - in order to minimize the effects of fluctuations in foreign exchange rates on their liabilities, the subsidiaries Gerdau
Açominas S.A. and Dona Francisca Energética S.A. entered into swap contracts that were converted into Brazilian reais on the contract date
and linked to changes in the CDI rate and the IGPM, plus additional interest. The subsidiary Gerdau Ameristeel Corporation also entered into
swap contracts linked to the London Interbank Offered Rate (LIBOR) plus interest between 6.05% and 6.45% p.a.
The swap contracts are listed below:
Consolidated
___________________________________________________________________________________________
Contract date Purpose Amount (US$ thousand) Rate Maturity
07/16/2001 to 07/05/2002 Prepayment 32,823 85.55% to 100.00% of the CDI 01/13/2005 to 03/01/2006
02/20/2002 Resolution 2770 54,000 106.00% of the CDI 06/20/2005
02/19/2003 Resolution 4131 3,300 85.70% of the CDI 02/04/2005
04/17/2003 Fixed assets 6,316 IGPM + 12.95% 05/16/2005 to 11/16/2010
04/17/2003 Fixed assets 13,095 97.00% to 100.90% of the CDI 05/16/2005 to 11/16/2013
10/30 a 11/03/2003 Bank notes 200,000 LIBOR + interest between
6.09% to 6.13% 07/15/2011
06/26/2003 Investment 55,000 4.86% to 5.40% 09/02/2005 to 10/02/2006
b) Market value - the market values of the financial instruments are as follows:
Company
_____________________________________________________________________________
2004 2003
____________________________________ ____________________________________
Book Market Book Market
value value value value
Financial investments........................................................................................ 95,702 95,702 25,163 25,163
Debentures....................................................................................................... - - 624 624
Investments...................................................................................................... 3,018,021 5,979,482 2,029,479 4,199,166
Related parties (assets)..................................................................................... - - 3,390 3,390
Related parties (liabilities) ................................................................................ 266 266 - -
Treasury shares - Note 23.................................................................................. 21,490 45,967 7,049 9,153

90 91
METALÚRGICA GERDAU S.A.
Consolidated
_____________________________________________________________________________
2004 2003
____________________________________ ____________________________________
Book Market Book Market
value value value value
Financial investments ....................................................................................... 1,666,178 1,666,178 890,130 890,130
Swap contracts - investments (liabilities)............................................................. 4,500 4,500 12,303 12,303
Securitization financing..................................................................................... 627,908 627,908 303,282 303,282
Import financing............................................................................................... 619,883 619,883 377,534 383,941
Prepayment financing........................................................................................ 808,983 804,724 807,385 818,786
Financing - Resolution 2770.............................................................................. 263,060 256,585 365,573 390,235
ACC (Advances on Export Contracts) financing.................................................... 43,891 43,891 500,118 524,935
Financing - Resolution 4131.............................................................................. 20,893 20,755 24,243 24,468
Bank notes financing......................................................................................... 1,050,835 1,260,376 1,144,601 1,292,733
Fixed asset financing ........................................................................................ 45,837 45,686 93,172 96,069
Other financing................................................................................................. 2,036,949 2,036,949 2,158,241 2,177,487
Debentures....................................................................................................... 576,490 576,490 427,607 427,607
Investments...................................................................................................... 112,547 112,547 463,224 463,224
Related parties (assets)..................................................................................... 1,231 1,231 30,509 30,509
Stock options (liabilities) - note 25..................................................................... - 13,663 - 8,298
The market values of the swap contracts of subsidiaries in Brazil were obtained based on future income projections for each contract,
calculated based on the present value of the forward U.S. dollar + coupon rates (assets) and CDI/IGPM future rates (liabilities) and adjusted
to present value on the balance sheet date, using the projected future CDI/IGPM rate for each maturity. The same methodology is applied for
the calculation of the market values of the swap contracts of the subsidiary Gerdau Ameristeel Corporation, using the LIBOR rate.
Swap contracts related to financing contracts are classified together with the related financing, as a contra entry to the “Financial expenses/
income, net” account, and are stated at cost plus accrued charges up to the balance sheet date. Contracts not linked to such financing have
been recorded at their market value under the heading “Other accounts payable”, in long-term liabilities.
The Company believes that the balances of the other financial instruments, which are recognized in the books at net contracted values,
are substantially similar to those that would be obtained if they were negotiated in the market. However, because the markets for these
instruments are not active, differences could exist if they were settled in advance.
c) Risk factors that could affect the Company’s and its subsidiaries’ business
Price risk: this risk is related to the possibility of price variations of the products that the subsidiaries sell or in the raw material prices and
other inputs used in the production process. Since the subsidiaries operate in a commodity market, their sales revenues and cost of sales may
be affected by the changes in the international prices of their products or materials. In order to minimize this risk, the subsidiaries constantly
monitor the price variations in the local and international markets.
Interest rate risk: this risk arises as a result of the possibility of losses (or gains) due to fluctuations in interest rates relating to assets
(investments) and liabilities. In order to minimize possible impacts resulting from interest rate fluctuations, the Company and its subsidiaries
have adopted a policy of diversification, alternating between fixed rates and variable rates (such as LIBOR and the CDI) and periodically
renegotiate contracts to adjust them to market.
Exchange rate risk: this risk is related to the possibility of fluctuations in foreign exchange rates affecting financial expenses (or income)
and the liability (or asset) balance of contracts denominated in a foreign currency. In addition to the foreign investments which are a natural
hedge, the Company and its subsidiaries use “hedge” instruments, usually swaps contracts, as described in item “a” above, to manage the
effects of these fluctuations.
Credit risk: this risk arises from the possibility of the subsidiaries not receiving amounts arising from sales or investments at financial
institutions. In order to minimize this risk, the subsidiaries adopt the procedure of analyzing in detail the financial and equity position of
their customers, establishing a credit limit and constantly monitoring their balances. In relation to financial investments, the Company and

its subsidiaries invest solely in institutions with low credit risk, as assessed by rating agencies. In addition, each institution has a maximum
limit for investment, determined by the Credit Committee.
17 - Financial Expenses/Income, Net
Company
Consolidated
__________________________________ __________________________________
2004 2003 2004 2003
Financial income
Financial investments........................................................................................ 1,227 8,574 136,413 142,746
Interest received............................................................................................... 15 1,674 29,934 69,913
Monetary variations - assets.............................................................................. 1 - 3,327 3,972
Foreign exchange variations - assets................................................................... - - (34,671) (79,356)
Foreign exchange swaps - assets........................................................................ - - 3,915 (62,884)
Other financial income...................................................................................... _____________ 8,996 _____________ 1,652 _____________ 110,343 _____________ 12,363
Total financial income.................................................................................. _____________
10,239 _____________
11,900 _____________
249,261 _____________
86,754
Financial expenses
Interest on debt................................................................................................ (844) (14) (417,041) (593,308)
Monetary variations - liabilities.......................................................................... (5,147) (5,602) (22,983) (29,115)
Foreign exchange variations - liabilities.............................................................. - - 197,607 716,672
Foreign exchange swaps - liabilities.................................................................... - - (44,127) (741,389)
Other financial expenses.................................................................................... _____________ (861) _____________- _____________ (111,098) _____________ (60,990)
Total financial expenses............................................................................... (6,852) (5,616) (397,642) (708,130)
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
18 - Taxes and Social Contributions Payable
Company
__________________________________
Consolidated
__________________________________
2004 2003 2004 2003
Income tax and social contribution on net income............................................... 843 710 202,962 39,600
Social charges on payroll................................................................................... 149 546 49,368 49,021
Value-added tax on sales and services (ICMS)..................................................... - - 32,131 12,865
Social contribution on revenues (COFINS)........................................................... 1,014 2,281 33,622 16,494
Excise tax (IPI).................................................................................................. - - 14,114 2,966
Social integration program (PIS)......................................................................... 220 - 6,903 3,923
Income tax and social contribution withheld at source......................................... - - 8,211 23,787
Taxes payable in installments............................................................................. - - 11,819 15,427
Other............................................................................................................... _____________ 21 _____________- _____________ 32,055 _____________ 14,359
2,247 3,537 391,185 178,442
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
19 - Tax Recovery Program (Refis) and Special Installment Payment Program (Paes)
a) REFIS
On December 6, 2000, the subsidiary Gerdau S.A. enrolled in the REFIS program to pay the Social Integration Program (PIS) and the Social
Contribution on Revenues (COFINS) contributions in installments. The balances of these tax liabilities are recorded in Taxes and contributions
payable, in current liabilities, and in Other accounts payable, in long-term liabilities. The balances of the renegotiated taxes, which were
originally divided into 60 installments of which 5 installments are not yet due, are restated by the Long-Term Interest Rate (TJLP) rate, and
are as follows at the year end:
Company and consolidated
__________________________________________________________________________________________________
2004 2003
______________________________________________ ______________________________________________
Principal Interest Total Principal Interest Total
PIS....................................................................... 2,608 2,551 5,159 9,895 6,494 16,389
COFINS................................................................ ______________ 620 ____________ 605 ____________ 1,225 ______________ 2,351 ____________ 1,540 ____________ 3,891
Total.................................................................... ______________
3,228 ____________
3,156 ____________
6,384 ______________
12,246 ____________
8,034 ____________
20,280
Current................................................................ 3,228 3,156 6,384 8,644 5,671 14,315
Long-term............................................................ - - - 3,602 2,363 5,965
Taxes, contributions and other liabilities are paid by the subsidiary Gerdau S.A. on their due dates, which is a basic requirement to remain
eligible for the REFIS program.

92 93
METALÚRGICA GERDAU S.A.
As guarantee for this installment payment program, the subsidiary Gerdau Açominas S.A. pledged the land and buildings of the Piratini
plant, located in the municipality of Charqueadas, in the state of Rio Grande do Sul, amounting to R$ 78,494.
The total income tax and social contribution credits from third parties offset against fines and interest on the consolidation of the REFIS
debts on December 6, 2000 totaled R$ 57,040 and were purchased for R$ 4,351. The subsidiary’s own tax credits were not used.
The constitutionality of the use of credits of R$ 40,118 of the total purchased is being challenged in court. This is because the Federal Revenue
authorities understand that tax credits must first be used to offset the assignor’s own debts, only transferring the excess to the assignee.
This understanding, based solely on a REFIS Management Committee Resolution, edited subsequently to the subsidiary’s enrollment in the
program, does not comply with the legal order. In fact, the law which established the Program authorized, with no conditions, the purchase
of third party tax credits for offset against own liabilities.
b) PAES
The proportionally consolidated (52%) subsidiary Dona Francisca Energética S.A. enrolled in the PAES, established by Law 10684/03, at the
Federal Revenue Secretariat, to settle Corporate Income Tax (IRPJ), Social Contribution on Net Income (CSLL), Social Integration Program
(PIS) and Social Contribution on Revenues (COFINS) liabilities. The balances of these tax liabilities are recorded in Taxes and contributions
payable, in current liabilities, and in Other accounts payable, in long-term liabilities. The balances of the renegotiated taxes, which were
divided into 180 installments of which 161 are not yet due, are restated by the TJLP and are as follows at the year end:
Consolidated
__________________________________________________________________________________________________
2004 2003
______________________________________________ ______________________________________________
Principal Interest Total Principal Interest Total
IRPJ..................................................................... 20,303 3,160 23,463 21,816 1,255 23,071
CSLL.................................................................... 7,360 1,145 8,505 7,908 455 8,363
PIS....................................................................... 720 112 832 774 45 819
COFINS................................................................ ______________ 3,326 ____________ 518 ____________ 3,844 ______________ 3,574 ____________ 206 ____________ 3,780
Total.................................................................... ______________
31,709 ____________
4,935 ____________
36,644 ______________
34,072 ____________
1,961 ____________
36,033
Current................................................................ 2,364 368 2,732 2,363 136 2,499
Long-term............................................................ 29,345 4,567 33,912 31,709 1,825 33,534
Dona Francisca Energética S.A. pays its taxes, contributions and other liabilities on their due dates, which is a basic requirement to remain
eligible for the PAES program.
20 - Provision for Contingencies
The Company and its subsidiaries are parties in labor, civil, and tax processes. Based on the opinion of its legal advisors, management believes
that the provision for contingencies is sufficient to cover probable and reasonably estimable losses from unfavorable court decisions, and
that the final decisions will not have significant effects on the financial position of the Company at December 31, 2004.
The balances of the contingencies are as follows:
I) Contingent liabilities provided
Company
Consolidated
_________________________________ _________________________________
a) Tax contingencies 2004 2003 2004 2003
Eletrobrás............................................................................ (a.1) - - 50,456 50,456
Finsocial.............................................................................. (a.2) - - 6,898 6,948
ICMS................................................................................... (a.3) - - 17,300 14,346
Social contribution on net income......................................... (a.4) - 198 7,333 40,954
Corporate income tax........................................................... (a.5) - 25 19,993 101,159
INSS.................................................................................... (a.6) - - 24,900 17,375
PIS...................................................................................... (a.7) 469 1,382 2,372 3,739
COFINS............................................................................... (a.7) - - 6,935 6,935
Emergency Capacity Charge.................................................. (a.8) - - 25,563 10,074
Extraordinary Tariff Recomposition ....................................... (a.8) - - 13,037 5,847
FGTS and other tax contingencies.......................................... (a.9) - - 1,503 2,330
(-) Judicial deposits.............................................................. (a.10) _____________- _____________- _____________ (73,938) _____________ (155,138)
469 1,605 102,352 105,025
b) Labor contingencies......................................................... (b.1) - - 49,798 29,609
(-) Judicial deposits.............................................................. (b.2) _____________- _____________- _____________ (10,538) _____________ (10,244)
- - 39,260 19,365
c) Civil contingencies............................................................ (c.1) 195 195 100,559 99,688
(-) Judicial deposits......................................................... (c.2) _____________- _____________- _____________ (1,207) _____________ (1,063)
_____________ 195 _____________ 195 _____________ 99,352 _____________ 98,625
Total liabilities provided........................................ _____________
664 _____________
1,800 _____________
240,964 _____________
223,015
INSS - National Institute of Social Security
FGTS - Government Severance Indemnity Fund for employees

a) Tax contingencies
a.1) Of the total provision, R$ 50,456 (consolidated) refers to the contingency of compulsory loans to Eletrobrás, the constitutionality of
which is being questioned by the subsidiary Gerdau S.A. In March 1995, the Federal Supreme Court judged the proceedings against other
taxpayers. Certain of the Company’s proceedings are pending decision, but the outcomes are already foreseeable, in view of the prior
decisions. The subsidiary Gerdau S.A. established a provision related to “compulsory loans”, taking into consideration that, although the
payment to Eletrobrás was made as a loan: (i) the reimbursement to the company would probably be in the form of shares of Eletrobrás; (ii)
the conversion will be made based on the net asset book value of the shares; and (iii) based on the current available information, the shares
of Eletrobrás are valued at substantially less than the net asset book value.
a.2) R$ 6,898 (consolidated) relating to the unconstitutionality of the Social Investment Fund (FINSOCIAL). Although the Supreme Court has
confirmed the constitutionality of the tax at the rate of 0.5%, some of the Company’s subsidiaries claims are still pending judgment, most
of them in the Superior Courts.
a.3) R$ 17,300 (consolidated) relating to amounts for Value-Added Tax on Sales and Services (ICMS), the majority of which relates to credit
rights involving the Finance Secretariat and the State Courts of the First Instance in the state of Minas Gerais.
a.4) R$ 7,333 (consolidated) relating to social contribution on net income. The amounts refer to challenges of the constitutionality of the
contribution in 1989, 1990 and 1992. Some proceedings are pending decision, most of them in the Superior Courts.
a.5) R$ 19,993 (consolidated), relating to Corporate Income Tax, challenged at the administrative sphere. Considering the many legal decisions
unfavorable to the unconstitutionality of the limitation of the offset of income tax and social contribution losses to 30% of net income,
the subsidiary Gerdau Açominas S.A. decided to no longer deposit in court the amounts related to the matter and requested, in the court
injunction records in which it is the petitioner, the conversion of the amounts deposited in court (R$ 338,992) into tax payments, and started
observing the legal limitation. The legal challenge has been maintained; however, in the event the STF reviews its current guidance and the
subsidiary is successful, it will plead the offset of the amounts overpaid.
a.6) R$ 24,900 (consolidated) on contributions due to the INSS which correspond to suits for annulment by the subsidiary Gerdau S.A. with
judicial deposits of practically the whole amount involved, in progress in the Federal Court of the First Instance in the state of Rio de Janeiro.
The provision also includes lawsuits questioning the position of the INSS in terms of charging INSS contributions on profit sharing payments
made by the subsidiary Gerdau Açominas S.A., as well as on payments for services rendered by third parties, in which the Institute calculated
charges for the last ten years and assessed the subsidiary because it understands that the company is jointly liable. The assessments were
maintained at the administrative level, and Gerdau Açominas S.A. filled annulment actions with the judicial deposit of the corresponding
amount, based on the understanding that the right to assess part of the charge had prescribed and that there is no such liability.
a.7) R$ 469 (Company) and R$ 2,372 (consolidated), relating to contributions for the Social Integration Program (PIS), and R$ 6,935
(consolidated) to the Social Contribution on Revenues (COFINS), in connection with lawsuits questioning the constitutionality of Law 9718,
which changed the calculation basis of these contributions. These suits are in progress in the Federal Regional Court of the 2nd Region and
the Federal Supreme Court.
a.8) R$ 25,563 (consolidated) relating to the Emergency Capacity Charge (ECE), as well as R$ 13,037 (consolidated) relating to the Extraordinary
Tariff Recomposition (RTE), included in the electric energy bills of the subsidiaries’ plants. According to the Company, these charges are
of a tax nature and, as such, are incompatible with the National Tax System provided in the Federal Constitution. For this reason, the
constitutionality of this charge is being challenged in court. The lawsuits are in progress in the Federal Justice of the First Instance of the
states of Pernambuco, Ceará, Minas Gerais, Rio de Janeiro, São Paulo, Paraná, and Rio Grande do Sul, as well as in the Federal Regional Courts
of the 1st and 2nd Regions. The subsidiaries have fully deposited in court the amount of the disputed charges.
a.9) R$ 1,503 (consolidated) relating to a lawsuit brought by the subsidiary Gerdau Açominas S.A. regarding the Government Severance
Indemnity Fund for Employees (FGTS) increased charges, which arose from the changes introduced by Complementary Law 110/01. Currently,
the corresponding court injunction is awaiting the judgment of the extraordinary appeal filed by the subsidiary. The amount provided is
fully deposited in court.
a.10) The judicial deposits, representing restricted assets of the subsidiary Gerdau S.A., relate to amounts deposited and maintained in
court until the resolution of the related legal matters. The balances of these credits, which at December 31, 2004 amounted to R$ 73,938
(consolidated), are classified as a reduction of the provision for tax contingencies recorded in the books.
b) Labor contingencies
b.1) The Company’s subsidiaries are also defending labor claims, for which there is a provision of R$ 49,573 (consolidated) at December 31,
2004. None of these claims refer to individually significant amounts, and the lawsuits mainly involve claims for overtime pay, health hazards
and risk premium, among others.
b.2) The balances of the deposits in court, which totaled R$ 10,313 at December 31, 2004 (consolidated), are classified as a reduction of the
provision for labor contingencies.
c) Civil contingencies
c.1) The Company and its subsidiaries are also defending in court civil claims arising in the normal course of its own and the subsidiaries’
operations, including claims arising from work accidents, in a total amount at December 31, 2004 of R$ 195 (Company) and R$ 100,559
(consolidated) as contingent liability for these claims.

94 95
METALÚRGICA GERDAU S.A.
The provision refers mainly to an issue involving the jointly-owned (52%) subsidiary Dona Francisca Energética S.A. According to a resolution
of the Brazilian Electricity Regulatory Agency (ANEEL), the operations of the subsidiary are restricted to the South of Brazil submarket. Since
some of its transactions were carried out in the remaining submarkets, Dona Francisca Energética S.A. may have to acquire the energy it
sells from third parties. The subsidiary challenges in court the validity of the ANEEL resolution and has obtained a favorable preliminary
injunction.
c.2) At December 31, 2004, the balances of deposits in court totaled R$ 1,207 (consolidated) and are classified as a reduction of the provision
for contingencies.
II) Contingent liabilities not provided
a) Tax contingencies
a.1) The subsidiary Gerdau S.A. is defendant in assessments filed by the state of Minas Gerais demanding ICMS tax payments arising mainly
from the sales of products to commercial exporters. The restated amount of the lawsuits totals R$ 32,848. The Company has not recorded
any provision for contingency in relation to these claims since it considers this tax is not payable, because products for export are exempted
from ICMS.
a.2) The subsidiaries Gerdau S.A. and Gerdau Açominas S.A. are defendants in assessments filed by the state of Minas Gerais, which demand
ICMS tax payments on the export of semi-finished manufactured products. The subsidiary Gerdau Açominas S.A. is also the petitioner of an
annulment action. The total amount demanded is R$ 249,742. The companies have not recorded any provision for contingency in relation to
these claims since they consider this tax is not payable because the products cannot be considered semi-finished manufactured products as
defined by the federal complementary law and, therefore, are not subject to ICMS.
a.3) Also, R$ 68,431 are being demanded due to the understanding of the Federal Revenue Secretariat that the transactions carried out by
the subsidiary Gerdau Açominas S.A., under the drawback concession granted by DECEX, were not in conformity with the legislation. Gerdau
Açominas filed a preliminary administrative defense of the legality of the arrangement, which is pending judgment. Since the tax liability
has not been definitely established, and considering that the arrangement which originated the demand conforms with the assumptions
required for the drawback concession, and also that the concession was granted after analysis by the legal administrative authority, Gerdau
Açominas S.A. considers an unfavorable outcome to be remote and, for this reason, has not recorded any provision for the contingency.
b) Civil contingencies
b.1) Two civil construction syndicates in the state of São Paulo alleged that the subsidiary Gerdau S.A. and other long steel producers in Brazil
divide customers among them, violating the antitrust legislation. After investigations carried out by the National Secretariat of Economic
Law (SDE) and based on public hearings, the SDE is of the opinion that a cartel exists. This conclusion was also supported by an earlier
opinion by the Secretariat for Economic Monitoring (SEAE). The process has now been forwarded to the Administrative Council for Economic
Defense (CADE) for final decision.
The subsidiary Gerdau S.A. denies having engaged in any type of anti-competitive behavior and believes, based on information available,
including the opinion of its legal advisors, that the administrative process until now includes many irregularities, some of which are
impossible to resolve. For example, the investigations carried out by SDE did not follow the due legal course and the representatives of the
SDE influenced certain witnesses who testified in the process. In addition, the SDE report was issued before the subsidiary Gerdau S.A. had
the chance to reply to the closing arguments, which indicates that there was a bias in the judgment made by the SDE. The same applies to
the SEAE report, which does not analyze the economic issues and is based exclusively on the witnesses’ testimony.
These irregularities, which also reflect non-compliance with the related constitutional provisions, will no doubt affect the administrative
decision by CADE, based on the conclusions presented by the antitrust authorities until now. The subsidiary Gerdau S.A. has pointed out and
tried to combat all these irregularities and will continue doing so in relation to the allegations and the irregularities in the administrative
process, believing in a favorable outcome to this process, if not in the administrative sphere, possibly in the judicial sphere.
Because of the above, no provision has been recorded for this case. According to Brazilian legislation, fines of up to 30% of gross revenues in
the prior fiscal years may be applied to the subsidiary Gerdau S.A. and, if personal responsibility of an executive is proven, such executive may
be penalized by 10% to 50% of the fine applied to the company. There are no precedents for fines exceeding 4%. In a similar case involving
flat steel companies, the fine was 1%.
b.2) A civil lawsuit has been filed against the subsidiary Gerdau Açominas S.A. regarding the termination of a contract for the supply of slag
and indemnities for losses and damages. At December 31, 2004, the lawsuit amounts to approximately R$ 37,014.
Gerdau Açominas S.A. contested all bases for the lawsuit and filed a counterclaim for termination of the contract and indemnity for breach
of contract.
The judge declared the contract to be terminated, since this demand was common to both parties. With regards to the remaining discussion,
the judge understood that both parties were at fault and judged the requests for indemnity unfounded. This decision was maintained by
the Court of Civil Appeals of the State of Minas Gerais (TAMG), and the court decision is based on expert evidence and interpretation of the
contract. The process was in the High Court of Justice (STJ) and was returned to the TAMG for judgment of the appeal requesting clarification
of the decision.
Gerdau Açominas S.A. believes that any loss from the case is remote, since it understands that a change in the judgment is unlikely.
b.3) A civil lawsuit has been filed by Sul America Cia. Nacional de Seguros against the subsidiary Gerdau Açominas S.A. and Banco
Westdeustsche Landesbank Girozentrale, New York Branch (WestLB), for the payment of R$ 34,383 to settle an indemnity claim, which has
been deposited in court. The insurance company pleads doubt in relation to whom payment should be made and alleges that the subsidiary

is resisting in receiving and settling it. The lawsuit was contested both by the Bank (which claims having no right over the amount deposited,
which resolves the doubt raised by Sul América) and by the subsidiary (which claims that there is no such doubt and that there is justification
to refuse payment since the amount owed by Sul América is higher than the amount involved). Subsequently, Sul América claimed fault in
the Bank’s representation, and this matter is therefore already settled, which resulted in the withdrawal in December 2004 of the amount
deposited. The process should enter the expert evidence phase, mainly for calculation of the amount due. Based on the opinion of its legal
advisors, the subsidiary expects loss to be remote and that the sentence will declare the amount payable within the amount stated in the
pleading.
Also, Gerdau Açominas S.A. filed, prior to this lawsuit, a lawsuit for the payment of the amount recognized by the insurance companies. The
lawsuits are pending. The subsidiary expects a favorable outcome in this lawsuit.
The civil lawsuits arise from an accident on March 23, 2002 with the blast furnace regenerators of the Ouro Branco steel mill, which resulted
in the stoppage of several activities, with material damages to the steel mill equipment and loss of profits. The equipment, as well as the
loss of profits arising from the accident, were covered by an insurance policy. The report on the event, as well as the loss claim, was filed with IRB - Brasil
Resseguros S.A., and an advance payment of R$ 62,000 was received in 2002.
In 2002, a preliminary and conservative estimate of indemnities related to the coverage of loss of profits and material damages, in the total
amount of approximately R$ 110,000, was recorded, based on the amount of fixed costs incurred during the period of partial stoppage of
the steel mill activities and the immediate expenses to be incurred to recover the equipment temporarily. This estimate approximates the
advance amount received plus the amount proposed by the insurance company as a complement to settle the indemnity. Subsequently, new
amounts were added to the discussion, as stated in the subsidiary’s plea, although not yet recorded.
Based on the opinion of its legal advisors, the Company considers that losses from other contingencies that may affect the results of
operations or the Company’s consolidated financial position are remote.
III) Contingent assets not recorded
a) Tax contingencies
a.1) The subsidiary Gerdau S.A. believes that the realization of certain contingent gains is probable. Among them is a court-order debt
security issued in 1999 in its favor by the state of Rio de Janeiro in the amount of R$ 26,580, arising from an ordinary lawsuit against the noncompliance
with the Loan Agreement for Periodic Execution in Cash under the Special Industrial Development Program (PRODI).
Due to the default by the state of Rio de Janeiro and the non-regulation of Constitutional Amendment 30/00, which granted the government
a ten-year moratorium for payment of securities issued to cover court-order debts not related to food, the realization of this credit is not
expected in 2004 and, also, there is no expectation of realization in 2005 and following years. For this reason, this gain is not recognized in
the financial statements.
a.2) The Company’s subsidiaries have filed several ordinary proceedings relating to the correct basis of calculation of PIS under Complementary
Law 07/70, due to the declarations of unconstitutionality of Decree Laws 2445/88 and 2449/88. The companies expect to recover the taxes
incorrectly paid. The amounts under discussion total R$ 84,245.
a.3) Also, the subsidiaries Gerdau S.A., Gerdau Açominas S.A. and Margusa - Maranhão Gusa S.A. expect to recover IPI premium credits.
Gerdau S.A. and the subsidiary Margusa Maranhão Gusa S.A. have filed administrative appeals for recovery, which are pending judgment.
With regards to the subsidiary Gerdau Açominas S.A., the proceedings were directed to the courts, with an unfavorable judgment. Currently,
the process awaits judgment of the appeal filed by the subsidiary. The Company estimates the credits at R$ 394,002 but no accounting
recognition has been made thereof because of uncertainty as to their realization.
21 - Related Parties
a) Analysis of loan balances
Company
Consolidated
__________________________________ __________________________________
2004 2003 2004 2003
Gerdau Açominas S.A........................................................................................ (381) 3,390 - -
Fundação Gerdau.............................................................................................. - - 1,305 16,762
Gerdau S.A....................................................................................................... 115 - - -
Sipar Aceros S.A. and other............................................................................... _____________- _____________- _____________ (74) _____________ 13,747
Total................................................................................................................ _____________
(266) _____________
3,390 _____________
1,231 _____________
30,509
b) Commercial transactions - the Company paid R$ 300 (R$ 300 in 2003) to the associated company Grupo Gerdau Empreendimentos Ltda.
for the use of the Gerdau trademark, as well as R$ 502 (R$ 524 in 2003) to the parent company Indac - Ind. Adm. e Comércio S.A. related to
guarantees.
c) Guarantees granted - the Company is the guarantor of the subsidiary GTL Financial Corp., in the amount of US$ 50,000, equivalent
to R$ 132,720 at the balance sheet date. The subsidiary Gerdau S.A. is the guarantor of the Euro Commercial Paper program of the subsidiary
GTL Trade Finance Inc., of US$ 110 million, equivalent to R$ 291,984 at the balance sheet date. The subsidiary is also the guarantor of financing
agreements of the subsidiary GTL Financial Corp., of US$ 5,000, equivalent to R$ 13,272, and securitization operations of the subsidiary
Gerdau Açominas Overseas Ltda., of US$ 233 million, equivalent to R$ 618,475 on the balance sheet date. The subsidiary Gerdau Açominas S.A.
is the guarantor of the vendor financing loan agreement of the associated company Banco Gerdau S.A., in the amount of R$ 68,138.

96 97
METALÚRGICA GERDAU S.A.
22 - Post-employment Benefits
Considering all types of benefits to employees granted by the Company, the asset and liability positions at December 31 are as follows:
Company
__________________________________
Consolidated
__________________________________
2004 2003 2004 2003
Pension plan actuarial liability - defined benefit.................................................. - - 154,199 162,719
Actuarial liability with post-employment health benefit........................................ - - 130,283 105,964
Retirement and discharge benefits payable......................................................... - - 9,996 10,187
_____________ _____________ _____________ _____________
Total liabilities.................................................................................................. - - 294,478 278,870
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
Unrecognized actuarial assets............................................................................ 1,964 1,892 165,510 125,107
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
a) Pension plan - defined benefit
The Company and other Group subsidiaries in Brazil are the co-sponsors of defined benefit pension plans that cover substantially all
employees in Brazil (“Açominas Plan” and “Gerdau Plan”).
The Açominas Plan is managed by Fundação Açominas de Seguridade Social - Aços, a closed supplementary pension entity to complement
the social security benefits of employees and retired employees of the Ouro Branco unit of Gerdau Açominas S.A. The assets of the Açominas
Plan mainly comprise investments in bank deposit certificates, federal public securities, marketable securities and properties.
The Gerdau Plan is managed by Gerdau - Sociedade de Previdência Privada, a closed supplementary pension entity to complement the social
security benefits of employees and retired employees of the Company of the other units of Gerdau Açominas S.A. and other subsidiaries in
Brazil. The assets of the Gerdau Plan comprise investments in bank deposit certificates, federal public securities and marketable securities.
Also, the Canadian and American subsidiaries sponsor defined benefit plans (Canadian Plan and American Plan) that cover substantially all
of their employees.
The Canadian and American plans are managed by CIBC Mellon and Wells Fargo, respectively, to complement the social security benefits of
employees of Gerdau Ameristeel Corporation and its subsidiaries, The assets of the Plans mainly comprise marketable securities.
The sponsors’ contributions to the pension plans were R$ 13 in 2004 and R$ 11 in 2003 for the Company and R$ 68,288 in 2004 and R$ 63,733
in 2003 for the consolidated.
The current expenses of the defined pension plan are as follows:
Company
Consolidated
__________________________________ __________________________________
2004 2003 2004 2003
Cost of current service....................................................................................... 39 60 49,884 41,261
Interest cost .................................................................................................... 124 700 125,054 110,212
Expected return of plan assets........................................................................... (204) (1,310) (162,001) (122,362)
Amortization of unrecognized liability................................................................. - - 462 467
Amortization of past service costs ..................................................................... - - 778 1,332
Amortization of (gain) loss ................................................................................ (18) - 2,550 2,764
Employees’ expected contribution ..................................................................... _____________- _____________- _____________ (4,383) _____________ (3,576)
Pension plan cost (benefit), net ......................................................................... _____________
(59) _____________
(550) _____________
12,344 _____________
30,098
The reconciliation of the assets and liabilities of the plans is presented below:
Company
Consolidated
__________________________________ __________________________________
2004 2003 2004 2003
Total liabilities ................................................................................................. (7,065) (6,223) (1,790,639) (1,623,000)
Fair value of plan assets.................................................................................... _____________ 14,993 _____________ 12,366 _____________ 1,867,506 _____________ 1,663,567
Net assets........................................................................................................ 7,928 6,143 76,867 40,567
Unrecognized (gains) losses............................................................................... (5,964) (4,251) (96,827) (91,405)
Past service costs ............................................................................................. - - 26,342 7,722
Other .............................................................................................................. _____________- _____________- _____________ 4,929 _____________ 5,504
Total assets (liabilities), net............................................................................... _____________
1,964 _____________
1,892 _____________
11,311 _____________
(37,612)
Actuarial asset ................................................................................................. 1,964 1,892 165,510 125,107
Pension plan liability recorded in balance sheet................................................... _____________- _____________- _____________ (154,199) _____________ (162,719)
Assets (liabilities), net....................................................................................... _____________
1,964 _____________
1,892 _____________
11,311 _____________
(37,612)

Changes in plan assets and actuarial liabilities were as follows:
Company
__________________________________
Consolidated
__________________________________
2004 2003 2004 2003
Changes in benefit
Benefit liabilities at the beginning of the year..................................................... 6,223 6,901 1,623,000 1,554,443
Cost of service.................................................................................................. 39 60 49,884 41,261
Interest cost..................................................................................................... 124 700 125,054 110,212
Actuarial loss (gain) ......................................................................................... 794 (1,336) 88,360 75,148
Payment of benefits......................................................................................... (115) (102) (69,534) (58,588)
Past service costs due to changes in the plan...................................................... - - 10,516 -
Foreign exchange effect on foreign companies.................................................... - - (45,000) (99,476)
Initial liability recognition adjustment................................................................. _____________- _____________- _____________ 8,359 _____________-
Benefit liabilities at the end of the year ........................................................ _____________
7,065 _____________
6,223 _____________
1,790,639 _____________
1,623,000
Company
Consolidated
__________________________________ __________________________________
2004 2003 2004 2003
Changes in plan assets
Fair value of plan assets at the beginning of the year........................................... 12,366 10,515 1,663,567 1,396,928
Return on plan assets........................................................................................ 2,729 1,942 232,043 314,371
Sponsor contributions........................................................................................ 13 11 68,288 63,733
Participant contributions.................................................................................... - - 5,202 4,232
Payment of benefits......................................................................................... (115) (102) (69,534) (58,588)
Foreign exchange effect on foreign companies.................................................... _____________- _____________- _____________ (32,060) _____________ (57,109)
Fair value of plan assets at the end of the year.................................................... _____________
14,993 _____________
12,366 _____________
1,867,506 _____________
1,663,567
The method for calculating the actuarial liability is the Projected Unit Credit Method, as determined by CVM Deliberation 371/2000.
The amount of the actuarial gains and losses to be recognized as income or expense is the unrecognized amount that exceeds, in each period,
the higher of the following limits: (i) 10% of the present value of the total actuarial liability of the defined benefit plan and (ii) 10% of the
fair value of the plan assets. The resulting amount will be amortized annually based on the average remaining years of service estimated for
the employees that participate in the plan.
The table below shows a summary of the assumptions made to calculate and record the defined benefit plan for both the Company and
consolidated:
North american
Gerdau Plan Açominas Plan plan
Average discount rate................................................................. 11.30% 11.30% 5.75% - 6.00%
Increase in compensation............................................................ 9.20% 8.675% 2.50% - 4.25%
Expected rate of return on assets................................................. 12.35% 12.35% 7.25% - 8.40%
Mortality chart........................................................................... GAM 83 (-1 year) AT-83 GAM 83
Disabled mortality chart.............................................................. RRB 1944 AT-83 RRB 1977
Turnover rate............................................................................. Based on service Null Based on age
and salary level
and service
(plan experience)
b) Pension plan - defined contribution
The Company and its subsidiaries in Brazil are also the co-sponsors of a defined contribution pension plan administered by Gerdau - Sociedade
de Previdência Privada. Contributions are based on a percentage of the compensation of employees.
The foreign subsidiary Gerdau AmeriSteel US Inc. has a defined contribution plan, the contributions to which are equivalent to 50% of the
amount paid by the participants, limited to 4% of salary. The other companies do not have this type of pension plan.
The total cost of this plan was R$ 55 in 2004 and R$ 62 in 2003 for the Company and R$ 12,005 in 2004 and R$ 9,827 in 2003 consolidated.
c) Other post-employment benefits
The Company estimates that the amount payable to executives on their retirement or discharge totals R$ 9,996 (consolidated) at December
31, 2004 (R$ 10,187 in 2003 - consolidated).

98 99
METALÚRGICA GERDAU S.A.
The American Plan includes, in addition to pension benefits, specific health benefits for employees who retire after a certain age and with
a certain number of years of service. The American subsidiary has the right to change or eliminate these benefits, and the contributions are
based on amounts actuarially calculated.
The composition of the net periodic cost for the post-employment health benefits is as follows:
Consolidated
___________________________________
2004 2003
Cost of service.................................................................................................................................................................. 3,007 2,542
Interest cost..................................................................................................................................................................... 5,715 6,492
Amortization of past service costs...................................................................................................................................... (563) -
Amortization of (gain) loss................................................................................................................................................. ______________ 80 ______________-
Expense for post retirement health benefits, net.................................................................................................................. ______________
8,239 ______________
9,034
The status of the fund for post-employment health benefits is as follows:
Consolidated
___________________________________
2004 2003
Plan assets at market value............................................................................................................................................... - -
Projected benefit liabilities................................................................................................................................................. ______________ (130,559) ______________ (111,390)
Fund status...................................................................................................................................................................... (130,559) (111,390)
Unrecognized gains and losses, net ................................................................................................................................... 8,101 5,426
Past service costs.............................................................................................................................................................. ______________ (7,825) ______________-
Post-retirement health benefit liabilities recorded in thebalance sheet................................................................................... ______________
(130,283) ______________
(105,964)
The changes in plan assets and actuarial liabilities was as follows:
Consolidated
___________________________________
2004 2003
Changes in projected benefit liabilities
Projected benefit liabilities at the beginning of the year....................................................................................................... 111,390 112,991
Purchase of North Star...................................................................................................................................................... 23,136 -
Cost of service.................................................................................................................................................................. 3,007 2,542
Interest cost..................................................................................................................................................................... 5,715 6,492
Participant contributions.................................................................................................................................................... 1,946 1,870
Actuarial loss.................................................................................................................................................................... 4,759 3,432
Administrative benefits and expenses paid.......................................................................................................................... (6,639) (6,528)
Foreign exchange effect ................................................................................................................................................... (4,364) (9,409)
Initial liability recognition adjustment................................................................................................................................. ______________ (8,391) ______________-
Projected benefit liabilities at the end of the year................................................................................................................ ______________
130,559 ______________
111,390
Consolidated
___________________________________
2004 2003
Changes in plan assets
Plan assets a the beginning of the year.............................................................................................................................. - -
Sponsor contributions........................................................................................................................................................ 4,693 4,658
Participant contributions.................................................................................................................................................... 1,946 1,870
Administrative benefits and expenses paid.......................................................................................................................... ______________ (6,639) ______________ (6,528)
Plan assets at the end of the year....................................................................................................................................... ______________
- ______________
-

The assumptions adopted in the accounting for post-employment health benefits were as follows:
North american plan
Average discount rate ...................................................................................................................................................... 5.75% - 6.00%
Health treatment - rate for the next year............................................................................................................................. 9.50% - 13.00%
Health treatment - rate for cost decrease to be reached from 2010 to 2013.......................................................................... 4.50% to 5.50%
23 - Shareholders’ Equity
a) Capital - authorized capital at December 31, 2004, comprises 50,000,000 common shares (50,000,000 at December 31, 2003) and
100,000,000 preferred shares (100,000,000 at December 31, 2003), with no par value.
The Extraordinary General Meeting of shareholders held on April 30, 2004 approved the capital increase of R$ 384,000 through the
capitalization of the reserve for investments and working capital, with a bonus of 30% on the shares on that date, representing 12,475,319
new shares (4,158,440 common and 8,316,879 preferred). Also, a split of 70% of these new shares was approved, with the issue of 29,109,076
shares (9,703,025 common and 19,406,051 preferred).
At December 31, 2004, 27,722,930 common shares (13,861,465 at December 31, 2003) and 55,445,860 preferred shares (27,722,930 at December
31, 2003) are subscribed and paid-up, totaling R$ 1,664,000 (R$ 1,280,000 at December 31, 2003). Preferred shares do not have voting rights
and cannot be redeemed, but have the same rights as common shares in terms of profit sharing.
b) Treasury stock - at December 31, 2004, the Company had 682,000 preferred shares (137,500 preferred shares in 2003), held in treasury for
subsequent sale in the market or cancellation, totaling R$ 21,490 (R$ 7,049 in 2003).
c) Interest on equity and dividends - the Company calculated interest on equity in accordance with the terms established by Law 9249/95.
The corresponding amount was recorded as financial expenses for tax purposes. For presentation purposes, this amount was recorded as
dividends, not affecting net income. The related tax benefit through the reductions of the income tax and social contribution on net income
charges for the year was R$ 55,250 (R$ 58,514 in 2003). Shareholders are entitled to receive, each year, a minimum mandatory dividend of 30%
of adjusted net income.
The amount of interest on equity and dividends credited for the year was R$ 433,879, shown as follows:
2004 2003
Net income for the year..................................................................................................................................................... 1,437,075 575,179
Transfer to legal reserve.................................................................................................................................................... ______________ (71,855) ______________ (28,759)
Adjusted net income......................................................................................................................................................... ______________
1,365,220 ______________
546,420
Distributions during the year
_____________________________________________________________________________________________________
Period Nature R$/share Credit Payment 2004 2003
1 st quarter......................................................... Interest 1.10 3/30/2004 5/18/2004 45,368 34,307
2 nd quarter ........................................................ Interest 0.62 6/30/2004 8/17/2004 51,142 23,287
Dividends 0.46 6/30/2004 8/17/2004 37,944 -
3 rd quarter......................................................... Interest 0.80 8/13/2004 11/17/2004 65,990 34,099
Dividends 0.91 11/3/2004 11/17/2004 75,062 -
4 th quarter ........................................................ Interest - 80,407
Dividends 1.92 2/11/2005 2/22/2005 _________ 158,373 ___________-
Interest on equity and dividends.......................... _________
433,879 ___________
172,100
% interest/dividends paid or credited.................. 32% 31%
Credit per share (R$).......................................... 5,26 4,15
Outstanding shares (thousands).......................... 82,487 41,447
The remaining income for the year was transferred to the statutory reserve for investments and working capital in accordance with the by-laws.
24 - Statutory Profit Sharing
a) The management profit sharing is limited to 10% of net income for the year, after income tax and management fees, as stated in the
Company’s by-laws;
b) The employees’ profit sharing is linked to the attainment of operating goals and was charged to cost of production and general and
administrative expenses, as applicable.

100 101
METALÚRGICA GERDAU S.A.
25 - Long-term Incentive Plans
I) Gerdau S.A.
The Extraordinary General Meeting of shareholders held on April 30, 2003 decided, based on a previously agreed plan and within the limit
of the authorized capital, to grant options to purchase preferred shares to management, employees or persons who render services to the
subsidiary or the companies under its control, and approved the formation of the Long-Term Incentive Program that represents a new form
of compensation of the strategic executives of the subsidiary. The options should be exercised in a maximum of five years after the grace
period.
a) Summary of changes in the plan:
Stock options grants (Number of shares)
________________________________________________________________________________
2003 2003 2004 2004 Total
Opening balance at December 31, 2003............................................... 403,228 280,840 - - 684,068
Grants in 2004................................................................................... - - 2,430 171,125 173,555
Share bonus on April 29, 2004............................................................ __________ 403,229 __________ 280,840 __________ 2,429 __________ 171,125 __________ 857,623
Closing balance at December 31, 2004................................................. __________
806,457 __________
561,680 __________
4,859 __________
342,250 __________
1,715,246
Exercise price - R$ .............................................................................. 11.94 11.94 30.50 30.50
Grace period....................................................................................... 3 anos - 3 anos -
Grace period....................................................................................... - 5 anos - 5 anos
The subsidiary Gerdau S.A. has a total of 1,573,200 preferred shares in treasury at December 31, 2004, These shares can be used for this
plan.
b) Plan status at December 31
Stock options grants
___________________________________________
2004 2003 Average
Total stock options granted........................................................................................................................................... 347,109 1,368,137
Exercise price - R$ ........................................................................................................................................................ 30.50 11.94 15.70
Fair value of options date of grant - R$ per option (*)..................................................................................................... 8.65 3.72 4.72
Average term of option to be exercised (years)................................................................................................................ 3.68 1.82 2.26
(*) Calculated using the Black-Scholes model
The percentage of dilution in interest that the current shareholders may experience if all options are exercised is approximately 0.6%.
II) Gerdau Ameristeel Corporation - (“Gerdau Ameristeel”)
Gerdau Ameristeel Corporation and its subsidiaries have stock compensation plans for their employees, as follows:
a) Former Co-Steel Plan
According to the terms of the Co-Steel Plan, the Stock-Based Option Plan, the company was authorized to grant purchase options to employees
and directors up to the limit of 3,041,335 common shares. The exercise price was based on the closing price of the common shares in the
market on the day prior to the issue of the option. The options have a maximum term of ten years and are granted during various periods, as
determined by the administrator of the plan at the date of the grant, up to April 13, 2008.
b) Gerdau AmeriSteel US Inc. (“AmeriSteel”) Plans
According to the terms of the Transaction Agreement relating to the acquisition of Co-Steel, the minority shareholders of AmeriSteel
exchanged their shares and stock options for shares and stock options of Ameristeel at the ratio of 9,4617 shares and stock options for each
share or stock option of AmeriSteel. This exchange occurred on March 31, 2003.
b.1) Stakeholder Plan
In March 2000, the Board of Directors of AmeriSteel a approved long-term incentive plan available to the executive management (Stakeholder
Plan) to assure that the interests of the senior management of AmeriSteel are in line with those of the AmeriSteel shareholders. The awards
are determined by a formula based on the return on employed capital of AmeriSteel in a given year of the plan. The awards are granted and
paid over a period of four years. The participants may choose payment in cash or in shares of AmeriSteel and Gerdau, for which a premium
of 25% is given, if chosen. Expenses related to the benefits for the years ended December 31, 2004 and 2003 totaled US$ 1,300 thousand
(R$ 3,450) and US$ 150 thousand (R$ 433), respectively. A premium of approximately US$ 14,000 thousand (equivalent to R$ 37,161) was
recorded at December 31, 2004 and will be granted on March 1, 2005. This premium will be provided in accordance with the payment schedule
established by the plan.

.2) SAR Plan
In July 1999, the Board of Directors of AmeriSteel approved the SAR/Shares Purchase Plan (SAR Plan) available to basically all employees. The
SAR Plan authorizes the sale of 946,170 common shares to the employees during three offer periods, from July to September in 1999, 2002
and 2005. The employees who purchase the shares are rewarded with stock appreciation rights (SARs) equal to four times the number of
shares purchased. SARs at market value were granted at the date of grant, determined based on an independent appraisal at the end of the
prior year. SARs can be exercised at 25% annually as from the date of the grant, to be exercised over a period of ten years as from the date
of the grant.
In July 2002, the Board of Directors of AmeriSteel approved the issue of new purchase options under the SAR Plan, which were granted to the
executive directors, with the exercise price determined by the fair value at the date of grant. A total of 6,244,722 SARs were authorized and
issued. One-third of all awarded options and common shares are vested two years as from the date of concession, and one third after each
subsequent two-year period. The options may be exercised in up to ten years after the date of concession.
At December 31, 2004, an expense related to this plan of US$ 20,700 thousand, equivalent to R$ 54,946, was recorded in the consolidated
financial statements (at December 31, 2003, an expense of US$ 9,400 thousand, equivalent to R$ 27,158 was recorded).
b.3) Equity Ownership
In September 1996, the Board of Directors of AmeriSteel approved the Equity Ownership Plan of AmeriSteel Corporation (the “Equity
Ownership” Plan), which grants common shares, purchase options for common shares and SARs. The maximum number of shares that may
be issued under this plan is 4,152,286, AmeriSteel granted 4,667,930 incentive stock options and 492,955 common shares under the Equity
Ownership Plan up to December 31, 2004. One-third of all options and common shares issued become vested two years from the date of the
grant, and one third after each subsequent two-year period. All grants were carried out at the market value of the common shares at the
date of grant, determined based on an independent appraisal at the end of the prior year. The options may be exercised for ten years as from
the date of the grant.
b.4) Purchase Plan
In May 1995, the Board of Directors of AmeriSteel approved an option/purchase plan (the “Purchase Plan”), available to essentially all
employees. The employees who purchased shares were rewarded with options for six times the number of shares purchased. A total of
356,602 shares were sold under the Purchase Plan at a purchase price of US$ 1.12 per share. The options were granted at market value at the
date of the grant, determined based on an independent appraisal at the end of the prior year. A total of 2,139,612 options were granted under
the Purchase Plan. No options are available for future grant. All shares granted can already be exercised, which may occur for ten years as
from the date of the grant.
A summary of the Gerdau Ameristeel plans is as follows:
2004 2003
___________________________________________ ____________________________________________
Number Weighted average Number Weighted average
of shares exercise price - R$ of shares exercise price - R$
Available at the beginning of the year............................. 3,606,570 17.01 1,367,400 26.87
Exchange of Ameristeel Planfor options of the
Gerdau Ameristeel Plan (*)........................................... - - 2,660,601 6.21
Exercised....................................................................... (374,609) 5.04 - -
Cancelled...................................................................... (76,973) 5.10 - -
Expire d ........................................................................ _________________ (321,700) ______________________ 51.65 _________________ (421,431) ______________________ 56.98
Available at the end of the year...................................... _________________
2,833,288 ______________________
15.77 _________________
3,606,570 ______________________
18.52
(*) Exchange mentioned in item “b” above.

102 103
METALÚRGICA GERDAU S.A.
The table below summarizes the information on the purchase options of Gerdau Ameristeel shares available at December 31, 2004:
Quantity exercisable
Available Average Weighted average at december 31,
Exercise price (R$) quantity grace period exercise price - R$ 2004
3.50 to 3.80 ................................................................. 752,829 4.40 3.66 597,086
4.78 to 5.04 ................................................................. 824,536 5.90 4.88 497,369
5.60 to 7.86 ................................................................. 563,923 4.50 11.89 563,923
41.01 to 49.61.............................................................. 342,500 2.10 44.59 342,500
53.25 to 53.49 ............................................................. __________________ 349,500 1.70 53.49 ________________________ 349,500
__________________
2,833,288 ________________________
2,350,378
The effect on net income for the year and shareholders’ equity would have been as follows, had the expenses for the option plans of Gerdau
S.A. and Gerdau Ameristeel Corporation been recorded:
Consolidated
______________________________________________
Net income
Shareholders equity
Balances based on financial statements............................................................................................ 3,341,097 2,961,034
Expenses for the period*................................................................................................................. ___________________ (2,649) ______________________ (8,383)
Proforma balances.......................................................................................................................... ___________________ 3,338,448 ______________________ 2,952,651
*using the fair value method (Black-Scholes model)
26 - Calculation of EBITDA
Consolidated
___________________________________
2004 2003
Gross profit...................................................................................................................................................................... 6,245,024 3,290,221
Selling expenses............................................................................................................................................................... (455,175) (448,131)
General and administrative expenses.................................................................................................................................. (1,050,953) (804,501)
Depreciation and amortization........................................................................................................................................... ______________ 766,819 ______________ 605,045
EBITDA............................................................................................................................................................................ ______________
5,505,715 ______________
2,642,634

27 - Information by Geographic Area and Business Segment
Information by geographic area:
Geográphic Área
_________________________________________________________________________________________________________________________________________________________
Brazil South america (*) North america Consolidated
_________________________________ _______________________________ ________________________________ ________________________________
2004 2003 2004 2003 2004 2003 2004 2003
Gross sales revenues............................... 12,914,377 9,024,250 1,039,986 652,829 9,453,210 6,105,888 23,407,573 15,782,967
Net sales revenues.................................. 9,975,760 7,306,927 763,865 490,122 8,857,637 5,569,912 19,597,262 13,366,961
Cost of sales........................................... (5,668,217) (4,444,848) (488,120) (325,333) (7,195,901) (5,306,559) (13,352,238) (10,076,740)
Gross profit ........................................... 4,307,543 2,862,079 275,745 164,789 1,661,736 263,353 6,245,024 3,290,221
Selling expenses..................................... (400,317) (407,717) (7,079) (5,140) (47,779) (35,274) (455,175) (448,131)
General and administrative expenses........ (751,200) (554,218) (45,934) (33,492) (253,819) (216,791) (1,050,953) (804,501)
Financial income (expenses), net.............. 33,673 (437,013) (4,491) (3,831) (177,563) (180,532) (148,381) (621,376)
Operating profit (loss)............................. 3,022,950 1,197,824 219,272 120,012 1,194,708 (165,655) 4,436,930 1,152,181
Net income (loss) for the year.................. 2,270,548 1,224,769 174,240 93,379 896,309 (61,274) 3,341,097 1,256,874
EBITDA (**)............................................ 3,657,500 2,256,415 250,983 151,524 1,597,232 234,695 5,505,715 2,642,634
(*) Does not include Brazilian operations,
(**) Income before financial expenses, income tax and social contribution on net income, and depreciation and amortization, as mentioned in Note 26,
The segments shown below correspond to the business units through which the Gerdau Executive Committee manages its operations: Long Steel Brazil, Açominas (corresponding to the
operations of the plant located in Ouro Branco, state of Minas Gerais), South America (excluding Brazilian operations) and North America (Gerdau Ameristeel):
Information by business segment:
Business sector
________________________________________________________________________________________________________________________________________________________________
Long Brazil Açominas Ouro Branco South America (*) Nort América Consolidated
___________________________ __________________________ ___________________________ ___________________________ ____________________________
2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
Net sales revenues..................... 7,329,008 5,359,998 2,646,752 1,946,929 763,865 490,122 8,857,637 5,569,912 19,597,262 13,366,961
Identifiable assets (**)............... 4,447,413 3,183,362 3,482,517 3,241,331 668,351 580,385 6,131,526 4,273,441 14,729,807 11,278,519
Capital expenditure.................... 648,070 329,999 265,851 355,984 27,367 22,253 1,156,660 164,803 2,097,948 873,039
Depreciation/amortization........... 235,767 235,878 265,707 120,392 28,251 25,367 237,094 223,408 766,819 605,045
(*) Does not include Brazilian operations,
(**)Identifiable assets: accounts receivable, inventories and fixed assets

104 105
METALÚRGICA GERDAU S.A.
Board of Directors
Chairman
JORGE GERDAU JOHANNPETER
Vice Chairman
GERMANO H. GERDAU JOHANNPETER
KLAUS GERDAU JOHANNPETER
CARLOS JOÃO PETRY
Board members
AFFONSO CELSO PASTORE
ANDRÉ PINHEIRO DE LARA RESENDE
OSCAR DE PAULA BERNARDES NETO
Secretary General
EXPEDITO LUZ
Executive Committee
President
JORGE GERDAU JOHANNPETER
Vice Presidents
FREDERICO C. GERDAU JOHANNPETER, Senior Vice President
CARLOS JOÃO PETRY, Senior Vice President
ANDRÉ BIER JOHANNPETER
CLAUDIO JOHANNPETER
OSVALDO BURGOS SCHIRMER
DOMINGOS SOMMA
FILIPE AFFONSO FERREIRA
RICARDO GEHRKE
Secretary General
EXPEDITO LUZ
Corporate Officers
EXPEDITO LUZ
GERALDO TOFFANELLO
GERALDO TOFFANELLO
Accountant CRC RS No. 31.084
CPF N0. 078.257.060-72

Report of Independent Auditors
To the Board of Directors and Shareholders
Metalúrgica Gerdau S.A.
1. We have audited the accompanying balance sheets of Metalúrgica Gerdau S.A. and the consolidated balance sheets
of Metalúrgica Gerdau S.A. and its subsidiaries as of December 31, 2004 and 2003, and the related statements of
income, of changes in shareholders’ equity and of changes in financial position of Metalúrgica Gerdau S.A., as well as
the related consolidated statements of income and of changes in financial position, for the years then ended. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements.
2. We conducted our audits in accordance with approved Brazilian auditing standards, which require that we perform
the audit to obtain reasonable assurance about whether the financial statements are fairly presented in all material
respects. Accordingly, our work included, among other procedures: (a) planning our audit taking into consideration
the significance of balances, the volume of transactions and the accounting and internal control systems of the
companies, (b) examining, on a test basis, evidence and records supporting the amounts and disclosures in the financial
statements, and (c) assessing the accounting practices used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
3. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial position
of Metalúrgica Gerdau S.A. and of Metalúrgica Gerdau S.A. and its subsidiaries at December 31, 2004 and 2003, and
the results of operations, the changes in shareholders’ equity and the changes in financial position of Metalúrgica
Gerdau S.A., as well as the consolidated results of operations and of changes in financial position, for the years then
ended, in accordance with accounting practices adopted in Brazil.
4. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a
whole. The statement of cash flows is presented for purposes of additional analysis and is not a required part of the
basic financial statements. This information has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial
statements taken as a whole.
Porto Alegre, March 4, 2005
Auditores Independentes
CRC 2SP000160/O-5 “F” RS
Carlos Alberto de Sousa
Accountant CRC 1RJ 056561/O-0”S”RS

106 107
METALÚRGICA GERDAU S.A.
Opinion of the Fiscal Council
The Fiscal Council of Metalúrgica Gerdau S.A., in performance of its legal and statutory duties, in compliance with
article 163 of Law 6404/76, having examined the Company’s Management Report, the individual (parent company)
and consolidated balance sheets and the related statements of income, of changes in shareholders’ equity and of
changes in financial position for the years ended December 31, 2004 and 2003, as well as the distribution of interest
on equity and dividends, and based on the report of PricewaterhouseCoopers Auditores Independentes, is of the
opinion that these accounting statements fairly reflect the Company’s individual and consolidated financial position,
in conformity with current accounting practices, and are in prefect condition to be approved at the Ordinary General
Meeting.
Porto Alegre, March 11, 2005
CARLOS ROBERTO SCHRÖDER
DOMINGOS MATIAS URROZ LOPES
MÁRIO MAGALHÃES DE SOUSA

Gerdau S.A.
Balance Sheet at December 31
(In thousands of reais)
Assets Company Consolidated
2004 2003 2004 2003
Current Assets
Cash and cash equivalents............................................................. note 5 15,709 177,684 2,041,967 1,017,006
Trade accounts receivable ............................................................. note 6 - - 2,496,808 1,526,176
Inventories .................................................................................. note 7 - - 4,236,642 2,336,598
Tax credits.................................................................................... note 8 32,038 1,844 240,462 120,815
Deferred income tax and social contribution on net income.............. note 9 - - 329,464 116,868
Dividends receivable...................................................................... 147,226 235,459 - -
Other accounts receivable.............................................................. 1,014 102 210,922 217,417
Total current assets......................................................................... 195,987 415,089 9,556,265 5,334,880
Long-Term Receivables
Related parties............................................................................. note 21 - - 1,448 26,979
Eletrobrás loans............................................................................ 8,908 8,908 10,212 10,212
Deposit for future investment in subsidiaries................................... note 4 - - 182,158 -
Deferred income tax and social contribution on net income.............. note 9 42,296 29,686 597,931 789,346
Compulsory deposits and other...................................................... note 10 25,495 25,503 242,570 224,720
Total long-term receivables............................................................. 76,699 64,097 1,034,319 1,051,257
Permanent Assets
Investments.................................................................................. note 11 7,100,464 4,248,312 112,017 461,412
Fixed assets.................................................................................. note 12 - - 7,927,363 7,378,725
Deferred charges........................................................................... note 13 - - 33,858 20,467
Total permanent assets.................................................................... 7,100,464 4,248,312 8,073,238 7,860,604
Total assets........................................................................................ 7,373,150 4,727,498 18,663,822 14,246,741
The accompanying notes are an integral part of these financial statements.

108 109
GERDAU S.A.
Liabilities and Shareholders’ Equity Company Consolidated
2004 2003 2004 2003
Current Liabilities
Trade accounts payable.................................................................. 72 - 1,935,953 1,192,428
Financing..................................................................................... note 14 - - 1,968,397 2,414,376
Debentures................................................................................... note 15 - - 2,986 3,027
Taxes and contributions payable..................................................... note 18 6,808 42,455 386,238 171,776
Related parties............................................................................. note 21 164,549 - - -
Deferred income tax and social contribution on net income.............. note 9 - - 180,166 35,721
Salaries payable............................................................................ 622 4,089 255,418 148,626
Dividends payable......................................................................... note 23 280,378 131,916 306,771 154,220
Other accounts payable................................................................. 4,838 11,801 211,739 222,725
Total current liabilities.................................................................... 457,267 190,261 5,247,668 4,342,899
Long-Term Liabilities
Financing..................................................................................... note 14 - - 3,490,374 3,396,085
Debentures................................................................................... note 15 692,476 227,878 915,086 449,039
Related parties............................................................................. note 21 - 20,961 - -
Provision for contingencies ........................................................... note 20 94,882 95,000 240,300 221,212
Deferred income tax and social contribution on net income.............. note 9 54,669 57,530 611,707 484,096
Post-employement benefits ........................................................... note 22 - - 294,478 278,870
Other accounts payable................................................................. - 7,472 251,162 219,393
Total long-term liabilities............................................................... 842,027 408,841 5,803,107 5,048,695
Minority Interest............................................................. - - 1,539,191 726,751
Shareholders’ Equity
Capital......................................................................................... note 23 3,471,312 1,735,656 3,471,312 1,735,656
Capital reserves ........................................................................... 376,672 376,672 376,672 376,672
Revenue reserves.......................................................................... 2,225,872 2,016,068 2,225,872 2,016,068
Total shareholders’ equity............................................................... 6,073,856 4,128,396 6,073,856 4,128,396
Shareholders’ Equity Including
Minority Interest.......................................................... - - 7,613,047 4,855,147
Total liabilities and shareholders’ equity..................................... 7,373,150 4,727,498 18,663,822 14,246,741
The accompanying notes are an integral part of these financial statements.

Statement of Income
Years ended December 31
(In thousands of reais)
Company Consolidated
2004 2003 2004 2003
GROSS SALES REVENUES................................................................... note 26 - 6,087,658 23,407,573 15,782,967
Taxes on sales................................................................................ - (1,068,692) (2,456,568) (1,427,585)
Freight and discounts..................................................................... ____________- ____________ (148,765) ____________ (1,353,743) ____________ (988,421)
Net Sales Revenues.................................................... - 4,870,201 19,597,262 13,366,961
COST OF SALES ............................................................................... ____________- ____________ (3,041,635) ____________ (13,352,238) ____________
(10,076,740)
Gross Profit............................................................... - 1,828,566 6,245,024 3,290,221
SELLING EXPENSES........................................................................... - (312,873) (455,175) (448,131)
FINANCIAL INCOME.......................................................................... note 17 42,326 3,210 209,846 52,029
FINANCIAL EXPENSES....................................................................... note 17 (49,329) (396,812) (385,952) (698,599)
GENERAL AND ADMINISTRATIVE EXPENSES........................................
Management fees.......................................................................... (1,261) (16,323) (43,562) (27,089)
General expenses........................................................................... (42,681) (305,054) (960,264) (736,351)
EQUITY IN THE EARNINGS (LOSSES) OF SUBSIDIARIES
AND ASSOCIATED COMPANIES...................................................... note 11 2,836,486 503,064 (343,116) (299,357)
OTHER OPERATING INCOME (EXPENSES), NET.................................... ____________ 28,057 ____________ 11,123 ____________ 187,866 ____________ 14,489
Operating Profit........................................................ 2,813,598 1,314,901 4,454,667 1,147,212
NON-OPERATING INCOME (EXPENSES), NET....................................... ____________ (1,065) ____________ (26,664) ____________ (24,930) ____________ (7,608)
Profit before Taxes and Profit Sharing................ 2,812,533 1,288,237 4,429,737 1,139,604
PROVISION FOR INCOME TAX AND SOCIAL
CONTRIBUTION ON NET INCOME................................................... note 9
Current......................................................................................... 4 (93,129) (951,201) (308,681)
Deferred........................................................................................ 20,063 (41,569) (202,286) 449,605
MANAGEMENT PROFIT SHARING....................................................... note 24a ____________ (1,261) ____________ (16,323) ____________ (41,363) ____________ (26,043)
Net Income before Minority Interest..................... ____________
2,831,339 ____________
1,137,216 ____________
3,234,887 ____________
1,254,485
MINORITY INTEREST......................................................................... ____________ (403,548) ____________ (117,269)
Net Income for The Year........................................... ____________ 2,831,339 ____________ 1,137,216
Net income per share - R$......................................................... ____________
9.59 ____________
7.68
Net equity per share - R$.......................................................... ____________
20.58 ____________
27.89
The accompanying notes are an integral part of these financial statements.

110 111
GERDAU S.A.
Statement of Changes in Financial Position
Years ended December 31
(In thousands of reais)
Company
Consolidated
2004 2003 2004 2003
Financial Resources Were Provided by
Operations:
Net income for the year........................................................... 2,831,339 1,137,216 3,234,887 1,254,485
Expenses (income) not affecting working capital
Depreciation and amortization............................................. - 183,832 766,665 604,887
Cost of permanent asset disposals ................................... 76,796 147,999 125,585 33,434
Equity in the (earnings) losses of subsidiaries
and associated companies .......................................... note 11 (2,836,486) (503,064) 343,116 299,357
Foreign exchange effects on working capital
of foreign companies.................................................. - - (54,312) (120,202)
Monetary variations on long-term debt............................. 44,942 1,621 (138,490) (15,737)
Monetary variations on long-term receivables.................... ____________- ____________ (1,493) ____________ (526) ____________ (5,107)
From operations............................................................. ____________ 116,591 ____________ 966,111 ____________ 4,276,925 ____________ 2,051,117
Third parties:
Capital increase.................................................................. - - 493,181 -
Treasury shares................................................................... note 23 (27,036) (17,103) (27,036) (17,103)
Contributions to capital reserves ......................................... - 66,304 16,246 66,304
Increase (decrease) in long-term liabilities............................. 388,245 (422,659) 1,055,900 639,723
Working capital of consolidated companies........................... - - - 53,198
Working capital - operational integration.............................. - 256,530 - -
Working capital - purchase of assets..................................... - - 669,446
Dividends not included in income for the year........................ 748,271 273,781 - 459
Total funds provided................................................................. 1,226,071 1,122,964 6,484,662 2,793,698
Financial Resources Were Used for
Investments .......................................................................... 840,734 156,913 35,395 75,280
Purchase of assets.................................................................. - - 924,457 -
Fixed assets........................................................................... - 263,483 1,262,707 843,461
Deferred charges.................................................................... - 2,304 18,654 7,246
Increase (decrease) in long-term receivables.............................. 12,602 (30,465) (12,039) 506,376
Dividends/interest on equity..................................................... note 23 858,843 351,247 938,872 351,546
Total funds used......................................................................... 1,712,179 743,482 3,168,046 1,783,909
Changes in Working Capital .......................................... ____________ (486,108)
____________ 379,482
____________ 3,316,616 ____________
1,009,789
Working capital
At the beginning of the year................................................ 224,828 (154,654) 991,981 (17,808)
At the end of the year......................................................... ____________ (261,280) ____________ 224,828 ____________ 4,308,597 ____________ 991,981
Changes in Working Capital .......................................... (486,108) 379,482 3,316,616 1,009,789
The accompanying notes are an integral part of these financial statements.

Statement of Changes
in Shareholders’ Equity
(In thousands of reais)
Capital reserves Revenue reserves
Special Investments Total
Investment Law and working Retained shareholders’
Capital incentives 8200/91 Other Total Legal capital Total earnings equity
At December 31, 2002......... 1,335,120 276,606 21,487 12,275 310,368 127,569 1,520,169 1,647,738 - 3,293,226
Net income for the year.............. - - - - - - - - 1,137,216 1,137,216
Capital increase......................... 400,536 - - - - - (400,536) (400,536) - -
Investment incentives................. - 66,304 - - 66,304 - - - - 66,304
Treasury shares.......................... note 23 - - - - - - (17,103) (17,103) - (17,103)
Distribution proposed for the
Annual General Meeting
Legal reserve ........................ note 23 - - - - - 56,860 - 56,860 (56,860) -
Reserve for investments and
working capital................. - - - - - - 729,109 729,109 (729,109) -
Interest on equity.................. note 23 - - - - - - - - (351,247) (351,247)
At December 31, 2003....... 1,735,656 342,910 21,487 12,275 376,672 184,429 1,831,639 2,016,068 - 4,128,396
Net income for the year.............. - - - - - - - - 2,831,339 2,831,339
Capital increase......................... note 23 1,735,656 - - - - - (1,735,656) (1,735,656) - -
Treasury shares.......................... note 23 - - - - - - (27,036) (27,036) - (27,036)
Distribution proposed for the
Annual General Meeting
Legal reserve ........................ note 23 - - - - - 141,567 - 141,567 (141,567) -
Reserve for investments and
working capital................. - - - - - - 1,830,929 1,830,929 (1,830,929) -
Dividends/interest on equity... note 23 - - - - - - - - (858,843) (858,843)
At December 31, 2004....... 3,471,312 342,910 21,487 12,275 376,672 325,996 1,899,876 2,225,872 - 6,073,856
The accompanying notes are an integral part of these financial statements.

112 113
GERDAU S.A.
Statement of Cash Flows
Years Ended December 31
(In thousands of reais)
Company
Consolidated
2004 2003 2004 2003
Net income for the year..................................................................... 2,831,339 1,137,216 3,234,887 1,254,485
Equity in the (earnings) losses of subsidiaries and
associated companies................................................................... note 11 (2,836,486) (503,064) 343,116 299,357
Provision for credit risks.................................................................... - 11,594 7,323 20,705
Gain on disposal of fixed assets......................................................... - 15,928 9,058 10,056
Gain (loss) on disposal of investments ............................................... 1,065 (1,645) 4,382 (111)
Monetary and exchange variations..................................................... (9,556) 82,483 (99,284) 130,790
Depreciation and amortization........................................................... - 183,832 766,665 604,887
Income tax and social contribution on net income............................... (34,703) (12,204) 463,938 (438,731)
Interest on debt................................................................................ 53,277 291,462 406,534 587,143
Contingencies/judicial deposits ......................................................... (110) 4,997 5,295 624
Changes in trade accounts receivable ................................................ - (160,073) (687,562) (180,879)
Changes in inventories ..................................................................... - (106,405) (1,402,408) (207,267)
Changes in trade accounts payable..................................................... 72 11,157 490,458 187,378
Other operating activity accounts....................................................... ____________ (42,524) ____________ 135,319 ____________ (56,428) ____________ 84,468
Net cash provided by (used in) operating activities.......................... ____________ (37,626) ____________ 1,090,597 ____________ 3,485,974 ____________ 2,352,905
Acquisition/disposal of fixed assets.................................................... - (262,887) (1,173,491) (873,039)
Increase in deferred charges.............................................................. - (2,304) (18,006) (7,246)
Acquisition/disposal of investments.................................................... (802,735) (25,488) (37,686) (71,603)
Purchase of assets............................................................................ - - (924,457) -
Receipt of dividends/interest on own capital ...................................... ____________ 833,126 ____________ 38,251 ____________- ____________-
Net cash provided by (used in) investing activities........................... ____________ 30,391 ____________ (252,428) ____________ (2,153,640) ____________ (951,888)
Suppliers of fixed assets.................................................................... - 2,436 144,574 2,196
Working capital financing.................................................................. - 112,645 (136,784) (336,901)
Debentures....................................................................................... 411,560 (426,154) 399,120 (394,340)
Increase in permanent asset financing................................................ - 111,684 762,766 454,989
Payment of permanent asset financing................................................ - (272,111) (677,357) (541,308)
Payment of financing interest............................................................. - (142,343) (372,676) (402,611)
Loans with related parties ................................................................. 196,195 7,574 32,872 (11,316)
Capital increase/treasury shares......................................................... note 23 (27,036) (17,103) 466,146 (17,103)
Payment of dividends/interest on equity and profit sharing................... ____________ (735,459) ____________ (402,793) ____________ (843,493) ____________ (407,910)
Net cash used in financing activities............................................... ____________ (154,740) ____________ (1,026,165) ____________ (224,832) ____________ (1,654,304)
Changes in cash and cash equivalents............................................ ____________
(161,975) ____________
(187,996) ____________
1,107,502 ____________
(253,287)
Cash and cash equivalents
At the beginning of the year.......................................................... note 5 177,684 365,680 1,017,006 1,430,656
Restatement of opening balance.................................................... - - (82,541) (173,735)
Opening balance of consolidated companies for the year................. - - - 13,372
At the end of the year................................................................... note 5 15,709 177,684 2,041,967 1,017,006

Notes to the Financial Statements
at December 31, 2004 and 2003
(All amounts in thousands of reais unless otherwise indicated)
1 - Operations
Gerdau S.A. is a holding company in the Gerdau Group, which is principally dedicated to the production of common and special steel rods
and sale of general steel products (flat and long), in plants located in Brazil, Uruguay, Chile, Canada, Argentina and the United States of
America.
The Gerdau Group has an installed capacity of 16.4 million tons of crude steel per year, basically producing steel in electrical furnaces, from
scrap and pig iron purchased, for the most part, in the region near each plant (mini-mill concept). Gerdau also operates plants which are
capable of producing steel from iron ore (through blast furnaces and direct reduction) and has a unit used exclusively to produce special
steels, It is the largest scrap recycling group in Latin America and among the largest in the world.
The industrial sector is the most important market, including manufacturers of consumer goods such as vehicles and household and
commercial equipment that basically use profiled steel in various available specifications. The next most important market is the civil
construction sector, which demands a high volume of rebar and wire for concrete. There are also numerous customers for nails, staples and
wires, commonly used in the agribusiness sector.
2 - Presentation of the Financial Statements
The financial statements have been prepared and are presented in accordance with accounting practices adopted in Brazil, which are based
on the provisions of Brazilian Corporate Law, together with the rules established by the Brazilian Securities Commission (CVM).
A statement of cash flows (company and consolidated), prepared under the indirect method, is being presented as supplementary information
in order to provide additional information.
3 - Significant Accounting Practices
a) Cash and cash equivalents - financial investments are recorded at cost plus income accrued up to the balance sheet date, applying the
interest rates agreed with the financial institutions, and do not exceed market value;
b) Trade accounts receivable - are stated at realizable values, and accounts receivable from foreign customers are adjusted based on the
exchange rates effective at the balance sheet date. The provision for credit risks is calculated based on a credit risk analysis, which includes
the history of losses, the individual situation of each customer and the economic group to which they belong, the collateral and guarantees
and the legal advisors’ opinion, and is considered sufficient to cover eventual losses on realization;
c) Inventories - are stated at the lower of market value and average production or purchase cost;
d) Investments in subsidiary and associated companies - are recorded on the equity method of accounting. The equity in the earnings or loss
is recorded in an income statement account;
e) Fixed assets - are recorded at cost, net of depreciation. Depreciation is calculated on the straight-line basis, at the rates stated in Note 12,
which take into consideration the estimated useful lives of the assets. Interest on financing obtained to finance construction in progress is
added to the cost of the constructions;
f) Deferred charges - amortization is calculated on the straight-line basis at rates determined based on the production of the implemented
projects in relation to their installed capacities;
g) Financing - is stated at the contract value plus the contracted charges, including interest and monetary or foreign exchange variations.
Swap contracts, which are linked to the loan agreements, are classified together with the related loans;
h) Income tax and social contribution on net income - current and deferred income tax and social contribution on net income are calculated
in conformity with current legislation;
i) Other current and long-term assets and liabilities - are recorded at their realizable amounts (assets) and at their known or estimated
amounts plus accrued charges and indexation adjustments (liabilities), when applicable;
j) Related parties - loan agreements between Brazilian companies are restated by the weighted average interest rate for market funding.
The agreements with foreign companies are restated by charges (LIBOR plus 3% p.a.) plus foreign exchange variation. Sales and purchases of
inputs and products are made under terms and conditions similar to those of unrelated third parties;
k) Determination of the results of operations - the results of operations are determined on the accrual basis of accounting;
l) Use of estimates - the preparation of financial statements requires estimates to record certain assets, liabilities and other transactions.
The Company’s financial statements therefore include various estimates related to the useful lives of fixed assets, provisions necessary for
contingent liabilities, for income tax and other similar matters. Actual results may differ from those estimated;
m) Environmental investments - expenses related to compliance with environmental regulations are considered as cost of production or
capitalized when incurred; and
n) Translation of foreign currency balances - asset and liability balances of transactions in foreign currency are translated to local currency
(R$) at the foreign exchange rate in effect at the balance sheet date (2004 - US$ 1.00 = R$ 2.6544 and 2003 - US$ 1.00 = R$ 2.8892),

114 115
GERDAU S.A.
4 - Consolidated Financial Statements
a) The consolidated financial statements at December 31, 2004 include the accounts of Gerdau S.A. and the directly or indirectly controlled
subsidiaries listed below:
Percentage
Shareholders’
Consolidated company ownership equity
Gerdau Participações S.A.................................................................................................................. 100 4,887,726
Gerdau Açominas S.A....................................................................................................................... 100 4,766,046
Gerdau Ameristeel Corporation and subsidiaries*............................................................................... 100 3,622,636
Gerdau Internacional Empreendimentos Ltda. - Grupo Gerdau ............................................................ 100 2,785,282
Gerdau GTL Spain S.L. ..................................................................................................................... 100 2,761,750
Gerdau Steel Inc. ............................................................................................................................ 100 2,351,341
Axol S.A.......................................................................................................................................... 100 476,156
Gerdau Chile Inversiones Ltda. ......................................................................................................... 100 476,126
Indústria Del Acero S.A. - Indac ........................................................................................................ 100 476,063
Gerdau Aza S.A. .............................................................................................................................. 100 421,401
Seiva S.A. - Florestas e Indústrias ..................................................................................................... 100 202,143
Itaguaí Com. Imp. e Exp. Ltda. .......................................................................................................... 100 193,964
Sipar Aceros S.A. ............................................................................................................................. 38 78,037
Margusa - Maranhão Gusa S.A.......................................................................................................... 100 73,714
Gerdau Laisa S.A. ............................................................................................................................ 100 51,897
Aramac S.A. .................................................................................................................................... 100 49,355
GTL Equity Investments Corp............................................................................................................. 100 49,286
Açominas Com. Imp. Exp. S.A. - Açotrading........................................................................................ 100 22,583
Florestal Rio Largo Ltda.................................................................................................................... 100 18,174
Aceros Cox Comercial S.A. ............................................................................................................... 100 10,110
Gerdau Açominas Overseas Ltd......................................................................................................... 100 7,914
Florestal Itacambira S.A.................................................................................................................... 100 7,650
Siderco S.A. .................................................................................................................................... 38 6,958
GTL Financial Corp. ......................................................................................................................... 100 4,931
GTL Trade Finance Inc. ..................................................................................................................... 100 27
Dona Francisca Energética S.A. ......................................................................................................... 52 (16,350)
* Subsidiaries:
Gerdau Ameristeel MRM Special Sections Inc. (100%), Gerdau USA Inc. (100%), Ameristeel Bright Bar Inc. (100%), Gerdau Ameristeel US Inc. (100%), Gerdau Ameristeel Perth Amboy Inc.
(100%), Gallatin Steel Company (50%) e Gerdau Ameristeel Sayreville Inc. (100%).
b) The more significant accounting practices used in preparing the consolidated financial statements are as follows:
I) Gerdau S.A. and its subsidiaries adopt consistent practices to record their operations and value their assets and liabilities. The financial
statements of foreign subsidiaries were translated using the exchange rate in effect at the balance sheet date and were adjusted to conform
with accounting practices adopted in Brazil;
II) Asset and liability, and income and expense, accounts arising from transactions between consolidated companies have been eliminated; and
III) Holdings of minority shareholders in subsidiaries are shown separately.
c) The following transactions occurred during the year:
I) On February 16, 2004, the subsidiary Gerdau Ameristeel Corporation signed a sale and purchase agreement for the acquisition of all
assets of Potter Form & Tie Co., headquartered in Belvidere, Illinois, in the United States of America. The acquisition price was US$ 11 million,
equivalent to R$ 31,995 on that date;

II) On April 16, 2004, Gerdau S.A., through its indirect subsidiary Gerdau Steel Inc., acquired 26,800,000 shares of Gerdau Ameristeel Corporation
through a capital increase of Cdn$ 131 million, equivalent to R$ 283,937 on that date. After this transaction, Gerdau S.A. held, indirectly, 72%
of Gerdau Ameristeel Corporation;
III) The Extraordinary General Meeting of shareholders held on June 30, 2004 approved the merger of the subsidiary GTL Brasil Ltda., without
the issue of new shares. The net assets transferred to Gerdau S.A. as a result of the merger, are as follows:
Assets
Current assets.......................................................................................................................................................................................................................... __________ 534
Long-term receivables............................................................................................................................................................................................................... __________ 8
Permanent assets
Investments
Seiva S.A. - Florestas e Indústrias........................................................................................................................................................................................... 17,883
Gerdau Açominas S.A............................................................................................................................................................................................................ 333,257
(-) Negative goodwill - Gerdau Açominas S.A.......................................................................................................................................................................... __________ (280,882)
Total permanent assets..................................................................................................................................................................................................... __________ 70,258
Total assets...................................................................................................................................................................................................................... __________
70,800
Liabilities
Current liabilities...................................................................................................................................................................................................................... __________ 1,495
Long-term liabilities.................................................................................................................................................................................................................. __________ 4,591
Total liabilities.................................................................................................................................................................................................................. __________
6,086
Total Net Assets............................................................................................................................................................................................................... __________
64,714
IV) On October 15, 2004, Gerdau S.A. announced to the market that the indirect subsidiary Gerdau Ameristeel Corporation obtained the
confirmation of its registration with the Canadian securities regulatory authorities for the public offer of 70 million common shares. Gerdau
S.A., through its subsidiary Gerdau Steel Inc., acquired 35,000,000 and 4,381,000 common shares on October 20, 2004 and November 18, 2004,
respectively, in the total amount of US$ 185 million, equivalent to R$ 528,787 on those dates. The transaction initially was a capital increase in
Gerdau Steel Inc., through the issue of 817,969 common shares. Subsequently, on December 28, 2004, Gerdau S.A. paid up capital in Gerdau
Internacional Empreendimentos Ltda. (the company that holds the investments abroad) through the transfer of 817,969 common shares of
Gerdau Steel Inc. in the amount of R$ 499,430. Following this transaction, Gerdau S.A. held, indirectly, 66.5% of Gerdau Ameristeel Corporation;
V) On October 28, 2004, Gerdau S.A., through its indirect subsidiary Gerdau Ameristeel Corporation, announced the signature of a sale and
purchase agreement for the acquisition of the assets of Gate City Steel Inc. and RJ Rebar Inc. (cutting and folding of rebar, with and without
epoxy covering), headquartered in Indianapolis, Indiana, in the United States of America. The acquisition price was US$ 16 million (R$ 42,470
at December 31, 2004);
VI) On October 29, 2004, the subsidiary Armafer Serviços de Construção Ltda. was merged by the subsidiary Gerdau Açominas S.A., and the
net assets of R$ 44,744 were recorded, replacing the investment account, without capital increase. The objectives of the transaction were to
reduce administrative expenses and improve operating synergy;
VII) On November 1, 2004, Gerdau S.A., through its indirect subsidiary Gerdau Ameristeel Corporation, purchased the fixed assets and working
capital of four mills producing long steel, three processing units of wire rods and one producer of steel grinding balls for the mining industry
owned by North Star Steel, announced on September 9, 2004. The price paid for these assets was US$ 266 million (R$ 706,070 at December
31, 2004), in cash. Gerdau Ameristeel Corporation also paid an additional US$ 52 million (R$ 138,029 at December 31, 2004) as an adjustment
in the purchase price due to fluctuations in working capital up to the transaction date;
VIII) On December 23, 2004, the Gerdau Group reached an agreement with the Mayaguez Group and The Latinamerican Enterprise Steel
Holding, majority shareholders of Diaco S.A., the largest Colombian producer of steel and rebar, and Siderúrgica del Pacífico S.A. - Sidelpa,
the only producer of special steel in that country, for the scheduled acquisition of their holdings in these companies. Initially, US$ 69 million
(R$ 182,158 at December 31, 2004) were invested, recorded as “deposit for future investment in subsidiaries” in long-term receivables. The
Mayagüez Group, which will remain as a Diaco shareholder for a maximum eight-year period, formed a strategic partnership with the Gerdau
Group for the development of the Colombian steel industry; and
IX) On December 3, 2004, the Board of Directors of Gerdau S.A. authorized the Company’s management to implement corporate restructuring
measures to obtain greater strategic advantages, as well as greater operating and management efficiency, arising from the specialization
and location of the different business units and areas of the Gerdau Group. The Company’s efforts will be concentrated in its main activities,
focused operations and gain of critical mass within each of the activity areas. Also, this restructuring will consider solutions for the Group’s
future growth. On December 29, 2004, the first act of this process was completed, with the capital increase of the holding company Gerdau
Participações S.A. through the shares held in Gerdau Açominas S.A. and part of the quotas held in Gerdau Internacional Empreendimentos
Ltda. by Gerdau S.A., representing, respectively, 91.5% and 22.8% of those companies’ capital. The capital of Gerdau Participações S.A. was
also increased by the direct and indirect investments held by Gerdau Internacional Empreendimentos Ltda. in Gerdau Chile Inversiones Ltda.,
Gerdau Laisa S.A. and Sipar Aceros S.A. The final corporate restructuring model has not yet been finished and will be implemented as the
management proposals are approved by the Board of Directors. Accordingly, additional measures should be implemented during this year and
they will be advised, as soon as they occur.

116 117
GERDAU S.A.
d) The financial statements of the jointly-owned subsidiary Dona Francisca Energética S.A., and the jointly-owned indirect subsidiaries
Gallatin Steel Company and Sipar Aceros S.A., have been consolidated proportionally based on the direct or indirect interest of the parent
company in the capital of these subsidiaries.
The amounts of the financial statements of these companies are shown as follows:
Dona Francisca Gallatin Sipar Aceros S.A.
Energética S.A. Steel Company Consolidated *
________________________________ ________________________________ ________________________________
2004 2003 2004 2003 2004 2003
Assets
Current assets............................................................. 116,627 111,782 586,106 290,036 144,251 85,185
Long-term receivables.................................................. 128,427 129,889 - - - 2,863
Permanent assets......................................................... ___________ 180,984 ___________ 191,728 ___________ 612,762 ___________ 736,223 ___________ 18,929 ___________ 19,109
Total assets................................................................. ___________
426,038 ___________
433,399 ___________
1,198,868 ___________
1,026,259 ___________
163,180 ___________
107,157
Liabilities
Current liabilities......................................................... 29,381 28,522 131,580 152,134 80,787 40,252
Long-term liabilities..................................................... 413,006 423,722 54,190 230,651 4,356 4,212
Shareholders’ equity..................................................... ___________ (16,349) ___________ (18,845) ___________ 1,013,098 ___________ 643,474 ___________ 78,037 ___________ 62,693
Total liabilities............................................................. ___________
426,038 ___________
433,399 ___________
1,198,868 ___________
1,026,259 ___________
163,180 ___________
107,157
Statement of operations
Gross sales revenues.................................................... 44,987 37,189 2,384,065 1,260,130 437,864 296,651
Sales deductions.......................................................... ___________ (2,207) ___________ (3,952) ___________ (11,215) ___________ (14,157) ___________ (87,259) ___________ (62,398)
Net sales revenues....................................................... 42,780 33,237 2,372,850 1,245,973 350,605 234,253
Cost of sales................................................................ ___________ (19,424) ___________ (19,520) ___________ (1,626,650) ___________ (1,194,150) ___________ (285,566) ___________ (188,139)
Gross profit................................................................. 23,356 13,717 746,200 51,823 65,039 46,114
Selling expenses.......................................................... - - (6,224) (5,336) (4,987) (2,259)
General and administrative expenses............................. (2,110) (2,251) (45,010) (33,376) (19,876) (12,762)
Other financial income (expenses)................................. (17,882) (20,743) (14,030) (22,620) (8,101) 2,681
Other operating income (expenses)................................ ___________- ___________- ___________- ___________- ___________ (76) ___________ (3,346)
Operating profit (loss).................................................. 3,364 (9,277) 680,936 (9,509) 31,999 30,428
Non-operating income (expenses), net........................... 380 3,790 10,225 (1,367) 759 (2,889)
Provision for income tax and social contribution............. ___________ (1,249) ___________ 1,871 ___________ (797) ___________- ___________ (10,188) ___________ (7,425)
Net income (loss) for the year....................................... ___________
2,495 ___________
(3,616) ___________
690,364 ___________
(10,876) ___________
22,570 ___________
20,114
* includes the subsidiary Siderco S.A.
e) The Company and its direct and indirect subsidiaries have goodwill and negative goodwill balances, which are being amortized as the
assets that generated them are realized or based on the realization of the projected future income, limited to ten years, as follows:
Amortization
period Company Consolidated
Goodwill included in the investment accounts
Balance at December 31, 2003...................................................................................................... 21,951 432,077
(+) Goodwill recorded in the period............................................................................................... 280,882 307,397
( - ) Reversal of goodwill based on the adjustment in purchase price (Margusa - Maranhão Gusa S.A.).. - (5,258)
( - ) Write-off of goodwill as a result of the merger of the subsidiary GTL Brasil Ltda. ........................ (280,882) (280,882)
( - ) Foreign exchange adjustment.................................................................................................. - (36,361)
( - ) Amortization during the year................................................................................................... up to 10 years ______________ (2,439) __________________ (364,119)
Balance at December 31, 2004 (based on expectation of future profitability)..................................... 19,512 52,854
Analysis of the goodwill by subsidiary:
Margusa - Maranhão Gusa S.A. ............................................................................................... - 24,728
Dona Francisca Energética S.A. ................................................................................................ 19,512 19,512
Armacero Industrial y Comercial Ltda. ...................................................................................... - 457
Distribuidora Matco S.A. ......................................................................................................... - 6,066
Salomon Sack S.A. .................................................................................................................. ______________- __________________ 2,091
19,512 52,854

Amortization
period Company Consolidated
Negative goodwill included in the investment accounts
Balance at December 31, 2003...................................................................................................... (270,949) -
( - ) Amortization during the year.................................................................................................. up to 10 years 28,877 -
( - ) Write-off of negative goodwill as a result of the capitalization of the subsidiary
Gerdau Participações S.A. ..................................................................................................... ______________ 242,072 __________________-
Balance at December 31, 2004...................................................................................................... - -
Goodwill included in the fixed asset accounts
Balance at December 31, 2003...................................................................................................... - 239,740
( - ) Foreign exchange adjustment.................................................................................................. - (14,860)
( - ) Amortization during the year................................................................................................... up to 10 years ______________- __________________ (79,921)
Balance at December 31, 2004 (based on undervaluation of assets)................................................. - 144,959
The goodwill mainly resulted from the assets of the subsidiary Gerdau Ameristeel US Inc.
Negative goodwill included in the fixed asset accounts
Balance at December 31, 2003...................................................................................................... - (272,130)
( - ) Amortization during the year................................................................................................... up to 10 years ______________- __________________ 28,853
Balance at December 31, 2004 (based on overvaluation of assets)................................................... - (243,277)
The negative goodwill mainly resulted from the assets of the subsidiary Gerdau Açominas S.A.
The goodwill recorded in the investment accounts, calculated on the subsidiary Gerdau Ameristeel US Inc., were reviewed in respect of their
amortization period and projected profitability. The remaining balance was amortized in accordance with accounting practices adopted in
Brazil, and based on the current scenario and performance of the subsidiary Gerdau Ameristeel Corporation.
The equity accounting loss in the consolidated statement of income refers, basically, to the effect of the devaluation of the U.S. dollar on the
foreign investments, to goodwill amortization for the year and to the tax incentive reserves arising from the reduction of income tax on the
exploitation profit of the subsidiaries Gerdau Açominas S.A. and Margusa - Maranhão Gusa S.A., both located in the Northeastern region of
Brazil, as well as to benefits arising from state tax financing.
5 - Cash and Cash Equivalents
Company
Consolidated
2004 2003 2004 2003
Cash and Banks................................................................................................. 1,347 10 333,720 121,615
Financial investment fund................................................................................... 12,373 174,842 571,745 326,551
Fixed income securities....................................................................................... 1,989 2,832 1,098,814 369,377
Equities............................................................................................................. - - 37,688 199,463
___________ ___________ ___________ ___________
15,709 177,684 2,041,967 1,017,006
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Of the existing balance, R$ 1,004,550 - consolidated (R$ 518,315 - consolidated in 2003) refers to investments in U.S. dollars.
6 - Trade Accounts Receivable
Consolidated
2004 2003
Customers in Brazil.......................................................................................................................................................... 812,420 533,631
Brazilian export receivables .............................................................................................................................................. 543,954 235,442
Receivables from customers of overseas companies............................................................................................................. 1,232,095 835,212
Provision for credit risks................................................................................................................................................... ____________ (91,661) ____________ (78,109)
____________
2,496,808
____________
1,526,176

118 119
GERDAU S.A.
7 - Inventories
Consolidated
2004 2003
Finished products............................................................................................................................................................ 1,728,652 868,147
Work in progress............................................................................................................................................................. 679,167 323,373
Raw materials................................................................................................................................................................. 1,112,467 586,311
Storeroom materials......................................................................................................................................................... 649,892 517,010
Advances to suppliers...................................................................................................................................................... ____________ 66,464 ____________ 41,757
____________
4,236,642
____________
2,336,598
The inventories are covered against fire and overflow. Coverage is determined based on the amounts and the risks involved.
8 - Tax Credits
Company
Consolidated
2004 2003 2004 2003
Value-Added Tax on Sales and Services (ICMS)..................................................... - - 99,803 90,804
Social Contribution on Revenues (COFINS) to offset.............................................. - - 56,302 -
Social Integration Program (PIS) to offset............................................................. 24,621 1,786 36,730 4,759
Excise Tax (IPI)................................................................................................... - - 3,310 6,358
Income tax and social contribution on net income................................................ 7,386 58 35,023 13,485
Tax on Added Value (IVA).................................................................................... - - 1,861 487
Other ................................................................................................................ 31 - 7,433 4,922
___________ ___________ ___________ ___________
32,038 1,844 240,462 120,815
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
9 - Income Tax and Social Contribution on Net Income
a) Analysis of the income tax and social contribution expense:
Company
____________________________________________________________________________
2004 2003
_____________________________________ ____________________________________
IR CS Total IR CS Total
Profit before income tax and social contribution,
after statutory profit sharing............................................... 2,811,272 2,811,272 2,811,272 1,271,914 1,271,914 1,271,914
Statutory rates of tax.............................................................. 25% 9% 34% 25% 9% 34%
Income tax and social contribution expense at statutory rates.... (702,818) (253,014) (955,832) (317,979) (114,472) (432,451)
Tax effects on:
- equity in earnings (losses).................................................... 709,122 255,284 964,406 125,766 45,276 171,042
- interest on capital................................................................ 15,669 5,641 21,310 87,694 31,569 119,263
- permanent differences (net).................................................. ___________ (7,340) ___________ (2,477) ___________ (9,817) ___________ 4,790 ___________ 2,658 ___________ 7,448
Income tax and social contribution expense.............................
___________ 14,633
___________ 5,434
___________ 20,067
___________ (99,729)
___________ (34,969)
___________
(134,698)
Current................................................................................. 4 - 4 (74,640) (18,489) (93,129)
Deferred................................................................................ 14,629 5,434 20,063 (25,089) (16,480) (41,569)
IR - Corporate income tax.
CS - Social contribution on net income.

Consolidated
____________________________________________________________________________
2004 2003
_____________________________________ ____________________________________
IR CS Total IR CS Total
Profit before income tax and social contribution,
after statutory profit sharing............................................... 4,388,374 4,388,374 4,388,374 1,113,561 1,113,561 1,113,561
Statutory rates of tax.............................................................. 25% 9% 34% 25% 9% 34%
Income tax and social contribution expense at statutory rates.... (1,097,094) (394,954) (1,492,048) (278,390) (100,220) (378,610)
Tax effects on:
- tax rate difference for foreign companies............................... (96,019) 91,649 (4,370) 38,906 (14,169) 24,737
- equity in earnings (losses).................................................... (85,779) (30,880) (116,659) (74,839) (26,942) (101,781)
- interest on own capital......................................................... 90,100 32,436 122,536 87,887 31,639 119,526
- foreign exchange effect........................................................ 29,731 2,676 32,407 72,863 26,231 99,094
- recovery of deferred tax assets.............................................. 270,770 48,109 318,879 305,724 117,027 422,751
- permanent differences (net).................................................. ___________ (40,554) ___________ 26,322 ___________ (14,232) ___________ (32,015) ___________ (12,778) ___________ (44,793)
Income tax and social contribution expense.............................
___________ (928,845)
___________ (224,642)
___________ (1,153,487)
___________ 120,136
___________ 20,788
___________
140,924
Current................................................................................. (785,225) (165,976) (951,201) (235,130) (73,551) (308,681)
Deferred................................................................................ (143,620) (58,666) (202,286) 355,266 94,339 449,605
IR - Corporate income tax.
CS - Social contribution on net income.
b) Analysis of the deferred income tax and social contribution assets and liabilities, at the statutory rates of tax:
Assets
_________________________________________________________________________________________________________________________
Company
Consolidated
___________________________________________________________ ____________________________________________________________
2004 2003 2004 2003
____________________________ _____________________________ _____________________________ _____________________________
IR CS Total IR CS Total IR CS Total IR CS Total
Income tax losses.................... 8,655 - 8,655 119 - 119 420,986 - 420,986 457,597 - 457,597
Social contribution losses........ - 3,758 3,758 - 517 517 - 60,651 60,651 - 89,175 89,175
Provision for contingencies...... 12,918 4,651 17,569 12,916 4,650 17,566 48,673 17,403 66,076 40,732 14,536 55,268
Benefits to employees............. - - - - - - 101,474 - 101,474 95,839 - 95,839
Commissions/other.................. - - - - - - 156,148 2,272 158,420 80,071 1,453 81,524
Amortized goodwill................. 1,220 439 1,659 610 220 830 2,314 833 3,147 610 220 830
Provision for losses................. ________ 9,664 ________ 991 ________ 10,655 ________ 9,663 ________ 991 ________ 10,654 ________ 87,595 ________ 29,046 ________ 116,641 ________ 94,462 ________ 31,519 ________ 125,981
________ 32,457 ________ 9,839 ________ 42,296 ________ 23,308 ________ 6,378 ________ 29,686 ________ 817,190 ________ 110,205 ________ 927,395 ________ 769,311 ________ 136,903 ________
906,214
Current.................................. - - - - - - 270,959 58,505 329,464 90,818 26,050 116,868
Long-term.............................. 32,457 9,839 42,296 23,308 6,378 29,686 546,231 51,700 597,931 678,493 110,853 789,346
Liabilities
_________________________________________________________________________________________________________________________
Company
Consolidated
___________________________________________________________ ____________________________________________________________
2004 2003 2004 2003
____________________________ _____________________________ _____________________________ _____________________________
IR CS Total IR CS Total IR CS Total IR CS Total
Accelerated depreciation......... - - - - - - 576,176 823 576,999 426,751 854 427,605
Amortized negative goodwill.... 40,198 14,471 54,669 42,301 15,229 57,530 50,341 14,628 64,969 55,821 16,601 72,422
Inflationary/exchange effect..... ________- ________- ________- ________- ________- ________- ________ 115,934 ________ 33,971 ________ 149,905 ________ 19,790 ________- ________ 19,790
________ 40,198 ________ 14,471 ________ 54,669 ________ 42,301 ________ 15,229 ________ 57,530 ________ 742,451 ________ 49,422 ________ 791,873 ________ 502,362 ________ 17,455 ________
519,817
Current.................................. - - - - - - 146,195 33,971 180,166 35,721 - 35,721
Long-term.............................. 40,198 14,471 54,669 42,301 15,229 57,530 596,256 15,451 611,707 466,641 17,455 484,096

120 121
GERDAU S.A.
The tax benefits recognized on income tax and social contribution losses, as well as on the provision for losses, both in the Company
and consolidated, are supported by projections of future taxable income adjusted to present values, based on technical feasibility studies,
approved by management. These studies, which consider the history of the Company’s and its subsidiaries’ profitability and the maintenance
of the current profitability in the future, permitted the recognition of an additional benefit for the year of R$ 318,879 (R$ 422,751 - 2003) in
subsidiaries, whose estimated recovery is shown in item “c” below. Other credits, based on temporary differences, mainly tax contingencies,
were maintained according to their estimate of realization.
c) Estimated recovery of deferred income tax and social contribution assets:
Company
Consolidated
2004 2003 2004 2003
Up to 2004........................................................................................................ - - - 116,868
2005 ............................................................................................................... - 1,843 329,464 129,587
2006 ................................................................................................................ - 3,201 65,829 124,612
2007 ................................................................................................................ 1,839 6,723 65,120 126,239
2008 ................................................................................................................ 2,298 9,371 71,933 137,865
2009 ................................................................................................................ 18,948 2,495 121,649 91,669
2010 to 2012.................................................................................................... 14,794 6,053 173,548 145,083
2013 to 2014.................................................................................................... 4,417 - 99,852 34,291
___________ ___________ ___________ ___________
42,296 29,686 927,395 906,214
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
10 - Compulsory Deposits and Other
Company
Consolidated
2004 2003 2004 2003
Compulsory deposits.......................................................................................... 15,550 15,558 28,052 16,566
Receivables under contract................................................................................. - - 47,496 40,328
ICMS credits on purchases of fixed assets............................................................ - - 74,978 55,612
Income tax incentives......................................................................................... 9,945 9,945 10,122 10,155
Prepaid expenses............................................................................................... - - - 3,036
Assets not for use.............................................................................................. - - 45,779 52,614
Prepaid financial expenses.................................................................................. - - 36,143 46,409
___________ ___________ ___________ ___________
25,495 25,503 242,570 224,720
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________

11 - Investments
Company
________________________________________________________________________________________________________________________________________________________________________________________________________________________________
2004 2003
_________________________________________________________________________________________________________________________________________________________________________________________________________________ ___________
Subsidiaries Other Total Total
______________________________________________________________________________________________________________________________________________________________________________________ _________ ___________ ___________
Gerdau Itaguaí
Gerdau Internacional Com. Imp. Dona Seiva S.A. -
Participa- Gerdau Empreend. e Export Francisca Florestas e GTL
ções S.A. 1 Açominas S.A. Ltda. 2 Ltda. Energética S.A. Indústrias Brasil Ltda. 3 Other
_______________ ______________________________ _______________ _________ ______ ____________________________ _______________ ______________________________ _______________
Negative Provision
Investment Investment Goodwill Investment Investment for loss Goodwill Investment Investment Goodwill Investment
_______________ _______________ ____________ _______________ _________ ______ ____________ _____________ _______________ _______________ ____________ _______________
Opening balance.......... 639 2,512,502 (270,949) 1,820,606 98,777 (9,765) 21,951 74,478 - - 30 43 4,248,312 4,410,913
Merger/
capitalization....... 4,879,338 (4,146,662) 242,072 (684,769) 97,132 - - (80,316) (64,714) (280,882) - - (38,801) (805,785)
Acquisition............... 116 - - 528,787 - - - - 26,261 - - - 555,164 513,100
Goodwill on
aquisition of
investment........... - - - - - - - - - 280,882 - - 280,882 -
Sale......................... - - - (15,426) - - - (17,882) - - - - (33,308) (99,199)
Equity in earnings
(losses) 4 ............ 154,920 2,203,954 28,877 358,467 22,783 1,293 (2,439) 23,720 44,913 - (2) - 2,836,486 503,064
Dividends/
interest on
own capital....... _______________ (147,287) _______________ (569,794) ____________ - _______________ - _________ (24,728) ______ ____________ - _____________ - _______________ - _______________ (6,460) ____________ - _______________ (2) _________ - ___________ (748,271) ___________ (273,781)
Closing balance............ _______________
4,887,726 _______________
- ____________
- _______________
2,007,665 _________
193,964 ______ ____________
(8,472) _____________
19,512 _______________
- _______________
- ____________
- _______________
26 _________
43 ___________
7,100,464 ___________
4,248,312
Capital ....................... 15,227,079 - - 2,663,343 145,110 - 66,600 - - -
Adjusted shareholder’s
equity...................... 4,887,726 - - 2,785,282 193,964 - (16,350) - - -
Net income
for the year.............. 154,974 2,483,483 - 404,571 21,719 - 2,495 48,517 55,522 55,522
Holding in capital (%).. 100.00% - - 72.08% 100.00% - 51.82% - - -
Common shares/
quotas held.............. 9,249,199,209 - - 1,919,769,142 145,109,651 - 345,109,212 - - -
1 On December 29, 2004, the Company increased the capital in Gerdau Participações S.A. (previously Siderúrgica Riograndense S.A.) paid through the merger of its total shareholding in the subsidiary Gerdau Açominas S.A. (91.5%) and the
equivalent of a 22.8% holding in the subsidiary Gerdau Internacional Empreendimentos Ltda., relating to the indirect holding of this company in Gerdau Chile Inversiones Ltda., Gerdau Laisa S.A. and Sipar Aceros S.A. These investments were
valued at the economic values of their net assets by an expert company based on projections of cash flows, discounted to present values, in the total amount of R$ 15,226,656. The difference between the book value of these investments
and the amount appraised represents an unrealized capital gain of R$ 10,347,318, recorded as a reduction of the corresponding capitalization. The realization of the capital gain will be made in accordance with the realization of the goodwill
recorded by the subsidiary Gerdau Participações S.A.
2 Company holder of the investments in foreign subsidiaries.
3 Company merged on June 30, 2004.
4 Includes amortization of goodwill/negative goodwill.

122 123
GERDAU S.A.
Consolidated
________________________________________________________________________
2004 2003
_____________________________________________________ ______________
Investment Goodwill Total Total
Gerdau Ameristeel US Inc. ........................................................................ - - - 281,870
Gerdau Ameristeel Corporation.................................................................. - - - 80,470
Margusa - Maranhão Gusa S.A................................................................... - 24,728 24,728 43,564
Dona Francisca Energética S.A.................................................................... - 19,512 19,512 21,951
Armacero Industrial y Comercial Ltda.......................................................... 9,871 457 10,328 10,321
Distribuidora Matco S.A. 1 ......................................................................... 12,400 6,066 18,466 -
Salomon Sack S.A. 1 .................................................................................. 17,873 2,091 19,964 -
Corporate joint ventures............................................................................ 10,036 - 10,036 9,984
Other investments..................................................................................... 8,983 - 8,983 13,252
____________________ ____________ ___________ ______________
59,163 52,854 112,017 461,412
____________________ ____________ ___________ ______________
____________________ ____________ ___________ ______________
1
Companies purchased by the indirect subsidiary Industria del Aceros S.A. - Indac.
12 - Fixed Assets
Consolidated
___________________________________________________________________________________________________________
2004 2003
_________________________________________________________ ______________
Annual
Accumulated
depreciation
depreciation
rate - % Cost and depletion Net Net
Land, buildings and structures.................................................... 0 to 10 3,310,732 (1,079,881) 2,230,851 2,301,431
Machinery, equipment and installations...................................... 5 to 10 7,965,817 (3,639,334) 4,326,483 4,085,090
Furniture and fixtures................................................................ 5 to 10 110,424 (69,644) 40,780 37,979
Vehicles................................................................................... 20 to 33 41,678 (31,112) 10,566 12,369
Eletronics data equipment/rights/licenses.................................... 20 to 33 284,837 (188,113) 96,724 93,764
Construction in progress............................................................ - 1,065,583 - 1,065,583 718,810
Forestation/reforestation........................................................... Felling plan 207,431 (51,055) 156,376 129,282
____________ _________________ ____________ ______________
12,986,502 (5,059,139) 7,927,363 7,378,725
____________ _________________ ____________ ______________
____________ _________________ ____________ ______________
a) Insured amounts - the assets are insured against fire, electrical damage and explosion. The coverage is determined based on the risks
involved. The plants of the North American subsidiaries and the Ouro Branco plant of the subsidiary Gerdau Açominas S.A. have coverage for
loss of profits.
b) Capitalization of interest and financial charges - R$ 2,021 was capitalized during the year - consolidated (R$ 1,174 - Company and R$ (14,711)
consolidated in 2003).
c) Guarantees offered - fixed assets were pledged as collateral for loans and financing in the amount of R$ 688,034 - consolidated (R$ 539,724
consolidated in 2003).
d) Summary of changes in fixed assets:
Consolidated
2004 2003
Balance at the beginning of the year ................................................................................................................................. 7,378,725 7,597,318
( + ) Purchases/sales for the year...................................................................................................................................... 1,167,372 812,583
( - ) Depreciation and depletion in cost of sales.................................................................................................................. (692,610) (538,286)
( - ) Depreciation and depletion in administrative expenses.................................................................................................. (69,440) (61,648)
( + ) Companies consolidated in the year........................................................................................................................... - 288,898
( - ) Revaluation reversal.................................................................................................................................................. - (365,347)
( + ) Purchase of North Star and others.............................................................................................................................. 267,948 -
( - ) Foreign exchange effect on foreign fixed assets............................................................................................................ __________ (124,632) __________ (354,793)
Balance at the end of the year..........................................................................................................................................
__________
7,927,363
__________
7,378,725

13 - Deferred Charges
Consolidated deferred charges comprise pre-operating expenses in the construction of a power plant, as well as reforestation, research,
development and restructuring projects.
14 - Financing
Financing are represented as follows:
Annual _______________________________
Consolidated
charges 2004 2003
CURRENT
Working capital financing (R$) ........................................................................................................... 8.00% to 14.00% 1,174 48,465
Fixed asset financing (R$)................................................................................................................... 12.00% - 3,054
Investment financing (R$) .................................................................................................................. CDI 4,500 4,500
Investment financing (US$) ................................................................................................................ US$ 133,955 45,649
Working capital financing (US$).......................................................................................................... 1.36% to 10.50% 1,085,418 1,341,746
Fixed asset financing and others (US$) ............................................................................................... US$ - 8,692
Working capital financing (Clp$)......................................................................................................... 0.23% to 0.32% 31,905 30,025
Working capital financing (PA$).......................................................................................................... 4.25% to 10.00% 19,956 -
Current portion of long-term financing................................................................................................ ______________ 691,489 ______________ 932,245
1,968,397 2,414,376
LONG-TERM
Working capital financing (R$)............................................................................................................ 10.02% 28,215 3,812
Fixed asset financing and others (R$).................................................................................................. 4.00% to 9.90% 657,720 627,727
Investment financing (R$)................................................................................................................... IGPM + 8.5% 29,045 35,019
Fixed asset financing and others (US$)................................................................................................ 1.74% to 9.97% 762,338 761,288
Working capital financing (US$).......................................................................................................... 2.95% to 10.75% 2,473,200 2,643,325
Investment financing (US$)................................................................................................................. 4.04% 182,943 -
Working capital financing (Cdn$)........................................................................................................ 2.00% to 3.25% - 164,974
Fixed asset financing (Cdn$)............................................................................................................... 2.00% to 3.25% 3,485 3,837
Working capital financing (Clp$)......................................................................................................... 0.29% to 0.43% 16,254 29,952
Fixed asset financing (Clp$)................................................................................................................ 0.26% to 0.43% 27,000 58,396
Fixed asset financing (PA$)................................................................................................................. 4.25% to 10.00% 1,663 -
(-) Current portion............................................................................................................................. ______________ (691,489) ______________ (932,245)
______________ 3,490,374 ______________ 3,396,085
Total financing................................................................................................................................... ______________
5,458,771 ______________
5,810,461
CDI - Certificate of Interbank Deposit interest rate.
IGPM - General Market Price Index.
Summarized by currency:
Consolidated
__________________________________
2004 2003
Brazilian real (R$)............................................................................................................................................................. 720,654 722,577
U.S. dollar (US$)............................................................................................................................................................... 4,637,854 4,800,700
Canadian Dollar (Cdn$)..................................................................................................................................................... 3,485 168,811
Argentine Peso (PA$)......................................................................................................................................................... 21,619 -
Chilean Peso (Clp$)........................................................................................................................................................... ____________ 75,159 ____________ 118,373
____________
5,458,771 ____________
5,810,461
The schedule for payment of the long-term portion of financing is as follows:
Consolidated
In 2006........................................................................................................................................................................................................ 527,860
In 2007........................................................................................................................................................................................................ 563,896
In 2008........................................................................................................................................................................................................ 565,035
In 2009........................................................................................................................................................................................................ 323,109
In 2010........................................................................................................................................................................................................ 210,048
After 2010.................................................................................................................................................................................................... ______________ 1,300,426
______________
3,490,374

124 125
GERDAU S.A.
a) Events during the year
On June 3, 2004, the Company concluded the placement of the second tranche, of US$ 128 million (equivalent to R$ 339,763 at December
31, 2004) of a US$ 400 million Export Notes Receivable program (equivalent to R$ 1,061,760 at December 31, 2004). This joint program with
Gerdau Açominas S.A. has an interest rate of 7.321% p.a., maturity in April 2012, a grace period of two years and quarterly amortization as
from July 2006.
b) Guarantees
The loans contracted under the FINAME/BNDES program are guaranteed by the financed assets, in the amount of R$ 180,109. The other loans
are guaranteed by sureties from the controlling shareholders, on which the subsidiary pays a fee of 1% p.a. on the amount guaranteed.
c) Covenants
In replacement of the tangible guarantees usually required, the loans are being contracted with certain financial covenants, as follows:
I) Consolidated interest coverage ratio - measures the debt service payment capacity in relation to EBITDA (Earnings before Interest, Taxes,
Depreciation and Amortization);
II) Consolidated leverage ratio - measures the debt coverage capacity in relation to EBITDA;
III) Required Minimum Net Worth - measures the minimum net worth required in financial agreements; and
IV) Current Ratio (current liquidity ratio) - measures the capacity to comply with short-term obligations.
All the covenants mentioned above are calculated on a consolidated basis, except for item IV which refers to the parent company Metalúrgica
Gerdau S.A., and have been observed. The penalty for non-compliance is the prepayment of the contracts.
d) Credit lines
The North American subsidiaries have a credit line in the amount of US$ 350 million, equivalent to R$ 929,040 at the balance sheet date,
falling due in June 2008, which can be drawn in U.S. dollars (at the LIBOR rate plus interest between 2.25% and 2.75% p.a. or US Prime/FED
Funds plus interest of 0.5% p.a.) or in Canadian dollars (at the Bankers Acceptance (BA) rate plus interest between 2.35% and 2.85% p.a. or
Canadian Prime plus interest of 1.00% p.a.). The distribution of this credit line among the companies is made in proportion to the working
capital of each North American subsidiary.
The subsidiary Gerdau Aza S.A. has a credit line for working capital amounting to Clp$ 28 billion, equivalent to R$ 133,582 at the balance sheet
date, bearing interest of 3.90% p.a., and a credit line for fixed assets in the amount of Clp$ 6 billion, equivalent to R$ 28,625 at the balance
sheet date, bearing interest of 4.50% p.a.
15- Debentures
General Number Annual
_________________________________
Issue meeting Issued In portfolio Maturity rate 2004 2003
3 rd - A and B.................................. 05.27.1982 144,000 52,946 06.01.2011 CDI 156,387 73,508
7 th ................................................. 07.14.1982 68,400 6,500 07.01.2012 CDI 121,068 21,628
8 th ................................................. 11.11.1982 179,964 65,811 05.02.2013 CDI 145,878 83,566
9 th ................................................. 06.10.1983 125,640 38,234 09.01.2014 CDI 170,954 29,927
11 th - A and B................................ 06.29.1990 150,000 97,044 06.01.2020 CDI 98,189 19,249
13 th ............................................... 11.23.2001 30,000 30,000 11.01.2008 CDI less 2% __________- __________-
Company 692,476 227,878
Gerdau Ameristeel Corp.................. 04.23.1997 125,000 - 04.30.2007 6.50% 232,618 226,021
Debentures held by
consolidated subsidiaries............. __________ (7,022) __________ (1,833)
Consolidated.............................. __________
918,072 __________
452,066
Current portion.............................. 2,986 3,027
Long-term portion.......................... 915,086 449,039
The Extraordinary General Meeting of shareholders held on April 29, 2004 approved the cancellation of the 4 th issue (42,000 debentures) and
10 th issue debentures (6,450 debentures), which were held in treasury.
The same EGM approved the split of the following debenture issues: 3 rd (classes A and B), 7 th , 8 th , 9 th and 11 th issues (classes A and B). On July
1, 2004, three new debentures were issued for each existing debenture, thus changing their nominal value.
The Extraordinary General Meeting of the subsidiary Seiva S.A. - Florestas e Indústrias held on April 30, 2004 approved the cancellation of the
1 st issue debentures, series A and B (12,000 debentures), which were held in treasury.
The Board of Directors’ Meeting held on October 14, 2004 approved the fixed remuneration of the 13 th issue debentures at the CDI interest
rate less 2% p.a., during the period from November 1, 2004 to October 31, 2005.
The debentures of Gerdau Ameristeel Corporation are convertible into common shares of that subsidiary, up to their maturity date.
The controlling shareholders hold, directly or indirectly, R$ 523,546 at December 31, 2004 (2003 - R$ 88,284) of the outstanding debentures.

16 - Financial Instruments
a) General comments - Gerdau S.A. and its subsidiaries enter into transactions involving financial instruments, the risks of which are managed
through financial positions and exposure limit controls. All instruments are fully recorded in the books of account and mainly relate to the
instruments listed below:
- financial investments - are recorded at their market value as of the balance sheet date and are explained and presented in Note 5;
- investments - are explained and presented in Note 11;
- related parties - are explained and presented in Note 21;
- financing - are explained and presented in Note 14;
- debentures - are explained and presented in Note 15; and
- financial derivatives - in order to minimize the effects of fluctuations in foreign exchange rates on their liabilities, the subsidiaries Gerdau
Açominas S.A. and Dona Francisca Energética S.A. entered into swap contracts that were converted into Brazilian reais on the contract date
and linked to changes in the CDI rate and the General Market Price Index (IGP-M), plus additional interest. The subsidiary Gerdau Ameristeel
Corporation also entered into swap contracts, linked to the London Interbank Offered Rate (LIBOR) plus interest of between 6.05% and 6.45% p.a.
The swap contracts are listed below:
Consolidated
Contract date Purpose Amount (US$ thousand) Rate Maturity
07/16/2001 to 05/07/2002 Prepayment 32,823 85.55% to 100.00% of the CDI 01/13/2005 to 03/01/2006
02/20/2002 Resolution 2770 54,000 106.00% of the CDI 06/20/2005
02/19/2003 Resolution 4131 3,300 85.70% of the CDI 02/04/2005
04/17/2003 Fixed assets 6,316 IGPM + 12.95% 05/16/2005 to 11/16/2010
04/17/2003 Fixed assets 13,095 97.00% to 100.90% of the CDI 05/16/2005 to 11/16/2013
10/30 to 11/03/2003 Bank notes 200,000 LIBOR + interest between 6.09% to 6.13% 07/15/2011
06/26/2003 Investment 55,000 4.86% to 5.40% 09/02/2005 to 10/02/2006
b) Market value - the market values of the financial instruments are as follows:
Company
_____________________________________________________________________
2004
__________________________________
2003
_________________________________
Book Market Book Market
Value Value Value Value
Financial investments........................................................................................ 14,362 14,362 177,674 177,674
Debentures....................................................................................................... 692,476 692,476 227,878 227,878
Investments...................................................................................................... 7,100,464 7,100,464 4,248,312 4,248,312
Related parties (liabilities)................................................................................. 164,549 164,549 20,961 20,961
Stock options (liabilities) - note 25..................................................................... - 8,096 - 5,088
Treasury shares - note 23................................................................................... 44,139 74,727 17,103 21,045
Consolidated
_____________________________________________________________________
2004
__________________________________
2003
_________________________________
Book Market Book Market
Value Value Value Value
Financial investments ....................................................................................... 1,708,247 1,708,247 895,391 895,391
Swap contracts - investments (liabilities) ............................................................ 4,500 4,500 12,303 12,303
Eurobonds ....................................................................................................... - - 83,235 72,581
Securitization financing..................................................................................... 627,908 627,908 303,282 303,282
Import financing............................................................................................... 619,883 619,883 377,534 383,941
Prepayment financing........................................................................................ 808,983 804,724 807,385 818,786
Financing - Resolution 2770.............................................................................. 263,060 256,585 365,573 390,235
ACC (Advances on Export Contracts) financing.................................................... 43,891 43,891 500,118 524,935
Financing - Resolution 4131.............................................................................. 20,893 20,755 24,243 24,468
Bank notes financing......................................................................................... 1,050,835 1,260,376 1,144,601 1,292,733
Fixed asset financing ........................................................................................ 45,837 45,686 93,172 96,069
Other financing ................................................................................................ 1,977,481 1,977,481 2,111,318 2,130,564
Debentures....................................................................................................... 918,072 918,072 452,066 452,066
Investments...................................................................................................... 112,017 112,017 461,412 461,412
Related parties (assets)..................................................................................... 1,448 1,448 26,979 26,979
Stock options (liabilities) - note 25..................................................................... - 13,663 - 8,298

126 127
GERDAU S.A.
The market values of the swap contracts of subsidiaries in Brazil were obtained based on future income projections for each contract,
calculated based on the present value of the forward U.S. dollar + coupon rates (assets) and CDI/IGPM future rates (liabilities) and adjusted
to present value on the balance sheet date, using the projected future CDI/IGPM rate for each maturity. The same methodology is applied for
the calculation of the market values of the swap contracts of the subsidiary Gerdau Ameristeel Corporation, using the LIBOR rate.
Swap contracts related to financing contracts are classified together with the related financing, as a contra entry to the “Financial expenses/
income, net” account, and are stated at cost plus accrued charges up to the balance sheet date. Contracts not linked to such financing have
been recorded at their market value under the heading “Other accounts payable”, in long-term liabilities.
The Company believes that the balances of the other financial instruments, which are recognized in the books at net contracted values,
are substantially similar to those that would be obtained if they were negotiated in the market. However, because the markets for these
instruments are not active, differences could exist if they were settled in advance.
c) Risk factors that could affect the Company’s and its subsidiaries’ business
Price risk: this risk is related to the possibility of price variations of the products that the subsidiaries sell or in the raw material prices and
other inputs used in the production process. Since the subsidiaries operate in a commodity market, their sales revenues and cost of sales may
be affected by the changes in the international prices of their products or materials. In order to minimize this risk, the subsidiaries constantly
monitor the price variations in the local and international markets.
Interest rate risk: this risk arises as a result of the possibility of losses (or gains) due to fluctuations in interest rates relating to assets
(investments) and liabilities. In order to minimize possible impacts resulting from interest rate fluctuations, the Company and its subsidiaries
have adopted a policy of diversification, alternating between fixed rates and variable rates (such as LIBOR and the CDI) and periodically
renegotiate contracts to adjust them to market.
Exchange rate risk: this risk is related to the possibility of fluctuations in foreign exchange rates affecting financial expenses (or income)
and the liability (or asset) balance of contracts denominated in a foreign currency. In addition to the foreign investments which are a natural
hedge, the Company and its subsidiaries use “hedge” instruments, usually swaps contracts, as described in item “a” above, to manage the
effects of these fluctuations.
Credit risk: this risk arises from the possibility of the subsidiaries not receiving amounts arising from sales or investments at financial
institutions. In order to minimize this risk, the subsidiaries adopt the procedure of analyzing in detail the financial and equity position of
their customers, establishing a credit limit and constantly monitoring their balances. In relation to financial investments, the Company and
its subsidiaries invest solely in institutions with low credit risk, as assessed by rating agencies. In addition, each institution has a maximum
limit for investment, determined by the Credit Committee.
17 - Financial Expenses/Income, Net
Company
Consolidated
2004 2003 2004 2003
Financial income
Financial investments......................................................................................... 18,674 25,392 141,394 139,860
Interest received................................................................................................ 301 26,072 29,928 30,318
Monetary variations - assets............................................................................... 62 1,486 3,325 4,438
Foreign exchange variations - assets.................................................................... 1 (18) (34,671) (79,356)
Foreign exchange swaps - assets ........................................................................ - (62,884) 3,915 (62,884)
Other financial income....................................................................................... 23,288 13,162 65,955 19,653
____________ ____________ ____________ ____________
Total financial income.................................................................................... 42,326 3,210 209,846 52,029
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Financial expenses
Interest on debt................................................................................................. (53,662) (291,462) (411,365) (587,143)
Monetary variations - liabilities........................................................................... (743) (23,741) (17,836) (24,018)
Foreign exchange variations - liabilities................................................................ 10,336 393,600 197,607 716,672
Foreign exchange swaps - liabilities..................................................................... - (452,210) (44,127) (741,389)
Other financial expenses..................................................................................... (5,260) (22,999) (110,231) (62,721)
____________ ____________ ____________ ____________
Total financial expenses................................................................................. (49,329) (396,812) (385,952) (698,599)
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________

18 - Taxes and Social Contributions Payable
Company
Consolidated
2004 2003 2004 2003
Income tax and social contribution on net income................................................ - 9,776 200,862 37,222
Social charges on payroll.................................................................................... 253 196 48,822 48,131
Value-added tax on sales and services (ICMS)...................................................... - - 32,131 12,865
Social contribution on revenues (COFINS)............................................................ 19 110 32,609 14,057
Excise tax (IPI)................................................................................................... - - 14,114 2,966
Social Integration Program (PIS).......................................................................... 1 - 6,683 3,607
Income tax and social contribution withheld at source.......................................... 76 18,058 7,349 23,016
Taxes payable in installments.............................................................................. 6,459 12,883 11,819 15,427
Other ................................................................................................................ - 1,432 31,849 14,485
____________ ____________ ____________ ____________
6,808 42,455 386,238 171,776
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
19 - Tax Recovery Program (Refis) and Special Installment Payment Program (PAES)
a) REFIS
On December 6, 2000, the Company enrolled in the REFIS program to pay the Social Integration Program (PIS) and the Social Contribution
on Revenues (COFINS) contributions in installments. The balances of these tax liabilities are recorded in Taxes and contributions payable,
in current liabilities, and in Other accounts payable, in long-term liabilities. The balances of the renegotiated taxes, which were originally
divided into 60 installments of which 5 installments are not yet due, are restated by the Long-Term Interest Rate (TJLP) rate, and are as follows
at the year end:
Company and Consolidated
_____________________________________________________________________________________________________
2004 2003
________________________________________ _________________________________________
Principal Interest Total Principal Interest Total
PIS....................................................................... 2,608 2,551 5,159 9,895 6,494 16,389
COFINS................................................................ ______________ 620 ____________ 605 ____________ 1,225 ______________ 2,351 ____________ 1,540 ____________ 3,891
Total....................................................................
______________ 3,228
____________ 3,156
____________ 6,384
______________ 12,246
____________ 8,034
____________
20,280
Current................................................................ 3,228 3,156 6,384 8,644 5,671 14,315
Long-term............................................................ - - - 3,602 2,363 5,965
Taxes, contributions and other liabilities are paid by the Company on their due dates, which is a basic requirement to remain eligible for the
REFIS program.
As guarantee for this installment payment program, the Company pledged the land and buildings of the Piratini plant, located in the
municipality of Charqueadas, in the state of Rio Grande do Sul, amounting to R$ 78,494.
The total income tax and social contribution credits from third parties offset against fines and interest on the consolidation of the REFIS
debts on December 6, 2000 totaled R$ 57,040 and were purchased for R$ 4,351. The Company’s own tax credits were not used.
The constitutionality of the use of credits of R$ 40,118 of the total purchased is being challenged in court. This is because the Federal Revenue
authorities understand that tax credits must first be used to offset the assignor’s own debts, only transferring the excess to the assignee.
This understanding, based solely on a REFIS Management Committee Resolution, edited subsequently to the Company’s enrollment in the
program, does not comply with the legal order. In fact, the law which established the Program authorized, with no conditions, the purchase
of third party tax credits for offset against own liabilities.
b) PAES
The proportionally consolidated (52%) subsidiary Dona Francisca Energética S.A. enrolled in the PAES, established by Law 10684/03, at the
Federal Revenue Secretariat, to settle Corporate Income Tax (IRPJ), Social Contribution on Net Income (CSLL), Social Integration Program (PIS)
and Social Contribution on Revenues (COFINS) liabilities. The balances of these tax liabilities are recorded in Taxes and contributions payable,
in current liabilities, and in Other accounts payable, in long-term liabilities. The balances of the renegotiated taxes, which were divided into
180 installments of which 161 are not yet due, are restated by the TJLP and are as follows at the year end:

128 129
GERDAU S.A.
Consolidated
_______________________________________________________________________________________
2004 2003
_________________________________________ ________________________________________
Principal Interest Total Principal Interest Total
IRPJ..................................................................... 20,303 3,160 23,463 21,816 1,255 23,071
CSLL.................................................................... 7,360 1,145 8,505 7,908 455 8,363
PIS....................................................................... 720 112 832 774 45 819
COFINS................................................................ 3,326 518 3,844 3,574 206 3,780
______________ ____________ ____________ ______________ ____________ ____________
Total.................................................................... 31,709 4,935 36,644 34,072 1,961 36,033
______________ ____________ ____________ ______________ ____________ ____________
______________ ____________ ____________ ______________ ____________ ____________
Current................................................................ 2,364 368 2,732 2,363 136 2,499
Long-term............................................................ 29,345 4,567 33,912 31,709 1,825 33,534
Dona Francisca Energética S.A. pays its taxes, contributions and other liabilities on their due dates, which is a basic requirement to remain
eligible for the PAES program.
20 - Provision for Contingencies
The Company and its subsidiaries are parties in labor, civil, and tax processes. Based on the opinion of its legal advisors, management believes
that the provision for contingencies is sufficient to cover probable and reasonably estimable losses from unfavorable court decisions, and the
final decisions will not have significant effects on the financial position of the Company at December 31, 2004.
The balances of the contingencies are as follows:
I) Contingent liabilities provided
Company
Consolidated
____________________________________ ____________________________________
2004 2003 2004 2003
a) Tax contingencies
Eletrobrás................................................................................ (a.1) 50,456 50,456 50,456 50,456
Finsocial.................................................................................. (a.2) 6,891 6,891 6,898 6,948
ICMS....................................................................................... (a.3) 1,099 1,099 17,300 14,346
Social contribution on net income............................................. (a.4) 7,216 8,978 7,333 40,756
Corporate income tax............................................................... (a.5) 19,993 20,247 19,993 101,134
INSS........................................................................................ (a.6) 12,963 12,954 24,900 17,372
PIS.......................................................................................... (a.7) 1,831 1,831 1,903 2,357
Cofins..................................................................................... (a.7) 6,387 6,387 6,935 6,935
Emergency Capacity Charge...................................................... (a.8) 9,368 9,306 25,563 10,074
Extraordinary Tariff Recomposition............................................. (a.8) 5,283 5,283 13,037 5,847
FGTS and other tax contingencies.............................................. (a.9) 305 299 1,503 2,330
( - ) Judicial deposits................................................................ (a.10) ______________ (34,818) ______________ (36,703) ______________ (73,938) ______________ (155,138)
86,974 87,028 101,883 103,417
b) Labor contingencies............................................................. (b.1) 16,257 16,257 49,573 29,609
( - ) Judicial deposits................................................................ (b.2) ______________ (8,349) ______________ (8,285) ______________ (10,313) ______________ (10,244)
7,908 7,972 39,260 19,365
c) Civil contingencies................................................................ (c.1) - - 100,364 99,493
( - ) Judicial deposits................................................................ (c.2) ______________- ______________- ______________ (1,207) ______________ (1,063)
______________- ______________- ______________ 99,157 ______________ 98,430
Total liabilities provided ..........................................................
______________ 94,882
______________ 95,000
______________ 240,300
______________
221,212
INSS (National Institute of Social Security).
FGTS (Government Severance Indemnity Fund for Employees).
a) Tax contingencies
a.1) Of the total provision, R$ 50,456 (Company and consolidated) refers to the contingency of compulsory loans to Eletrobrás, the
constitutionality of which is being questioned by the Company. In March 1995, the Federal Supreme Court judged the proceedings against the
taxpayers. Certain of the Company’s proceedings are pending decision, but the outcomes are already foreseeable, in view of the prior decisions.
The Company established a provision related to “compulsory loans”, taking into consideration that, although the payment to Eletrobrás was
made as a loan: (i) the reimbursement to the Company would probably be in the form of shares of Eletrobrás; (ii) the conversion will be made
based on the net asset book value of the shares; and (iii) based on the current available information, the shares of Eletrobrás are valued at
substantially less than the net asset book value.

a.2) R$ 6,891 (Company) and R$ 6,898 (consolidated) relating to the unconstitutionality of the Social Investment Fund (FINSOCIAL). Although
the Supreme Court has confirmed the constitutionality of the tax at the rate of 0.5%, some of the Company’s claims are still pending
judgment, most of them in the Superior Courts.
a.3) R$ 1,099 (Company) and R$ 17,300 (consolidated) relating to amounts for Value-Added Tax on Sales and Services (ICMS), the majority of
which relates to credit rights involving the Finance Secretariat and the State Courts of the First Instance in the state of Minas Gerais.
a.4) R$ 7,216 (Company) and R$ 7,333 (consolidated) relating to social contribution on net income. The amounts refer to challenges of the
constitutionality of the contribution in 1989, 1990 and 1992. Some proceedings are pending decision, most of them in the Superior Courts.
a.5) R$ 19,993 (Company and consolidated), relating to Corporate Income Tax, challenged at the administrative sphere. Considering the many
legal decisions unfavorable to the unconstitutionality of the limitation of the offset of income tax and social contribution losses to 30% of
net income, the subsidiary Gerdau Açominas S.A. decided to no longer deposit in court the amounts related to the matter and requested at
September 30, 2004, in the court injunction records in which it is the petitioner, the conversion of the amounts deposited in court (R$ 338,992) into
tax payments, and started observing the legal limitation.
The legal challenge has been maintained; however, in the event the STF reviews its current guidance and the subsidiary is successful, it will
plead the offset of the amounts overpaid.
a.6) R$ 12,963 (Company) and R$ 24,900 (consolidated) on contributions due to the INSS which correspond to suits for annulment by the
Company with judicial deposits of practically the whole amount involved, in progress in the Federal Court of the First Instance in the state
of Rio de Janeiro.
In the consolidated statements, the remaining amount refers to lawsuits questioning the position of the INSS in terms of charging INSS
contributions on profit sharing payments made by the subsidiary Gerdau Açominas S.A., as well as on payments for services rendered by third
parties, in which the Institute calculated charges for the last ten years and assessed the company because it understands that the company
is jointly liable. The assessments were maintained at the administrative level, and Gerdau Açominas S.A. filled annulment actions with the
judicial deposit of the corresponding amount, based on the understanding that the right to assess part of the charge had prescribed and
that there is no such liability.
a.7) R$ 1,831 (Company) and R$ 1,903 (consolidated), relating to contributions for the Social Integration Program (PIS), and R$ 6,387 (Company)
and R$ 6,935 (consolidated) to the Social Contribution on Revenues (COFINS), in connection with lawsuits questioning the constitutionality
of Law 9718, which changed the calculation basis of these contributions. These suits are in progress in the Federal Regional Court of the 2 nd
Region and the Federal Supreme Court.
a.8) R$ 9,368 (Company) and R$ 25,563 (consolidated) relating to the Emergency Capacity Charge (ECE), as well as R$ 5,283 (Company) and
R$ 13,037 (consolidated) relating to the Extraordinary Tariff Recomposition (RTE), included in the electric energy bills of the companies’ plants.
According to the Company, these charges are of a tax nature and, as such, are incompatible with the National Tax System provided in the Federal
Constitution. For this reason, the constitutionality of this charge is being challenged in court. The lawsuits are in progress in the Federal Justice
of the First Instance of the states of Pernambuco, Ceará, Minas Gerais, Rio de Janeiro, São Paulo, Paraná, and Rio Grande do Sul, as well as in the
Federal Regional Courts of the 1 st and 2 nd Regions. The companies have fully deposited in court the amount of the disputed charges.
a.9) R$ 305 (Company) and R$ 1,503 (consolidated) relating to a lawsuit brought by the subsidiary Gerdau Açominas S.A. regarding the Government
Severance Indemnity Fund for Employees (FGTS) increased charges, which arose from the changes introduced by Complementary Law 110/01.
Currently, the corresponding court injunction is awaiting the judgment of the extraordinary appeal filed by the company. The amount
provided is fully deposited in court.
a.10) The judicial deposits, representing restricted assets of the companies, relate to amounts deposited and maintained in court until the
resolution of the related legal matters. The balances of these credits, which at December 31, 2004 amounted to R$ 34,818 (Company) and
R$ 73,938 (consolidated), are classified as a reduction of the provision for tax contingencies recorded in the books.
b) Labor contingencies
b.1) The Company and its subsidiaries are also defending labor claims, for which there is a provision of R$ 16,257 and R$ 49,573 (consolidated)
at December 31, 2004. None of these claims refer to individually significant amounts, and the lawsuits mainly involve claims for overtime pay,
health hazards and risk premium, among others.
b.2) The balances of the deposits in court, which totaled R$ 8,349 at December 31, 2004 (Company) and R$ 10,313 (consolidated), are classified
as a reduction of the provision for labor contingencies.
c) Civil contingencies
c.1) The Company and its subsidiaries are also defending in court civil claims arising in the normal course of its own and the subsidiaries’
operations, including claims arising from work accidents, in a total amount at December 31, 2004 of R$ 100,364 (consolidated) as contingent
liability for these claims.
The provision refers mainly to the issue involving the jointly-owned (52%) subsidiary Dona Francisca Energética S.A. According to a resolution
of the Brazilian Electricity Regulatory Agency (ANEEL), the operations of the subsidiary are restricted to the South of Brazil submarket. Since

130 131
GERDAU S.A.
some of its transactions were carried out in the remaining submarkets, Dona Francisca Energética S.A. may have to acquire the energy it
sells from third parties. The subsidiary challenges in court the validity of the ANEEL resolution and has obtained a favorable preliminary
injunction.
c.2) At December 31, 2004, the balances of deposits in court totaled R$ 1,207 (consolidated) and are classified as a reduction of the provision
for contingencies.
II) Contingent liabilities not provided
a) Tax contingencies
a.1) The Company is defendant in assessments filed by the state of Minas Gerais demanding ICMS tax payments arising mainly from the sales
of products to commercial exporters. The restated amount of the lawsuits totals R$ 32,848. The Company has not recorded any provision for
contingency in relation to these claims since it considers this tax is not payable, because products for export are exempted from ICMS.
a.2) The Company and its subsidiary Gerdau Açominas S.A. are defendants in assessments filed by the state of Minas Gerais, which demand
ICMS tax payments on the export of semi-finished manufactured products. The total amount demanded is R$ 249,742. The companies have
not recorded any provision for contingency in relation to these claims since they consider this tax is not payable because the products cannot
be considered semi-finished manufactured products as defined by the federal complementary law and, therefore, are not subject to ICMS.
a.3) Also, R$ 68,431 are being demanded due to the understanding of the Federal Revenue Secretariat that the transactions carried out by
the subsidiary Gerdau Açominas S.A., under the drawback concession granted by DECEX, were not in conformity with the legislation. Gerdau
Açominas filed a preliminary administrative defense of the legality of the arrangement, which is pending judgment. Since the tax liability
has not been definitely established, and considering that the arrangement which originated the demand conforms with the assumptions
required for the drawback concession, and also that the concession was granted after analysis by the legal administrative authority, Gerdau
Açominas S.A. considers an unfavorable outcome to be remote and, for this reason, has not recorded any provision for the contingency.
b) Civil contingencies
b.1) Two civil construction syndicates in the state of São Paulo alleged that Gerdau S.A. and other long steel producers in Brazil divide
customers among them, violating the antitrust legislation. After investigations carried out by the National Secretariat of Economic Law (SDE)
and based on public hearings, the SDE is of the opinion that a cartel exists. This conclusion was also supported by an earlier opinion by the
Secretariat for Economic Monitoring (SEAE). The process has now been forwarded to the Administrative Council for Economic Defense (CADE)
for final decision.
Gerdau S.A. denies having engaged in any type of anti-competitive behavior and believes, based on information available, including the
opinion of its legal advisors, that the administrative process until now includes many irregularities, some of which are impossible to resolve.
For example, the investigations carried out by SDE did not follow the due legal course and the representatives of the SDE influenced certain
witnesses who testified in the process. In addition, the SDE report was issued before Gerdau S.A. had the chance to reply to the closing
arguments, which indicates that there was a bias in the judgment made by the SDE. The same applies to the SEAE report, which does not
analyze the economic issues and is based exclusively on the witnesses’ testimony.
These irregularities, which also reflect non-compliance with the related constitutional provisions, will no doubt affect the administrative
decision by CADE, based on the conclusions presented by the antitrust authorities until now. Gerdau S.A. has pointed out and tried to combat
all these irregularities and will continue doing so in relation to the allegations and the irregularities in the administrative process, believing
in a favorable outcome to this process, if not in the administrative sphere, possibly in the judicial sphere.
Because of the above, no provision has been recorded for this case. According to Brazilian legislation, fines of up to 30% of gross revenues
in the prior fiscal years may be applied to the Company and, if personal responsibility of an executive is proven, such executive may be
penalized by 10% to 50% of the fine applied to the Company. There are no precedents for fines exceeding 4%. In a similar case involving flat
steel companies, the fine was 1%.
b.2) A civil lawsuit has been filed against Gerdau Açominas S.A. regarding the termination of a contract for the supply of slag and indemnities
for losses and damages. At December 31, 2004, the lawsuit amounts to approximately R$ 37,014.
Gerdau Açominas S.A. contested all bases for the lawsuit and filed a counterclaim for termination of the contract and indemnity for breach
of contract.
The judge declared the contract to be terminated, since this demand was common to both parties. With regards to the remaining discussion,
the judge understood that both parties were at fault and judged the requests for indemnity unfounded. This decision was maintained
by the Court of Civil Appeals of the State of Minas Gerais (TAMG), and the court decision is based on expert evidence and interpretation
of the contract. The process was in the High Court of Justice (STJ) and was returned to the TAMG for judgement of the appeal requesting
clarification of the decision.
Gerdau Açominas S.A. believes that any loss from the case is remote, since it understands that a change in the judgment is unlikely.
b.3) A civil lawsuit has been filed by Sul America Cia. Nacional de Seguros against Gerdau Açominas S.A. and Banco Westdeustsche Landesbank
Girozentrale, New York Branch (WestLB), for the payment of R$ 34,383 to settle an indemnity claim, which has been deposited in court. The

insurance company pleads doubt in relation to whom payment should be made and alleges that the subsidiary is resisting in receiving and
settling it. The lawsuit was contested both by the Bank (which claims having no right over the amount deposited, which resolves the doubt
raised by Sul América) and by the subsidiary (which claims that there is no such doubt and that there is justification to refuse payment since
the amount owed by Sul América is higher than the amount involved). Subsequently, Sul América claimed fault in the Bank’s representation,
and this matter is therefore already settled, which resulted withdrawal in December 2004 of the amount deposited. The process should enter
the expert evidence phase, mainly for calculation of the amount due. Based on the opinion of its legal advisors, the subsidiary expects loss to
be remote and that the sentence will declare the amount payable within the amount stated in the pleading.
Also, Gerdau Açominas S.A. filed, prior to this lawsuit, a lawsuit for the payment of the amount recognized by the insurance companies. The
lawsuits are pending. The subsidiary expects a favorable outcome in this lawsuit.
The civil lawsuits arise from an accident on March 23, 2002 with the blast furnace regenerators of the Ouro Branco steel mill, which resulted
in the stoppage of several activities, with material damages to the steel mill equipment and loss of profits. The equipment, as well as the loss
of profits arising from the accident, were covered by an insurance policy. The report on the event, as well as the loss claim, was filed with
IRB - Brasil Resseguros S.A., and an advance payment of R$ 62,000 was received in 2002.
In 2002, a preliminary and conservative estimate of indemnities related to the coverage of loss of profits and material damages, in the total
amount of approximately R$ 110,000, was recorded, based on the amount of fixed costs incurred during the period of partial stoppage of
the steel mill activities and the immediate expenses to be incurred to recover the equipment temporarily. This estimate approximates the
advance amount received plus the amount proposed by the insurance company as a complement to settle the indemnity. Subsequently, new
amounts were added to the discussion, as stated in the subsidiary’s plea, although not yet recorded.
Based on the opinion of its legal advisors, the Company considers that losses from other contingencies that may affect the results of
operations or the Company’s consolidated financial position are remote.
III) Contingent gains not recorded
a) Tax contingencies
a.1) The Company believes that the realization of certain contingent gains is probable. Among them is a court-order debt security issued in
1999 in favor of the Company by the state of Rio de Janeiro in the amount of R$ 26,580, arising from an ordinary lawsuit against the noncompliance
with the Loan Agreement for Periodic Execution in Cash under the Special Industrial Development Program (PRODI).
Due to the default by the state of Rio de Janeiro and the non-regulation of Constitutional Amendment 30/00, which granted the government
a ten-year moratorium for payment of securities issued to cover court-order debts not related to food, the realization of this credit is not
expected in 2004 and, also, there is no expectation of realization in 2005 and following years. For this reason, this gain is not recognized in
the financial statements.
a.2) Gerdau S.A. and its subsidiaries have filed several ordinary proceedings relating to the correct basis of calculation of PIS under
Complementary Law 07/70, due to the declarations of unconstitutionality of Decree Laws 2445/88 and 2449/88. The companies expect to
recover the taxes incorrectly paid. The amounts under discussion total R$ 84,245.
a.3) Also, the Company and its subsidiaries Gerdau Açominas S.A. and Margusa - Maranhão Gusa S.A. expect to recover IPI premium credits.
Gerdau S.A. and the subsidiary Margusa Maranhão Gusa S.A. have filed administrative appeals for recovery, which are pending judgment.
With regards to the subsidiary Gerdau Açominas S.A., the proceedings were directed to the courts, with an unfavorable judgment. Currently,
the process awaits judgment of the appeal filed by the subsidiary. The Company estimates the credits at R$ 394,002 but no accounting
recognition has been made thereof because of uncertainty as to their realization.
21 - Related Companies
a) Analysis of loan balances
Company
Consolidated
___________________________________ ___________________________________
2004 2003 2004 2003
Fundação Gerdau.............................................................................................. - (32) 1,304 16,762
Sipar Aceros S.A. and other................................................................................ - 1,677 (122) 13,607
Metalúrgica Gerdau S.A. ................................................................................... (115) - 266 (3,390)
Gerdau Açominas S.A. ...................................................................................... (51,245) (22,606) - -
GTL Financial Corp. .......................................................................................... ____________ (113,189) ____________- ____________- ____________-
Total....................................................................................................... ____________ (164,549) ____________ (20,961) ____________ 1,448 ____________ 26,979
Financial income (expenses)............................................................................... 5,890 62,497 20,448 70,071

132 133
GERDAU S.A.
b) Commercial transactions
Company - 2004 Company - 2003
________________________________ ______________________________________________________________
Income Accounts Income Accounts
(expenses) receivable Sales Purchases (expenses) receivable
Armafer Serviços de Construção Ltda........................ - - 207 - - -
Aço Minas Gerais S.A. - Açominas ............................ - - 5,112 193,020 - -
Açominas Overseas Ltd. (*)...................................... - - 272,616 - - -
Gerdau Laisa S.A. .................................................. - - 585 - - -
Gerdau Aza S.A. .................................................... - - 6,027 - - -
Sipar Aceros S.A. ................................................... - - 58,617 - - -
Banco Gerdau S.A. ................................................. 287 1,962 - - 399 2,113
Grupo Gerdau Empreendimentos Ltda. (**) ............... (600) - - - (600) -
Indac - Ind. Adm. e Comércio S.A. (***).................... (3,345) - - - (7,098) -
(*) Transaction carried out due to securitization operations.
(**) Payments for the use of Gerdau trademark.
(***) Payments of guarantees of loans.
c) Guarantees granted - The Company is the guarantor of loan agreements of the jointly-owned subsidiary Dona Francisca Energética S.A.,
in the total amount of R$ 97,275, corresponding to 51.82% of the joint guarantee. The Company is the guarantor of the Euro Commercial
Paper program of the subsidiary GTL Trade Finance Inc., of US$ 110 million, equivalent to R$ 291,984 at the balance sheet date. The Company
is also the guarantor of financing agreements of the subsidiary GTL Financial Corp., of US$ 5,000, equivalent to R$ 13,272, and securitization
operations of the subsidiary Gerdau Açominas Overseas Ltda., of US$ 233 million, equivalent to R$ 618,475 on the balance sheet date. The
subsidiary Gerdau Açominas S.A. is the guarantor of the vendor financing loan agreement of the associated company Banco Gerdau S.A., in
the amount of R$ 68,138.
22 - Post-Employment Benefits
Considering all types of benefits to employees granted by the Company, the asset and liability positions at December 31 are as follows:
Company
Consolidated
___________________________________ ___________________________________
2004 2003 2004 2003
Pension plan actuarial liability - defined benefit .................................................. - - 154,199 162,719
Actuarial liability with post-employment health benefit........................................ - - 130,283 105,964
Retirement and discharge benefits payable......................................................... - - 9,996 10,187
______________ ______________ ______________ ______________
Total liabilities.................................................................................................. - - 294,478 278,870
______________ ______________ ______________ ______________
______________ ______________ ______________ ______________
Unrecognized actuarial assets............................................................................ 352 150 162,928 122,683
______________ ______________ ______________ ______________
a) Pension plan - defined benefit
The Company and other Group subsidiaries in Brazil are the co-sponsors of defined benefit pension plans that cover substantially all
employees in Brazil (“Açominas Plan” and “Gerdau Plan”).
The Açominas Plan is managed by Fundação Açominas de Seguridade Social - Aços, a closed supplementary pension entity to complement the
social security benefits of employees and retired employees of the Ouro Branco unit of Gerdau Açominas S.A. The assets of the Açominas Plan
mainly comprise investments in bank deposit certificates, federal public securities, marketable securities and properties.
The Gerdau Plan is managed by Gerdau - Sociedade de Previdência Privada, a closed supplementay pension entity to complement the
social security benefits of employees and retired employees of the Company of the other units of Gerdau Açominas S.A. and of other
subsidiaries in Brazil. The assets of the Gerdau Plan comprise investments in bank deposit certificates, federal public securities and
marketable securities.
Also, the Canadian and American subsidiaries sponsor defined benefit plans (Canadian Plan and American Plan) that cover substantially all
of their employees.
The Canadian and American plans are managed by CIBC Mellon and Wells Fargo, respectively, to complement the social security benefits of
employees of Gerdau Ameristeel Corporation and its subsidiaries. The assets of the Plans mainly comprise marketable securities.
The sponsors’ contributions to these pension plans were R$ 40 in 2004 and R$ 1,508 in 2003 for the Company and R$ 68,258 in 2004 and
R$ 63,708 in 2003 consolidated.

The current expenses of the defined pension plan are as follows:
Company
Consolidated
___________________________________ ___________________________________
2004 2003 2004 2003
Cost of current service....................................................................................... 111 5,612 49,798 41,068
Interest cost..................................................................................................... 345 14,402 124,782 109,114
Expected return of plan assets........................................................................... (569) (15,297) (161,554) (120,556)
Amortization of unrecognized liability................................................................. - - 462 467
Amortization of past service costs ..................................................................... - - 778 1,332
Amortization of (gain) loss................................................................................. (49) - 2,589 2,764
Employees’ expected contribution...................................................................... ______________- ______________- ______________ (4,383) ______________ (3,576)
Pension plan cost (benefit), net..........................................................................
______________ (162)
______________ 4,717
______________ 12,472
______________
30,613
The reconciliation of the assets and liabilities of the plans is presented below:
Company
Consolidated
___________________________________ ___________________________________
2004 2003 2004 2003
Total liabilities ................................................................................................. (50,196) (44,164) (1,779,443) (1,613,516)
Fair value of plan assets ................................................................................... ______________ 108,988 ______________ 64,759 ______________ 1,844,817 ______________ 1,645,528
Net assets ....................................................................................................... 58,792 20,595 65,374 32,012
Unrecognized (gains) losses............................................................................... (58,491) (20,445) (87,897) (85,274)
Past service costs ............................................................................................. 51 - 26,323 7,722
Other .............................................................................................................. ______________- ______________- ______________ 4,929 ______________ 5,504
Total assets (liabilities), net ..............................................................................
______________ 352
______________ 150
______________ 8,729
______________
(40,036)
Actuarial asset ................................................................................................. 352 150 162,928 122,683
Pension plan liability recorded in balance sheet................................................... ______________- ______________- ______________ (154,199) ______________ (162,719)
Assets (liabilities), net ......................................................................................
______________ 352
______________ 150
______________ 8,729
______________
(40,036)
Changes in plan assets and actuarial liabilities were as follows:
Company
Consolidated
___________________________________ ___________________________________
2004 2003 2004 2003
Changes in benefit liabilities
Benefit liabilities at the beginning of the year .................................................... 44,164 141,739 1,613,516 1,543,659
Cost of service.................................................................................................. 111 5,612 49,798 41,068
Interest cost .................................................................................................... 345 14,402 124,782 109,114
Actuarial loss (gain).......................................................................................... 8,485 (11,789) 86,910 77,637
Payment of benefits .......................................................................................... (2,960) (2,779) (69,419) (58,486)
Past service costs due to changes in the plan ..................................................... 51 - 10,497 -
Effect of merger/operational integration.............................................................. - (103,021) - -
Foreign exchange effect on foreign companies ................................................... - - (45,000) (99,476)
Initial liability recognition adjustment ................................................................ ______________- ______________- ______________ 8,359 ______________-
Benefit liabilities at the end of the year .............................................................
______________ 50,196
______________ 44,164
______________ 1,779,443
______________
1,613,516

134 135
GERDAU S.A.
Company
Consolidated
___________________________________ ___________________________________
2004 2003 2004 2003
Changes in plan assets
Fair value of plan assets at the beginning of the year................................... 64,759 149,865 1,645,528 1,381,584
Return on plan assets................................................................................ 47,149 67,229 227,308 311,599
Sponsor contributions............................................................................... 40 1,508 68,258 63,708
Participant contributions........................................................................... - - 5,202 4,232
Payment of benefits ................................................................................. (2,960) (2,779) (69,419) (58,486)
Operational integration............................................................................. - (151,064) - -
Foreign exchange effect on foreign companies............................................. - - (32,060) (57,109)
______________ ______________ ______________ ______________
Fair value of plan assets at the end of the year............................................ 108,988 64,759 1,844,817 1,645,528
______________ ______________ ______________ ______________
______________ ______________ ______________ ______________
As a result of the operational integration on November 28, 2003, the assets and liabilities of the Gerdau Plan, relating to the employees
transferred to Gerdau Açominas S.A., were allocated to the Açominas Plan, and the Supplementary Social Security Secretariat approved the
addition of Gerdau Açominas S.A. as a sponsor of the Retirement and Supplementary Retirement Plans managed by Gerdau - Sociedade de
Previdência Privada.
The method for calculating the actuarial liability is the Projected Unit Credit Method, as determined by CVM Deliberation 371/2000.
The amount of the actuarial gains and losses to be recognized as income or expense is the unrecognized amount that exceeds, in each period,
the higher of the following limits: (i) 10% of the present value of the total actuarial liability of the defined benefit plan and (ii) 10% of the
fair value of the plan assets. The resulting amount will be amortized annually based on the average remaining years of service estimated for
the employees that participate in the plan.
The table below shows a summary of the assumptions made to calculate and record the defined benefit plan for both the Company and
consolidated:
North American
Gerdau plan Açominas plan plan
Average discount rate...................................... 11.30% 11.30% 5.75% - 6.00%
Increase in compensation................................. 9.20% 8.675% 2.50% - 4.25%
Expected rate of return on assets ...................... 12.35% 12.35% 7.25% - 8.40%
Mortality chart................................................ GAM 83 (-1 year) AT-83 GAM 83
Disabled mortality chart................................... RRB 1944 AT-83 RRB 1977
Turnover rate................................................... Based on service Null Based on age and service
and salary level
(plan experience)
b) Pension plan - defined contribution
The Company and its subsidiaries in Brazil are also the co-sponsors of a defined contribution pension plan administered by Gerdau - Sociedade
de Previdência Privada. Contributions are based on a percentage of the compensation of employees.
The foreign subsidiary Gerdau AmeriSteel US Inc. has a defined contribution plan, the contributions to which are equivalent to 50% of the
amount paid by the participants, limited to 4% of salary. The other companies do not have this type of pension plan.
The total cost of this plan was R$ 149 in 2004 and R$ 2,145 in 2003 for the Company and R$ 11,892 in 2004 and R$ 9,713 in 2003 consolidated.
c) Other post-employment benefits
The Company estimates that the amount payable to executives on their retirement or discharge totals R$ 9,996 (consolidated) at December
31, 2004 (R$ 10,187 in 2003 - consolidated).
The American Plan includes, in addition to pension benefits, specific health benefits for employees who retire after a certain age and with
a certain number of years of service. The American subsidiary has the right to change or eliminate these benefits, and the contributions are
based on amounts actuarially calculated.

The composition of the net periodic cost for the post-employment health benefits is as follows:
Consolidated
_____________________________________
2004 2003
Cost of service.................................................................................................................................................................. 3,007 2,542
Interest cost..................................................................................................................................................................... 5,715 6,492
Amortization of past service costs...................................................................................................................................... (563) -
Amortization of (gain) loss................................................................................................................................................. _______________ 80 _______________-
Expense for post retirement health benefits, net.................................................................................................................. _______________
8,239 _______________
9,034
The status of the fund for post-employment health benefits is as follows:
Consolidated
_____________________________________
2004 2003
Plan assets at market value................................................................................................................................................ - -
Projected benefit liabilities................................................................................................................................................. _______________ (130,559) _______________ (111,390)
Fund status...................................................................................................................................................................... (130,559) (111,390)
Unrecognized gains and losses, net ................................................................................................................................... 8,101 5,426
Past service costs.............................................................................................................................................................. _______________ (7,825) _______________-
Post-retirement health benefit liabilities recorded in the balance sheet.................................................................................. _______________
(130,283) _______________
(105,964)
The changes in plan assets and actuarial liabilities were as follows:
Consolidated
_____________________________________
2004 2003
Changes in projected benefit liabilities
Projected benefit liabilities at the beginning of the year....................................................................................................... 111,390 112,991
Purchase of North Star...................................................................................................................................................... 23,136 -
Cost of service.................................................................................................................................................................. 3,007 2,542
Interest cost..................................................................................................................................................................... 5,715 6,492
Participant contributions.................................................................................................................................................... 1,946 1,870
Actuarial loss.................................................................................................................................................................... 4,759 3,432
Administrative benefits and expenses paid.......................................................................................................................... (6,639) (6,528)
Foreign exchange effect..................................................................................................................................................... (4,364) (9,409)
Initial liability recognition adjustment ................................................................................................................................ _______________ (8,391) _______________-
Project benefit liabilities at the end of the year.................................................................................................................... _______________
130,559 _______________
111,390
Consolidated
_____________________________________
2004 2003
Changes in plan assets
Plan assets at the beginning of the year ............................................................................................................................. - -
Sponsor contribution ........................................................................................................................................................ 4,693 4,658
Participant contributions.................................................................................................................................................... 1,946 1,870
Administrative benefits and expenses paid.......................................................................................................................... _______________ (6,639) _______________ (6,528)
Plan assets at the end of the year....................................................................................................................................... _______________
- _______________
-

136 137
GERDAU S.A.
The assumptions adopted in the accounting for post-employment health benefits were as follows:
North American plan
Average discount rate........................................................................................................................................................ 5.75% - 6.00%
Health treatment - rate for the next year............................................................................................................................. 9.50% - 13.00%
Health treatment - rate for cost decrease to be reached from 2010 to 2013.......................................................................... 4.50% to 5.50%
23 - Shareholders’ Equity
a) Capital - authorized capital at December 31, 2004 comprises 240,000,000 common shares (240,000,000,000 at December 31, 2003) and
480,000,000 preferred shares (480,000,000,000 at December 31, 2003), with no par value.
The Extraordinary General Meeting (AGE) of shareholders held on April 29, 2004 approved the capital increase of R$ 1,735,656 through the
capitalization of the reserve for investments and working capital, with a bonus of 100% on the shares on that date, representing 148,354,011
new shares (51,468,224 common and 96,885,787 preferred).
At December 31, 2004, 102,936,448 common shares (51,468,224 at December 31, 2003) and 193,771,574 preferred shares (96,885,787 at December
31, 2003) are subscribed and paid-up, totaling R$ 3,471,312 (R$ 1,735,656 at December 31, 2003). Preferred shares do not have voting rights and
cannot be redeemed, but have the same rights as common shares in terms of profit sharing.
b) Treasury stock - at December 31, 2004, the Company had 1,573,200 preferred shares (345,000 preferred shares in 2003) held in treasury for
subsequent sale in the market or cancellation, totaling R$ 44,139 (R$ 17,103 in 2003).
c) Interest on own capital and dividends - the Company calculated interest on own capital in accordance with the terms established by
Law 9249/95. The corresponding amount was recorded as financial expenses for tax purposes. For presentation purposes, this amount was
recorded as dividends, not affecting net income. The related tax benefit through the reduction of the income tax and social contribution on
net income charge for the year was R$ 114,395 (R$ 119,424 in 2003). Shareholders are entitled to receive, each year, a minimum mandatory
dividend of 30% of adjusted net income.
The amount of interest on own capital and dividends credited for the year was R$ 858,843, shown as follows:
2004 2003
Net income for the year..................................................................................................................................................... 2,831,339 1,137,216
Transfer to legal reserve.................................................................................................................................................... _______________ (141,567) _______________ (56,860)
Adjustment net income...................................................................................................................................................... 2,689,772 1,080,356
Distributions during the year
Period Nature R$/share Credit Payment 2004 2003
1 st quarter ........................................................ Interest 0.64 03/30/2004 05/18/2004 94,443 74,177
2 nd quarter ........................................................ Interest 0.36 06/30/2004 08/17/2004 106,249 50,440
Dividens 0.29 06/30/2004 08/17/2004 85,589 -
3 rd quarter......................................................... Interest 0.46 08/13/2004 11/17/2004 135,762 75,661
Dividens 0.53 11/03/2004 11/17/2004 156,422 -
4 th quarter ........................................................ Interest - 150,969
Dividens 0.95 02/11/2005 02/22/2005 ___________ 280,378 ___________-
Interest on own capital and dividends............................................................................................................................................................. ___________
858,843 ___________
351,247
% interest/dividends paid or credited............................................................................................................................................................. 32% 33%
Credit per share (R$)..................................................................................................................................................................................... 2.91 2.37
Outstanding shares (thousands)..................................................................................................................................................................... 295,135 148,009
The remaining income for the year was transferred to the statutory reserve for investments and working capital in accordance with the by-laws.
24 - Statutory Profit Sharing
a) The management profit sharing is limited to 10% of net income for the year, after income tax and management fees, as stated in the
Company’s by-laws;
b) The employees’ profit sharing is linked to the attainment of operating goals and was allocated to cost of production and general and
administrative expenses, as applicable.

25 - Long-Term Incentive Plans
I) Gerdau S.A.
The Extraordinary General Meeting of shareholders held on April 30, 2003 decided, based on a previously agreed plan and within the limit
of the authorized capital, to grant options to purchase preferred shares to management, employees or persons who render services to the
Company or the companies under its control, and approved the formation of the Long-Term Incentive Program that represents a new form
of compensation of the strategic executives of the Company. The options should be exercised in a maximum of five years after the grace
period.
a) Summary of changes in the plan:
Stock option grants (Number of shares)
__________________________________________________________________
2003 2003 2004 2004 Total
Opening balance at December 31, 2003.......................................... 403,228 280,840 - - 684,068
Grants in 2004............................................................................. - - 2,430 171,125 173,555
Share bonus at April 29, 2004........................................................ 403,229 280,840 2,429 171,125 857,623
____________ ____________ ____________ ____________ ____________
Closing balance on December 31, 2004........................................... 806,457 561,680 4,859 342,250 1,715,246
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
Exercise price - R$ ....................................................................... 11.94 11.94 30.50 30.50
Grace period ............................................................................... 3 years - 3 years -
Grace period ............................................................................... - 5 years - 5 years
As mentioned in Note 23b, at December 31, 2004 the Company has a total of 1,573,200 preferred shares in treasury. These shares can be used
for this plan.
b) Plan status at December 31
Stock option grants
______________________________________________
2004 2003 Average
Total stock options granted .......................................................................................................................... 347,109 1,368,137 -
Exercise price - R$........................................................................................................................................ 30.50 11.94 15.70
Fair value of options at date of grant - R$ per option (*).................................................................................. 8.65 3.72 4.72
Average term of option to be exercised (years)................................................................................................. 3.68 1.82 2.26
(*) calculated using the Black-Scholes model.
The percentage of dilution in interest that the current shareholders may experience if all options are exercised is approximately 0.6%.
II) Gerdau Ameristeel Corporation - (“Gerdau Ameristeel”)
Gerdau Ameristeel Corporation and its subsidiaries have stock compensation plans for their employees, as follows:
a) Former Co-Steel Plan
According to the terms of the Co-Steel Plan, the Stock-Based Option Plan, the company was authorized to grant purchase options to employees
and directors up to the limit of 3,041,335 common shares. The exercise price was based on the closing price of the common shares in the
market on the day prior to the issue of the option. The options have a maximum term of ten years and are granted during various periods, as
determined by the administrator of the plan at the date of the grant, up to April 13, 2008.
b) Gerdau AmeriSteel US Inc. (“AmeriSteel”) Plans
According to the terms of the Transaction Agreement relating to the acquisition of Co-Steel, the minority shareholders of AmeriSteel
exchanged their shares and stock options for shares and stock options of Ameristeel at the ratio of 9.4617 shares and stock options for each
share or stock option of AmeriSteel. This exchange occurred on March 31, 2003.
b.1) Stakeholder Plan
In March 2000, the Board of Directors of AmeriSteel approved a long-term incentive plan available to the executive management (Stakeholder
Plan) to assure that the interests of the senior management of AmeriSteel are in line with those of the AmeriSteel shareholders. The
awards are determined by a formula based on the return on employed capital of AmeriSteel in a given year of the plan. The awards are
granted and paid over a period of four years. The participants may choose payment in cash or in shares of AmeriSteel and Gerdau, for which
a premium of 25% is given, if chosen. Expenses related to the benefits for the years ended December 31, 2004 and 2003 totaled US$ 1,300
thousand (R$ 3,450) and US$ 150 thousand (R$ 433), respectively. A premium of approximately US$ 14,000 thousand (equivalent to R$ 37,161)
was recorded at December 31, 2004 and will be granted on March 1, 2005. This premium will be provided in accordance with the payment
schedule established by the plan.

138 139
GERDAU S.A.
b.2) SAR Plan
In July 1999, the Board of Directors of AmeriSteel approved the SAR/Shares Purchase Plan (SAR Plan) available to basically all employees. The
SAR Plan authorizes the sale of 946,170 common shares to the employees during three offer periods, from July to September in 1999, 2002
and 2005. The employees who purchase the shares are rewarded with stock appreciation rights (SARs) equal to four times the number of
shares purchased. SARs at market value were granted at the date of grant, determined based on an independent appraisal at the end of the
prior year. SARs can be exercised at 25% annually as from the date of the grant, to be exercised over a period of ten years as from the date of
the grant.
In July 2002, the Board of Directors of AmeriSteel approved the issue of new purchase options under the SAR Plan, which were granted to the
executive directors, with the exercise price determined by the fair value at the date of grant. A total of 6,244,722 SARs were authorized and
issued. One-third of all awarded options and common shares are vested two years as from the date of concession, and one third after each
subsequent two-year period. The options may be exercised in up to ten years after the date of concession.
At December 31, 2004, an expense related to this plan of US$ 20,700 thousand, equivalent to R$ 54,946, was recorded in the consolidated
financial statements (at December 31, 2003, an expense of US$ 9,400 thousand, equivalent to R$ 27,158 was recorded).
b.3) Equity Ownership
In September 1996, the Board of Directors of AmeriSteel approved the Equity Ownership Plan of AmeriSteel Corporation (the “Equity
Ownership” Plan), which grants common shares, purchase options for common shares and SARs. The maximum number of shares that may be
issued under this plan is 4,152,286. AmeriSteel has granted 4,667,930 incentive stock options and 492,955 common shares under the Equity
Ownership Plan up to December 31, 2004. One-third of all options and common shares issued become vested two years from the date of the
grant, and one third after each subsequent two-year period. All grants were carried out at the market value of the common shares at the date
of grant, determined based on an independent appraisal at the end of the prior year. The options may be exercised for ten years as from the
date of the grant.
b.4) Purchase Plan
In May 1995, the Board of Directors of AmeriSteel approved an option/purchase plan (the “Purchase Plan”), available to essentially all
employees. The employees who purchased shares were rewarded with options for six times the number of shares purchased. A total of
356,602 shares were sold under the Purchase Plan at a purchase price of US$ 1.12 per share. The options were granted at market value at the
date of the grant, determined based on an independent appraisal at the end of the prior year. A total of 2,139,612 options were granted under
the Purchase Plan. No options are available for future grant. All shares granted can already be exercised, which may occur for ten years as
from the date of the grant.
A summary of the Gerdau Ameristeel plans is as follows:
2004 2003
__________________________________________ ______________________________________________
Number Weighted average Number Weighted average
of shares exercise price - R$ of shares exercise price - R$
Available at the beginning of the year............................. 3,606,570 17.01 1,367,400 26.87
Exchange for options of the Gerdau Ameristeel Plan (*).... - - 2,660,601 6.21
Exercised options........................................................... (374,609) 5.04 - -
Cancelled options.......................................................... (76,973) 5.10 - -
Expired options.............................................................. ________________ (321,700) _____________________ 51.65 _________________ (421,431) ________________________ 56.98
Available at the end of the year......................................
________________ 2,833,288
_____________________ 15.77
_________________ 3,606,570
________________________
18.52
(*) Exchange mentioned in item “b” above.
The table below summarizes the information on the purchase options of Gerdau Ameristeel shares available at December 31, 2004:
Quantity
Available Average Weighted average exercisable at
Exercise price (R$) quantity grace period exercise price - R$ December 31, 2004
3.50 to 3.80 ................................................................. 752,829 4.40 3.66 597,086
4.78 to 5.04 ................................................................. 824,536 5.90 4.88 497,369
5.60 to 7.86 ................................................................. 563,923 4.50 11.89 563,923
41.01 to 49.61.............................................................. 342,500 2.10 44.59 342,500
53.25 to 53.49.............................................................. ________________ 349,500 1.70 53.49 _________________________ 349,500
________________
2,833,288 _________________________
2,350,378

The effect on net income for the year and shareholders’ equity would have been as follows, had the expenses for the option plans of Gerdau
S.A. and Gerdau Ameristeel Corporation been recorded:
Company
Consolidated
_________________________________________ _________________________________________________
Net Shareholders’ net Shareholders’
income equity income equity
Balances based on financial statements........................... 2,831,339 6,073,856 3,234,887 6,073,856
Expenses for the period (Black-Scholes model)................. ________________ (1,959) ______________________ (4,936) _____________________ (2,649) _________________________ (8,383)
Pro forma balances........................................................ ________________
2,829,380 ______________________
6,068,920 _____________________
3,232,238 _________________________
6,065,473
26 - Calculation of EBITDA
Consolidated
_________________________________________________
2004 2003
Gross profit............................................................................................................................................ 6,245,024 3,290,221
Selling expenses..................................................................................................................................... (455,175) (448,131)
General and administrative expenses........................................................................................................ (1,003,826) (763,440)
Depreciation and amortization................................................................................................................. _____________________ 766,665 _________________________ 604,887
EBITDA..................................................................................................................................................
_____________________
5,552,688
_________________________
2,683,537
27 - Information by Geographic Area and Business Segment
Information by geografic area:
Geographic area
______________________________________________________________________________________________________________________________________
Brazil South America (*) North America Consolidated
__________________________________ _______________________________ _________________________________ ______________________________
2004 2003 2004 2003 2004 2003 2004 2003
Gross sales revenues................. 12,914,377 9,024,250 1,039,986 652,829 9,453,210 6,105,888 23,407,573 15,782,967
Net sales revenues.................... 9,975,760 7,306,927 763,865 490,122 8,857,637 5,569,912 19,597,262 13,366,961
Cost of sales............................. (5,668,217) (4,444,848) (488,120) (325,333) (7,195,901) (5,306,559) (13,352,238) (10,076,740)
Gross profit............................... 4,307,543 2,862,079 275,745 164,789 1,661,736 263,353 6,245,024 3,290,221
Selling expenses........................ (400,317) (407,717) (7,079) (5,140) (47,779) (35,274) (455,175) (448,131)
General and administrative
expenses............................. (704,073) (513,157) (45,934) (33,492) (253,819) (216,791) (1,003,826) (763,440)
Financial income
(expenses), net................... 5,948 (462,207) (4,491) (3,831) (177,563) (180,532) (176,106) (646,570)
Operating profit (loss)............... 3,040,687 1,192,855 219,272 120,012 1,194,708 (165,655) 4,454,667 1,147,212
Net income (loss) for the year.... 2,164,338 1,222,380 174,240 93,379 896,309 (61,274) 3,234,887 1,254,485
EBITDA (**).............................. 3,704,473 2,297,318 250,983 151,524 1,597,232 234,695 5,552,688 2,683,537
( * ) Does not include Brazilian operations.
(**) Income before financial expenses, income tax and social contribution on net income, and depreciation and amortization, as mentioned in Note nº 26.
The segments shown following correspond to the business units through which the Gerdau Executive Committee manages its operations:
Long Steel Brazil, Açominas (corresponding to the operations of the plant located in Ouro Branco, state of Minas Gerais), South America
(excluding Brazilian operations) and North America (Gerdau Ameristeel):

140 141
GERDAU S.A.
Information by business segment:
Business sector
________________________________________________________________________________________________________________________________________________________________
Long Brazil Açominas Ouro Branco South America (*) North America Consolidated
___________________________ __________________________ ___________________________ ___________________________ ____________________________
2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
Net sales revenue......................... 7,329,008 5,359,998 2,646,752 1,946,929 763,865 490,122 8,857,637 5,569,912 19,597,262 13,366,961
Identifiable assets (**)................. 4,378,419 3,146,342 3,482,517 3,241,331 668,351 580,385 6,131,526 4,273,441 14,660,813 11,241,499
Capital expenditures.................... 648,070 329,999 265,851 355,984 27,367 22,253 1,156,660 164,803 2,097,948 873,039
Depreciation/amortization............ 235,613 235,720 265,707 120,392 28,251 25,367 237,094 223,408 766,665 604,887
( * ) Does not include Brazilian operations.
(**) Identifiable assets: accounts receivable, inventories and fixed assets.

Board of Directors
Executive Committee
Chairman
JORGE GERDAU JOHANNPETER
Vice Chairmen
GERMANO H. GERDAU JOHANNPETER
KLAUS GERDAU JOHANNPETER
FREDERICO C. GERDAU JOHANNPETER
Board Members
AFFONSO CELSO PASTORE
ANDRÉ PINHEIRO DE LARA RESENDE
OSCAR DE PAULA BERNARDES NETO
Secretary General
EXPEDITO LUZ
President
JORGE GERDAU JOHANNPETER
Vice Presidents
FREDERICO C. GERDAU JOHANNPETER, Senior Vice President
CARLOS JOÃO PETRY, Senior Vice President
ANDRÉ BIER JOHANNPETER
CLAUDIO JOHANNPETER
DOMINGOS SOMMA
OSVALDO BURGOS SCHIRMER
FILIPE AFFONSO FERREIRA
RICARDO GEHRKE
Secretary General
EXPEDITO LUZ
Corporate Officers
DIRCEU TARCÍSIO TOGNI
ELIAS PEDRO VIEIRA MANNA
EXPEDITO LUZ
FRANCESCO SAVERIO MERLINI
SIRLEU JOSÉ PROTTI
Clemir Ühlein
Accountant CRC RS N0. 44.845 - S - RJ
CPF N0. 424.614.210-72

142 143
GERDAU S.A.
Report of Independent Auditors
To the Board of Directors and Shareholders
Gerdau S.A.
1. We have audited the accompanying balance sheets of Gerdau S.A. and the consolidated balance sheets of
Gerdau S.A. and its subsidiaries as of December 31, 2004 and 2003, and the related statements of income,
of changes in shareholders’ equity and of changes in financial position of Gerdau S.A., as well as the related
consolidated statements of income and of changes in financial position, for the years then ended. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements.
2. We conducted our audits in accordance with approved Brazilian auditing standards, which require that we
perform the audit to obtain reasonable assurance about whether the financial statements are fairly presented
in all material respects. Accordingly, our work included, among other procedures: (a) planning our audit taking
into consideration the significance of balances, the volume of transactions and the accounting and internal
control systems of the companies, (b) examining, on a test basis, evidence and records supporting the amounts
and disclosures in the financial statements, and (c) assessing the accounting practices used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
3. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial
position of Gerdau S.A. and of Gerdau S.A. and its subsidiaries at December 31, 2004 and 2003, and the results of
operations, the changes in shareholders’ equity and the changes in financial position of Gerdau S.A., as well as the
consolidated results of operations and of changes in financial position, for the years then ended, in accordance
with accounting practices adopted in Brazil.
4. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as
a whole. The statement of cash flows is presented for purposes of additional analysis and is not a required part
of the basic financial statements. This information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation
to the financial statements taken as a whole.
Porto Alegre, March 4, 2005
Auditores Independentes
CRC 2SP000160/O-5 “F” RJ
Carlos Alberto de Sousa
Accountant - CRC 1RJ 056561/O-0
Opinion of the Fiscal Council
The Fiscal Council of Gerdau S.A., in performance of its legal and statutory duties, in compliance with Article 163 of Law
6404/76, having examined the Company’s Management Report, the individual (parent company) and consolidated balance
sheets and the related statements of income, of changes in shareholders’ equity and of changes in financial position for
the years ended December 31, 2004, as well as the distribution of interest on equity and dividends, and based on the report
of PricewaterhouseCoopers Auditores Independentes, is of the option that these accounting statements fairly reflect the
Company’s individual and consolidated financial position, in conformity with current accounting practices.
Under these circumstances, the Fiscal Council recommends to the Stockholders the approval of the accounting statements,
which will be submitted to them in the upcoming Ordinary General Shareholders’ Meeting.
Rio de Janeiro, March 14, 2005
JOSÉ ANTÔNIO CRUZ DE MÓDENA
JOSÉ BERNARDO DE MEDEIROS NETO
PETER WILM ROSENFELD

Gerdau Açominas S.A.
Balance Sheet at December, 31
(In thousands of reais)
Assets Company Consolidated
2004 2003 2004 2003
Current Assets
Cash and cash equivalents ............................................................ note 5 597,950 179,266 763,821 258,327
Trade accounts receivable ............................................................. note 6 1,398,760 829,542 1,269,716 762,045
Inventories................................................................................... note 7 1,732,128 1,172,964 1,742,064 1,179,545
Tax credits ................................................................................... note 8 169,655 96,652 176,067 98,665
Deferred income tax and social contribution on net income ............. note 9 304,190 98,412 304,190 98,412
Other accounts receivable.............................................................. 117,977 147,337 115,965 151,760
Total current assets.......................................................................... 4,320,660 2,524,173 4,371,823 2,548,754
Long-Term Receivables
Related parties ............................................................................ note 19 8,178 - 21,804 -
Eletrobrás loans............................................................................ 1,304 1,304 1,304 1,304
Deferred income tax and social contribution on net income ............. note 9 109,298 385,423 111,719 388,373
Compulsory deposits and other ..................................................... note 10 105,877 53,502 114,811 62,823
Total long-term receivables............................................................. 224,657 440,229 249,638 452,500
Permanent Assets
Investments.................................................................................. note 11 154,372 197,463 43,669 66,638
Fixed assets ................................................................................. note 12 4,866,670 4,397,120 4,924,735 4,504,438
Deferred charges ......................................................................... note 13 23,608 10,515 29,665 12,386
Total permanent assets..................................................................... 5,044,650 4,605,098 4,998,069 4,583,462
Total assets ........................................................................................ 9,589,967 7,569,500 9,619,530 7,584,716
The accompanying notes are an integral part of these financial statements.

144 145
GERDAU AÇOMINAS S.A.
Liabilities and Shareholder’s Equity Company Consolidated
2004 2003 2004 2003
Current Liabilities
Trade accounts payable................................................................. 844,851 464,233 848,906 466,675
Financing .................................................................................... note 14 877,613 1,889,592 895,067 1,898,976
Taxes and contributions payable..................................................... note 17 287,503 105,363 291,106 107,126
Deferred income tax and social contribution on net income ............. note 9 149,905 19,790 149,905 19,790
Salaries payable............................................................................ 83,535 64,212 83,667 65,454
Dividends payable......................................................................... note 21 306,197 283,986 306,197 283,986
Related parties ............................................................................ note 19 - 138,309 - 125,320
Other accounts payable................................................................. 98,356 90,208 99,225 91,175
Total current liabilities.................................................................... 2,647,960 3,055,693 2,674,073 3,058,502
Long-Term Liabilities
Financing .................................................................................... note 14 2,079,721 1,412,705 2,083,176 1,424,506
Provision for contingencies ........................................................... note 18 51,993 31,533 51,993 31,645
Post-employment benefits ............................................................ note 20 6,418 7,794 6,418 7,794
Other accounts payable................................................................. 37,829 31,455 37,824 31,949
Total long-term liabilities............................................................... 2,175,961 1,483,487 2,179,411 1,495,894
Shareholders’ Equity
Capital ........................................................................................ note 21 2,340,576 2,340,576 2,340,576 2,340,576
Capital reserves............................................................................ 289,667 98,762 289,667 98,762
Revenue reserves.......................................................................... 2,135,803 60,222 2,135,803 60,222
Retained earnings......................................................................... - 530,760 - 530,760
Total shareholders’ equity............................................................... 4,766,046 3,030,320 4,766,046 3,030,320
Total liabilities and shareholders’ equity..................................... 9,589,967 7,569,500 9,619,530 7,584,716
The accompanying notes are an integral part of these financial statements.

Statement of Income
Years Ended December, 31
(In thousands of reais)
Company
Consolidated
2004 2003 2004 2003
GROSS SALES REVENUES .................................................................. 12,964,674 3,164,358 13,090,660 3,174,613
Taxes on sales.............................................................................. (2,300,771) (292,972) (2,305,821) (292,970)
Freights and discounts ................................................................. (627,550) (233,792) (629,425) (233,801)
____________ ____________ ____________ ____________
Net Sales Revenues .............................................................. 10,036,353 2,637,594 10,155,414 2,647,842
COST OF SALES ................................................................................ ____________ (5,828,901) ____________ (1,638,289) ____________ (5,914,999) ____________ (1,647,875)
Gross Profit.......................................................................... 4,207,452 999,305 4,240,415 999,967
SELLING EXPENSES .......................................................................... (396,972) (94,133) (400,301) (94,702)
FINANCIAL INCOME ......................................................................... note 16 81,317 (30,847) 82,364 (29,052)
FINANCIAL EXPENSES ...................................................................... note 16 (59,337) (93,827) (57,529) (94,173)
GENERAL AND ADMINISTRATIVE EXPENSES
Management fees......................................................................... (39,603) (9,460) (40,267) (9,706)
General expenses ......................................................................... (599,077) (164,086) (605,243) (164,334)
EQUITY IN THE EARNINGS (LOSSES) OF SUBSIDIARIES
AND ASSOCIATED COMPANIES...................................................... note 11 10,391 6,458 (10,025) (1,323)
OTHER OPERATING INCOME (EXPENSES), NET.................................... note 22 143,473 (1,068) 145,150 (1,046)
____________ ____________ ____________ ____________
Operating Profit .................................................................. 3,347,644 612,342 3,354,564 605,631
NON-OPERATING INCOME (EXPENSE), NET ........................................ (13,916) 43,127 (13,363) 49,856
____________ ____________ ____________ ____________
Profit Before Taxes and Profit Sharing .......................... 3,333,728 655,469 3,341,201 655,487
PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION
ON NET INCOME.......................................................................... note 9
Current ....................................................................................... (610,180) (142,204) (617,176) (142,357)
Deferred ..................................................................................... (200,462) 346,038 (200,939) 346,173
MANAGEMENT PROFIT SHARING....................................................... note 23 (39,603) (9,460) (39,603) (9,460)
____________ ____________ ____________ ____________
Net Income for yhe Year ..................................................... 2,483,483 849,843 2,483,483 849,843
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income per share - R$......................................................... ____________
15.65 ____________
5.36
Net equity per share - R$.......................................................... ____________
30.04 ____________
19.10
The accompanying notes are an integral part of these financial statements.

146 147
GERDAU AÇOMINAS S.A.
Statement of Changes in Financial Position
Years Ended December 31
(In thousands of reais)
Company
Consolidated
Financial Resources Were Provided By
2004 2003 2004 2003
Operations
Net income for the year ........................................................... 2,483,483 849,843 2,483,483 849,843
Expenses (income) not affecting working capital:
Depreciation and amortization.............................................. 485,481 147,273 492,433 148,450
Cost of permanent asset disposals........................................ 74,995 6,435 79,505 6,462
Equity in the (earnings) losses of subsidiaries and associated
companies ..................................................................... note 11 (10,391) (6,458) 10,025 1,323
Foreign exchange effects on working capital of foreign
companies...................................................................... - - (611) (44,901)
Monetary variations on long-term debt.................................. (180,542) (48,893) (180,542) (45,369)
Monetary variations on long-term receivables........................ ____________ (399) ____________ 102 ____________ (399) ____________ 102
From operations.............................................................. ____________ 2,852,627 ____________ 948,302 ____________ 2,883,894 ____________ 915,910
Third parties
Contributions to capital reserves................................................ 190,905 6,950 190,905 6,950
Increase (decrease) in long-term liabilities.................................. 864,334 (82,578) 864,059 (45,516)
Working capital - operational integration................................... - (256,530) - (256,530)
Working capital of merged/consolidated companies.................... 2,451 - - (1,157)
Dividends not included in income for the year............................. 5,613 600 300 -
Total funds provided........................................................................ 3,915,930 616,744 3,939,158 619,657
Financial Resources Were Used For
Investments.................................................................................. 6,441 52,814 148 52,814
Fixed assets.................................................................................. 970,534 393,501 977,457 395,552
Deferred charges.......................................................................... 13,803 1,581 18,654 1,639
Increase (decrease) in long-term receivables................................... (217,730) 274,841 (203,261) 275,079
Dividends/interest on equity ......................................................... note 21 938,662 283,986 938,662 283,986
Total funds used ............................................................................... 1,711,710 1,006,723 1,731,660 1,009,070
Changes in Working Capital........................................... ____________
2,204,220 ____________
(389,979) ____________
2,207,498 ____________
(389,413)
Working capital
At the beginning of the year...................................................... (531,520) (141,541) (509,748) (120,335)
At the end of the year............................................................... 1,672,700 (531,520) 1,697,750 (509,748)
Changes in Working Capital........................................... 2,204,220 (389,979) 2,207,498 (389,413)
The accompanying notes are an integral part of these financial statements.

Statement of Changes
in Shareholders’ Equity
(In thousands of reais)
Capital reserves Revenue reserves
Premium Investments Total
Investment on issue and working Revaluation Retained shareholders’
Capital Incentives of Shares Other Total Legal capital Total reserve earnings equity
At December 31, 2002 1,699,503 65,615 23,822 2,375 91,812 17,730 - 17,730 372,742 255,694 2,437,481
Net income for the year - - - - - - - - - 849,843 849,843
Capital increase 641,073 - - - - - - - - (255,694) 385,379
Investment incentives - 6,950 - - 6,950 - - - - - 6,950
Realization and reversal
of reserve - - - - - - - - (372,742) 7,395 (365,347)
Distribution proposed for
the Annual General Meeting:
Legal reserve note 21 - - - - - 42,492 - 42,492 - (42,492) -
Proposed dividends note 21 - - - - - - - - - (283,986) (283,986)
At December 31, 2003 2,340,576 72,565 23,822 2,375 98,762 60,222 - 60,222 - 530,760 3,030,320
Net income for the year - - - - - - - - - 2,483,483 2,483,483
Investment incentives - 190,905 - - 190,905 - - - - - 190,905
Distribution proposed for
the Annual General Meeting:
Legal reserve note 21 - - - - - 124,174 - 124,174 - (124,174) -
Reserve for investments
and working capital - - - - - - 1,951,407 1,951,407 - (1,951,407) -
Interest on equity/
proposed dividends note 21 - - - - - - - - - (938,662) (938,662)
At December 31, 2004 2,340,576 263,470 23,822 2,375 289,667 184,396 1,951,407 2,135,803 - - 4,766,046
The accompanying notes are an integral part of these financial statements.

148 149
GERDAU AÇOMINAS S.A.
Statement of Cash Flows
Years Ended December 31
(In thousands of reais)
Company
Consolidated
2004 2003 2004 2003
Net income for the year............................................................... 2,483,483 849,843 2,483,483 849,843
Equity in the (earnings) losses of subsidiaries and associated
companies............................................................................. note 11 (10,391) (6,458) 10,025 1,323
Provision for credit risks.............................................................. 5,135 8,461 5,135 8,461
Loss on disposal of fixed assets.................................................... 9,771 1,492 9,843 1,537
Loss on disposal of investment..................................................... 4,227 - 3,574 -
Monetary and exchange variations................................................ (128,671) 85,604 (128,234) 85,398
Depreciation and amortization..................................................... 485,481 147,273 492,433 148,450
Income tax and social contribution on net income.......................... 317,856 (343,445) 318,769 (344,086)
Interest on debt.......................................................................... 177,641 79,159 179,827 79,356
Contingencies/judicial deposits.................................................... 6,469 (4,394) 6,136 (4,509)
Changes in trade accounts receivable............................................ (604,478) 164,479 (541,337) 59,154
Changes in inventories................................................................ (555,229) (106,265) (562,455) (105,083)
Changes in trade accounts payable............................................... 260,590 54,742 264,557 54,381
Other operating activity accounts................................................. 244,071 (21,756) 244,826 (31,452)
____________ ____________ ____________ ____________
Net cash provided by operating activities.................................. 2,695,955 908,735 2,786,582 802,773
____________ ____________ ____________ ____________
Purchase/disposal of fixed assets.................................................. (913,233) (405,273) (919,758) (407,342)
Increase in deferred charges........................................................ (13,803) (1,581) (18,006) (1,639)
Acquisition/disposal of investments.............................................. (7,984) (52,814) 650 (52,814)
Receipt of interest on own capital/profit distribution...................... 900 - - -
____________ ____________ ____________ ____________
Net cash used in investing activities......................................... (934,120) (459,668) (937,114) (461,795)
____________ ____________ ____________ ____________
Suppliers of fixed assets.............................................................. 151,445 8,585 151,022 8,511
Working capital financing............................................................ 219,262 (331,504) 232,498 (290,395)
Permanent asset financing........................................................... 442,306 268,753 442,653 268,881
Payments of permanent asset financing......................................... (892,765) (175,108) (898,300) (175,460)
Payment of financing interest....................................................... (176,594) (104,768) (177,706) (104,973)
Loans with related parties........................................................... (146,502) (19,012) (148,141) (10,695)
Payment of dividends/interest on equity and profit sharing.............. (940,345) (18,226) (939,655) (23,679)
____________ ____________ ____________ ____________
Net cash used in financing activities......................................... (1,343,193) (371,280) (1,337,629) (327,810)
____________ ____________ ____________ ____________
Changes in cash and cash equivalents....................................... 418,642 77,787 511,839 13,168
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Cash and short-term investments
At the beginning of the year.................................................... note 5 179,266 101,479 258,327 276,444
Restatement of opening balance............................................... - - (6,345) (31,895)
Opening balance of consolidated/merged companies for the year..... 42 - - 610
At the end of the year............................................................. note 5 597,950 179,266 763,821 258,327

Notes to the Financial Statements
at December, 31 2004 and 2003
(All amounts in thousands of reais unless otherwise indicated)
1 - Operations
Gerdau Açominas S.A. is the company that includes the steel producing assets of the Gerdau Group in Brazil and has an installed capacity of
7.6 million tons of crude steel per year. The Gerdau Group is dedicated mainly to the production of common and special steel rods and sale of
general steel products (plates and rods), in plants located in Brazil, Uruguay, Chile, Canada, Argentina and the Unites States of America.
The Gerdau Group has an installed capacity of 16.4 million tons of crude steel per year, basically producing steel in electrical furnaces, from
scrap and pig iron purchased, for the most part, in the region near each plant (mini-mill concept). Gerdau also operates plants which are
capable of producing steel from iron ore (through blast furnaces and direct reduction) and has a unit used exclusively to produce special
steels. It is the largest scrap recycling group in Latin America and among the largest in the world.
The industrial sector is the most important market, including manufacturers of consumer goods, such as vehicles and household and
commercial equipment that basically use profiled steel in various available specifications. The next most important market is the civil
construction sector, which demands a high volume of rebar and wires for concrete. There are also numerous customers for nails, staples and
wires, commonly used in the agribusiness sector.
2 - Presentation of the Financial Statements
The financial statements have been prepared and are presented in accordance with accounting practices adopted in Brazil, which are based
on the provisions of Brazilian Corporate Law, together with the rules established by the Brazilian Securities Commission (CVM).
A statement of cash flows (company and consolidated), prepared under the indirect method, is being presented as supplementary information
in order to provide additional information.
3 - Significant Accounting Practices
a) Cash and cash equivalents - financial investments are recorded at cost plus income accrued up to the balance sheet date, applying the
interest rates agreed with the financial institutions, and do not exceed market value;
b) Trade accounts receivable - are stated at realizable values, and accounts receivable from foreign customers are adjusted based on the
exchange rates effective at the balance sheet date. The provision for credit risks is calculated based on a credit risk analysis, which includes
the history of losses, the individual situation of each customer and the economic group to which they belong, the collateral and guarantees
and the legal advisors’ opinion, and is considered sufficient to cover eventual losses on realization;
c) Inventories - are stated at the lower of market value and average production or purchase cost;
d) Investments in subsidiary and associated companies - are recorded on the equity method of accounting. The equity in the earnings or loss
is recorded in an income statement account;
e) Fixed assets - are recorded at cost, net of depreciation. Depreciation is calculated on the straight-line basis, at the rates stated in Note 12,
which take into consideration the estimated useful lives of the assets. Interest on financing obtained to finance construction in progress is
added to the cost of the constructions;
f) Deferred charges - amortization is calculated on the straight-line basis at rates determined based on the production of the implemented
projects in relation to their installed capacities;
g) Financing - are stated at the contract value plus the contracted charges, including interest and monetary or foreign exchange variations.
Swap contracts, which are linked to the loan agreements, are classified together with the related loans;
h) Income tax and social contribution on net income - current and deferred income tax and social contribution on net income are calculated
in conformity with current legislation;
i) Other current and long-term assets and liabilities - are recorded at their realizable amounts (assets) and at their known or estimated
amounts plus accrued charges and indexation adjustments (liabilities), when applicable;
j) Related parties - loan agreements between Brazilian companies are restated by the weighted average interest rate for market funding.
The agreements with foreign companies are restated by charges (LIBOR plus 3% p.a.) plus foreign exchange variation. Sales and purchases of
inputs and products are made under terms and conditions similar to those of unrelated third parties;
k) Determination of the results of operations - the results of operations are determined on the accrual basis of accounting;
l) Use of estimates - the preparation of financial statements requires estimates to record certain assets, liabilities and other transactions.
The Company’s financial statements therefore include various estimates related to the useful lives of fixed assets, provisions necessary for
contingent liabilities, for income tax and other similar matters. Actual results may differ from those estimated;
m) Environmental investments - expenses related to compliance with environmental regulations are considered as cost of production or
capitalized when incurred; and
n) Translation of foreign currency balances - asset and liability balances of transactions in foreign currency are translated to local currency
(R$) at the foreign exchange rate in effect at the balance sheet date (2004 - US$ 1.00 = R$ 2.6544 and 2003 - US$ 1.00 = R$ 2.8892).

150 151
GERDAU AÇOMINAS S.A.
4 - Consolidated Financial Statements
a) The consolidated financial statements at December 31, 2004 include the accounts of Gerdau Açominas S.A. and the directly controlled
subsidiaries listed below:
Percentage
Shareholders’
Consolidated company ownership equity
Margusa - Maranhão Gusa S.A. ....................................................................................................... 100 73,714
Açominas Com. Imp. Exp. S.A.- Açotrading ....................................................................................... 100 22,583
Gerdau Açominas Overseas Ltd. ....................................................................................................... 100 7,914
Florestal Itacambira S.A. .................................................................................................................. 100 7,650
b) The more significant accounting practices used in preparing the consolidated financial statements are as follows:
I) Gerdau Açominas S.A. and its subsidiaries adopt consistent practices to record their operations and value their assets and liabilities. The
financial statements of the subsidiary Gerdau Açominas Overseas Ltd. were translated using the exchange rate in effect at the balance sheet
date and were adjusted to conform with accounting practices adopted in Brazil; and
II) Asset and liability, and income and expense accounts balances arising from transactions between consolidated companies have been
eliminated.
c) The subsidiary Armafer Serviços de Construção Ltda. was merged on October 29, 2004 and the net assets of R$ 44,744 were recorded
in Gerdau Açominas S.A., replacing the investment account, without capital increase. The objectives of the transaction were to reduce
administrative expenses and improve operating synergy.
d) The Company has goodwill which is being amortized in up to three years based on the realization of projected future results, as
follows:
Amortization
Period Company Consolidated
Goodwill in the investment account
Balance at December 31, 2003................................................................................................... 43,564 43,564
(-) Reversal of goodwill based on the adjustment in purchase price
(Margusa - Maranhão Gusa S.A.) ........................................................................................... (5,258) (5,258)
(-) Amortization for the year....................................................................................................... Up to 3 years _________________ (13,578) __________________ (13,578)
Balance at December 31, 2004 (based on expectation of future profiability)................................... _________________
24,728 __________________
24,728
The goodwill arises from the assets of the subsidiary Margusa - Maranhão Gusa S.A.
5 - Cash and Cash Equivalents
Company
Consolidated
_______________________________ _____________________________
2004 2003 2004 2003
Cash and banks .............................................................................................................. 49,758 64,110 49,915 64,969
Financial investment fund ................................................................................................ 548,192 115,156 555,951 115,156
Fixed income securities .................................................................................................... _____________- ____________- ____________ 157,955 ____________ 78,202
_____________
597,950 ____________
179,266 ____________
763,821 ____________
258,327
Fixed income securities and financial investment fund include R$ 165,369 - consolidated (R$ 78,076 - consolidated in 2003) of investments
in U.S. dollars.
6 - Trade Accounts Receivable
Company
Consolidated
_______________________________ _____________________________
2004 2003 2004 2003
Customers in Brazil.......................................................................................................... 792,706 520,274 794,961 522,985
Brazilian export receivables............................................................................................... 675,881 372,717 544,582 302,509
Provision for credit risks .................................................................................................. _____________ (69,827) ____________ (63,449) ____________ (69,827) ____________ (63,449)
_____________
1,398,760 ____________
829,542 ____________
1,269,716 ____________
762,045

7 - Inventories
Company
Consolidated
______________________________ _____________________________
2004 2003 2004 2003
Finished products............................................................................................................. 542,924 356,825 547,126 357,180
Work in process............................................................................................................... 351,139 227,808 351,139 227,808
Raw materials ................................................................................................................. 450,218 287,478 454,801 290,470
Storeroom materials......................................................................................................... 327,666 262,583 328,272 265,635
Advances to suppliers ...................................................................................................... ____________ 60,181 ____________ 38,270 ____________ 60,726 ____________ 38,452
____________
1,732,128 ____________
1,172,964 ____________
1,742,064 ____________
1,179,545
The inventories (company and consolidated) are covered against fire and overflow. Coverage is determined based on the amounts and the
risks involved.
8 - Tax Credits
Company
Consolidated
______________________________ _____________________________
2004 2003 2004 2003
Value-Added Tax on Sales and Services (ICMS)............................................................ 94,547 87,636 97,207 88,631
Social Contribution on Revenues (COFINS) to offset..................................................... 55,579 - 56,302 -
Social Integration Program (PIS) to offset................................................................... 11,130 2,811 11,344 2,812
Excise Tax (IPI) ....................................................................................................... 3,107 6,097 3,310 6,358
Income tax and social contribution on net income....................................................... 2,222 90 4,843 115
Other..................................................................................................................... ____________ 3,070 ____________ 18 ____________ 3,061 ____________ 749
____________
169,655 ____________
96,652 ____________
176,067 ____________
98,665
9 - Income Tax and Social Contribution on Net Income
a) Analysis of the income tax and social contribution expense:
Company
_________________________________________________________________________________________
2004 2003
_________________________________________ __________________________________________
IR CS Total IR CS Total
Profit before income tax and social contribution, after statutory
profit sharing.......................................................................... 3,294,125 3,294,125 3,294,125 646,009 646,009 646,009
Statutory rates of tax.................................................................... 25% 9% 34% 25% 9% 34%
Income tax and social contribution expense at statutory rates.......... (823,531) (296,471) (1,120,002) (161,502) (58,141) (219,643)
Tax effects on:
- equity in earnings (losses).......................................................... 2,598 935 3,533 1,615 581 2,196
- interest on equity....................................................................... 74,824 26,937 101,761 (150) (54) (204)
- recovery of deferred tax assets.................................................... 141,864 48,109 189,973 305,724 117,027 422,751
- permanent differences (net)........................................................ __________ 20,337 __________ (6,244) __________ 14,093 __________ (343) __________ (923) _________ (1,266)
Income tax and social contribution expense................................... __________
(583,908) __________
(226,734) __________
(810,642) __________
145,344 __________
58,490 _________
203,834
Current....................................................................................... (447,281) (162,899) (610,180) (103,857) (38,347) (142,204)
Deferred...................................................................................... (136,627) (63,835) (200,462) 249,201 96,837 346,038
Consolidated
_________________________________________________________________________________________
2004 2003
_________________________________________ __________________________________________
IR CS Total IR CS Total
Profit before income tax and social contribution, after statutory
profit sharing.......................................................................... 3,301,598 3,301,598 3,301,598 646,027 646,027 646,027
Statutory rates of tax.................................................................... 25% 9% 34% 25% 9% 34%
Income tax and social contribution expenses at statutory rates........ (825,400) (297,144) (1,122,544) (161,507) (58,142) (219,649)
Tax effects on:
- equity in earnings (losses).......................................................... (2,506) (902) (3,408) (331) (119) (450)
- interest on equity....................................................................... 74,824 26,937 101,761 - - -
- recovery of deferred tax assets.................................................... 141,864 48,109 189,973 305,724 117,027 422,751
- permanent differences (net)..................................................... __________ 21,844 __________ (5,741) __________ 16,103 __________ 1,471 __________ (307) _________ 1,164
Income tax and social contribution expense.................................. __________
(589,374) __________
(228,741) __________
(818,115) __________
145,357 __________
58,459 _________
203,816
Current.................................................................................. (452,402) (164,774) (617,176) (103,962) (38,395) (142,357)
Deferred................................................................................. (136,972) (63,967) (200,939) 249,319 96,854 346,173
IR - Corporate income tax.
CS - Social contribution on net income.

152 153
GERDAU AÇOMINAS S.A.
b) Analysis of the deferred income tax and social contribution assets and liabilities, at the statutory rates of tax:
_________________________________________________________________________________________________________________________
Assets
___________________________________________________________
Company
____________________________________________________________
Consolidated
____________________________
2004
_____________________________
2003
_____________________________
2004
_____________________________
2003
IR CS Total IR CS Total IR CS Total IR CS Total
Income tax losses.................... 228,735 - 228,735 273,713 - 273,713 230,165 - 230,165 275,506 - 275,506
Social contribution losses ....... - 52,403 52,403 - 83,867 83,867 - 53,060 53,060 - 84,662 84,662
Provision for contingencies ..... 12,071 4,345 16,416 3,998 1,439 5,437 12,405 4,345 16,750 4,353 1,446 5,799
Commissions/other.................. 6,221 2,239 8,460 4,038 1,453 5,491 6,221 2,239 8,460 4,038 1,453 5,491
Amortized goodwill................. 1,094 394 1,488 - - - 1,094 394 1,488 - - -
Provision for losses................. ________ 77,931 ________ 28,055 ________ 105,986 ________ 84,799 ________ 30,528 ________ 115,327 ________ 77,931 ________ 28,055 ________ 105,986 ________ 84,799 ________ 30,528 ________ 115,327
________ 326,052 ________ 87,436 ________ 413,488 ________ 366,548 ________ 117,287 ________ 483,835 ________ 327,816 ________ 88,093 ________ 415,909 ________ 368,696 ________ 118,089 ________ 486,785
Current ................................. 245,685 58,505 304,190 72,362 26,050 98,412 245,685 58,505 304,190 72,362 26,050 98,412
Long-term ............................. 80,367 28,931 109,298 294,186 91,237 385,423 82,131 29,588 111,719 296,334 92,039 388,373
_________________________________________________________________________________________________________________________
Liabilities
___________________________________________________________
Company
____________________________________________________________
Consolidated
____________________________
2004
_____________________________
2003
_____________________________
2004
_____________________________
2003
IR CS Total IR CS Total IR CS Total IR CS Total
Inflationary/exchange effect..... ________ 115,934 ________ 33,971 ________ 149,905 ________ 19,790 ________- ________ 19,790 ________ 115,934 ________ 33,971 ________ 149,905 ________ 19,790 ________- ________ 19,790
Current ................................. ________ 115,934 ________ 33,971 ________ 149,905 ________ 19,790 ________- ________ 19,790 ________ 115,934 ________ 33,971 ________ 149,905 ________ 19,790 ________- ________ 19,790
The tax benefits recognized on income tax and social contribution loss carryforwards, as well as on the provision for losses, both in
the Company and consolidated, are supported by projections of future taxable income adjusted to present values, based on technical
feasibility studies, approved by management. These studies, which consider the history of the Company’s and its subsidiaries’ profitability
and the maintenance of the current profitability in the future, permitted the recognition of an additional benefit for the year of R$ 189,973
(R$ 422,751 in 2003) in the Company and consolidated, whose estimated recovery is shown in item “c” below. Other credits, based on
temporary differences, mainly tax contingencies, were maintained according to their estimate of realization.
c) Estimated recovery of deferred income tax and social contribution assets:
Company
Consolidated
_______________________________ _____________________________
2004 2003 2004 2003
Up to 2004 ..................................................................................................................... - 98,412 - 98,412
2005 .............................................................................................................................. 304,190 93,101 304,190 93,101
2006 .............................................................................................................................. 22,128 84,086 22,128 86,411
2007 .............................................................................................................................. 16,979 83,905 19,284 84,178
2008 .............................................................................................................................. 25,367 76,707 25,367 77,059
2009 .............................................................................................................................. 10,947 20,377 11,063 20,377
2010 to 2012 ................................................................................................................. 23,497 27,247 23,497 27,247
2013 to 2014 ................................................................................................................. _____________ 10,380 ____________- ____________ 10,380 ____________-
_____________
413,488 ____________
483,835 ____________
415,909 ____________
486,785
10 - Compulsory Deposits and Other
Company
Consolidated
_______________________________ _____________________________
2004 2003 2004 2003
Compulsory deposits ....................................................................................................... 12,077 187 12,345 833
Receivables under contract............................................................................................... 23,770 20,544 23,770 20,546
ICMS credits on purchases of fixed assets.......................................................................... 69,992 32,722 69,992 32,730
Assets not for use............................................................................................................ - - 8,665 8,665
Income tax incentives....................................................................................................... _____________ 38 ____________ 49 ____________ 39 ____________ 49
105,877 53,502 114,811 62,823
_____________ ____________ ____________ ____________
_____________ ____________ ____________ ____________

11 - Investments
Company
________________________________________________________________________________________________________________________________________________________________________________
2004 2003
__________________________________________________________________________________________________________________________________________________________________ __________
Subsidiaries Other Total Total
_________________________________________________________________________________________________________________________________ _____________ ____________ __________
Açominas Com. Gerdau Florestal
Imp. e Exp. S.A. - Açominas Itacambira Armafer - Serv.
Açotrading Overseas Ltd. S.A. Margusa - Maranhão Gusa S.A. Constr. Ltda. 2 Other
________________ ______________ ______________ _________________________________ _________________ ______________
Investment Investment Investment Investment Goodwill Investment Investment
Opening balance............................................... 22,592 7,504 7,211 53,248 43,564 41,470 3,897 17,977 197,463 29,870
Merger/capitalization ................................... - - - - - (47,066) - 32 (47,034) 108,921
Reversal of goodwill ..................................... - - - - (5,258) - - - (5,258) 52,814
Acquisition ................................................... - - - - - - - 78 78 -
Sale ............................................................. - - - - - - - (4,294) (4,294) -
Equity in earnings (losses) 1 ........................... (9) 410 576 25,643 (13,578) (3,030) - 379 10,391 6,458
Deposit for future capital increase ................. - - - - - 8,626 13 - 8,639 -
Dividends......................................................... ________________ - ______________ - ______________ (137) _________________________________ (5,176) - _________________ - ______________ - _____________ (300) ____________ (5,613) ___________ (600)
Closing balance................................................. ________________ 22,583 ______________ 7,914 ______________ 7,650 _________________________________ 73,715 24,728 _________________ - ______________ 3,910 _____________ 13,872 ____________ 154,372 ___________ 197,463
Capital ............................................................ 17,689 133 5,790 10,702 -
Shareholders’ equity ......................................... 22,583 7,914 7,650 73,714 -
Net income (loss) for the year ........................... (9) 1,019 575 21,860 (3,030)
Percentage of interest (%)................................. 100% 100% 100% 100% -
Common shares/quotas held.............................. 400,000 50,000 158,985 8,615,249 -
Preferred shares held ........................................ - - - 2,086,310 -
1
Includes amortization of goodwill.
2
Company merged on October 29, 2004.

154 155
GERDAU AÇOMINAS S.A.
Consolidated
____________________________________________________________________
2004 2003
_____________________________________________________________ ___________
Investment Goodwill Total Total
Margusa - Maranhão Gusa S.A. ........................................................................... - 24,728 24,728 43,564
MRS Logística S.A. ............................................................................................. 4,772 - 4,772 4,772
Corporate joint ventures ..................................................................................... 10,036 - 10,036 9,984
Other investments .............................................................................................. 4,133 - 4,133 8,318
________________ __________ _________ _________
18,941 24,728 43,669 66,638
________________ __________ _________ _________
________________ __________ _________ _________
12 - Fixed Assets
Company
_______________________________________________________________________________________
2004 2003
_______________________________________________ ___________
Annual
Accumulated
depreciation
depreciation
rate - % Cost and depletion Net Net
Land, buildings and structures................................................ 0 to 4 2,385,691 (944,679) 1,441,012 1,508,988
Machinery, equipment and installations.................................. 10 4,571,194 (2,213,718) 2,357,476 2,126,167
Furniture and fixtures............................................................ 10 60,572 (36,584) 23,988 25,110
Vehicles............................................................................... 20 22,848 (18,581) 4,267 4,368
Electronic data equipment/rights/licenses................................ 20 266,201 (177,950) 88,251 85,268
Construction in progress........................................................ - 863,195 - 863,195 582,748
Forestation/reforestation....................................................... Feeling plan 123,431 (34,950) 88,481 64,471
___________ ____________ __________ __________
8,293,132 (3,426,462) 4,866,670 4,397,120
___________ ____________ __________ __________
___________ ____________ __________ __________
Consolidated
_______________________________________________________________________________________
2004 2003
_______________________________________________ ___________
Annual
Accumulated
depreciation
depreciation
rate - % Cost and depletion Net Net
Land, buildings and structures............................................... 0 to 4 2,403,143 (946,302) 1,456,841 1,529,014
Machinery, equipment and installations.................................. 10 4,586,568 (2,220,908) 2,365,660 2,160,821
Furniture and fixtures............................................................ 10 60,657 (36,827) 23,830 25,367
Vehicles............................................................................... 20 23,561 (18,797) 4,764 4,495
Electronic data equipment/rights/licenses................................ 20 266,217 (178,003) 88,214 86,383
Construction in progress........................................................ - 863,704 - 863,704 600,647
Forestation/reforestation....................................................... Feeling plan 156,672 (34,950) 121,722 97,711
___________ ____________ __________ __________
8,360,522 (3,435,787) 4,924,735 4,504,438
___________ ____________ __________ __________
___________ ____________ __________ __________
a) Insured amounts - the assets are insured against fire, electrical damage and explosion. The coverage is determined based on the risks
involved. The Ouro Branco plant has coverage for loss of profits.
b) Capitalization of interest and financial charges - R$ 1,084 was capitalized during the year - Company and consolidated ((R$ 16,715) -
Company and consolidated in 2003).
c) Guarantees offered - fixed assets were pledged as collateral for loans and financing in the amount of R$ 371,494 - Company and consolidated
(R$ 249,924 - Company and consolidated in 2003).

d) Summary of changes in fixed assets:
Company
Consolidated
______________________________ ____________________________
2004 2003 2004 2003
Balance at the beginning of the year................................................................................. 4,397,120 2,825,208 4,504,438 2,825,208
( + ) Purchases/sales for the year...................................................................................... 905,549 387,067 912,003 389,090
( + ) Company merger...................................................................................................... 48,772 - - -
( - ) Depreciation and depletion in cost of sales.................................................................. (423,312) (131,180) (430,213) (132,352)
( - ) Depreciation and depletion in administrative expenses................................................. (61,459) (16,028) (61,493) (16,033)
( - ) Revaluation reversal................................................................................................... - (365,347) - (365,347)
( + ) Operational integration with Gerdau.......................................................................... - 1,697,400 - 1,791,555
( + ) Companies consolidated in the year........................................................................... - - - 12,317
____________ ___________ ____________ ___________
Balance at the end of the year.......................................................................................... 4,866,670 4,397,120 4,924,735 4,504,438
____________ ___________ ____________ ___________
____________ ___________ ____________ ___________
13 - Deferred Charges
Deferred charges (Company and consolidated) comprise pre-operating expenses with reforestation, research, development and restructuring
projects.
14 - Financing
Financing are represented as follows:
Annual Company Consolidated
_____________________________ __________________________
charges 2004 2003 2004 2003
Current
Working capital financing (R$).......................................... 8.00% to 14.00% 523 48,173 1,173 48,173
Fixed asset financing (R$) ................................................ 12.00% - 3,054 - 3,054
Investment financing (R$)................................................. CDI 4,500 4,500 4,500 4,500
Investment financing (US$)............................................... US$ 1,387 45,649 1,387 45,649
Working capital financing (US$)........................................ 1.36% to 10.50% 267,797 921,803 284,601 925,847
Fixed asset financing and others (US$) .............................. US$ - 2,912 - 5,082
Current portion of long-term financing............................... ___________ 603,406 __________ 863,501 __________ 603,406 __________ 866,671
877,613 1,889,592 895,067 1,898,976
Long-term
Working capital financing (R$).......................................... 10.02% 28,215 3,812 28,215 3,812
Fixed asset financing and others (R$)................................. 4.00% to 9.90% 599,817 554,153 603,272 569,124
Investment financing (R$)................................................. IGPM + 8.5% 29,045 35,019 29,045 35,019
Fixed asset financing and others (US$) .............................. 3.09% to 6.00% 619,884 616,837 619,884 616,837
Working capital financing (US$)........................................ 2.95% to 7.34% 1,406,166 1,066,385 1,406,166 1,066,385
(-) Current portion........................................................... ___________ (603,406) __________ (863,501) __________ (603,406) __________ (866,671)
___________ 2,079,721 __________ 1,412,705 __________ 2,083,176 __________ 1,424,506
Total financing................................................................ ___________
2,957,334 __________
3,302,297 __________
2,978,243 __________
3,323,482
CDI - Certificate of Interbank Deposit interest rate.
IGPM - General Market Price Index.

156 157
GERDAU AÇOMINAS S.A.
Summarized by currency:
Company
Consolidated
_______________________________ _____________________________
2004 2003 2004 2003
Brazilian real (R$).................................................................................................... 662,100 648,711 666,205 663,682
U.S. dollar (US$)...................................................................................................... ____________ 2,295,234 ____________ 2,653,586 ____________ 2,312,038 ____________ 2,659,800
____________
2,957,334 ____________
3,302,297 ____________
2,978,243 ____________
3,323,482
The schedule for payment of the long-term portion of financing is as follows:
Company
Consolidated
In 2006...................................................................................................................................................................... 462,261 462,889
In 2007...................................................................................................................................................................... 511,326 511,954
In 2008...................................................................................................................................................................... 522,084 522,712
In 2009...................................................................................................................................................................... 281,148 281,776
In 2010...................................................................................................................................................................... 168,086 168,715
After 2010.................................................................................................................................................................. ____________ 134,816 ________________ 135,130
____________
2,079,721 ________________
2,083,176
a) Events during the year
On June 3, 2004, the Company concluded the placement of the second tranche, of US$ 128 million (equivalent to R$ 339,763 at December 31,
2004), related to a US$ 400 million Export Notes Receivable program (equivalent to R$ 1,061,760 at December 31, 2004). This joint program
with Gerdau S.A. has an interest rate of 7.321% p.a., maturity in April 2012, a grace period of two years and quarterly amortization as from
July 2006.
b) Guarantees
The loans contracted under the FINAME/BNDES program are guaranteed by the financed assets, in the amount of R$ 180,109. The other loans
are guaranteed by sureties from the controlling shareholders, on which the Company pays a fee of 1% p.a. on the amount guaranteed.
c) Covenants
In replacement of the tangible guarantees usually required, the loans are being contracted with certain financial covenants, as follows:
I) Consolidated interest coverage ratio - measures the debt service payment capacity in relation to EBITDA (Earnings before Interest, Taxes,
Depreciation and Amortization);
II) Consolidated leverage ratio - measures the debt coverage capacity in relation to EBITDA;
III) Required Minimum Net Worth - measures the minimum net worth required in financial agreements; and
IV) Current Ratio (current liquidity ratio) - measures the capacity to comply with short-term obligations.
All the covenants mentioned above are calculated on a consolidated basis of the parent company Gerdau S.A., except for item IV which refers to
the parent company Metalúrgica Gerdau S.A., and have been observed. The penalty for non-compliance is the prepayment of the contracts.
15 - Financial Instruments
a) General comments - Gerdau Açominas S.A. and its subsidiaries enter into transactions involving financial instruments, the risks of which
are managed through financial positions and exposure limit controls. All instruments are fully recorded in the books of account and mainly
relate to the instruments listed below:
- financial investments - are recorded at their market value as of the balance sheet date and are explained and presented in Note 5;
- investments - are explained and presented in Note 11;
- related parties - are explained and presented in Note 19;
- financing - are explained and presented in Note 14; and
- financial derivatives - in order to minimize the effects of fluctuations in foreign exchange rates on its liabilities, the Company entered into
swap contracts that were converted into Brazilian reais on the contract date and linked to changes in the CDI rate. The swap contracts are
listed below:
Company and Consolidated
_____________________________________________________________________________________________________________
Contract date Purpose Amount US$ thousand Rate Maturity
07/16/2001 to 05/07/2002 Prepayment 32,823 85.55% to 100.00% of the CDI 01/13/2005 to 03/01/2006
02/20/2002 Resolution 2770 54,000 106.00% of the CDI 06/20/2005
02/19/2003 Resolution 4131 3,300 85.70% of the CDI 02/04/2005

) Market value - the market values of the financial instruments are as follows:
Company
________________________________________________________________
2004 2003
______________________________ _____________________________
Book Market Book Market
Value Value Value Value
Financial investments............................................................................................... 548,192 548,192 115,156 115,156
Eurobonds.............................................................................................................. - - 370,342 370,956
Securitization financing............................................................................................ 627,908 627,908 303,282 303,282
Import financing...................................................................................................... 619,883 619,883 377,534 383,941
Prepayment financing............................................................................................... 808,983 804,724 807,385 818,786
Financing - Resolution 2770..................................................................................... 263,060 256,585 365,573 390,235
ACC (Advances on Export Contracts) financing ........................................................... 27,088 27,088 500,118 524,935
Financing - Resolution 4131 .................................................................................... 20,893 20,755 24,243 24,468
Other financing....................................................................................................... 589,519 589,520 553,820 573,067
Investments............................................................................................................ 154,372 154,372 197,463 197,463
Related parties (assets)............................................................................................ 8,178 8,178 - -
Related parties (liabilities)........................................................................................ - - 138,309 138,309
Consolidated
________________________________________________________________
2004 2003
______________________________ _____________________________
Book Market Book Market
Value Value Value Value
Financial investments............................................................................................... 713,906 713,906 193,358 193,358
Eurobonds.............................................................................................................. - - 370,342 370,956
Securitization financing............................................................................................ 627,908 627,908 303,282 303,282
Import financing...................................................................................................... 619,883 619,883 377,534 383,941
Prepayment financing............................................................................................... 808,983 804,724 807,385 818,786
Financing - Resolution 2770..................................................................................... 263,060 256,585 365,573 390,235
ACC financing ........................................................................................................ 43,891 43,891 500,118 524,935
Financing - Resolution 4131 .................................................................................... 20,893 20,755 24,243 24,468
Other financing....................................................................................................... 593,625 593,625 575,005 594,251
Investments............................................................................................................ 43,669 43,669 66,638 66,638
Related parties (assets)............................................................................................ 21,804 21,804 - -
Related parties (liabilities)........................................................................................ - - 125,320 125,320
The market values of swap contracts were obtained based on future income projections for each contract, calculated based on the present
value of the forward U.S. dollar + coupon rates (assets) and CDI future rates (liabilities) and adjusted to present value on the balance sheet
date, using the projected future CDI rate for each maturity. Swap contracts related to financing contracts are classified together with the
related financing, as a contra entry to the “Financial expenses/income, net” account, and are stated at cost plus accrued charges up to the
balance sheet date.
The Company believes that the balances of the other financial instruments, which are recognized in the books at the net contracted values,
are substantially similar to those that would be obtained if they were negotiated in the market. However, because the markets for these
instruments are not active, differences could exist if they were settled in advance.
c) Risk factors that could affect the Company’s business
Price risk: this risk is related to the possibility of price variations of the products that the Company sells or in the raw material prices and
other inputs used in the production process. Since the Company operates in a commodity market, its sales revenues and cost of sales may
be affected by the changes in the international prices of its products or materials. In order to minimize this risk, the Company constantly
monitors the price variations in the local and international markets.
Interest rate risk: this risk arises as a result of the possibility of losses (or gains) due to fluctuations in interest rates relating to Company
assets (investments) and liabilities. In order to minimize possible impacts resulting from interest rate fluctuations, the Company has adopted
a policy of diversification, alternating between fixed rates and variable rates (such as LIBOR and the CDI) and periodically renegotiates
contracts to adjust them to market.

158 159
GERDAU AÇOMINAS S.A.
Exchange rate risk: this risk is related to the possibility of fluctuations in foreign exchange rates affecting financial expenses (or income)
and the liability (or asset) balance of contracts denominated in a foreign currency. In order to manage the effects of these fluctuations, the
Company uses “hedge” instruments, usually swap contracts, as described in item “a” above.
Credit risk: this risk arises from the possibility of the Company not receiving amounts arising from sales or credit instruments at financial
institutions. In order to minimize this risk, the Company adopts the procedure of analyzing in detail the financial and equity position of its
customers, establishing a credit limit and constantly monitoring their balances. In relation to financial investments, the Company invests
solely in institutions with low credit risk, as assessed by rating agencies. In addition, each institution has a maximum limit for investment,
determined by the Company’s Credit Committee.
16 - Financial Expenses/Income, Net
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Financial income
Financial investments............................................................................................... 45,684 42,239 46,699 43,962
Interest received...................................................................................................... 31,265 3,934 29,025 3,962
Monetary variations - assets..................................................................................... 2,410 2,351 2,842 2,351
Foreign exchange variations - assets.......................................................................... (35,422) (81,329) (34,756) (81,329)
Other financial income............................................................................................. 37,380 1,958 38,554 2,002
___________ ___________ ___________ ___________
Total financial income ............................................................................................. ___________
81,317 ___________
(30,847) ___________
82,364 ___________
(29,052)
Financial expenses
Interest on debt....................................................................................................... (180,450) (79,159) (180,231) (79,356)
Monetary variations - liabilities ................................................................................ (18,058) (4,143) (18,464) (4,279)
Foreign exchange variations - liabilities...................................................................... 220,309 274,937 220,342 274,991
Foreign exchange swap - liabilities ........................................................................... (40,741) (275,736) (40,741) (275,736)
Other financial expenses .......................................................................................... (40,397) (9,726) (38,435) (9,793)
___________ ___________ ___________ ___________
Total financial expenses .......................................................................................... (59,337) (93,827) (57,529) (94,173)
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
17 - Taxes and Social Contributions Payable
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Income tax and social contribution on net income....................................................... 138,762 21,792 141,983 21,945
Social charges on payroll.......................................................................................... 46,208 46,759 46,380 47,591
Value-added tax on sales and services (ICMS)............................................................. 32,129 12,563 32,131 12,897
Social contribution on revenues (COFINS)................................................................... 32,485 13,800 32,512 13,904
Excise tax (IPI) ........................................................................................................ 14,114 2,912 14,114 2,966
Social Integration Program (PIS)................................................................................ 6,659 3,575 6,666 3,607
Income tax and social contribution withheld at source................................................. 6,892 2,937 6,912 3,096
Other .................................................................................................................... 10,254 1,025 10,408 1,120
___________ ___________ ___________ ___________
287,503 105,363 291,106 107,126
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
18 - Provision for Contingencies
The Company and its subsidiaries are parties in labor, civil, and tax processes. Based on the opinion of its legal advisors, management believes
that the provision for contingencies is sufficient to cover probable and reasonably estimable losses from unfavorable court decisions, and
the final decisions will not have significant effects on the financial position of the Company at December 31, 2004.

The balances of the contingencies are as follows:
I) Contingent liabilities provided
Company
Consolidated
______________________________ _____________________________
2004 2003 2004 2003
a) Tax Contingencies
Social contribution on net income.............................................................. (a.1) - 31,660 - 31,660
Corporate income tax............................................................................... (a.1) - 80,887 - 80,887
Emergency Capacity Charge ..................................................................... (a.2) 16,195 743 16,195 768
Extraordinary Tariff Recomposition............................................................. (a.2) 7,754 522 7,754 564
ICMS .................................................................................................... (a.3) 16,201 13,248 16,201 13,248
INSS ..................................................................................................... (a.4) 11,937 4,418 11,937 4,418
FGTS and other tax contingencies.............................................................. (a.5) 1,198 1,273 1,198 1,392
( - ) Judicial deposits................................................................................ (a.6) ____________ (39,012) ____________ (118,252) ____________ (39,012) ____________ (118,326)
14,273 14,499 14,273 14,611
b) Labor contingencies ...................................................................... (b.1) 33,316 13,352 33,316 13,352
( - ) Judicial deposits................................................................................ (b.2) ____________ (1,964) ____________ (1,959) ____________ (1,964) ____________ (1,959)
31,352 11,393 31,352 11,393
c) Civil contingencies......................................................................... (c.1) 7,575 6,704 7,575 6,704
( - ) Judicial deposits................................................................................ (c.2) ____________ (1,207) ____________ (1,063) ____________ (1,207) ____________ (1,063)
____________ 6,368 ____________ 5,641 ____________ 6,368 ____________ 5,641
Total liabilities provided .......................................................................... ____________
51,993 ____________
31,533 ____________
51,993 ____________
31,645
INSS (National Institute of Social Security).
FGTS (Government Severance Indemnity Fund for Employees).
a) Tax Contingencies
a.1) Considering the many legal decisions unfavorable to the unconstitutionality of the limitation of the offset of income tax and social
contribution loss carryforwards to 30% of net income, the Company decided to no longer deposit in court the amounts related to the matter
and requested, in the court injunction records in which it is the petitioner, the conversion of the amounts deposited in court (R$ 338,992) into
tax payments, and started observing the legal limitation. The legal challenge has been maintained; however, in the event the STF reviews its
current guidance and the Company is successful, it will plead the offset of the amounts overpaid.
a.2) R$ 16,195 (Company and consolidated) relating to the Emergency Capacity Charge (ECE), as well as R$ 7,754 (Company and consolidated)
related to the Extraordinary Tariff Recomposition (RTE), included in the electric energy bills of the Company’s plants. According to the
Company, these charges are of a tax nature and, as such, are incompatible with the National Tax System provided in the Federal Constitution.
For this reason, the constitutionality of this charge is being challenged in court. The lawsuits are in progress in the Federal Justice of the First
Instance of the states of Pernambuco, Ceará, Minas Gerais, Rio de Janeiro, São Paulo, Paraná, and Rio Grande do Sul, as well as in the Federal
Regional Courts of the 1 st and 2 nd Regions. The Company has fully deposited in court the amount of the disputed charges.
a.3) R$ 16,201 (Company and consolidated) relating to amounts for Value-added tax on sales and services (ICMS), the majority of which
relates to credit rights involving the Finance Secretariat and the State Courts of the First Instance in the state of Minas Gerais.
a.4) R$ 11,937 (Company and consolidated) refers to lawsuits questioning the position of the National Institute of Social Security (INSS) in
terms of charging INSS contributions on profit sharing payments made by the Company, as well as on payments for services rendered by
third parties, in which the Institute calculated charges for the last ten years and assessed the Company because it understands that the
Company is jointly liable. The assessments were maintained at the administrative level, and the Company filed annulment actions with the
judicial deposits of the related amounts, based on the understanding that the rights to assess part of the charge had prescribed and that
there is no such liability.
a.5) R$ 1,198 (Company and consolidated) relating to a lawsuit regarding the Government Severance Indemnity Fund for Employees (FGTS)
increased charges, which arose from the changes introduced by Complementary Law 110/01. Currently, the corresponding court injunction is
awaiting the judgment of the extraordinary appeal filed by the Company. The amount provided is fully deposited in court.
a.6) The judicial deposits, representing restricted assets of the Company, relate to amounts deposited and maintained in court until the
resolution of the related legal matters. The balances of these credits, which at December 31, 2004 amounted to R$ 39,012 (Company and
consolidated), are classified as a reduction of the provision for tax contingencies recorded in the books.
b) Labor Contingencies
b.1) The Company is also defending labor claims, for which there is a provision of R$ 33,316 at December 31, 2004 (Company and consolidated).
None of these claims refer to individually significant amounts, and the lawsuits mainly involve claims for overtime pay, health hazards and
risk premium, among others.

160 161
GERDAU AÇOMINAS S.A.
b.2) The balances of the deposits in court, which totaled R$ 1,964 at December 31, 2004 (Company and consolidated), are classified as a
reduction of the provision for labor contingencies.
c) Civil Contingencies
c.1) The Company is also defending in court civil claims arising in the normal course of its operations, including at December 31, 2004 claims
arising from work accidents totaling R$ 7,575 (Company and consolidated) as contingent liability for these claims.
c.2) At December 31, 2004, the balances of deposits in court totaled R$ 1,207 (Company and consolidated) and are classified as a reduction of
the provision for contingencies.
II) Contingent liabilities not provided
a) Tax Contingencies
a.1) Gerdau Açominas S.A. is defendant in an assessments filed by the state of Minas Gerais, as well as the petitioner of an annulment action,
relating to the export of semi-finished manufactured products. The total amount demanded is R$ 225,486. The Company has not recorded
any provision for contingency in relation to these claims since it considers this tax is not payable because the products cannot be considered
semi-finished manufactured products as defined by the federal complementary law and, therefore, are not subject to ICMS.
a.2) Also, R$ 68,431 are being demanded due to the understanding of the Federal Revenue Secretariat that the transactions carried out
by the Company, under the drawback concession granted by DECEX, were not in conformity with the legislation. The Company filed a
preliminary administrative defense of the legality of the arrangement, which is pending judgment. Since the tax liability has not been
definitely established, and considering that the arrangement which originated the demand conforms with the assumptions required for the
drawback concession, and also that the concession was granted after analysis by the legal administrative authority, the Company considers
an unfavorable outcome to be remote and, for this reason, has not recorded any provision for the contingency.
b) Civil Contingencies
b.1) A civil lawsuit filed against Gerdau Açominas S.A. regarding the termination of a contract for the supply of slag and indemnities for
losses and damages. At December 31, 2004, the lawsuit amounts to approximately R$ 37,014.
Gerdau Açominas S.A. contested all bases for the lawsuit and filed a counterclaim for termination of the contract and indemnity for breach
of contract.
The judge declared the contract to be terminated, since this demand was common to both parties. With regards to the remaining discussion,
the judge understood that both parties were at fault and judged the requests for indemnity unfounded. This decision was maintained by
the Court of Civil Appeals of the State of Minas Gerais (TAMG), and the court decision is based on expert evidence and interpretation of the
contract. The process was in the High Court of Justice (STJ), and returned to the TAMG for judgment of the appeal requesting clarification
of the decision.
The Company believes that any loss from the case is remote, since it understands that a change in the judgment is unlikely.
b.2) A civil lawsuit filed by Sul America Cia Nacional de Seguros against the Company and Banco Westdeustsche Landesbank Girozentrale,
New York Branch (WestLB), for the payment of R$ 34,383 to settle an indemnity claim, which has been deposited in court. The insurance
company pleads doubt in relation to whom payment should be made and alleges that the Company is resisting in receiving and settling
it. The lawsuit was contested both by the Bank (which claims having no right over the amount deposited, which resolves the doubt raised
by Sul América) and by the Company (which claims that there is no such doubt and that there is justification to refuse payment since the
amount owed by Sul América is higher than the amount involved). Subsequently, Sul América claimed fault in the Bank’s representation,
which matter is already settled, which resulted in the withdrawal in December 2004 of the amount deposited. The process should enter the
expert evidence phase, mainly for calculation of the amount due. Based on the opinion of its legal advisors, the Company expects loss to be
remote and that the sentence will declare the amount payable within the amount stated in the pleading.
Also, Gerdau Açominas S.A. filed, prior to this lawsuit, a lawsuit for payment of the amount recognized by the insurance companies. The
lawsuits are pending. The Company expects a favorable outcome in this lawsuit.
The civil lawsuits arise from an accident on March 23, 2002 with the blast furnace regenerators of the Ouro Branco steel mill, which resulted
in the stoppage of several activities, with material damages to the steel mill equipment and loss of profits. The equipment, as well as the
loss of profits arising from the accident, were covered by an insurance policy. The report on the event, as well as the loss claim, was filed
with IRB - Brasil Resseguros S.A., and an advance payment of R$ 62,000 was received in 2002.
In 2002, a preliminary and conservative estimate of indemnities related to the coverage of loss of profits and material damages, in the total
amount of approximately R$ 110,000, was recorded, based on the amount of fixed costs incurred during the period of partial stoppage of
the steel mill activities and the immediate expenses to be incurred to recover the equipment temporarily. This estimate approximates the
advance amount received plus the amount proposed by the insurance company as a complement to settle the indemnity. Subsequently, new
amounts were added to the discussion, as stated in the Company’s plea, although not yet recorded.
Based on the opinion of its legal advisors, the Company considers that losses from other contingencies that may affect the results of
operations or the Company’s consolidated financial position are remote.
III) Contingent assets not recorded
a) Tax Contingencies
The Company and its subsidiary Margusa - Maranhão Gusa S.A. expect to recover IPI premium credits. Margusa Maranhão Gusa S.A. has
filed an administrative appeal, which is pending judgment. The Company has filed an injunction requesting the return of credits, which was
judged unfavorably. Currently, the process awaits judgment of the appeal filed by the Company. The Company estimates the credits at
R$ 145,786 (Company) and R$ 160,365 (consolidated) but no accounting recognition has been made thereof because of the uncertainty as to
their realization.

19 - Related Parties
a) Analysis of loan balances
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Gerdau S.A............................................................................................................. 51,245 22,606 51,245 22,606
Fundação Gerdau .................................................................................................... 1,304 16,795 1,304 16,795
Armafer Serviços de Construção Ltda......................................................................... - 652 - -
Seiva S.A. - Florestas e Indústrias.............................................................................. 220 1,657 220 1,657
GTL Brasil Ltda........................................................................................................ - 5,958 - 5,958
Florestal Rio Largo Ltda............................................................................................ (8,302) (4,676) (8,302) (4,676)
Metalúrgica Gerdau S.A............................................................................................ 381 (3,390) 381 (3,390)
Açominas Com. Imp. e Export. S.A. - Açotrading......................................................... (13,912) (13,921) - -
GTL Financial Corp................................................................................................... - (173,885) - (173,885)
Gerdau Internacional Empreend Ltda. ....................................................................... (23,556) (7) (23,556) (7)
Sipar Aceros S.A. and other....................................................................................... ___________ 798 ___________ 9,902 ___________ 512 ___________ 9,622
TOTAL..................................................................................................................... ___________
8,178 ___________
(138,309) ___________
21,804 ___________
(125,320)
Financial income (expenses)...................................................................................... 41 2,840 (1,017) 2,845
b) Commercial transactions
Company - 2004 Company - 2003
______________________________________________ ______________________________________________
Income/ Accounts Purchases/ Accounts
Sales expenses receivable Sales expenses receivable
Gerdau S.A.................................................... - - - 193,020 (5,112) -
Açominas Overseas Ltd. (*).............................. 3,633,608 - 671,485 1,711,861 - 352,549
Armafer Serviços de Construção Ltda. .............. 256 - - 42 - 114
Gerdau Laisa S.A. .......................................... 62 - 116 - - 116
Gerdau Ameristeel Corporation ....................... - - - 10,506 - -
Sipar Aceros S.A. ........................................... 11 - - 14,337 - 7,509
Gerdau AZA.S.A. ............................................ 565 - 105 - - -
Indac - Ind. Adm. e Comércio S.A. (**).............. - (8,154) - - (624) -
(*) Transactions carried out due to securitization operations.
(**) Payments of guarantees of loans.
c) Guarantees granted - The Company is the guarantor of vendor loan agreements of the associated company Banco Gerdau S.A., in the total
amount of R$ 68,138 at December 31, 2004.
20 - Post-Employment Benefits
Considering all types of benefits to employees granted by the Company, the asset and liability positions at December 31 are as follows:
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Retirement and discharge benefits payable................................................................. ___________ 6,418 ___________ 7,794 ___________ 6,418 ___________ 7,794
Total liabilities........................................................................................................ ___________
6,418 ___________
7,794 ___________
6,418 ___________
7,794
Unrecognized actuarial assets................................................................................... ___________ 161,240 ___________ 121,862 ___________ 161,240 ___________ 121,154
a) Pension plan - defined benefit
The Company and its subsidiaries are the co-sponsors of defined benefit pension plans that cover substantially all employees (“Açominas
Plan” and “Gerdau Plan”).
The Açominas Plan is managed by Fundação Açominas de Seguridade Social - Aços, a closed supplementary pension entity to complement
the social security benefits of employees and retired employees of the Ouro Branco unit. The assets of the Açominas Plan mainly comprise
investments in bank deposit certificates, federal public securities, marketable securities and properties.
The Gerdau Plan is managed by Gerdau - Sociedade de Previdência Privada, a closed supplementay pension entity to complement the social
security benefits of employees and retired employees of the other units of Gerdau Açominas S.A. The assets of the Gerdau Plan comprise
investments in bank deposit certificates, federal public securities and marketable securities.

162 163
GERDAU AÇOMINAS S.A.
The sponsors’ contributions to these pension plans were R$ 12,911 in 2004 and R$ 8,784 in 2003 for the Company and R$ 12,957 in 2004 and
R$ 8,828 in 2003 consolidated.
Current expenses of the defined pension plan are as follows:
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Cost of current service............................................................................................. 20,364 11,365 20,511 11,443
Interest cost............................................................................................................ 64,749 34,200 65,213 34,287
Expected return of plan assets.................................................................................. (104,382) (51,170) (105,145) (51,220)
Amortization of (gain) loss ....................................................................................... (3,157) (873) (3,224) (873)
Employees’ expected contribution.............................................................................. (4,383) (3,576) (4,383) (3,576)
___________ ___________ ___________ ___________
Pension plan cost (benefit), net................................................................................. (26,809) (10,054) (27,028) (9,939)
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
The reconciliation of the assets and liabilities of the plans is presented below:
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Total liabilities........................................................................................................ (620,166) (527,213) (620,166) (527,977)
Fair value of plan assets........................................................................................... ___________ 873,050 ___________ 771,482 ___________ 873,050 ___________ 771,985
Net assets............................................................................................................... 252,884 244,269 252,884 244,008
Unrecognized (gains) losses...................................................................................... (102,021) (122,407) (102,021) (122,754)
Past service costs..................................................................................................... ___________ 10,377 ___________- ___________ 10,377 ___________-
Total assets, net...................................................................................................... ___________
161,240 ___________
121,862 ___________
161,240 ___________
121,254
Changes in plan assets and actuarial liabilities were as follows:
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Changes in benefit liabilities
Benefit liabilities at the beginning of the year............................................................. 527,213 333,903 527,977 334,756
Cost of service........................................................................................................ 20,364 11,365 20,511 11,443
Interest cost............................................................................................................ 64,749 34,200 65,213 34,287
Actuarial loss.......................................................................................................... 11,474 57,198 10,962 56,944
Payment of benefits................................................................................................. (14,874) (12,474) (14,874) (12,474)
Past service costs due to changes in the plan.............................................................. 10,171 - 10,377 -
Effect of merger/operational integration..................................................................... ___________ 1,069 ___________ 103,021 ___________- ___________ 103,021
Benefit liabilities at the end of the year..................................................................... ___________
620,166 ___________
527,213 ___________
620,166 ___________
527,977
Company
Consolidated
____________________________ ____________________________
2004 2003 2004 2003
Changes in plan assets
Fair value of plan assets at the beginning of the year.................................................. 771,482 499,627 771,985 500,079
Return on plan assets............................................................................................... 97,530 120,249 97,780 120,256
Sponsor contributions.............................................................................................. 12,911 8,784 12,957 8,828
Participant contributions.......................................................................................... 5,202 4,232 5,202 4,232
Payment of benefits................................................................................................. (14,874) (12,474) (14,874) (12,474)
Effect of merger/operational integration..................................................................... ___________ 799 ___________ 151,064 ___________- ___________ 151,064
Fair value of plan assets at the end of the year........................................................... ___________
873,050 ___________
771,482 ___________
873,050 ___________
771,985

As a result of the operational integration on November 28, 2003, the assets and liabilities of the Gerdau Plan, related to the employees
transferred to Gerdau Açominas S.A., were allocated to the Açominas Plan, and the Supplementary Social Security Secretariat approved the
addition of Gerdau Açominas S.A. as a sponsor of the Retirement and Supplementary Retirement Plans managed by Gerdau - Sociedade de
Previdência Privada.
The method for calculating the actuarial liability is the Projected Unit Credit Method, as determined by CVM Deliberation 371/2000.
The amount of the actuarial gains and losses to be recognized as income or expense is the unrecognized amount that exceeds, in each
period, the higher of the following limits: (i) 10% of the present value of the total actuarial liability of the defined benefit plan and (ii) 10% of
the fair value of the plan assets. The resulting amount will be amortized annually based on the average remaining years of service estimated
for the employees that participate in the plan.
The table below shows a summary of the assumptions made to calculate and record the defined benefit plan for both the Company and
consolidated:
Gerdau plan
Açominas plan
Average discount rate ............................................................................................. 11.30% 11.30%
Increase in compensation ........................................................................................ 9.20% 8.675%
Expected rate of return on assets ............................................................................. 12.35% 12.35%
Mortality chart ....................................................................................................... GAM 83 (-1 year) AT-83
Disabled mortality chart........................................................................................... RRB 1944 AT-83
Turnover rate........................................................................................................... Based on service Null
and salary level
b) Pension plan - defined contribution
The Company and its subsidiaries are also the co-sponsors of a defined contribution pension plan administered by Gerdau - Sociedade de
Previdência Privada. Contributions are based on a percentage of the compensation of employees. The total cost of this plan was R$ 2,661 in
2004 and R$ 181 in 2003 for the Company and R$ 2,682 in 2004 and R$ 195 in 2003 consolidated.
c) Other post-employment benefits
The Company estimates that the amounts payable to executives on their retirement or discharge totals R$ 6,418 (Company and consolidated
at December 31, 2004, (R$ 7,794 in 2003 - Company and consolidated).
21 - Shareholders’ Equity
a) Capital - authorized capital at December 31, 2004 comprises 200,000,000 common shares (200,000,000 at December 31, 2003) and
200,000,000 preferred shares (100,000,000 at December 31, 2003), with no par value.
At December 31, 2004, 158,633,709 common shares (158,633,709 at December 31, 2003) and 17,798 preferred shares (17,798 at December 31,
2003) are subscribed and paid-up, totaling R$ 2,340,576 (R$ 2,340,576 at December 31, 2003). Preferred shares do not have voting rights and
cannot be redeemed, but have the same rights as common shares in terms of profit sharing.
b) Interest on equity and dividends - the Company calculated interest on equity in accordance with the terms established by Law 9249/95.
The corresponding amount was recorded as financial expenses for tax purposes. For presentation purposes, this amount was recorded as
dividends, not affecting net income. The related tax benefit through the reduction of the income tax and social contribution on net income
charge for the year was R$ 101,761. Shareholders are entitled to receive, each year, a minimum mandatory dividend of 30% of adjusted net
income.
The amount of interest on equity and dividends credited for the year was R$ 938,662, shown as follows:
2004 2003
Net income for the year..................................................................................................................................................... 2,483,483 849,843
Realization of revaluation reserve....................................................................................................................................... - 7,395
Transfer to legal reserve.................................................................................................................................................... ___________ (124,174) ___________ (42,492)
Adjusted net income......................................................................................................................................................... ___________
2,359,309 ___________
814,746

164 165
GERDAU AÇOMINAS S.A.
Distributions during the year
Period Nature R$/share Credit Payment 2004 2003
1 st quarter........................................................................ Interest 0.48 03/30/2004 05/18/2004 75,915 -
Dividends 0.17 03/30/2004 05/18/2004 27,288 -
2 nd quarter....................................................................... Interest 0.47 06/30/2004 08/17/2004 74,884 -
Dividends 0.85 06/30/2004 08/17/2004 134,536 -
3 rd quarter....................................................................... Interest 0.94 07/31/2004 11/17/2004 148,498 -
Dividends 1.08 11/03/2004 11/17/2004 171,344 -
4 th quarter....................................................................... Dividends 1.93 02/11/2005 02/22/2005 _________ 306,197 _________ 283,986
Interest on equity and dividends......................................... _________
938,662 _________
283,986
% interest/dividends paid or credited.................................. 40% 35%
Credit per share (R$)......................................................... 5.92 1.79
Outstanding shares (thousands)......................................... 158,651 158,651
The remaining income for the year was transferred to the statutory reserve for investments and working capital in accordance with the by-laws.
c) Reserve for tax incentives
The Company recorded a reserve for tax incentives in the amount of R$ 190,905 due to the reduction of income tax on the exploitation profit
of the units located in the Northeastern region of Brazil, as well as benefits arising from state tax financing.
22 - Calculation of EBITDA
Consolidated
____________________________
2004 2003
Gross profit...................................................................................................................................................................... 4,240,415 999,967
Selling expenses............................................................................................................................................................... (400,301) (94,702)
General and administrative expenses.................................................................................................................................. (645,510) (174,040)
Depreciation and amortization........................................................................................................................................... ___________ 492,433 ___________ 148,450
EBITDA............................................................................................................................................................................ ___________
3,687,037 ___________
879,675
23 - Other Operating Income (Expenses), Net
The amount recorded as operating income (expenses), net mainly refers to the recognition of R$ 102,449 (Company and consolidated)
arising from the favorable outcome obtained in the lawsuit regarding PIS incorrectly paid.
24 - Statutory Profit Sharing
a) The management profit sharing is limited to 10% of net income for the year, after income tax and management fees, as stated in the
Company’s by-laws;
b) The employees’ profit sharing is linked to the attainment of operating goals and was charged to cost of production and general and
administrative expenses, as applicable.

Board of Directors
Chairman
JORGE GERDAU JOHANNPETER
Vice Chairmen
GERMANO H. GERDAU JOHANNPETER
KLAUS GERDAU JOHANNPETER
FREDERICO C. GERDAU JOHANNPETER
CARLOS JOÃO PETRY
Board Member
MARCO ANTÔNIO PEPINO
Secretary General
EXPEDITO LUZ
EXECUTIVE COMMITTEE
President
JORGE GERDAU JOHANNPETER
Vice Presidents
FREDERICO C. GERDAU JOHANNPETER,
Senior Vice President
ANDRÉ BIER JOHANNPETER
CLAUDIO JOHANNPETER
OSVALDO BURGOS SCHIRMER
DOMINGOS SOMMA
FILIPE AFFONSO FERREIRA
RICARDO GEHRKE
Secretary General
EXPEDITO LUZ
Sérgio Braz Domingues
Accountant
CRC RS No. 27.466 - S - MG
CPF No. 204.819.850-34
Corporate Officers
ALFREDO HUALLEM
ANDRÉ FELIPE GUEIROS REINAUX
ANDRÉ PIRES DE OLIVEIRA DIAS
CLÁUDIO MATTOS ZAMBRANO
DIRCEU TARCÍSIO TOGNI
ÉRICO TEODORO SOMMER
EXPEDITO LUZ
FLADIMIR BATISTA LOPES GAUTO
FRANCISCO DEPPERMANN FORTES
GERALDO TOFFANELLO
GERSON MARCOS VENZON
GUILHERME CHAGAS GERDAU JOHANNPETER
HEITOR LUIS BENINCA BERGAMINI
JOAQUIM DE SOUZA GOMES
JOAQUIM GUILHERME BAUER
JOÃO APARECIDO DE LIMA
JOÃO CARLOS SALIN GONÇALVES
JOSÉ MAURÍCIO WERNECK GUIMARÃES DA SILVA
JULIO CARLOS LHAMBY PRATO
LUIZ ALBERTO MORSOLETTO
LUIZ ANDRÉ RICO VICENTE,
Vice President on Gerdau Açominas
LUIZ AUGUSTO POLACCHINI
MANOEL VÍTOR DE MENDONÇA FILHO
NESTOR MUNDSTOCK
OMAR DE OLIVEIRA FANTONI
PAULO RICARDO TOMAZELLI
PAULO ROBERTO PERLOTT RAMOS
RUY LOPES FILHO
SIRLEU JOSÉ PROTTI
TADEU PETTERLE

166 167
GERDAU AÇOMINAS S.A.
Report of Independent Auditors
To the Board of Directors and Shareholders
Gerdau Açominas S.A.
1. We have audited the accompanying balance sheets of Gerdau Açominas S.A. and the consolidated balance sheets
of Gerdau Açominas S.A. and its subsidiaries as of December 31, 2004 and 2003, and the related statements of
income, of changes in shareholders’ equity and of changes in financial position of Gerdau Açominas S.A., as well
as the related consolidated statements of income and of changes in financial position, for the years then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements.
2. We conducted our audits in accordance with approved Brazilian auditing standards, which require that we
perform the audit to obtain reasonable assurance about whether the financial statements are fairly presented in
all materials respects. Accordingly, our work included, among other procedures: (a) planning our audit taking into
consideration the significance of balances, the volume of transactions and the accounting and internal control
systems of the companies; (b) examining, on a test basis, evidence and records supporting the amounts and disclosures
in the financial statements, and (c) assessing the accounting practices used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.
3. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial
position of Gerdau Açominas S.A. and of Gerdau Açominas S.A. and its subsidiaries at December 31, 2004 and
2003, and the results of operations, the changes in shareholders’ equity and the changes in financial position of
Gerdau Açominas S.A., as well as the consolidated results of operations and of changes in financial position, for
the years then ended, in accordance with accounting practices adopted in Brazil.
4. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as
a whole. The statement of cash flows is presented for purposes of additional analysis and is not a required part
of the basic financial statements. This information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly presented in all material respects in relation
to the financial statements taken as a whole.
Porto Alegre, March 4, 2005
Auditores Independentes
CRC 2SP000160/O-5 “F” MG
Carlos Alberto de Sousa
Accountant CRC 1RJ056561/O-0 - “S” MG

Services to Analysts and Investors
I n v e s t m e n t a n a l y s t s a n d c a p i t a l m a r k e t
institutions may obtain additional information
and copies of this report by contacting the Office
of Investor Relations at:
Av. Farrapos, 1811
CEP 90220-005 – Porto Alegre, RS
Brazil
Phone: +55 (51) 3323.2703
Fax: +55 (51) 3323.2281
Website: www.gerdau.com.br/ri
E-mail: inform@gerdau.com.br
Analysts and investors of Gerdau Ameristeel Corp.
must contact the Office of Investor Relations at
the following address:
4221 W. Boy Scout Blvd. – Suite 600
Tampa, FL 33607 – U.S.A.
Phone: +1 (813) 207.2300
Website: www.gerdauameristeel.com
E-mail: ir@gerdauameristeel.com
Shareholder Services
Book-entry shares issued by the listed companies
are held at Banco Itaú S. A. at the following
address:
Superintendência de Serviços para Empresas
Av. Engenheiro Armando de Arruda Pereira, 707
Jabaquara
CEP 04344-902 – São Paulo, SP
Brazil
Phone: +55 (11) 5029.7780
Fax: +55 (11) 5029.1917
For the purposes of exercising rights or obtaining
information concerning the status of shares,
please refer to any branch of the Depositary
Institution (Banco Itaú) or contact Shareholder
Relations at Gerdau:
Av. Farrapos, 1811
CEP 90220-005 – Porto Alegre, RS
Brazil
Phone: +55 (51) 3323.2211
Fax: +55 (51) 3323. 2281
Toll free: 0800 702 2001
E-mail: acionistas@gerdau.com.br

Corporate Communications
Av. Farrapos, 1811
CEP 90220-005 - Porto Alegre, RS
Brazil
Phone: +55 (51) 3323.2151
Fax: +55 (51) 3323.2295
gerdau@gerdau.com.br
www.gerdau.com.br
Writing and Coordination
Gerdau Group Corporate Communications
Graphic Design and Production Supervision
GAD’ Design
Printing
Impresul Serviço Gráfico e Editora Ltda.
Translation
Scientific Linguagem
Photo Credits
Conception and production of images on the cover and pages 18, 44 and 56: SLM Ogilvy
Gerdau archive (pages 41, 53, 54, 55, 64, 65, 66, 67)
Junior Achievement archive (page 51)
Ary Diesendruck (pages 43, 67)
Carlos Alberto Pereira (page 63)
Carlos Levitanus (page 64)
Cláudio Meneghetti (page 18)
Eliana Pereira (page 32)
Eneida Serrano (pages 52, 67)
Felipe Hellmeister (cover, pages 44, 56)
Flávio Luiz Russo (pages 5, 8, 40, 46, 51, 58, 62, 64, 65)
GH Digital (pages 35, 36, 48)
Juliana Maria Carniel (page 63)
Leonid Streliaev (pages 9, 12, 31, 47)
Luis Fernando Arenas (page 41)
Lya Huguet (pages 53, 61)
Mathias Cramer (pages 6, 59)
Matías del Campo (page 49)
New York Stock Exchange, Inc. (page 24)
Osmar de Souza Raposo (page 63)
Rodrigo Antônio Moreira (page 52)
Rosangela Reitz (page 35)
Rudolph Lopez (page 38)
Paper
High whiteness produced by Cia. Suzano from cultivated trees.
Print Run
3,800 copies in Brazilian Portuguese and 1,000 copies in English.
We would like to thank all of those who contributed by supplying information and images for
this publication.
Porto Alegre, May 2005.

2004 GERDAU Annual Report
Brazil
gerdau@gerdau.com.br
Canada and the United States
gerdau@gerdauameristeel.com
Chile
gerdau@gerdauaza.cl
Uruguay
gerdau@laisa.com.uy
Argentina
sipar@sipar.com.ar
www.gerdau.com.br