3Q16 Earnings Conference Call André B. Gerdau Johannpeter President & Chief Executive Officer

Harley Lorentz Scardoelli Chief Financial Officer

Gerdau is the pioneer in the world steel industry in industrial equipment monitoring systems, thanks to its partnership with GE Digital

Slight increase in demand for steel is expected in 2016, after the decline last year World steel demand should increase 0.2% in 2016 compared to 2015, reaching 1.5 billion tonnes, after dropping 3% in 2015 (Worldsteel Association). Surplus global installed capacity and unfair trade practices remain industry concerns. Add to this the economic recession in Brazil, which is reflected in lower demand. In Brazil, steel consumption in 2016 should drop 14%, the worst level in the last decade. In 2017, domestic consumption should increase 3.8% (Brazilian Steel Institute). In North America, the increase in imports, the caution surrounding the elections in the U.S. and weak industry demand have affected margins in the sector. In 2017, steel consumption should grow 3% in the U.S. In South America, the highlights are the bright prospects in 2017 for the economies of Peru (+4.1%), Colombia (+2.7%) and Argentina (+2.7%). In the Special Steels segment, the automotive sector in Brazil should improve in 2017. In the Unites States, the light vehicles market should continue its healthy performance. In India, the automotive sector is expected to remain buoyant.

Global steel demand in 2017 should grow 0.5%. Excluding China, demand in emerging economies and developing countries should grow 4% 2

Net sales of R$ 8.7 billion in 3Q16 Reduction of 23% in selling, general and administrative expenses compared to 3Q15 reflects the Company's cost management efforts. In the first nine months, SG&A expenses decreased by R$ 222 million. Adjusted EBITDA of R$ 1.2 billion is 7% lower than in 3Q15 but remains stable in relation to 2Q16. Net income of R$ 95 million in the quarter and R$ 293 million in the year. Unit

3Q16

3Q15

∆%

9M16

9M15

∆%

SHIPMENTS

'000 ton

3,668

4,669

-21%

11,759

13,083

-10%

NET SALES

R$ million

8,699

11,925

-27%

29,032

33,123

-12%

COST OF GOODS SOLD

R$ million

(7,652)

(10,714)

-29%

(26,090)

(29,628)

-12%

SG&A EXPENSES

R$ million

(483)

(631)

-23%

(1,705)

(1,927)

-11%

EBITDA Adjusted

R$ million

1,200

1,291

-7%

3,332

3,591

-7%

EBITDA MARGIN Adjusted

%

13.8%

10.8%

11.5%

10.8%

R$ million

95

193

-51%

293

725

-60%

R$ million

230

1,646

-86%

1,048

1,797

-42%

NET INCOME Adjusted FREE CASH FLOW

Free cash flow of R$ 1.0 billion in the first nine months of 2016 3

Investments of R$ 286 million in 3Q16

7% Brazil 20%

South America 50%

23%

North America Special Steel

Main projects Heavy plate rolling mill at Ouro Branco Unit in Minas Gerais Melt shop in Argentina CAPEX disbursement planned for 2017 is R$1.4 billion, focused on productivity improvement and maintenance

4

Financial Results Gerdau S.A. Consolidated – IFRS

Geographic diversification reduces volatility in results Shipments ('000 ton) North America BD

Brazil BD 1,938 1,629

3Q15

2Q16

1,664

1,482

South America BD

Special Steel BD

1,644 1,372

3Q16

3Q15

2Q16

3Q16

583

532

516

617

595

3Q15

2Q16

3Q16

3Q15

2Q16

437

3Q16

EBITDA and EBITDA margin per BD North America BD

Brazil BD

19.7%

470

13.2%

12.6%

585

402

15.5% 10.7%

519

9.5%

7.9%

408 274

3Q15

2Q16

EBITDA (R$ million)

3Q16

16.6%

32.5%

32.2%

3Q15

2Q16

EBITDA Margin (%)

Special Steel BD

South America BD

3Q16

18.7%

14.0%

13.6%

16.8%

10.2%

9.1%

187

157

224

267

130

233

3Q15

2Q16

3Q16

3Q15

2Q16

3Q16

Participation of Adjusted EBITDA per BD (last 12 months)

6

EBITDA stable despite challenging scenario EBITDA (R$ million) 148

2,956

31

1,291

1,200

(2,374) (852) EBITDA 3Q15 Shipments Adjusted

Net Cost of Sales Sales/tonne*

SG&A

Others

EBITDA 3Q16 Adjusted

* Includes Net Sales of Iron Ore

Net Income (R$ million) 105 193

12

(91)

Net Income EBITDA Variation Adjusted 3Q15

Depreciation

Net Financial Result*

(124)

95

Income Taxes and others*

Adjusted Net Income 3Q16

* Net of the effect from Net Investment Hedge.

SG&A reduced 23% compared to 3Q15 7

Maintenance of Net Debt Debt & Leverage Ratio

Long-Term Debt Amortization Schedule

R$ billion

R$ billion 3.5

27.6

26.5 3.7x

4.2x

23.7

3.6x

4.1x

20.7 4.1x

21.1

3.6x

4.0x 3.6x

4.9

5.3

4.0x

2.6 2.7*

2.0

3.3

1.9

2.7x

6.7

6.9

5.5

1.7 0.9 0.2

Sep/15

Dec/15 Gross Debt

Mar/16

Net debt/EBITDA (R$)

Jun/16 Cash

2017

2018

2019

2020

2021

2022

2023

2024

Net debt/EBITDA (US$)

Average Debt Cost: 7.4%

(1) EBITDA in the last 12 months.

Sep/16

2025 and after

Average Debt Term: 5.5 years

*R$ 2.6 billion refers to a bond with maturity in October 2017.

Stability of the Net Debt/EBITDA ratio 8

Net sales reduction affected the financial cycle Working Capital (R$ million) Trade accounts receivable (+) Inventories (+) Trade accounts payable (-) Working Capital

12.31.2015

06.30.2016

09.30.2016

4,587 8,781 3,630 9,738

4,043 6,764 2,757 8,050

4,091 6,911 2,558 8,444

11.4 9.7

9.3 8.1

86

84

8.4

87

83 71

sep.15

dec.15

mar.16

Working Capital (R$ billions)

jun.16

sep.16

Cash Conversion Cicle (days)

Working capital reduced by R$ 1.3 billion in 2016

9

Positive free cash flow despite the challenging scenario 3Q2016 1,200

(286)

(40) (255)

Adjusted EBITDA 3Q16

CAPEX

Income Tax

(1,097)

(132)

Debt Interest

(389)

230

Working Capital

Free Cash Flow 3Q16

9M2016 3,332

(856)

(199)

1,048 Adjusted EBITDA 9M 2016

CAPEX

Income Tax

Debt Interest

Working Capital

Free Cash Flow 9M 2016

EBITDA was more than sufficient to honor the Company’s commitments 10

Closing Remarks Management's efforts helped to mitigate the impact of the adverse scenario in the steel industry in Brazil and around the world. Third Quarter Highlights: - Reduction in selling, general and administrative expenses (-23%) - Improvement in EBITDA margins in almost all operations - Continued containment of Capex (R$ 286 million in 3Q) - Substantial free cash flow generation (R$ 1 billion in 9 months) - Stability of net debt Brazil: despite the improvement in margins, the market scenario is expected to remain challenging in the coming months, marked by a gradual and slow recovery in economic activity and lower volume of exports. The challenging scenario also applies to other operations in the Americas. Ongoing review of the potential profitability of assets. Modernization of corporate culture. Digital innovation in operations, with the use of new technologies to rapidly improve efficiency and productivity and to cut costs. 11

4Q16 Earnings Release: February 22, 2017

22 FEBRUARY

12