Institutional Presentation
1Q19
Classification of Information: Public AGENDA
Usiminas
Pillars of Usiminas’ Management
People Clients Results
Governance and Highlights
Appendix Classification of Information: Public Usiminas at a Glance
Company Overview Geographic Footprint
✓ Usiminas is the leading integrated flat steel producer in Latin America, with operations in several segments of the value chain, such as mining and logistics, capital goods, service and distribution centers and customized solutions
✓ Two steel plants strategically located along Brazil’s main industrial axis, with sales force present in the main regions of the country IPATINGA Belo Horizonte Itabria Porto TUBARÃO ✓ Steel company with the largest number of patents rights and largest research Itaúna center in Latin America
✓ First Brazilian steel company certified by ISO 9001 and ISO 14001 Mining São Paulo Porto ITAGUÁ ✓ Founder of the most enduring environmental education project in the private Steel Steel Processing Porto CUBATÃO sector since 1984 Capital Goods
Shareholder Structure (% of total capital, except otherwise indicated) Financial Highlights (in R$mm, except otherwise indicated)
Voting Capital Preferred Shares LTM 2015 2016 2017 2018 1Q19 Nippon Group Control Group: Ternium/Tenaris 1% 68.57% of Voting Nippon Group Group Net Revenues 10,186 8,454 10,734 13,737 14,025 Capital 1% 2% Growth YoY (13%) (17%) 27% 28% 2% Others 23% Nippon Adjusted EBITDA 291 660 2,186 2,693 2,539 Group Margin 3% 8% 20% 20% 18% Ternium/ 32% Tenaris Net Income (3,685) (577) 315 829 748 Group Others Margin (36%) (7%) 3% 6% 5% 7% Usiminas 98% Pension Total Debt 7,886 6,942 6,656 5,854 5,496 Fund Cash and Equivalents 2,024 2,257 2,314 1,693 1,773 Ternium/Tenaris Group 4% 32% Net Debt 5,862 4,684 4,342 4,161 3,723 705,260,684 shares 547,818,424 shares Net Debt / EBITDA 20.1 x 7.1 x 2.0 x 1.6 x 1.5 x 56% of ON and 44% of PN
2 Classification of Information: Public Complete Solutions on Products and Services
Upstream Downstream
Mining Steel Steel Processing Capital Goods
Mineração Usiminas Ipatinga | Cubatão | Unigal Soluções Usiminas Usiminas Mecânica
✓ JV formed in 2010 through a ✓ Largest producer of flat rolled ✓ Created in 2010, Soluções ✓ High value-added products for partnership with Sumitomo steel in LatAm Usiminas has a wide portfolio of the capital goods industry Corporation products and services in the ✓ Two industrial plants in Ipatinga transformation and distribution ✓ Major provider of creative ✓ Responsible for the mining (MG) and Cubatão (SP) of flat rolled steel division solutions for the steel, mining, operations, in addition to rail automotive, energy, and port transportation ✓ Production capacity of 9.5mm ✓ Holds 7 industrial facilities petrochemical, among other tons of annual crude steel industries ✓ Four mining properties in the ✓ Working with steel produced by Serra Azul region in MG ✓ Also holds Unigal Usiminas, a JV the Usiminas plants, it ✓ Main products/solutions: with Nippon Steel responsible for aggregates services, logistics bridges, metallic structures, ✓ Also has pellet and sinter feed steel hot-dip galvanizing and adaptation of volumes to the blanks, equipment, foundry, etc processing plants activities, enhancing the customers’ demands technology content within ✓ Industrial plants in Ipatinga ✓ Concluded investments that will Usiminas’ steel (MG), Congonhas (MG) and expand the current capacity to Cubatão (SP) 12mm tons/year
3 Classification of Information: Public Mining Usiminas is evaluating alternatives for its participation in this asset
Overview Assets Location
44°25’W 44°20’W 44°15’W ▪ JV formed in 2010 through a partnership with Sumitomo Corporation São Joaquim
(30% economic stake) responsible for mining operations in addition to De Bicas
5’S 5’S ° Emicon °
rail and port transportation MUSA 20 Mineração Leste MUSA Pau 20 Usiminas MUSA MMX de Vinho ▪ Four mining sites in the Serra Azul region (MG), with resources of 2.4 Central billion tons of iron ore MUSA Oeste ▪ Asset base also includes pellet and sinter feed processing plants Ferrous Comisa Ferrous
Arcelor (Santanense) 10’S
Mittal 10’S °
▪ Concluded investments that will expand the currently capacity to 12 ° 20 mm tons/year MBL 20 ▪ The company also has 20% voting shares of MRS Logistica and a Itatiaiuçu strategic field in Sepetiba Bay (RJ) 44°25’W 44°20’W 44°15’W ▪ ISO 9001 certification from Bureau Veritas Certification (BVC) 0 5 10 20 km
Iron Ore Sales and Price PLATTS (62% FE CFR China) EBITDA (R$ mm) and EBITDA Margin (%)
Mining Business Unit - Thousand tons – Prices in US$/ton
36.5% 74 72 83 65 67 26.3% 19.5% 1,896 16.5% 1,806 1,768 12.0% 1,514 1,386 868 839 1,084 670 681 153 221 416 235 167 136 83 708 609 612 49 555 569 33 38
1 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 2Q18 3Q18 4Q18 1Q19 Sales to Usiminas Sales to 3rd parties - Domestic Market Reported EBITDA Reported EBITDA Margin Exports Total Iron Ore Price - US$/t CFR China 1 With a negative non-recurring effect of R$ 38 Million negative due a provision for non- recovery of ICMS. 4 Classification of Information: Public Mining (Cont’d) Dry Stacking
Dry Stacking
Reclaimed water
Filtration plant
Waste + water
Flotation Dry Stack Waste Tailings
✓ MUSA is in the process of investing in the dry stacking technique. With an approved investment of R$140 million, the expectation is that this process will start operating in 2020, depending on environmental licensing.
Classification of Information: Public 5 Mining (Cont’d) Friables Project
Friables Project
✓ Increased capacity from 8 million to 12 million tons / year of iron ore
✓ Iron ore with better quality, higher concentration of iron content and lower impurity level
✓ Two iron ore processing plants
Classification of Information: Public 6 Steel
Overview
▪ The company’s steelmaker, being the largest producer of flat rolled steel in LatAm
▪ Two industrial plants in Ipatinga (MG) and Cubatão (SP)
▪ Production capacity of 9.5 mm tons of annual crude steel
▪ Also holds Unigal Usiminas, a JV with Nippon Steel engaged in steel hot-dip galvanizing, enhancing the technology content within Usiminas’ steel
Steel Sales Evolution (Thousand tons) EBITDA (R$ mm) and EBITDA Margin (%)
1,107 1,089 25.1% 1,026 1,004 977 115 170 18.9% 120 119 143 16.1% 16.8%
9.7%
992 919 905 804 834 885 569 578 471 301
1 2 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 2Q18 3Q18 4Q18 1Q19 Reported EBITDA Reported EBITDA Margin Exports Domestic Market
1 Negative non-recurring effect of R$ 62 million, due to the provision of the RS Government related to assessment ICMS credit appropriation. ² Non-recurring effect of R$ 503 million, relative to Fiscal credits related to ICMS tax in the base calculation of PIS/COFINS (R$411 Mi), Amounts Receivable – Eletrobras (R$ 186 Mi), PDD (R$ 34 Mi Negative) e Other Non-recurring (R$60 Mi negative) 7 Classification of Information: Public Steel (Cont’d) Flat steel consumption markets
Auto Industry and Household Agricultural and Civil Oil and Gas Pipelines Autoparts Appliances Road Machinery Construction
Heavy Plates, Hot Rolled, Cold Rolled and Heavy Plates and Hot Rolled, Heavy Plates and Heavy Plates and Cold Rolled and Galvanized Hot Rolled Cold Rolled and Hot Rolled Hot Rolled Galvanized Galvanized
8 Classification of Information: Public Steel (Cont’d)
Crude steel capacity of 9.5 million tons, being 5 million tons in Ipatinga and 4.5 million in Cubatão, which had the operation of its crude steel production temporarily suspended and currently processes purchased slabs
Galvanized Heavy Plates Hot Rolled Cold Rolled Electrogalvanized HDG Total Total Production Capacity1 1,900 4,200 2,200 350 1,020 9,670 of Products for Sale Generation of Products for Sale 900 2,070 2,200 350 900 6,420 with the Equipment in Operation2
1 According to the theoretical mix of sales in the implementation of the line. 2 Excluding the temporarily suspended capacities of Heavy Plates and Hot Strip Laminator #1 in Cubatão.
9 Classification of Information: Public Steel (Cont’d) Investments
CLC Technology (Accelerated Cooling Process for Heavy Plates)
✓ Start up in 2010 ✓ Meets the requirements of Petrobras, focused on pre-salt, besides the shipbuilding sector
Galvanizing Line
✓ Start up in 2011 ✓ Double the capacity to 1 million tons /year ✓ Higher expertise in ultra-resistant steel production (dual phase)
Classification of Information: Public 10 Steel (Cont’d) Investments
Coke Plant Revamp - Ipatinga
✓ Met coke with adequate specifications for pig iron production in the blast furnace process ✓ Reduction of particle emissions, gases and volatile substances ✓ Coke gas to be used in the operational facilities of Ipating Mill and electric energy production ✓ Coke plant total capacity of 1,1 million tons/year ✓ Started up on May 2015
Classification of Information: Public 11 Steel (Cont’d) Focus on developing new steel and improving production processes
Research and Development
Largest Center for Steel Research in Latin America
o More than 40 years of operation o 17 LABORATORIES o Improve processes and develop products o CONTRIBUTE TO THE LEADERSHIP OF USIMINAS IN THE GENERATION OF PATENTS IN BRAZIL
Steel mill with the largest number of patents in Brazil. Annual R&D investment in the range of 0.2% to 0.3% of gross revenue.
12 Classification of Information: Public Steel Processing and Capital Goods
Overview – Soluções Usiminas Overview – Usiminas Mecânica
▪ Soluções Usiminas (steel transformation business unit) operates in ▪ Usiminas Mecânica (capital goods business unit) is one of the the distribution and service markets as well as in the production of Brazilian largest companies in the sector, providing value added small-diameter tubes, offering value added products products such as industrial equipment, heavy metallic structures, steel blanks, railway cars, among others ▪ The steel processing capacity is 1.8 million tons of steel per year at 7 strategically located sites ▪ Industrial plants in Ipatinga (MG), Congonhas (MG) and Cubatão (SP)
▪ Net Revenue of R$ 879 million in 1Q19 ▪ Net Revenue of R$ 63 million in 1Q19
EBITDA (R$ mm) and EBITDA Margin (%) – Steel Processing - Quarterly EBITDA (R$ mm) and EBITDA Margin (%) – Capital Goods - Quarterly
4.8% 4.1% 4.3%
2.0% 1.4% 28.9%
37 40 29 33 17 12 (1) 1Q18 2Q18 3Q18 4Q18 1Q19 (15) (20) (20) -2.1%
-21.8% -19.6%
-27.6% 1 1Q18 2Q18 3Q18 4Q18 1Q19
1 With non-recurring effect of R$ 8 million relative to ICMS tax in the base calculation of PIS/COFINS.
13 Classification of Information: Public AGENDA
Usiminas
Pillars of Usiminas’ Management
People Clients Results
Governance and Highlights
Appendix Classification of Information: Public PILLARS OF USIMINAS’ MANAGEMENT People, Clients and Results
PEOPLE
MANAGEMENT OVERCOMING RESULTS
CLIENTS
15
Classification of Information: Public PEOPLE
Reformulation of POLICIES AND PRACTICES of People management DEVELOPMENT of Usiminas' leadership REPOSITIONING the as a protagonist for Corporate Board OF change Organizational Development and Strategies to People Management strengthen CULTURE AND AUTONOMY WORKPLACE for managers to use new people management practices
Classification of Information: Public 16 People Social and Environmental Highlights
Highlights 2018
“Projeto Superar” “Todos pela Água” 193 thousand 1.039 97% Awarded by World Steel Association was the greatest winner in the Dental Care Customer “Excellence in health and safety – Impact category “Best sustainable Scholarship partner project” of “IX Prêmio at the “Integrated Dentistry Center” at “Colégio São Francisco Satisfaction on occupational health.” Hugo Werneck” in Sustainability & Xavier”. at “Hospital Márcio Cunha”. Love to Nature.
“Mobiliza Caminhos do Vale” Project
Promotes the recovery of rural roads based on steel aggregates, having as a counterpart the realization of socio- environmental projects and the recovery of springs by the municipalities
✓ 1.8 Million tons of applied Siderbrita ✓ 1.3 Million beneficiaries ✓ 1,417 km of rural roads recovered ✓ 72,000 trips on 25 tons’ trucks ✓ 54 municipalities in the east of Minas Gerais ✓ 1,445 springs in recovery process ✓ 572,700 seedlings planted (average 396/spring) ✓ 141,960 wood fence posts used ✓ 425,880 meters of wire fixed
17 Classification of Information: Public PEOPLE Social and Environmental Initiatives EDUCATION AND CULTURE
São Francisco Xavier School Usiminas Institute First educational institution in Brazil to Usiminas invested over R$260 million, obtain ISO 9001 encouraging around 2,000 social projects
PROJECTS AND PROGRAMS Xerimbabo Usiminas Project “Plante uma vida” Project Promotes protection and environmental The initiative promotes the planting of education free of charge for more than native tree by employees who had a 2 million young people children in the year
18 Classification of Information: Public PEOPLE Social and Environmental Initiatives
SÃO FRANCISCO XAVIER FOUNDATION
Márcio Cunha Hospital – Unit I Márcio Cunha Hospital – Unit II Reference center in the area of health in Brazil Hospitalization, Ambulatory Care, Diagnostic Imaging Center and Usifamília
Cubatão Hospital Carlos Chagas Municipal Hospital General Hospital for services of medium complexity, Reference for the municipalities of the Itabira reference for the region of São Vicente, Cubatão, microregion to SUS patients Guarujá and Praia Grande
19
Classification of Information: Public CLIENTS
Action Plan
CONTINUOUS Customer satisfaction IMPROVEMENT survey, identifying your OF CUSTOMER "Usiminas in the Vision of wants and needs the Client“ Report SATISFACTION
General Customer Satisfaction Index
Classification of Information: Public 20 CLIENTS Customer Satisfaction, Awards and Recognition
AWARDS AND RECOGNITION
Top Supplier Ford – Raw Material and Stamping 2018 Gestamp Supplier Quality – Excellence Award 2017 MotoHonda Supplier – Excellence in Quality and Delivery 2017 Mercedes Benz award for environmental responsibility 2017 2015 REI Award Ranking of the "100 most Innovative Companies in Brazil" Toyota Global Suppliers Award Auto Data Quality Ranking and Partnership 2015 PSA Peugeot-Citroen Award
MAIN SUPPLIER FOR THE AUTOMOTIVE MARKET
21 Classification of Information: Public RESULTS
CONSTRUCTION OF THE FUTURE Retrieval of AF1 in Ipatinga CONSTRUCTION OF Retake of ITM RESULTS Flotation and ITM Focus on results Leste in Itatiauçu Group of Ten New products SURVIVAL Restructuring the Improvements for Capital increase of R$ customers 1Bi team Debt Restructuring Valorization of "Exploring Change of the business employees Opportunities" and CRISE model in Cubatão Austerity measures "Vale do Vale" Deterioration of Revenue increase results Loss of Market Cap. Furnace shutdown
Classification of Information: Public 22 Results (R$mm, except otherwise indicated)
Net Revenues Adjusted EBITDA and Adjusted EBITDA Margin
19.8% 24.2% 16.2% 18.2% 13.8%
3,862 830 3,427 3,532 3,244 3,204 641 703 519 488
1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 2Q181 3Q18 4Q18 2 1Q19
Capex and Capex as % of Net Revenues Net Income and Net Margin
11.7%
7.0% 270 7.0% 241 7.5% 220 52 5.0% 8 2 2.5% 170 2.0% 2.1% 2.3% 3.0% 4.8% 401 120 90 89 1.0% 289 67 178 2.2% 65 14 3 21 70 4 6 2 1 1 -1.0% 1 4 3 1 157 72 66 20 56 57 -3.0% -0.6% 76 (19) -30 1Q18 2Q18 3Q18 4Q18 1Q19 -5.0% 1Q18 2Q18 3Q18 4Q183 1Q19
Steel Capital Goods Steel Transformation Mining Total Capex
¹ Negative non-recurring effect of R$ 62 million, due to the provision of the RS Government related to assessment ICMS credit appropriation. ² Non-recurring effect of R$ 467 million, relative to Fiscal credits related to ICMS tax in the base calculation of PIS/COFINS (R$418 Mi), Amounts Receivable – Eletrobras (R$ 186 Mi), PDD (R$ 38 Mi Negative) e Other Non-recurring (R$99 Mi negative) 23 ³ With non-recurringClassificationeffect ofofR$901Information Million.: Public Results (R$mm, except otherwise indicated)
Working Capital
R$ Billion
4.0 3.7 3.7 3.5 3.0
1Q18 2Q18 3Q18 4Q18 1Q19
Working Capital – Steel inventories
Thousand Tons
733 648 689 566 553
1Q18 2Q18 3Q18 4Q18 1Q19
Days in 47 68 53 49 61 24 Inventory Classification of Information: Public Financial Restructuring In 2016, Usiminas implemented important actions to preserve its financial and operational capacity
Capital Increase Debt Renegotiation
Ordinary Shares Preferred Shares R$ 6.3bn Capital Increase Amount R$1 billion R$50 million Renegotiated Creditors with no haircut Involved
Subscription Price R$5.00/sh R$1.28/sh 92% of Usiminas indebtedness
Debentures Holders # Subscribed Shares 200 million 39 million
• 10 years (three years of grace period) Tenor Homologation AGE RCA • Installments increasing gradually
• CDI+3% p.a. Closing Date 11-Jul-16 6-Jun-16 Cost
Share Price @Closing Date R$7.01/sh R$1.92/sh Completion • September 2016
25 Classification of Information: Public Liquidity and Indebtedness (R$mm as of 1Q19, except otherwise indicated)
Debt Repayment Schedule Cash Position and Indebtedness
Current cash position covers c.3.4 years of debt 1.8x 2.3x 1.8x 1.6x 1.5x
Duration: R$: 41 months 5,680 5,843 5,893 5,854 5,496 US$: 44 months 1,773 134 1,121 4,211 4,161 1,119 1,119 4,117 4,740 3,723 886 779 244 244 244 1,638 194 421 169 93 90 877 875 874 610 693 1,682 1,693 1,773 18 1,563 1,104 75 331 Cash 2019 2020 2021 2022 2023 2024 2025 1Q18 2Q18 3Q18 4Q18 1Q19 Local Currency Foreign Currency Net Debt Cash Gross Debt Net Debt / EBITDA
Debt Profile by Category Credit Rating
Total Debt Domestic Debt
Global National Outlook 22% 7% 1% B1 Baa2.br Stable
B brBBB Positive 78% 92%
BRL USD CDI TJLP Others B+ A-(bra) Positive
26 Classification of Information: Public AGENDA
Usiminas
Pillars of Usiminas’ Management
People Clients Results
Governance and Highlights
Appendix Classification of Information: Public Usiminas’ Corporate Governance Usiminas’ model of corporate governance meets government and market requirements for listed companies, preserving and encouraging transparency
Corporate Governance Model Board of Directors
ADR Ruy Luiz (OTC) Hirschheimer Faria Chairman Independent Independent member member ✓ The Board of Directors is ✓ Listing on B3 Level 1, ADR on responsible for general OTC Market (New York) and strategic policies Latibex exchange (Madrid)
✓ 8 effective members and their ✓ Public offering have to use respective alternates mechanisms to favor capital dispersion ✓ 18 meetings in 2017 Oscar Antonio ✓ 16 meetings in 2018 YTD ✓ Improvement in quarterly Martinez Mendes ✓ Election for unified terms of 2 reports, including the disclosure years of consolidated financial statements and special audit revision 2 committees supporting the BoD: ✓ Human Resources Committee ✓ Disclosure of an annual calendar Rita Elias of corporate events Fonseca Brito Audit Committee ✓ Independent ✓ Minimum Free Float of 25% member Permanent Fiscal Council ✓ Evaluation of Board of Directors, ✓ Review of the financial Management, and Committees statements, investment plans, budgets, opinion on dividend ✓ Minimum dividend/JCP of 25% of distribution, etc the net profit (after legal reserves ✓ Five members elected in and contingencies – in General Meeting compliance with Law No 6.404) Ronald Kazuhiro Seckelmann Egawa Independent member
Note: Independent board members based on the criteria of the Brazilian Code of Corporate Governance and Novo Mercado.
28 Classification of Information: Public Usiminas’ Corporate Governance (Cont’d) Recently approved programs that ensure safety for the investor, transparency of actions, management control and clarity in communication
Integrity Program Policies of the Brazilian Corporate Governance Code
P Code of Ethics and Conduct P Policy of Destination of Results
P Anticorruption Policy
Policy of on the Remuneration of the Members of the Competition Policy P P Board of Officers
Policy of Conflict of Interests and Transactions with P Related Parties
P Policy of Rewards, Gifts and Hospitalities P Policy of Contracting of Extra-audit Services
P Policy of Sponsorship and Donations
Policy of Disclosure of Information and Negotiation with Policy of Relationship with Third Intermediary Parties P P Securities
Approved by the Board of Directors in October 2018
29 Classification of Information: Public Key Investment Highlights
Leading position in the Brazilian steel market, with presence in strategic international 1 markets
2 Diversification across products and markets
Assets strategically located in the country’s main industrial and logistic axis in 3 the country
4 Seasoned and specialized management team
5 Solid corporate governance
6 Culture of Employee, Social and Environmental Responsibility
30 Classification of Information: Public AGENDA
Usiminas
Pillars of Usiminas’ Management
People Clients Results
Governance and Highlights
Appendix Classification of Information: Public Over Half a Century of Leadership
Creation of Selling of Soluções Temporary R$ 1 billion Listing on Ternium stake Usiminas Automotiva shutdown of Mineração Operation Start Cosipa LATIBEX stock Joint Mining One CNPJ: Usiminas the primary Usiminas’ Up privatization exchange Agreements Usiminas Divestment areas in capital section with MBL e incorporates Cubatão reduction Ferrous Cosipa
1962 1991 1993 1994 2005 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Entrance of Creation of Ternium / Launch of ADR Usiminas Acquisition of Mineração Tenaris into R$ 1 billion BF #1 Relight I program on Friables Project privatization iron ore mines Usiminas Usiminas capital increase in Ipatinga the OTC conclusion on Acquisition of Control Group (shut down in Listing on Market Acquisition of Mining Debt (New Jun 2015) BOVESPA (New York) Zamprogna Codeme and Renegotiation Metform stake Shareholders agreement)
32 Classification of Information: Public World Crude Steel Market in 2017 (Million tons)
China 831.7
Japan 104.7
India 101.4
USA 81.6
Russia 71.3
South Korea 71.1
Germany 43.3 Excess of Capacity Turkey 37.5 661 Nominal Capacity 2,351 Brazil 34.4 Production 1,690
Italy 24.1
Source: World Steel Association / OECD
33 Classification of Information: Public World Crude Steel Production
2007 2017
Others Europe Africa Europe Africa (Others) 1% 6% (Others) 1% South 3% 2% Others America South 9% 3% America North 4% America China North 7% America 36% China 10% European 49% Union European 10% Union Asia and 16% Asia and Oceania1 Oceania1 22% 22%
+25% 1,348 million tons 1,689 million tons
Source: World Steel Association 1 Except China.
34 Classification of Information: Public Brazilian Flat Steel Market (Million tons) 22%
15% 15% 14% 13% 12% 13% 11% 9% 7% 8%
15.2 14.9 14.5 15.0 14.7 14.3 14.3 14.3 14.2 14.2 13.7 13.7 13.1 13.2 13.4 12.3 11.9 11.8 10.6 10.2 10.4 9.3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Production Consumption Imports
Source: Instituto Aço Brasil / Usiminas Note: Excludes Slabs.
35 Classification of Information: Public Key Investment Highlights
Leading position in the Brazilian steel market, with presence in strategic international 1 markets
2 Diversification across products and markets
Assets strategically located in the country’s main industrial and logistic axis in 3 the country
4 Seasoned and specialized management team
5 Solid corporate governance
6 Culture of Employee, Social and Environmental Responsibility
36 Classification of Information: Public 1 Leading Position in the Brazilian Steel Market, with Presence in Strategic International Markets Usiminas’ leading position is underpinned by the superior quality of its products and the long-term relationship with key clients
Sales Volumes – Steel Awards Received
Thousand Tons – Quarterly
1,089 1,107 1,026 115 1,004 170 977 120 119 143
Top Supplier Award 2018 (Raw Material and Stamping)
-2% -9% 19% 992 919 905 -9% 834 885
Quality Excellence Award
1Q18 2Q18 3Q18 4Q18 1Q19
Exports Domestic Market
Best Raw Material Supplier Award
37 Classification of Information: Public 2 Diversification Across Products and Markets Usiminas has capacity to produce a wide variety of steel, allowing for flexibility to adjust its production according to market demands domestically and internationally
End Markets Share of Volume, 1Q19 Revenues by Country Share of Net Revenue, 1Q19
White Line 2 7% Mexico Others 1% 3% Civil Construction 9% USA 11%
Automotive 36% Industrial Domestic Exports Europe1 9% 88% 12% 44%
Argentina 41%
Distribution 39%
1 Europe includes: Germany, UK, Spain, Belgium, Portugal, Switzerland and Netherlands 2 Other includes: Colombia, Paraguay and Bolivia.
38 Classification of Information: Public 3 Assets Strategically Located in the Country’s Main Industrial and Logistic Axis in the Country The location of Usiminas’ assets allows for access to raw materials (e.g. iron ore), consumption centers and logistic terminals (railways, ports)
Itabria Belo Horizonte IPATINGA Porto Itaúna TUBARÃO
Mining São Paulo Porto ITAGUÁ Steel
Steel Processing Porto CUBATÃO Capital Goods
39 Classification of Information: Public 4 Seasoned and Specialized Management Team Usiminas’ Executive Board consists of professionals with deep knowledge in their respective areas
Sergio Leite de Andrade Takahiro Mori CEO Corporate Planning Vice President Officer • Joined Usiminas in 1976 as Research Engineer, also • Prior to joining Usiminas, he worked at Nippon Steel & working in several other areas in the company before Sumitomo Metal Corporation as Manager Of Domestic being named CEO in 2016 Plate Sales, Group Manager of Personnel Dept., Manager of HR, among other divisions • Holds a BS degree in Metallurgical Engineering by the Federal University of Rio de Janeiro (UFRJ) and a • Holds a B.A. in Laws, Tokyo University, and MBA in the Master’s degree in Metallurgical Engineering by the The Wharton School of the University of Pennsylvania Federal University of Minas Gerais (UFMG)
Alberto Akikazu Ono Kohei Kimura CFO and IR Vice President Officer Technology and Quality Vice President Officer • Prior to joining Usiminas in 2009, he worked in other • Prior to joining Usiminas, he worked at Nippon Steel & Mining & Metallurgy companies such as Aços Villares SA, Sumitomo Metal Corporation CBMM, Votorantim Industrial and Votorantim Siderurgia • Kohei Kimura holds M.Eng. in Metallurgy from Osaka • Holds a Ph.D. in Metallurgy from The University of Tokyo University and a M.Sc. in Metallurgical Engineering from the University of São Paulo
Tulio Cesar do Couto Chipoletti Miguel Angel Homes Camejo Industrial Vice President Officer Commercial Vice President Officer • Prior to joining Usiminas, he worked at The Confab • Prior to joining Usiminas, he was General Manager for Industrial SA the Andean Region of Ternium Colombia and Exports Manager at Ternium Sidor • Graduated in Industrial Engineering from the Faculty of Industrial Engineering - EIF, in Sao Bernardo do Campo • Graduated with a degree in Economy from Universidad – SP. He holds an MBA in Finance from the Brazilian Catolica Andres Bello, in Venezuela, and has completed Institute of Capital Market - IBMEC different management programs at Chicago Booth and Stanford University in California, USA.
40 Classification of Information: Public 5 Solid Corporate Governance Recently approved programs that ensure safety for the investor, transparency of actions, management control and clarity in communication
Integrity Program Policies of the Brazilian Corporate Governance Code
P Code of Ethics and Conduct P Policy of Destination of Results
P Anticorruption Policy
Policy of on the Remuneration of the Members of the Competition Policy P P Board of Officers
Policy of Conflict of Interests and Transactions with P Related Parties
P Policy of Rewards, Gifts and Hospitalities P Policy of Contracting of Extra-audit Services
P Policy of Sponsorship and Donations
Policy of Disclosure of Information and Negotiation with Policy of Relationship with Third Intermediary Parties P P Securities
Approved by the Board of Directors in October 2018
41 Classification of Information: Public 6 Culture of Employee, Social and Environmental Responsibility Usiminas translates concepts into practice, conciliating the objective of all stakeholders
Employee Investments in professional training and safety prove the ongoing commitment to the 70,6 training 400 leaders 100% “Mãos Seguras” Accidents qualification, development hours per employee, participating of our employees Hand safety program awarded dropped by 40% and life of our people more than 3x the Brazilian in the Trilha da Liderança were assessed in 2017 by the World Steel Association, and 0 fatalities national average (Leading path program) in the Safety Excellence Category
Social The company's sponsorship policy R$ 6,3mm planned and executed by invested by Instituto the Institute favors Cultural Usiminas 150 thousand 46 social, 28 thousand 97 scholarships projects that promote people attended cultural and sports visits in the Colégio São inclusion, training and Instituto Cultural projects to the Hospital Marcio Francisco Xavier human development Usiminas shows sponsored in Minas Gerais Cunha Rehabilitation and São Paulo Center
Environmental We believe that R$ 91mm innovation and investment in sustainability are essential engineering, maintenance to ensure that we and process improvement, 1,87 million 19.000 935 96% continue to do business education and resource tons of tree saplings springs recovered of the water and stay competitive management recycled materials reused of different species were cultivated by the Caminhos do used in the steel making within the Green Areas program Vale program process is recirculated on Usiminas steel plants
42 Classification of Information: Public Rating Agencies’ Views Comments from latest available rating reports
“ On June 12, 2018, S&P Global Ratings “ São Paulo, January 30, 2019 -- Moody's “ On May 21, 2018, Fitch Ratings upgraded raised its global scale corporate credit América Latina Ltda. upgraded Usinas Usinas Siderurgicas de Minas Gerais S.A.’s ratings on Usinas Siderúrgicas de Minas Siderúrgicas de Minas Gerais S.A. (Usiminas) Long-Term Foreign and Local Gerais S.A. (Usiminas) to 'B' from 'B-' and ("Usiminas")'s corporate family ratings to B1 Currency Issuer Default Ratings (IDRs) to the national scale ratings to 'brBBB' from from B2 (global scale) and to Baa2.br from ‘B+’ from ‘B’ and its National Scale rating to 'brBB'.” Ba1.br (national scale). ” ‘A–(bra)’ from ‘BBB–(bra)’. The Rating Outlook was revised to Positive from “Improving market conditions and profitability will “The upgrade of Usiminas' ratings to B1/Baa2.br Stable.” continue to support stronger operating cash flow reflects primarily the continued recovery in operating generation for Brazilian steelmaker Usiminas over performance during 2018 as a consequence both of “The upgrade reflects the ongoing improvements the next few quarters, resulting in further cost-saving initiatives and a better demand in Usiminas’ credit risk profile, supported by declining leverage.” environment, which allowed the company to improve growing operating cash flow generation due to credit metrics substantially. The upgrade is also better prices and volumes, as well as efficiency “The outlook remains positive, indicating we supported by Usiminas' adequate liquidity profile and gains achieved through various measures such as expect that the continuous strengthening of its enhanced financial flexibility to withstand the closing the primary area of its Cubatão plant. The Usiminas' cash flows is likely to support further volatility in its main end-markets. Going forward, we upgrade also reflects its improved debt profile and debt repayments and larger investments to expect metrics to remain strong on the back of a recent shareholders agreement, which should improve operating efficiency, leading to stronger healthy demand environment in Brazil and Usiminas' result in a unified business strategy for the financial metrics and liquidity, which will help more efficient cost structure.” company” mitigate the still volatile and uncertain demand for steel.” The track record of divergences between its main “The Positive Outlook is supported by Fitch’s shareholders (Ternium/Techint and Nippon Steel) expectation that Usiminas’ credit profile and “Our expectations that despite potentially volatile and still evolving corporate governance standards financial flexibility will be further enhanced over prices and demand in the next few months, are credit negative, although we believe risks related the medium term. Fitch forecasts Usiminas’ net Usiminas will be able to maintain strong cash to shareholders disputes have abated.” leverage ratio will remain below 2.0x through the generation over the next 12 months, supported next few years. The sustainability of strong by increasing steel and iron ore volumes and domestic steel prices and growing volumes, in an leaner operations aimed at keeping stable EBITDA environment of continued uncertainty over the margins. As a result, we expect metrics to pace of Brazil’s economic recovery, will be key to continue quickly improving, leading to debt to support this low leverage and positive rating EBITDA below 3.0x and FFO to debt of about 30% actions in the next 24 months.” in 2018, and close to 2.0x and 35%, respectively, in 2019.”
43 Classification of Information: Public Income Statement – Per Business Unit (R$mm, except otherwise indicated)
Income Statement per Business Units - Non Audited - Quarterly
Steel R$ million Mining Steel* Capital Goods Adjustment Consolidated Processing
1Q19 4Q18 1Q19 4Q18 1Q19 4Q18 1Q19 4Q18 1Q19 4Q18 1Q19 4Q18
Net Revenue 418.1 316.3 3,088.5 3,202.9 879.4 831.1 62.5 66.8 (916.5) (990.2) 3,532.0 3,427.0
Domestic Market 132.7 120.4 2,729.3 2,810.2 879.4 831.1 62.5 66.8 (916.5) (990.2) 2,887.3 2,838.4
Exports 285.5 195.9 359.2 392.7 0.0 0.0 - - - - 644.7 588.6
COGS (233.5) (220.3) (2,794.2) (2,872.4) (846.7) (792.1) (53.6) (81.1) 892.0 914.7 (3,036.0) (3,051.1)
Gross Profit (Loss) 184.7 96.1 294.3 330.5 32.7 39.0 8.9 (14.3) (24.5) (75.4) 496.0 375.9
Operating Income (Expenses) (64.3) 109.3 (203.3) (278.7) (22.9) (34.8) (10.2) (148.1) 0.3 (27.7) (300.5) (380.0)
Selling (23.5) (19.5) (28.4) (75.0) (11.4) (14.6) (2.9) (2.8) (1.2) (1.4) (67.4) (113.3)
General and Administrative (5.9) (6.8) (77.7) (95.5) (14.3) (16.2) (6.3) (8.7) 3.5 3.9 (100.8) (123.3)
Others, Net (34.9) 135.6 (97.2) (108.2) 2.7 (4.1) (1.0) (136.6) (2.0) (30.2) (132.4) (143.4)
EBIT 120.3 205.3 91.0 51.8 9.8 4.2 (1.3) (162.4) (24.3) (103.1) 195.5 (4.1)
Depreciation 32.3 32.3 209.9 222.5 7.5 7.6 - 4.7 (8.6) (8.6) 241.0 258.6
Provisions 13.6 16.7 60.7 (37.7) - - (0.0) (0.0) (36.7) 134.2 37.5 113.1
EBITDA (Instruction CVM 527) 166.1 254.3 361.5 236.6 17.3 11.8 (1.3) (157.7) (69.6) 22.5 474.0 367.6
EBITDA Margin (Instruction CVM 39.7% 80.4% 11.7% 7.4% 2.0% 1.4% -2.1% 0.0% 7.6% -2.3% 13.4% 10.7% 527)
Adjusted EBITDA 152.6 38.1 300.8 803.6 17.3 11.8 (1.3) (14.6) 18.2 (8.6) 487.5 830.3
Adj.EBITDA Margin 36.5% 12.0% 9.7% 25.1% 2.0% 1.4% -2.1% -21.8% -2.0% 0.9% 13.8% 24.2%
Note: All intercompany transactions are made at arm´s length basis. *Consolidated 70% of Unigal 44 Classification of Information: Public Share Price Performance
Usiminas (R$/share)(R$/ação) X X B3 B3 ( (points)pontos)
From 01/01/2017 to 03/31/2019 USIM5: +149% USIM3: +43% IBOV: +60% R$ 10.04
95,415 points R$ 11.65 R$ 8.17 59,588 points R$ 11.44
USIM5 USIM3 IBOV
Source: Broadcast+ in 04-Apr-2019
45 Classification of Information: Public Leonardo Karam Rosa Head of IR [email protected] Tel: 55 31 3499-8550
Danielle Ap. Maia Felipe Gabriel P. Rodrigues IR Analyst IR Analyst [email protected] [email protected] Tel: 55 31 3499-8148 Tel: 55 31 3499-8710
www.usiminas.com/ri
Declarations relative to business perspectives of the Company, operating and financial results and projections, and references to the growth of the Company, constitute mere forecasts and were based on Management’s expectations in relation to future performance. These expectations are highly dependent on market behavior, on Brazil’s economic situation, on the industry and on international markets, and are therefore subject to change.
Classification of Information: Public