Gerdau Ameristeel Corp. reported net income of $144.3 million on net sales of $807.9 million for the quarter, and net income of $271.3 million on net sales of $2.2 billion for the nine months ended September 30, 2003.

Third Quarter Results—Net income of $144.3 million ($0.64 per share fully diluted) compares to a net loss of $10.1 million ($(0.05) per share fully diluted). Net sales of $807.9 million compares to net sales of $460.6 million for the quarter ended September 30, 2003. EBITDA of $168.5 million compares to EBITDA of $15.1 million for the September quarter of last year.

During the third quarter, the company recorded the utilization of net operating losses related to the U.S. operations that resulted in a $45 million reduction of tax expense. This provided a contribution to earnings of $0.20 per diluted share.

Including joint ventures, the Company shipped 1.5 million tons of finished steel third quarter, an increase of 5.7% over the third quarter of 2003. Average mill prices increased $246 per ton, or 79.6%, compared to the third quarter in 2003. Scrap raw material costs increased $97 per ton (84.8%) compared to the third quarter of 2003, partially offsetting the mill price increases. Metal spread (the difference between mill selling prices and scrap raw material cost) increased $150 per ton (76.6%) compared to the third quarter last year.

Mill manufacturing costs were $215 per ton compared to $175 per ton in the third quarter of 2003. Increased costs reflect increased yield costs due to higher scrap prices, higher energy prices, higher production costs at the Canadian mills due to their scheduled annual maintenance shutdowns, and the stronger Canadian dollar. Fabricated steel prices increased $195 per ton compared to the third quarter of the prior year.

Income from operations was $124.0 million and joint venture operating income was $55.1 million. Based on 1.5 million tons of finished steel shipped, the composite operating income was $120 per ton. For the three months ended September 30, 2003, loss from operations was $3.4 million and joint venture operating income was $0.4 million. Based on 1.4 million tons of finished steel shipped, the composite operating loss was $(2) per ton for the third quarter of 2003.

Nine Month Results—Net income of $271.3 million ($1.26 per share fully diluted) compares to a net loss of $23.3 million ($(0.12) per share fully diluted) for the nine months ended September 30, 2003. Net sales of $2.2 billion compares to net sales of
$1.3 billion for the nine months ended September 30, 2003. EBITDA of $396.4 million compares to EBITDA $48.4 million for the nine months ended September 30, 2003.

Utilization of net operating losses related to the U.S. operations resulted in a reduction of tax expense and a contribution to earnings of $0.21 per diluted share.

Net operating losses are related to the U.S. operations of the former Co-Steel entity. At the time of the Co-Steel acquisition, tax assets were recorded at their estimated realization rate according to purchase accounting under U.S. GAAP. Due to subsequent profitability of U.S. operations, the company is now able to utilize more of these losses. Utilization of these net operating losses will reduce cash tax payments by approximately $30 million in 2004 and $15 million over the next three years.

Including joint ventures, the company shipped 4.5 million tons of finished steel, an increase of 7.5% over the prior year, reflecting strong North American demand for steel products. Average mill prices increased $185 per ton (61.8%) compared to the nine months ended September 30, 2003. Scrap raw material costs increased $63 per ton (55.4%) compared to the nine months ended September 30, 2003.

Metal spread increased $122 per ton (65.8%) compared to the previous year. Mill manufacturing costs were $199 per ton, compared to $171 per ton for the same period in the prior year. Fabricated steel prices increased $135 per ton compared to the nine months ended September 30, 2003.

Income from operations was $299.0 million and joint venture operating income was $102.2 million. Based on 4.5 million tons of finished steel shipped, the composite operating income was $90 per ton for the third quarter of 2004. For the nine months ended
September 30, 2003, loss from operations was $7.6 million and joint venture operating income was $6.2 million. Based on 4.2 million tons of finished steel shipped, the composite operating loss was $(0.30) per ton for the third quarter of 2003.

CEO Comments—Phillip Casey, President and CEO of Gerdau Ameristeel, commented: “The results for the first nine months of 2004 set a record for Gerdau Ameristeel. This earnings performance is largely a result of favorable market dynamics and notable operating improvements from the Co-Steel assets acquired in October 2002. Throughout 2003 and the first quarter of 2004, the industry pursued steel price relief to restore reasonable margins in response to escalating raw material costs. Metal spreads have fully recovered as steel product prices and raw material costs are now more balanced. However, inflationary pressures are driving up the steel manufacturing cost structure for other commodity elements including energy, electrodes, and alloys.

“The volatility of the industry, combined with the influence of globalization, make it challenging to predict the magnitude and duration of market cycles,” continued Casey. “Overall market demand remains strong; however, imports, especially on long steel products into the North American market, are starting to increase. For the future, the key unknown is the sustainability of the positive industry pricing trend in an uncertain political, economic, and globally competitive environment. During the September quarter, we also experienced some minor effects from the strengthening of the Canadian dollar and logistical disruptions from the recurrence of major storms in our primary markets.”

Within the steel industry, the trend toward consolidation continues, and Gerdau Ameristeel is actively participating with the acquisition of the North Star Steel assets of Cargill, Inc. This strategic expansion represents a 30% capacity increase in Gerdau Ameristeel’s core business with favorable additions to geographical coverage and product range. With the successful closing of that transaction earlier this week, substantial management resources and focus will be directed at the integration of these assets to realize the anticipated synergies from economies of scale, increased steel production capacity, and cost savings. In accordance with business combination requirements under U.S. GAAP, the assets of North Star, including inventory, will be re-valued to fair market value. Until this inventory is dispatched to customers, this accounting process will temporarily delay the realization of incremental financial earnings from the acquisition.

Gerdau Ameristeel is the second-largest minimill steel producer in North America with annual manufacturing capacity of over 8.4 million tons of mill finished steel products. Through its vertically integrated network of 15 minimills (including one 50%-owned minimill), 15 scrap recycling facilities and 36 downstream operations, Gerdau Ameristeel primarily serves customers in the eastern two-thirds of North America. The company's products are generally sold to steel service centers, to fabricators, or directly to original equipment manufacturers for use in a wide variety of industries.