• EBITDA of R$1,484 million in 1Q18, up 74% from 1Q17, with EBITDA margin of 14.3%.

• Reduction in selling, general and administrative expenses in 1Q18, which corresponded to 4.0% of net sales, compared to 5.2% in 1Q17.

• Financial leverage measured by net debt/adjusted EBITDA ratio falls to 2.7x as of March 31, 2018.

• Adjusted net income of R$ 451 million in 1Q18, with dividend distribution of R$136.1 million, equivalent to the amount distributed in the whole of 2017.

Gerdau’s performance in the first quarter of 2018

The Consolidated Financial Statements of Gerdau S.A. are presented in accordance with the International Financial Reporting Standards (IFRS) and the accounting practices adopted in Brazil, which are fully aligned with the accounting standards issued by the Accounting Pronouncements Committee (CPC). The information in this report does not include data of associates and jointly controlled entities, except where stated otherwise.

Production and shipments

• On a consolidated basis, crude steel production and shipments increased in 1Q18 compared to 1Q17, due to stronger steel demand, led by the Brazil and North America BDs.

 • In relation to 4Q17, consolidated shipments also increased, due to stronger demand in the North America and Special Steel BDs.

Operating result

• In 1Q18, consolidated net sales increased in relation to 1Q17, due to the higher net sales per tonne at all BDs, supported by the higher international prices.

• Consolidated cost of goods sold increased in 1Q18 compared to 1Q17 and 4Q17, reflecting the higher raw material costs.

• Consolidated gross profit more than doubled in relation to 1Q17, due to the better performance of the Brazil and North America BDs. Meanwhile, gross margin expanded, with higher prices more than offsetting the increase in raw material costs in the period.

• The reduction in selling, general and administrative expenses in 1Q18, which correspond to 4.0% of net sales, compared to 5.2% of net sales in 1Q17, reflects the continuous efforts made to streamline all business divisions and the net sales growth in the period.

Dividends

• Gerdau S.A. approved the payment of dividends in the form of interest on equity in the amount of R$ 136.1 million (R$ 0.08 per share) in 1Q18, distributed as an advance of the minimum mandatory dividend stipulated in the Bylaws. Payment date: June 1, 2018 Record date: close of trading on May 21, 2018 Ex-dividend date: May 22, 2018

Financial liabilities

• On March 31, 2018, gross debt was 13.0% short term and 87.0% long term, with 17.6% denominated in Brazilian real, 80.0% in U.S. dollar and 2.4% in other currencies.

• On March 31, 2018, 65.7% of cash was held by Gerdau companies abroad and denominated mainly in U.S. dollar.

Investments

• In 1Q18, CAPEX amounted to R$217 million. Of the amount invested in the quarter, 43.4% was allocated to the Brazil BD, 36.7% to the North America BD, 15.4% to the Special Steel BD and 4.5% to the South America BD.

• CAPEX projected for 2018 is R$ 1.2 billion, which will focus on productivity gains and maintenance.

• On March 31, 2018, the nominal weighted average cost of gross debt was 6.6%, or 7.8% for the portion denominated in Brazilian real, 5.6% plus exchange variation for the portion denominated in U.S. dollar contracted by companies in Brazil and 7.9% for the portion contracted by subsidiaries abroad. On March 31, 2018, the average gross debt term was 6.5 years.

Divestments

• According to the material fact notice dated January 2, 2018, the Company entered into a final agreement for the sale of certain rebar production units, fabricated rebar units and distribution centers in the United States, to Commercial Metals, for US$ 600 million (equivalent to R$ 2.0 billion), subject to adjustments to the acquisition price typical of transactions of this kind. The agreement includes mills in Jacksonville (Florida), Knoxville (Tennessee), Rancho Cucamonga (California) and Sayreville (New Jersey) with combined annual production capacity of 2.5 million short tonnes, in addition to the rebar processing and distribution units in the United States, which are reported in the North America segment. The transaction is subject to authorization by regulatory agencies and to typical settlement conditions, which should occur by the end of 2018. Furthermore, due to the measurement of net assets classified as held for sale at the lowest of carrying amount or fair value less selling expenses, the Company recognized an expense, net of income tax, of R$ 649 million in the line Income (expense) from transactions with subsidiaries in its Income Statement.

• On January 31, 2018, the Company announced a final agreement for the sale of its wire-rod production unit located in Beaumont, Texas and two processing units to Optimus. On March 30, 2018, the Company concluded the sale for US$ 99.5 million (equivalent to R$ 330.7 million). The sale includes the Company’s mill located in Beaumont, Texas and the processing units Beaumont Wire Products and Carrollton Wire Products. The mill has a melt shop with annual capacity of approximately 700,000 tons, and is capable of producing both wire rod and coiled rebar. Although the proceeds are reflected in 1Q18, the deconsolidation effect will be registered as from 2Q18.

• On February 14, 2018, the Company issued a notice on the sale of its two hydropower plants in Goiás for R$ 835 million to Kinross Brasil Mineração, a wholly-owned subsidiary of the mining company Kinross Gold Corporation. The plants Caçu and Barra dos Coqueiros, inaugurated in 2010, have total installed capacity of 155 MW. The transaction is subject to authorization from regulatory agencies and typical settlement conditions.

• Gerdau maintains its strategy of focusing on its more profitable assets and, since 2014, has conducted divestments in the United States, Europe, Latin America and Brazil, with aggregate economic value of R$6 billion. The transactions are aligned with the process to optimize the Company’s asset portfolio with a focus on deleveraging.

Free Cash Flow (FCF)

• In 1Q18, free cash flow amounted to R$ 65 million generated by adjusted EBITDA, which was sufficient to honor the CAPEX, income tax and interest commitments, as well as the working capital consumption, reversing a historical standard of seasonality in the period.

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