Ternium SA Q1 FY2025 earnings call

• EBITDA increased sequentially in Q1 driven by improved margins and slightly higher shipments. • Trade tensions created uncertainty for global economic growth and affected manufacturing. • In Mexico, operating environment was challenging but the administration supports reducing reliance on Asian suppliers. The Plan Mexico aims to enhance industrialization. • In Brazil, local steel demand was resilient but unfair trade practices persisted with increased imports. • In Argentina, microeconomic situation showed signs of improvement. • Focus on cost reduction initiatives to enhance earnings competitiveness. • Expansion project in Mexico: Pick clean and finishing lines started operation; cold rolling mill and galvanized line scheduled to begin by end of December; upstream project now anticipated to be operational by Q4 2026 with total CapEx revised to $4 billion (16% increase from previous estimate).

Steel segment: Net sales were slightly higher in Q1. Margins improved due to lower raw material and purchase costs, and efficiency improvements. Mining segment: Shipments increased slightly quarter-over-quarter and rose 14% year-over-year. However, margins decreased in Q1 due to higher costs. Revenue contribution details weren't explicitly given in absolute terms beyond the described performance.

• Anticipate double-digit EBITDA margin in Q2 supported by increase in real asset prices in Mexico and cost reduction initiatives. • Expansion project in Mexico: Cold rolling mill and galvanized line scheduled to begin by end of December; upstream project now expected to be operational by Q4 2026 (delay from original schedule). • Total CapEx for expansion project revised to $4 billion, representing a 16% increase from previous estimate.

• Trade tension creating uncertainty in global economic growth and business confidence. • Unfair trade practices adversely impacting manufacturing globally. • Uncertainty in Mexico's economic environment affecting investment and consumption. • Delay in upstream project expansion timeline. • Persistence of unfair trade practices in Brazil affecting market dynamics.

Q: Regarding Mexico's GDP and industrial customers' adjustments amidst uncertainty.

A: Mexico's steel apparent consumption decreased in 2024. Demand expected to start increasing in following quarters, especially in commercial market. Imports coming down and company expecting to gain market share with new lines. Trade discussions between Mexico and US to resolve uncertainty.

Q: About margins and profitability levels.

A: Expect better margins in Q2 compared to previous quarters. Trend expected to sustain or improve moving forward, with margins potentially returning to reasonable levels seen in recent quarters.

Q: Elaborating on cost decline into Q2 and future cost-cutting.

A: Cost reduction measures from 14 automotive technology continuing, with expected cost declines in Q2 and beyond. Ongoing cost-reduction program contributing to margin improvement and expectation of continued cost cuts.

Q: Volumes and market share opportunities.

A: Capacity to increase volumes in Mexico today as imports have decreased. Opportunities to gain market share with new investment and certifying products for industrial customers.

Q: Impact of trade tension on cash returns and Argentina outlook.

A: Company intends to sustain dividend payments despite uncertain period. Argentina's steel sector outlook improving with macroeconomic signs, expecting increased shipments in coming quarters and spare capacity to support growth.

Q: Reasons for CapEx increase and timeline.

A: CapEx increase due to higher assembly and construction prices, and larger volume of structures and civil works. Total CapEx for 2025 expected to be around $2.5 billion, with remaining CapEx for expansion project over next few years.

Q: US-Mexico relationship impact on steel, downside scenario, and Argentina FX controls.

A: US-Mexico steel relationship to be resolved through reasonable negotiation, with focus on enhancing market and defending region against Asian imports. Downside scenario of Mexico economy slowdown and US import restrictions would require company to position accordingly. Argentina's FX controls have positive aspects with steps towards dividend payments but still some restrictions.