TX - Earnings call transcript Q2 2022

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Operator

Thank you for standing by, and welcome to the Ternium Second Quarter Conference Call. I will now hand today's call over to Sebastian Marti. Please, go ahead.

Sebastian Marti

Good morning and thank you for joining us today. My name is Sebastian Marti and I'm Ternium's Global Investor Relations and Compliance Senior Director. financial XXXX. the its first quarter yesterday of half released results second for and Ternium is to call This complementary that presentation.

who Financial Joining Executive me the be Pablo conclusion Chief there prepared performance. a Officer, Chief Ternium's Brizzio, Officer, will Maximo Vedoya; of environment today and the At are and will discuss Ternium's Q&A remarks, business our company's session.

information or vary would that affect contained this and Factors contains and today's forward-looking in Before from could you conference may webcast Exchange two results expressed remind we and like begin, results actual to in implied. with I that our Commission those that the presentation. page call are on filings Securities

measures also non-IFRS issued reference to release find turn to yesterday. financial With will that, the call any Vedoya. the comparable Mr. in over to I'll press reconciled You IFRS the measures most directly

Maximo Vedoya

and Good $X.X Hello? margin reported participation than conference ton. in Sebastian. our morning, you, $XXX of the Thank quarter you for everyone, your for and per very a today adjusted EBITDA results second Ternium much call. more thank strong billion with know of do per solid than everybody I the in These will Sorry, of those for year, first start ton. to were obtained more results similar $XXX XXXX. a with quarter is continue. [indiscernible] a I the if margin hearing? representing

Okay.

million to our EBITDA, $XXX outstanding XX shareholders Over returned $X.X of competitive business its attractive free of effort in cash the billion enable dividend In Ternium's of people generated the flow to this and billion $X.X adjusted months, advantage very past position period, payments. over conditions. it take solid and of we

business invasion steel Ukraine increased upsurge raw caused of quarter, the and expect first In we environment. ahead, material volatility an in in prices. the Looking Russia’s

decrease. restrictions, a steel tightening significant of prices to COVID-XX consequence As energy a over the inflationary global on chains last higher and China's raw monetary supply material drug, effect few pressures, cost, months, the and

are variables sustainable steel believe Looking ahead, main today level. more closer I business the to

we will of to the stabilization see a there next this, said just the volatility for could related persist time, of be I’ve a factors as couple So mentioned. uncertainty level to during some considerable months. Having continues

Let's a of the our industrial main industry inputs industries. semiconductors relatively continued The other healthy, the dynamics remains market In production to different markets. Mexico, turn with and review affecting different supply disruptions from process. to of availability the now in for its auto chain suffer

expected. supply for they We decrease harder several to have to continue And affect recent these to global these people but lockdowns seem been expecting disruptions solve be to already, China’s what most quarters that chains.

On demand the is industry. unsatisfied this user significant other there hand, end in

So procurement through, are when there an to opportunity worked to shipments will for OEMs. problems finally us these be increase

something gain In mill hot Pesquería, in HVAC industries to with and like in electrical addition, share making our new in product will we us sector. are rolling this market enable doing have well. certification been progress that manufacturing motors Other

slowing inventory a On hand, as value industry end the product goods of rates the result a the chain. is down regulation in other production white of

construction by of last impact mostly weak well as months is market the and few activity steel demand process Finally, the the to in destocking end having the from interest over driven due commercial decrease in on prices as Mexico, inflation. customers rate apparent a currently resulting higher

a inventories the of second Looking restocking is during happen will the level half. in need low the forward, market probably that going to

sector. industry has But industry, macro regarding in level demand auto our of increased conference Argentina. quarters and remains volatility despite levels in Steel the last higher now environment. at those Moving to energy Most to agribusiness of similar Argentina macroeconomic like demand sector the situation last the since the good call. continue goods show uncertainty the the sector, white country's the of the market to in few the countries

released SASB So reporting substantial further reinforce topics. on sustainability In the this progress is discussions for reflect quarter, share and on some still of recommendations Ternium iron to like sustainability annual adding line producers in We with company, -- Last we our new sustainability and believe TCFD. also volatility. the our framework steel addition, of would I forward its the matter. our macroeconomic in now may report. standards a by the on disclosure current this step

our have have company. we assessment This is Ternium's last few emissions gases of been been and under World reporting out use carried emission completed management the complementary COX emissions also tools on improving for the of Steel greenhouse, Recently, accounting GAG working to We green the of COX over years. the standards. we the which Protocol in methodology, the

the of time the emission It metrics. a of methodology is standards, verifications important assessment management application to third-party first the for This whole boundaries an tending line. enhanced are Ternium to to Protocol GHG emissions that down the With performed provides also we each capabilities also the we have company. production note

topic in of place, safety. programs we from are the actions the by in results is getting and relevant of company's so share organization weeks we safety is future our Another results are countries few plans. Safety we a best the is the managers where key encouraged the agenda, for day had far. safety to around A the practices an annual participation with our Ternium and we issue ago, all employees opportunity event It operate. and

keep the has up, time our lowest during first Wrapping the of over year ever. frequency to injury the been expect following As quarters. lost healthy shipments rate we half showing the

distinctive sustainable stabilize and steel prices margin bring a well the steel normalization of variables gradually the positioned and investment to to to steel as hand, material business our variables Ternium were when a books. goes our raw with strength the expected market. capital remain are. navigate release On should than anticipate input balance they sheet share probability of will position all in recent Ternium significantly cost other costs competitive we the of business we am of once show prices is and changes steel Further more The and to generation made through the volatility positive Ternium levels. I higher will enhanced good currently on, cash robust, working decrease

Okay. the ask to review with With performance. and quarter's I stop of our a Pablo that, go here ahead

Pablo Brizzio

Maximo, Thanks, our thanks call. in everybody and for participating

showing see similar will webcast Ternium results quarter – we presentation, today's recurring year, very in those in As the quarter. to strong continues the the second first of

was at Ternium margins billion looking by earnings in per adjusted start of $X.X second with on XX% at EBITDA ton. net or Let page in the presentation, X EBITDA quarter the $XXX and

in the over We expect lower margin decrease going steel significant the prices they start to here reflect months. benchmark forward, but last

also costs. for in prices decreasing per cost operating as standards, $XXX consume strong reflecting performance. market material third by previous the quarter purchase period lately, in will ton increase expect the material income to the historical months we been raw Net $X.XX higher solid reached has million, Although, or per at in the raw ADS, company

turn tons, year-over-year increase the volume third Let's combining in by On steel and market market the see region, to Mexico the tonnes the year-over-year offset in higher as in that facility region. shipments XXX,XXX page can year versus a was and of other integration light In quarter, shipments. basis, which were second increased Argentina, you were Brazil, quarter the in second slightly review the sequentially in Ternium next a a can second slabs right prior shipments in of down the parties XXX,XXX on below development, the In finished been the at of sequentially second X.X X down region, in arrive in lower sheet mainly is the Ternium now steel page, sequentially and second slab achieved slightly in In mostly quarter, higher year basis. finishing sequentially. were gray. steel X, see cart quarter. quarter level consolidated gradually the X and the the Mexico, of In tons volumes the this the tons year, Ternium to shipments second in this the million quarter. prior increasing you in facilities we million little number shipment top stable to

we remain into forward anticipate to shipments the third relatively Looking quarter, stable.

ton the quarter growing on per in and slightly sequentially revenue prices, second year-over-year steel a to increased on substantially basis. Moving are

in and As significantly, in I the prices have gradually by contract reflected decrease prices quarter anticipate steel a as of be we steel Mexico. in will decreased mentioned set prices third this large earlier, the

Page in employee mainly was was offset costs. a the on quarter, There main net and drivers sequential higher This in review realized Mexico slight profit increase by together Mexico Ternium X, costs cost. now the the Let's energy behind EBITDA cost by would connection second Argentina, slab partially income. and purchase EBITDA in changes lower in partially steel with increased Labor offset adjusted in adjusted in quarter, higher increase reflecting sharing. in prices second the

accounting to [indiscernible] Let that me our you use we remind value inventories.

and it changes raw reflect takes in five up to our slab material to prices. financial So months in

lower by higher expect stable of Looking decrease reflecting while a forward, adjusted better instruments income to a tax quarter, [indiscernible] increase improvement value as financial financial driven slightly a increased at in better a margins This rate. Ternium primarily of quarter, and results. EBITDA bottom higher reflected result sequentially effective results sequential tax and third second the in the relatively shipments. mainly show sequentially In the

$XXX the cash The after raw for million reduction of June. tax operations volumes. in Ternium's of impact working of as and Let's by XXXX. $XXX turn inventory payments a no now a steel million. cash in of quarter, negative capital $XXX year the billion in million as the increase There year Page generated a of mainly of X. Tax CapEx the increase in in on in capital to Free in includes earnings income payment includes of as and cash was fiscal both from the costs end quarter Argentina higher well the million. flow outstanding a Mexico with $XXX slightly increase result advanced values result This, higher to was May payments record of second in XXXX XXXX as over XXXX together working balance material of million cash dividend a in second $X strong $XXX the payment period tax and resulted position for of paid significant fiscal in an a

first Now increase was yearly operations in $XXX after Slide flow review year cash income performance of billion this X, number of capital and deducting let's million. our a working of payment million, the half Cash basis. tax $XXX final the $X.X on from

million, the first in Ternium steel is the Brazil. deflation based income flow second Looking of price the the approximately CapEx $XXX capital half to the and to expectation cash material of of healthy a through reduction loss tax half and for that and year the in estimate year, compared show of Ternium forward will working decrease generation payments a on our raw

are we ready prepared Okay. for operator, your again With remarks. finish your questions. much we time Please, for session. this, now Q&A very you attention. and with our Thank proceed And

Operator

Instructions] of you. the question first with from Your Thank Wolfe [Operator comes Research. line Timna Tanners

Timna Tanners

morning, Hey, Yes. good everyone.

Maximo Vedoya

morning, Timna. Good

Timna Tanners

if Wanted to ask a on questions, I volumes few could.

more to about the of still tonnage? just $XXX a guidance volumes years in that expect where has couple volumes offsetting up was looking COVID, question the been sustainable And any year-over-year level. to one If of are hoping But is bags been down at prior ton. qualified we frame little was First bit a a of in to to as last that The you other ramp we years see close there? a help the or EBITDA the question average on look Pesqueria you a has continue course, could if the if just at get it's Mexico, showing should ton. of existing better. up time the quantify $XXX to I five just

would gap levels two on any So helpful? thoughts be those you. the Thank between

Maximo Vedoya

Pesqueria market the the of think I where Mexico, commercial the honest, in what running market, Pesqueria, especially is XX% in as I we conference in and between demand XX% to Okay. Thank of very we high -- talking. very the have you is call, apparent of in good. very which be mentioned Volumes last running at and capacity, Timna. decrease problem But because -- a are are

one the the issue capacity. volumes is other lower much mill, lower So the that running the Churubusco, with hot than is in what -- with the strip

year. other takes process and time all one The certification issue least new the of all the is automotive these certification steel at take

So every take up least that a these now products we ramping to are more will is year flow to customers, our this new starting starting but at quarter. process see one through

main So that's issue. the

more a second EBITDA, what of your Regarding sustainable with do question, the we part need level. we

between almost I this put think normal to last objective But put would color I our say, let more was higher most Timna, we and and a peers. before ratio you to if of this. let's -- then of EBITDA what two XX% years, have remember, that Pablo That always our XX%. compared and

think looking be this of that And third especially next that will range bar in future, to have is we this probably we little have at in is I a the the the between XX% the outlook for and we we put that XX%. range the increase are will quarter. doing this what year higher objective bit and

So, you to put into -- want this clarification know, our this. Pablo, is if I more

Pablo Brizzio

Hi.

Maximo. Okay

have the on we it. some already question answered have to color You

investment So yes, mentioned, are before is really, is that we expectations, expecting, we this the well, Ternium the did, expecting, pandemic. especially the be but uncertainty on even lower But that facility, should Maximo a raw want, range. mentioned the should have more important that there we which what the the the is the after what it's margins into we prices second Maximo that period especially, we into Maximo going at returning all of the in of course, are level forward, during if think be or your prices, a what enter we of we I to little have that of that are ramp-up depending side levels was also materials, XXXX part saying range, new upper the we we're looking targeting normalized enter you year, and Pesqueria that of the or

then, couple or should think be we So a little normal used to quarters, margins and you not to that, one. next that point the main there in that's clearly, approaching a will the to only we of returning to be I during the but have, level reduction higher pass targeting

Timna Tanners

would company-specific what the the that some Mexico investments So vertical be in in you're the Is guidance of function has the a higher other Ternium of made downstream, and range that end the integration of actions. the saying? of

Pablo Brizzio

you're right. Exactly, exactly. Yes,

what the taking is but this we said be, are prices into clearly and what the is we you you know never targeting. consideration Of what course, product, clearly of will it are final where for looking have

Timna Tanners

over. it hand I’ll Thanks. Thanks, Great. again.

Maximo Vedoya

Timna. you, Thank

Operator

next question of UBS. Your Bokkenheuser is Andreas the with from line

Andreas Bokkenheuser

Thank you, very much.

questions me. Just two from quick

if coming some at I you pressure capacity Just be volume or volumes seen increased the some US potentially some that market Mexican first we've the increased of maybe the new the online is give steel could the obviously and import just destined from volumes coming the mean Thank Mexico. the you in that starting your Are looking meal at price question. was And from moment, into of That thoughts for see Mexico. us in question, second you the reported US very would EAF That's great. much. updated to on expanding within capacity.

Maximo Vedoya

increase a we going strip then was Yes, There year April you last And November, about biggest import, Thank to on our volumes Mexican the and started products, still the imports if which March, increase you, imported it. mill, not material Mexico. very mill honest, -- the imports be let's are huge the Andreas. and are part think of we're To come market, in talk lead not our the it hot when -- in are functioning. -- the time see was and steel prices of prices Mexican seeing up. high. October, I the those flat between And I was between mean, decrease

several that in imports. of they of And they from imports months were long a mean those I peak. honest, -- we down to what started bit that are XXXX. Today, than be seeing So lower of were are coming drag are

the is seeing at So and our I least up, -- have. going numbers we not that's think share we are market

yet. the at very to least seeing increasing. not customers problem, So that we eager us are and let's not again, market from we our buy say, material in are But Mexico, seeing the share

question was, second Andres, sorry, The

Andreas Bokkenheuser

expanding Just on or – on on EAF an – update or thinking your side? the updated

Maximo Vedoya

still engineering. Yes. mean, but we No, compliance project in the have told USMCA is for -- project, XXXX last sure. forward you, And conference all we I I as complicated go this mean, very are automotive the I industry should, to call, a for it's a doing

mean, going and still the are to I we everything. are sites -- doing and in the process So of the engineering all we

track. So still in

Andreas Bokkenheuser

Thank Got it. clear. That's you very much. very

Maximo Vedoya

Welcome, Andres

Operator

question from Alfonso the is Scotiabank. of Salazar line Your with next

Alfonso Salazar

Yes. two. and have Hello you I my questions. taking for thank

behind that that have is The can you -- asking share years in steel you we the if prices. respond anything first for be can But one related the see and all swings now. to I about we value to been know this price lower to comment and very led -- try -- the how

to industry -- price? that that what is share auto are anything regarding And can recognize second So we some the having the in more trends today. to seeing come you and the

is in there from are the that see to very autos backdrop, example, what vehicles. unclear higher, menu. the and to in trend this is sales the to basically OEMs they -- attractive are coming that in steel going are on EVs that menu, gaining how it's with For of understand strategy regard, of And high-strength focusing are -- premium to much I reducing past more and parts? more the there that return for and menu why the auto which more against to more price produce in cash auto considering OEMs it's Aluminum increasing and disappearing be affordable OEMs SUVs will it is And the aluminum. aluminum this want And is level. compares use

to do going the what you see understand Ternium? strategy forward is just how this And I market want there? So for

Maximo Vedoya

Alfonso. Hi, Okay.

first you made. take question me that Let the

taking we the value consequence on discussing a we reflecting for is long What then the seeing company. know, are marketing probably the opening time. what will Steve mentioned as an And we having pandemic the is EBITDA of a of we you that margins during have we during reason on remarks sector having the are to and some of low company's we having a margins or this of reflecting are yet been to US closer to to that of adjustment and a on the future of that, multiple third mentioning have the years we companies, we clearly with extremely probably is steel there be a where the reflect period sales seeing, the of the multiple reflecting out As not this that also or can question readjustment rest used on probably prior today, still an level. since is good very after new that the couple are

We lower are are historical than seeing the multiples numbers. that

So these Ternium, to you taking of should enhance question. to comparison multiples look company. this That's your past clearly, ratio, very at the are and in our increasing some the two we also, the on our support been to sales, the payout quite which dividend recover high is which have been in has companies. relationship parts to other actions certain the dividend now we relatively price of And point, at increasing like well think I yield deriving payment the or TX, have share in but if and significantly or of try specific value all discussed to the in the also comparison in to clear, past payment in

plants. our in work to continue We

what that how to work we care, that not is if trying trying trying order have We that we yet have we value we sell is simplify an do – today, in we And are only the to perform company alternatives we market to way our to a corporate operations but and than to direction. do say structure, what reduce successful are been that. in I'm higher the find to if that, we different we But or able not have try have that. to our

in some there that difficult, to Of minus. have be different cases, or peers, will other that past we course, will have that in diversity be be some because things be characteristics some of others are the a geographies will some from that plus, our are but we like

in have and now first, increase continue have general, things been So Ternium endpoint we into take Ternium the to to markets perform to to issue to But try will that value. share do have doing to lead – in also the to our up we that and order consideration.

Maximo Vedoya

this SUV the Okay. the was from I again, are part auto luxury And and the Also, the better. semiconductors. think a let – and it question first putting the But of than there in more luxury clearly, these other very probably mean, car, me a it's producing on margins restriction, take type – is industry, I our – have of course. and of because cars can your They but things the restrictions are they automotive SUV, on and OEMs more several are knowledge, selling have. more say, luxury preferred thing the the speak to second and that higher of all inputs more

they margin So have don't because of to because restrictions. choose higher enough these products, capacity, they do the

the I model. think that's

them the units, This of and XX million and was in the to I'm If not but saying, Last the of we in market XX you similar is same that similar XXXX. forecast That's see XXX demand. this every the it markets, the million automotive restrictions world, the around see was market, do automotive although difference year, units. the million the demand total units. the do production final similar was total it automotive Again, in it’s it's a year world. to was production

see I In we Mexico, think inventory. are US also. Brazil There's it you the not There in the no in inventory it are also. in seeing and dealers.

once OEMs. thinks, harder which have chain show that we supply mean, seen including said I to initial I -- remarks -- think the everybody these that I in So it's, much as my issues, what very

see different that you demand a issue the automotive until in So couple then first I to steel probably -- come generation and forward last the mean, for don't years the going reports steel, Aluminum of next of the batteries for industry. the out main it's from also new industry, for the costs will there, stay change for stable that's are the be part. versus I that. see big if

– for to is So steel going again peak. is demand

the That's it's electrical mostly of in equation the going produced long-term, are we vehicles steel. driven are there. the to think cost what clear from seeing. I very be mean, or I cost driven,

So I left I Alfonso. problem a there, the answered don't I question, see Alfonso. something don't hope not -- I know this but if I answering also --

Alfonso Salazar

And could No. a the more Thank by can producing that this I that [indiscernible]. in future. bit you, affordable little that be structural, are fact it makes interesting do affordable Yes, Maximo. very, has margins regulations, with with for emissions cars What also them to do OEMs to think the not which them margin to expensive if better is realizing are very the they regulations, a is less safety that no comply with – left. there and car

evolves, probably So future see is in but the I that this will something that how a.. see we

Maximo Vedoya

I seeing not – agree am trend. No, But that you. don’t I totally with No. I

I some to the affordable are going demand to somebody that a of mean there and think cars. do. I OEMs is produce is going

much they the also. the less Model less And cars, do, is cars do If want is the the are more the the world and more X. demand. the Model they new I about, to that are you steel side. of S, is other are to high-margin they but see mean, on to talking expensive course, they what want going doing, I -- But -- mean much a somebody X Model Tesla usage build needing they affordable one cars.

Alfonso Salazar

coming brands how I Maximo. get I'm see good of to that things But do. will concerned just we'll it's might that that Chinese which you. going totally to and are agree part turn. brands be a you, Thank with going Asian

Maximo Vedoya

in Also, steel, use to be it the but USMCA need pour Alfonso, could they naphtha and melt be it to compliance.

we So have customers. American, our they us Japanese, have I are mean we Chinese, we if for customers, have

Alfonso Salazar

much, Maximo. That's a you good point. so Thank

Operator

line Greiner with Caio Your Pactual. BTG the next question is of from

Caio Greiner

Good Hello. Thank morning, you. everyone.

Just my. from questions two quick

between situation in high unofficial gap First seen largely in unsustainably as seen exchange. the of reporting, what we've be one, with Argentina the official could Argentina. because foreign the some the results operations and mean, I companies large

And So the know just it's mostly consumer two side. points here. on I

perspective, tons what anything be should we or from on mentioned going that impact forward expected that's quarter seen just that a slow to Because for -- call, an the I that kind anything Mexico coming aware but in from up if around that of going just have third the we shipments, might a so wanted wanted to process alert division well? you conference the around Pesqueria. geography of the Maximo been you Ternium your see for seen to be check have and at? XXXX. looking you not to X think that to could be previous been any I million on just for I And we guys in expect been to quarter case check, saying anything sensing remember year, accounting So do for markets that's for that been guys here, point we the to we with still commercial have mean, on have could last I the this the I mean, should And where guys second or follow-up steel point, second XXXX. see impact country? incremental for? the question have you kind takes what guys be certification for especially slowdown I have from the in X of to demand you second customers as Pesqueria, in you Mexico if

an and helpful? even have XXXX well, you. just volumes for be could estimate check we that anything as So for you guys if for updated that get those Thank Mexico if for can to wanted incremental

Maximo Vedoya

the Argentinian start part second impact Caio. with talk much, the I'll very The I'll part. of market. let you Thank the question, Pablo about and Okay. accounting on first your

it be is not demand Ternium as to and before, initial going at today, the same mean I and are the honest. shipments macroeconomic new I my it I in last new said Minister quarter levels, this, said we the stable from remarks, Economy impact about as is of plan. before, important market. is mean, mean, they the As I the very very good And level very said situation economic yet Having and the complicated. is been still seeing any I at has in steel quarter Argentina to speak

be I the Argentina. not we see the today, demand not So there stable. -- are to am that is at in end, say. we think able again, to But it's to we coming, When going very an affection yet

and are be to customers orders are our good selling honest. everything, Our very

the cautious Pablo, in very cautious. why -- of have are that, we part. don't very spite are we So you accounting

Pablo Brizzio

Okay.

that to Caio, let in are putting first Okay. in side me say, to more the way, let's margin. answer an then what's exchange in Argentina clearly, say, related enter can there expanded periodical able prices customers you? are said, the, let's to or -- working to happening how be buy especially expert, the financial your Ternium. retail companies into more and in some and we rate So try the you If, question will official are as

of This is to and buying So only this some the our products that use have case our companies selling the not in by product. which could exonerate, is, to. use case. our the way, be talking in We numbers you the you have can official been the both central

sales and that buying So market. imported our -- materials. official in all the in exonerate as case Argentina we And raw in the been of similarly, our have you using the know,

and is is part mentioned not uncertainty the of specific to XX% plan expenditure the profitability there solution a today consequences have our control also, that. denominated, demand of this possible then But increase that situation as especially denominated your dollar the you an bit would Argentina, to and positive case in usually Argentina initially evaluation new first a have to if adjust a the the relationship the in in or case In cost market. things because Ternium we inflation on part you value of you gain in as that and answering question, be have to consider is mentioned, the or little the you our any devaluation, in country situation. So not a could that we the have have other that Maximo volumes that in in also -- helped and impact the around

But or -- to the question Ternium not moment. need And have announcement And a that back impacting your be on will uncertain wait is situation a of will probably the towards something that. today. clarity So, of middle today. the very part then going we to is we until at

Maximo Vedoya

conference in past, project. right. And Well, think, call Pesqueria to you're to call. Caio. go last the in November to year shipment we objective ramping that when the said I achieve were and the in was of was think we when be not last going year are that we a put put, I clear, up that incremental conference we I And Pesqueria the it We question it

think the this two were the end is stock are the imports for that of of came huge expecting first all One I that these last And part was in there things. at that. not year, we year.

we if point worse commercial is infrastructure, second declining, market than is Mexico a in construction you clearly, although The is the what growing the expected. Mexico country. the continue I that, the mean, of GDP see whole in as

normal these But were coming in something is we of to where The substitute go. didn't hoping we imports expect. process were market to go didn't the to those So commercial production certification had any have that account. last we up things capacity year middle into that first, to and the ramp we two

-- course, the the line I that volume The is the facility, exactly Pesqueria strip is the an -- the hot is is which, today, the older as Pesqueria production Churubusco facility. running So plant, so mill we is of but production. the problem projected. with in mean of

I expect. we did not So the capacity volume there. we -- are the be producing at think will there XXXX,

I ready part that be going certification, the is in that think to of XXXX.

are grow, Mexico going react, to construction infrastructure see volumes the and is that's customers. The big if the if. going is, from in we to incremental if is going a commercial industrial to question market So

I think it but will, in months. see we have coming that to the

Caio Greiner

Thank very Maximo Pablo. you, much and

currently Just with, provide could to any guys do Mexico you expectation are or Thank is of this an a year? And far guidance maybe kind shipments get increase working terms guys in you, away for from a that sense you. of say anything? too XXXX, to that expect for still you you

Maximo Vedoya

the the not steel world XXXX, today. early given bit of of talking the uncertainty economy, think moment a it's think, business, I the little about of I

own We ones. they are but internal projections, have our

see increase a a we any XXXX I or are should don't they Of a wait say number to in But more. increase in growing. think little Mexico. in publicly, bit I bit XXXX course, little

Caio Greiner

much very you, gentlemen. Thank

Maximo Vedoya

Caio. You’re welcome,

Operator

question with next the of is line The Thiago Bradesco Lofiego from BBI.

Thiago Lofiego

on Thank follow-up lower the have which mentioned, on And prioritize you the that sites, there. caution the of Mexico so volumes, XXXX Does better see other in certifications quick if Pesqueria sense way? and is, specifically the given -- just margins? and all a you make construction Pesqueria we or you. costs expressed on adverse to to its question, over second Maximo, still going it first question a sector, think considering volumes more you you then about scenario are

you that relatively to in second mentioned half. see expect levels restocking the you also some and inventory volumes support low You the

see this demand, basically evolving Mexico? about you this restocking, key can bit next that for talk the months following So And So, a about XX do Thank construction right? What drivers how in little underlying bucket? the that? more activity in beyond you six you. you're to also, are

Maximo Vedoya

Okay. Perfect, are your for Pesqueria. prioritizing question. Volume, Thiago. Thank you we

and doing that the are those is is mean at the and honest. are [ph], the the mill but continue minimal the ramp-up going to at Guerrero mill or first the are we capacity second Pesqueria, We we had be I is full is Pesqueria curve today, XX, today plant first to

more less one we that to that take realizing demand. is is are Churubusco. one or going the the according So, not the to volume That's

three X.X construction The -- point. drivers. that's there that's drivers, So industry, mean, I the are

driver that future. the to is near infrastructure. don't Mexico. first I is in The not improve expect Infrastructure mean, I good. in

hard the a to buildings the of think and make turn. some going years, point, of is to residential sector. going couple But down be homes The second honest. It’s of It's that that's take comment. see, going you increase is to really if and it are the Again, to to in months looking see to for projects say, think but permits more if some I this will people new private last I do trying construction in also that seeing When?

is side, the north talked much, building the The in we our I we have near-shoring, business, a industrial that facilities. they industrial ourselves parks building or The this one the these a unit in very at all conference one our in customers industrial building this the doing boom third a a that customers that months, is sites, the of industrial of even construction year. industrial say several lot and Mexico. I have very some are all Mexico thing backlog for that mean, make structure mean, about that's very, is well of having one call only

So in that's because very a thing only which increasing are the that news is really those is that Mexico, facilities good coming.

customers the Some steel in of of them. They of future. going are are some consume them us, to

So so – working, not two other but are the Thiago.

Inventories, the are said, prices. So low they I decrease I of the main issue they mean, stop prices I they in that they started is because distribution, think and Mexico. in think I buying. to are as stop, low

going they I investment. going I again, private mean, start not I have and change the the quarter, in think only in mean, your a question, not if restocking, we think to I main I what – the happen. in volumes, Thiago. the really but in to is lot is But hope investment – industrial answered think I issue buildings, not to that infrastructure do some construction moving the fourth it's third I that's think.

Thiago Lofiego

Maximo. Yes. Very, very Thank you. clear,

Operator

with question America. next the Your Bank of line from is of Caio Ribeiro

Caio Ribeiro

opportunity. everyone. morning, the Good Thanks Hi. Yes. for

So have I here. questions two

a plans look well, pricing just Mexico. to capacity. And US of bids upstream back feel terms bottom the short correction you up? started And could right that now? production was gentlemen. iron And after for as your into to additional after that your capacity ore also, expand noticing $XXX pick starting prices the with going wondering, first, feed you, correction, if I volume in The in ton, also that you HRC near expansion do have your that your in slab to to US you question, $XXX per for second we're Thank upstream near

Maximo Vedoya

Ciao. Yeah, question you, Yeah. Good good questions. Thank

mean, iron new have saying not our analyzing facility new we that We a open are are projects away we with looking always the to – mean, I or we are ore for facilities, iron far are new capacity. going and I ore our are seeing reserves. upstream for from although we

that – US. I what of more future for in future, are are are – take hard with it's People going sales seeing couple it higher honest, weeks, we trying you. for we – But prices a I I To agree seeing facility. the we think the months to We -- hot-rolling we the than buy sure. and In – today. the are near hot-rolled although they think probably I inquiries. – are have with is that to more price to last are of say, little indicative that I in in very not US can we actual mean, But mean, be iron are buy anything. that they our ore because have we the some are more. price much bit going but bottom,

in still month construction in about So said, I in the is customers construction. healthy. about shoring I mean, there. industrial this mean talking is US, very see very -- talk and we recession, although both sides everybody I mean, I what border, the demand as Industrial healthy think very is the Near healthy. in that, demand also happening the I of is I US, still is

I a So again, of next think see our some honest. -- month, month steady the least that, rebound there. at that and in to to going bottom in This part are be or prices stay coming they to we is are the vision,

Caio Ribeiro

much, you Thank Maximo. Perfect. very

Operator

next Spies with Your Morgan of Stanley. James [ph] question from line is the

Unidentified Analyst

questions. to wanted Thank for I on ask capital. my Hello. taking working you just Yes.

stable year assuming And or raw any that if use of that You in the of evolving had this terms a relatively capital the the quarter. working large rest color see you the give of of large you remain half on materials. considering how could really second prices throughout year,

Maximo Vedoya

and slabs Yes. Russia of is because we PCI, the Brazil Thank in increase increase we as in you, of increase carbon. to PCI to Jim. working the are capital the in the of honest, There we now capital, working inventory to -- higher it the from we Australian from the the if was XXX%, and Remember, in make bought as prices, volume. didn't of in going increase have the some part PCI And is increase most buying be was But some The not some bought honest. Australia. know work. we and change we volume working much. to the capital have because be And of that decrease --

accounts it the think -- was for I this down. that increase, XX% And see prices. coming mostly was is we of

capital. least -- see the several nexttwoX at the working in going quarters, a are So decrease the we next to

Unidentified Analyst

Thank Perfect. you. Okay.

Operator

session to Q&A the over remarks. today's for concludes today. That hand the now any back CEO for closing I will call

Maximo Vedoya

participating Okay. much for call. the in Thank all you very

any us, Goodbye. I or if questions. to have in call. the additional you. feedback everyone hope Thank talk next to conference you And contact always As

Operator

joining. This concludes today's call. Thank you for

You may disconnect. now

Ternium (TX) 3 Aug 222022 Q2 Earnings call transcript