- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ternium Third Quarter 2022 Earnings Call. [Operator Instructions] Thank you. Sebastian Marti, you may begin your conference.

Sebastian Marti

Good morning. Thank you for joining us today. Marti, Senior am Director. Sebastian Relations Global is Compliance and name and Ternium's I Investor My Ternium the first XXXX. third today quarter released its and nine financial months results for of that to complementary is call This presentation.

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

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

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

Maximo Vedoya

final working that of thank more you, than had top $X in and Thank billion, to adjusted the sales, for call of equivalent of EBITDA results with release. interim Cash by [indiscernible] change range. November of payment to the good annual third November XX. I payment was In Good an in will to operations per conference commitment an an $XXX capital equivalent dividend payment This ADS, dividend Ternium that for on to long-term cash quarter line, participating with a $XXX a schedule our million be ADS This significant in adjusted payment $X.XX quarter. ton. of Last a dividend to our from very our in advance year per is that Sebastian. an XX% within $XXX reported generation payment. Board this more today margin on margin of set a announced compared is EBITDA was positive a May. increase morning, strong of margin underscores historical transitioned level you interim twice a return million Ternium's we of a On of all than shareholders. this, Directors in $X.XX paid a our believe the today. aided and we Ternium's from last development this year, payment per schedule represents to

war facing a with are we Rise economic uncertainty geopolitics global as and slowdown. China's inflation, are and combined ahead, household situation economic high interest slowing policy in Looking confidence the and as down driven with economic in complex like undermining monetary investment by Ukraine tightening, rates, spending. well

in the the But in infrastructure a the this, an housing to in and sector growth downturn the sector investment the sector to just private Focusing released, short-term the decrease into the to is economy. negative not infrastructure territory Construction Association increase in steel balancing to softening investments activity and was World rising that non-residential market. law in on outlook expected support Steel strong demand. get a is will energy demand steel U.S., despite still due due according will

back In is are expectations levels XXXX. markets result, our a expected In demand very the U.S. has those on momentum pre-pandemic in below is the in to as very to addition, are and construction maintain sector activity in the similar easing as been constraints. expected Mexico, supply recovery the And of automotive positive chain both sector slow. The a sector remain of related. to this gradual pent-up

better which household sector, manufacturing since and the a output pandemic, In has also weakening addition, faces appliances like in HVAC. relative performed the industries small

development probably is should in the slowing growth, we work manufacturing forces announcements automotive is There sector new spike constraints. and gaining There increase EWS a thanks of by sustain momentum that of that companies new PBT is worth though the still XXXX. we for the in easing several in will our in which not majority North like an It even been us a that speak. capacity shipments of decline. down, Near hand, at to American noting has has are the been market as are in of that north our region. in help is other Mexico, the capacity the expecting made to internal during the Mexico region shipments investment see are manufacturing shoring On [ph] to supply the

many also there. result construction us. increasing these a into of to will the new consuming this, future, of facilities related for steel As In turn has been strongly activity facilities industrial customers

we aspect our certification with advance new in grow of up The provided our mill broaden as are will result, the us products. This Mexico new our that the shipments we are throughout new products of our XXXX in in with for activity supply is the new help next new significantly as Pesqueria. certification capabilities progress booking And center speeding strip Another this of contracts a has of by gradually hot R&D product range. facility us ramp-up our the enabled to year.

unique its years, invested Over Mexican market our advantage imports This competitive take position of against opportunities, enable in share XX we offering. facility local market and product new to new capacity increase us the to our producers. puts enhance in to other in Ternium have expand last and these a the

remained appliances, Turning and now. than as sector working year now healthy at construction it been good is more and a energy household to Argentina. like The Steel are for levels. industries automotive has stable demand

making need in the unstable country. macro Although fourth situation expect we to this the market we the stable shipments regarding for continue a warning in quarter,

thoughts share Rio employees in our de Two fatally on facility now one some was of weeks injured our Brazil. me safety. ago, Let in Janeiro

event. and more fatality moved years. deeply reside for had friends. our understand Ternium the what are We traveled family And happened. And our findings. right and are will from four We there by Brazil news continue we this learn investigating team set hadn't to after thoughts strategic a to to with I of heard in than and our the his this worked I development, we with causes

note in communities the center a the about XX, infrastructure intensity mining in our After their was tailing had same effects Mexico South a Colorada dams brief a condition. dams Pena third-party make that our significantly me twice Let the the findings was surrounding of mining September's the the affected. expert facility from for event, there we situation earthquake by where of September Ternium in and Michoacan, was are both earthquake not Unfortunately, our On XXX about in and inspected which was perfect were activity communities. facilities. some our of from X.X and surrounding and now kilometers our

communities. As To the we result, remarks, to schools up a medical even and quarters, levels these like macroeconomic some our fund in help as have would I shipment environmental, created the to in prepared regarding that for my a clinic wrap softening say we following rebuild positive a a expected. are remote one

are confident. We

quarter. competitiveness of Pablo Our product very Mexican manufacturing efforts us go and you to sustain that us the ahead much. and Ternium us analysis I'll our will the sector. let -- serves With in during by sustain market help third expand help Thank its this, substituting gradually will range XXXX, in shipments imports the increase results with mainly increase

Pablo Brizzio

today. and your good and to thank Thanks, Maximo, you everybody, morning again participation for

have that in level fuel the sequential over to have our per of you third will a decrease the last to in we higher or of transition presentation lower margin see cost firm X. adjusted EBITDA more Adjusted as profitability, was already webcast And $XXX quarter Page been quarters, and result third prices $XXX we move expected. of million quarter XX%. of few Let's to ton mainly the was sustainable The and sales. in the a the EBITDA

first quarter's to anticipated in fourth decline, range this in margin quarter a trend EBITDA reversing call, in reaching below continue last the quarter of the before company's we XXXX. As level the typical will

cost prices of with our quarterly steel in past. price in -- quarter in way will fourth time levels quarter, the in decrease. financials that have did Mexico of reflecting account but contracts point they ton cost, not go accounting, the will one under than more level the a per costs third As and at prices reset a the In that lower restart a not quarter, mismatch will the happened a first-in-first-out with temporary way between in in fourth will

the Ternium's investment high-cost per investment of continue which test So price it in in our gradual material, our of half this coal of to value-in-use, per in which to includes changes income the were relatively impairment related September. Usiminas. impairment a company's pair XXXX of after end the previous led $XX the ADS reflected to will first purchased the Usiminas We per the at equivalent more ADS Argentine be to fair capital Argentina. steel from affected quarter will $XXX third cost first subsidiary, the the loss by related production on Usiminas estimation and reflect of Ukraine investments Ternium adjustment which quarter dividend to invasion to raw lower Raw were need The recently certain earnings to of the during This on. along $X.XX main quarter of when an the of Usiminas of markets. company's million, lower to the third write-down kind of of Russia the by Net with as material the availability in performance was a value further purchased Net million loss flow disrupted collected year situation. fell inventories current global $X.XX. income ton macroeconomic Ternium due securities in of the in its through of the from facilities,

in Turning now X to Page the presentation.

that compared second million of Mexico a quarter see year basis, to in steel shipments X.X year-over-year can on reaching third quarter in the You tons. and the increased this

macro of in by slightly the stable, in market restocking second already Maximo, in in end continues quarter below forward, the to other as demand in shipments the steel In decreased commercial the quarter. in region improvement region slightly the and Mexico Argentina, seasonal the in fourth in share the slightly southern increase a Looking level shipments situation, achieved a quite regional, expected demand again an despite mentioned but relatively sequentially. slowdown result steel quarter for market. as Shipments market year to in the the are products uncertain. was third be remains Ternium's In

remain third-parties relatively slabs to right the the level in you chart, within As period, industrial a in see top can of Brazil Ternium's levels systems. the reflecting slab low of of at integration volume company's the facility shipped high in

to now five. Turning Page

shipments on to were volume tons last to very that quarter, of previous quarters. higher volume offset the steel the year, the see quarter steel can similar You third Compared consolidated to shipments achieved in basis, two the a Ternium's X the in million in decrease shipments. a the decreased of by slabs reflecting consolidated steel partially quarter, in third shipped third third-parties, finished

Moving the ton or to quarter on this per at realized declined sequentially trend in as year-over-year steel market and in revenue ton Revenue expected. in quarterly the and levels prices period per a reflected Realized the steel in downward third Mexico prices. of lower prices. a reset contract prices basis, decrease

anticipate the steel further earlier, price a continues September. reset market through decrease as quarter the mentioned we trend six I lower prices in last contract reflecting Mexico fourth in levels, steel As over at the months in prices downward of to

the sectors. in in The first as purchased of decrease flow was on Now quarter and realized already high-priced raw result the in year. sequential increase drivers we the steel the decrease the prices the reflected third slabs Mexico, in material the and The higher discussed, to all steel the let's third part cost of and lower in quarter. due the net six, income during main adjusted Page inventories of of gradual costs EBITDA review mainly through steel had

a income impairment at income, the fair in two bottom Usiminas extent, the the decrease from net of investment $XX the call, to of securities a lenient of in income, operating I million we the beginning mentioned in our Regarding a Ternium chart, lesser value and sequential a items Argentina. as and decrease have the million at $XXX received

million $X release first finalize billion, September. net our $X.X operations let's the in the million. the third flow cash billion Cash our of capital by cash position of of end XXXX slightly the the the basis. the flow nine $X.X presentation, on a of quarter of of $XXX seven. review was CapEx including million sheet that year-on-year Cash Page year was same $XXX performance Page on cash above in $XXX a performance To year quarter the cash drove working billion, flow flow Let's from now balance period. third Free X, operations in almost after months from in our in achieved level the in review prior to was

in the you chart. continue release capital forward, close cash fourth year, top-right Looking estimated of the see investment we Ternium $XXX based further can to the expect and last quarter year after working working significant for million capital CapEx on the significant will in generating as

Moving to in the see per the dividends ADS bottom can the Directors of $X.XX Board announced of the interim chart the early of today. page. dividend We that

paid As ADS XX% per already dividend the interim last mentioned, -- higher $X.XX than year.

expect yearly dividend XXXX announce We to February annual to when corresponding the XXXX Directors Board they accounts. of the Ternium's need to review in

forward, striving Looking proceed will Thank we the let's stop your for to that will so you attention. can shareholders' very operator, if with I taking much Please, start possible, Q&A the company your time continue and sustain, session. here return. improve questions. and

Operator

Pactual. Greiner with Caio Your Instructions] [Operator from question first BTG comes

Your line is open.

Caio Greiner

everyone. morning, Two good questions here. Hello,

your on working release. first one So capital the

in XXXX, in presentation. from that's capital your guys working billion So investment, $X.X had you

to And of part only that. small so far, reversed a you

question from something in posting next should expect I so you guys quarters? continue those a positive capital to we of mean, working are my expected is, question here of or $X.X that change even lead ahead And billion full the reversion contributions might capital allocation. And did a second claim to or going that on only you forward? that my part guys of ahead

$X.X know cash, be even much that's a we while. in pile same very continues already cash truth mean, But I that a I while robust, to you to continue the been than up have the net asking billion So question for and is more ago, flow cash. free pretty expected generation guys maybe

with quite only is, you to going to mean, few going guys guys capital the my being guys you announce that only still is robust. flow supposed mean, short-term? even you you it's even So to could a part outflow can with going can that is the finance And -- the forward, take announced, I to generation cash you CapEx So It's going question free -- I generation still that be flow in the time. first mean, strong, you guys outflow working what even some happens, if be already projects to be that is guys and expected question do years. my with is going it's continue forward, in have of cash reversed? free I to continue -- are true if to

won't mean, change despite So I materially it dividends rising, that.

guys you guys buyback, in mean, been with So the that in you can that mentioned been can you to question deal the mean, is, what amount an short-term what a the cash regarding announce option can really much. guys net know that is that board you that? do of extraordinary dividend? order you you have Thank not of, have guys that I in maybe guys an I I past piling guys it's have So up? you M&A favorable very do analyzing? the

Maximo Vedoya

the try second and Thank answer to would you the Pablo/ I'll first one. Pablo very question much. answer I let then

Pablo Brizzio

You are very right.

a have of increase level of that significant capital reduce. started in generated, materials, on because we different We working raw significant prices have to the

mentioned, it's remarks, to not reduced, that we have during do the quarter in XXXX. we you but mentioned our already amount as fourth expecting As continue full and to I into also initial are the that

materials raw So of depend Of completely we significant the past will build-up recovered. prices continue have different the will a But working it's the we reducing products least the of purchase. course, that right. this Will at on and be in of -- you capital? capital working portion are we

Maximo Vedoya

Pablo. you, Thank

It's Caio. The second about allocation, true. capital

capabilities world little honest, comfortable financial bit to think We USMCA We know, be already And haven't we uncertainty, to be position, position. the important are investment having we but in made, shop strong the a the have have going you announced, true. all that that given or as investments Nevertheless, XXXX. to a to. we very But coming very been is steel strong ones feel it's this announced. I have that's our a be very mainly committed to clear by Mexico been with expand compliant we the

are, giving a of having. in high have making. we are So mean, the on Buyback are the see dividend you of we table, yield we to honest, be this dividend, a as because huge not interim discussed we as And I can that's is past. investment

said you -- think and opportunities, I analyze, have that M&A, know anything So and We we I no. analyze to today. different never inform don't we that but

look that given So are for there opportunities. the be think are going the things to have, are again, good in in that table uncertainty and we this the expecting I it's world to to position. we But are

dividend, giving high. the cannot are calculate a of we February, to position, going amount well, if huge until We comfortable this but be in you it's yield, because dividend very very

Caio Greiner

you Thank Okay. much. very

Maximo Vedoya

welcome, are Maximo. You

Operator

question comes next Jon Your from with HSBC. Brandt

Your line is open.

Jon Brandt

ask my and gentlemen. your morning, prices how rates, the Obviously, view Thanks Good I Maximo, first global sort we'll higher questions. and there's you wanted that. slowdown what much steel see; interest inflation, like in XXXX for economy taking and about Hi. concern about to things in COVID higher is zero there. of China

guess, current steel away your prices, been the this the a we'll XXXX? see some And quantify that I Do don't there's of you downside prices? iron of expectations timing timing the impact? ore a are but head way quantify I more take potentially to into in differences, to spot us buying the slabs understand for sort pressures question And of a way if as U.S. Thank bit that there are you're where cost on particularly I and wasn't you second what is or my detail? seeing, then your this we to look little prices -- had have you But slab relates So know that if and to ore ore, it, at iron it there -- if Mexico you. could spot iron they're that costs margins would the Is the just and quarter? more just temporary. what you're spot give mostly if sort impact you is sort margins think if

Maximo Vedoya

the Pablo issue, I'll summary to ask will because much. make because much very it's start the you second And try Thank broad, one I shorter. the prices with of think. it's to a then I one, think very I first

Pablo Brizzio

prices saw this per slabs year, that it's the Maximo and that basically and cases, to first reflecting we of the or question the $XXX both to in you that When big But year our timing prices the right. cost we you is down, cost a is are message of trend The remarks, tried a in of ore see mismatch of we and and something you second you up, product ton. our quarter iron higher clearly we the reaching prices going coal in question, opening way the saw the or of, have during that, of have we of than of prices prices ton margins. answer meaning which making that a reduction our have you in coal were your in At are -- here price the product our financial the this even expected. statements. myself, reflecting, prices will reached what and clearly, You're the $X,XXX levels of your issue what other is per quarter is slabs in what will moment, the you of reflecting move other pass have some where today margin going that when between around, is the the

that are prices prices way below recent today seeing that way You also, know, don't these this I saw And level. are we in quarters. are the below prices

very these that the be of are materials. a one to of we go comfortable trying But to though course or will specific costs real we to why than I'm that's the much level showing a next even quarter say -- number. So higher replacing raw

year. back expecting into level to are normalized We go entering next to

first entering normal probably fourth the to said return to in will that part -- range why year into first Ternium the into we a least the of we we of the that's that level go margin will below quarter year. So at and to

is So from. this is mismatch where the coming

this be the this entering So fourth impact the the into of and of this be quarter semester second negative should and over the both year. then half year, third the having first will

us, good. relatively for Ternium the that's be to number So why for continues

for exactly be XXXX. of If we're should is we that XXXX, on the we will same, the a entering expecting reflect EBITDA clearly, the we you that level and take decent but profitability of average see because good what pretty a you see to presenting solid, generating reflecting are price into are levels or

Maximo Vedoya

new to the the analyze. a expectations. to normal higher, of were this short something prices America. range a $XXX, going also, still I what base going although be we in clear said price $X,XXX, to the steel that between the How in decrease, steel much, is in level it's affecting I is -- prices I'm think able. if region conference in try price still in prices price world course, continued short-term, is mean, But even calls, -- of Price don't be is to to I'll steel range forward. the happening in is that below the North clearly, have $XXX, that I clearly price several as that between or reaching going know American I our XXXX, of be the the somehow North that normalized

to I quarters. there I a news, happen going lot the good there are the in prices is news will reflection or are of some be a mean, bad Clearly, are news. but what there think economy next good in of

short-term China, the to Americas, recession prices as a in be I think if troubled, as is is the end very doesn't there the economies But range. I not going that in going parts impact short it's But to the is going of said, doubt. no world. that other to the as am that hard, the in recession, of in are to world confident slowdown clearly, going or be as it's expectation the more in going be are The to how or long a parts. are a is change is. that this how in bad other going how recession that hard some really we reflection Again, to now news is And in customers the region customers, a not of of in good term reshoring; the mean, our as seeing hard market. dynamics heard I heavily old nearshoring, new the some the the very, this seeing Americas. Europe much other friend-shoring. there's than we today, it we customers in new seem get I The happening. have I to and is harder investing day, be are

the you it or sense a take make have manufacturing If example, but make our small buildings. so in construction very, Mexican we small that market, very in -- division -- a any numbers, industrial doesn't for the very

next the for full [quotation] next two and for And months. years. are two we a the or half have We seven

that a the and and are I steel. of consumes industrial So are also put course, these more steel, the U.S. are of consume facility that be to are the going the to are But coming of facilities, we to this Mexico, steel. mean much customers selling manufacturers lot -- to coming them in more -- that to future,

seeing coming. are trend you this So

give a you on, short-term the going to of going a this it summary starts, hope is America to is Clearly, for outlook I little news. what happen but opportunity the it's the more big to If prices. That's us, the that be have the prices. So impact a not stable North bit long-term, volume, supposed only lower. for think of to medium, in there a with in Jon. I will recession good

Jon Brandt

Its easy not I Thank an question. appreciate. you. do

Operator

Carlos from comes De Alba question Morgan next with Stanley. Your

line Your open. is

Carlos De Alba

Good you. morning. Thank Yeah,

So new - not flow timing coming in of America? we whether Xback dividend might the the this pays about the can generation, and the ADS share for North coming or that per the years? cash electrical an in potential per the And the announcement to company talk timing impact the CapEx or maybe negatively furnace

Maximo Vedoya

Carlos. you, Thank

second investment, the I capable but more The clearly, think of no. answer, a mean, I is no, than huge part, Ternium doing. is it's

this have mean, is and in rule process. we to we been -- first new timing. XXXX. are very working the honest, we of the I The by the facility the this part hard of have To discussing USMCA this That's mean, the I be deadline running have the origins. of question on engineering

So have discussion how we uncertainty and best we technology how of giving us And some both in are competitive the honest, what having, be time. the to of economy be to can the is cost world, the production and to -- use, more we to time CapEx. think and in in it's competitive that's this even sense, the the

exact So soon. are we in but should it We be process. don't that have timing,

Carlos De Alba

All Asia down the prices situation low. complicated. And shutting well. demand prices into Mexican in my of as Europe yeah, demand America, risk also quite to are the right. from And on other from is but in related second they question capacity places. is mostly are side Thank But are you. U.S., imports the mostly the potential market North from low, is The and weak

see into how imports So risk market? the the of Mexican you do

Maximo Vedoya

is risk The always there.

at grow, I can see where in we full long -- products. the are -- think you flat especially we is products, can if which in capacity we

has if last a going of information -- the been So September, mill information there strip decline in We Mexico. in amount September, Why, think that running. months, market very when last to get steady flat to speaking products, the I see Last coming hot we share. imports was is XX that the of eager our the you to put we continue. because said that are month

honest, There going that input. Asian is of is be risk, we very there today, that a steel. gaining and risk think spot European risk think more countries. yes. a I to a is export, don't in There a are is contracts or But we I are continuous So of yes. North through competitive America export from

don't I going forward So the long run. they have the competitiveness in think

probably spot Some a level. low substantial operation, at

in XXX, the the is is XXX. which in in In you Mexico, The good. a other very have have you U.S., to and of thing the Mexico remember U.S. that also kind

the is North when it's not protection, not countries level of make dumping because these protection, but American steel there it's So kind the to of some helping -- of region.

more that's it So that a bit second part little make a difficult.

today probably, we U.S. our third, cost asked having the structure able you about we competitor are to them the and yes, the our we U.S., that good. facilities Again, our bigger have in think The is compete with very flexibility

the So but XX trend to is to trend the going going that I continue Mexico. are a is imports months think in of last continue,

Carlos De Alba

very you Thank much.

Maximo Vedoya

welcome. are Your

Operator

next comes question from Thiago Bradesco. with Your Lofiego

open. is line Your

Thiago Lofiego

you. Thank on side Maximo, Mexico. the on one question actually my Good gentlemen. in side, morning, demand

by infrastructure? in residential, commercial, what So give be low. you you us very So color would you're if helpful/ more on that us give construction Can mentioned could activity seeing, properties, you it Mexico color breaking down is more maybe

Maximo Vedoya

in for construction in the U.S. Thiago, the same I Yes, sure. is down happening market residential the the not as Mexico. it's timing is in And in that one mean,

think to very also material industries the and residential home decline, are sells for down to to been this also for residential residential. to is recently. I'm well. it Mexico, the time U.S., export those is quite to Mexico market, going the in very this Because starting that but example, that U.S., the of industries In I some that, housing both not about talking U.S. sells performing and has the of some appliances, already for

is performing non-residential the there very industries On the Construction better. other are hand, that high. is in

is As of very again, our you, which building facility, our told I metal small. example

huge of Mexico they two a But where that also So you a squares statistic it's it GLL, take many meter years it's a make survey is mean, makes broker, if happened. continued I is survey never that's construction, an there. numbers how of are There how many broker, than the industrial million no non-residential about construction, American infrastructure. can constructed growing. it doesn't are you But quotation in made construction non-residential say in Ternium. more in good have to

as usually 'XX, that This constructed -- rate in lot amount same quarter, today about last constructed year all of occupation warehouses industrial first are almost they of these semester works first the a the X%. That X%, it's the rented. X%, this And amount the was the of semester.

chain some enough they industry, still still high are again, industrial is get balancing be. Mexico. mean, So thought the demand there is as parks, in big. would plants, you other car industries. Thiago. perfect, stoppage other different of kind is problems a it's is but it cannot in thing that supply balancing I is the of let's a some huge having That we investment not new Automotive very not way, it put is with have the They is And one. these -- that another in

I think in low. the U.S., inventories are also very

that capacity. So And bit other I equipment think in very they are high increase little going to companies trying companies, works in a to that demand. especially are also continue

I balance. I a question, it's Thiago. the So hope answered

Thiago Lofiego

Yeah, Maximo. you did,

very Just follow-up. quick a

So on sector. the auto

you is normalize more get and So do or ramp months? of but there in definitely enough or is in happening already seeing already expectation there, Because auto production equation, more will that is is demand I is then -- that? up is which things this demand of will think the you're this - production an there the the side coming coming there

Maximo Vedoya

with - what my at in is well, Let me least answer thoughts happening Mexico.

them, are that there more. semiconductors them pace produce much happening. pieces easing, to the have at of I from thought from restrictions. of their in That these what I allow heard easing, the think not And was but plants we then to some most we they easing the to mean, produce is searches it kinds don't it or want going other be of at it's to produce. is pace automakers

going XX% cannot more. for very rapidly. week is it They're don't for XX% announced answer saying produce they're I tell one one. produce sure, we the how changed but more, because have exactly going more I or So same or for much number that, other to are stoppage the to straight the you the mean, a

is So what happening. that's

Thiago Lofiego

And one. very last

guess Just out here Is for of steel next confirming flattish that that. year. your for everything in terms is balancing best right? in Mexico, volumes the demand So

Maximo Vedoya

see Yeah, think increase. which it demand think you an the grained Again, I it's way. in short an the is if Mexico, correct increase that outlook, I of X% think X% of or to was

Thiago Lofiego

increase? actually So small a

Maximo Vedoya

world conservative No, a it's is lot going to a not saying a this big our are mean, in that being -- balance, there increase. is scenario steel. That's be we a Again, it recession. base case and I depends

And in an consumption conservative. is consumption. being it so Nevertheless, we -- steel are increase in

Operator

Your next with Scotiabank Alfonso comes from question Salazar

Alfonso Salazar

over-capacity could America. not built And regarding the in There country but What North fact all of The of and the for your there that capacity the in are being is in is excess XXXX, problem regarding the and I that expectations, be steel challenges only the is is China have that global trade. long-term? because capacity question more question the facing.

So increased just years China, the trying in demand four, hear U.S. the in to thoughts understand to your five demand against backdrop of now want or about going happen what's from lower to

you making in to coming And more the in prices also warrants difference With extent protectionism expect decade? Mexico? the you do the that globally, investments are later in protection USMCA what big

Maximo Vedoya

a good it. to make best try question, to the I'll very it's Alfonso, and effort answer

are I that decrease all growing is today, a future, global think I and steel there trend is regionalization more that to in at seeing whatever mean, going this. we the trade or is it. is clear call, call one to the want or Alliance one. moving that you moving And and another want whatever that you Atlantic I is the to it's China Atlantic very think way

there's China. of over-capacity So in course,

been over-capacity Of for with. been And has that as is China over-capacity. working something before, I work that, or to we course, dealt But is have advocate I happening. that nearshoring be said that that we think has very to have

region. North trend first, be demand, And come for this to steel other America to also that there example, probably is that are consumption benefit that Brazil, going will but so for parts, the also.

this well or we am to next sense, -- balanced I years. over-capacity I is we I who our be several for are mean, continue not and in very which where benefit going concerned because trend going very producing the the are So well in that other think will places a think are U.S. operations, something is in steel are I about to happen positioned for that it that

mean, yes, some time compete the to inputs think, the with in has next mean, built. more a of I I that years, facilities I to shut are million tons. new in in being of going second, are them XX They there there's are some be to than some And U.S., there competitive. plants old five honest, also, down, they're be But very lot us. not

not answered the we the I'm with are this for question hope I worried five where us Alfonso think trend next helping I about Ternium I that, So And of positioned that. as years. is

Alfonso Salazar

helpful. Yeah, you. Thank that’s very

Operator

with question Wolf Research. from Your comes next line Timna the Tanners of

line is open. Your

Timna Tanners

we've One do of volumes to get I ramp a and Good past. morning, bit the Obviously, about have just about your market? in But flat or with thinking how of through up couple going about competitive up the further. improving? process nature mentioned ramping in how little light the Maximo, ability more you Mexico. qualification Pablo. just of taking you spare from import But know through about and I potentially the that like is, questions. in color were going AMSA A you do regarding light mix you're share And to think we think ahead said we ahead, volumes, mix both the talked capacity of more wanted Ternium's the in broader

Maximo Vedoya

try question. because me Let to it's Timna, answer that, a good

think I news. are there I market and Mexico, in bad as mean, said, -- some I some good

The SRO, well. On of Steel the it in month. of put at lot, that as products. increase the to have tons, are around have it we the this The in a we are not know we capacity lower grow to XXX,XXX mill a but in tons mill that citing but as we volume the going running World is flat Churubusco imports ramp-up flat hot made very Pesqueria XXX,XXX So capacity, I a is October, market, which strip was are products to are more the grow input. confident doing we record. going in Mexico that

of those industrial of customers. imports course, lot a there's So in are Mexico. of most imports But

takes those time. to a that certification that's through go -- all mix. needs So And most customers of industrial process that

contracts XXXX. are we are new seeing winning that now And so we for

new weren't of discussing able we are do. products to We that contracts

producers Regarding a two situation. other are in the of Mexico, think different the I in them

and don't of about the -- a is are one those lot but other competitors, side. So other want to the and one in I -- increasing talk some production

of we So lot change there. don't see a

Timna Tanners

then how other going I about So EBITDA regarding is to per one think the and ton questions had, forward. margins

the costs lag on a higher by hit from lag into prices on the But should QX quarterly a see contracts. as costs fall, clearly, declining as quarter prices you on more fall. product way first So your price that you even

is potential do the have rate this or prices do run So and good to several rate do both a given perhaps you there's think how rate that recent costs about relative -- a last into next obviously, quarter? to third margin or good margin you how think quarters this the from still decline bit earning to run run think out improvement see a is maybe you that year,

Pablo Brizzio

Timna, this is Pablo.

Clearly, reduction of expecting something you of margin the we fourth explained. that this third quarter, me are that a because quarter XX%, which Let over reason, the is take in to what question. is saw the which during see I

quarters consideration historical should low that We range during next is question be sustain and to expecting part see that we the between be mean of the more with the entering picture if normalized prices. first of to with at the and will I view. were these of level quarters sustainable new we in in input reduction the coming depicted margins, year, level seeing adjusting When to this third that EBITDA the entering I on we and starting the Your prices, we of will case quarter. reduction the moving second that's of expecting follow, into are and of in level quarter Taking there level EBITDA the significant course, to levels, that cost, margins mean of view stabilize the and year, to XX% of to in I are into second cost more two XX% first And the Maximo on going the quarter the into the a starting level. quarter margin. is, what return to of after

fourth the the that and moving quarter quarter. the we the during second And will there then year. into be start quarter sustain not into rest and first will recovering that the We of during entering level

Maximo things that helped be new will by customers Of course, that imports. the will the mentioned, to all substitution we view and have. the this that This of but the of new market, the this also be changes is subject which goal is products is the we This in have.

and a we in seeing. So that's work that's are our scenario, what

Timna Tanners

talked the on some one about could, for -- finishing investment on CapEx thoughts if in you've was past, particular, into billion lines. in And me, heading the last just in then I XXXX, $X

a trying increase just year-over-year? we to was projects expect get I to much see are on that sense if those might track? of still So how And

Maximo Vedoya

is that are expecting than a we to bit Yes, all have still in going we things XXXX that little the been XXXX, with probably billion $X be higher discussing.

Timna Tanners

Thanks again.

Maximo Vedoya

Thank you, Timna.

You welcome. are

Operator

There are back Vedoya the turn CEO, remarks. closing I'd call no Maximo to to like for further questions.

Maximo Vedoya

for all much today. very you participation your Thank

any suggestion contact please a good always, Have or us day. very additional questions. for As

Operator

This conference call. concludes today's

disconnect. now may You

Ternium (TX) 3 Nov 222022 Q3 Earnings call transcript