Earnings call transcript Q4 2022

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Operator

Good morning, my name is Rob and I'll be your conference operator today. At this time. I would like to welcome everyone to the Ternium Fourth Quarter 2022 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

may conference. you begin Marti, your Sebastian

Sebastian Marti

Good name am is you for Ternium's today. My joining us Director. Sebastian Senior Investor and morning, Relations thank Global Compliance Marti and I

and for yesterday released quarter year projects. that complementary its call results presentation. announced Ternium the investment new financial and fourth full is to This XXXX

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

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

reference any directly release financial find comparable also measures reconciled most issued in IFRS will to the press to the non-IFRS You yesterday. measures

to turn the With Vedoya. Mr. call that, I'll over

Maximo Vedoya

Thank morning to thanks in your and you, Sebastian, for this call. good very interest conference much all

billion. a $X.X XXXX, net positive $X. which cash of the with billion. generation very strong $X.X in significant was our free earnings had income ADS cash EBITDA company performance $X.X On-top this billion reached flow cash were of results, had per increased $X.X Ternium and Net billion, position to

per XXXX an $X.XX financial dividend. per company's represent of Board $X.XX compared of an equivalent million. the dividend Ternium's position, XXXX's these ADS good results for solid annual of and Considering Directors proposed to increase annual to This ADS, $XXX

significant several we today share Another projects like is thing to company. would that very are our yesterday approved to that I

We the this be this able a facility in to project about talked in and several today. to we launched new times to we USMCA a project you give details excited calls, previous build the about are First, plan slab region.

DRI base arc of this very will initiative steel positive X.X be construction our electric of company. tons, the capacity annual as X.X with capacity tons. believe an of shop as include annual furnace million It module a I million with will for well

with half CapEx Together material for first with location will expect handling. facilities of a the build facility port will a $X.X course. to this, of XXXX raw commission billion. in The be total We in we facilities of these the disclosed exact due currently also

careful consideration, several believe that advantage technology steel to others the choose a alternative, install have After we against shop. we

We have The two a well the have, CapEx only a This also of with smaller as one lowers two degassing facility of project will facility vacuum expenses. lines. instead operating it's large the caster and EAS units. as slab

this for of the produce to from applications the All like auto enable of necessary steel highest the those specifications customers demanding most us industry. will

hot new art In announced rolling February increased support will which capacity XXXX slab operations in addition, of this the our and complement state-of-the in and that downstream in we XXXX. project mill, began production Mexico

leading will manufacturing region USMCA The in and melt integration the and requirements of advance of implementation support This supplier destination as the for project the the These investment. an agreement nearshoring the chain the pour continued system value attractive position our made for the industrial with USMCAs has recent in ongoing of our capacity a Ternium's auto reform the trends compliance region. will also initiative industry. steel USMCA new and steel trade

The for feasible new related modern use available. and decided is to hydrogen project natural future. technology our this to the gas decarbonization the include new the this to of whenever carbon aspect operations. as greener Also steel model most shop all is we the switch currently of significant is Another reduction in do models DRI of will be capture ready to capabilities our and will green the direct it from

very will beneficial of it Ternium build not with announce in its from years be this of come. a in announcement aspect only also Argentina it a a sustainability business source from new the we for I'm Wrapping to to in but wind mind, sustainability will that electricity. excited which this farm Ternium, up operation very project, And to from expect also

We expect have which will XX XXXX. million of in second operations megawatts power alumina to capacity $XXX projects and invest this the of begin in will half

electricity XX% us This will subsidy to providers. allow purchases currently Argentine replace the of that external from our

the secure country. be We its capacity first doing renewable opportunities grid so project, the see to energy farm power will if facilities our transport the to national have our future. This company we to access we already owned this to for in expand wind and plan in

We are thrilled of this you with has more project operation the commitment believe sustainable its I make Ternium as today these of more proof with announcements we to are and over-time. sharing are

the X.X the know, in to Ternium as frequency in you that priority is another aspect close As I'm glad report operations. our accident top hours million had XXXX, per of of has this year. in safety for the its worked we the in people a lost injury the agenda In to all important rate time we we make been priority safety and our incorporating keep safety The of awareness This best of levels. is company. and our history lowest a rate always practice

main our Let's the now turn to state markets. of

in a performance expectations We have positive XXXX. regarding Ternium's

are steel the as USMCA decrease and year, half cost prices During the margins we normalize of expect per ton to region recovering. in should the first

second cycle difficult road. down impact economy The is uncertainty of half its the the some to a regarding forecast which ongoing introduces the on tightening XXXX, interest-rate more considering bit

we increase recovering, the in began XXXX the anticipate continued region prices seeing steel first Mexico, a steel the in are year. a Since market. of restock we volumes in the commercial during when the In half end of

recent that demand to investment industrial imports. slightly improving and against yielding still market program us most share On Ternium other is market the gain allowing hand, products is new are

take constraint we market other mill adjust as are our in back perfectly up very of ramp-up we In bringing the situation, are facilities and to utilization of last reduced Ternium had our advantage to to which this capacity market customers. demand. are increasing the we advanced and positioned in lines, country to opportunities environment new positive capitalizing of the downstream year new lower in utilization we this on serve is

is Another Mexican manufacturing the development Since to interesting activity the companies under state has of a investment value change in increase the investments of are nearshoring And number of the an last linked announced conference greenfield the in main chain market the facilities our in where destination value New of the steel for capacity. country. number dynamic capacity is remarkable call, of these allocated expansion investments. one Orleans in the our

market. ready serve We growing this to in are needs the

are to under we as such shop steel to grow facility currently development last an expand year us opportunity the of downstream and project new put advantage the this even addition, we will take position to In our projects business. better in launched different our

purchasing performing Turning sector XXXX, a year were The did sector of country now in affect automotive well agri customers to are extend the good and to in also business the industrial Argentina, although level are industry well The the drought come. in and active sector. our maintaining XXXX index ones very construction in the during most energy activity. should activity the the construction,

first of half in good is levels present uncertainty this the demand quarter, always in the in with but first of expecting are usual the macroeconomic XXXX market. during Argentina We seasonality

demand future. So activity this could adversely in steel the affect and economic

emphasize in I finish our positive remarks, my would XXXX. Ternium's to view like To regarding performance prepared

the very to addition, project capacity enable the growth manufacturing In We Ternium, the support growth company's, of are and substitution we this drug believe near-shoring the excited contributing USMCA and project import development. with strategy. the region under company, will of in de-carbonization

this, With ahead. Pablo, please go

the in Thank fourth XXXX. of you. With quarter results the and review Ternium full

Pablo Brizzio

Thanks Max morning, and everyone. good to

me by start Ternium Let do and achievements describing that. to

XXXX level reached record, in on on begin the previous our X, hot mill Mexico. supported highest Page presentation. by Ternium the Let's the webcast new strip of achievement in in investment

the strategy In the has million XXXX evidenced which of shipped Ternium as third-parties, X.X XXXX. to of integration moved in advanced from in volume slab to addition, XXX,XXX tons by tons its reduction

the strong mainly level Ukraine. caused year, by reflecting year, the sales to a Adjusted of raw decrease last increased material slabs during and of were material cost was steel raw beginning higher of, very profitability. in more global XXXX linked The in to net invasion in Russia's market disruption price XXXX. EBITDA purchased to And due in and the the of normal of and transition a income

value negative higher to due effect slab production reflecting leave million. This partially for impairment integration the was proposed to $X.XX $XXX Ternium's of in mostly sales offset XXXX by a mix realized increased in steel from XXXX, last higher And $X.XX Brazil. prices, annually five years equivalent significantly to in

in interim $X.XX and We XXXX, in have last XXXX November started dividends in November per of ADS pay $X.XX year. to with

ADS, net the or million. remainder interim Once approved, payment, November the annual dividends. the May, in company Board dividends per is proposal equivalent is XXXX dividend This to of will $X.XX pay later $XXX of the

year Cash On tariff new with the partially the can years. XXXX significant cash see, Ternium XXXX next from an five in up the mill in in you page, connection working operations in ramp and shift past buildup capital Mexico. in inventory reflecting XXXX, also was material cost in steel fluctuation those prices strong raw and in of and generation the in in the

have two to investment years into under last and which the to end Mainly we CapEx per This expected upstream as we of last of start-up about initiatives year. mill announced relatively rolling the at $XXX galvanizing the project XXXX. yesterday project $XXX a million projects is to the been clearly four over result at which stable that the has the development. downstream line, three the million cold change announced are now and year - is of

years, the take company CapEx CapEx a will $X.X add billion approximately the XXXX. we projects CapEx these four over XXXX, to of $X.X in big company of next billion the Some and to total intensity for total with in

to it two to significant new at exceptionally is we expenditure The last around in the This with Turning can equivalent payment continue Ternium's strengthens $XX and as billion to years, us when high-level cash us the cash free flows, strong help enables balance products. chart, also dividend be a of has ADS. generation announced will each. seen capital in $X.X now per sheet been

review fourth quarter results Ternium's next now in page. the the for Let's

raw As which declined in there usual below price per in the the ton was revenue of previous Adjusted a revenue lower materials per and slow gradually because at range. lagging EBITDA happened with inventory mismatch quarter's deflated before per the cost and prices we the ton company's anticipated in margin This company's in pace quarter decline call. ton raw sales. a the through the to the material fourth level impacting cost

decreasing expect development the help should We the Ternium's of per couple raw ton quarters. Reflecting last over normalize second to materials believe to the lower margin purchased next cost this quarters. priced half over in continue We Ternium's of year. coming gradually

decreased the write-down Ternium also of reflecting Net quarter impact of of investment adjusted Ternium's EBITDA negative level $XX and income million million was $XX in fourth the in Brazil.

tons Turning continue an now Mexico, next a Page in in reached mostly steel remarks of see million in fourth the increased few the increase X, should all-time described factors, and quarter. quarters. initial high in can X% Shipments by as driven X.X we in Mexico to in Maximo's the shipments we growing

hand the the On fourth shipments sales Southern to quarter division compared unchanged. the remained volume in in XX% market decreased and region other other in third the the

We expect this the Southern of decrease year. first region to the shipment in in quarter seasonally

Let's turn now X. to Page

in levels. in market contract at As ton sequentially steel consolidated Mexico fourth anticipated, prices the decreased reset per and as lower quarter, prices declined steel steel Ternium revenue

Although in region. steel USMCA are support prices improving the

this in offset lower year, be prices to the first trend positive by of the contract quarter at reset this levels. expect of We

So stabilize after half to the revenue decreases year. days per second during ago ton last the anticipate we of

time results offset in income X, net decrease the a sequential million $XXX the for the analyzed let's million items investment the in securities drivers income of Ternium decrease the the in that of Ternium $XX fourth we impairment the from Usiminas Page answers quarter two company main in of The earnings received value fair as EBITDA in partially decrease decrease reflected These in net the behind quarter negative $XX Brazil. in review quarter. call. adjusted dividend and in Argentina. the fourth the and third already write-down in a the million by mention A Ternium In were of

and Page $XXX release working on capital impact The quarter finalize operations resulted To of generation the in including of from of working $X.X raw Cash billion steel, fourth let's the cash a flow declining slab presentation, now Ternium change million. prices capital material. review in the was purchased X.

December. flow last fourth cash drove million. was in year of Free our cash $X.X billion at after $XXX position million the of quarter This end net CapEx to of the $XXX

time your am very much Thank I my this, finalizing you attention, and your are for and we for With ready presentation. now questions.

session. let's Q&A please start So operator, the with

Operator

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

line Your open. is

Caio Greiner

you. everyone. morning, Thank good Hello,

been project. I the question So, in scale my you the smaller past. than slightly on EAF mill first the guess had indicated guys was

per I think it's slightly ton lower CapEx two.

wanted the estimated provide I whether if were will cost what the number main this any just And on too first color cost any or ton can that on second the drivers a for be also be on So for just helpful details quartile you you planned it can of if understand the or to that. will the quartile curve. or provide per

helpful too. I think it be

the I to in you margins half just your the first on normalization of mean, specifically. that XXXX, guys wanted understand on of first you margins, secondly expect I And direction views but quarter, of the mentioned the

for see the of from I in direction understand fourth that magnitude helpful downwards the too. maybe And I trends, are still of prices spot some here the wanted though if would you first on contracts we the but mean I That for quarterly then color ton on to much. even quarter. damage Thank just quarter. the prices on provide firstly quarter, resetting revenue that per costs, any might the on the first very guys So understand rise, so be could so you

Maximo Vedoya

you, market The putting morning and -- I'll your in you, EAF smaller that the What question thank It's of bigger that today. probably two would probably we EAFs EAF. total EAF available for million alternative is X regarding the the the tons. past of take a to What putting first the today, one the but doing Okay, Caio. part biggest of investment. those is of the it's we be in not good much roughly said million biggest are a X that of EAF, only have two we putting capacity are the tons. is EAF's,

and the So with one. configuration than one number would lower is we us part that's put million we of only the other the we That bit configuration, you give putting little that the the it's roughly are other is X.X changing CapEx what smaller million if tons or or be a X.X little EAF, bit tons question. thought that help the

cost, the the is two, Number cost operating smaller.

allow capacity a putting one EAF, the in but to us expect If it see And grow also. in is you number only have that's this don't long-run, the the three, so this fairly revenue, one. but future could second

technology our it's but little think then to do I with two that convenient So, operation through different to alternatives these very putting the for go was a capacity, bit EAFs. more

the answer So is I question. that's for the think first

Pablo, about that. question second The don't you margins, answer why

Pablo Brizzio

numbers. because Okay, perfect. that got our to already a fourth decreasing expecting also reflected have So, on we in quarter margin, prices an Hi decreasing we in Caio, been costs the how of seeing is been are as everything have which squeeze longer have taking environment the we but you? be

range range or of Ternium the X% what Clearly, done margin have the fourth the we within around expected have. the below at EBITDA in is quarter, expected

the range years, coming to specifically the are to we this back So coming in quarters. get in expecting

Clearly in yet contracts, Mexico. Will guess Maximo at prices increased some the coming because in be our our numbers reset that reflected on will point prices in -- comment, we reason, I the that. fully extensively quarter, in especially not the of of are

coming that results. and to we continue On hand, costs, to see are into see reduction expecting we quarter first the some other the

that quarter precise thing the So as been beginning have the the of be all-in answer recover in the second we to to range but give we third approaching you will of we that, start normal whole levels the or and the are at to saying, I've level year, quarter more end return all and quarter. should more of and in summarizing that to not first the yet expecting

Maximo Vedoya

Caio, answer hope two I the with that questions. we

Caio Greiner

guys Yes, what provide point on color in you're of DRI the for one just project plus the cost terms you Can still. on facilities. any expecting EAF

the in but expected slab your cost per the ton terms your projects, cost production per announced CapEx, the In total for for of operations not ton. -

Maximo Vedoya

and put are around be provide understand because sorry. on materials. number operating cost it's some our $XXX. raw and you very difficult that of I'm of deep. the It's the about I will around part of a market might to the mean as now numbers can I the cost. To So, if that very cost project today. Caio, $XXX price the numbers some Slab today's depends Yes, I numbers put we I are That's what this you question tell expect take,

Caio Greiner

That's you, helpful. Thank Thank Pablo. Maximo. you,

Maximo Vedoya

You're welcome Caio.

Operator

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

open. is line Your

Timna Tanners

for color great the thinking good the get on more volumes. Hi, a last thanks to and guys, about how up detail. question follow I you're wanted morning and on little

it you you guide second that segment. from first So mean Does about in reiterate to the approaching half. fourth That's talking more the that in was when the fourth target of refer in sounds on like is you be of like answer normal steel if making the I that range you or about that quarter to normal. returning to kind question the gave XX% could just last clarify normal, would more that EBITDA then want first half. quarter When definitely just first - question about that improving the talk to margins historical XX% quarter. the would you're And

I like availability And in then with gap the seems on to be not AMSA a of my market. there operating volumes, said second question in obviously kind fully, Mexican

fill a that in meaningful to the demand see to gap good your uptick possible given it is volumes described. So you

color would volumes your given Thanks, availability lot. to go more any could where be a great. Just on

Maximo Vedoya

and to expecting normalized is refer be quarter, quarter, you, is near Yes, in little margin When bit more to question, is the morning. the fourth of good the not first lower a Timna, answer we range first like these margin. XX% between the we XX% yes. Thank what the

We the not would bit quarter. the little closer but then more getting to normalized are numbers, a range, be fourth those

volumes Yes, Mexico. the Clearly, one going aspect in of is that in to are Mexico increase in Volumes AMSA. quarters. following two

The are is against gaining you second we that that can market-share see imports. aspect

to which facilities Churubusco And at one working old, especially - but the our depreciation work old the very so are its it's at not that a mill, we was facility starting much the capacity. renewed, higher old rate, low was the

capacities. the much forth least next facility working we see for at so higher few And that quarters, at

have hard customers number exact don't our see working demand. the very The with final we to the very we increase, - of are but yet it clear,

I that demand in is think also that in steel Mexico. the thing clear, - that of one is consumption Timna, -

We that seeing going to is the future are in are and all thinking increase the investments. we

are Mexico but Our customers when of increase, set next of kind Last see in the going apparent marginal. is we doing, customers, on figures, it's consumption coming new it the decreased over time. our time year, but year to

share. we is So volumes market against the are gaining important

of question. kind market that's what so, hope today seeing little are bit this, clarified I with we And the Timna. a in I your

Timna Tanners

No helpful. that's really

So quite happening? I'm know on this like were I'm it sure don't you And what's even telenovelas reopen. up sounds not if to AMSA to-date

Maximo Vedoya

Convening here.

Timna Tanners

it It to yes? market sticky operations, like we share volume you do return as the do sounds If imports. see some of because at against is think and of improvement well, gains that least

Maximo Vedoya

Mexico we Yes, to that What are you that's going imports And increase what AMSA you year, we true. several the market Remember are expect future, you of have yes come. you the to that ArcelorMittal, mill now we in see hot seeing seeing not is also and and for next less is are increasing mainly probably new is tons, in against demand have strip years producing us. but both you share with have, course, trends. AMSA of course,

all this we mill this capabilities to coming, that are With able remember our also hot products, the manufacturers that with the some couldn't be before industrial of the near produce. strip shoring

certification have going but year the a customers, now, the industrial and I industrial let's completed. this do this - year, it all next process, put So through mean, customers, of painful to we it, certification which process, are painful, they are is. mostly way, lot

So, gain volume imports. started to we are that against all

Timna Tanners

color. great. again for the Thanks Okay,

Maximo Vedoya

Yes.

Operator

comes the of[ question next from from Spies] line James Morgan Your Stanley.

open. is line Your

Unidentified Analyst

you from want for taking Brazil there? divert just you the ask to to question. integrated also, the operations. and volumes just Ternium have And I Mexican to where wanted currently volumes auto percentage ask, thank to hello, have markets. you my your to plan to I yes Yes, What industry color of Ternium of the goes some to approximately, do, which Brazil more

Maximo Vedoya

Yes James, for good question, you thank question. your very

and The Let in me also broad with bit start with Argentina capacity of Argentina put have we'll Mexico a in mill. a a course answer. capacity little spare we because it, have

tons X.X We need that have capacity roughly slabs. of million

facility, I'm So out mill facility. mini the taking the Guerrero

full So, full at if we producing are not were - at capacity. yet which producing capacity,

[indiscernible] in if X the Pesquería But strip produce the mill is of and in mill tons between Brazil will X.X X.X probably full tons. Churubusco hot million and producing we at full need slabs. million Argentina today capacity, mill capacity around the

have we deficit bringing kind a we are So the capacity that or in. new is in-line its bigger, with

slabs have consuming to probably Ternium of we most operations. our in will anything So, we the don't divest from Brazil, own continue

Having there that partner [indiscernible] a for long-term and slabs is said that the are customers Brazil. in us needs of that

from will into the to our we'll tons around X.X around specific for probably, the and we selling I increase we some that around today new Brazil. Ternium XXXX So these Mexico, industry be sell Brazil continue the automotive general, I in is say when automotive in line. think - million of to that's industry. increasing. million Remember capacity come view tons Volume market, a would as buying X specific our for slabs USMCA will

Unidentified Analyst

very much. clear. Thank you perfect, so Okay,

Maximo Vedoya

You're welcome.

Operator

next Your Bradesco Vasconcelos the BBI. comes of from from Isabella question line

is line Your open.

Isabella Vasconcelos

for thanks morning, opportunity. Good you. end. I my on the one question have Thank here

destocking market. happening the is of that you terms in demand, In mentioned Mexican there commercial

wanted restocking to already if above-average that supply the understand in we Mexico more I currently see just months? the in do stock is in you think at coming continue just are or where happening to So chain

Maximo Vedoya

very and much. Okay, thank you. morning, you Good thank Isabella

the see to year. think in is Mexico X% the restocking I you consumption decrease honest, be when apparent starting last the just

or that in the destocking destocking especially in was increases, the Mexico. you through year, there second half, in a see GDP Mexico profound Although

it the value restocking So I'm expecting all see change. that we these and in

much not change There Mexico. stock value, in in the

going for I automotive said, come And to of industrial is a of industry of couple as a some industries or there continue at then increasing are think it's couple that demand, one months least we'll So quarters. are the have Mexico of again. huge automotive problems we in of the are automotive in in January are OEMs most we industry consumption industry because of them that the in producing the Mexico, components, but lack the of seeing I in on,

stoppage, and because of change of that any industry automotive the working. Without lack already the components in it supply seems is

So demand I are And industries we the for are the back. quarter in year the second think half expecting them. more come demand other going from second that in or to of

So it hope from that's lsabella. we Mexican I helps have that the our market. view

Isabella Vasconcelos

already helpful, in projects later expect quick have up you on on think in for to near shoring very something demand one been seeing that XXXX/XXXX? near that's you or Yes, follow actual shoring, products - do

Maximo Vedoya

Except steel, demand for in XXXX, mean the numbers demand, XXXX that have all course, construction and a not 'XX saw 'XX. facilities and in the seeing late 'XX, it's because to we our are come first of of production going That but coming we is that last demand. lot not of and year of I one you No, onboard, are seeing the we demand. takes in the

that happening, this seeing, of production That's we But the and I the is been said coming has I said built. is factory are in the is why we near because beginning when that are something in facility running. buildings years, the all what shoring, seeing couple a - that it's

Isabella Vasconcelos

you. Thank clear. That's

Maximo Vedoya

welcome. You're

Operator

next the question comes Salazar Scotiabank. Alfonso Your of from line from

Your line open. is

Alfonso Salazar

is are building know good considering keep know new you wanted for but you to are have energy everyone. goals the fit, water what you of they is that new the your - in if that clean the good Yes, Does like regarding do a Pesquería to availability, the and you the to questions, the looks one can location first - just a to the the location. give are on have mind. And it what because some morning, carbon to have with need energy you don't that I Thank plant location me [indiscernible]. considerations availability, color for do what

The is a Ternium Brazil. second clarification just question about

So facility. will if you new be you this correctly, with understood I slab

basically neutral you slab you'll on is amounts You margin plant end for will users, a mean be your for, some it be another would correct? even see some or the needs bagging small if selling

Maximo Vedoya

Yes, thank you Alfonso.

second the correct. think you I are part,

being we to yes, said, we yes, But, but go as - sell I to are hedged, [indiscernible]. We going almost are to be going mainly, probably think. I are

think almost and sense lot but it's point-of-view, market continue a a buying logistic are be reasonable very from it's logistic so slabs -- a in going I very of to Ternium, makes the are hedged. and probably we we going to as

honest, we going it are the exact location question, To the be things, discussing possibilities, are the yes, I or location, we said, disclose mean, still answer are we tried to be analyzing. Alfonso. Pesquería could one the to to there's soon. hope of clearly. some I I But as I and

Alfonso Salazar

Energy with concern it region could a those of kind problem consideration is we future so, I -- you availability but in the be have. in water point, of to are not is of know that energy many there to scarcity State clarify, the just Yes, and Mexico, also León. just this Nuevo of a understand some problems clean that invest want at this [technical in really difficulty] in were the

Maximo Vedoya

and plant. yes, problem. mean be not for water no. our Pesquería It's a honest, Well I to

close that plant Pesquería all the of view, is - water to the the standpoint the all of we a from is I electrical water increase that mean, consumes know, -- the you plant from in plant, facility had disposal downstream with As Pesquería Pesquería. facilities the and

clean is and efficient grow. view So from very point the we plant water very, prepared a are so and not to water consuming of it's

for country, the water in concern plant although concern sewage you it I a all, the is sustainability, how I don't the So black English, Pesquería waters. felt waters. it's part we all at north in Yes of consuming because a of the said the not are know the we and think

problem any with water. have don't we so And

Energy, Mexico. which is a big in concern

north not supply of I more think the that the The country. the a north energy it's country has energy consumption. in concern of

be shouldn't it So another problem.

I alternative is discussing disclose think have and that based soon. location the pretty our decision to we on

Alfonso Salazar

Okay, you, Thank Maximo. that's really helpful.

Operator

[Operator Instructions] Your next from question Alex line comes from the Hacking Citi. of

open. Your is line

Alex Hacking

Good I the few guess call. on and I the a mostly have projects. morning, for just thanks follow-ups.

with or to be you So parties? of some that of new at the third would DRI, the consuming DRI that facility selling all EAF be Ternium would

Maximo Vedoya

Yes.

Alex Hacking

Okay.

Maximo Vedoya

consuming We DRI. are the all

Alex Hacking

that will technology to that technology, you're be What familiar on, it going the [indiscernible] is based be very with?

Maximo Vedoya

Clearly, are have probably [indiscernible]. two intend most our what plants, decided. course, mean, in technology do. And But it's I [HYL] all we we is there likely. to of not

Alex Hacking

Okay. And from and from any exposed you tolerances in high finally, replicate are auto are steel to quality? sheet quality you automotive can very that made In EAF? for slabs, comfortable chain, Brazilian fully your body an shifting particular then your quality slabs there supply implications current

Maximo Vedoya

to Yes, the that is, yes, different reasons. go it's of course, But road answer have technology. we a several for

First, we have and to be compliance. pour USMCA melted

going blast to We a are Mexico in be honest. to furnace or anywhere, not make

slabs how produce operation quality the produces. all worked Brazilian the last see to will exactly to year technology this steel same shop and we hard So see that to the be

as And that be the same secondary probably Brazil. in will we steel shop the have

same. comfortable are the we So the be hard working although quality that will very are we

Alex Hacking

correct prime using the thanks. assumption? Okay, on side. mix, And DRI the just a that outside assume I the is and you would back some in material then of also scrap raw be that

Maximo Vedoya

probably steel, steel DRI, with less it's mixed of a the and -- on going DRI more the depends XX% be quality, produce DRI XX% scrap. to roughly with of prepared steel facilities and mixed, the in or the the depending again Yes, but to quality the course general of

Alex Hacking

the for perfect. you clarifications. Okay, Thank

Operator

And for some Ternium's back further turn at there Vedoya to over are remarks. time. this will CEO, the no I questions Maximo call closing

Maximo Vedoya

Okay, any thank interest you your if our questions. you very comments Thank for for all you very call today If goodbye. very as and in please contact we'll And conference us additional much any not, have questions. usual, next call. talk your much, good or

Operator

today's call. your concludes participation. conference This for you Thank

now disconnect. may You

Ternium (TX) 15 Feb 232022 Q4 Earnings call transcript