Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your operator today. At this time, I would now like to welcome everyone to the Ternium Second Quarter 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

my Please turn go now to call Sebastian Marti. ahead. pleasure is today's to over It

Sebastian Marti

Good morning. Global Thank name Senior is you for joining Marti Director. I us and am Ternium's IR Compliance Sebastian and today. My

released quarter first second is to half for call and that This yesterday presentation. its XXXX. Ternium results complementary the financial of

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

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

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

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

Maximo Vedoya

you, a of participating call. we to $XXX margin in equivalent quarter, you In results this Good our reported all for million, morning Thank set adjusted EBITDA conference of a with of and XX%. strong thank Sebastian.

a new upstream additional shares implementation center in also announced management the strategy. of that completed and of acquisition the direct company's of in the us we change the involvement Usiminas, location enable a of more the Mexico, country. our the Pesqueria in We group industrial completing facility mill Ternium's to in our in integration the And its have of finally, control

main substitution and main markets. positioning this presented imports opportunities in of us In with nearshoring taking the manufacturing the advantage our is market about of capacity. in comment me Let the Mexico, Ternium opportunities: two offer

its sophistication. Over the increased market has years, Mexico flat steel continually in the

percentage high building a of this point represented Before good process. XX about use. industrial to and more our technology, that went up being in XX%, lengthy this, in flat the manufacturing of apparent market. demands sector XX% a Pesqueria, of year, facility XX% sector value-added than represent began in share increase. steel steel imports, still This the require we Mexico Last of consumption certification products which by is know-how flat served On top Mexico

and XX Over a investments the compete to consumption growth have past imports years, well based market. most the the substitution as of service products customer country of us as our A industrial development. in value-added of and to in products, on product this enable targeted service on high sophisticated focus same customer differentiation,

as that is Mexico steel the SRO previous very significant, in for in times, have hand, the increase growth is the XXXX, nearshoring it we is it also this total expected. than investment so XX% World X.X%. The to the demand captured linked several estimation expectation pace other mentioned coming consumption in nearshoring and updated This and to two-thirds of of The dynamic. far Steel something the Mexico. in XXXX, industrial with compared in was of been our country market has is of Mexico flat we so On reflected X.X% a has more is north to April doing happening in release steel faster than in

course, our It it respond our accelerating to capacity substantially integration significantly the be mind, of With And this in of of part decarbonization our with in strategy key the background changes facilities in growth will in new the Mexico, targets. complement will in help mill Pesqueria region. will a market. slab to the our

investment region as program. with In our addition, steel we supplier position the are reinforcing leading a downstream our in

opportunity others. products, value-added for These renewable us appliance customers us energy an continue and serve the automotive, in going We will among home demand Mexico. excellent in from better into high-end products help steel new to deeper industries, are which projects capturing our represent

make some about now me Brazil. comments Let

Chairman is beginning in Chara, areas Usiminas encompass Alberto is but our Usiminas changes. introducing first of of as the plan to organization it former industrial in the business controlling Ono, It increase make Ternium with and been Usiminas group, management, operations. Marcelo the the As replacing made several now after its of is focus that Board the Board. CEO who CEO, changes step Brazil, appointed a company, special will new a participation while has a of practices, to all now designs Director its of

great is also very potential low steel current ago, per than was Brazil of consumption one what years lower it countries including can has other market or the capita Usiminas it XXX at steel developed is XX applications, steel consumption in with a sophisticated not but number grade long-term. has is The most it steel which industrial in compared kilos lately, believe demanding not. steel capita been Brazil. and its auto per supplier either with provide highly I when the the best grade for Brazilian

and support The main the in containing chains coming new Brazil growing of from investment consistently products should integrate Brazilian start in rate substantial the import transition agenda, intensity vehicles vehicle, energy for the the are and in this well home as which improving to under opportunities the market with nearshoring opportunities It gap which use of as steel. trend, see per has an infrastructure steel. trend all, to value agriculture substitution, finally, machinery, to of increased need opportunities inhabitants in offer aging industrialization, I also All of the the again country. significant from increase availability, a comes

Turning for by an shipments be stable the but quarter, macroeconomic to reforms, needs country Southern later. it's the demand sooner second significant the continue in now probably election going steel there to the get see Region and year. also similar We quarter, that underway rather of than is during the to will to end The third process them currently Argentina. over

market negatively near this impact to this in future. expect the We

team various some my important very A different recent leaders' of scheduled July, about a respect the including to that Two activities position charge where this Before The safety, matter, has the of the would beginning is safety week, operate. with the our panels prepared comments the closer in weeks to report event. brief wrap enabling Annual Vice throughout of even change Safety our safety. our we up experience celebrated an of review shoring in I and a in the event we remarks, direct ago, since countries EHS performance. make like I expert President me, was Day

environmental you and the our regarding this We all strategy. we when considered we communities look. Finally, operate, our relationship human -- included included, which a of assessing climate comprehensive a issues, where take last resources with I change, issued to report. description sustainability there business our encourage month are our activities

Let comments an Brazil final dynamic by we with into stronger is believe been Latin expansion aggressive new company capabilities, our product in make now, -- recently regional and ESG leader steel regionalization America greater portfolio strategy. we me exacerbated offering Usiminas, have business markets integration in to role the for of of prepare The I Mexico, for are or throughout a the new for now time, our my remarks. to nearshoring growth some close a our R&D strategy preparing and prepared a integration. unique a which with long a

will great more The potential. in our know and again, opportunities next significant development company growth have that strengthening position. competitive for we markets transform of have our steps We once even

All the you can with performance please, Ternium now right. ahead the Pablo, in go of presentation second quarter.

Pablo Brizzio

morning good and Maximo, everybody. to Thanks

during Ternium quarter. performance review the Let's

a quarter, Ternium's robust the for particularly of during Expected improving page net with on can of in quarterly second period. the of conditions of set presentation, you income market and results a normalization a America, derived together performance EBITDA costs the the in On basis. North see three production

$XXX $XXX operating XX% net the a million of second of quarter reached led performance EBITDA an $X.XX. period income per net margin improved on $XXX with per million Adjusted to the or ton. ADS in sales in of earnings of The

call it consolidate the equity increased a Usiminas with significant Ternium's far results. third for Usiminas been Before on of in non-consolidated quarter. no fully the so numbers. impact we that Usiminas earnings control have results additional will takes of companies, on your fact recent let me in operating acquisition the and of Ternium we and impact on data results as will of of financial shares quarter have attention After turning accounting Usiminas Usiminas Ternium consequently third in consolidation the The we XXXX, group reporting continue,

for Today's impact the CapEx the they quarter. third number with sense consolidation remain adjusted account because it qualitative takes of guidance EBITDA margin, will more on Ternium second Usiminas in reported we for not quarter believe that the and shipment comparable the

In the the presentation. quarter, The supported results. first all-time quarter, business second analysis shipment said below of in year-over-year million basis, by Ternium's still market that, the me four in to X steel quarter XX Having remarkable our high. on tons a of let share gain months. review now volumes last the over were a shipment slightly page turn steel second Mexico XX% flat the second On Mexico, in quarter, increased

facility. in the finished shipments at fell quarter material chain short Ternium mainly our expectations, expected of second raw our due supply However, in Mexico steel with contained of to

the forward, industry strong the as expect mention The Apparent industry. healthy. quarter. increase activity third show market special we demand in continues goods with automotive white the well Looking steel to to shipments remains to Mexico industrial in to as

seen any recession not sign American in the of the market. being, For we time have North

not the is and we commercial inventory do to at volatile addition, It and this Mexico is levels, price steady. a market time. more to In are steel more sensitive market in higher trends but inventories believe remains

volume a shipments shipments reflecting quarter. mainly were following Argentina Region, quarter Southern higher demand as the tons, basis, reduced the to On higher export other seasonally in In steel Argentina X%, and first a year-over-year slow a countries the slightly Region. Southern in second in lower sequentially, in decreased XXX,XXX

to in shipments relatively stable expect region. remain we forward, Looking this

Turning now in Ternium downstream concurrently integration and shipments Mexico. regard, growing with to company's Mexico. decreased Volumes increased in slab presence to the in facilities the company markets. facility increased Brazil this In other

steel next can million slightly you the second tons a combining see quarter, these that developments, in In of page, level. X the five, the at first below number arrived we quarter consolidated shipment

third Looking steel sequentially in taking consideration consolidation, into consolidated Usiminas forward without and quarter. we to shipments the anticipate increase

increase the Moving in second sequential The Revenue steel American sequentially the behind close the North in ton market the driver onto the per ton increased to during per $XXX strength revenue prices. ton. was by of per main quarter period. steel

consolidated quarter pricing of ton in to prices prevail period. due the impact over sequentially positive of is third decrease to in the to earning impact the Mexico steel expect the per in expected the weaker which current We revenue better contract environment,

prices steel main EBITDA The sequential mainly behind purchase to EBITDA quarter. lesser and of services second costs, page slabs result drivers maintenance by on of higher in prices, now review realized the was six, increase the adjusted and offset lower Let's and costs. the performance including higher the improvement, -- a lower partially expenses energy extent, the

a slightly quarter Looking in partially ton, sequential adjusted explained, expect decrease higher lower offset revenue adjusted forward, in decrease EBITDA on by shipments. per the in the third margin by EBITDA as ton driven per cost we and higher

The subsidiary low with in the net the improvement in partially income income the results gain shows rate with tax reflecting X%, results. operational was was tax deferred Mexican better The the Ternium sequential second that X% bottom in during Mexico quarter the effective chart very quarter. tax by an appreciation result of at connection just a driven peso again

due $XX $XX position. Cash steel previous $XXX analyze as in reflecting in This to cash inventories quarter to in which and the steel our million and in after mainly from capital. higher seven inventories the negative we price. increase million turn an changes realized second other in million increase was Mexico effect the to page of now $XXX the increase cash trade million in decrease and Let's in was revealed quarter, receivables working net operations includes flow

We are this increases further capital working on. like expecting not

of The second flow development million tons, XXXX million. cash CapEx the XXX to in $XXX after negative led free quarter of

kind billion $X.X increasing This of plan free million the non-controlling we results, continue the reduction $XXX paid in net second shareholders the reflects dividend to paid CapEx million position June, to second mainly amounting flow to Ternium in we million. Mexico, in quarter. accounting expect a with As half to to in our progress of the by interest cash the dividend end $XXX and decreasing cash a $XXX year. was investment

half earnings a of $X.X billion half period billion year. led was margin eight per were the page the longer sales. shipments of tons, of on to first of a similar and to in $X.X the This the the of of Adjusted first in steel to numbers this ADS first last Consolidated in perspective. net million in half Turning and year. levels shipment XX% income the term review X net EBITDA to $X.XX

paid quarter, increased with a will over our of the last we sustain $X.XX ADS. May we improve per in It has and also looking payment This forward. yearly part return second dividend years or try return to of the shareholder shareholder

$XXX slide flow reflecting cash the year number year This operation the nine, in led performance you mainly half of Finally, see of with of cash inventory and million flow after of highest million $XXX in volumes the capital million. increase of in trade receivables. flow CapEx half first working first to the cash $XXX can that $XXX totaling million after free this the

period. questions. your attention Q&A operator, our participation finish Thank today, we and are and with this, With Okay. proceed remarks. ready for much the very take your we now prepared Please, to you

Operator

[Operator Instructions]

comes De Stanley. with the first of Carlos Alba Your Morgan from question line

Your is is Carlos your open. Alba, De open. line line

Carlos De Alba

Yeah.

you on was morning Pablo Sebastian. Thank very I Maximo, much. Good mute. Sorry, and

let So, maybe but several right now. me two questions, to stick

The [indiscernible] returns Usiminas' [XX:XX] on the you're forward. and given been planning Pablo, with Ternium negative company the on market I are to Usiminas keeping second. question. the is going struggling first you and one overall and is moment new mentioned the be with of I'll what until Ternium that for the and in Usiminas? come margins I at what numbers the That trends first to the But on that obviously, going your appreciate consolidating the consolidation is up hence, negative business. be all opportunity guess, the this be going impact will But the consolidation. the on can how reporting in you with the we back time are Yeah. transparency guess my so Ternium has fully

Pablo Brizzio

Okay.

that how Let you? take are Carlos, Yeah. me one.

answer you. completely and us This is important what give you right. to Clearly, You're is right. an an important mentioned to

be level We of impact Usiminas this depending lines statements. different comparison impact you achievements of and the consolidating current the sales results, the the will in the all will be on numbers. the will looking statement, financial and the consolidation the Usiminas, the income, numbers, other impact EBITDA our these line will net minor. in financial upper be of as Clearly, at result be of our at in But numbers to mentioned, our the in not minor

the we the separated we be today, segment, then giving mining have have segment a segment will Initially, segment be on we which information a will and basis between what is Usiminas. which steel will

the -- these So and of three consolidation then, of course, we have segments.

you have So, you the clarity. I think will -- have

analyze You order will And numbers. company. be a to of in public continues need to the course, Usiminas

recently. we Maximo look will at. will the analyze I if be the on see also at proposition that. you to initially if at need very But a you clear our numbers look there more you changing the number least that explanations is then, for guess there will will have And on is solve to in So, numbers decides to that details the numbers. But this initial see

Carlos De Alba

then have Pablo. the integration just Thank about You've that how the quarters. think right. been in what -- the few should sales the Brazil? given are you, last expectations from slab greater -- we And third-party All having you

Maximo Vedoya

is Carlos. Hello. together zero, Usiminas buying I I you? are Ternium mean, with honest. to slabs. to it's Yeah, be need How continue to think be going going to with

from Ternium either slabs to Argentina. Mexico Ternium the Brazil go So, all Usiminas Ternium most or to to likely, going to are or

sales -- going be So, to probably there's not not any slabs.

Carlos De Alba

you. the Thank line. right. much. appreciate I'll on get it. All very I back Understood. you Thank

Maximo Vedoya

you, Thank Carlos. Okay.

Operator

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

open. is line Your

Thiago Lofiego

Good you. morning, gentlemen. Thank

talk would on Maximo, be side. strategy? industrial You bit First mentioned a about could focus little more about the steel. the the question you Usiminas

do question you you So, your bring the question. company is, my that So CapEx to much operating need optimal? to in deploy up you or Usiminas how to think will think the the target first or potential back is that's levels efficiency

demand view Thank the or slab should expanding globally? from slab you. My on compressing second What's your market. the spread question is supply whether we And slab HRC about here? see

Maximo Vedoya

I very first. market. been there's lot know, big with I'll The of as transaction always not second it's you take another the mean, one slabs. market, slab a

probably. oil think small less sustain the of it's the level at some gap trading got in in in biggest future, today in or can the mean, But changes of it's for But the today, level the the a I see same the is see compared the This average the levels that We slabs six and coins. the are much We we we to difference. number history. hot at are. we downs, And it's today. the buyer years. don't gap more will five whatever is you or that last that

So, going the don't course, volatility, that difference expect it's today. being the of it of steel to what is why we we change. continue to Again, see But industry. with

number strategy I'm not and mean, you clearly, I don't CapEx, we Regarding today am Usiminas don't able of give a I a to have number. -- yet. I think CapEx

are -- CEO. I Usiminas. manage. arriving future. the took some But our are near of Ternium, them moving. Marcelo changing dynamics As of as the how of mean, going I team People our team is in we Chara And said over companies to start the

give some you So, on we we CapEx. will spend an exact before probably, months the can number

Usiminas the competition the to months probably two, batteries. the increase to is blast competitiveness steel of be for CapEx, Clearly, few the in the next going our and to number of coke the for Ipatinga's the Usiminas, finalize shop agenda furnace, upstream plan especially

be efficiency So, we in the the Usiminas. will have increased this And target focus. to main

other on side. commercial the think the is I one

customers several Usiminas the Ternium. know, of customers you the of are same As of

solution integration. exactly So, all But but the you it more, call can let's not we this if in markets. more offer customers with want, to it's our integration

that we the that's I think segment is issue. I on the efficiency of the Usiminas. of to think the focus have second so, industrial first But And

Thiago Lofiego

Very be just And clear, timing about quickly to this Maximo. detailed more number. CapEx for -- us to for mentioned you a know --

the like the You be of a maybe will couple think end months, to like until this understand? year just for or us

Maximo Vedoya

will But by again, honest. But of few number have of the the first months the will a we year. end rough until it's the in idea target by the quarter a be the year. the rough mean, have to end I to probably, of a be end going we moving

steel with furnace take to battery. have in today the the the Thiago, coke the the battery, problems You blast have and of the that we into are number account, we and two relining middle shop

So, are stressed in going are there working bit I that are going plans. parallel, these of and on finish is much little end the people I middle mean, think on that a that trying but good try are we in in And in are things September. a some people well. we more focused and delay, But way. to to

something, So, be but by the should we of not the the September end the it's or have definite of going at one. end quarter, to

Thiago Lofiego

you, Fair enough. Thank Maximo.

Maximo Vedoya

Thiago. welcome, You're

Operator

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

Your line open. is

Timna Tanners

Hey, wouldn't shipments. the trying outlook good everyone. and mind margin you morning. a Mexican us help if bit to Wanted the on your comments see refine Thanks to

to being more guided an give you there's shipments that higher running, that's order strong to without you just in Are can and can I'm you the obviously, quite has the So, normal. market know ship? of than If demand more a there? fulfilled wondering, in with been gap ship? much willing how even Mexico. imports there us you We magnitude that AMSA

Maximo Vedoya

of because constraint Mexico, we we be that material fulfill, Yeah. I had Pablo, a To problem chain to plan constraints. to of chain some lines supply our And morning. this In think, in honest, in was the quarter. some and not Thank for able our shipment bigger the as you, customers. supply shipment mentioned, coming to were a raw Timna. some Good

this very orders not more much shipped. like us. than We good that. don't for have we quarter what So, we for It's

So, at I that more. next think quarter, ship to tons plan the XXX,XXX is least

a roughly. So, increase, XX%

the promise But don't that all because supply everything. of very have in of all I chain want to I addressed. It's again, very these think some very, Mexico. it's constraints tight, tight, been

bit the orders were more the them. yes, we able even than if increase -- to and orders probably but that, have we a So, we little ship

Timna Tanners

Okay.

Pablo Brizzio

here. Pablo

margin, issue You other mentioned the for is the expected the quarter. margin as third

presented I have first look at, to were think XX, is, and number side to company for first but look the which at this good as course, if XX%, have in our we in year, at which But the was conference very of of talk during meetings, during calls you prior the that the when upper you of part a we one margin margin XX. target Maximo is that level second about, the the Ternium which the the range of remind, always we if semester, quarter, to make we XX that be range. a that that a important

more coming line the should with quarter. of we the So, second than, what quarter this to have course, be in in in we level

So, it's a of than here we usually, support. us, better with is look in expected a quarter. But if the we to more numbers timeframe clear it look during semester, what line little example what a Ternium to happened of, in at for the is at are more longer

Timna Tanners

Okay. Perfect.

You question. second of my answered part the

there I'll leave it the next So, person. and again. off Thanks to pass it

Maximo Vedoya

Thank you, Timna.

You're welcome. very

Operator

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

line Your is open.

Caio Ribeiro

you for Thank the morning. Good opportunity.

penetration. and flat you'll in steel coming to I have down and question the months. you on get just right the high been in market in prices the start you advantage weaker to the right, wanted in perspective see where Usiminas So, ask weeks given steel recently, flat finished of evolving fact a wanted premiums, import coming results I the Brazil, Brazil demand, consolidate that your specifically also import the take about To coming higher to parity, how prices quarter.

the you. it's maintenance on maintenance furnace up conclusion what out wanted the at capacity. have So, Ipatinga, that right? with if you running back ask I to carrying of impact full have perspective in right, on you midst furnace once blast company, the in Thank up Usiminas with secondly, then and And could of blast of margins any the

Maximo Vedoya

clearly today Good I Brazil mean, a problem morning. imports. marketing Caio. with you, in has Thank Yeah.

around tons was see number it's higher as imports XXXX, monthly in a of XXX,XXX number is which Brazil, the you is to market. it month, If a same coming with the but

a is And the other be very, this target this It number. target our Brazil. is companies very to our in big target us, of For reduce the number. should and steel

think to to at moment, into on trade steel, done that everybody all take I used to further the Brazil that has with the Europe. Mexico have trade. account other some except target from USA, that against some they mean, has thing that unfair this. Argentina very Brazil put a Colombia, markets strong And I remedies Brazil to -- in to is be a some trade country have position

Somehow in I weak. and I this. have the years, is that support But government to bit the has think this last position willing to, we a little believe been more

And so that's strategy. the

than into these to -- be imports sooner later. efforts. agenda has have But we with account one on let's that have For we much to put the side, our other, combat commercial in unfair to take the trade

first So question. that's your

was second about… The question

Pablo Brizzio

after -- the relying the on difficulty]. on impact [technical The the numbers

Maximo Vedoya

I increase. of Usiminas Well, blast is three furnace big number blast two much as very today, very are know, and will fuel rate. cost competitive higher the one. clearly Blast furnace, a which because of are margin have operating that small production the very mean, three you are one furnaces. The

start as around as September. producing change So, very the soon we that of the numbers are middle be to should positive going

Caio Ribeiro

Okay.

Maximo Vedoya

I Caio, the hope, I answered question.

Caio Ribeiro

above of or front? you I that if sort return will that expect? Is mean, you way guidance on double-digit, a any us to margins there any give XX% that number maybe can

Maximo Vedoya

or No, to Yeah, or target a I next number don't not Caio, to Probably we I'm our today. quarter, can call number, even put you. not today. a in conference have in Usiminas but a put able today give it conference,

Caio Ribeiro

I Maximo. much, very it. you Thank Perfect. appreciate

Maximo Vedoya

to you you, Caio. thank Well,

Operator

is Leo with question Correa from BTG. next Your

Your line is open.

Leonardo Correa

good so Yeah, everyone. Hello, starting just Thank a more you. theoretical… morning, out with

Maximo Vedoya

Can little well. cannot hear bit We you louder? very you speak a Leo?

Leonardo Correa

Maximo. Sorry,

hear now? can guys You me

Maximo Vedoya

Yes, perfect.

Leonardo Correa

better? it is Yeah,

Maximo Vedoya

Yeah, it's better. better. Much

Leonardo Correa

Yeah.

Okay.

about that, sorry guys. So, Yeah.

Maximo Vedoya

worries. No

Leonardo Correa

So, which obviously question following years Maximo. everyone And a CSA, which I you made with being more for a guys move been has also the conceptual, is consolidated, with super Usiminas Ternium now story is now many mean, years, first some relevant. Brazil, the right? ago bit is little

conceptual, I Ternium do given and merging is would that Usiminas make the you again, guys potentially this synergies, sense, no involve? at mean, know Brazil, it Just consider the would potentially possibility I but clear there's all entertaining some decision and point of right, very that any

And U.S., sharply bit volatility, mainly market the the towards seeing, right? questions. mean, We're of second prices markets in early question We very upside. year the saw in the is, I in moving sheet reacting more a to

Now, try we're prices We a get to hikes two bit We to prices. price you headed the on a where saw view correction. just your of are stabilize seeing towards to wanted year. end think the rounds of of

So, those much. you the very questions. are Thank two

Maximo Vedoya

today, you, that. something have to Leo. Thank plans Brazil, like Perfect. Usiminas and do Ternium don't we

what the is the we As but agreement, it agreement clear and Usiminas agreement a public you changed know, or what is company we Nippon Steel, that was agreement have an with is. our this partner,

we of the anything So not that. for are analyzing being, time

companies. in going Usiminas, not and make synergies going Ternium do that We to impact be a do there's know between to or both in in Usiminas both we not and Ternium are in companies, expect that positive

the clearly, close Of and very are Cubatao complementation I slabs. Brazil mean, Ternium practices, management with course, the by.

putting be the purchasing procurement I together both Joining efforts companies. power a in -- of companies mean, synergy both should for

also, And I our Usiminas Argentina, stronger. -- least Usiminas. see in customers a going U.S. in Brazil, as little Usiminas involvement to the Mexico bit I customers are shipments At see are they the mean, making our think in same industrial also.

it the of is. a there's way think synergies I with So, lot

question. the first So that's

Prices volatility went America, quarter, Prices went clearly, the up in is North first there. down second quarter.

they $X went went I Today, a down. bit up. Now, think little

to to are as I But or today, $XXX. of there. around, to it's But have $XXXs, is the still be, going over next going I it's volatility stay I and think range be going that in the there's I American think But think in I is of The these volatility think prices is we around around prices, that So, And level quarters. the in $XXXs. going there. there. think it's high couple North around the to a said, still of volatility market new I U.S.

Why We demand The also the in I are in Mexico, very it and U.S. this? is it strong. we see said seeing

is certain taking ago, market. in we a conference again, worried was that more U.S. maintain Clearly, share bit enables demand And not talking. U.S. about about that think recession. to I the Six level were a we the this recession pricing. that little months big Everybody imports call. in strong. But should are talked be of a share

it's next been today. months, I think not that lowered. six of risk really think I It's that the risk -- for much a

stay make it around think this, my I point there, I I the with hope So, should prices. Leo.

Leonardo Correa

It's very very Maximo. Thank clear, you much. Yeah.

Maximo Vedoya

to you Thank you.

Operator

Instructions] [Operator

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

Your line is open.

Carlos De Alba

Yeah. you much. very Thank

follow-up the working capital. a Just on

Maximo Vedoya

can't we deal with [ph] two Carlos, questions.

Carlos De Alba

Just one more.

keep one. Just it's interesting. easy it to an And

to So, look Pablo I good. make want

Maximo Vedoya

Perfect. Okay.

Carlos De Alba

On so this consume of working a capital, quarter. cash lot you

I and coming capital? you give on the to working a from Pablo, level that more a that color But cash mentioned don't improvement magnitude regeneration continue expect maybe on quarters. you the can pieces little maybe different or the of bit think in moving you of range

Maximo Vedoya

Yeah.

increasing I particularly Pablo. happened in like we is Mexico. -- Let stock, and let was answering start stock. of takes think $XXX XX% the in to give XX% me then But the one or that the of I million start with that me it increase that And -- our it's things

And these have two things.

of in generate first was of last I working and capital year, remember, if generation last mean, the you in this from like billion. cash of two quarter we quarter $X.X I year quarters. First, think fourth a lot

shipments, natural are it's we prices increasing. increasing very were that So,

again, working and customers chain suffer not these our in stock has it to having supplying capital much So, up. supply very of restrictions, And to Mexico. come we enough

maybe we main which much expecting working we were were not reason number went a that high up that's of expecting number, capital. much, but So that it the why

future, the for Pablo. Now

Pablo Brizzio

Yeah.

issues that, first, seeing to add should type movement me in Let that we think more in the for we that level of in be the increases that the line forward, in we have movements And looking quarter. expectation these and of capital with volumes, capital we things. in now affect working shipments inventory normal that prices, coming now working need the of

a see are very we the working the at movement said not we capital significant in to as in why, that's coming beginning, quarter. expecting So

what normal working we the more capital than of what significantly quarter. the significantly number with absolute in in So, saw, than lower and lower second we showed line change

Carlos De Alba

All -- okay. right. But

is generate capital. from this to just normal are more to color, drivers going go back to lower that necessarily you -- it's just to it's working just clarify, So going to great cash that It's not changes, right? and traditional

Maximo Vedoya

to the to Yeah. of bit, generation or going seeing. up we going think working but It's capital little be we are cash see next down I from don't working in quarter. are not a -- that

is reasonable that shipments we We at now level the a for that are of have. level

Carlos De Alba

Yeah. All very Thank right. Got you guys. it. much,

Maximo Vedoya

Carlos. you, Thank

Operator

is question with from next line the Your of Brandt HSBC. John

line Your is open.

Jonathan Brandt

Hey, taking good guys. Thanks my for question. morning,

ones me. Just two quick for

that know mean, help Mexico. I nearshoring. into or particularly if quantify nearshoring you of a for you whole exactly likely you of there's -- increased much of and us need seen and host on you sort I you're so the said somehow. other and -- The wondering we've I'm customers, could northern announcing just is their can GM from actually seeing first clarify seeing try demand? have mean, I what producers auto the negotiations Tesla there's that steel How mean, plans. going investment just with lots I are impact? auto customers, quantify had you about

What going just into should understand a that what still whole to flow? you Argentina. not And of just think cash flow expect back expect cash then in or and with are I the can what trapped a if free dividend there's there's we of the second is plans Argentina. to sort fair It's so there, -- Inc., plan given for question it cash amount help it relates us that cash relatively out keep Is Thank Do you you. to Ternium investment of there? positive. to lot still that's the

Maximo Vedoya

you, I nearshoring, I'll it's question, the mean, first a honest. answer the in to impact of put mean, a it. Thank bit to be difficult answer I John. cannot try little today number, though it to I

the consume production customers that investing new lines, are not we auto customers Mexico steel. in now industry, are that of lot mean, to Mexico, small a in and but the more from parts. right seeing to bringing coming big overseas that customers are are We in I automotive seeing probably

white We are goods. in seeing

in HVAC. are We seeing

in electric motors. We are seeing

putting capacity are ones increasing are in in or seeing plants. lot shipments. people our or that they are are Those seeing we We for goods, the different of that new segments today a white industries are that increasing example,

to beside automotive. know is investment couple not announcing a plant don't if in coming or course, Of Pesqueria. doubling right they're are but there some somehow in a huge -- of Kia is it's our Tesla announcing years, you the know. Monterey, as that capacity, I it's

lot will long other small in are a consumption. the of So, see, that are industry, which coming in in is those a when to consumption most but we or comes not are although are couple in to industry Today, reflection years. not you and them of increasing Mexico suppliers companies, increase for growing of flat first or the the as in sized industries that industries we a Mexico, seeing and products, some that that medium from come time of them or from things general, going some products. automotive of see of Because flat increase increasing consumption the is even Mexico, does of a

that So, a most first but their hope number, again, consumption. I answered of to difficult increasing I customers part, I put are mean, John. our

Jonathan Brandt

perfect. Yeah. Maximo. No, Thanks

Maximo Vedoya

Yeah.

Pablo Brizzio

So, cash let easy How John. in you? the are Argentina. me you're The now. take right. situation Hi, Clearly, one

the positive of of have generating cash of Argentina, a We that in position a which keeps a business reflection cash reality first results. Argentina in position significant in all, Argentina, our is,

that dealing So, One two is different is dividends. with we the way in have paying been perspectives.

million. So, year, have This paid last million. $XXX dividends $XXX we year,

know, quite unfortunately, are to that, regulations in in Argentina, continue is as do changed but regulations you and are certain idea the to rapidly. there the the So, restrictions

to certain So, again a for this dividend during restrictions year. there payment are us do

under current the So, that. to wait year we need do to until restrictions Argentina in next

that the of the In in Argentina. try the that protect the the devaluation or have fluctuation do to the other any in we Argentina currency cash is price of dollar meantime, on we the against thing

this not which there that year. least something Of we to, we to is the the course, we first, but a in at during year done in have is of and perfect strategy can trying cash value that Argentina. mechanism are get possible the this to part distribute meantime, to do have In the as during continuing of best that last sustain we that,

I don't know clear, that but... was if

Jonathan Brandt

Thanks Pablo. That's great.

Pablo Brizzio

very You're welcome.

Operator

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

open. is line Your

Timna Tanners

taking Yeah. my for Hey, follow-up. thanks

So, Argentina. I to wanted actually, just on follow-up,

do Does If there government reforms. mean? being volumes, there? or future dense. you if impact could near What in devaluation? of shipments, Yeah. get exactly that What the bit I'm to negative you are decipher you the on the from a but demand, impact stable out sorry some exactly prices, trying comments I'm

Pablo Brizzio

charging are we Timna. you worry, time like And no. the so Carlos, second for don't No,

Timna Tanners

I'll pay in Argentinian.

Maximo Vedoya

We it have don't or different restriction the yet, last, future. customers. been in problems -- dollars several not No. in no some not more materials I we quarter of to is imports in because anything. going repeating this has central expect very we are of things, to well. doing mean, some for There we is The XXX% imports I know have our we Argentina every we have the quarters, mean, but think, inflation. bank mean, macroeconomics raw if I than have don't even I of of some

half, And has honest, quarters now. in this delicate. in steel quite of So, very, an consumption be This situation, very and to I it decrease change and Argentina were of doesn't as And is -- economics I for doing. think, have how in several a economic make a very Argentina expecting come. we been everything which stable, not shipments sense two very, lot last, of is are a mean, the and for not years a

situation be let's Now to it elections that put going is the decreasing, there's way. and

the at now. fourth should point, decrease least, -- should some at So, our quarter be shipment I think, in

Pablo Brizzio

little to usually type what through Argentina, in adjust adjustment for that or in course, you of the this mechanism Argentina. years, our the have many that. In of maximize in is devaluation me when either a macro situation, Let an macro see history, you through bit different

initially impact recover but in your is this a will that have one. in soon shipments, when your implemented usually you see relatively they positive volumes, plan adjustment, if You you the an see

are reaction So, that's transitions. the why or will adjustment, to usually trying the level, type if with say, need in reduced a what then of market Argentina recover initial we correction -- the see this to that the but this will of what there be is we to happens a is to volume

Timna Tanners

Got it.

Maximo Vedoya

hope, we sorry? are I a Timna, little -- bit

Timna Tanners

for the shipments part of about talking commentary? then most that you're with So, kind

Maximo Vedoya

Yeah.

yeah. Argentina, part For shipments, the most shipments demand and in

Timna Tanners

all my makes from production then of promised -- the last but a know comments that. one, you're sense. and lot Mexico I capable We greater Super. the Okay. And on

that we you is levels do happens, would if some assuming wondering, see maintain because able that to to and those expect of be of that Just restart, just AMSA tons? or you of the when displace, to displacement think

Maximo Vedoya

the Nevertheless, lot we think sure. we imports have of good market volume mean, a those everyone clearly, and get we more we a for is are but the than a imports, against if capable or again, good is that. great a That's don't Timna, I that's for question, answer of have AMSA, gaining are question, I fighting of some or there's the production. share

and that the producing, was to AMSA AMSA of very stopped. mean, they it's they that thing a into come account, have would take have only you XXX,XXX other back it's shut level tons number using that I AMSA, that difficult several is the when for the is at production XXX,XXX that information between But know, press, available that being the don't I Timna, difficult the mean, near the AMSA I public, future. back that month. months, very down in to and again, come in in

they fix yesterday or you that ago, down the know were in You shutting two informed that three That's can days years. coal batteries. they two or something that

AMSA see don't we next lot a mean, quarters. increasing in the I So,

Pablo Brizzio

Yeah.

to over there. little down tons to shutting to completely, Just When prior around one tons, XXX,XXX The have. that a XXX,XXX month that used shipment thing number. was number what of refer you was that they

of certain take So, to lowest producing, it's level it production. they decide were Maximo, market. that will reach even number if to amount not a if to back the to time some will And a production, take significant consideration, into they take, come it back even that they of to the also tonnage return

Timna Tanners

great. That's helpful. Thank That's No. you.

Maximo Vedoya

You're welcome.

Operator

at time. turn Ternium's now will closing no back call further I this for There CEO are questions the to remarks.

Maximo Vedoya

much questions. you participating today's thank And you. Very conference. all Thank good in very for

And always, free see We us comments or any with we'll next with If as can we are you hope to Thank additional feel not, can all questions. conference very them. in of the all. much to answer. very you glad I talk we you we'll contact answer any or call.

Operator

call. today's conference Ladies gentlemen, and This concludes participating. you thank for

You now may disconnect.

Ternium (TX) 2 Aug 232023 Q2 Earnings call transcript