Thank you for standing by. And welcome to the Ternium Fourth Quarter 2024 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. At this time, I will turn the call over to Mister Marti. Please proceed.

Good morning, and thank you for joining us. My name is Sebastian Marti, and I am Ternium's Global IRM Compliance Senior Director. Yesterday, Ternium released its financial results for the fourth quarter and full year 2024. This call is meant to provide additional context to that presentation. I'm joined today by Maximo Vedoya, Ternium's Chief Executive Officer, and Pablo Brizzio, our Chief Financial Officer, who will discuss the company's business environment and performance. After our prepared remarks, we'll open up the floor to any questions. Before we begin, I would like to remind you that this conference call contains forward-looking information that actual results may vary from those expressed or implied. Factors that could affect results are contained in our filings with the Securities and Exchange Commission and on page two in today's webcast presentation. You can find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the flash release issued yesterday. With that, I'll turn the call over to Mister Vedoya.

Thank you, Sebastian. Good morning, and thanks everybody for joining us today. Ternium reported shipments of 16 million tons for 2024 with adjusted EBITDA of $2 billion on a 12% margin. In a challenging year for the steel industry, our operation generated $2 billion in cash. The company's net cash position remains strong at $1.6 billion by the end of December, even though CapEx was close to $2 billion in the year, and we paid dividends of more than $600 million. During the quarter, we made significant progress on our downstream expansion project in Mexico. The pickling line at Pesqueria, along with the finishing center, started operations and are steadily advancing in the ramp-up process. We currently have two remaining lines under construction for the completion of this project: a cold rolling mill whose planned startup has been advanced to December 2025, and a hot-dip galvanized line which will also commence operation by the end of the year. Another positive development of the fourth quarter is that the wind farm in Argentina began generating energy. All of the 22 wind turbines have already been installed. The wind farm is expected to deliver approximately 480 gigawatt-hours per year, replacing the majority of our purchase of third-party electricity in the country. This initiative provides substantial economic benefits and assists the company in achieving its decarbonization goals. To address the latest development in international trade, a surge in US trade actions during the last few weeks has been creating substantial uncertainty in the global market. Mexico, together with Canada, are among the countries that have been singled out by the recently announced trade measures. In addition, steel has been a specific target as the US announced it will revoke all country-specific exceptions to the 25% tariff on steel imports under Section 232. I am a strong believer in the advantage of the USMCA. It is a deeply complementary relationship among USMCA members, which has led to increased trade, investments, and job creation within the North American region. USMCA has played a critical role in enhancing the competitiveness of the whole area. Therefore, we believe that the value chains among these nations will continue to thrive. Further deepening commercial integration among the three countries is the way to go, and it would be beneficial for all of them. Ternium is well equipped to navigate any potential trade scenarios due to its ability to adapt its structure in response to changes in the landscape. As always, we will continue our effort to enhance the efficiency of our operations to reduce costs. We are ready to compete effectively in today's uncertain environment. Now, let's review our main steel markets. In Mexico, shipments in the fourth quarter decreased due to a weaker-than-expected commercial market. The industrial market in Mexico is showing steady activity levels following an increase of 6% in the auto industry's production in 2024. On the other hand, weak government infrastructure investment and uncertainties surrounding trade actions are affecting volumes in the commercial market. This will probably continue to happen until a definitive understanding of the final trade measures is achieved. Moving now to Brazil, 2024 was a positive year with flat steel apparent consumption increasing a healthy 10%. Vehicle production grew strongly as well with a 10% increase compared to 2023. 2024 saw significant operational improvement in Usiminas, resulting from investments made in recent years, particularly the relining of blast furnace number three. As a result, Usiminas produced 3.2 million tons of crude steel, among the highest volume levels of the last ten years. On the other hand, imports of flat steel exceeded 3 million tons in 2024, setting a new record. China remains a destabilizing factor in the international steel market. The contraction of steel consumption in its domestic market in recent years has led to a disproportionate increase in exports under unfair trade conditions. Imports from China have significantly disrupted the Brazilian market, accounting for approximately 80% of flat steel imports. The import quota system implemented last year did not achieve its goal. We look forward to more effective trade measures from the Brazilian government, especially as other countries strengthen their defense against unfair trade, potentially causing a diversion of China's exports to other markets. On a different subject, we are very proud to share that last week, the Roberto Roca Technical School in Santa Cruz, near our Ternium Brazil facility, began its first classes. This is the second technical school that Ternium built and operates, with the first one active near our Pesqueria facility in Monterrey, Mexico. The school will provide high-quality technical education to its initial cohort of 192 students in the community and will accommodate close to 600 students over the next three years. All students at the Roberto Roca Technical School network receive scholarships based on their family's financial needs, ensuring equal access to education. This initiative reflects Ternium's dedication to supporting the development of the communities near its production sites and creating transformative opportunities for their youth. Turning now to Argentina, in 2024, shipments experienced a year-over-year decline of approximately 20%. This reduction was primarily due to the implementation of macroeconomic measures by the Argentine government, which aimed to address substantial economic imbalances. Although Argentina's steel demand has been recovering throughout 2024, it's starting from a low base and has yet to return to historic sales volumes. Authorities in Argentina are advancing the transformation of the local economy through a process of deregulation, reducing public spending and taxes, and opening up trade. Although we welcome this transformation, uneven progress in this area could increase the risk of higher imports of unfair trade products in the steel value chain. I would like to close my prepared comments with a few thoughts. US trade measures against imports are currently fluid. During the first half of 2025, it is likely that we will continue to navigate this uncertain scenario in the North American region. We trust that at the conclusion of the negotiations, rational decision-making will prevail, resulting in a region experiencing significant growth and improved defense against unfair trade practices. In the same line, the plan Mexico recently announced by the Mexican government aims to address issues related to regional integration, with a focus on industrializing for import substitution. The plan outlines strategies to attract investment and increase the local and regional content of manufactured goods through nearshoring, infrastructure development, and support for SMEs. In this context, our expansion projects in Mexico are crucial for strengthening Ternium's integration into the North American market. As we move forward, melted and poured steel products are expected to be canceled. In Brazil, Usiminas' manufacturing facility achieved significant efficiency improvements in 2024, a trend we expect will continue in 2025 as operations are further streamlined. Finally, given the improvements in macroeconomic conditions in Argentina, I expect our shipments will continue recovering throughout this year. This concludes my remarks. Pablo, please proceed with a review of Ternium's performance in the fourth quarter.

Thanks, Maximo. Good morning to everybody. Let's start with the webcast presentation for a detailed look at our operations and financial results. If we begin on page three, we see that adjusted EBITDA decreased. The key factors regarding these results include lower realized prices in our main markets and a reduction in shipments. These were partially offset by an increase in steel cost per ton. As we look ahead to the first quarter of this year, 2025, we anticipate a sequential increase in adjusted EBITDA, supported by a margin improvement and a small increase in volumes. Moving to the next slide, net income for the fourth quarter was $333 million. The company recognized a $404 million provision reversal for ongoing litigations related to the 2012 acquisition of a stake in Usiminas. The main difference between net income in the fourth quarter and the third quarter was a decline in operating income, as we have already seen, along with a negative effect of changes in foreign exchange results. On the other hand, we recorded lower income tax charges and the provision mentioned earlier. Regarding changes in foreign exchange results, it's important to point out the impact of the Brazilian real's 12% depreciation against the US dollar during the fourth quarter on Usiminas' US dollar-denominated financial debt. This is because Usiminas uses the real as a functional currency, not the US dollar. Now let's review the performance of our three segments on page five. In this quarter, steel shipments across all of Ternium's key markets declined, primarily due to a typical seasonal reduction in demand by the end of the year. Additionally, the commercial market in Mexico experienced a downturn, as Maximo already mentioned. Looking ahead, we expect some increase in shipments in Brazil during the first quarter of 2025, while shipments in Mexico and Argentina are expected to remain stable. On the following page, the steel segment net sales declined sequentially by 14% in the fourth quarter. In addition to lower shipments, this decrease was driven by a reduction in realized prices across all markets. The decline in prices was partially offset by a reduction in cost per ton, which, however, was not enough to avoid the decrease in margins. It's worth noting that the pace of cost reduction in our books is slower than the decline in raw materials and slab prices in the market. The company is consuming high-priced inventories acquired in earlier periods. Next, let's turn to slide seven for the overview of our mining segment performance. Mining shipments remained stable during the quarter, but year-over-year, they were down around 9% in the fourth quarter, mainly due to lower production levels both in Mexico and in Brazil. On the other hand, margins improved, mainly driven by lower costs. Let's move on to the next slide to review our cash flow performance. Ternium reported a robust cash flow from operations in the fourth quarter, supported by a decrease in working capital, mainly driven by lower trade receivables. CapEx increased as we advanced the expansion project in Mexico and finished the wind farm in Argentina. Additionally, we paid interim dividends in November. Even though we had these significant cash investments in the fourth quarter, our financial position remains strong, with $1.6 billion net cash at the end of December, helped by a $2 million increase in the fair value of financial instruments. Let's now shift our focus to page nine to assess our full-year performance. EBITDA declined in the last two years, primarily due to the consolidation of Usiminas and the downward pressure on flat steel prices. These factors affecting our results are reflected in net income. The decline also incorporates the net provision I mentioned earlier, together with negative deferred tax results and the impact of a significant depreciation of the Brazilian real during the year on Usiminas' foreign exchange results. Cash flow from operations was solid in 2024, allowing us to finance the increased level of CapEx in the year. Looking ahead, we expect CapEx to peak in 2025, reaching around $2.5 billion. It's important to mention that the Board of Directors put forward a proposal for an annual dividend of $2.70 per ADS. This represents a dividend yield of approximately 9%. We have already distributed an interim dividend of $0.90 in November, and subject to shareholder approval, the remaining $1.80 will be paid out in May. Alright. This concludes our prepared remarks. We are now ready to take your questions. Operator, please begin the Q&A session.

On your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. And our first question comes from Carlos De Alba with Morgan Stanley. Please go ahead.

Yeah. Good morning, everyone. Thank you very much. Yes. So first question is, I'm gonna try to press a little bit on the outlook for the first quarter. I know it's a lot of uncertainty out there, but how did you define slight improvement? Right? There's a wide range of consensus forecasts. And so I we're really happy you can provide a little bit more details as to how do you see the quarter evolving. And then, I wanted to also ask for an update on the different ramp-ups and the electric arc furnace project in Pesqueria. You can maybe be a little bit more specific about when do you expect the ramp-up of the finishing lines to be completed and, you know, when do you expect the cold coil and the hot-dip galvanizing new lines to be running at close to full capacity or full capacity if they start in the summer of this year. Thank you very much.

Thank you, Carlos. I will start with the second, which is much more direct, and then try to answer the first one. Ramp-up of Pesqueria. So, you know, in the finishing lines, we have four projects. Let's put it that way. The pickling line and the finishing lines are already producing and are a little bit ahead of what was planned, and I guess for the next two or three months, it will be at full capacity. Then we have the hot-dip galvanized line, which was supposed or is supposed to start in December. We are not seeing any delay in the ramp-up curve that starts in December of this year. All the equipment is there in Pesqueria, and we have all the people working in the construction and putting those equipment in place. In the cold rolled facility, the PLTCM two, we were expected to start in February or March of 2026, but we are seeing some improvements and some better advance in the construction of equipment and the facility. So we are expected to start in December of this year. So we have advanced the ramping curve a couple of months. And so on those projects, we don't see any problem. And we're going forward at full speed. The other one is the steel shop and the reduction unit that is supposed to start in mid-2026. We are still having that date. But as you know, in that facility, we don't have yet all the contracts finalized. I mean, we are finalizing in this quarter some of the contracts for equipment and, more importantly, most of the contracts for the construction. Although the construction is going through, so by the end of next quarter, we will probably have an idea exactly of when we will start, but we are still holding the time for mid-2026. No. That's fine. And just wanted to clarify, when would you expect the cold rolled and the hot-dip galvanized to be reaching full capacity? Well, the ramp-up curve in these projects is usually between nine months and one year. But they are steadily producing from day one. For example, in the case of the cold roll, to get to 120 or 130 thousand tons a month, it could take between nine and one year. That's what we have in our plans. We will try harder to get that closer to December of 2025, but for now, it's between nine and twelve months. Okay. I hope that answers the question. This is the second question. So, Outlook Pablo?

Okay. Take that. Carlos, as we said, we are expecting to see an increase in EBITDA generation for the first quarter of the year. This is the sum up of three different things that will happen during the quarter. First, volumes. As Maximo described in the opening remarks, we are expecting to see a steady level of shipments in the different markets where we are. This is coupled with the issues that Maximo mentioned, and also some seasonality. So we are expected to sustain the level of shipments during the first quarter. That's the first point. The second point is that though prices are moving, we see a decline in the average price of the company, due to the issue that you know very well, which is that prices are reset every quarter, so all changes in prices are not reflected immediately. And the most important part is that during the first quarter, we will see a decline in cost. Differently from what we saw during the fourth quarter, this decline in cost will be higher than we expected to see over the decline in prices. So we are expecting to see a better margin during the first quarter. We continue to see the same situation that we saw during the fourth quarter of the year, which is that there is a delay in reflecting the prices throughout our cost structure due to the first-in, first-out methodology that we utilize. So we are expecting to continue seeing the evolution of the cost reduction throughout this semester and having a better picture in the second quarter of this year in that respect.

Your next question comes from the line of Caio Ribeiro of Bank of America. Please go ahead.

Yes. Good morning. Thank you for the opportunity. So my first question is on your stake in Usiminas. Right? Later this year, you have the option to purchase Nippon's stake within the control block. Nippon, you know, has the option to sell that stake to Ternium. My question is, you know, is adding to your stake in the company something that you're contemplating right now? And is there any color that you can share on how both sides, you know, see this particular transaction? And then secondly, you know, still on Usiminas, you know, with the blast furnace revamp completed, what are the next priorities that you see for the company? Right? Do you see a potential to green light the CapEx in the mining division this year or next? And if so, you know, how would the company fund that CapEx? Thank you.

Thank you, Caio, for the two questions. Regarding the first one, I mean, the only thing that happens, as you said, in July is that both Nippon Steel and Ternium have the options to sell or buy. And they become exercisable. I mean, we can exercise those from July. That's the only thing that changed in Usiminas. I clearly cannot speak of what Nippon is thinking of this. But from our side, I can say that as you saw in the results, I am very pleased with how Usiminas and our partnership with Nippon Steel are performing today. So we will, for now, keep working with the goals of bringing Usiminas to the highest potential. Regarding the priorities in Usiminas, clearly the CapEx in mining is one of the things that we're working on. As I said in some other calls, we have to take the decision by the end of this year or the beginning of next year. But in the meantime, we're working very hard to get to the point of having to make the decision with most of the things done so that we don't have any delays if we go through that project. The other priorities of Usiminas are clearly improving the performance of Ipatinga's mill. That's clearly a priority of the management. There are some investments that we have to do and that we are doing in order to decrease costs and increase productivity. And the second is the commercial side where we have all the challenges with the imports from China and how we approach customers and give more value to them, and that we are working on in Usiminas right now. I hope it answered the question, Caio.

Yes. Absolutely. That's very clear. Thank you, Maximo.

Your next question comes from the line of Alejandro DiMatellis with Jefferies. Please go ahead.

Yeah. Good morning, Maximo. Thank you very much for taking my questions. A couple of questions, please. The first one is, Maximo, you talked about Ternium being prepared to navigate the situation on the trade front and so on. Would that also include, say, putting on hold some of your new investments in Mexico or any of the rest of the regions? That's the first question. And then the second question is in the case of Argentina, you talked about the situation about volumes recovering and so on. Could you please talk also about the situation of the scrap exports and how that could impact also your cost structure over there?

Yeah. The second one, the scrap export is not very significant for us. As you remember, I mean, in Argentina, we don't use much scrap. It's different than in Mexico. And so the amount of scrap we buy from the market every month is around 8,000 tons. It's clearly not an issue. The scrap is probably an issue for other steel companies in Argentina that have a much more scrap-based input. But remember, as in Argentina, I don't know. Regarding the call of new investments, no. We are not thinking of stopping or postponing any investment. As I said, the PLTCM, the cold rolling mill and the galvanized line are almost completed. I mean, by the end of the year, they are going to be completed. And if you see what is happening in the Mexican market, the Mexican market has a huge amount of imports from third countries, which we are not able to really substitute because we don't have enough capacity probably to do so in the technical issue. So we are going to forward that it's very rush to continue. The other one is the steel shop. And the steel shop, again, probably in all this that is happening, as you mentioned, in this uncertainty in the North American market, one thing that is sure is going to happen is that the rule of origin is going to be strengthened even more. So melted and poured requirements are going to be needed. And so for that, I think that strengthens the Pesqueria project and strengthens the position of Ternium. I hope, Alejandro, it's clear.

Yeah. No. It is very clear. I can follow-up a little bit on that. So on the discussions that you're having with your main customers, particularly the automotive industry for the rest of the year, how are they indicating volumes, say, between now and the end of the year?

They don't have any changes in the volumes. Remember, the auto industry in Mexico ended up the year with growth, and they are not indicating any changes. What they are doing is clearly working on changing some of the imports they have from third countries. So we are working with them to start changing or making running changes of imports they have from Asia mainly.

Thank you.

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

Yeah. Hey. Good morning. Maximo, I wanted to pick your brain really on the theme, I feel like, of the introductory remarks was really that China continues to be a big problem for the three main regions where you operate. So do you have any level of optimism that those countries, Argentina, Brazil, Mexico, can implement enough barriers or will be interested in doing so to help prevent some of those problems of imports that you've been talking about anytime soon?

Yes. I am optimistic in different levels depending on the country. I mean, let me put the perspective of China a little bit, and then I'll talk specifically about what the three countries are doing. China, or the steel industry in China, but it's not only applied to the steel industry. It applies to a lot of industries. So China has been decreasing consumption for the last three years, apparent consumption in the country. So it reduced, I think, on average, 4% each year for the last three years. But on the contrary, production has been the same. So this is a huge rebalance of the Chinese steel industry. Exports from China in steel increased in 2024 by 25%. That's an enormous amount of steel. And then if you see the balance of what is happening in the steel industry in China, well, most of the companies are earning money. So it's not a sustainable situation. Having said that, they are still exporting and doing all these things that have no sense. In our countries, I think Mexico is the one that's acting the quickest. Clearly, they understand very well what is going on in China. They understand the importance of defending the industry against unfair trade. And they are working in this sense. So they are putting the dumping cases. They are putting some tariffs. And I think that they are starting to work on other issues that are fighting flash shipments that are happening in Mexico, in the US, in Canada. So China is looking for ways to evade these tariffs, and I think Mexico has a very clear path on how to work. In the middle is Brazil, which they made measures of this quota, but clearly, this quota, as I said, is not working. So the dumping cases have been presented. I think the government, I mean, I'm quite positive that the government is going to go through these dumping cases, which will be a much more effective barrier to unfair trade. Argentina, I think, is the one that is a little bit behind all these. Sorry. Because Argentina is still trying to stabilize the macroeconomy. But, again, I think that some part of this year, they're going to start realizing that if we want to sustain an industry, we have to fight against unfair trade. That's simply the reason. So I'm optimistic that in some part of this year, they're gonna realize this and we are going to work together doing this. Timna, I hope I answered part of your question.

Yes. That was helpful. Thanks, Maximo. So I wanted to also put you on the spot regarding US-Mexico. So in the past, you've also talked about how any tariff on Mexican steel could be positive for Ternium because any retaliatory tariff would keep exports because the US is a net importer of steel. So if there were a retaliatory tariff, then that steel would stay in Mexico, and you could fill the gaps and take share right from imports. But on the other hand, if now those tariffs look to be applied to the downstream side, some downstream customers could be affected, and of course, you already addressed auto. So, I mean, any updated thoughts on retaliation or if the tariffs are in place as it is, is it more negative just because of your customer impact than the positive of no longer receiving US imports? Thanks again.

Thank you, Timna. It's a very uncertain question to answer because clearly, I don't know where this is going to end. What I can tell you is, first of all, Ternium, as of today, we don't export significant volumes to the US. So 4% of our flat rolled products go to the US. It's not a very significant amount. And as you said, in the steel relationship between Mexico and the US, Mexico has a huge steel trade deficit. I mean, I think that this is the only country, Mexico is the only country where the US steel industry has a surplus, and a surplus that is very big compared to between exports and imports. So, I mean, as I said, the challenge that both the US and Mexico are facing today is not the trade between these two countries, but it's the trade we have in Mexico, that they have in the US, with all these other countries. So at the end, I think that the US and Mexico are going to reach a reasonably reasonable agreement in this situation. I am not seeing any scenario where it goes further as you were telling after eight in both sides. Because, again, it should be a reasonable agreement given the situation. But, again, it's difficult to speculate on all these negotiations that are going through between the US and Mexico today. Well, the implications of the scrap markets as well.

Yes. Thank you. Maximo, you mentioned in your presentation that we hope that rational decision-making would prevail. I think we all agree with you on that. Now the question that I have is regarding how is the US planning to balance the supply and demand without imports in the US? I mean, it doesn't look to me that something that will be easy to do. Is there an appetite to invest in more capacity given that, you know, there is a global overcapacity? You know, what would be the implications for, you know, end users of steel also for the global scrap markets in North America and globally? If there is more need of scrap in the US, I mean, it seems that it's going to have lots of ramifications that eventually would be, you know, severe. And we can end in a world in which, basically, we have this bifurcation of trade with China, you know, selling more to other countries and other countries selling more steel, you know, and then you have, like, a sanctuary in not in North America anymore, but in all US. You know, but that doesn't seem to be a situation that could stay for long. So any color that you can provide, especially in how do you envision, you know, a market that is properly supplied without imports in the US? Thank you. I That's okay. The implications of the scrap markets as well.

Yeah. Alfonso, thank you very much. It's a very good question. I don't know if I have the answer to that. I think it's a question for other companies, but I mean, but you're right about it. I mean, I don't think that the outcome of all these negotiations could be that what you are saying. But as I said in the initial remarks, I don't know against the rest of the world. And I'm not capable of saying what would be the relationship between the US and China or Asia or Europe. But I am a strong believer in the advantage of the USMCA. If you see the story of the USMCA, which is not a very long story, the trade among the members of the three countries grew significantly over the last year, in every way. I mean, from Mexico to the US, but the US to Mexico. And the USMCA played a role in enhancing the competitiveness of the area. I mean, it's very reasonable to think of the USMCA as a way of strengthening the supply chain there to get competitiveness for fighting or for not fighting, but competing with other regions like China. So for me, again, I think that at the end, it will prevail because I think the USMCA is beneficial for the three countries. On the other side, I see how Mexico is reacting. Before all this trade, even before all this trade, if you see the Mexico plan, the plan Mexico that President Sheinbaum announced, I think, at the beginning of the year, very focused on what we have been saying for a long time. In how we must focus on industrializing import substitution for Asia, strengthening North America's supply chain. I mean, if you hear what Mexico is doing, the Mexico plan, it's also going the same way. So again, I am optimistic that reason will prevail. I can tell you that also.

Yeah. Thank you. Just any comment on the global scrap trade, you know, and how you see that changing or unfolding given, you know, what we know about the tariffs and this idea to, you know, produce more in the US.

Well, I think to produce more in the US, it's a long time, so at least any new capacity will be three, four, five years to come in. Except for what we are already seeing in the US. So I don't think that there's gonna be a lot of change. Of course, scrap is gonna be, but we know this. I mean, it's gonna be a market where more people are going to use scrap because we are changing the route from blast furnace to electric arc. But this is taking a long way. So I don't foresee any major changes in the next two years.

Excellent. Thank you so much, Maximo.

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

Okay. Thank you very much all for participating. Very good questions. Always your feedback is much appreciated if you have any. Have a good day, and we'll see you. We'll talk in the next three months. Thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect.