Hello everyone, and welcome to Ternium First Quarter 2025 Results Call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question-and-answer session. I’d now like to hand the call over to Sebastian Marti. Please go ahead.

Good morning, and thank you for joining us. My name is Sebastian Marti, and I am Ternium’s Global IR and Compliance Senior Director. Yesterday, Ternium released its financial results for the first quarter of 2025. 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, Ternium's Chief Financial Officer, who will discuss the company's business environment and performance. After our prepared remarks, we'll open up the floor to your questions. Before we begin, I would like to remind you that this conference call contains forward-looking information and that actual results may vary from those expressed or implied. Factors that could affect results contained in our filings with the Securities and Exchange Commission and on page 2 in today's webcast presentation. You will also find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued yesterday. With that, I turn the call over to Mr. Vedoya.

Thank you, Sebastian. Good morning, and thank you all for joining Ternium conference call. In the first quarter of the year, we reported a sequential increase in EBITDA, driven by improved margins and slightly higher shipments. Trade tension in recent months has created a climate of uncertainty, impacting business confidence and posing risks to global economic growth. On the other hand, there is a consensus that unfair trade practices in recent decades have adversely impacted manufacturing around the world. Many countries are now addressing this issue, which is a promising development. In this context, the operating environment in Mexico has been challenging as uncertainty is affecting investment and consumption. However, the current administration has shown support for reducing reliance on Asian suppliers within the North American regional market, and in my view, they are doing a very good job in this regard. Along these lines, there is an announcement of the Plan Mexico, which aims to enhance industrialization and import substitution to strengthen North American supply chains. The plan includes strategic initiatives to attract investment and increase the local and regional content of manufactured goods through shoring infrastructure development and support for MSMEs. In addition, the future renegotiation of USMCA presents a significant opportunity for Mexico to further align its trade strategy with that of the United States, while also enhancing the defense of the Mexican market against unfair trade practices from Asian countries. Moving now to Brazil, the local market is showing resilient steel demand, but the issue of unfair trade practices persists with a significant year-over-year increase in imports during the first quarter of this year. Brazilian trade authorities recently released preliminary results of an anti-dumping investigation on imports from China of cold-rolling steel and corrosion-resistant steel, identifying substantial dumping margins. However, unlike the usual practice in many countries, the authorities did not recommend any anti-dumping tariffs. A final determination is expected to be made in October. In Argentina, the microeconomic situation is showing signs of improvement, which provides optimism for our achievements in this market in the upcoming quarters. In this demanding trade environment, our goal is to enhance earnings competitiveness by increasing operational efficiency and reducing costs. Specifically, in recent quarters, we have been focusing on several initiatives that have already yielded good results in our performance metrics. We will continue to implement similar actions in the coming quarters to maximize the profitability of operations during these uncertain times. For the second quarter, we anticipate achieving a double-digit EBITDA margin supported by the increase in real asset prices in Mexico, as well as by our cost reduction initiatives. I would now like to provide an update on our expansion project in Mexico. Following the completion of our recent review, the pick and clean finishing lines have already started operation, and the cold rolling mill and galvanized line are scheduled to begin on time by the end of December. The steel mill and DRI facilities, known as the upstream project, are now anticipated to be operational by the fourth quarter of 2026, which represents a slight delay from the original schedule. In this review, the total CapEx for the entire expansion project has been revised to $4 billion, representing an increase of approximately 16% compared to our previous estimate disclosed in February of 2024. The primary focus contributing to the project's cost increase were higher assembly and construction prices, and a larger volume of structures and civil works. The project will place Ternium in a new competitive position. Integration of advanced technology in our picking, finishing, cold rolling, and galvanizing lines will not only increase operational efficiency but also enhance product quality and expand our product range. In addition, by completing the upstream project, we will be able to provide our customers with a complete product range up to the most demanding industrial applications. This will be the first time that an electric arc furnace-based mill will be able to produce exposed material automotive steel with significantly lower CO2 emissions than previously possible. Additionally, this expanded steel capacity will enable us to meet our expectations for growing melted and pooled requirements in the USMCA region. Let me conclude my prepared comments with some final remarks. Global trade is currently undergoing major changes, resulting in considerable market uncertainty. However, adjustments were necessary as China's progress with non-competitive trade practices has contributed to declining manufacturing, employment, and value addition over the past two decades. In North America, both the U.S. and Mexican administrations are working to address this issue. Therefore, it would be reasonable to expect an agreement on trade issues between the two countries. Although uncertainty and volatility are affecting consumption and investment, impacting steel demand in the Mexican market, we expect the implementation of Plan Mexico, along with a better alignment of Mexico's trade strategy with that of the U.S., will enable this country to better defend the region against unfair trade. This could result in a gradual shift in production from Asia and other countries to the USMCA region. Overall, I expect the USMCA to become stronger and better prepared to continue growing now. Pablo, please go ahead with the review of Ternium’s performance in the first quarter of this year.

Thanks, Maximo, and thanks everybody for being here today in this conference call. Let's now move to the webcast presentation for a detailed review of our operating and financial results. If you look at page 3, you will see the adjusted EBITDA improvement this quarter. This was driven mainly by better margins and higher steel and iron ore shipments. The main contributor to the slight improvement in margins was a decrease in steel cost per ton, which was partially offset by a decline in realized steel prices. Looking ahead, we expect a sequential increase in adjusted EBITDA in the second quarter, supported by higher realized steel prices and another slight decrease in cost per ton, which together should help our adjusted EBITDA margins reach double-digit territory, as Maximo mentioned. Now moving to the next slide, net income for the first quarter of 2025 stood at $142 million. The figure includes a $45 million provision adjustment charged related to the ongoing litigation in connection with the acquisition of our participation. The adjustment reflects both interest accrual and appreciation of the Brazilian real against the U.S. dollar during the quarter. Adjusted net income, excluding this charge, was $188 million, marking a significant improvement over the prior quarter. Among the main differences, net financial results improved by $130 million, mainly due to the foreign exchange gain and realized gain from the partial divestment of bond holdings in Argentina. Now let's take a look at the performance of our steel segment on page 5. This quarter, we saw high achievements in Brazil and other markets, partially offset by lower sales volumes in Mexico. Entering the second quarter, we expect the steel achievements to remain relatively stable on a sequential basis. Mexico volumes are anticipated to remain subdued due to the ongoing tariff situation. In Argentina, shipments are anticipated to increase during the second quarter, supported by an improving macroeconomic environment. Meanwhile, in Brazil, we anticipate stable achievements in the second quarter with resilient steel demand. In other markets, we will probably see a decrease in shipments to the U.S. market. Moving on, net sales in the steel segment were slightly higher in the first quarter. Although revenue per pound declined, a months-long drop in raw material costs and improved efficiencies supported better margins. Let's move to slide 7 for a summary of the mining segment's performance. Shipments increased slightly quarter-over-quarter and rose 14% year-over-year, driven by higher production levels in Mexico and Brazil. The sequential decrease in margins in the first quarter was due to the cost per ton, which was partially offset by higher realized lower prices. Moving to the final slide of the presentation, we can review the cash flow performance and balance sheet. We continue to show significant capital levels this quarter as we make progress on the construction of the new facility at Ternium’s Pesquería industrial center. As Maximo mentioned earlier, the total cost of the project was increased compared to our latest review, which was in February last year. Of the $4 billion new estimate, $1.4 billion has already been invested as of March this year. Looking ahead, the remaining CapEx is expected to be roughly $1.4 billion over the next nine months of 2025, $1 billion each in the next two years. Considering both expansion plans and the rest of our CapEx investment, we project Ternium to continue to have CapEx in 2025 to be around $2.5 billion. Finally, this period of high CapEx is supported by a very strong balance sheet with a net cash position of $1.3 billion at the end of March 2025. So, with this, we conclude our prepared remarks, and we're ready to take any questions you may have. Please, operator, begin with the Q&A session. Thanks.

Your first question comes from Carlos De Alba of Morgan Stanley. Your line is now open.

Thank you very much, and good morning. So, first question is regarding the situation in Mexico. We'll see what happens with GDP this morning I think it will be announced, but most likely Mexico is in a technical recession or in a very, very low growth environment. And so, I hear your comment on the industrial customers still doing alright, and it's hard to believe that they're not making adjustments. So, can you share a little bit more color around what lies ahead, maybe beyond just the second quarter or the ongoing quarter? What sort of measures are they taking or planning to take given the uncertainty of the entire auto supply chain and also the impact that it will have on other businesses in the Mexican economy? And then, the second question has to do with the level of margins and profitability overall that the company is experiencing for the second consecutive quarter. In fact, if I remember correctly, we have only seen these levels of margins in 2009, 2015, and 2019, and in those instances, we had severe crises not only in one of the countries that you operate, like Argentina. To be fair, Argentina has exposure in your business overall that has decreased dramatically. So how do you explain this? What can you tell us here? When do you expect things to really improve? Because prices in your biggest market are not necessarily low in Mexico. So, I am really struggling to understand when we can see an improvement in operating margins.

Yes, Carlos. Hello. How are you? Well, let me start with Mexico and what is happening there. I don't know the numbers of the GDP of the first quarter, so I'm not going to comment on that. What I can say is what is happening in the steel industry, and you're right, I mean, apparent consumption of steel decreased almost 5% in 2024 last year. So, we are operating at a level of consumption that is lower than in the past. This is mainly due to the commercial market. I mean the infrastructure and construction in Mexico, but because of the new government and the change in administration, typically big infrastructure projects end with the outgoing administration, and the new administration always takes time to get things going. Construction is not doing very well in Mexico. So that's what is happening; still demand. I expect that demand is going to start increasing in the following quarters, especially in the commercial market. Construction has to pick up, and the numbers may not see a significant increase, but they will be good enough to improve. The other part is that imports are coming down, and we are gaining market share with the new lines that are coming online in the Pesquería project. Overall consumption is not very good, as you said, but I think our shipments will start moving forward in the second half of the year. I hope I answered your question about Mexico. You talked also about industrial customers. Clearly, this uncertainty will resolve when the trade discussions between Mexico and the U.S. are concluded. I don't know when this is going to happen, but it's going to happen at some point. As I said in my initial remarks, we are operating on the assumption that the USMCA is not only going to move forward, but it's going to become stronger.

The level of margins?

Hi Carlos. How are you? Let me make a couple of comments on that. You are right that there was a decrease in margins in March in the latest quarters. But let me point out that the situation that we saw in 2024 was a decrease of margins throughout the year. So, we started with very good margins, and then we saw a decline through the year until the fourth quarter where we reached probably the lowest in recent times, which was 7%, along with the decline in prices in the market. Now, what we are seeing is potentially, and this is the expectation, the opposite situation. We have already a margin in the third quarter, which is not only higher than the previous quarter, but is in line with the margin that we had in the third quarter last year. Secondly, we have already stated, as Maximo mentioned in his initial remarks, that our expectation is for better margins in the second quarter; we anticipate a position that is more favorable than in the third quarter of last year. There are uncertainties and issues to be negotiated, but the expectation is for this to sustain or even improve moving forward. If that trend continues, we should be able to increase our margins through the rest of the year and be in a position to exceed the levels we saw last year. So, if that situation unfolds, we will return to more reasonable margins, similar to those we've seen in the last two quarters.

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

Yeah. Hello. Good morning. I wanted to ask about costs a little further. You talked about more costs declining into Q2, so could you elaborate and is that going to be the lowest, or are there still areas to continue to cut costs?

Hi Timna. How are you? There are issues that are moving because we have 14 automotive technology, so we are still seeing reductions in costs that we observed in the last quarter, especially slabs and some raw materials that have been introduced in the last couple of quarters. This has been reflected in our performance, and we continue to expect to see this trend continue into the second quarter and beyond. As Maximo mentioned in his initial remarks, we are undergoing a cost reduction program, which had an important impact during the first quarter. We expect this to continue. Again, we are already stating that our margins will move to a double-digit region. The most significant part of that will result from price adjustments in our sales, especially in the Mexican market, but also from the impact of the cost reduction program. Our expectation is to continue seeing cost reductions in the coming quarters.

Okay, great. Thank you. And then with regard to volumes, I know you gave volume guidance for Q2, but broadly speaking, I think you still have quite a bit of spare capacity in Mexico. Assuming a bit better demand and clarity, can you talk about what order of magnitude volumes could grow to, to take some share? Are we still receiving imports from the U.S. or has trade flow kind of stopped both ways lately? Just wondering if you can elaborate on the opportunity for further volumes even before, well, the expansion will just be upstream, I guess, but just talk about maybe some market share opportunities that you might see as the year progresses.

Yes, Timna. Of course, we are in a position to increase volumes in Mexico today. Imports have decreased from, if I recall correctly, about 600,000 tons for flat products in the middle of 2024 to today, about 400,000 tons every month. So, there's a significant potential for growth in that sense. Most of those imports are to industrial customers. We are working to certify our products for those customers; 70% of those inputs come from the U.S., Japan, and Korea. We believe there are opportunities to gain some market share from those imports. Again, we have the capacity today, and we are working to increase our share. There are opportunities, and it's up to us how much we can capture.

Your next question comes from Caio Ribeiro of Bank of America. Your line is now open.

So, my first question is on cash returns. Ternium has been consistently increasing its dividend per share ratio over the past years. Yet in 2020, with the pandemic, the company opted to suspend dividend payments. So, I wanted to see if you could discuss how the trade tension escalation via the announced tariffs could impact those decisions regarding the DPS, if at all going forward. Secondly, I just wanted to see if you could focus a little bit more on Argentina in light of the recent IMF agreement. How do you see the outlook for the steel sector changing in the country? And could those macro improvements lead you to eventually expand capacity in Argentina? Thank you.

Hi, Caio. How are you? Maximo can answer the first question about the cash return.

Good morning, Caio. Regarding Argentina, the outlook for the steel sector and the economy in general is improving. What the Argentine government is doing well is clearly positive. However, there are still a lot of risks because of the existing conditions in Argentina, so I don't want to claim that we are over the issues. Inflation is still high, but shipments from Argentina in Q1 may very well be the lowest in the last quarters. Projected for the following quarters, we are expecting at least a 20% increase in shipments in the next quarter. We do not see any decrease in the third and fourth quarters. As for expansion in Argentina, we are not seeing that yet. We have spare capacity in our Argentine mills, so I believe we can sustain or grow those shipments with the spare capacity we have.

Thank you. That's very clear, Maximo and Pablo.

Your next question comes from the line of Henrique Marquez of Goldman Sachs. Your line is now open.

Hi. Thanks for taking my question. I just wanted to better understand the key reasons for the increase in CapEx and the extended deadline. I want to clarify if it was more of a mistake in the budget planning or if there were any operational issues during construction. Additionally, when should we expect to see this increase in CapEx? Will this affect this year? Should we anticipate this additional $500 million to be incurred this year, next year, or distributed over two years? Thank you.

Yeah, thank you, Henrique. You will see the CapEx distributed over the project timeline. This year, to give you an idea, the total CapEx for Ternium this year is going to be $2.5 billion. Next year, it will be around $2 billion, and in 2027, around $1 billion. As for the project, specifically, I would say that this year, up until March of this year, $1.4 billion has already been invested in the project. The rest of the year over the next nine months, we expect to complete around $1.4 billion. In 2026, we anticipate $1 billion, and in 2027, about $200 million. The increase we noted is primarily due to a combination of budgetary process changes and negotiations where many vendors increased their prices due to inflation and other factors. This is the main reason behind the increased CapEx. We also have additional structural requirements, especially in the DRI facility and steel shop.

Your next question comes from an analyst at UBS. You may now proceed with your inquiry.

Hi. Good morning, everyone. Thank you. So, two questions here. The first one, circling back to the U.S.-Mexico relationship. Maximo, I know that you mentioned that your base case is currently for a stronger USMCA agreement, which could positively impact the outlook for the region as a whole. However, steel has been a point of contention for Mexico, with U.S.-Mexico prices for HRC specifically decoupling. I wanted to see how you view this moving forward, considering Mexico has faced a 25% tariff but also has several trade agreements with its partners. How do you interpret the recent shifts in the Mexican supply-demand balance for steel, and where do you see the new pricing equilibrium in this environment? The second question, again, regarding the base case of a stronger USMCA agreement, I wanted to explore the downside or bear case on how Ternium sees its capital allocation in a scenario where the Mexican economy slows down and the U.S. restricts imports of various goods coming from Mexico. How would Ternium position itself in this scenario? I'm very sorry to ask a final quick question about the recent changes in FX controls in Argentina and how they might affect your ability to pay dividends from Argentinian operations to the controlling company. Thank you.

Thank you, Caio. Well, I'll start by addressing your questions about the U.S.-Mexico relationship in steel, particularly. As I've mentioned, there's a global perspective, and we think there are positive developments ahead. You're right that there are significant concerns regarding steel, and it's a problem between the U.S. and Mexico. In terms of steel, aluminum has to be resolved more quickly than the long term issues. Steel's position between these two countries has been troubling. Looking at the trade data, when considering steel and steel derivatives, the U.S. generally has a surplus in trade with Mexico. Rough estimates indicate that the U.S. exported around $17 billion in 2024, while Mexico exported about $11 billion in steel and steel derivatives. It doesn't make sense to impose tariffs between these two nations, and I hope we can avoid that outcome. We are working closely with the Mexican administration to ensure reasonable negotiations. Ultimately, I believe it is in the best interest of both steel industries to reach an agreement. In various scenarios for Mexico, there remains considerable opportunity to capture market share. We continue to focus on developing our capacity and product quality, particularly in areas where we previously lacked it. With our new investments, we aim to gradually gain market share from the 400,000 tons of flat products currently imported into Mexico every month. As for the FX controls in Argentina, the outlook there is improving for the steel sector and the economy overall. Although there are still risks in Argentina regarding inflation, we expect shipments to grow in the upcoming quarters, possibly by about 20% in the next quarter, as we see a more solid economic environment.

Hi Kevin. Regarding the effects of the measures implemented in Argentina, it is positive to observe the openness as the government is rolling out these new measures for the population. However, there still remain some limitations for companies, which is your concern about dividend payments. A couple of important aspects have been introduced, and we still need final clarifications on these new regulations. One positive development is the allowance for businesses to pay dividends in dollars. All profits generated in Argentina can be paid out as dividends starting next year. The government is also considering introducing a bond similar to those issued previously to address unpaid commercial debt. These measures show progress, but there are still some restrictions and uncertainties. Nevertheless, there is a path for companies to work towards potential dividend payments.

Yes. Thank you, both.

There are no further questions. I'd now like to hand the call back to our CEO. Please go ahead.

Okay. Thank you very much. We appreciate your participation in today's call and welcome your feedback. I hope to talk to you in the next conference call. Thank you very much.

Thank you for attending today's call. You may now disconnect. Goodbye.