Ternium (TX) 6 Nov 242024 Q3 Earnings call transcript

Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ternium Third Quarter 2024 Results Call. [Operator Instructions] I would now like to turn the call over to Sebastian Marti, you may begin.

Good morning, and thank you for joining us. Martí, IR Sebastian Director. Compliance is name Ternium's and Global Senior My Ternium the XXXX. months for financial quarter Yesterday results X third released and first of call presentation. complement intended This is to that by Officer, who discuss Officer; today I'm Chief performance. environment will Vedoya, Ternium's Financial Brizzio, Ternium's Executive joined Chief and Maximo and Pablo business Ternium's

floor We the following prepared to will open remarks. our questions up

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

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

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

our and of as reported realized EBITDA price shipments an main third much in margins to in increased for Good you and million decrease experienced adjusted income quarter's third $XX the the very for market. Ternium participating declined, primarily markets a quarter our calls. morning, today's anticipated primary thank across net earnings million in of We call, last in $XXX due quarter. Ternium's the all and our

Mexico of The these review level Let's status the operating steel remains market at last significant markets. steel XX% in consumption. in year healthy, after consistent a year-over-year increase

of had high record quarter we shipments market. XXXX, the third this In fact, in in

shipments decline a weak period a For of quarter, the the in as of expect the we fourth seasonally being result year. this

expect aimed the the to has to this process plans following launch government which demand coming Mexican we Mexico Once change competitiveness been announced several a of recently, soft Additionally, industry. completed, projects new administration. enhancing projects return from infrastructure has at of is public investment as is in

bright optimistic am pickling which result in growth the be will our production the the first our is several in capacity record units new for increased year, to it expect next we to this year industrial In quarter ahead, line, markets ramp X% in of this is year-over-year would be sequential spots. has X the come. shipment automotive first and high. of months outlook market, our market Looking XXXX, part pushing and in in about X.X million Mexican which the reach I a production. up Automotive of XXXX expected Furthermore, by as

are to markets expected trends on border. benefiting the nearshoring steel of Finally, both the persist, sides

very for the its The new a administration policy for in what to in have been we much advocating stated substitution, with commitment recognized Mexico country has of pursuing opportunity this line import and and years. industrialization many

Brazil. We to has year. year-over-year in see market. growing Vehicle increase with is a Moving the market X% been the months in XXXX. and activity during Brazil of Steel year, distribution increasing growing healthy well production an consumption as X in expected this X% dynamic first industrial

On import this the China, mainly steel other first shipments increased the jumped XX% year-over-year in as this hand, flat significantly steel months, markets. to country international from X

a noticed Brazilian these above happened the result, X-year place results. fair China subject to hasn't put quarter in of under increase in XX% from already it certain As as are tariff. at other steel imports has trade still expected And the yield and system government in capacity. which their Unfortunately, excess countries, vote this a measures

Brazil. These steel have antidumping promising. investigations path and continue from team, disindustrialization several prevent in to are government to this, We encourage over [indiscernible] been measures initiated this the more China. Following mainly imports Brazilian prepainting of

construction and a program fourth commercial that to shipments in With Argentina. Steel slowdown year. Argentina reform promote market. is Argentina in in the market industrial in over we XXXX, despite ambition steel past has will recovery review country. local volumes In an activity expect steel level in a activity we seasonal the and of within of shown end the quarter, the stable industrial will government the a let's several The a the maintain implementing demand. view, both the Finally, quarters, think Argentine improve expect towards recovery favoring long-term investments I the

However, there of made unfair risk in is next authorities market to steel. products a will an in an with increase with the and important Argentina issue trade during this of imports This up be year. follow

with project renewable in operation with completion a will significant as December, planned farm renewable January. wind begin the turbines use our and self-generated begin external milestone basis project [indiscernible] today. first Argentina reach the our sources. energy to will energy XX of completion delivering commitment reliance installation and decarbonization. energy in wind XX and the anticipate by expected in of by full represents The We boosting that This year-end, is on to reducing of Our progressing

has pickling a These started products up. ramping now Let you an at capacity. operation tons XXX,XXX pickling currently progress the of of The are and XXX,XXX tons line of lines me Pesqueria of in customized in and lines expansion center per give and update year X on the our new finishing X year are projects. capacity the

start X the lines remaining center. the in the During next finishing months, we up plan to X

start the XXXX, In to We early addition, per XXXX we the making end are year operation XXX,XXX respectively. cold galvanizing of line plan and tons the on mill. year at and steady X.X this per ton progress million rolling

commenced. have work are and completed movement assembly Equipment already the have and rapidly. civil advancing and of structure the soil shipments buildings We

we construction X.X year cleaning soil the slab million areas. in Lastly, making tonne Pesqueria, and per movement the in most facility for the have completed of

Also underway. foundation and are have installations. civil operational awarded been key contracts are and We making progress the in work structural

start this by mid-XXXX. slab facility expect to up We

Pesqueria needs efficiency of lines of product tendency on high-quality the broader its high-quality slabs is from downstream the automotive profit the and with production supply raw operation, steady increase in leading appliance Ternium's facility to also expected will the significantly products sectors. suppliers, facility The improved of diverse and to Moreover, a production Mexico, processing. reduce enable capacity offerings enhance new will to a cost requirements range external to in more savings This enhance project Ternium margins. the steel company meeting new [indiscernible] effectively, steel and slab the customer ensuring

Finally, since includes several I sustainability report among of publications on an target, features, our detailing introduced update would enhancements the to initial target decarbonization other new XXXX. Ternium's latest highlight set report. like Ternium's This was in

such related with For processing Scope our during our semifinished not category emissions, slabs associated X the customers first target of the of time, includes directly mills mills. and company and company. includes produced third production One to generated which from slabs products This and by are the party as our emissions XX emission our

emissions indices using to include expanding are emissions as intensity crude The boundaries And a requirements. to steel prepare seal by future regulatory we improve XXXX production. baseline. is methodology in XX% our great COX reporting we protocols beyond comparability of update the target for other and GHG addition, with XXXX, reduction to hot-rolled In be a

in XXXX protocols As inventory Methodology. World greenhouse previous as our Steel was years, said, a both by audited GHG for following, third and I party

changes, are X these very among to we targets. our companies Scope With the reporting, few their emissions that in include

detailed offer extensive accuracy significantly sustainable understanding will you from Our report. website aim review report The information increase is the our on download We to a initiatives. in transparency emission practices. our our of comprehensive insights our sustainability this the with commitment invite and and decision to to

to our in reforms Brazil our consumption performance Ternium's I of markets say I'm several and initial in the my the Mexico, in believe will up confident like opportunities market the recovery with significant the wrap to would main of I strength Argentina's remarks, neutral company XXXX. To offer for in economy. steel

of In material addition, improve our raw expect cost during continued and gradually lower slabs and I work cost-cutting margin in year our with initiatives. to the

With the quarter. this, review the with Pablo, standing proceed performance please now you of can third of

thanks, call. for conference our participating Thanks, in everybody, Maximo, and

The our to quarter. move were these our of which adjusted lower start see an per and realized results. for in overview that, prices Page we results steel steel presentation financial as increase main the webcast Let's across in were cost by small ton EBITDA our markets, by main offset driving this declined decline shipments. a partially factors and X, operations If detailed we a anticipated,

Looking by expect seasonal in sequenced driven shipments. fourth in EBITDA, better this margins, quarter, increase although a we a ahead by slightly decrease will offset partially for the more adjusted be

operating Brazilian to real net next income. third The quarter quarter deferred depreciation quarter comparing third effect tax and losses the to local gain in dollar-denominated the U.S. financial against decline income the adjusted the gain, slide. by in the U.S. Usiminas dollar, appreciation a currency quarter, see Mexico, was for second FX net of third the reflects cost position $XX the Net Mexican improved quarter million. in and When debt. income Turning the favorable [indiscernible] results net and lower the FX peso in income, offset partially we

X. Page on performance segment Steel our to turn Let's

This [indiscernible] markets. quarter, with significant increase our key in in

to the Looking due decrease both year-end usual in seasonality, and ahead, Mexico fourth shipments we in a anticipate in in Brazil. quarter

our consolidated a by realized shipment, held primary revenue the decrease a on segment affected the increase profitability look ton, decline margins. in Despite steady the steel market, of an page. Now a to due at to in sales our compared the previous steel let's sales which take and quarter the per next driven Steel prices in in

consumption. small in was Steel by record And primarily [indiscernible] we both gains the operations as decline the offset ton material quarter. in the and decrease to a particularly third price cost continue in slab in per partially raw in use fuel unit, The turning fuel efficiency

and costs sequentially decreased quarter. the labor maintenance in addition, In third

Slide growth, Let's quarter, Brazilian due to ore mining of production In sales by review quarter-over-quarter iron prices. performance the lower Mexican by net in offset market segment. sequentially, were to of higher third our shipments on Despite relatively the rose this and stable move X operations. to driven the our XX%

ore in due drop the the cost slight this of per to helped margins to soften this in a prices, decrease. this mainly Mining ton while decreased in segment impact in quarter, reduction iron Our

Let's review next cash on our performance. flow the to slide move to

compared billion, As working increase net together cash of to position EBITDA with declined in to with and decrease to a $X.X flow cash of operations higher decrease second the a in September, primarily from in quarter capital capital end the Ternium expenditure.

over slide, a expenditures increase. a the to our Moving final years. X first see of performance of our we X the saw months capital past In can year-over-year the XXXX, summary significant

We Pesqueria as Center new as Industrial new our in the facilities continue making Argentina. in well of wind in farm in explained, progress, construction the Maximo

$X.X announced ADS, to of presentation, of this payment million. of expect billion highlight billion Board an of CapEx would $X.XX $X.X in We between have per a I interim conclude To Ternium's $XXX that XXXX. dividend yesterday, like totaling to the to total Directors

preferred past Over in with the structured the shareholders' total amount, represents X company has annual dividend following of payment remaining the interim November roughly so approval. that the [indiscernible] years, the X/X

We expect approach. this time similar to follow the

XX% a represent adjusted payout ratio the based corresponded on dividend XXXX to XX about current past of price year our fiscal X% payment the total So for would months. and on the income based a net share yield

consistently practice capital X a with the capability of Over yield decision substantial past years, financial income and expenditures. current an attractive this net during of solid increased even is dividend [indiscernible] of a providing distribute portion a established position. significant allocating dividend aligned Ternium's annually. of This result decided dividend periods The to

With go have prepared and we may begin would any to take session. remarks. have. Q&A to initial our now concluded this, the you like We Operator, that Thanks. please questions

[Operator comes Goldman of the with Sachs. Marcio first Instructions] Our line question Farid from

me? A couple of my hear you -- can questions on yes,

yes, No, I Yes. think.

All right.

A on good. Let not side. couple if that's Yes. my know of things me

as somewhat Mexico's profitability right? showing and showed started be seems well. weaker we as next the to performing that's and costs. prices benchmark surprise then call for some improvement think lower prices, have cut. also on into was But well, good earnings the in still we and conviction lower, reason I demand the well understand, or [indiscernible] year conviction by dividend the as going good the main quarter, third obviously, I that been Argentina

cut a through to stable CapEx dividends same leverage dividends, initial execute at flat understanding us. and of hear cycle, year cycle allow keep the we as if commitment has the to when understand assume to turn, even resume right? the the the the a to year. the will that if So outlook, constructive dividends eventually, bit can it trying surprise been would reason balance that's at that one to a decided sustain And why And last we $X.X to low you is this Our well. why was you time, reason on share we the paid of to the we're levels growing you sheet about and of just kept growing Board

of And secondly, probably, topic today mean, the I election. big is the outcome U.S.

Mexico, taken actions think also laid I well. activity to administration of it to showing, our the but in is in situation as Mexican industrial some the the some part extent, has to are out important support that we

as of [indiscernible] the to we on see higher the potentially renegotiation agreement. taxation U.S. and relates Obviously, Mexico of headlines suggesting CMA some So it

about initial Mexico So in North and your as and if great. be America, directly well, the Ternium that risks exposed that U.S. can and be indirectly for would the and talk you thoughts opportunities up and to

you will election an The to with question, the Thank allow part start were honest. outcome much, very of you and we Marcio. your the you and go this clear. mean I then me. second the see be I U.S. dividend, if very as I opportunity, to of

first out of the are think, of all, I we uncertainty.

job, one month new We is in X already have will U.S. administrations, in now a the the in X there now have Mexico, and we

and talking So working can now that's something can together. start start because I think good people

the she the concern the clear [indiscernible], new and U.S. this. with especially President vocal administration, and very Trump share I trade. very view, very think administration, She has fair understands much point the the of think about China and and from been I Mexican than

As of CEO you is administration for few dialogue, CEOs the know, quite between And and several new with which going Mexico you the U.S. ago, weeks dialogue been this probably was a we that's on a U.S.-Mexico participate know, years Mexico. in the in

think I say North strengthen American to by a trade, all consensus the opportunity participants big to Asia. that was and the what region of of violation against especially the there

XXXX, U.S., by I bringing the in the XX% of Mexico was about export people benefits, but the which that positive from in Mexico, meeting, increased also were to new also, than lot very negotiated which And USMCA. of from good a the outcome time. USMCA that both of in mean, more period

using strongly that -- of up Asia, firm reducing thing the the that again, President show and America, was, that -- about in trade had billion. in of, about she The North words, very said $XXX Mexico her vision I'm Mexico the she meeting with deficit other has was

similar. I So think are the quite alignments

which I has a think The improve. discussion the USMCA, But to be I is clearly, revision start. has room think again, it's it going to that positive. to the good, There's very USMCA. of

outcome or Marcio. answered these that So question, question hope elections. of positive I'm the about I the part I of the

That was detailed. great, very

you call Pablo, And want dividends? to about

Yes.

Okay. I Max. will that. Yes, do

see consider dividend be increase has having company the position, will is plan cash the and generation into company to year, is has but that So that than which that ratio also if But on was you of you consideration we higher, Taking nominal the only that payment. the consideration year. dividend into part a the Board the was you not entering in reduction that also reduced the the we that this decision if EBITDA know, reduced net or proposed but year, CapEx not broader the -- are taking total of approved have. that as next only that but want the of the for second, a you significantly will increased was payout yield the dividend maintained the dividend company

all, and as strong with the high we're transformation a is of you like that possible are a many important doing is So in remarks, strong doing very allow very distribution. say that CapEx, know, Pesqueria. times, opening discussed in sustain the position, level type very is deal very doing financial the I the a because one we position is the company this very, strong us payment company a having while of that we financial And to all as sustaining in what

of view, the high with having. is sustain approval our basically level company this we that is have payments billion payment done the the So work dividend in of

last this case. to payments X the continues in X the and be or dividendd years, We have increased substantially

comparisons look the Of just course, nominal answered been But hope disimparment you all look has and/or at if reduction you number, high. ratio, be to if Marcio. by continues question, that one. very I the there more I your on the

that year-to-date, to assume fair should than obviously, it of payout at fair But dividend XX% is Is the it nominal right? yields, because we and the great. Yes. that's price say the No, helping rather deal down the yields the more share at then is look that's should look to the we more term... about

again, payout about the in other companies past to and any ratio the -- high which past years. have is we around comparison is basically Exactly XX%, the because done X quite X or what in

So we what we are the year. distributing significant of generated amount have during

And your next Scotiabank. line question with the comes of Alfonso Salazar from

for industry we what is net for steel. needed same capacity is the as time, China America could we another only are America, have weakens here? new overcapacity shoring. question reshoring it's regarding globally, demand worse in impact for importer Maximo, region. not have more is all weakening. to that steel that efforts But be -- China There -- going Because there and this in these North and is competitiveness in the big North know getting Yes. only is What I the that this And Mexico. a but is implemented, at is problem the in And of outlook you. tariffs

is are there tariffs possibility. risk that North even out that the there cannot American within region a rule And we

have is X Are to do the you did Europe? how going North X one separate going America globally, going X by to by steel another China to market to markets steel Or over one and balance? see unfold years? how So this the global and we next

government you whatever steel, want, on overcapacity because call but that government but industrial or industries. a so in Chinese China, capacity China reason it but for the know policy of an a -- But because many in market don't overall a was overcapacity answer I an that only clearly, forces, a question, thought great great I I have was create that's not if made policy, it incentives of you. not can is you there

that's in problem to has the skill products. impossible So with all in all or I schemes China, the that state-owned Chinese subsidies compete it's many as always itself. a enterprises with and other many, said, And the in

will this, of reacting react. the America U.S. reacted. of What are or happen North and to has most to that is Brazil has this. already Europe starting implemented the regions to what is actions. is is reacting series Mexico happening a

America region very are case we operate going the In region And I So America, have to markets. is North how the think many a emission regional know, intensity I -- by big the to of think COX the it's the going mean, in future. steel, the the followed probably lowest produce steel, particularly, producer markets of North low of especially I that's you Mexico, as carbon big per of is competitive U.S. to ton

So way. a and -- in competitive

So the capacity, -- North of to is the investing Ternium companies of competitive. is and including all most North is in that needs think I very America America, some in itself region again, investing be in And more able -- the supply in way. because topic, And of place. I a a Again, the can competitive governments are Alfonso. very answer I think is no a that that long China. gave taking state a of that compete like hope with short I one that, is reaction

helps. That Yes.

be Just can entering do your tariffs that if one in U.S. or question would the view, of happens Ternium what in is steel a on the The risk this. strategy? what for risk

today in the Look, I cannot tariffs U.S. about speculate

and administration the discussions same. supply to I they are negotiations. of is I an this. think confident U.S. at American the in strengthen has North think I'm more the be and the looking the future the end, I Mexico new administration the the common think But there administration as objective that, chain. will a -- in And opportunity in I or course, very of that that beginning, said all this in

things guess are resolved. be to I going So

Okay.

be reduce from North what to is basically, would That America imports other So the regions. goal? needs

objective several was clear President that's she billion Well, put She the things of a $XXX in the and in public about even number very public. Mexico. of of And in this the

-- the the or the I administration future think of U.S. the it's of new also objective

beneficiary And general, very I strength the was is way Trump it's of of the lot Mexico. everyone. President America of North benefit U.S. that and to energy lot a think, think China, is that of the important positive this I and U.S. there's integration subject for I clear to mean, can dependence go. very a the chain, in North very supply discuss sector clear a in also not the about America. the things That's the

be about there so way will -- very things this. positive think are positive think, discuss, I'm So I to which I the very

continue Okay. elsewhere the still Last right? is, around one, I region So and it, promise. way it There is may... question -- in the near This to other to term, countries. import need will from no from

consumed sure if that. region, Mexico, of mean most I that think U.S. about region. I'm supply we and you count not steel is the can think the I the I Canada, in

but Yes [indiscernible] year. last

a big it's So amount.

both -- of But have there, you between the imports countries.

have to that. you So discount

Correct.

increase are So And manage. about import of that you $XX the things less steel Europe and think Japan of net of and can come imports, $XX most some from that than of I you million, million. capacity, we imports talking and net the if -- that's

Correct.

wanted to just Okay. That's I what understand. Yes.

And Stanley. your Morgan from [indiscernible] next of the comes with line question

I have my side. questions on X

longer in is doing if now investments you expect the plan wanted one the -- to season. imports continue now possibility. And about an Americas know [indiscernible]? I we Brazil. But about extend next the going And after know investments. in in you reducing I expansion any the from the what's in just to the have study some mentioned you regions you [indiscernible] with is from season if going will a other an or is to other making cold thoughts company regarding the to tariffs for increase the First you of going for is have one what's time, Ternium initial the ongoing the Mexico, that plan. the remarks that it's step what some the in in about if to somehow, working a CapEx period if are close way? you're outcome future is and reduce that your if know the I government more how steel

these Brazil, systems. I mean, Steel I government -- quote in June. Enrique. you, implement this the implemented imports mean, It in Thank

you very know it's a maybe mean, you So a system it's But know don't I that have X-month a -- I quarter. early. quarter, it, but

So for you X real China. That's tons. is the product China, This the The quota. give of that because was slab of surplus quota supposedly is And the month. me you was the first The numbers. quota, imports, XXX,XXX Of for an mainly that that cannot let example. quota around XXX,XXX. from instead XXX,XXX XX%

it's those double. So didn't this pay tariff than And most XX%. of of more

So what we're saying step, to -- are I it a good the government, some not Ternium the I in know, particular, it's there the is first government good the a it's mean association system. implemented, in don't loopholes is saying because as to not it's but working is

saying, side, one loopholes. should working So we from we close to those continue are okay,

second filing thing are dumping companies is and doing The other Ternium that cases.

the Enrique? from that's first is most hope takes a think clear we as this a I long-term the doing, that are I but countries the are long of question, view that as second. But doing time.

Yes, that's clear. very

are I Future Yes. we in going be America. always to focused investments, mean, we said, as

We other regions. are not to going to go

I biggest think you of focused have in countries, in you we increase ever or Americas, continue the our know, as mainly is investment. in America, in especially history. project, know, are to where have the Latin growing in Today, a -- we the the as had in Pesqueria opportunities project place we are continue to the we

know, really shop going completely time. steel project be the with in this So on focused you first the next to their X And as of are we kind. not it's the years quality, in

focused on So completing this in we this. be are and successful very

Camilla Our [Operator Instructions] question next the line Bradesco Barter with from of comes BBI.

X quick questions. Just

quarter, results. provide what as coming But you free QX, through there if First on expect we to on terms flow inventories of flow looking in a And material estimate as can CapEx drop raw And CapEx. expectations could for you your could I'm not XXXX? it will say, early is at also cash sure mentioned well. but you great for lower too in for in be it's cost? XXXX, cost, expect any the

much very Camilla, first for think you, in questions. that CapEx Thank your was I question? XXXX, your

Yes. Yes.

[indiscernible]. billion. the Our going This A probably total of be project, $X.X is our be XXXX year of will more course, to Pesqueria of project. CapEx of part that including Pesqueria around history the the because is will CapEx in big

questions, quarters. we Then, in in well didn't hear was think second yes coming expectation flow generation sorry, free but respect to your that cash one I but for the our the

take that Yes, one. Yes. me axles. Let

So That your Okay. question. you're was Most right. yes, Yes.

free have and account in that was special, amount, increase more it we changes in in quarter, shouldn't It what or is, significant So we already capital. else, asked our of working with all, you is are into Maximo respect to nothing working have you payables basically to was our significant payables investment, in quite a consideration, taking this expecting as amounts. cash capital increase the inventories that account flow, first increase clearly gave which CapEx and Without increasing the in continue accounts and receivable.

-- case the coming be it shouldn't shouldn't that that quarter. we in So have

have operating and a flow the in should CapEx. cash positive So increasing continue then

So one we all a that the position better than in should all, be quarter. in this have

ways have we to reducing myself, as do already different and Maximo continue to -- is expectation cost, our mentioned, that. and Secondly both

is a both cost slab, coming reduction still a of and in should that are quarter. every in quarters the discuss why following in the something prior next material special we the which higher that that's almost is raw we current -- see and them we quarter, one One price that utilizing have than

slightly EBITDA we of said -- a quarter. in can So asked that coming -- we was is have better that we that generation the have why reasons the one

also operating. reduction program all we And -- the was hard especially are mentioned, continuing in the as in our facilities always this cost and situation, in working very all

respect. that be especially for mentioned quarter, and in The positive the to already tend that XXXX. fourth we So numbers for we

CEO, And the would back to further this questions Vedoya. the at Maximo there like turn time. are to I call no over

this very joining We much you you us great call. Thank all and have welcome in a your See feedback months. X for day. in

conference concludes today's This call.

You disconnect. may now