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Ternium (TX)

Participants
Sebastian Marti IR
Maximo Vedoya CEO
Pablo Brizzio CFO
Caio Ribeiro Credit Suisse
Thiago Lofiego Bradesco BBI
Caio Greiner BTG
Carlos De Alba Morgan Stanley
Alfonso Salazar Scotiabank
Fabian Graimann Pictet Asset Management
Call transcript
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Operator

At this time, I would like to welcome everyone to the Ternium first quarter 2021 results call. I would now like to turn the call over to Sebastian Marti. Please go ahead, sir.

Sebastian Marti

Good morning, and thank you for joining us today. My name is Sebastian Marti, and I am Ternium's Investor Relations and Compliance Director. financial the its XXXX. quarter yesterday released results first for of Ternium call presentation. that complementary This to is

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

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

Maximo Vedoya

thank Ternium increases had conference you Steel EBITDA the in Ternium's benchmark outstanding reported and year, and around participating first have last morning, today with the for Good significant quarter call. all margins. over months. prices in the Sebastian. results the X of EBITDA you, record Thank globe

pandemic-induced during the demand outpacing half steel first in for decrease the of significantly, year, of steel last production. increased recovery global speed a Following

industries. not also levels. many As this, reached with low the conditions the inventories world This along other with chains but only happened different unbalanced supply value a very steel, across iron ore supply-demand with chain at of result and affecting markets,

second quarter, as decrease gradually will steel year, prices demand. up utilization could remain around of current and expect catches the the the We of capacity for second levels during steel this half with rest

in margins programs the we yesterday's the main efforts. more that steel a is ton. prices reflecting should realized second high, this a guidance third of countries' than different contract, sales driver The in quarter XXXX, higher by of will in there the per progress continue prices for noting are of and the deployment steel higher our worth cost on first quarter half in guided Mexico higher factors quarters under as In second support and positive steel the stimulus the prices continuous the It second hand, and of that EBITDA subsequentially release, steel other respectively. On government and prevailing demand: are XXXX. for press healthy offset are partially some vaccination remain to realized

ton, ore the In inventories are in many also of over yet reflected addition, the cost consume elevated time. higher not are per totally is raw and The levels, showing iron we our happening with like being materials, as of same slabs. and costs cost our scrap,

year, you So during rest the regularly ton of per the should cost see increasing.

the review main state Let's markets. now our of

During the second market expect subsequently currently in Center now. should in month year, during rolling mill from start of new the After gradually shipments remain quarter. the we are, if our they Consequently, at Pesqueria hot expect steady. we in in as half weather a U.S. have to is up market quarter. in from February, and facilities commercial disrupted first facilities production Southern in with running XX,XXX been Monterrey, tons at Northern the at a activity conditions export-led and the our of high industrial our shipments to strong approximately extreme be negative Mexico Demand at the then, Since levels. Mexico in continue impact in Industrial to that, increase second increase conditions capacity customers the Mexico continue as shipments to

slightly had the in this for the Argentina, the sector. strong construction the quarter the is country sequential the during the weak first quarter region. as year a to Shipments now first seasonally as decrease activity industrial quarter remained Turning in of did

America. is for by noting durable is domestic building that second pandemic of during demand second stable supported underway continued the Although wave worth a across materials, COVID-XX we expect shipments and to South goods remain quarter, it currently

there any conditions being, this as deteriorate, government-mandated time we cannot it But been year. rule has the out. if industrial lockdowns happened For of last facilities not

Ternium the Colombia, Latin we anticipated, Varela of expected. new recovering The is and better is with facility facility environment, XX,XXX the third in highest Janeiro the is progressing per in increased it before the All currently it like Ternium America. than during the working of remarks for providing steel as for than facility, Palmar XXXX. Ternium's time. give competitive the key Pablo's XX,XXX With a is steel market de ramp-up conditions. doing price production manufacturing is of system. facilities de at to quarter. first in In shift operations our previously positioning, into faster which facility parties. would is shipments Ternium's In local month, capacity acquired it specification intended were increase operations providing process integrates Slab some slab base of Our Ternium's being steels, third today's are substitution that the better production in market we across with in in strongly, reflecting Ternium going subsequentially levels, Rio to industrial ahead the back in approximately tons new in Ternium's with was as configuration, strong I XXXX, when high very is This incorporated final region, a purchased extra capable addition price this most further Colombia to as our prices Brazil also steel steel at overall and performance right, tons facilities analysis are high of

become at an to expanded steel capacity I imbalance range product as in market new now increases it higher of very As the this facilities. throughout put very productivity with enables offering the in time the and close rolling we market, into operations hot our mill mentioned, the state-of-the-art our In Mexico. handy term, are will shorter

us incremental CA, market, our than up ramp and North shipments we U.S. current to this life, will a tons total be ready development. second expectation further more in milestone country's truly As But in for the the Ternium's this the I half steps achieve American in make believe in new of it this the with view, of year. line, will a XXX,XXX significant longer-term and is

effect for steps which to caution. developed the are chronic recycled a detrimental not news many not right And roadmap steel steel direction. this it progressing it operate of in we that in country's vaccination through, about steel the decarbonization its gradually to steel the long-term potential for and steel we excess February. targets. progressing hold. is all the to around note zero the steel-making finally, have programs steel at in the In COVID-XX our of I the decarbonize industry operations taking In the on a clearly the the If steel as steel The capacity reduce announcement cut case, solve countries in medium-term would will the is all pandemic world beneficial are in import a government mandating makers, and steel global export is of aim country's countries. quick future the could the to rebates Chile's the cuts China, Another doing the like fast development production are world companies. followed effects with very will have products, potential be announced and pig they duty Plans of relevant crude market. many has are it in iron, mention Today's of to over, that as decarbonization issue in could towards as as

dealing to more our will this our lives we communities, those working pandemic probably, have most being assured people can of communities. the in time So in effects we case, you some continue our committed, personal we as these until for the and for with best the If our continue for done that rest our now. as and will have team, doing is a business markets,

ahead with presentation. Okay. please slide Pablo, go the

Pablo Brizzio

good to everybody. Thanks, morning Maximo, and

that slides significant see and market Ternium's been with generation the margins, initial economic our high attractive remarks quarter, is today's throughout a steel being that on The first results strong quarter a You very described balance strengthening and Maximo outstanding. consistent sheet. following his profitability reflected and cash in financial Ternium's performance historically in has environment of will fourth

$XXX the review ton. period $XXX quarter this. income EBITDA in per of on EBITDA start billion was first million or in webcast in or the ADS. XXXX Page presentation XX% was the per $X.X $X.XX an or margin of Let's X Net to

even results an of second the year. the set expect quarter in We stronger of

this in in the We more will details slides. discuss coming

quarter Let's first both turn year-over-year basis. in now to and Page a on Mexico, increases X to the X%, analyze shipments. steel In sequentially

the quarter. the southern weather increased We region, second decreased quarter expect In in volumes in upon X% in the country A to and increase first shipments shipment from of production. year-over-year. our sequentially significantly conditions XXXX quarter third impact the record extreme

XXXX Let you the the was to that quarter lockdowns related in COVID-XX first affected me of activity remind pandemic. by

of similar relatively shipments remain levels. gray, the see second parties you slabs quarter, sequentially in reflects the the Looking the facility to on company the a that in forward third Ternium's increased system. we Brazil decreased slab of the light basis. market shipped and other both the can the quarter, with at region volume to in in expect year-over-year In industrial This into first integration reduction regions,

continue level Mexico. We expected volume in this expect quarter to increasing increase in the slab second of year, integration the the offsetting

in steel are the has first de new in Of at chart note, which in Palmar of the dark ramping see can quarter this Ternium's Colombia, regard, you the increased in to up shipments country. this Now shipments higher we region, finished blue, in same in which contributed XXXX. facility in Varela

combining these development, in shipments can sequentially in X% ripe this the tons steel X% quarter, So year-over-year. of consolidate higher as see next are page, first higher you X.X to we the and

in forward, lower consolidated to with in third higher Looking sales discussed, stable expect steel the that shipments Mexico, been parties. summarizing all slab second has offsetting we shipments quarter

Steel as revenue lag key of continue sequentially of anticipates the especially Mexico, strengthening to prices America. North since our in these last trends conference call, second prices, reset per contract increased this prices This, commented year. year-over-year a quarter, in together by the with our in third to turning and quarter in continued in Maximo. ton markets Now

stable the last price the sequential combination Compared resulted year, to higher net Moving billion. first in quarter. shipments in the net XX% realized sales increased first to in quarter XXth to relatively same in a chart, bottom $X.X and on the period the sales of increase

realized shows result sequential #X, on higher by drivers increase, EBITDA cost higher quarter income. behind Turning changes ton net higher EBITDA now and price which significant top a the slab in of material and the influence on to raw review per the first was the the chart The next purchased of offset partially as page, let's prices. the the main

in quarter connection income a and higher the We million entirely third be to company's sequential expect as EBITDA the increase even that quarter in slight raw related inventories. seen operating excluded higher second quarter. this previously to of increase fourth the with cannot continue cost of increasing in year of through prices, de-recognition a of was offset ton per flow year the realized the sequential below shows from discussed, increase due significant The with by the as fourth of net income partially contingency in the material in in result as a new to the in in prices the last This calculation quarter credits. gain EBITDA gain ISMS the XXX nonrecurring chart

the results, We a XX the impacted over this fourth fourth financial when quarterly fluctuation after to even Cash $XXX working the now X. capital in our million the prices realized increases which are appreciation in in Mexican peso around also this higher due was fourth in raw were presentation, sheet expected Mexican dollar, value should our cost payable. position. net from of increase, Page the balance operations the first note, peso also the had and the rate, flow Mexican To let's third partially in expected of an in of in tax in a finish a to effective quarter extra to significant was U.S. others the of suppliers of This in $XXX what in The of by flow year, performance X% exchange XX% $XXX be steel million capital there rates. quarter in compared significant offset and down to the depreciation a against higher no in quarter due went quarter the to other quarter on peso turn compared X% steel working first cash Of and the to in material net-short better higher receivables period. trade the quarter appreciation accounts million, and the inventories. mainly and

the we increases higher Looking working forward second in costs, as into price capital, realized reflecting quarter, further previously and expect discussed.

This and to cash flow, generate to free March, working at $XXX company last XX-month equivalent Regarding enabled net EBITDA. capital investment debt X.Xx $XXX after to capital. end million of in of the net the to debt to million Ternium expenditures the reduce $XXX managed mentioned million further

as ADS. has $XXX as company remind me on at Let May General to of previously equivalent you If to X. paid a announced, Directors Board XX record million, it the approved shareholders, meeting dividend of of that proposed May Ternium's annual would of $X.XX per shareholders on be

Okay. With we finish our this, remarks. prepared

we and As attention. always, very appreciate your time much

ready to operator, proceed with now questions. the session. Q&A are We Please take your

Operator

[Operator Instructions] question Ribeiro And with your Caio from first Credit comes Suisse.

Caio Ribeiro

next. my year-to-date. new question Mexico that's and The there considerable is steel both Clearly right Mexico. first online flat tight be coming the the appears and favorably have So to been on in this prices and is prices But U.S. market incoming trending in U.S. very very capacity, year now.

just new are if this new secondly, normalized lower And do you happening? have see levels how that if chain what your Mexico to the you capacity And compare this whole then online? when was so, normalizing capacity the levels. this comes for in I talk where see I if you once So could think you now, supply will inventory at and prices throughout that about in wondering a the prices, was impact on base wondering right you they steel expectations see

Maximo Vedoya

with Very at of see more all even at industrial [indiscernible] second a our very, high because can little customers, today. They're their production easy. I the bit they're they're have Inventory you customers start normalized yet if levels, in that are the not levels good industrial low you low, very least rate not question. base. it's are in the and -- see more one,

U.S., I decrease U.S. quarter, are second third to online they event, capacity in very to new Mexico the decrease fourth prices the my somehow, during in because near the inventories an the said and much. today. prices remarks, as they future. is be So going going I yes, to in going the the is don't I not see are in demand in too the and very are Flat although should something very, that see don't is strong think flat as I low. quarter continue And prices in

to know the over So on term, in long online was next fourth diminish things don't the question. quarter I an event problematic capacity online. don't coming be But your see third by year, dynamics the that I with question analysis, the future, see long capacity going term, a I'm new if and you this going new a market a in that steel very Mexico. I probably or In is prices second, Caio, few the quarter is very this don't if are in longer, going But There term bit near that I'm -- more sorry. talking take little to much. good and are a as the and long moving U.S. this to are

has going Mexico kilos develop, inhabitant. consumption low very to more per consumption. is grow. a start steel. That's going If to mean that First, consuming to going I Mexico consumption a XXX it's is is

going grow consumption in the to So following years. in Mexico is

It's The is is more the going impact going is issue. have going second piece few the years. And the infrastructure. reshoring pace This infrastructure, the next in that happening if have at growing incrementally probably which the past. to is be the in we in through, U.S. And a consumption. But thing plans this also to is is didn't of is third this an happening.

million a and is compete less. XXXX, bit were these in typical year year flat if from capacity tons, new Because year. somehow a more, to X fulfill is XX online U.S. products is with a take you little finished little and imports And coming So not Mexico this the which coming that's imports. things the a

have imports. room you with a lot these So of to compete

And are that cost that's imports, capacity is why we the so one able at the is, we capacity and question a competitive is are position. least with the with is our Ternium very building, compete to building building,

And than able think so to are we more compete. that we

hope on that longer. prices. huge Caio, answered to So little I is although a a your have I going don't this impact I see bit capacity new question,

Caio Ribeiro

I No, medium to how full term trying in very flow to short perfect, was complete. going that's in and appreciate I to Maximo. long understand the really the the just answer, exactly the no, mean through that's momentum term. I

those think So If that levels? was with normalize a that take very to answer. complete just one inventory quickly I do long follow-up could thing you very may the How levels. inventory on it

Maximo Vedoya

To be sides. to year. think, little continues this demand in think more the honest, two going I think If way, of take customers, the not normalize in until to the to in going future. Mexico, the it's it's month longer. final is near over I market, Industrial near, going be I a Commercial, commercial

Operator

of next from question Bradesco And BBI. Lofiego your the with Thiago comes line

Thiago Lofiego

Thank you, a couple here. of questions

capital allocation the but will coming in be flow cash On or coming significant here mean the years. likely the you generation I quarters, every most guys that side, usual your year question in quarter, X get

we new think second given for your high will Pesqueria how Where persists, and how half should third-party that you question up year. ramp as should world? is steel consider? how allocation see we more this see you on your Should we mill? this is the at what level speeding scenario, on new -- very So up this approach the in of opportunities shipments slab prices should terms level Ternium might dividend? guys specific more we that that of globally, the second if guys capital this Any understand organic to significant growth for mindset really about should other Just of just Ternium? see point, Or the M&A given you this here agenda? And

Maximo Vedoya

easy start the Well, second one. the Thiago, with one, I

consume we than tons fourth or tons. bit But million to X run In X in Mexico, third-party a facility, slabs, is quarter, of the today next are consume year, million we probably X ramp-up year. little at going The a also to with the of new easy. slabs, are probably million around And less. other a one pace going more tons more we of the

of Next bit and year, Mexico, then little probably at probably X more. slabs of needs million tons a for

finished Brazil. Calvert. million with side, that, other at at little is a have bit than less tons, our you we know, but as almost almost Ternium running tons. the X million we And contract X On Brazil Ternium

So we to beginning U.S. in of don't May. have the to sell anything the

we local almost our Brazil, in Nevertheless, production balanced our the from opportunities particularly But if needs. slab it because you way, going slab in depend and third third on that I to to is sell that buy facility needs. the answers are are see the to third buy intend it's going our we parties But that, Brazil, So parties. we in question. from Ternium hope to balanced sell Thiago, to slab to from almost and slab from market. on are what parties to our today

Thiago Lofiego

Maximo, a Yes, just follow-up. quick

you're when like of that's premium? to Brazil, the in third going solely buy want rationale because economics because sell parties so say better the from What So to a Brazil sell to there? you at to in market you is you guys for

Maximo Vedoya

premium customers, Yes, for with so time, you these to because and have Exactly, have we customers. exactly. a them don't huge pay once every the mean, they exactly. month receiving a the by currencies, -- vessel I train ship of freight. mean, we instead a don't I day you shipping the ship a transit just-in-time premium of freight. instead a Freight,weak

analysis. economic pure So analysis, economic it's an

Thiago Lofiego

Got it.

Maximo Vedoya

term, around a are million this The in capital CapEx first we well short going in the have $XXX to year. allocation, question,

increase working to We capital. still are going

million. dividends. and $XXX with the We we we first -- in month, quarter, have little investment almost are to in prices also increase of invest Q And capital. going in million the are $XXX But in working second probably in volumes, this third huge to going next working pay and a in in the a probably capital

the organic more to always strategic Thiago, table, is up they a all that bit for analyze M&A, I dividends, is have the that are in in our question, or we continue any today. strengthens growth, your little our in are answer what doing the think aim which we Now us. further, position mean was I markets. speeded opportunity that And

mean, region We position developing have long in market. as there Mexico. to plans -- opportunities in to we are our as industrial platform the our in continue strengthen we have this I

the confident to and opportunities going to Mexico also We are there what other grow. in very of are today, seeing we that in And we where are we markets strong do. future are are that's

Operator

your comes from line of next BTG. with the And Greiner Caio question

Caio Greiner

you. Thank

contracts my U.S. trying we quarters, in per one But quarter first rising on I prices over steel to guidance EBITDA average be two results. equation industrial be might said flow to just Because attention. if that ton. on ahead. but the one hand, one probably the or you through at shaken Ternium only those and do look out EBITDA something understand would TX going that revenue was how understand more than calls your question prices that our I doubled coming to So in I in guys' the next increase by do you're year-over-year. has that that's quarters this take that is XX%, understand And per ton, to

coming they shape which material is coming have that, start And Pesqueria just results through material cost increase quarters. trying you guys understand And that going should next inflation top also that's through how also flow hand, raw also should also profitability. online, costs, you out flowing to have also you something on So inventories. mentioned as of also to that that the on I higher over Ternium's was raw other the

end about thinking a look Does forecasting at So question, quarters? the an levels if looking EBITDA just help coming for the quick the of at with coming over of ton And of of one. the issues, over you the second $XXX until understand you maybe to Ternium end see per until guys was above So just guys the to just I the it make all how those ton in sense your trying my EBITDA us per to year. trying quarters, are I numbers year? can us was

you As spot us a Maximo, ones, to how deliver many month can you share that would actually follow-up Ternium's Mexico nowadays, in maybe days guys us volumes, or are can be months, with how of one share maybe lead with of times great. taking are the you previous if

Maximo Vedoya

lead times to volume are today. Our for spot in those similar the U.S.

for So X than a to are bit you be rolled, hot weeks, more little or more, honest.

so spot no in mean, we that of contracts, someone little have we But customers monthly and a wants, problem. also a for X bit have regular volume For volume, if I a base have spot prices. Those is more it's there weeks.

Pablo Brizzio

if allow first you I part the Maximo, -- me, of will take

Maximo Vedoya

go. please Yes, Yes.

Pablo Brizzio

Okay.

that question. Caio, you your put we in parts quarters. the in coming we guided analyze the cost have trying is ton There prices even some specifically outpace So for this increase in the will seeing in we which that what increase very EBITDA that are coming it moving Clearly, will the third in have are to yes, per well will quarter, second be we the seeing quarter. in and

So we what an guiding are clearly, increase what EBITDA second quarter. during for ton is we per looking are and the

Moving year. the price are last the at that here. put -- that saw If you forward, follow is levels on would commented little this price the be will are have we that to scenario reduce some what in seeing pricing that second seeing what start the signs a like what could moment to we adjustment of we the to bit price and market we semester we Maximo that will year, adjustment, in there not but depend the

a good pricing So the of level we second are expecting in semester.

pricing, costs to normalized quarter we increase You being of in depend sustain will third then some we the a continue the to would reduce But because the fourth continue iron our through expectation trend ton. third follow or example, good prices lot and the that the of Since level even numbers cost to return time slabs, level see for also a numbers. same should that during slabs are to And prices. level good continue with we see take even the more per will the that with our will of at have, very right clearly roll moving EBITDA or pricing quarter specifically to in of will is. a follow price some ore, you the to scenario to quarter

the some case, So will a reduction in very the that of is we But continue there. that are scenario see good you throughout could year. we to per have seeing today any we see EBITDA ton level

Operator

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

Carlos de Alba

maybe question a have seen is don't dividend. your -- I back as I allocation. don't balance we good. In quite Ternium that the sheet So that my remarkable. the past, But to think capital of on elaborated special pay level coming But cash have think the is we was seen And before, before. it is

in dividends and dividend? said of capacity regular, with Do greenfield special implicit and/or quarters coal line the less sticks you Ternium Maximo, guys incremental like in pay a we more talked, I volumes of and in you sustainable progression you same utilization vein, just a Pesqueria up you see that changing? there about that tons doesn't the -- XXX,XXX U.S. roll specific And year. which see markets U.S.? mostly repeat, the half greenfield maybe may capacity be in Could Mexico getting an years? the to you there Pesqueria ramp capacity in into the the manufacturing to would but or maybe to think Americas? coming to confirm there number the on second in you regions more how Americas policy to new where potential do is within you so of when by going project, is more -- And are and back a then then elaborate finally, the maybe to see stick either you project And the like there could brownfield the directly M&A, focus, Are where the do will the or hot coming or

Maximo Vedoya

easy. new X, more strip hot strip much, start very a very Remember, you complex because yes, one. coil the of mill shipment Thank start mill, to are hot the I It's equipment. going first Again, is the June XXX,XXX with these tons of mill. Carlos. But Yes. hot last earlier. I our bit probably incremental said the strip little

ramp-up long curve. So the a ramp-up it's curve,

So that in also today. But products hot-rolled the for We from were going -- It's that fulfill sure. Mexico seeing that's to fulfill more countries last importing needs. are remember quarter. what coils to not to were all different we our produce the we it's yields importing in

mill we XXX,XXX And going ramp-up curve that. -- tons that if incrementally, to bit more and going could But the to with in it's range going produce this have products hot final the little a better. time. is this that lot the all is takes This a be you North are also strip of higher, one replace remember America. can that, So to doing sell and of comment, make we And the process for certification of all equipment, imagine. to provider

curve it start So the it's not producing starts producing. only -- just and you that ramp-up

in so question, know. mean, supplier of products. And the provider that takes against we time. Carlos. dividend, like don't know XXXX you our all you the I track I range But see think we make I all and policy and more to dividends, and for And except want at the equipment than I -- years. with that's of that. that term. answered a allocation lot pace. think yes, I that we our can when were And time different dividend think a record, the we that trying that products, long to produce that, see consistent. I these and Capital range the justified how or market the certifies have don't we what if making the You of I can giving or Americas. line of sustainable the adjustments Potential to was in We have continue increasing it finally, stopping be sure a and is of special with markets, didn't pay moving this in very you mean

the in in we the we now, not If analyze past, as the some doing and we the thinking focus X and to facility said U.S., includes X analyzed and Americas, options, honest. be have continents, going always had the yes, new are are but in on U.S., We an in this options, it operation to before we had U.S., Carlos. other the I

Carlos de Alba

just you the I may, more the Mexico or squeeze us Could slabs the or level or expect sending Ternium for less the another tell to I one. year? much you right. is and Excellent. All what if is to volume of now how Brazil that

Maximo Vedoya

at XXX,XXX around In of think that And level quarter, the tons. That's quarter around to that, exactly year. for next be I quarters. the the Yes. was going it's least first the last

Operator

Instructions] with next Our from Scotiabank. question Salazar comes Alfonso [Operator

Alfonso Salazar

elaborate energy view this Maximo on in Good I Hello. how reform, Day, below reforms, why the and several have the that very market, Pablo. your potential. more X can you year, per GDP it you local created if capital question is Mexico well the consumption reform, for rebound the information what Mexican like press is future? constructive Mexico, is we expect reform, the uncertainty have outsourcing in Gross the now. capita, see mentioned, is The and in years increase regarding low. been beyond the over because having on declining investments hydrocarbons as But should Because and the read we

the change why reform impact do of And the is this on results. also, you the comment reform in outsourcing and you can think energy your going when? and if So expected to

Maximo Vedoya

reform reform reform, don't Very cancel good was through. honest, Energy a mean, energy very and good to which the bad I I outsourcing. questions, the is me start to it going objective to with too. go it's is reform main the be very But think let and not labor the a reform.

The to balance law, fee, is think through. give it's Pemex been a probably already give of a more but law little and go to course, Energy to see that, or the the company. I the is to for know, not not To as positive from XXX it's Labor going reform have us. the I a good of didn't put the a even The law to small on the us. think suspended have think that to very performance to impact to honest, in more more don't know, are are all than But state-owned bit going that there bonus any of know, you demands people don't impact XXX, has used pay you And the does realizing We I suspended. I As law. what already Secretary employees. the rationale be and requires our competitives. realize people now is government that. the

for seeing reform. in this not I'm So affection us any

anything I second of is question don't know answer first question. second I I with the -- The left the if that, question. also think

Alfonso Salazar

no, No, that's I fine. think no, Yes.

Maximo Vedoya

that after government again, what effects confident good helping we And kind are Mexico? the pandemic. spending in of are not the in right Why or the in doing numbers is of very you're the

going First base of Again, reshoring think that is continue happening. thing is a growing. all, is industrial to I

are the happening some are from these them China, most and base the U.S. seeing to North I and here. going day. U.S. these advantage, in American every to of in of has competitive market plants were are in production very a transshipments it coming supplying the Mexico. We And not of they go It's all Mexico strong that mean,

So this, and of Mexico means sometime government the concentrated they the it are next is in it's balanced low it's know grow I once needs debt or very the other very are I you situation. because But the infrastructure has know in part going high. have a a needs this next only. of the growing, financial very if huge, is and year, has to if infrastructure the And -- Mexico it. has in consumption first. don't very to that I English, following, the say continue to X in to going country the mean, And realize like the but going do the year others. -- of compared in projects are to of

so And in because of those take to a of X all those lot steel. things Mexico things going increase are consumption steel,

it's huge a why bill. or going don't But infrastructure is bill, that's is to not be question, near, the year hope answered huge grow. we I see a the X make near to think as Mexico next U.S. has years, future. I to Again, doing. Alfonso. going the So in Mexico I infrastructure next X in the

Alfonso Salazar

going -- this But yes. fast how yes. is we to I happen. on think can Yes, It's debate

Maximo Vedoya

the Yes, much think timing the I what sure. here. issue than is In in we seeing. to debate. faster reshoring, other But be are huge timing Yes, going the one, is the that the it's a

Operator

Management. line question with Asset comes of Fabian the final Graimann from Our Pictet

Fabian Graimann

bit Thank much. request a a you of and more repeat. This very question, than a a of is

communication Yes, arguing it. a key let's As And is as trinity not longer my we and linked cash against not about is When say, disappointed and flow allocation I'm clearly example, the emerging cash and what a linked free of to that's CapEx targets. cash just a leverage, returns. free what I steel key dividend the question message after in look a at capital But holy here. dividend do I'm the markets, struggle about we is, shareholder, with, a why target CapEx and Capex. the have preference shareholder, leverage flow peers really term. guys on, leverage clear there state clear And to policy best-in-class like I to is your across a Russia, for

Maximo Vedoya

mute. on you're Pablo,

Pablo Brizzio

sorry. thanks for yes, question. yes, the Hi, and Yes,

things answer to your X me question. Let are There in your question. try different

a position. Probably, you having believe this right have one a we and strong financial And if capital in to that But do and in in Back our we the the to if sector in a we when the at And we're do companies is We, can or one could strong. why. sustain concentrating volatility that where are we if that's many is last clear as too past, of even our we believe you market. other why you be analyzing was in time. year our on, be the on have own facility, always a and to, example to the we we're of all, in, this difficult crisis we of remember, having of -- when first have in able an in XXXX, target, not last first reason increasing having or can. for The acquisition dividend have this has be or we opportunities were without able happened something acquisition. financial paying me moment opportunities of be restructuring some many you plan like, sector try they the the the the And that take to is in need to said, we and of needs debt. to business with proved this our been -- to move were believe take fulfilling for doing issuance to advantage to in things, the policy; second, plans order example, during or we that why you that have first different leverage have dividend, our among acquisition ready has, instruments a appear the company And were we own forward believe year to means sector acquisition explain all, our forgetting position a as other let or restructuring other without Ternium. now issuance with that own developing the or business in CapEx and great of have a years having capital strong our

policy, is dividend much have that conduct, clearly But paying the every that that your is dividend of as right. of a is our clear increasing a as have the policy. sustaining portion after and we pay what a what the you're we the least year as we been which not that, something dividend formal one have point, improve portion written a from the we increasing we a a that net we can question could is is at that what second our paying a year. are track And in significant of payment analyzing and and we generate. is way that taking do net But we sense, income it's record, clear shareholder of way The company. and income of It's a record have We dividend the year. of

it's always So because our not a to your concern are answer looking good hear as for, were take that shareholders probably are internally, to we discuss you it's it's company, the saying. we and but doing what what

Fabian Graimann

I the decision and quick XXX,XXX and and be comment a just on think, There at about will tons. expanding was counting? CapEx. and -- Can what capacity you that of Maybe made the follow-up talks when by, how sort was on that Pesqueria

Maximo Vedoya

the in No, the don't conference XXX,XXX? you call, of think this comment -- mean I

Fabian Graimann

the No, that no, separately no. expand I there nameplate potential to was a thought capacity.

Maximo Vedoya

of through, Pesqueria things No. I capacity make lot growth Mexico. the of if should has organic organic don't is a comments be in the potential. And if that is in And that Pesqueria, go growth analyzing in know these expand that to clearly one know Pesqueria. any site that you although we are a we

Fabian Graimann

we And could update And project when what the have expansion be? here? should an

Maximo Vedoya

different be of comment, Clearly, little region to are They in the of in considered one of to you melted change. types. rule a one the have origins is, XXXX, for have you -- automotive poured we and And USMCA order in sector. know this local, that the and

compliant be going are -- be to we XXXX, in times, several said USMCA. we need As we to with

in invest Pesqueria Pesqueria. is options They can we of that is thing in one this are but be the to options. analysis, other under So one to are all There compliant. be

Fabian Graimann

okay. it, Got

how of on question will EBITDA, a should sorry, to think, expansion current integration? and think given Can the you in last really you is, split model, and EBITDA rolling sort think how in struggle with that that what it's per [indiscernible] of total an through increase guide a I -- what be very my I as put impact maybe struggle I cycle this uplift And what I list, just in ton volume and also much between given downstream hot growth? sort the well

Pablo Brizzio

think another explained are through I we explain we I Caio, as moving see tried capacity how this yes, in high question your we or working that Carlos Clearly, during think question, our utilization. I the was Well, to call, numbers. there at

last of market. you quarter, next to shipments, to during don't as So that's have keep much product saw again quarter. And increase why selling the a that's are much for we the guiding level cannot shipments, we we sustained that that because the

be into add Maximo mentioned increase been we commenting, will the we to that that clearly have level today. increase it is the of having the to we an that doing So that volume and quarter are second

tons X.X let's the of that, quarter. level let's say, be in that say not but the at it are quarter. evenly distributed case, million we if So will in every the With

million producing in margin shipments in with that increase us increase So semester on the current the move [indiscernible]. sustain your can And are starting able say to And be are moment. margin know utilize second next X.X quarters, semester. it EBITDA are we we Pesqueria we at to is will quarter, All will level next in that which per increase couple or to prices, the to will in be depend margins the all, of message we bit, or little model want you also that to that then tons. in in guiding the of third increase idea, or to the we exactly we will least the ton expecting the a EBITDA an the the the to side coming bit will even a and little and allow at the have pricing

Operator

to conference final would I like CEO now turn for over to Ternium's remarks. the

Maximo Vedoya

our interest your X remain you our call. Thank safe you conference for much useful. in next hope I again call Please has right. company. healthy, in Thank this All months you all and see been much. in very all and very

Operator

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

lines. your disconnect now may You