Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the town in first quarter 2020 results Conference call.
At this time all participants on in listen only mode.
So to speak this presentation, there will be a question and answer session to actually question. During this session you would need to press star one of your telephone you.
Have you require any further assistance. Please press star Zero I went out what's ahead the conference over to your speaker today Sebastian Marti. Thank you. Please go ahead Sir.
Thank you good morning.
Thank you for your participation at our conference call today.
My name is to Boston, Mark the old I am turns investor relations, So compliance director.
Yes, so they ternium issued a press release containing its financial results for the first quarter two people couldn't twentys.
This call is complimentary it's about presentation.
Joining me today are Luxembourg, and those are starting to see you.
Oh wait till the company CFO, who will discuss started its business environment I'm performance.
At the conclusion of all prepared remarks that wouldn't be acutely session.
Before we begin I would like to remind you that this conference call contain forward looking information.
Actual results may vary from those expressed or implied.
Factors that could affect results are contained in our filings with the securities and Exchange Commission.
On page two in todays webcast presentation.
With that Oh, so the court over to Mr., Belgium.
Thank you won't see about beyond.
Good morning to everyone and welcome to our fourth quarter Twentytwenty Conference go Oh. Thanks again for your interest he now what company I'm, taking time to be with US today, especially in this unprecedented super centers I Hope all of you on your comedies are well keeping things.
Hi, good like to dedicate my initial remarks to share with you our view regarding how the coffee 19 outbreak.
In fact in dispute market on our company and what we're doing to mitigate these effects.
He's probably don't would make a brief review of all Unfortunately, we sold before going into the Q1 <unk> session.
He seems last quarters conference call it won't be spread of coking ideas, so won't be America.
Probably change the piece in this environment and he's affecting steel demand across the region.
And Steve I'm sure it to him.
What the impact of coking then you will be on the global economy are the nature of these bryce use different from what we have seen in device.
Oh, well number one priority during the outbreak.
Two shade work to count on safety of all one brief employees throughout our industrial system.
All of our employees, who come before <unk> dot remotely ought to be working from home.
For those employees that has to be on site we.
Being very fast to implement best Brook disease to me My school they chose Doug.
I don't like Weve or in many cases exceed local authorities directives.
We are adopting SPRIX social these don't seem policies Onyx off peak contentious prevention measures I was wondering freshman face masks all the time.
It's important to checks I'm disinfection policies at all transportation site can be shows working both GFY two relocations.
Well, one employees at higher rates of developing serious complications from the virus ought to date I told him.
We are making I'm very happy monitoring all suspicious KCI and implementing worry team not only for them, but don't go for anyone washing close contact with them.
We are going out extensive communication programs across our facilities regarding waste to work safely and to prevent completions at work and at home.
Yeah, the reset Tony how long lease of mixtures really clemente to mitigate these risk at our facilities and we keep an eye lighting new ones.
And I'm. Their response has been in critical we're very proud off I will I, where people are dealing with these demanding situation you're showing strength. So do you have already a recipients and making big airports to make sure everyone stay safe and healthy.
Yes.
The coping 19 outbreak east affecting all show all of our communities.
And we are helping to support.
Same thing infrastructure of key host because we see that were communities, we could donation something teenager equipments for intensive care I'm 60 gig for all health professionals.
We also believe and we are up by writing a field host be does for the community Monterrey, Mexico, We got hundreds bet on an intensive care unit. We then 40 year Wiedeman places.
Another thing to consider doing these outbreak.
So if I were brought you change your working very closely with customers I'm surprised you both can be di di People's time together I.
Our robust custom integration ITC since <unk> to be a body about June when mobility restriction for imposed in many of our markets. We have always seen our company. So part of up ecosystem and discuss be never been more. If you then why didn't you can do situation like two days.
You can be a short period of time, inc., which could be 19 spread throughout the region.
Actively implementing several measures to prepare the company for these uncertain times on the production sites.
I would diversified industrial base bright lights significant operation for TV, which enable us we integrate our facilities across the Americas in different ways to reduce run right. We didn't know what's possible impact production cost.
We're also optimizing production on overhead cost I'm, reducing jared expense, he's an extraordinary maintaining for works.
On the working.
On the walking up the got site.
We were very fast food with youth sports yourself room at you've got to third parties fields and nothing about two years on spare parts minimizing inventory build ups.
We have also been working with our supply chain to optimize our procurement activities through the use of working copy does.
<unk> gosh.
We are slowing down.
Or books, foamed sitting right capital expenditure projects across our facilities.
For example, we currently expect to delay the start up of our Newport running meaning Pisgah, you need in Mexico to wait breed of 2021.
No were new steel bar mill in Palomar, everybody not you anything Colombia to the second half of Twentytwenty.
In addition, considering the significant uncertainty around the effects of the recession on the industry.
On the Irene, but on our company in the medium term during his board of directors decided to withdraw the I never DBM propulsion for fiscal <unk> 29 team. They had made in February.
They were not payment of leave you then it's not something then your bore.
Exactly I could demonstrate over more than 10, new yes, obviously, how your dividend payment.
The board.
Well she never did Britain to withdraw its proposal until they become more certainly over the effect. This unprecedented situation we shop on the company's business.
Let me turn now.
To the current state of our markets I know operations.
In Mexico, we continue to operate our main production lines.
But this breadth of coffee 19 in the country impact shipments beginning in late March.
Do you have to what do you mean between in Mexico is going to close and is expected to gradually to reopen hearing me.
He seemed to treat value change between Mexico, and the U.S. highly integrated on demand synchronize production both sites over the border. So so what reopening of operations. He said he bought any issue for both countries.
Other industrial customers in Mexico, I see White grew 10 electric motor industry, I feel great things like Roger scaling back production in anticipation or we get in and customer demands.
The construction sector you go showing we go.
98 breeders I see it was subject to strict operation restrictions, which were what really begins to be lifted during the day.
In Brazil, our slot, succeeding we do so Brady I think a minimal due to weak global demand for scraps.
The Brazilian market demand for slabs from look I see produces a socialist significantly decreased 50 consumption in the country he's getting weaker.
Making up for these degrees in facing the second what are we kinda slaps you pinch to other markets.
When you don't we prudently expect to should sequentially, she more or less the thing donnatal slots to third parties in the second quarter I'm pilots, they lower production rate with lower intercompany shipments wont facility in Mexico.
You know didn't do you know.
Tended to be locked down in both in March in late March might be authority has been very strict from the beginning.
If I recall last facility. Our main plant. There is currently operating a technical mediums, if you'd consider non interoperable operation.
The rest of Atlanta.
Other operating but only for shipments to essential sectors.
They look down operations have been Gina he's beginning very slowly to loosen up.
Sought after very weak shipments you need what do you expect I grew up not volume increase over the rest.
Oh, the second quarter.
Okay, Alright, see the Cobi 19 outbreak affecting economic activities I'd be operation or facility, you know where markets I'd be effect of the situation you know where business.
Show in the second quarter.
A year and beyond.
But we got ready for sure we got very quickly adapting our company. These new scenario I'm working very hard to me, Mike does affect as much as possible.
Did you divide your we cannot at these difficult times, how should we have done in other markets crises over the history of our company.
We've got I did Pablo make it very quick comment about our performance in the first quarter and then we go to the QNX. Thank you. Please popular go ahead.
Thanks flexible with more into all minimum for you from four months following the webcast presentation starting on page three.
Oh, what do you sense for the first quarter in groups. The question, but just like you can see the buttons to mediate score.
Do you plan increased to $302 million on maybe the medicine also.
Switching 13% of let's say.
He did a thought was was one dollar.
Well it isn't there something we're going to Bermuda drivers of this increase.
Sure, Okay, let's see how do you better performance than before.
Argentina, Colombia authorities and post no bombs from much 20 to mitigate <unk> team right now.
We wouldn't do that from keeping products, we didn't say shamil sage two essential sectors, such as well and then I see more countries.
Looking for war, considering you see how do you already discussed we split the sequentially condition, and we see Michigan nowhere shipments on the more than a decrease maybe be a football.
I saw that didn't go into first quarter.
20 would report to the loss or $90 million, Oh, six cents, but yes.
Besides you do they want somebody and they do not meet you know gosh before tax loss due to a 20% depreciation of the Mexican peso against the U.S. dollar.
Let me first exercise, we think we run into a 96 and last but yes. So adjusted net income for years to exclude these non cash items that we sell well be maybe go but ABS or 19 cents in different schools.
Next page four we got Lucky so what's your performance appraisal as you can see.
The first quarter I've got it wouldn't be shipments in Mexico increased sequentially I'm on a year, we gotta basis.
Oh no use the for the quarter, we're over to increase our participation in the commercial markets. Despite so somebody.
Yeah.
Our commute.
We have continued ramping up our got you got about nice I'm thinking facilities.
[noise] our markets also increased bigger imports. We did you wait continue to represent a significant Seattle, let Steve consumption the country.
By the end of March I would definitely got them are starting to face slow down and about the situation whether we can you see more we didn't think some decline in prices, but affecting that were issued Monday country in the cyclical.
You know these from we anticipate lower shipment to the constitutional sector during the second quarter Twentytwenty.
The second resorts are subject to the operating for things Johnson due to equal we like the outbreak.
Well, we do the sub numbers.
You can see but shipments decreased sequentially in the first quarter.
Also on the year over year basis.
Yeah I was in by these two markets remain weak you a difference quarter, reflecting seasonally low demand.
<unk>.
I'd be Oh, we.
So the last part of my son continued tuesday's looking for our government potential.
Minutes from east to see a good old or volume increase over the rest of the second quarter. After labelle operations in the country seems to be slow we slowly beginning to realize.
Indiana markedly so.
Cementing grew sequentially.
Just Jim and volume were mainly due to changing love to see much.
Yeah.
Oh, no Brasil, you'll need to third parties slaps you to weather Sagna facility, mainly to Mexico Oh.
Oh, it's Nicolas and even some stuff you know if I'm not sure.
Looking forward.
Im not in the other markets.
The second quarter expected to be piece, maybe you to the back to look, though the Columbia Mcus I slept shipments to support it should remain stable.
Turning to page five.
We can see that's due to shipments in the first quarter Twentytwenty increased 3% sequentially.
Decreased six person for the year over year.
Let's see what we go through Skus with.
You too much in the second quarter two sequentially decrease in all regions.
What we've noticed in prices, we see that covered that somebody's price decreased 2% in the first brought to the Leo I suspect when you put them in Mexico decreased slightly I, certainly felt a weaker industrial contract rights price, reflecting the luck like we said of these contracts mostly upset by.
In places like the sport mother could compare to the fourth quarter last year.
Second quarter.
We expect a decrease in living and put them in Mexico, We just don't in sports like that'd be God. He much being partially offset by that's important took their life price that's really improving over the first one.
Finally, we can see that midsized the first quarter twentytwenty increased slightly sequentially, reflecting the 3% English and she'd been hopes it by 2% decrease wherever possible.
Let's move now to page seeks to very motivated Rightless Olivier I never thought the first quarter.
The sequential increase in the media.
Most of it sounds like how do you have that we'd be able to talk to a lesser extent they listen to.
The improvement in there with your problem was mainly due to lower cost.
Or might be Uh huh.
Partially offset by slightly.
Really new portal absolutely stuff.
On the job on the bottom we got to the positive effect.
But he didn't come and that's like myself as well.
Good where more bankruptcy, but do you already mentioned net gushing by over 199 million before tax loss related to the 20% the precision in Mexico.
That's not necessarily sides increased sequentially, reflecting sporting Nixon game or the significance of traditional up then Mexican peso already mentioned Oh, so it's good to personally precision nothing but a ceiling.
The U.S. dollar.
Let me know page six seven shortly before going to the Q and then.
We consistently generating significant cash before.
We can see from cash from operations into first quarter of the reaching a strong $443 million. We took several measures to manage working capital in these news about.
On the free cash flow after tax a $195 million disposable income.
Probably that expenditure.
Well $258 million into school in line with your previous quarters.
I want to companies that expenditure, Florida brokers, we don't tension to do that.
We would start to see if he can be topics from the second quarter asked me, there's no doubt or postpone topics.
I see Askmen somebody Bucks.
Well they bought us inside the first quarter with them. So we continue to grow with a strong financial position.
No that's continued because they seem to first quarter over here. So much study first 2020, we saw net debt of $1.3 billion.
If we want to single point I'm done last 12 month since you did and it got supposed to sort of lumpy on the mothers.
There are more things Tyson is good.
All right.
Thank you very much well you're fine we're now ready to take your questions. Lisa Operator proceed with the Q and they session.
So that's a reminder to ask a question you would need to press star one on your telephone to withdraw your question press the pound or Heskey. Please standby, we somehow the acuity roster.
Your first question comes from 10 out with Bank of America.
Oh, Hey, good morning, this is timna tanners.
Wanted to ask first if you could give us any thoughts on what conditions the board might require to resume the dividend. So as you point out your cash says we're still strong in the first quarter. You know is it a question of visibility in certain T or is it a question of something else. If you have any thoughts on that.
Mhm.
[noise] mm.
Thank you Tina.
I mean it.
I said in my remarks, I mean, we have been given dividends for the last 10 years on increasing them year over year I think indeed, there's no anything else there's nothing else.
And what I said I mean, the uncertainty around what does affect beside roots obese and recession, we have you know where steel market 15 uncertainty.
So the.
Bought country that Barry.
Very prudent to withdraw the did they propose some until we see more clarity on the steel demand.
We have always been a very.
Let's put it conservative.
It company in our financial position and show DCC goals with it I know you probably know you want to what something else.
Studies.
Yeah. So it's really early where would you said.
We can see are very important too to having strong financial position.
We reinforce our customers cash position without changing that.
You can see we felt reveals that during the quarter, but in the meantime, we've taken some new new that's all exceeded 211 to us tooling for <unk>.
Oh I got supposition just to to be prepared so to me, it's an area that queued up here in the next couple of course, though clearly we understand that these.
Well, they bought or the stood up instead, the boy to to think in front of these uncertainties and clearly whenever this uncertainty so where they bought of I guess or what they consider the following the steps.
Okay perfect. Thank you.
A question I want to task is really to try to pin down a little bit more of your thoughts on volumes going forward.
Completely recognize it it's challenging and visibility is not great. It's we're just talking about but on the one hand I wanted to ask about slabs from Brazil, you said that you could offset some of the weaker domestic market to export, but I'm, just having a hard time understanding where the exports will go because so many countries with extra.
A supplier talking about exports and I wonder to home, they're shipping and then on that same lines in terms of you know the auto recovery in Mexico.
How do we think about the timing there because they'll certainly be some inventory to work down first so you know the shipment start to materialize more in the third quarter or how do you think about that thanks [laughter]. Thank you teenage I wonder if a question I'd ask you said [laughter] because it's a challenge to answer that today. These.
Times, but I would try to make an airport.
The volumes I can answer very.
If you pick on deploying some of the second quarter, most likely our bond yields we come down year someone near 30% in the whole markets affecting you HM that exceeds the shipments we are going to.
Equally in the in the second Q.
I'm not gone works today, we see a Ah I mean, she VTB that they're going to start increasing.
[laughter] somehow in how the recoveries, we don't see out be recovery of some economies are saying, it's more like an you. So do you think we cease I'm not going to be very very steep, but I think that that that most of the countries, where we operate I'm going to take measures you know there too.
The seed industry tried to increase their their shipments.
Yeah.
They did I told you our party you Brookfield has to blast furnace you can watch operating at the right.
Oh, so doing going today, [laughter] 15.8 thousand tonnes, a a day to day he celebrated a minimum of around 9000 9000 ton today.
What we were doing it the fourth quarters shipping more to the locals.
It's lapses.
Good to know cuts to customers and I mean, the second quarter, we are going to sheep almost the same to the U.S. and some customers in Europe.
Yeah, I mean, we are going to review.
She mentioned to all of a facility in Mexico.
In the third quarter, we would probably change that we were going to shift more towards actually de Mexico, but that's something that we have to seem to future and we're going to reduce shipments brought by the to the U.S. and Europe. So that's used to change on the outdoor recovery I mean, most of the of the automobile industry should be.
Oh Auto company seen in Mexico.
Aren't going to start producing between.
Today some of them.
And the 15 or 20 of me.
It's true that that recovery, it's gonna be it's gonna take time for our shipments, but remember I wish him it should be automobile industry are around 15%.
In Mexico, 15% to 20%, so we're going to see some increasing in the second Q.
Some increased sorry in may and I'm, especially in June.
But you're right that did increase will be more into third quarter compared to did she mentioned they bring that were almost zero HM.
Also de stocking in the changing in in Mexico. He said he would be low were done to wining in in the U.S. E and some of the other companies work with just in time inventory. So there's not a huge stock.
You know live on your change in Mexico. So that's another.
Bullshit deep thing that could happen in June.
I hope would be.
I answer all the questions.
Yes, very helpful. Thank you and stay healthy thanks.
You too.
Your next question is from Carlos with Morgan Stanley.
Yeah. Thank you very much I hope everybody is doing well, so just going back to the dividend or a topic seen the shareholders meeting was postponed I want to understand if there is a possibility that did for decide to bring back at a later.
Hello.
<unk>.
Yes Hello.
And you hear me too [laughter] no no no we'd love to you for I mean it.
Hi, sorry, so unfortunately, some dividends is there a possibility that the board decides to a we stayed the DB then at a later date in 2020, given that I get to the shareholders meeting was fair and he may still take place at these here or is this a dividend that is for gone completely for for the.
I understand that this aboard the feature but maybe you can provide some color.
And then my second question has to do with them.
Volumes in Argentina.
Clearly the the first quarter saw the Lois or the weekends volumes a in history, yet that we have you know model at least even worse than that in the first quarter of 2000.
Nine how bad was April and how much worse quarter Im quite a kind of get a in Argentina and then finally, if I got to squeeze out there. A question is on the Capex. How do you see the Capex. This year based on the postponement, but you were mentioning earlier. Thank you.
Okay. Thank you Carlos I take the I started with the last one.
Go up from their Capex you remember in the last conference call Capex was.
For 2020 $850 million APC add 420, 21, we make a.
We said it would be around 500 MPT.
Medium daughter, what we're seeing today the plants were making today each for twentytwenty to be between 550 600 medium donor suites decreased between 250 on $300 million.
I'm.
You can't get went to one to be around $600 million, we expect to finish the they killed it caught screen, meaning in fiscal yet with the Capex. We these topics.
And and.
Postponing some of the thing said, we're doing in 2020 to 22 in Q1. So overall, we are expecting that degrees not only here, but on both the two years.
We think optics.
I think on board fees volumes in Argentina, clearly body and seen doesn't eat into first quarter were very bad.
Second quarter are going to be slower remember Argentina.
Make no down the record locked down so only one of our plans were operating.
And most of the construction industry, what CLO I mean, there were no construction for me did show. So what we're volumes you neighbors are gonna be very low.
And and but they are going increase in March in May and June and and we hope by the third quarter will be.
Kind of the same machine to first quarter, So, yes, Argentina, taking <unk> ER.
I impact on on the way there that they are.
Managing these pandemic.
But again, Argentina diminish we're taking in Argentina, I do we are making that the the company is not a burning cash or anything like that so so we are very.
I'm optimistic that that the company, we go through piece and they're very healthy way.
And the third one was deeply then probably know why don't you answer that.
Yeah Okay.
Got it looks like you know a dividend.
Well to be size of either.
Realized Oh, Oh, I'm a shareholder meeting.
But clearly the boy the board of directors stuff, saying on on the proposal.
Clearly we have no.
Say that no change to happen.
Dose study, we did have the or even though you said to these these difficult to see Cincinnati at the moment seeds.
He is hardly ternium base dividend once a year.
We baby and well be speedier time every year. So between April and May if we are.
Yeah.
The most concerned about the way to answer your question is that the video I see it doesn't change entered into in the are most probably the only set of the v. that we've come on the following one but we cannot say that this is not that well see you could because they already in the shareholder meeting.
On the war, who propose something closer to.
They are low broadly do you know where are you at the moment that these could happen, but we've got multiple check that.
Thank you very much good luck.
Thank you got it thank you.
Okay. My first question. Please press star one on your telephone keypad.
Your next question is such a cargo.
[noise] Chicago Auto your line is open.
Hi, Good morning, one Chadwick from Goldman Sachs.
That's true or you can provide any type of the teach and on the few pages in Argentina and the measure is off to know opening for the look now and if you believe that no debt Pvp. Yes. They are you can you know really rack.
Wants to be Sterno, Mark if you think that no other regions in the world a I also so for you know.
Thank you and what would be perhaps you know the minimum level that you you'd see that wouldnt be profitable guns off Boston's to operate yesterday. Thank you.
Oh. Thank you do you have all.
I I couldn't hear the first question, but I won't I'm going to answer the second one and then I ask you to repeat the first one because he was a a notion to line im sorry about that.
M.C. say autonomy in Brazil.
I am telling the city now operating as I said to around 9000 tonnes a day, that's a I degrees.
Now for around 38% from what we were operating in the first Q.
Got you might older. She mentioned the second Q, we have already secure and we're shipping.
The order during the second quarter, we don't have any problem with the second quarter.
We think we can continue operating at that.
11 into third quarter, because we're going to need.
Oh snapped for the Mexican up from our own Mexican operation.
So.
We don't have any place.
To place.
The collapse, because steel and mining due to weak in the third quarter. Most of those clubs are coming for our Mexican operation. So I don't see any problem.
I don't see provenance today in operating Yeah, I would tell you repeated operation at that level.
I hope we beat I answered the second part of the question on capital.
[laughter].
Sure. The first question was that similar one but related should the Argentine operations, we saw the drop in the fourth quarter.
I imagine that no did drop in demand the second quarter be even wars I'm you know what would be a reasonable level reason that you could you know to be profitable in Argentina.
And you do have you know a better outlook for the third and fourth quarters.
Yes, and Argentina, I think that the knocking down in Argentina was a profound I mean, what's very.
Cart, let's put it I don't know got toward but it wasn't very hard and so we need only operate they suddenly going to spend which is the one that has a blast furnace again, the blast furnace there each operating those show a hot technique on minimum.
And with that in the first quarter do you see we were profitable in Argentina, So and I don't.
She any problems seem to third and fourth quarter to continue at these levels of their minimum in the blast furnace again in Argentina.
We're not expecting to be lumpy inventory in the second quarter, although these.
Did increase into shipment.
Second we are reducing the they production of our blast furnace.
And we also expect that they looked down he kind of.
Oh improving to say.
Something I I should mention we resumed in May and June and we start to grow into third quarter. I mean, you had very low volume she knows in D. now and I don't think that the board you scan remain de slow.
So I'm confident I get that Argentina good.
We can sustain the production are these minimum for the second quarter I need to third world water, we will start increasing our shipments I hope we lease I I hope I answered the question.
Yes, you did thank you.
Your next question is from Chicago.
From Dbi.
Hi, I guess to have a problem with geography right. Its jago list [laughter], Oh, hi, guys that thank you. So most of my questions were answered the so just a actually.
Two remaining ones here one is about.
The costs associated with the measures you're taking because of the cozy 19. So do you have a.
And that's the met all of those costs and and and just a second one going back to the volume questions that were already asked just to get a little bit more clarity you mentioned, an average 30% drop in the second quarter or can you give us a little bit more D.
Bill I mean is Argentina going to be even more than 30% drop in the second quarter, offset by Mexico, and Brazil or or is it pretty much even across a the you know all of the units there.
Okay. Thank you very much Seattle.
I I am going on so first the second one I I said in answering <unk>.
The next question I mean, it's really challenge to predict volumes and so.
The they dropped by many shouldn't around 30% is what we expect today He's got got change.
Upwards or downwards.
Although we only have two months to go because they they the uncertainty still big but.
I think the drop we'd be I need to be hiring you have to do you know where he's going to be a little bit higher antigen no.
For third parties that drop is gonna be almost zero in Brazil.
Number we have the same body of snuff for third party embracing the first quarter I seem to second quarter.
I show I need is gonna be around that for Mexico.
That's what we are expecting it today.
I think with these I I answer the second question Pablo can you answer the first one of Seattle.
Yes, the Portland led me to let's say on sort of Maxsimil clearly also Colombia, we probably see reduction in Bali, you're right I will be yeah, we'll be compensated by the ones that we've been from the buses, but in both due to your first question Joel.
Clearly the if it gets put in I'm about to put up but I think that the best way to answer. Your question is what we said in that work Oh, you know, we're releasing I would open reminds me too, though we got to see if you actually bond yields maximum mentioned the lumber we got to see in small reaction or plan to sustain the level of baby.
Medicine.
The company. These skelly is coming from the level of most of them. We have taken in order to previews cost we deal with working capital that's our facility to the new level for saying so your hobby.
It did they went to reflect that is precisely there.
It's sustaining or trying to sustain but doesn't become the 11 or maybe a but [laughter] Mars into the company. We resolved. So clearly sees the way the best way, we'd have to sustain profitability in our company as you know the Companys always working with no.
Looking for ways to reduce our cost clearly, especially in situation like piece one so.
Though because due to poor there have been told us they come the if one of the company is doing is very very strong reflection wouldn't be even small things actual oh for where they would be the margin.
Yep bubble actually meant more owned a specific you know expenses associated to covert 19. So like you know sending people to work at home or you know are postponing the projects or what is the cost of you know just basically you know postponing the project you have some some specific.
It's associated to that so that I understand you know the a lower fixed cost dilution shoes, and et cetera, but it's more on that specific.
No [laughter] costs are expenses associated took over 90.
Yeah, Yeah go up we're not seeing.
I I huge and increasing the cost of that I mean, the project for example, the topics on the project.
Postponing, we don't see any we can the capex there once we wish him operations in fact.
To be honest, we're seeing some reduction in the total amount we are going up.
And invest in the coach Greek Neil in biscuit here, because we are seeing waste and renegotiations of some contracts that we're seeing some savings there so.
Overall, we cannot see a huge.
But ER on that cost actually that's off today I.
I mean.
It's true that some people in their home.
Especially the vulnerable once the one that has great conditions that make their health more vulnerable.
[laughter], but apart from that we are seeing only reduction or you know what costs.
I hope, we got I know I'm, we're more p. or capital.
No. That's that's clear thank you, but [laughter].
Okay.
[noise] again people I to ask a question. Please press Star then that number one and your telephone keypad at this time.
Your next question is from Alex hacking with Citi.
[laughter] a good good morning, and thanks again in my my name correct I was excited to see [laughter] [laughter].
Not Chicago.
So [laughter] just following up.
You mentioned, a a small reduction in EBITDA per ton in the second quarter I guess could you describe a little bit more like your cost structure in the second quarter, because obviously, we're gonna see low volume.
We're gonna see lower prices.
Maybe some of the levers that are allowing you to I guess moderate what you're expecting on EBITDA per ton declines. Thank you very much.
Okay.
Yeah, you're right.
Let me take these these one.
Clearly what do you see is different things you're right that would we see a review of all you go right that we will see.
He was pricing, but it's also true that we are expecting to see.
Some of your actions in raw material cost.
More significantly than that east.
We are seeing.
We are expected to adapt our facilities to produce a then at the level that we really needed to supply our customers. They specifically for its something that case or overseas, where we are expecting defeat basically the same at the same level.
Oh boy.
Volumes to third parties, we are reducing.
D C bench, well, we don't facilities in Mexico, just too about the.
They they purchase 11 to them we are useful for facility I'm not increase I would imagine they see it clearly another way for us to review the cost of the spring in 11 documentaries same thing in Argentina, where we weren't able to.
We view the level of output of our Bluff 70.
Do they got a need for both of our facility.
Beyond that we are working but he said we are here, we do but now we need to boot.
It should be a blank, we ought to be abuse and the cost.
Oh yeah.
Going to bad we Uh huh.
Before we the overhead cost you know, where you know where system. So we are working.
MCSI momentum with our supply here also to work together to overview situation, probably the dust and took abusive we tell the impact of these cost in demand for it.
Yeah.
Oh, well, we don't know overtime. So we are working in many of you from France, but all of the only cost but no. We have you seen line would be I see the iron ore body, but besides that we are seeing exactly how we are making a lot of before in the first of all of us anything but just.
To the new currency Bush from this is the way the best way with hub, who called we've ever you actually prices.
Thing as much as we come the living off of your <unk> margin.
Thanks, Pablo and then just a follow up.
I mean, so you you wouldn't view the cost savings and the EBITDA per ton generation into Q.
Sustainable in those market conditions. So it's not just a one off effective inventory revaluation or something like that like Ternium could sustainably operate at these lower volumes and lower prices. Obviously, we expect some kind of rebound, but ternium could sustain <unk> sub staying a sustainably operate at those love.
Yes.
You know for for a longer period of time. The U.S. So my question is that makes sense.
Yeah that makes sense I like but clearly we're looking for.
As we said that we've actually volume probably in our case, we know what about another.
You know companies.
Clearly the situation, though we thought we Mexico.
Your one which we can more than double your actual because then they will be important that's always going to your first that the producer.
But if.
We don't we kind of a break the use 11, we are seeing already what somebody mentioned do the cool that's.
Smaller leased sounds more recovery for example is the I think that market in the case will proceed to weaken switch because we have different see really do that he said he said was actually an upsized to third parties to move she moved volumes to our don't facilities in Mexico.
In Mexico, where we tell me market.
He said he said he thought of beautiful sector I will somebody's got to all.
We opened you should.
See in the medium term after this quarter it better living off of body in any case clearly when we talk about that our facilities to preview on two we went to be profitable.
I had a big government live below or you might be able to 11 or a perfect I really didn't know what we thought a good level, but we believe that these days have been kind of anymore. You can you go back to these specific labs.
Okay. Thanks.
Then just one follow up if I may.
Or any estimate for a working capital.
For the rest of the year. Thank you.
Yes, working capital or when my team already mentioned, the only known as opposed to boot.
But the numbers, we are expected to have a $600 billion. They see a ANEXIO. So oh, we already mentioned the we invested during the first quarter $250 million. So the rest of the or is it.
He wants to see how about 600 million doing.
So we have reduced the living off of Capex.
And DC ski or the number.
Yeah.
I think that was your question Alex sorry, Oh, that's why we're working capital not capex hostility sorry, [laughter]. So there was some notion that I saw it start World Cup.
So yeah working capital PW, we continue working.
We used the 11 the whole working capital.
As you know when you have a significant reduction in volume is difficult to dust baby very fast.
Two to two to comment because actually working capital to be at the same level needed for the collection lever we were able to have positive working capital.
These actions during the first quarter clearly we believed that we will continue at least you into second quarter two to make and therefore to that so she'll be also positive number duty.
Well.
Thanks, Pablo take care.
You too thank you.
At this time, though no other questions I would now like to turn the call back over to the CEO for closing remarks.
Okay. Thank you all know.
Well again from danger zone on our conference call. Please contact cost if you need any further support a common.
And in the meantime, take care and stay safe all of you and hope to see you hear from you. All from you know where next conference call. Thank you very much and goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Good.
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