Q4 2021 Ternium SA Earnings Call
<unk> measures in the press release issued yesterday.
With that I will.
Turning to Colombia.
Davidson.
Thank you Sebastiano good morning, and thank you all for joining us today.
2021 was an amazing year for <unk> EBITDA reached <unk> four $9 billion close to four times the previous year's level net income was $4 4 billion.
Thats fair.
19.
Almost five times earnings in 2020.
All of these are record.
Our record levels now.
Last year <unk> also finished latest expansion program with the startup of a new state of the art Hot Rolling Mill at <unk> facility in Mexico and of the repo Rolling meal Greenfield project in Colombia.
On top of these very positive results. The company has significant cash generation with free cash flow too.
$2 $1 billion, we took we took our balance sheet to a net cash position.
Taking into consideration the Companys strong performance and a solid financial position that is board of directors proposed a dividend.
The year of $2 and 60.
Yes.
Balance to $510 million.
This represents an increase of 24% compared to 2020 and it.
It is the highest annual dividend on record be more than double the.
I'll leave it at that level the company was paying three COVID-19 pandemic.
Another development is a company.
<unk> offer to acquire from studying them a cantina it minority participation in settling of Mexico that revenue.
Not all directly these transaction is primarily aimed at screen lining our corporate structure.
<unk> corporate structure allow for both a more straightforward management of our operations and then easier analysis of our performance and results by our stakeholders.
The offer is still being analyzed by telling you Argentina board of directors.
We've been attracted it would need to be put to the both of its shareholders.
Okay.
I'll turn now to the status of our main markets beginning with Mexico.
So that is shipments in Mexico decreased in the fourth quarter more than what we expected last conference call.
Even though the fourth quarter of the year is seasonally weak.
There were additional factors that's intensified.
Equating shelf fall in volumes.
During the first nine months of 2021, Steve consumption grew significantly in Mexico.
The rate of increase in steel prices with the local steel industry working at full capacity there was a large increase in import orders to cover.
<unk> of the markets in the fourth quarter, whereas steel prices beginning began to fall imports are arriving with a longer lead time as a result of supply chain disruption costs, an increase in inventories and a decrease in apparent demand by the end of the year. In addition.
An unexpected persistence of the semiconductors shorter for vehicles.
Manufacturers continue impacting tonnage shipments at Rialto industry represent about a quarter of our sales volume.
This was not the only affected the sector as other industrial customers have been dealing with a similar environment.
Our current view is that the imports into the region will decrease in part due to the significant steel correction over the last few months. In addition, a glossy anomalies.
Of the Abbvie reliability of semi conductor should support a recovery in apparent steel demand and a consequent increase in <unk> volume something that we are already seeing in the first quarter of the year.
The company is ready for such scenario I can Scott as its new controlling medium fiscal year continue to ramp up with the first million tons of production milestone already would be Canada.
With a whole new range of.
<unk>. This is Paul Chung two brothers substitute imports in the Mexican market.
Let's review now the situation of the Argentinian market.
Shipments in Argentina has been steady during 2021 with a very healthy level, especially in agribusiness, the automotive industry and construction and we expect this to continue for the rest of the first quarter.
Have you set piece there is a high degree of uncertainty regarding Argentina macroeconomic environment in 'twenty.
Ladies and gentlemen, this is the operator, we there was a slight technical delay please remain on the line.
Yeah, we are.
Hello, and as Europe now Maximo.
Bastian Your live we had lost Maxwell.
Thank you.
Hello can you hear us.
Okay, sorry, I think we have an unusually the communications.
I'll now is much more workable vaccine.
Back to you Mark is the growth now.
So.
Let me start with by my Robotics, and then when we hit a maximal backing in line and we will.
Continue to.
Opening remarks.
Hello, good morning to everybody.
Despite bye bye going.
The presentations.
I Havent really moved up by four months.
For the full year 2021 I'm.
Sorry, it might you might go back in line.
Yes, I am sorry about that guys jumping up in CRE in Mexico.
So we're speaking I think about Argentina.
I mean data regarding our davita microeconomic environment with plenty to do to although the country has recently agree with MSA I think I will say on the topic of a roadmap to refinancing debt.
Argentina has very low level itself international returned a significant fiscal deficit.
<unk> inflation.
These imbalances are not addressed appropriately and stability in the main macroeconomic variables in the country could have a negative FX interim saying in the market in the year ahead.
I would like now to make a quick comment regarding <unk> sustainability initiatives in the last quarter's conference I mentioned, the company's cargo capture and <unk> capacity expansion project in the generator affordable our facilities in Mexico. Since then we launched the second phase of the project and the algorithm.
Facility with the aim at increasing by 42%. Our current capacity. This will result in a total cotwo capture and use of capacity with over 400000 tons per year in Mexico.
Two the <unk> mission of all deep of almost 90000.
Cars.
Let me remind you that the technology. We have is done at our Cri facility is by no means come on worldwide.
DRA models are among the green and in the World.
We have also launched a project at our slab facility in Rio de Janeiro to increases crop yet for us.
<unk> capacity with the aim at reducing this year two emissions rate of steelmaking in these locations. In addition to our new reporting.
<unk> strategy to CDP for the first time in 2020 and received upbeat score on the topic of climate change in line with the steel sector average.
That means effort to improve safety performance were recognized award with a safety and excellence.
This recognition.
On diversity equality and inclusion continue to be strategic topic in studies.
<unk> agenda in December the human Rights campaign Foundation certified for.
For the second consequent year as one of the best places to work in Mexico for the LGBT community.
Wrapping up.
Fair enough Sterling ear in 2021 the company expects to deliver solid performance in 2022 in our business in a business environment with gradually normalizing as steel prices and margin.
<unk> plans to leverage on its new Hot Rolling Mill in Korea, and Kelsey appliance clearly demand at its main market in the U S. MCA. This together with positive expectation for deflation in there yet to come should put the company in a position to sustain attractive.
A return to its shareholders and to analyze the opportunity for further profitability profitability growth initiatives. Okay ill finish my remarks here and Pablo. Please go ahead with a review of the quarter and the full year performance.
Thank you back to Bob Martin Dolby audio I'm, sorry for being a bit the countryside.
Let me go back to.
To comment on.
The presentation that we have today and reviewing third quarter performance.
Full year pledge transceiver.
And then I will really be cannibalizing.
The performance of the quarter. So if you go to page three in the webcast presentation.
Slide you cannot face the magnitude by which certainly besides being traded so beyond outpaced total fleet.
Okay.
So you got to be consolidators steel shipments volumes water.
2021, although they remain below the levels achieved in 2000.
In 2019.
Based on behind these wasn't significant volume on small cheap honestly, the Bulldog acquisition of <unk> in Brazil in September 2017.
Country in the chalk.
<unk> progress with the integration of <unk>.
Our facility in Brazil, these volumes inventory.
Thank goodness and finished steel shipments in 2021, reflecting the ramp up of <unk> news.
Affinities in Colombia, and Mexico and are recovering the steel demand.
We believe that slab to third parties with the state government or slightly lower leverage while feed each shipment.
<unk> will continue growing as we increase our presence in our main markets, particularly particularly in the U S. MCA.
EBITDA margin in Q1.
Reflecting the increase in fuel prices along the year.
Big box prices, which make our leverage in September .
And then start to decline yet if prices remain at very good levels with enough space for him to be modestly despite a decrease in cost.
Good profitability level and continuous strength in our steel demand supports our expectation for an overall solid performance.
<unk>.
2022.
In the bottom right you can review the increase in EBIT during the last few years.
As for the.
The current Bill will discuss in 'twenty one the company has already paid an interim dividend of <unk> <unk>.
In November .
Yes.
Meaning that we felt.
Both dividends of two <unk> to the extent practical maximo comment.
It's approved at the annual shareholders meeting.
Hey, thanks.
We don't know when.
You get paid on May 11, 2020.
With record date of May six.
Would it be dumping.
Thanks.
To pay an interim dividend again in November of <unk>.
Separately you on page four the cash flow generation of 2021 .
Personal promo credential.
Strongest you end up partnering working capital decrease of the state.
A large chunk of the increase in working capital may be higher prices because of the effect on the value of trade receivables and also the increase in raw material costs.
We have an effect on the value of inventories.
But it also reflected an increase in the volume of long steel products related in part to the ramp up of new facility announced looking at recovery.
Demand.
Turning now to the free cash flow. The figures for 2021 was also the strongest on record capital expenditure.
But remain within <unk>.
As usual the.
Company concluded the expansion plan during the first half of last year.
We have plenty to do we expect <unk> capital expenditures to increase a.
A little bit compared to last year, when the base of approximately 600 million donuts without considering any further expansion.
Yeah.
Let's turn now to <unk> performance in the fourth.
Is the following.
EBITDA in the last quarter of the year was down sequentially, but remarkably strong by historical standards.
This result, led to net income per mbas or $5 a day.
Also its solid performance.
Looking forward, how do you expect to be beta remained at healthy levels.
Surgical centers in the first quarter of 'twenty.
The sequential decrease reflects lower Miocene.
Daniel said by carrier consolidate because previously.
Well without to achievements listen I like the performance.
Each of our markets are basics.
In Mexico, you continue to see how the situation we have.
As Randy described affected volumes in the last quarter.
Again, we believe that by nature these essential type situation.
Our vision statement.
Same with.
With that market.
Zero.
The other market region shipments increased sequentially, mainly due to higher.
Since these shipments is all of sudden market, partially offset by lower shipments of slabs to third party.
Looking forward one.
Shipments in the <unk> in the first quarter Bcf.
Volumes on the <unk> should.
<unk> decreased a little bit more in the coming season.
Next page page seven you can see that combined with the development. We have heard about the consolidated shipments of $2 8 million tons in the fourth quarter down 8% compared to the third quarter.
Yesterday.
It's all my life now.
This is a net savings.
The fourth quarter that was nice sequential increase in revenue.
With increases in all our markets.
Because of everything based on how we accomplish that.
Got.
In Mexico contract prices sequential increase in the fourth quarter.
More than offsetting a decrease in benchmark prices that began back in September .
While it might get resolved there was a positive impact of the higher participation of previous achievements over slots.
Buyer might have lower spot prices in these markets.
Looking forward we.
We expect sequentially lower realized oil prices in the third quarter, it'll be a year with revenue per ton reflecting.
Recent decreases in spot prices.
The partial offset of longer dated contracts.
Fusion with a lag.
Moving onto the next page you can now the main driver behind this equation changes in EBITDA.
The BBA chart on top.
Top shows the impact on EBITDA of lower feed.
Higher cost per pump.
Well I'll tell you as a result of an increase in brokerage.
Prices that as.
As usual are reflected in our cost structure with a lag.
About accounting methodology.
These negative effects were partially offset by an increase in revenue per quote as a branding Scott.
The chart below show that the sequential decrease in net income in the fourth quarter were regularly by.
<unk> operating income.
Impact on income tax.
Now to finish the presentation, let's turn to page nine to review tangible cash flow and balance sheet performance on a quarterly basis.
Kasper operations in the fourth quarter was strong at $1 $1 billion of working capital increased much less than the previous quarter.
The increase in inventory.
Of CBD products in the quarter, but it was partially offset by a decrease in trade receivables.
The strong cash from operations, a significant increase in free cash flow in the fourth quarter with Capex remaining relatively stable.
As a result in a net cash position.
One $2 billion by the end of the year in December .
Our current expectation is a personal we continue drilling we currently class cash generation during 2022.
Alright. Thank you very much for your attention and we are now ready to take any question I'll do my Com. Please operator proceed with the Q&A session.
Thank you to ask a question. Please press star one on your telephone keypad.
First question is from Kyle <unk> of Bp's key patois. Please go ahead. Your line is open.
Yes, hi, Thank you good afternoon, everyone.
So I have two questions. The first one I wanted to explore your outlook for the first quarter on the release, you mentioned, an expectation of lower sequential EBITDA.
I wanted to get a little more color on two topics regarding that which has caused some realized prices and so on costs.
I was wondering if you could maybe share your expectations for the first quarter. If you still see rising cost pressure in your results and where is the pressure mostly coming from and on prices.
We do have a good visibility on on your revenue per ton one quarter ahead. So if you could just maybe share your impressions of flat steel prices in North America.
If you're already seeing any signs of a bottom anytime soon it would be very helpful. And my second question on capital allocation I mean, the company generated very strong free cash flow in the quarter. You guys are already at a 1 billion net cash position and I think the main question here is what can the company do to move back to.
A more efficient capital structure.
We have seen your dividend proposal.
I was wondering if this is not the time to maybe be more aggressive become more aggressive on cash return considering the company is that is that such a solid financial position are there any plans to maybe have a formal written down dividend policy, maybe even based on free cash flow generation and if this is not the case it would be great to hear.
Management's capital allocation plans for 2022, thank you very much.
Well, thank you very much.
Ill.
And good morning.
The first question.
Regarding costs.
I mean the cost.
In the fourth quarter the cost increased.
Increased by roughly $100 per ton.
Mainly the cost issues of that increase was slab purchases iron ore coke carbon coke or metallurgy coke.
And as you know the inventory fortinet in asking for <unk>. So we see a little bit of luck. What we are saying for the first quarter is that we are not going to cover the increase or a substantial increase in costs is a very small increase.
Regarding prices and they bought enough I think.
We talk of lithium in December .
In the server.
<unk> conference call and in the last two conference calls, we were seeing that price, especially in the U S. MCA region, we're going to discrete I mean, the gap between <unk> and the rest of the world was very very high and we even talked I think in one of the conference that we were going to see a new law.
Normal bottom price.
Around 1000 tons, we are still seeing the same thing I think the decrease was a little bit more steep than what we thought to be honest.
But we are seeing the same thing and then another issue so it kind of coming to the bottom I think in this quarter or early next quarter I am not we are not seeing a decrease in.
Much longer than that for the other on the icon prices in Europe and in Asia are starting to increase a little bit.
And raw material cost archive. So I don't think there is room for decrease is more than that.
The second question Pablo.
Yes, okay.
Lots of noise in relation to capital allocation, let me start with one comment.
Thank you.
Comment okay.
Hi, how are you how are you so.
We have been I think that the company has been doing so well.
Reinforce.
The distribution of all of.
Davidson.
Okay.
I'll close the part of the paradigm generating.
During this year.
<unk> come up with.
Something that is sustainable over time.
As we have described that we're opening in robotics or <unk> by itself we have been.
<unk> or the Golar letters of proposed ABV than that.
Reflecting a division of <unk>.
6% or more.
Of course, because of the starting 11 oversight.
Hey, Julien.
It's below the traditional ones that we pay but we have also introduced.
Biannual dividend payments, so I think that indeed then.
November .
Therefore, we didn't need it.
Announced bye bye bye now.
In may so all in all we have reconfirmed that the piece of the level of DVT and PE.
As was mentioned during the opening remarks is more than double the level of dividend that we had prior to the.
And then the <unk> leverage.
As we always mentioned, we saw a track record of increasing and sustaining.
Our dividend and this should be the case for <unk> in the country.
So this is in relationship to Davita in payments and I guess that is important for vacuum automation on certain things and relationships with capital allocation thoughts or they're coming for the coming year.
Just one more thing before.
Yeah.
They want to Maximo is that <unk>.
Imports.
Payments that we need to make basically tax payments that will reflect the group ourselves, but we have last year. So it will be some.
Our need of cash that will be helpful. In DCF, but I think that the most important bodies.
We are envisioning.
The capital opinion, Sean projects for the coming year. So I think these types of annually like to call.
Yes.
Taking your question Tayo of capital allocation.
Let me comment I'm pleased.
As you know and you are.
You guys in the lap some about some projects of what we were thinking.
And we are continue analyzing projects of growth. We think we have a very solid operation in Brazil in Mexico, and Argentina, and there's a lot of opportunity to grow.
As you may have seen in the Mexican brands.
Yet today, we are in the final stage of launching a new expansion initiative.
To complement all these capabilities, we have in the <unk> facility.
This particularly in your expansion would be glut would include a <unk> line.
Second cold Rolling Mill, our third galvanizing meal, and several finishing lines.
The capex that was putting the breadth is around.
$1 billion, which is what we expected. This particular capex would take and this would bring us the ability to increase our value added products that today, we have with the new code <unk>. So today, we have.
$4 5 million state of the our thoughts remain fine.
All of that material is going to go through our own funnel.
Part of that material is going to go to the market because we didn't have that capability.
But also these new facilities will allow us.
To increase our value added significantly in the future. So that's another thing that I wanted to comment because there are several projects on the pipeline. This is one of them.
I hope with this carrier we answer the question was a little bit sorry about that.
No no no problem at all.
I'll leave the other questions similar to any other analysts. Thank you so much gentlemen.
Okay.
Your next question comes from Rodolfo <unk> from St.
<unk> of J P. Morgan. Please go ahead your line is open.
Hi, everyone.
My first question is on the volumes in Mexico.
My understanding is there was the impact of the imports arriving in the fourth quarter.
And lastly, you mentioned inventory.
<unk> levels going higher in Mexico.
Just wanted to ask two.
How do you see.
This situation of imports and inventories.
For the first half of the year.
Maybe better how when do you expect to see that normalizing.
A second question I have is just you know this is a short one.
The increase in Capex is that related to the fact that with <unk>, you'll have a bigger.
On the sustaining capex or is there anything.
In addition to that.
And my final question.
And it's too long.
Capital location.
Okay.
Because you know that.
Fast.
The story okay.
Was marked by many.
Gordon transformation right.
And the company grew to have a footprint now.
In the key markets in the Americas, So their presence in Mexico, and Brazil, which was a gap in the beginning.
In other regions in Latin America, including Argentina.
And when you sit down with our board today.
Ted.
You know aside from.
Tony just like adding a violence to the fiscal year plan.
This is kind of the final.
Drawing.
The final picture that you see for the company.
Sure.
<unk> from opportunities like increasing value at our existing lives is there anything else as their new geography.
Something else that is.
An ambition from the for the company as for the Torch.
Thanks.
Thank you all for let me see.
Start with the volumes in Mexico, and try to explain it a little bit what happened in <unk>.
And where we see 2022.
As I said in my initial remarks.
Consumption in Mexico, we covered.
Very strongly.
Yes.
Take 2022 2021 apparent consumption of steel increased more than 20%.
And if you take a burn centers in the U S which is.
Also kind of an integrate market increased 22%. So it is a huge increase in consumption and this increasing consumption both in the U S and in Mexico happened, mainly in the first nine months of the.
The year.
So our customers.
Are customers of our competitors.
We call on us as an industry for you'll see those in each of our.
Our ramp up of <unk> in July and so we couldnt get that capacity in time, so most customers in both sides of both sides of the border in the U S and Mexico start importing more probably than what they needed.
And there was a huge lack of imports I mean imports usually take four to five months and in some cases because of this disruption of our supply chain because of vessels in port <unk>.
<unk>.
These six seven or eight months. So some of the imports that were supposed to come in in the second or third quarter arrived in the fourth quarter and so that all of.
Our customers the way of of <unk>.
Booking inventory normal what not receiving shipments from from the local suppliers and I think these happen to all the companies.
Joe.
Additionally, what's on that is that the fourth quarter also the automotive industry has provident with semiconductors.
And any plan not even in the auto companies.
We are seeing that this is stabilizing inputs are coming down in January there were down probably they are going to be down in February and March.
In December also they were down.
And we are seeing an increase in our book orders for the first quarter and also for the second quarter. So I think all Bdcs is normalizing.
And we're going to see at least from the first the fourth quarter an increase in the first quarter in the second quarter.
Yeah.
I think we've got.
Another issue is that both in the U S and Mexico are going to grow in consumption in 2022.
Although note that at the rate.
Of last year, but at least for a 5% increase in consumption. So volumes are normally starting to increase. So we are very confident that we are going to be able to to attack. These inputs.
Much better now that we have the capacity.
The second question was about Capex Pablo.
Yes, yes, no question.
The relationship too.
The level of normalized Capex capex. So local here in fact, if you look at the Capex in the last couple of years.
Without taking into especially in Asia.
Expansion plan that will finish.
Last year, we have basically only what was normalized capex of around 6 million.
A year.
It is.
Of course, not only maintaining the capex.
With the new facility will become an exposition that Monday Capex, but this also is doing somebody is more project, but we usually have some announcement that we made.
Is that.
In the process of doing.
Cannibalization or initiatives that we have so.
In a regular basis $600 million.
He is a normalized capex again, this is not including workshops maximo manager.
On the display that is page already.
The Capex plan.
We have so this is we would say that normalized capex. So.
Maximo already the third question was with regard to capital allocation.
Okay.
Yes, Thank you Pablo.
It'll allocation as I said.
Besides these new planned in fiscal year <unk>.
Pointed out to make more value added products, which I think there's a huge opportunity.
I mean, we are seeing more opportunities clearly.
Can you talk about new regions.
Are you listening yet no.
Okay.
Gary.
Perfect sorry, sorry.
So we think it definitely is a company that's going to be dedicated probably to America I remember some conference call that all of that if we're going to be seeing things in Europe or other regions. We are seeing a lot of opportunities and I think we have a lot of opportunities in.
North America.
Evan.
Mexico, clearly with a 9 million tons of imports is a huge play where we have to grow as I said before in 2027, we have to be compliant in the melted and poured for the automotive industry. So we are going to be compliance.
We announced a couple of a.
A couple of months ago, our new investment investment in the U S for almost doubling the capacity in.
Our Shreveport facility in Louisiana.
So.
I mean, our growth, but its regarding the Americas and as I said, we see several opportunities.
Hmm.
I hope with that.
I answer the question.
The question on political.
Yeah, no. Thank you very much.
Your next question is from Kyle Roberto <unk> of Bank of America. Please go ahead. Your line is open.
Yes. Good morning, everyone. Thank you for taking my questions.
So my first question moving back to the cash returns and I know that this has been a recurring theme for the company and over the past quarters, but with terna immuno net cash at $1 2 billion.
Seems like a very conservative level for the company right and even with steel prices continuing to drop ahead, we still see the company generating significant free cash flow. This year. So this net cash position should increase further.
And I know you aren't looking to implement a formal dividend payout policy, but why not set a net debt target for the company that way.
Whatever net debt levels are debated below that target can be interpreted as excess cash by the market and this could potentially provide more visibility on what to expect in terms of cash returns ahead without committing to a to a dividend payout policy. So I just wanted to get your thoughts on that and whether you have what level of.
Net debt in mind today that you would consider a sustainable long term target for the company.
And then secondly, still on cash returns I just wanted to hear from you whether it would make sense to announce a buyback program.
Especially given that your shares are trading well below historical average multiples. Thank you.
Yeah.
Okay. Thank you how are you.
It would be along the bottom all these questions.
Information two cash reserve.
Of course banks, notably the possibility of doing what you said.
I'm, leaving the company.
David.
Moving into that direction.
But by being quite consistent.
The way these cdos.
Patterns to the stockholders.
Without talking about the specifics.
Specific scenario on.
Percentages off of the fee income or target net.
Net debt above that if they're using what we have.
This has not been what we have been in the past because as you look at the numbers of the company.
Looking at the industry.
As you know the industry with the volatility.
It's difficult to have especially the target on net debt.
Okay.
As a way to manage the cash.
Okay.
Really what the order by directors or the company.
Brazil is that we have.
In distributing that.
Okay.
So the shareholders in a sustainable way.
Whenever we can increase we have do that now.
Results of the company basically loss of.
A sustained number besides of course most of the neighborhood.
One.
More than doubled.
Operator.
Payment.
Of course, it was I think.
These new business.
We have never called.
And targeting.
Deb.
Cause this.
Another way, we believe a company like ours.
Work.
We have this is not the first time that we are in a position to be.
Gosh I think it was mentioned in a prior question.
Here, we have.
Deferred.
Deferred payments that we would need to make in relationship to <unk>.
Not only capex, but also taxes dividends so yes.
The allocation of funds for the year I think are quite clear and taking also.
In terms of Eurasia, Maximo mentioned relationship.
The Capex plan that in the last stage of.
Yeah.
We do not forget that we have also.
Color on Elfa in place.
Dubai box here.
70 of Argentina Holdings in New Mexico. So this is Alan.
But are you still on the table.
These transactions are moving forward will be very positive for <unk>.
I would require some additional.
Yeah.
Cash utilization so all in all this.
This is the way the company has been working with.
Hey, guys.
On the bus recommendation from your side.
That's why we have been increasing and sustaining.
David.
The issue of buybacks, which is another issue that we frequently discussed we do see.
Kelly is something that we.
Now, let me out as a possibility, but then we have the issue so that level of growth and that the company has.
You need to factor in everything and to take this into consideration.
Is this something that the company can do at some point again will result without doubt but.
We also need to take some of the things into consideration because.
When we deliver in nature.
It won't be huge.
We will look back.
The limit of growth and that the company was negative.
The sky not Merrell growth is always something that we need to also take your questions.
So.
Hey, guys.
Summarizing something that we can we can do at some point.
But we need to think other things into consideration.
To sustain.
Good liability of the company.
Okay understood. Thank you Pablo.
Youre welcome.
Your next question comes from Carlos de Alba of Morgan Stanley . Please go ahead. Your line is open.
Thank you very much everyone.
Happy to hear so.
The question I have is a follow up maybe to the investment programs.
So this one how much is the total investment in dollars that you expect for these finishing lines that I guess would add value to that to the new hydro.
And also.
I guess, how does this affect in any way.
The.
Timing of a potential electric arc furnace in Mexico.
Can you comment on that a maximum of how you see that that investment to increase not only the value added.
To what you currently have which is what you just mentioned, but also increased crude steel capacity in the region.
And then.
So a couple of final ones just could you give us.
A color on the mix by hot rolled coil chorale coil galvanized rebar.
Turning.
In your Mexico operation.
Given how prices got move I think this is this is relevant and then.
Finally in terms of the transaction with <unk>.
<unk>.
Argentina.
Our stake in <unk>, Mexico.
Any update on the potential timing of these transactions when if everything goes well when would these be close.
Okay. Thank you very much for your question.
Carlos Let me take the one the first one the investment.
Investment, we think is $1 billion to these <unk> facilities.
The restaurant.
These investments.
That's a market I mean, we have now the hot rolled mill, we have the ability.
<unk> ability to produce.
Andy brought up in hot rolled mill.
But also the market is meeting value added products like cold growth, peaking or galvanized so.
The rationale is.
I mean.
Putting break.
Going up to the importance of our growth some of one time.
Those also were up from from for the technical facility remember.
But also going through the rest of the inputs usually in automotive and industrial customers. So it is going to be.
<unk> nine which is roughly 500000 tons each.
It will be a new PL TCM, which is.
Around one 5 million tons and it will be a new galvanized line for the industry.
500000 tons, that's the idea and then finishing line for those products.
The AGM of this investment regarding.
The investment in our steel shop, as we discussed in the past.
That's something that we this this plan is not.
Putting a stop for that plant or anything we are still analyzing.
With the <unk>.
The vision we need.
Two supplier or automotive customers in 2027 with melted and poured in the region. So we have to comply with them. We still have time and Thats why we were taking our time to be which is the best way of.
Complying that.
Claim that but.
There are two different.
And we are launching these one.
The top in the next few weeks.
Timing of the Argentinian transactional Pablo.
Yeah, Okay, Maximo, yes, hi, Carlos how are you.
The transactional.
Through all the process.
That needed to be.
Jim.
But the.
Please use the compute management.
Saturday in Argentina auto body that product needs to recommend the transaction that will need to be approved by the shareholders of starting up a cleanup.
These will require stockholder meeting that usually takes a rob and mob up there.
The approval of recommendation from the board of directors and they are not the bad because of the complexity of the transaction.
The.
The refinance debt transaction.
Kelly.
It would take an additional.
15 to 30 days for completion so.
The transaction.
Let's say approved at some point in the next month it will take in total around two months for this transaction.
Our portfolio performed but we need the perfect which is an important one these two.
The recommendation from.
In our water and so on.
This is something that we have.
Board of directors.
But the Dana.
Yes.
Considering the proposal so we are expecting to receive payments from them from there.
This is a timing.
Hi, good morning.
Carlos.
So just basically most likely the second quarter right.
Yes, most likely.
Group.
Most likely.
The Chicago.
Yes.
Sorry, you asked also about the share of products in Mexico.
Yes.
So if you took in <unk> numbers.
Leave us and why our long products, it's about 1.2 medium tons.
And then the capacity of galvanize and painting products, it's around two.
Two for $2 5 million galvanized and then call it.
8 million tons of prepaying, the products, but the used galvanize no dose prepaid product.
Cold rolled and call on hot rolled.
Hmm and the total capacity Joseph Darling, Mexico is around what.
Sure.
9 million tons.
Yes, the total capacity of thoughtful today of course, we are in the ramping up of the <unk>, It's the coker capacity extend.
10 million tonnes, I mean in rebar and wire Rod one too.
2 million tonnes of hot rolled.
Alright, I am sorry, if I can.
To say fair to assume that you aim to maximize run at full capacity the painting line the galvanizing line.
And then whatever it is you cannot use there do you produce corridor coil.
Exactly we usually run full capacity at nine galvanic also supply the full capacity of preventing products for growth capacity is around 4 million tons, a little bit less than 4 million tons, we used to run the fleet.
We most of the time run the coal remains approved capacity and today, we are aiming to run the <unk> capacity to run.
The loan products facilities at full capacity to run the <unk> network capacity and the moly.
Pre meeting <unk> go is the one that is going to not be run at full capacity at least in the year in this year, but we are thinking that in 2023 of 2024 should be running at least very close to full capacity.
Alright, Thank you very much.
Youre welcome.
Your next question is from cannot Kenner's of Wolfe Research. Please go ahead. Your line is open.
Yeah, Hey, good morning, everyone hope you're doing well.
Yes, Thanks, Matt Good morning, good morning.
I just wanted to follow up a little bit on that comment and understand a little better.
First off I wanted to ask you about how you see the addressable market of that now.
There has been definitely attorney <unk> makes perfect sense.
Mexico.
Is that the addressable market Mcintyre North American market or is this just kind of a.
A temporary situation until downstream has expanded and then how do you think about the pulp production in the past you talked about.
Amping up gradually but I'm just curious do you pay for capacity at that $4 5 million of that a little less that you are setting.
Clarify that and then finally, if you could just discuss the timing of when we can be.
Come on on the Capex.
Thanks, a lot.
Okay. Thank you very much Tim I tried to answer.
All right.
All of them.
Don.
Okay.
Context.
Thinking mainly.
In.
For the Mexican market and some export to the U S.
Our main effect objective in the Mexican market as I said.
You take 2021, Mexico recorded $9 million.
Continue.
Don't know if you hear me well because I'm hearing some notice.
Alright, I'll put myself.
Yes.
Okay perfect Alright.
So.
Mexico imports 9 million tons of.
Our flat products, although roughly $4 million.
Court ruling brought out.
And a half galvanized and the rest goes wrong.
So there is a huge market for us and Thats the main aiming of that.
<unk> for US. It's also an important market. Although we are not seeing that we're going to make our investment case to export everything to the U S.
But some of it our prototype going there and we expect it to grow a little bit there are probably some of the U S mail wanted to grow a little bit in Mexico regarding the second question, we are expecting the.
Okay.
The country meeting with Korea to be running at full capacity at least at the 80% of utilization, which is a normal thing for these.
July August September .
As I said, we will decrease if we were going to decrease a little bit the production of.
If you look at what's coming in overall.
We should increase <unk> production in 2022 by around 1.8 million tons of that <unk> going to the market and some is going to replace our imports from Japan.
So I think Thats the second question and the third question Dana sorry, I forgot.
Yeah, I would just about the timing of the investments and when we should start thinking about the additional value add to come through greater.
Greater on average in your.
Okay.
Yes, as I said.
When I answer the first question I think was scale.
We are in the final stage of lease.
You didn't have yet the board approval, although we discussed it in deeply yesterday, and it's probably going to be.
Bruce shortly and we expect that this is coming online in at around three years.
Some of them are coming.
A little bit earlier, and some of them probably because of the equipment delivery a little bit later, but roughly three years.
Okay. Thanks, again, and thanks Thomas for your candor.
Yeah.
No I think you do timna.
Your next question is from Isabella Mahalla Vasconcellos of Bradesco <unk>. Please go ahead. Your line is open.
Hi, good morning, everyone.
Just one question I think most of the points have already been addressed.
But it also in terms of capital allocation and I had some connection issue so hopefully.
Everything here, but.
Just to understand it seems that youre going.
To the organic growth.
In terms of key carrier capacity.
Are you analyzing inorganic growth opportunities.
Eric.
Jill or even in Mexico, and the U S.
That's my question. Thank you.
Yes, Thank you Isabella as we deal with it.
We're always analyzing opportunities and we have a track record.
Doing this in a very responsible way.
Today, we have nothing special in our pipeline today.
These things around and we are with our analyzing these opportunities.
Yes.
Yeah.
Your next question is from Leonardo of Graham. Please go ahead. Your line is open.
Yeah.
Yes.
Hello, Good morning, gentlemen, I hope you can hear me good morning, much more Pablo Sebastian Thanks for the follow up here.
I'm just.
Finally, we can hear you well.
Okay perfect. Thanks, Mike Tomorrow. So so just a quick one for me I think most of the issues have been addressed thanks for all the color on visibility guys.
Still on the topic of re rating right. We've been seeing I mean, we've been covering the company for a while and it's always a similar level, which is highly depressed now we're going through a global movement, which is.
Significant de rating so turning them alone you see guys like Mittal.
Others trade.
Trading at 40%, 50% discounts.
I mean, you guys announced a move in December which was somewhat unexpected write the buyout of minorities and <unk> in Mexico.
I mean, what else is on the agenda, you can elaborate a bit I know that the dividends and buybacks story is quite clear to me.
From what you guys had been indicating but is there anything else on.
Potential corporate simplification still that's pending or there's always the issue of seeded out in Argentina right. Whether there is a minority stake I think from the pension fund, which could be bought out.
The dual listing issue has been historically also a pending issue I mean is there anything that you guys had been considering at this point too.
Try to change the situation on the company. Thank you.
Hi.
His question on margin.
We have different <unk>.
Similarly, the ones that we.
Consider.
<unk>.
The ones that we are.
Got you.
Here, we are in relationship to the transaction and that's something that is tied to.
A couple of percent of the.
The closing of new Mexico.
And look having talked about.
Holding.
<unk> bye.
So these are all very much.
The corporate sector Latanya, if this transaction.
Moves forward.
That's something that we have been discussing many times.
After after this.
This transaction on these.
Is completed.
Corporate structure will be basically work.
We would like to have we have been simplifying the corporate sector for many many years now.
Thanks.
To grow internationally, we acquire company so.
I'll start work to simplify the corporate structure at least it was an important step for us.
We think that we have.
Just on the possibility of achieving that.
You need to see it.
This is happy.
We have been analyzing them of course.
I'll be discussing Laura.
If you recall this adaptive the dual listing.
Other opportunities okay.
Because of evidence of it.
Okay.
Okay.
SaaS previously.
Probably the only plays well into 2000 has been clearly is not.
But to follow at the moment, but we are.
And as we have discussed in the past the idea of moving from one <unk> to at least twice a year the repayment we already.
And we did that so we are on it.
<unk> alternatives possibilities.
Ed.
You need to see.
These three.
Three seven months.
So we are we are often and would have been otherwise.
Which is the best way for us to have a better I'll turn the call perspective.
Our relationship with all our stakeholders so.
We are open we are open we are always highlight uncertainties, while we need to see.
If there is or.
So.
Now we are at this point.
We are moving the right direction.
Clearly we keep analyst.
Yeah.
Okay. Thank you very much.
Europe .
Your next question comes from Ohio Gardner.
P. J patois. Please go ahead your line is open.
My question has been answered thank you.
Oh.
There are no further questions at this time I will now.
Now turn the call over to the CEO for closing remarks.
Okay. Thank you very much to everybody for the employees for the very good questions.
I really appreciate your participation and as usual if you have any.
Additional questions any feedback please don't hesitate to call us acu in around three months.
<unk> conference call have a nice day, thank you very much.
This concludes today's conference call. Thank you for your participation you may now disconnect.
[music].