Q1 2022 Ternium SA Earnings Call
In our filings with the Securities and Exchange Commission and on page two in today's webcast presentation.
You will also find any reference to non <unk> financial measures reconciled to the most directly comparable <unk> measures in the press release issued yesterday.
With that I'll turn the call over to Mr. Burrows.
Thank you Sebastien and good morning to everyone and thank you very much for joining us today.
<unk> showed a strong set of results in the first quarter of the year shipments are recovering and margins decreased as expected.
They remained at high levels.
Since our last conference call in February the global business environment changed significantly as a result of invasion of grain and a consequent wave of international sanctions against Russia not to mention the humanitarian tragedy. This conflict created.
In an already volatile steel market environment the consecutive Glenn here.
Brought even more disruptions as both of these countries are relevant participants in the trade of steel and related raw materials create.
Creating scarcity of these inputs and a consequence.
Bush to steel prices.
The Guy run PCI slabs, and hot rolled steel were particularly affected us.
As a result of the supply disruptions in the domestic and international markets.
Usually declining steel prices too.
A sharp turn up by the end of the first quarter and recently stabilized.
Really high levels.
Let's review now the latest development in our main markets in this new scenario.
In Mexico, we expect shipments to continue increasing in the second quarter of this year.
There is currently a restocking in the commercial market in response to these new conditions in the market, although it remains somewhat slow.
On the other hand, the industrial market continues to be healthy and we expect to continue growing in this market aided by the new Hot strip mill in <unk>, increasing our market participation.
The auto industry continued to suffer from supply chain disruptions.
Order backlogs that should support higher still demand down the road. We are now more positive in our expectation for this industry. During the second half of the year as we are already seeing some recovery in orders.
The ramp up of the new Hot Rolling Mill in <unk> in Mexico is progressing as expected as we continue working on certifying our products with different industrial customers.
Gradually adjusting the facility and its logistics for a higher level of production.
To complement the capacity offered by the new Hot strip mill.
To broaden our value added product portfolio, we recently announced a new investment program at our <unk> Industrial Center there.
The program consist on the new Cold Rolling mean hot dip galvanized line, a push pull between line and a new a new finishing lines.
The new investment program with expected startup of operations in the first half of 2024 should help us better serve our customers in the automotive renewable energy and home appliance industry and will support our leading position as a steel supplier in Mexico.
This us.
Through the already announced expansion of our Shreveport facility in U S State of Louisiana with a second coil coating painting line expected to startup in mid 2024.
Yeah.
Let me now turn to Argentina.
For some time now the Argentine market has been a very stable one despite I have a high degree of uncertainty and this is not to change.
Currently steel demand remains healthy in the auto industry construction, the agribusiness and the energy sector.
Based on what we can see for the next few months shipment in the second quarter should increase a bit from last quarter.
However, there are some factors that could affect steel demand further on mostly related to the unstable macro situation in the country.
Because right now to make a quick comment regarding sustainability.
Our ongoing projects we.
We are committed to the industry sustainable development and our efforts were recognized once again by the World Steel Association.
Early this month that <unk> was selected as a sustainability champion for the fourth year in a row.
This was on top of the safety and health Excellence recognition for our safety management initiative also from warranty.
Also since our last call we participate in a survey from Echo bodies on our ESG initiatives. The commodities is on ESG rating agency used by several of our largest industrial customers in deserved survey, we have been attained a top.
10% score in our industry.
The rate obtained is already higher than the rate required by our customers for 2025.
This inquiry was structured in four main topics environmental labor and human rights.
Typical behavior and sustainable procurement.
Let me now ramp up this initial remarks with some final thoughts.
We started the year with very good results and we expect to have an even better performance in the second quarter.
But we should not lose sight of the fact that there is significant uncertainty regarding the performance of the world's economy down the road.
The ongoing disruption from the where the war in Ukraine, and the Covid related Lockdowns in China.
A cause of concern this together with the current inflationary environment in the world and the beginning of a monetary tightening cycle could affect the world's economic growth rate in the future.
We believe we are very well positioned in this uncertain scenario the transformation of our company since the acquisition of our slot fatigue, and Brent in Brazil, and the conclusion of our expansion project in Mexico enables us to continue growing our market participation with an even better competitive.
Position in it.
Vision, we currently have a strong financial position and expect to have a significant cash generation. In 2022. This is a comfortable situation from which to face any volatility volatility in the steel markets.
This financial strength will allow us to continue to execute our dividend program with the next payment due in may and the <unk> payment for 2022.
Dividend due in November .
Now with a longer term view I'm positive regarding their downstream investment program in fiscal year <unk>.
Initiative ecosystem, we have a long standing strategy to continuously optimize our industrial system in order to capture future market opportunities.
It could shrink as our competitive position enable us to replace the inputs in the Mexican market and better serve our customers with a broader and more technologically advanced product portfolio.
Alright, I'll finish my remarks here. Please Pablo go ahead with your review of the quarter performance.
Thank you Maximo and good morning to everybody.
<unk>.
Maximo can just discuss that.
Relatively limited influence on <unk> performance during the first quarter of the year, but naturally its implications are expected to be more evident for us further along.
Let's now turn you pro forma in different quarter of 2022, and also review our guidance regarding the second quarter and better than U S.
Let's start on page three of the webcast presentation.
Slide three depicts.
And income in each of the last five quarters.
The historical standard EBITDA in the first quarter has been strong although lower sequentially as anticipated.
The reason behind this is a decrease in EBITDA margin will reflect it still price correction from <unk> levels.
And the second part of last year.
The increase in the robotic vehicle looking.
Looking forward in the second quarter, we expect the company to rebound.
We will analyze in more details in the coming slides.
The strong operating performance in the first quarter led to net income of.
$3 95 thing also a solid number.
In page four let's review the performance of <unk> and shipments.
Shipments in each market.
In Mexico in the first quarter of the year, we personally don't recover the volume loss in the fourth quarter and looking forward, we expect shipments to continue improving in the second quarter.
In the southern region shipments decreased sequentially in the first quarter.
Reflecting weaker demand in Argentina.
Looking ahead, we expect shipments in the southern region increased slightly in the second quarter.
In the other markets region volumes decreased slightly on a sequential basis, reflecting lower volumes of love.
As for third parties.
It was pretty much offset by higher finished steel shipments.
In page number five you can see that combined with this development. We arrive at consolidated shipment of 3 million tons in the first quarter up 4% versus the fourth quarter.
Based on what we have discussed we expect to report in the second quarter, a sequential increase in consolidated industry.
Thanks.
Let's now review with new prices and net sales in the third quarter revenue per ton.
<unk>, 5% sequentially on lower realized prices, mainly in Mexico, and we are a market leader.
The combination of sequentially higher achievement on lower revenue per phone result.
There was net sales of $4 $3 billion.
Looking forward.
We expect revenue per tonne to rebound in the second quarter on higher realized price and <unk> main steel market.
For a response.
Moving to the next page, but over you know the main driver behind the sequential change.
And net income in the third quarter of the year.
EBITDA drag on the top shows the impact on EBITDA of lower revenue per ton and higher cost per ton.
Which increased mainly as a result of higher raw material prices.
These negative effects were partially offset by failure shipments.
For the next quarter, we expect EBITDA to increase sequentially, reflecting higher shipment a margin of error.
Revenue per ton.
It's more that cost per tonne.
The chart below show in the third quarter, a sequential decrease in net income mainly driven by lower operating and financial results.
Which decreased mainly due to a higher foreign exchange losses, and a lower value of by now.
The effective tax rate in the first quarter was relatively low mainly to the positive deferred tax that result.
At <unk> in Mexico.
Dana subsidiaries.
To conclude with today's presentation, Let me review on page seven third earnings cash flow performance and financial position.
Cash from operations in the first quarter were $692 million Wattenberg include income tax payments in the quarter of $868 million.
And also a working capital release of 334.
The $1 million.
Which reflected lower inventory volumes as well as expected the impact of higher fuel prices and raw material costs.
Income tax.
Usually high in the quarter, mainly as a result of the payment of income tax balance of fiscal year 2021 in Mexico.
And here, we have tremendous increase in profit compared to the previous one.
<unk>, let me remind you that we paid income tax balances during the year, but based on the income tax of the previous fiscal year in this case <unk> digital inventory.
The year of the COVID-19 pandemic. So we have a strong recovery in profitability in 2021, the income tax viola left to be paid in March 2022.
Okay.
Of the 2021 resulted in a very high payment.
With a stable capex.
Cash from operations in the third quarter led to a very solid free cash flow in the period, whereas in our net cash position to one $6 billion by the end of March.
Our current expectation is that <unk> will continue to grow in therapy.
Cash generation during the rest of the year based on our Capex.
For the year of approximately 600 million.
With this.
We finished our opening remarks. Thank you very much for your attention. We are now ready for taking the questions. Please operator proceed with the Q&A session.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
And your first question comes from the line of Tayo Greener from BTG Pactual. Your line is open.
Yeah.
Hi, Yes, good morning, everyone. Thank you.
My first question on <unk>.
Wanted to check with you guys at what stage is the best of your ramp up currently at so.
So far we haven't really seen volumes rise as initially expected and I remember speaking with you guys a few quarters ago.
The idea was to have incremental shipments of nearly $1 5 million tons already in 2022, and 'twenty three and so far it seems like this is still not the case, so what needs to happen for us to start seeing those incremental volumes for journeys and.
In Mexico and start seeing that thesis of of imports substitution play out which would still remain quite elevated and and just just to understand what has changed since then.
Is it due to higher slab prices.
Only or is there any other reason behind that and my second question on capital allocation. So I was just wondering I just wanted to see if you guys could share with US an updated capex estimate for 2022 and 'twenty three.
Because I'm just looking to understand how the 1 billion investment recently announced is going to impact our cash flow generation over the next couple of years and even so I mean, you're still running on a one six net cash position. So I also just wanted to understand if on top of those investments, we could see more aggressive dividend payments.
In 2022, 23, and maybe into 2020 24 as well.
Or if you have any other short short term plans for that that amount of cash that youre currently carrying thank you.
Got you. Thank you very much for your two questions very good ones.
<unk> ramp up so there are two things here first.
Ramp up of the <unk> facility is going very well at least from a technical point of view I mean, we produced in the fourth quarter.
This year, roughly 500000 tonnes, which was kind of it.
Program.
In the first quarter, we produced almost 700000 tons from that country meal, and we expect to produce almost a million I think it's 900.
Tons in the second quarter, and then 1 million and a little bit in the third quarter.
Of this year, that's what we expected in the business planning when we make the investments. So that's from a technical point of view is running very well on the other side you are right about the volumes.
As we discussed last quarter.
And I think the one before we saw a slowdown in the commercial market in Mexico and that made us.
Yields less from the facility and durable score I mean.
The commercial market was very weak in Mexico in the fourth quarter and it was and it started to increase a little bit this quarter and I think it's going to be better next quarters as I said in the previous remarks.
So the plan to increase volume, what's a little bit delayed if you take outside I mean, if you take this year the sales of slabs from our because slab going to decrease the sale.
As we.
And more slabs from Brazil to Mexico, we are going to decrease slab sales to third parties.
The volumes are going to increase this year, we got to compare to last year rapidly.
In almost 1 million tonnes.
Dc's, Mexico, mainly in North America, not only Mexico, but mainly was due to the delay was due to the market conditions. So I hope I answered your questions.
The first one scale.
The second one was regarding capital allocations.
We have somebody thinks about capital allocations.
But I want to comment on this the first one of course.
The capital allocation of the Capex. This year is going to be around 600 million tons and then it's going to increase with these investment of 1 billion. Most of these $1 billion is going to be next year.
In our balance sheet.
Second thing is we are going to continue with it and I mean remember that the.
Our dividend pay.
What's race.
I think there was 24% the annual dividend proposal this year sorry.
Sorry, the 2021 compared with the 2020.
And we expect to continue giving.
Shai dividends in the next future.
And the third is that as you know we have plans for more capex in the near future. We have discussed in the past our necessity to be U S MCA compliance.
We've met that improved by 2027 D C something that we have to do we are on the final stage on analyzing what is which one is the best way to do this.
But that is going to be required.
Capex.
In the future. So those are the three things I could play well I can't comment about capital allocation.
Thank you very much mark so just to make sure I understand so the the.
The melting important investment that you're supposed to make in Mexico. This is supposed to be for the short term rates could we still we're still seeing announcements in 2022.
Or if there's going to be.
For the 20.
'twenty three but it should be in the in the near future yes.
We have a team analyzing.
And as you know the projects we announce it once we have completely understand and very clear what is.
The technical solution and we ought to be.
Understood.
Thank you very much.
Youre welcome.
Your next question comes from the line of Carlos de Alba from Morgan Stanley . Your line is open.
Yes, good morning, Massimo and Pablo.
Thank you, Florida for the call.
First question is.
Could you maybe.
Remind us of what is his lab situations for tearing you might as you ramp up.
Pesky suitable scope maybe lower than.
And then before.
But given the situation in Ukraine, and Russia, and what is happening with the global slab market.
What are you what are your plans there and how much exposure do you think you have for this year and for next year <unk> increases.
What are they starting to use that you see available to the company.
You move forward and then maybe to complement our and I'm sorry, if I missed this.
Working capital very impressive results in the first quarter can.
Can you explain a little bit about what is behind the fact that you released.
Working capital in Q1.
And also what do you see going forward again, given all the moving pieces that were the worst thing in the market.
Okay. Thank you Carlos I take the first question because it's very difficult to widen and then Pablo is 81.
And Youre right about slabs, I mean, clearly the situation in Russia, and a greener and greener sorry.
It's modifying or it's.
Having some effects.
In the slab market there 30%.
The world trade of merchants lapse guns, or these come from Russia and Ukraine.
Grain is not producing snap at all now because most of the factories that produce less are in the conflict area.
And of course, some of the Russian facilities.
R R.
With.
I mean, we are not able to buy from them because of the sanctions.
But.
Nevertheless, with these remember that from 2018.
We took.
Slot facility in 2017.
In Brazil.
We start increasing our shipments of slabs and that was the idea to Mexico from Brazil. So today is the first year, we rent the facility, 30% overlap from Brazil went to Mexico. This quarter, 85% of the lapse from the facility in Brazil went to two.
The Mexico. So if you see the situation for now.
It's it's not very.
Very tight if you take on the other side, what we bring from Mexico, 90% of our total shipments in Mexico of slots or inputs in Mexico comes today from Brazil.
And the other 10% we are finding other sources.
Other than Russia.
And so I think we can manage that 10%.
With these other sources, we are now importing from.
I hope I answer that question without Carlos.
And maybe just to clarify Mike and thank you for those details.
So this year.
What is the balance of the slabs that you are expecting maybe for next year. What is the balance of their bodies labs that you may need to purchase on a net basis.
On a net basis yeah.
I think it's almost zero.
On a net basis, because it's a little bit less than 500000 tons.
On a net basis.
Next year is going to be a little bit more but.
Probably 1 million tonne.
On a net basis, but we are selling some because I mean, we as we already discussed we see advantage in selling and then buying from other sources a little bit more cheap.
Hmm.
Okay Alright.
It's not a huge volume I mean, the slab facilities position will be producing almost 5 million tonnes.
Alright, okay.
Hum.
Okay.
A question now on when he got himself.
Basically what we have during this quarter.
He is a decrease on stock.
It was not only good because we're able to reduce the level of inventory, but because the pricing.
All of the different raw materials were increasing.
Secondly.
We have an.
An increase in.
Our account receivable because of the increase that you saw.
Our volumes to the market during the first quarter and especially the ones in the U S.
And the third.
<unk> of that is that we increase there.
The level of her town.
Because all of the increase of prices and the increase of volume volume require.
Cost of the new production level.
The higher price of literacy in the market. So all in all.
We have around $300 million of capital or working capital relief during the quarter.
Looking forward, we will continue to increase our accounts receivable because all the.
How are you.
A few minutes.
We try to sustain the level of inventories.
On a comparable rule also should return to more normalized levels. So from the working capital.
Meaning a more stable situation as we continue to see prices go.
One important issue to government, which is not working capital free cash flow or cash flow is that during this quarter into the first quarter, we have a huge.
Allocation of cash to pay the violence of income taxes in Mexico. So all in all we pay a lot.
<unk> $700 million.
On taxes during this quarter.
Must be the same in the next one of course, the advances that were willing to pay will be valued about what we have left.
But in comparison to reward repair during the first quarter.
So all in all we should continue to have.
Uh huh.
On free cash flow, though probably working capital will not help us much we thought this quarter.
Thank you Pablo.
Yes.
One quickly so next year.
Most of that $1 billion investment in Mexico will take place.
Are you trying to reach.
What did you see the Capex in 2023.
And maybe 2024, given given that that investment.
2023 properties 1 billion.
So as we can before it will depend on what Im actually more yes, exactly 30, 34, we need to wait a little bit.
Carlos.
Alright fair enough. Thank you.
Our next question comes from the line of Thiago <unk> from Bradesco <unk>. Your line is open.
Thank you gentlemen.
Quick two quick questions here the first one on costs, how do you guys see.
Cost evolving in the next couple of quarters.
And the second one Maxim with just about the slab position you mentioned, so correctly correct me, if I'm wrong, but you mentioned 1 million tonnes.
Gap next year. So is this a structural gap considering but that gives you a fully ramped up and if so.
Do you think there might be opportunities to close this gap.
M&A or do you think from a strategic point of view and you guys are are fine with with this with the short position. Thank.
Thank you.
Thank you Jeff I think first the second question I think it's.
So next I mean remember the facility.
<unk>.
Brazil facility produced 5 million tons of slabs.
Uh huh.
Roughly I mean, the capacity is not producing that is producing for fixed now or something like that.
We tried to increase at the maximum level.
<unk> for CVD.
The new culture eats around 4 million tons.
If you're not staying at that capacity to be honest remember it has alone.
Ramp up.
Facilities and the Molino <unk> has.
Roughly of capacity of need less of 3 million tons.
So.
The balance today.
It would be 2 million tonnes.
If we are at full capacity.
In basically two towards those facilities. So that's the imbalance we have of slabs 2 million tonnes.
But to be honest there is.
Our sales to be made in net in Brazil also tools you need ines.
Which we will like to participate and don't see Mena remember has upholstery meaningful what's our facility with no upstream. So the idea in the future is to sell to <unk>.
And that's why I also as I said before.
We have to be U S. MCA compliance in 2027, so probably we probably most likely we are going to invest.
To be U S. MCA compliance so that balance will be probably zero in the future.
I hope that is that Thiago I answered the question.
I do.
I'm a little bit confused here much I'm sorry.
Okay.
Just.
From what you mentioned to Carlos right. So you mentioned on a net basis youre going to have to purchase 1 million tons next year right is that right, yes, exactly but we are not at full capacity attributable cost cutting okay.
Got it so when you when you go to full capacity the Chiller Bhaskar do you think your net purchases will be Europe .
Thank you.
No My network, if I go to full capacity will be around two.
2 million tons, Yeah, I'm, sorry, 2 million tonnes, that's net but that's where we want to sell <unk>.
Probably we need to buy a little bit more.
But on the other side again, we have to invest.
In the near future because if not we are not going to be U S. MCA compliance in Melbourne and four.
Yeah.
I think that we have to do before 2027.
And so even in the future.
Talking about the near future, but leasing four or five years, we are going to be.
Net zero I mean, we are not going to need to.
<unk> property.
Got it so I guess my question is how are you going to get there.
Well, we have to invest in in a still joke.
Got it okay, so if you're not going to be.
North America U S MCA market.
Okay, Yes got it mountain Alex Thank you Maxime.
Okay, Joe because I don't know yeah, okay. So literally into a cost clearly when we see them enter into next quarter is the increased price of slabs.
Wanda.
Recently.
We will be buying remember that price of less than three is also quite significantly the price of coal.
Increased PCI different raw materials, basically able to materially increase prices, where we would expect to see them through our cost during the second quarter and also especially during the third quarter.
But what we have said.
These are markets that we are expecting.
So in the market the prices of the three.
Finished product selling prices.
We will become a year, but the impact of the different raw material cost increases and that's why we are expecting to see a better margin.
We're into the second quarter clearly cost.
Will be higher.
Okay, that's very clear and if I may I'm, sorry, I guess I just macro just back on the first question. So.
And the timeframe of the next maybe two to three years would you expect to be.
Doing that.
Correct on the slab side in North America.
Reasonable.
Yes, yes, we have to do it to be honest and so we are analyzing I I think we took a little bit about it.
Conference call also we are not ready to announce it but it is very clear.
Our automotive.
Customers.
Very important for us we sell almost.
More than two to 3 million tons to them in the North American market and we expect to continue doing so so we need to be U S. M. TAA compliant company signaled this telco, Jeff and that clarification is not that in five years, we are going to be out.
Of purchasing slabs. We are continued we are probably going to continue purchasing slabs I'm probably.
Brazil, our Brazilian mill will sell slab to third party as we're doing today.
But the net balance probably is going to be zero.
No. That's that's very cute alright, thank you Massimo again.
Yeah.
Our next question comes from the line of Timna Tanners from Wolfe Research. Your line is open.
Yeah, Hey, good morning, everyone and thanks.
I wanted to just unpack that a little bit more on the volume outlook.
So I know you touched on an improvement into the second quarter I mentioned that demand was little bit light into that first quarter, but it still is hard for me to square.
The declines year over year, because there is still covered hits a year ago.
About <unk> when we think about the 900000 tons from past Korea, and just assume flat year over year I mean, we're talking about almost 4 million tonnes from Mexico.
Sorry overall is that is that the right way to think about that potential upside, but you know quarter over quarter or am I missing something.
My first question. My second question was just to get some tax rate guidance given that like first quarter on the rate not the payout I understand the cash implications. Thanks a lot.
Okay I didn't know how are Ya, let me, let me start by by the tax issue.
We are pushing on volume.
Yeah.
Unfortunately for us it is very difficult to predict exactly how the tax rates.
The nominal tax rate will be because it very much dependent on the situation of the ether and currencies.
So if you have.
The revaluation you have renewables and in fact, as you kind of a devaluation.
How do you one so that will depend on how long the situation at the end of the market you know that.
The tax rate for <unk>.
Overall.
Without taking into consideration before taxes.
28%.
Which is the mix of rates.
Mexico, Brazil and Argentina.
So both and that would be good.
There's no before taxes.
That's a very poor term you should be.
That 28%.
Clearly we have them.
Deepa and impacting the currency during this last quarter in China.
<unk> Mexico.
<unk> excuse me, we are launching in Mexico.
We certainly devaluation hasn't been out about the devaluation was below.
Alright.
So that's the cumulative impact of these I know that is not very clear.
But you need to see which is the cash position or the financial position of our company to to see that so in general that's the level you have.
Revaluation of the currency you reduce our tax rate.
Jason.
We're all familiar with our increase in E&P.
And in Argentina will depend very much on the relationship between devaluation on an intangible.
I know that.
It's done very complex on the time, Unfortunately, we need to wait until the last day of the quarter with exactly how we work with.
Cost will depend very much on how the movement of the refund guarantees work.
I I hope I have been clear on that might not come back.
What we can do both.
Yes.
The volume.
I don't know if I follow your math. So so let me try to answer your question, but.
I mean, if it is correct.
Our volume outlook, I mean, Argentina, it's going to be probably the same volume that we do.
Last year I mean.
Though we were a little bit more pessimistic, we are seeing now the market.
With this uncertainty I talk but we are seeing volume scanning orders coming so it's purely it can see the market in Argentina, where you expect to continue that way at least for this quarter and next quarter.
In the case of Brazil.
Our slabs.
This is going to decrease third party slabs aren't going to decrease.
I believe we should.
Half of that.
And in the case of the other markets.
Our increasing volume will be properly I need to be more of one.
Indian tons, one year compared to the other one.
That's our volume outlook in this with the market as I said in Mexico, which in industrial market in Mexico is very strong.
That commercial market that most of that is construction and infrastructure that it's not growing very good in Mexico.
No.
<unk> part of the market, but I hope with this I answer, but I'll answer or correct me, if I'm wrong Didnt at least I think that with just Simplistically think year I doubt he.
<unk> produced almost $3 1 million tons and if we just added Simplistically 900000 tons protected from pet scan, we'd be at 4 million tons that seems like a big number relative to your Q1, sorry, I just wanted to say is that right or wrong and why and just in light of the fact that recent prices Spike we know you explain it a bit.
Yeah, I think the ramp up in Mexico or is that not an opportunity also to boost volumes, given where oil prices have run two internationally.
No sure sure. We can I mean, I was talking mainly about Mexico and Youre right. There is an opportunity to export and we are seeing to ramp up those opportunities too to be honest, we don't have.
Much of that volume yet in what I told you if we increase a lot. The export we are very cautious of that also.
Not to increase to a lot of markets, but yes, it's an opportunity that we are seeing timna.
Okay, great. Thank you.
Well thank you.
Your next question comes from the line of Alfonso Salazar from Scotiabank. Your line is open.
Yes.
Good day, everyone and the question that I have gotten growth on what we can see the impact would be the high because cogeneration.
Two new people, let's say, we think the size of the company were just discussing.
Investments in Mexico, and North America automotive snap. So I think it would be very useful if you can provide some guidance on how that's going to look five or six years from now in terms of production capacity in time, so the geographical exposure.
What's going to happen in Mexico, where our plants you mentioned, Jim oversees all of them with them.
How about like a map on how denim is going to look at.
Thank you.
Six years to hit him probably is not on there.
So right now.
Help us to understand what the plan to meet any kind of these investments that could be very useful.
Yeah I'll also thank you very much for your question, it's clearly a very broad question.
And we have.
I mean.
Yeah.
Several things.
I mean.
The growth possible venues via clearly, we're I mean, our growth parts of the Americas.
And we are going to have some growth in Argentina, probably but that's in value added products.
And in the long term.
Nothing of this is something that we are going to announce in the near future. We also have a view of growing in Brazil, Brazil, our acquisition of.
The TSA facility was very successful.
Now we know much more of the market. So there is a decent.
Ah thinking embedded in that that's a market where most of our customers also.
Today, we can go there and clearly the North American market is a place where we'll continue growing I I talked about the investments. We are seeing we are seeing that the volumes in the market there is going to increase.
I know there is capacity also being built in North America, but but we are seeing a lot of these.
Near showing a reassuring.
Happening I mean.
Now the problem between the U S and China The war now.
This is all making.
All people that will have their supply chain in Asia. Most of them are thinking or some of them are already coming to the U S into Mexico.
Every month, you see new investments of our own customers or new customers coming to the north region of Mexico. So I think that the biggest opportunity of us each over there and Thats why we are getting ahead of that doing Dan.
The call growth facility, the new one the galvanizing, particularly at night I'm thinking of being a U.
U S MCA compliance with a much bigger capex, probably I don't know if you want to add something to that.
Just one thing just to complement.
First of all Stephen USA clearly the idea of.
Facilities, but we are sure that we've got.
<unk> worked with them a very full capacity utilization.
Maximo has mentioned in Brazil, it's clear he already mentioned before you have a question.
Two.
Possibility working at the maximum capacity or.
Of that one then.
As we were addressing the issue of the new hotel in EMEA, we already have we approach it very fast.
Fully communication of that facility, probably utilizing less others like that.
So that's the same idea.
We already announced and the Capex that we analyze.
So that has been what we have done in the past and clearly something that we are.
Planning to do.
In the near future.
Just to complement them.
Your question.
Yeah.
That's helpful for sure and I note that Saturday Brookfield, and then probably we can talk about these in many conference calls in the days to come.
This could be kept the loss.
A follow up on Mexico, if I.
The energy reform.
I'm just wondering if you can say anything about how these changes deanna just drop your capsule image and strategy.
Opportunities in the country.
Yes. Thank you a phone so youre right the energy reform did not bought.
But I think there's still a lot of confusion about them.
Well you call it DEA Spanish I think the D C electric industrial at all.
It was passed.
A couple of months ago.
Six months ago, and then it.
It was not declare unconstitutional, but this was nothing but let's not forget also constitution and so there is that going to be a still.
A lot of noise about energy in Mexico, I think for the next following months.
Our case in particularly remember we produce most of our own energy, we've got very competitive facility.
And this is not going to change with this new law. So we are relatively comfortable where we are but I don't see a lot of energy investment in Mexico in the near future.
Until he said yeah. This electrical industry law is clarified and so new investments are going to come to Mexico, I hope with that I I clarify what is happening in Mexico.
Yep.
Thank you.
Okay.
And we have a follow up question from Carlos de Alba from Morgan Stanley . Your line is open.
Yeah. Thank you very much.
So.
And in.
Situation of being a U S MCA compliance.
Okay, I guess there is two choices.
You're investing in crude steel capacity.
In one of the three countries or are you trying to buy something is there anything that is available.
That would provide that second alternative or you are really only analyzing at this point a greenfield facility.
Thank you and.
Hello again Carlos.
And no we are not seeing I mean, we are seeing a greenfield facility.
Okay.
And it will it will likely be a electric arc furnaces are definitely beyond electrograph.
In Italy, the electric arc furnace, yes.
And if that's the case.
What would this come.
Together with an expansion of your iron ore Bennett.
Facilities or do you think that what you have.
If there's a piece of the iron ore mining side of it you would be okay.
Just to spend your palette and.
DRA facilities.
Yeah, not necessary a mining operation right now.
Probably at the right facility yes.
These are all the things Carlos.
To be honest. These are all the things that we are analyzing which is the best way to go and that's why.
I mean.
We are not announcing anything yet we are discussing which is the best way, which is the best technical solution clearly is electrical arc furnace.
Clearly you said direct reduction.
Not necessarily investing in new capacity of betted.
In the near future or in the.
The short term.
Perfect. Thank you very much Michael.
Yeah, you're welcome Carlos.
And there are no further questions at this time I will turn the call back over to Tony I'm CEO for some closing remarks.
Okay. Thank you all very much for your participation today and for your interest in our company, yes as usual please.
Please contact us for any feedback or any additional questions you may have.
Take care and goodbye. Thank you very much again.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Yeah.