Q3 2023 Ternium SA Earnings Call

Thank you for standing by my name is Eric and I will be your conference operator today.

At this time I would like to welcome everyone to the attorney them third quarter 2023 results conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one again, thank you.

I'd now like to turn the call over to Sebastian Marti. Please go ahead.

Good morning, and thank you for joining us today.

My name is Sebastian Marti and I am Jenny Global Companion C. L K.

Yesterday, its financial results for the third quarter and the first nine months of 2020.

This call is complimentary to that presentation.

Joining me today are Chinese Chief Executive Officer, Maxim over there yeah, the company's Chief Financial Officer, Pablo <unk>, who will discuss the business environment and performance.

At the conclusion of our prepared remarks, there will be a Q&A session.

Before we begin I would like to remind you that this conference call contains forward looking information and that actually results may vary from those expressed or implied.

Factors that could affect results are contained in our filings with 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. Miller.

Thank you Sebastian and good morning, and thank you all for participating in <unk> conference call today.

Glad to report, we have healthy third quarter with.

With the consolidation of <unk> for the first time, we had a margin of 13% as you may know well see minutes main blast furnace being offline for a realigning.

And its operating results in the quarter were affected accordingly.

When considering that in your operations before the consolidation we had a margin of approximately 17% in the quarter, which is within our usual margin range.

Operator: Thank you for standing by. My name is Eric and I will be your conference operator today.

Operator: At this time, I would like to welcome everyone to the Ternium 3rd quarter, 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on the telephone keypad. If you would like to withdraw your question, press star one again. Thank you.

With fuel prices recently, increasing in the U S. M. G region and does he mean, starting the ramp up of its main blast furnace I am positive that from the beginning of next year, we will see more normalized improve margin performance.

With this in mind, we announced yesterday, an interim dividend payment of $1.10 per eight a D S equivalent to $216 million to be paid on November 16.

Sebastin Marti: I would now like to turn the call over to Sebastin Marti. Please go ahead. Good morning and thank you for joining us today.

Sebastin Marti: My name is Sebastin Marti and I am turning global IR and compliance in our director.

This represents an increase of 20 cents per.

Sebastin Marti: Ternium will this yesterday its financial results for the third quarter and the first nine months of 2023. This call is complimentary to that presentation.

D a.

22%.

Compared to last year interim dividend payments.

After my initial remarks, Pablo will go through the details of our performance in the quarter and the explanations for the following ones.

Sebastin Marti: Joining me today are Ternium's chief executive officer, Maximo Vedoya, and the company's chief financial officer, Paolo Gritia, who will discuss Ternium's business environment and performance.

Let's now review the business environment in our main markets beginning with Mexico.

Apparent steel demand in Mexico remain strunk's as.

So we have been discussing do they last the last conference calls near shoring is happening and it's developed.

If positive for the U S MCA consumption of steel.

Ice's, Brent excuse me a sustainability to steel demand in the region for the years to come.

In this context, the new Capex handy and high end.

<unk> products, we can know foot now as a result of the investment programs. We developed during the last few years enabled us to increase our shipments by 25% in the first months of 2023 compared to the same period of 2022.

Sebastin Marti: As a conclusion of our prepared remarks, there will be a Q&A session. Before we begin, I would like to remind you that this conference call contains four looking information and that actual results may vary from those express to imply. Actors that could affect results are containing our findings within the Securities and Exchange Commission and on page two in today's webcast presentation. You will also find any reference to non IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued yesterday.

Maximo Vedoya: With that, I will turn the call over to Mr Vedoya. Thank you Sebastin. Good morning and thank you all for participating in Ternium's conference call today. I am glad to report we have healthy third quarter. With the consolidation of Useminas, for the first time, we had a margin of 13%. As you may know, Useminas' main blast furnace has been off-line for our relining and its operating results in the quarter were affected accordingly.

We are expecting certainly shipment in Mexico to continue increasing in the fourth quarter as we have been working on solving certain supply chain bottlenecks, which affected the previous quarters with these two happen even though this is the seasonally weakest quarter in the year.

Maximo Vedoya: When considering Ternium operations before the consolidation, we had a margin of approximately 17% in the quarter, which is within our usual margin range. We feel prices recently increasing in the U.S.N.C, region and Useminas starting the ramp up of its main blast furnace, I am positive that from the beginning of next year, we will see more normalized, improved margin performance.

Steel prices recently buttoned up in this region and this is fueling a restocking in the value change in the commercial market due to low inventory levels on the other hand industrial market continued to show rather healthy steel demand the auto industry in Mexico.

Has not been affected by the strikes in the U S.

The positive pricing dynamics, we are seeing in the U S. MCA region will be more <unk>.

Maximo Vedoya: With this in mind, we announced yesterday an interim dividend payment of $1.10 per AADF, equivalent to $216 million to be paid on November 16. This represents an increase of 20 cents per AADF or 22% more compared to last year interim dividend payment.

Notable in the first quarter of next year.

The lag effect of contract prices in Mexico will be Iraq on the fourth quarter realized prices.

Moving to Brazil in this quarter, we fully consolidated <unk> finance Gen for the first time. So let me review the latest developments in Brazilian market. We have always believed the potential of this market is a standing but Brazil has recently.

Maximo Vedoya: After my initial remarks, Pablo will go through the details of our performance in the quarter and the explanations for the following ones. Let's now review the business environment in our main markets, begin with Max. A parent steal the man in Mexico remain strong as we have been discussing to the last the last conference calls, near showing is happening and it's developed is positive for the USMCA consumption of steel. I see this trend has given sustainability to steal the man in the region for the years to come.

Be going through some challenges.

Still demand in the country is at reasonable levels, but still imports in Brazil increased by 57% in the first nine months of the year, reaching the highest level in more than 10 years as a percentage of steel consumption.

And about 80% of <unk>.

That's the imports are coming from China.

Maximo Vedoya: In this context the new capacity and handy and high end products we can offer now as a result of investment programs we developed during the last few years enable us to increase our shipment by 25% in the first month of 2023 compared to the same period of 2022. We are expecting turning shipment in Mexico to continue increasing in the fourth quarter as we have been working on solving certain supply chain bottlenecks which affected the previous quarters.

This is a big concern not only for <unk>, but.

For the whole industrial sector in Brazil.

With the surge of steel import from China. The government of several countries in the Americas as in the U S and Mexico has taken trade measures to avoid being flooded by unfairly traded Chinese steel, Brazil should follow these.

Same bus.

The local steel injury industry has been vocal about the need to defend the country from these dangerous dynamic and we plan to be very active in this front.

Maximo Vedoya: We expect this to happen even though this is the seasonally weakest quarter in the year. Field prices recently buttoned up in this region and this is feeling a restocking in the value change in the commercial market due to low inventory levels. On the other hand industrial market continue to show rather healthy steel demand. The auto industry in Mexico has not been affected by the strikes in the US. The positive price dynamics we are seeing in the USMCA region will be more notable in the first quarter of next year as the lack effect of contract prices in Mexico will be a drug on the fourth quarter realized prices.

In this difficult context <unk> has just finished the realigning of its blast furnace <unk>.

This lengthy investment process together with the territory deteriorating steel pricing environment have suddenly cut.

So honestly I mean as profitability in the third quarter and will.

And we will not see a significant improvement.

Early next year, when the new facilities are ramped up.

Let me finish my comment about Brazil, My comments about Brazil by stating that we are fully committed to see me Ness in these new states. We've got reinforced with genius management teams since we entered the company four months ago.

This new team and the C media has been working round the clock to bring the company to its full potential it many efficiency increasing initiatives are being designed and put in place. The focus today is on the industrial operations. The court of the company we expect.

Maximo Vedoya: Moving to Brazil in this quarter we fully consolidated usinimeth into terms of financing for the first time. So let me review the latest development in Brazilian market. We have always believed the potential of this market is a standing that Brazil has recently been going through some challenges. Steel demand in the country is at reasonable levels but still imports in Brazil increase by 57% in the first nine months of the year reaching the highest level in more than 10 years as a percentage of steel consumption.

This process to be a marathon not a sprint, but im confident that <unk> will be able to increase its competitiveness and regain his position in the market in the Brazilian market.

Let me turn to Argentina.

Although operationally Argentina continued to perform well in the third quarter with relatively stable shipments the constraint to input of inputs for production for our company and our value chain have been worse over time and will likely impact economic activity in the comp.

Maximo Vedoya: And about 80% of flat steel imports are coming from China. This is a big concern not only for usinimeth but for the whole industrial sector in Brazil. With the third of steel import from China the government of several countries in the Americas asking the US and Mexico to take on trade measures to avoid being flooded by unfairly trade Chinese steel. Brazil should follow this same path. The local steel industry has been vocal about the needs to defend the country from this dangerous dynamic and would plan to be very active in this front.

And in the country. The microeconomic in Argentina is currently extremely unstable and the high degree of uncertainty.

Regarding the outcome of presidential electric to be healthy three weeks make it hard to have a clear picture of the measures.

The next administration is going to take to tackle this.

As unsustainable situation, the new administration would likely have to put in place a senior.

Maximo Vedoya: In this difficult context usinimeth has just finished the relining of its blast furnace in Ipatinga. This lengthy investment process together with the deteriorating steel pricing environment have certainly cut their toll on Useminas profitability in the third quarter and we will not see a significant improvement until early next year when the new facilities are ramped up.

Of needed reforms during 'twenty, 'twenty, four which will probably have a toll in economic activity at the beginning the sectors with potential towards or the storm.

In a better past reforms in Azure remain being the energy like a more of that mining and agribusiness sector.

Moving now to our sustained nobility agenda, we are proud to announce that we recently won a bid to extent our wind farm project in Argentina from 72 megawatts of annual capacity.

Maximo Vedoya: Let me finish by comment about Brazil, my comment about Brazil by stating that we are fully committed to Siminas. In this new stage we have reinforced Siminas management teams since we entered the company four months ago. This new team in Siminas has been working around the clock to bring the company to its full potential. Many efficiency increasing initiatives are being designed and put in place. The focus today is on the individual operations, the heart of the company. We expect this process to be a marathon not a sprint but in confidence that Siminas will be able to increase it competitively and regain its position in the market in the Brazilian market.

299 megawatts did this expansion will enable us to replace 90% of the purchased energy for our facilities in the country, reducing a total of over 127000 tons of cotwo emissions per year.

These additional expansion with airlines seamlessly with our current construction schedule, we are proceeding with the PREPA PREPA preparatory work <unk>.

Including routes and expect to initiate the foundation of works. This week, we anticipate installing the first their bids by May next year.

Okay.

In Mexico, we are also making progress with our project to build a steelmaking facility in pesky area using DRA EIF technology, the facility's emission intensity will be almost 70% lower than the world average for the BS Pos route.

Maximo Vedoya: Let me turn to Argentina. A lower operation in Argentina continues to perform well in the third quarter with relatively stable Siminas. The constraints of import for production for our company and our value chain have been worsening over time and we likely impact economic activity in the company and in the country.

And we'll be able to produce all qualities of steel demanded by the auto industry. We have already closed most of the most important equipment procurement contracts for the DIY facility. The EIF and also for the downstream lines like the new call in Cold Rolling Mill and the Galvanizing line.

Maximo Vedoya: The macroeconomic in Argentina is currently extremely unstable. The high degree of uncertainty regarding the outcome of presidential elected to be held in three weeks make it hard to have a clear picture of the measures. The next administration is going to take to tackle this unsustainable situation. The new administration would likely have to put in place a series of needed reforms during 2024 which will probably have a toll in economic activity at the beginning. The sectors with potential to water the storm and prosper in a better post-reforms scenario remain being the energy, bacamoarta mining and agribusiness sector.

Yeah.

Let me now make a few final comments to close these prepared remarks.

I'm very positive with what <unk> hit.

I can't off for tenure.

Though the fourth quarter is going to show a decline due to the works in the blast furnace <unk> and the reset of contract prices in Mexico, which we should see improvement beginning in the first quarter next year one of the blast furnace.

<unk> ramped up and the new pricing scenario in Mexico reflects on our financials.

With a long term view, we working on deepening the synergies of our industrial system in the region, where they've got the ability to serve our industrial customers seamlessly across the continent also we will refocus.

Maximo Vedoya: Moving now to our sustainability agenda, we are proud to announce that we recently won a bid to extend our wind farm project in Argentina from 72 megawatts of annual capacity to 99 megawatts. This expansion will enable us to replace 90% of the purchased energy for our facilities in the country, reducing a total of over 127,000 tons of CO2 emissions per year. This additional expansion will align seamlessly with our current construction schedule. We are proceeding with a preparatory work, including routes and expect to initiate the foundation of works this week. We anticipate installing the first turbines by May next year.

The expansion of our facility in place Korea, which will turn into the most sophisticated and sustainable steel industry system, India Americas.

Alright.

Pablo go ahead with your analysis of <unk> performance in the third quarter.

Thank you Maximo and good morning to everybody and thanks again for participating today and our conference call.

In today's presentation, we will review, our operations and financial performance and the effect of the consolidation of <unk> in the fourth for the fourth time in the third quarter of this year.

If we go to page three of the <unk> operating results were relatively strong in the third quarter in line with operating results.

Maximo Vedoya: In Mexico we are also making progress with our project to build a steel-making facility in Pesquaria using DRI EIS technology. The facility's emission intensity will be almost 70% lower than the world's average for the B.F. B.O.F, route. And we'll be able to produce all qualities of steel demanded by the auto industry. We have already closed most of the most important equipment procurement contracts for the DRI facility, the EIS, and also for the downstream lines like the new Coilin Reef Coil rolling mill and the galvanized lines.

Last year.

[laughter].

And you can see moderate.

Sequential basis perspective.

And you can see the adjusted EBITDA adjusted EBITDA.

<unk> hundred $98 million in the third quarter.

2% versus the same period of last year and down 22% versus the second quarter.

The sequential decrease in adjusted EBITDA was mainly the result of lower prices and higher costs.

Partially offset by higher shipments.

Adjusted EBITDA margin in the third quarter was 13% down from 23 in the second quarter.

Maximo Vedoya: Let me now make a few final comments to close these prepared remarks. I am very positive with what Sternium's are set, what's ahead of the photonium. Although the fourth quarter is going to show a decline due to the works in the blast furnace in Eusimina and the double reset of contract prices in Mexico, which we should see improvement beginning in the first quarter next year. One, the blast furnace in Eusimina has run up and the new price in scenario in Mexico reflects on our financials. With a long good term view, we will be working on deepening the synergies of our industrial system in the region with the capability to serve our industrial customers seamlessly across the continent.

Momentum with Madison was effective on one side.

Recent realized prices in the U S MCA market on the other side by the consolidation of usually mean, that's operating result, as usual quarterly automobile modestly in the period.

Looking forward.

We expect adjusted EBITDA to decrease in the fourth quarter due to decrease in the Borgata team, partially offset by slightly higher <unk>.

We will analyze these more details in the coming slides.

Moving onto net result, adjusted net income and adjusted earnings per ADR.

Decreased sequentially to $323 million or $1 38.

We expect to meet their fleet.

Maximo Vedoya: Also, we will be focused on the expansion of our facility in Pizcaria, which will turn into the most sophisticated and sustainable steel industry system in the Americas.

The decrease in operating result are noteworthy.

Yourself.

Yeah.

Yeah.

Adjusted net income was calculated.

Adjusted to exclude a $1 1 billion noncash loss related to the increase in the participation.

Pablo Gritia: All right, please Pablo go ahead now with your analysis of Sternium performance in the third quarter. Since maximum and good morning to the audience, it's a great opportunity today in our conference call. In today's presentation, we review our operations on financial performance and the effect of the consolidation of Eusimina in the first four fourth time in the third quarter of this year. If we go to page three of the presentation, we will see that Sternium's operating result will relatively stop shown in the third quarter in line with operating results in the same period of last year.

These more recent government right.

Let's turn now to our shipment performance on page four.

Mexico expected.

<unk> reached a new all time high of $2 1 million tons in the third quarter.

Shipments were up 5% sequentially and 24% versus the prior year third quarter supported by sustained market demand and EMC or some logistic constraints affecting our performance in the second quarter.

Opex in the market are quite positive with continued healthy demand in the industrial sector are really active commercial market.

Pablo Gritia: Excuse me, and decreasing more at millions on a sequential basis as expected. As you can see in the chart in the top, adjusted the VBA reached $698 million in the third quarter. Up, 2% versus the same period of last year and around 22% versus the second quarter. There's a question decrease in adjusted the VBA was mainly the result of low relative prices and higher costs. Pasha had upset by higher statements. Adjusted the VBA margin in the third quarter was 13% down on 23 in the second quarter.

Lower inventories and increase in steel market prices.

In Brazil reported volumes in the third quarter was almost entirely attributable to the consolidation of UC Minas.

The industrial sector in Brazil accounted for approximately 70% of <unk>.

Looking forward to the fourth quarter, we expect shipments in Brazil to remain relatively stable.

In the southern region shipments.

603000 tons in the third quarter up 7% sequentially, mainly due to deconsolidation of assays in the country.

Pablo Gritia: As Max mentioned, this margin was affected on one side by every increase in realized the prices in the Eusimina market and on the other side by the consolidation of Eusimina operating results. As Eusimina is recorded almost nearly marginally in the period. Looking forward, respect adjusted the VBA to decrease in the fourth quarter due to decrease in the fourth quarter. Pasha had upset by slightly higher statements. We will analyze these in more details in the coming slides.

Looking forward, we anticipate a sequential decrease in shipments in the fourth quarter, mostly as a result of the import restrictions in Argentina already mentioned by Maximo.

In Argentina, the uncertainty regarding the steel demand remain remains high as the New administration will take office in December.

Expecting to see which are the new measures that the company that the government will be taken.

Pablo Gritia: Moving on to net results, adjusted net income and adjusted earnings per ABS decreased sequentially to $323 million and $1.20 and 38 cents respectively, reflecting the decrease in operator results and lower workforce tax results. Adjusted net income was calculated as net result adjusted to exclude a 1.1 billion non-cast loss related to the increase in the participation in the seminars. We will analyze these in more detail in coming slides.

In the next page number five you can see that combined with these developments we arrived at consolidated shipments of four 1 million tons.

Looking forward, we expect shipments to increase slightly in the fourth quarter.

Consolidated net sales were $5 $2 billion.

Total net sales of <unk> products accounted for $5 billion of mining and other product net sales accounted for $221 million.

<unk> reported iron ore shipments to third parties of $2 2 million tons in the third quarter as a result of deconsolidation of the stimulus.

Pablo Gritia: Let's start now to our shipments performance on page 4. In Mexico, expected Ternius shipments reached a new, old and high of 2.1 million tons in the third quarter. Shipments were up by percent sequentially and 24 percent versus the prior year third quarter, supported by the same market demand and amissy of some logistics and chain affecting our performance in the second quarter.

<unk> mining operations in Mexico continue exclusively serving our owner of it.

The country.

Moving to steel price consolidated revenue per ton in the third quarter was down sequentially by $74 and decreased year over year about close to $160 per tonne.

Pablo Gritia: Prospect in this market are quite positive. We continue healthy, demanding industrial sector are a very active commercial market, given by low inventories and increasing steel market prices. In the field report volumes in the third quarter were almost entirely attributable to the consolidation of new seminars. The industrial sector in Brazil accounted for approximately 70 percent of the shipments in the period. Looking forward to the fourth quarter with the achievement in Brazil to remain relatively stable. In the southern region shipments were 603,000 tons in the third quarter, up 7 percent sequentially, mainly due to the consolidation of the similar sales in the country.

In the third quarter. The sequential decrease was mainly the result of the lower steel prices in Mexico with a negative trend in benchmark steel prices was partially offset by higher interest cost.

Contract prices.

Looking forward of or anticipate realized steel prices to decrease further in the fourth quarter, reflecting lower industrial contract prices in Mexico, and lower realized oil prices in Buffy.

Let's now review adjusted EBITDA and net income on page six.

From the jump off the top.

The main reason behind the decrease in adjusted EBITDA was a decrease in realized prices.

<unk> costs.

Partially offset by higher shipments of the consolidation of using us did not significantly EBITDA in this quarter.

Pablo Gritia: Looking forward, we anticipate the sequential decreasing statements in the fourth quarter mostly as a result of the import restrictions in Argentina already mentioned by maximum. In Argentina, the uncertainty regarding the steel demand remains high. As a new administration will take office in December and we are expected to see which are the new measures that the government will be taking.

At the bottom you can see the impact of net result of the lower operating income lower taxes itself and the noncash effects.

The increase in the participation in these meetings.

The infusion of the participations you didn't ask a full noncash effects and $135 million.

Due to the recycling of other comprehensive income to net results.

Pablo Gritia: In the next page number five, you can see that combining these developments we arrive at consolidating the achievement of 4.1 million tons. Looking forward, we expect the achievements to increase slightly in the fourth quarter. Consolidating net sales were 5.2 billion dollars of the total net sales of steel products accounted for 5 billion dollars. And mining and other products net sales accounted for 221 million dollars. Turning reported iron ore shipments to third parties of 2.2 million tons in the third quarter, as a result of the consolidation of the seminars.

And they're hungry and $71 million loss.

A remeasurement of Permian Stakes in Salinas, resulting from the purchase price allocation.

And I had it on $35 million loss mainly include.

Currency translation adjustment losses accumulated along the years in connection with repeat precision feeding when Rio basins in the U S. Dollar on the evaluation of <unk> stake.

This loss was non cash we have no income tax effect and did not change the value of <unk> equity.

Moving on to income tax result wouldn't go to revert back loss.

Pablo Gritia: As termings, mining operations in Mexico continue exclusively by serving our own iron needs in the country. Moving to steel price, consolidating steel revenue per ton in the third quarter was down sequentially by $74 and decrease year-to-year about close to $160 million. In the third quarter, the sequential decrease was mainly the result of the lower steel price in Mexico, with a negative trend in benchmark steel prices, was partially upset by higher industrial cost contact prices.

New Mexico, and Argentina subsidiary in connection with the depreciation of the local currency.

To the U S dollar.

Now, let's review in the next page our cash performance cash from operations was $945 million.

Quarter aided by a $388 million decrease in working capital.

Pablo Gritia: Looking forward to anticipate, realize steel prices to decrease further in the fourth quarter, reflecting lower industrial contact prices in Mexico and lower realized steel prices in Brazil.

This was mainly due to lower inventories, partially but usually mean on failure.

Yes.

Free cash flow reached five one.

Hundred $63 million in.

In the third quarter after capex of $392 million.

We invested 100 on a.

$19 million.

In the acquisition of original shares of Humana.

Pablo Gritia: Let's now review adjusted the BDA and the income on page 6 on the chapter of the top. The main reasons behind the decrease in adjusted the BDA was the decrease in realized steel prices and higher cost. Partial upset by higher shillment as the consolidation of the cityness did not significantly can untie the BDA in this quarter.

<unk>, we consolidated usually means a net debt position all in all net cash position increased $200. During this quarter, reaching $2 $4 billion by the end of September.

Let's now turn to page eight of the presentation to review our performance in the first nine months of the year.

These shipments were eating over 10 million tons in the video increasing $1 3 million tons year over year.

Pablo Gritia: At the chair of the bottom, you can see the impact of net results of the lower operating income, lower the tax results and the non-cash effects to increase in the participation in incentives. The increase in the participation of sininas has two non-cash effects and $135 million loss due to the recycling of other capacity income to net results. A $131 million loss due to the remissionment of termion steaks in sininas resulting from the purchase price allocation.

Maintaining between these two videos were on the positive side, an increase of one 3 million tons in Mexico also a replay and the consolidation of <unk>, which added about.

1 million tons on the outside.

Lower shipment.

In our markets as a region totaling around 600000 ton as higher level of input.

Degradation during 2023 between our REO.

Pablo Gritia: The $135 million loss may be included in currency translation adjustments. The loss is accumulated along the years. In connection with the depreciation of the graphene of real versus the US dollar on the evaluation of termion steaks in sininas. This loss was non-cash, it has no income tax effect and did not change the value of termions equity.

As a major slot facility and our operations in Mexico would you like to.

And even over 400000 tons of love shipments to third parties in the comparison.

Adjusted EBITDA in the first nine months of the year were $2 1 billion decreasing from $3 $1 billion in the same period of last year.

Mainly as a result of lower steel prices, partially offset by lower costs.

Pablo Gritia: Moving on to income tax results, we recorded a third-tag loss at termion Mexico and Argentine as a theory in connection with the depreciation of the local currency to the US dollar.

Adjusted net income was $1 $5 billion in the first nine months lower than the $2 $1 billion. In this NPV of 2020 with adjusted earnings per Avs of $6 48.

Pablo Gritia: Now let's review in the next page our cash performance. Caster operations was $945 million in the per quarter, a by a $388 million decrease in working capital. This was mainly due to lowering interest partially at sininas and higher pay efficiency. Three cash flow rates, $563 million in the third quarter after a couple of $382 million. We invested $19 million in the acquisition of original shares of sininas and in addition, we consolidated using the net debt position. All in all, termion net cash position increased $200 during this quarter, reaching $2.4 billion by the end of September.

This was the result of lower operating result, partially upset by default back to yourselves.

Moving on to shareholder return on November 16.

At <unk>, we will be paying the first part of our yearly dividend corresponding to 2023.

The interim dividend announced amounted to $1 10.

But.

Representing 22% increase over the interim dividend paid last year.

Now in the final slide number nine you can see things accumulated cash flow performance Gazprom operate operations with $1 6 billion in the first nine months of the year with a stable working capital.

And free cash flow of $828 million after capex of $778 million.

Pablo Gritia: Let's now turn to page 8 on the presentation to review our performance in the first nine months of the year. The achievement was really over 10 million tons in the period, increasing 1.3 million tons every year. We maintained between these two videos where on the positive side is the increase of 1.3 million tons in Mexico, as I already explained, and the consolidation of each minas, which added about 1 million tons.

Okay with this we finish our prepared remarks. Thank you very much for your time attention. We are now ready to take any questions. You may have please operator proceed with the Q&A session.

Thank you.

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, we will pause for just a moment to compile the Q&A roster.

Pablo Gritia: On the other side, we have low achievement in other markets and other regions, totaling around 600,000 tons, and higher levels of integrations during 2,000 and 23 between our Rio, the Generous Love Facility and our Operations in Mexico would like a little over 400,000 tons of lakhs of achievements to reserve parties in the company. Foundation, Adjustice DBA in the first nine months of the year were 2.1 billion dollars, decreasing from 3.1 billion dollars in the same period of last year, mainly as a result of lower retail prices, partial upset by lower costs.

Your first question comes from Carlos de Alba with Morgan Stanley. Please go ahead.

Yes, good morning, gentlemen, and thank you very much. So first question is just very simply what do.

Do you have a number for turning EBITDA exclusive munis.

Okay.

Okay.

As I was expecting for the second.

Oh, yes.

Just maybe one Scott.

We have seen the analysis that you that the difference.

I have been doing is not exactly the same the number ex using us because.

Pablo Gritia: Adjustice Metincam was 1.5 billion dollars in the first nine months, lower than the 2.1 billion dollars in the same period of 2022. With Adjustice, Hermin paid the US of $6 and 48 cents. This was the result of lower operational result, partial upset by a higher default actually result.

Know that we need to reflect the number of as you mean as accordingly, and will be a testament of the purchase price allocation. So the number that we have been reflected in our numbers.

You mean as in an hour.

$25 million.

<unk> is a very minor number that we have received from using the.

Pablo Gritia: Moving on to shareholders return on November 16, 2023 will repaying the first part of our yearly billion corresponding to 2023. The Interindignant announced amounted to $1 and 10 cents per ABAs representing 22% increase over the Interindignant paid last year. Now in the final slide, number nine you can see terms of cumulative cash flow performance, cash flow operator operations which 1.6 billion dollars in the first nine months of the year with stable working capital. This led to 3.8 billion dollars after the capex of $778 million.

Consolidation during this quarter, we have already mentioned.

Pablo Gritia: Okay, we finish our work with every month.

Pablo Gritia: Thank you very much for your time, attention.

Operator: We are not ready to take any questions you may have. Please operate or proceed with the Q&A session. Thanks. Thank you. 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. We will pause for just a moment to compile the Q&A roster.

Carlos Alba: Your first question comes from Carlos da Alba with Morgan's family. Please go ahead. Yeah, good morning. Gentleman, thank you very much. So the first question is you're very simply what do you have a number for turning EBDA X to Seminas? Okay, Carlos, I was expecting for your second question. Yeah, I'll ask just maybe one other time. We have seen the analysis that you that the different analysts have been doing. It's not exactly the same, the number X using in us because you know that we need to reflect the number of using in us accordingly to the adjustment of the purchase price allocation.

<unk> very.

Interest project that as you know, we haven't decided he's going through a little button in some cases.

We are making all the progress so that we can decide.

If we go through two studied right immediately there's a team working on that project, particularly but that's the only thing we will never.

Came on line again, I mean, we will have a plan probably for two <unk>, but in the long term, but we do not include blast furnace for sure.

Carlos Alba: So the number that we have been reflecting our numbers of using in us is a little about $25 million. In any case, it's a very minor number that we have received from the use in us consolidation during this quarter. As we have already mentioned, and the maximum on myself, we are not expecting to see in a different number till the first quarter of next year, where we will be starting to see more normalize a level of a VDA generation. But you're not going to disclose what was the EBDA before Seminas? No, no. From now on, we need to be consolidating the numbers altogether. All right, good.

And for the Coke, we have been doing some progress in the Coke we shut down.

Owned facilities that where we were spending a lot of money and in the near future. We are going to have the solution for the coke in a much smaller probably.

Mm scale than we have too so all of the things we are going through in.

In in in in.

The day to day work and be objective.

You know he said that all the facilities.

Reach the standard level that we have out that a new at the end.

Maximo Vedoya: And then the other question I have is, have you, when do you expect to come up with a plan for Seminas? Clearly, a lot of things going on, besides just stabilizing the operations, you need to decide whether you're going to invest or repair in the cooking or oven batteries, if you're going to invest in the mining business, if you're going to restart the Cuba-Tao blast furnaces, or maybe perhaps you're going to do an electric car furnace there.

We have opportunities and most of the lines of course, you mean and I were objecting or no plan is to do that to have the same standards asking petting him.

Oh I hope I.

<unk>.

That sounds good yeah.

Call him excellent. Thank you very much.

Final question on my end.

Back on the queue is.

From them.

And what is it this is around Oh two point.

Maximo Vedoya: What are you in mind? And when should we expect you to announce the plans for first? Yeah, we don't, Carlos, hello, Maximo, how are you? Thanks for the question. We don't have a date to announce the plants. We are doing the some of the plants where we're already taking care and some of the other things we are still analyzing. Clearly, Musa is a very interest project that as you know, we have not decided going through, but in some cases, we are making all the progress so that we can decide if we go through to start it right immediately.

3.6 billion.

In cash and cash equivalents plus other investments that you reported.

$1.3 billion in Argentina, and given where we have seen happening there with a currency.

How how do you mark to market. These cash position that you have in Argentina, what what more can you add the giving and then obviously there is a key concern from from the market on a significant amount of cash that you have or.

Cleveland and that you have in Argentina.

Yeah.

Learning.

Something to do with all of that because it's an important thing.

Mentioned.

You said that we have iPhone September $1.25 billion.

Maximo Vedoya: There's a team working on that project in particular. Blasphonies in Kubatao will never came online again. I mean, we will have a plan probably for Tubertao, but in the long term, but we do not include Blasphonies for sure. And for the coke, we have been doing some progress in the coke. We shut down old facilities that were we were spending a lot of money. And in the near future, we are going to have the solution for the coke in a much smaller, probably scale than when we have to.

Basically you know to do that.

Of that.

Have different instruments.

I think I've mentioned in the past.

We will do he took over this exposure heaviness, Indiana.

Are you.

To do that we need to use the limited instruments. That's 11. These days in the country. So we are we are having.

More of a fraction of that.

Which is related to basically.

Instrument, which are basically for the day to day operation.

Maximo Vedoya: So all these things we are going through in a, in, in, in, in. In the, in the day today work, the objective, as you know, is that all the facilities reach the standard level that we have a turnium at the end. I mean, we have opportunities in most of the lines of us. We mean that and our objective and our plan is to do that, to have the same standards as in turnium. I hope I put that on that. That's good, that's a very good color, Maxion. Thank you very much.

Bunny.

A significant portion of around $100 million, Nevada.

On Barnes and Barnes.

That.

$2 or are you going to be $19 benefit.

<unk>.

Instruments like corporate bonds. So.

This last one not exposed to any devaluation on the government to your supervisor because of the video and.

Directly dollar instruments.

They they usually seem to relationship do you have some time bonds that we need to account for them.

Carlos Alba: And just many final questions on my end and I'll get back on the queue is from them. What is it is around two point, yeah, almost 3.6 billion in cash and cash equivalence plus other investments that you reported 1.3 billion are in Argentina. And given you what we have seen happening there with the currency. How, how, how, how do you mark to market this cash position that you have in, in Argentina, what, what more color can you add there given that obviously there is a key concern from, from the market or on, on this significant amount of cash that you have or, or equivalence that you have in Argentina.

At the official exchange rate. So there we are exposed to any.

Devaluation any fluctuation of the value of the dollar Bill you off that bonds.

Market and also.

B B b.

They are between the official exchange rate.

The finance so.

We found that the best instrument to protect our our money in the country.

We.

<unk>.

We have not.

Let's say, we are to marketing that bonds, but taking into consideration b O official eccentric when you're the only one that you can use in the country I don't know if I play via your point, but if you have any other specific but if you can.

Carlos Alba: Yeah, Carlos, let me, let me talk a little bit about that because it's an important thing to mention. As you, as you said, we have a sort of September 1.25 billion dollars in cash in, it based in Argentina of that we have different instruments. As we have mentioned in the past, the way we want to hedge or cover this exposure that we have in Argentina is to the dollar and to use, in order to do that, we need to use the limited instruments that are available these days.

On this point.

Try to do those jobs.

Just when when follow up there what is it oh, the 800 minimum more or less.

In bonds and yours bonds, how much is Argentine government bonds and how much is <unk>.

Private companies bonds.

Of the one of.

800 million.

This is hundred per cent.

Carlos Alba: So we are having a more fraction of that which is related to peso-dominated instruments which are basically for the day to day operation of the company. A significant portion of around the hundred million dollars that are based on bonds, Argentine bonds that are quoted in dollars or are denominated in dollars, better said. And other instruments that are directly dollar denominated instruments like corporate bonds. So this last one and not exposed to any devaluation on the currency or in a situation because of the variant are directly dollar instruments.

I think I phones, we have an additional $200 million on corporate bonds.

Okay, Alright, and then about 300 in vessel they don't mean anything instruments.

Yeah I live in there because the other link basically I mean.

Instruments.

Among other things, but yes, okay.

Okay. Thank you.

You're welcome.

Thank you. Your next question comes from the line of Timna Tanners with Wolf Research. Please go ahead.

Yeah, Hey, good morning.

[noise] about combining and why that's a little bit more about.

Obviously.

But.

Not as close to that would be helpful to get a sense of what that cadence of costs could look like once that last one.

Carlos Alba: The issue is in relationship to the Argentine bonds that we need to account for them at the official exchange rate. So there we are exposed to any devaluation, any fluctuation of the value, the dollar value of that bonds in international market. And also in the gap that is there between the official exchange rate and the financial exchange rate. So we found that the best instrument to protect our money in the country.

Just looking at them.

Alright.

And in that format or whatever way you can share with us how you think of those costs falling off and specifically any thoughts on the fourth quarter.

What's that prices coming down or are we going to see any relief on top.

Okay, let let me hi, how are you eliminate the danger.

That goes down the monkey alone you can come into the pricing environment.

So let.

Let me first give you a direct answer them then we would you like to eat on that we are expecting to see very similar cost coming into the fourth quarter.

Carlos Alba: And we are not let's say we are marked to marketing that bonds but taking to consideration the official exchange rate which is the only one that you can use in the country. I don't know if I clarify your point but if you have any other or specific clarification on this point please let me know and we will try to do that. Just one follow up there. What is of the 800 million more or less that are in in bonds in US dollar denominated bonds?

Why first of all because we haven't seen changes in the price of the recycled materials.

Underprice yourself or.

Lots of we will go through our finances.

The first one.

Though with a fetish.

Do you rely on you know Vanessa.

You mean us we have not suspecting yet to see the impact of that during the fourth quarter and we are expecting to start to see that during the first quarter of next year. So clearly we are not.

Carlos Alba: How much is Argentine government bonds and how much is the private company bonds? Of this 800 million dollars that this is 100 percent Argentine bonds. We have an addition of 200 million dollars on corporate bonds. And then about 300 in personal denominated instruments. We are living there because dollar link personal denominated instruments among other things. But yes. Okay, thank you. You're welcome. Thank you.

Selecting the cost of producing our own fluff.

Using enough, but the cost of imported or purchase laughs. So all in all we are not expecting to see much changes.

In the different parts of W.

<unk> cost coming into the fourth quarter.

We are expecting to see in the first quarter B increase in price.

In.

And the whole W. Only considering thank you baby.

Timna Tanners: Your next question comes from the line of Kim Netanners with Wolf Research. Please go ahead. Yeah, hey, good morning.

Mmm.

The other one was prices yeah.

Timna Tanners: I want to talk a little bit more about good morning. I want to ask a little bit more about costs. Obviously things are a little muddied with the addition of losing minutes but not as close to that store and would be helpful to get a sense of what the cadence of costs could look like once the blasphemous realign is done. Just looking at the pertinent members, if you have it in that format or whatever way you can share with us how you think of those costs falling off. And specifically any thoughts on the fourth quarter cost with the price. This is coming down and we're going to see any relief on costs.

Up.

<unk> in the.

I was just wondering about the order of magnitude about how to think about the relying a magnitude of that cost coming up I heard that it was gonna be low I was just wondering if there is any color there.

Clearly will be much lower because.

As you know.

We will be we are at these moments are you do you need us at the moment is expensive lap. So the whole marching off of buying flavia against produce lab will be getting by the company enter into the first.

Yeah. So what I remember you would like to put that it's quite a significant number of them will be helping turned me on to to recover.

Maximo Vedoya: Okay, let me, hi Timna, how are you? Let me tell first the issue of the cost on the maximum you only can come from the pricing environment. So, let me first give you a direct answer and then we will try to leave on that. We are expecting to see very similar costs coming into the fourth quarter. Why? First of all, because we are not seeing much changes in the price. We have a different material and the prices of slaps that we go through our financials in the fourth quarter.

The ability to go at much lower number or the lower number of calls on the cost side together, we are things that we need to consider like the impact of some reviews pricing and costs.

Raw materials.

And the other thing is.

He said currently using meanness, he's working with to the other two blocks from his number one and number two.

Which are very small and not very efficient.

A number three.

Maximo Vedoya: Though we have finished the relining of the blasphemies in Simina, we are not expecting yet to see the impact of that during the fourth quarter and we are expecting to start to see that during the first quarter of next year. So clearly, we are not reflecting the cost of producing our own slaps in Simina, but the cost of imported or purchased class. So, all in all, we are not expecting to see much changes in the different parts of Ternium in relationship to cost coming into the fourth quarter. And we are expecting to see in the first quarter the decrease in price in the whole Ternium on the consolidated basis.

Much bigger and much more competitive so you are going to change at least one of these small glass finished for the big one.

Got it that makes sense. Okay. So then yeah. That's part of my question is really young and your plan prices. So that price hikes that are being announced now in the U S. I really more of a first quite a story so far attorney I'm, giving it lacks a corner cause of that contract structure does that mean these price hikes that are announced now are more of a second quite a story are they also going to be.

Logging into that the first quarter like typical delays.

[laughter].

Yeah, 471, and we got talking about Mexico, now Ah Yeah Ah.

Remember affordable sending that where she meant in in in in Mexico or commercial spot markets. So we are seeing from the last two or three weeks and increasing prices how much of that is going to be in the fourth quarter.

Not much but.

Maximo Vedoya: The other one was prices. Sorry, Timna. So I was just wondering about the order of magnitude about how to think about the real line and magnitude of that cost coming up. I heard that it was going to be lower. I'm just wondering if there was any color there. Clearly, we will be much lower because as you know, we will be we are at this moment, as you see me in this moment, is purchasing slaps.

November and December we're going to have higher prices that September and October.

On the other side the 60% of his shipments our contract. So you're clear we ended up having we're not going to have any effect on the fourth author and prices in the industrial sector in the fourth quarter are gonna be nowhere.

For the first order, we are going to see increases.

The amount of those increases still depends I need repeat on the increases.

Maximo Vedoya: So the whole margin of buying slab against producing slab will be gained by the company entering into the first quarter of the year. So whatever number you would like to put that is quite significant number that will be helping Ternium to recover the profitability and to show a much lower number or lower number on cost on the cost side. Together, we are things that we need to consider like the impact of some reduced price on slaps and cost and raw material.

That we are going to receive in the next several weeks I.

Think I think everybody things that Brian is at least in.

In the next couple of months are going to continue to improve in the U S. M C a region.

So we are going to see an increase in the first quarter for sure.

Makes sense, Okay, if I could squeeze one way and I just wanted to ask of course that demand Street [laughter].

The demand story, you know it sounds really good.

Maximo Vedoya: And the other thing, Timna, is that current pollution in us is working with two, the other two blocks from this number one and number two, which are very small and not very efficient. And number three is much bigger and much more competitive. So you are going to change at least one of these small blocks for the big one.

[noise] of course and manufacturing.

Or you're not seeing any impacts from higher interest rates some of that color and the last is certainly some.

Action activity unconcerned out.

Any impact some some of her of that higher interest rates that you can.

Mexican region.

Yeah to be honest, we are not seeing that yet and I pulled yet because we haven't been talking for the last couple.

Maximo Vedoya: Got it, that makes sense. Okay, so then the other part of my question is really into your point on prices. So the price types that are being announced now in the US are really more of a first quarter story. So for Ternium, given it often lags a quarter because of the contract structure, does that mean these price types that are announced now are more of a second quarter story? Or are they also going to be lagging into the first quarter?

Of conference calls that we weren't expecting some kind of impact.

But still the Monday still very robust in the U S to be honest and and we are not seeing a decline on on demand.

It's calling all for industrial sectors that are also dependent on the U S.

Production of car increase like seven or 8% in the year and all the other industrial sectors are.

Maximo Vedoya: Like typical delays at four quarters. Yeah, for Ternium, and we are talking about Mexico now. Remember, 40% of our shipments in Mexico are commercial spot markets. So we are seeing from the last two or three weeks and increasing prices. How much of that is going to be in the fourth quarter is not much. But. November and December, we are going to have higher prices that September and October. On the other side, the 60% of our shipments are contracts.

Dining in the same line.

Yeah, we know any degree some that.

And the commercial market in Mexico is also very strong.

No interest rate has increased also in Mexico.

Construction is is is coming back inventory in in in the commercial markets Hello.

So we are not seeing the Suffolk yet.

I think that in some point.

Maximo Vedoya: So you are clear, we are not going to have any effect on the fourth quarter and prices in the industrial sector in the fourth quarter are going to be lower. But for the first quarter, we are going to see increases. The amount of those increases still depends a little bit on the increases that we are going to receive in the next several weeks. I think, but I think everybody thinks that prices at least in the next couple of months are going to continue to improve in the USMCA region. So we are going to see an increase in the first quarter for sure.

[laughter], we're going to see that.

But this is taking much longer thanks, Scott that what do we thought.

So for now we are seeing very robust demand in both markets.

Maximo Vedoya: Makes sense. Okay. I could squeeze one more in.

Thanks again.

Thank you.

Thank you. Your next question comes from the line of Gabriel symbols with Goldman Sachs. Please go ahead.

Hi, Thank you for the presentation. Thank you for taking my questions first question I would like to piggyback on on Tina's question and the Mexican market. So you mentioned, you're you're still seeing strong demand for the market as a whole.

Just wanted to understand how much room to see for turning to continue to gain market share from its competitors in the near term and if you've seen the dynamics change in the market.

Maximo Vedoya: I just wanted to ask the demand story. I think in Mexico, the demand story, you know, sounds really good on reshoring of courts and manufacturing. But are you not seeing any impact from higher interest rates? Some of the color in the US is certainly some weaker construction activity and concern over automotive. So any impact from spillover of the higher interest rates that you can point to in the Mexican region. Yeah, to be honest, we are not seeing that yet.

The implementation of the higher import tariffs are given that.

<unk> sure from inputs was it was also one of the goals here would do it behind investments in the country.

And the second question here would be on dividends. So you announced hire Andrew dividends disorder than you did for the same period last year and you wanted to better understand how we should think about cash returns going for given that you still have a very comfortable cash position attorney them, but at the same time sizable investments to making the <unk> facility and potentially.

Maximo Vedoya: And I put yet because we have been talking for the last couple of of of conference calls that we were expecting some kind of impact. But still, the man is still very robust in the US to be honest. And we are not seeing a decline on demand that is going for industrial sectors that are also dependent on the US production of car increase like seven or eight percent in the year. All the other industrial sectors are kind in the same line as last year.

[noise], hi investments <unk> as well so I just wanted to to understand how we can sector. All these things and to think about cash returns in the future. Thank you.

Okay. Thank you Gabrielle I I started with the first question that needs the mundane Mexico I mean, the the Monday, Mexico as you said, it's it's very robust if you take the nine months of the year.

We are at least 7%.

And last year. So it's a huge increase in demand of course are she'd meant increased much more.

Maximo Vedoya: We know any decrease on that. And the commercial market in Mexico is also very strong, although interest rate has increased also in Mexico. Construction is coming back inventory in the commercial markets are low. So we are not seeing this effort yet. I think that in some point, we are going to see that. But this is taking much longer than Scott that what we thought. So for now, we are seeing very robust demand in both markets.

Maximo Vedoya: Okay. Good stuff. Thanks again. Thank you.

February reasons first our market share against import of course increase and also one of our competitors.

It's not producing in the market. So that's also helpful.

Now what.

We gain more I I think we have steel.

A very huge amount of the market that we can gain.

Our problem is how we increase production because most of our lives today are working I'd, rather full capacity, we have some production in the them culturally meaningful <unk>.

Gabriel Simoes: The next question comes from the line of Gabriel Somos with Goldman Sachs. Please go ahead. Hi. Thank you for the presentation. Thank you for taking my questions.

And we are increasing that production.

Gabriel Simoes: First question, I would like to piggyback on Tina's question in the Mexican market. So you mentioned you're still seeing strong demand for the market as a whole. I just wanted to understand how much room you see for turning to continue to gain market share from its competitors in the near term. And if you've seen the dynamics change in the market, simply implementation of the higher import tariffs, given that gaining share from imports was also one of the goals here with the higher investments in the And the second question here would be on dividends.

And we have to.

I mean imports today are still at high demand, even though the they they increasing the terrorists. Although we have seen some decrease in September from July and August there was a big decrease in September but there are still some.

Imports sure that we can gain with a capacity we have so we're very confident that we can continue gaming these market share in in new Mexico, and we have room for that.

I hope I clarified a little bit your question that'd be out with this.

Gabriel Simoes: So you would now hire an interim dividends this quarter, then you did for the same period last year. And he wanted to better understand how we should think about cash returns going forward given that you still have a very comfortable cash position at Ternium, but at the same time, sizable investments to make in the Piscadia Facility and potentially higher investments at Arizona as well. So just wanted to understand how we can factor all these things in to think about cash returns in the future.

You did thank you.

Okay, you got me limit how long does it take.

Maximo Vedoya: Thank you. Okay, thank you, Gabriel.

Those are the questions you mentioned first of all that the deal was announced.

On entering D V then.

The last two years, though you know that.

What was needed needs to approve the <unk> and the last two years.

The internet.

The same thing.

One third of the total for the year. So there you go.

Maximo Vedoya: I'll start with the first question and it's the Monday in Mexico. I mean, the Monday Mexico, as you said, it's very robust. If you take the nine months of a year, we are at least 7% higher than last year. So it's a huge increase in demand. Of course, our shipments increase much more for several reasons. First, our market share against imports, of course, increase. And also one of our competitors is not producing in the market.

Yeah.

<unk> all the details and that will be paid.

Okay.

On the basis.

I've already mentioned will be around 22% higher than we paid.

Paid last year. So there you have one reflection of what the company relationship to copy that on occasion so.

Outside the normal usage of cause of September at Us and we have already mentioned many times that the spectation off.

Of topics for the next year.

Around $1.5 million without including the Catholics, unless you mean.

Maximo Vedoya: So that's also helpful. Now on what can we gain more, I think we have still a very huge amount of the market that we can gain. Our problem is how we increase production because most of our lines today are working at rather full capacity. We have some production in the hot-free meaning to the busco and we are increasing that production. And we have to, I mean, imports today are still at high demand, even though the increase in the tariffs.

We are expecting to see an additional three.

$300 million around that number for 2024.

So besides that we are.

We.

Can you see that even payment.

Many of the companies.

This is in a position will continue to followed up so.

So basically what we're doing is first of all financing the capex that the company is having you know those insignificant level of capex coming and mix them in the following year to finalize the process, Mexico, and then sustained increasing.

Maximo Vedoya: Although we have seen some decrease in September from July and August, there is a big decrease in September. But there's still some import share that we can gain with the capacity we have. So we are very confident that we can continue gaining this market share in Mexico. And we have room for that. I hope I clarified a little bit your question, Gabriel, with this. You did. Thank you.

The living off of the pavement.

Besides that will complete you we will continue and we are in a position to continue having a very strong financial position.

Maximo Vedoya: Okay.

It's important for the years to come.

Mm.

That's perfect. Thank you very much for the <unk> for the answers.

Thank you. The next question comes from the lineup Rodolpho Adriano reason the angle.

Pablo Gritia: Let me take your second question. Let me mention, first of all, that the dividend that was announced is just an interim dividend. And in the last two years, though you know that Chagos-Mirri needs to approve the final dividend in the last two years, this, the interim represented one-third of the total dividend for the year. So there you have an expectation of the dividend that will be paid on a nearly basis, which as I already mentioned, will be a 122 percent higher than we paid last year.

Please go ahead.

Hi, good morning.

A few questions. My first question is.

In this scenario that we're seeing you mentioned that increase is to import.

<unk>, Brazil.

We've been hearing the local industry discussing.

Lobbying for increasing taxation of imports and I wanted to to hear your thoughts around that.

That's what my my first question.

Yeah.

Yeah, I think it's something that the Brazilian government has to do.

Pablo Gritia: So there you have one reflection of what the company is doing relationship to capital allocation. So outside the normal usage of cash of the company has, and we've already mentioned many times that the expectation of of CapEx for next year is around $1.5 billion without including the CapEx of the Seminas. That we are expecting to see an additional $300 million or around that number for 2024 in the Seminas. So beside that, we are increasing the dividend payment, and as we always mention if the company is in the position, we'll continue to follow that option.

As I said in my initial remarks resolved for most of countries.

Mhm U S Mexico, you're up some Asian countries. They are all protecting against unfair trade.

Especially from China.

I mean, so if you want to have an industry, which I think it's very important in Brazil.

Have to have some defense.

Of that industry, it's impossible today.

If you don't have that so I think it's very important that the government takes into account and I'm very.

Supported of what the.

Low cut Brazilians I'll tell ya, saying I I I.

Pablo Gritia: So basically what we are doing is, first of all, financing the CapEx that the company is having, you know there is a significant level of CapEx coming in next and the following years in order to finalize the project in Mexico, and then sustain and increasing the level of the dividend. Besides that, we will continue and we are in a position to continue having a very strong financial position. We think it's important for the years to come in time.

I fully agree with them.

Okay.

Second question is more about.

[noise] about how do you see mining in this environment because.

We saw Chinese steel hurting too margins for a number of years in the past.

And there was.

Always challenging for this to make us, but the ones that had some type of backward integration, especially into or and or kind of food.

Came out a little bit better than than the rest of you are already have it.

Pablo Gritia: That's perfect. Thank you very much for the answers. Thank you very much. Thank you.

Exposure torn in north so I just wanted to hear his thoughts on on how do you see iron ore overall and what's the.

Rodolfo Angele: The next question comes from the line of Rodolfo Adriano, please go ahead.

We know about the expansion of moves you mentioned that there isn't a decision yet, but how do you go about it what are the what.

What do you need to see to make a decision to go ahead with it and then I have a final question. After this.

Rodolfo Angele: Good morning. I have a few questions. My first question is in this scenario that we're seeing, you mentioned, that increase in still imports in Brazil. We've been hearing the local industry discussing a law being for increasing taxation of imports. I wanted to hear your thoughts around that. That's my first question.

Okay, well I mean, it's not that we have to take the decision today. We are we are working and and.

He knows what to do to analyze and to go all the steps we have before having to have make a decision. These nothing.

These doesn't does not mean that we are not working.

We are working.

Maximo Vedoya: Yeah, Rodolfo, I think it's something that the Brazilian government has to do. I mean, as I said in my initial remarks, Rodolfo, most of countries, US, Mexico, Europe, some Asian countries, they are all protecting against unfair trade. Especially from China. I mean, so if you want to have an industry, which I think it's very important in Brazil, you have to have some defense of that industry. It's impossible today if you don't have that. So I think it's very important that the government takes into account and I'm very supported of what the local Brazilians are saying. I fully agree with them.

And the decision has to be made I think between one and two years.

Maximo Vedoya: Okay.

Because we are going through from the permission and environmental permission, we're going through with all the analyses and the quotations and engineering of equipment. So we are going.

And there was a project.

The project <unk> as if the project is going through.

But the approve of it or the project we have to take it in.

I think it's a little bit more than one year and a half. So that's the only reason why we.

We are not saying a year and a half from now what do we have all the engineering's. When we we do realize what are the different issues of the reserves of the appointments the final cost.

All of these engineering.

We should make an announcement, if we go through or not.

Maximo Vedoya: Second question is more about how do you see mining in this environment? Because we saw Chinese steel hurting steel margins for a number of years in the past. And during that period, it was always challenging for the filmmakers, but the ones that had some type of backward integration, especially to our North, kind of, here came out a little bit better than the rest. You already have exposure to our North. So I just wanted to hear your thoughts on how do you see our North overall?

Okay makes sense.

My final question is my question that goes from any restaurant I didn't know the answer so we do of course know about the changes.

<unk> the controlling shareholder group.

And with Nippon, sending out and leaving gradually more room for the 16th grouping.

And those who munis.

Mmm and.

Question I got was in about when you go if there's.

Maximo Vedoya: And what's the, you know, we know about the expansion of Mousa, you mentioned that there isn't a decision yet, but how do you go about it? What are the, and what do you need to see to make a decision to go ahead with that? And then I have a final question after this. Okay. I mean, it's not that we have to take the decision today. We are working in order to analyze and to go all the steps we have before having to have mega decision.

Any discussion.

Actually about influence to sounding also there stick their to you or Tuesday meals itself anything changes there or not.

No no that has not only got a steel.

Phil and I think it will be 70% as you may not 30% Nippon steel I don't think we're going to change that.

There's any plan to change that remember we also have the same facility in Mexico, where we have 51%.

Maximo Vedoya: This doesn't, as I said, this doesn't, that's not mean that we are not working. I mean, we are working and the decision has to be made. I think between one and two years because we are going through from the permission and the environmental permission. We are going through with all the analysis and the quotations and engineering of the equipment. So we are going. Through the project, through the project of Musa, us, if the project is going through, but the approval of the project, we have to take it in.

And perhaps 49% of that so for that particular, new market for that particularly type of line.

Maximo Vedoya: I think it's a little bit more than that one year and a half. So that's the only reason why we are not saying, a year and a half from now, when we have all the engineering, when we do realize what are the different issues of the reserves, of the equipment, the final cost of all the engineering, we should make an announcement if we go through or not.

I got a on ice.

Maximo Vedoya: Okay, make sense.

Got not galvanize, having kind of a new line for the automotive industry, we are very comfortable.

<unk> with this so I don't see any changes.

Okay.

Very much so it was all for me.

Thank you.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

The next question comes from the line of Carlos to Alba with Morgan Stanley. Please go ahead.

Yeah. Thank you very much I just wanted to follow up maximo on discussion of potentially important stealing pushing Brazil.

Thinking about these how what is the level that jubilee could be.

Feasible for empathizing, Brazil, because I hear you and I hear the preceding it looks like you're just talking about Mexico on the U S. A Canada 20, 25%, but none of these countries export to China as much as Mozilla. So how can the Chinese government, it's already there.

Maximo Vedoya: My final question is, my question I got from an investor, I didn't know the answer. So we of course know about the changes between the control and shareholder group and with Nippon selling out and living gradually more room for the Tequins group in Nusse Minas. And the question I got was in about Unigau, if there is any discussion eventually about Nippon still selling also their stake there to you or to Zimino itself, anything changes there or not.

I'm Gonna go onto other Chinese and we don't want you to steal but we want you to take our iron ore proteins Greens.

Maximo Vedoya: No, no, there has no. Unigau is still, I think it will be 70% Zimino, 30% Nippon still. I don't think we are going to change that or there's any plan to change that. Remember, we also have the same facility in Mexico where we have 51% and Nippon has 49% of that. So for that particular market, for that particular type of line and galvanize galvanize and galvanine line for the automotive industry, we are very comfortable with with this. So I don't see any changes.

I think I'm much more complex discussion diomedes for Mexico, or the U S. So.

We at least agree that we can't get the 20% or.

Or is it more likely that we stay in maybe a 50 anywhere lucky.

Maximo Vedoya: Okay, thank you very much. That was all for me. Thank you.

I think there are two different things got lost and and and.

Vaguely clear I mean, eh going in the primary sector as you said grains and I know.

I think it's more of a commodity market and so is not that.

China is doing Brazil.

Brazil, any fever, or Argentina buying the grains I mean, it's a market.

The market with a practice.

Is set in a very different environment. It has nothing to do with Brazil, China or anything.

In the industrial sector I think is very different because what you cannot.

The roommate, Oh What'd you cannot.

Compete with is unfair trade and what we're talking here about unfair trade.

And that is important I mean, Canada export to to to China, Europe exports to China.

Equipment and everything Nevertheless, why do we have to do is respect the rule of law I respect the rules that you cannot.

Sending to our market with unfair practices.

Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad.

Trade and that's the thing that the Brazilian steel industry and I think other industries should start fighting in Brazil.

Carlos Alba: The next question comes from the line of Carlos the Alba with Morgan Stanley. Please go ahead. Yeah, thank you very much. I just wanted to follow maximum on the discussion of potential imports, still imports in Brazil. Thinking about this, what is the level that you believe could be feasible for import areas in Brazil because I hear you and I hear the Brazilian executives talking about Mexico and the US, Canada, 20, 25%, but none of these countries export to China as much as Brazil does.

If you see what.

The story of Usn's, Yeah, you know the story of Mexico.

So you're off re industry radiation.

We look at each nation, but re re English reputation were clearly have much more higher salaries for four people from the primary sector and in Brazil.

Gone for the last 10 years in a very decent road and.

Carlos Alba: So how can the Chinese government, sorry, the Brazilian government go and tell the Chinese, we don't want you to steal but we want you to take our iron ore and our proteins and our grains. So I think a much more complex discussion than it is for Mexico and the US.

And and I think that some of the problems that Brazil is having.

And so.

Making a case for unfair trade.

Defending from unfair trade, it's a very valid gays from Brazil, and it's I think that the government should.

Maximo Vedoya: So if you realistic that we can get the 20% or hit more likely that we stay maybe 15, we're lucky. I think there are two different things, Carlos and I'm very clear. I mean, going in the primary sector as you said grains and iron ore, I think it's more of a commodity market and so it's not that the Chinese is doing make Brazil any favor or Argentina buying the grains. I mean, it's a commodity market where the price is is set in a very different environment and has nothing to do with Brazil, China or anything.

Go back to the.

So they are thinking.

February is ago, where they did this.

So.

I think it's a completely.

Completely different position.

Alright, I don't know exactly hear about this.

Right here.

It it's something that that it's making very huge I mean, I have a lot of people from Brazil, asking me what is Mexico doing very well.

Because Mexico is doing very well.

To be honest and what Mexico isn't doing what it is exactly this.

Maximo Vedoya: In the industrial sector, I think it's very different because what you cannot permit, or what you cannot compete with is unfair trade. And what we're talking here is about unfair trade. And that is important. I mean, Canada export to China a lot, Europe export to China, a lot of equipment and everything. Nevertheless, what we have to do is respect the rule of law. I respect the rule that you cannot sell into a market with unfair practices of trade.

It's the then yes showing is is is.

Fighting unfair trade.

It's not that the things that that and for Brazil to go this way to have.

Increase in demand to have increasing in growth.

You have to go this way you have to defend your industry. If not you have gone to primary is even more of the economy, which everybody knows is not very good.

Fair enough. Thank you very much when I come up.

You're welcome Carlos.

Thank you. Your next question comes from the line of K O Greener with BTG Pactual. Please.

Maximo Vedoya: And that's the thing that the Brazilian still industry, and I think other industries should start fighting in Brazil. If you see the story of USNCA or the story of Mexico, it's a story of re-industrialization, of re-localization, but re-industrialization, where clearly you have much more higher salaries for people from the primary sector. And Brazil has gone for the last 10 years in a very different road. And I think that's some of the problems that Brazil is having.

Please go ahead.

Hi, Good morning, I, just a confirmation from my side of the <unk>. The call quality is a little poor here you guys mentioned that I mentioned your Capex estimates for 2024 can you please repeat that.

We didn't I dunno inclination.

Yeah.

We we are expecting to her capex off.

2024 $1.5 billion.

Turn you around $300 million for for using it yeah.

Remember <unk>.

Are expected Capex slipped Avenue in 2023 was 1 billion, but because of some of the delays in the contract of Cascadia, That's capex, there's going to be 850 million in.

Maximo Vedoya: And so making a case for unfair trade, for defending from unfair trade, it's a very valid case from Brazil. And it's a thing that the government should go back to be thinking several years ago what they did.

Only <unk>.

Did you say 250 is going to be go to 1.5.

All the investment and <unk> start coming in.

Shininess is going to decline from 600.

I think she's under 50 this year.

<unk>.

300.

Maximo Vedoya: So I think it's a completely different position. I don't even hear about this. And again, it's something that it's making very huge – I mean, I have a lot of people from Brazil asking me, what is Mexico doing very well? Because Mexico is doing very well, to be honest. And what Mexico is doing very well is exactly this. The near-sharing is fighting unfair trade. It's not other thing than that. And for Brazil to go this way, to increase in demand, to have increasing in growth, you have to go this way. You have to defend your industry.

Mmm Alright, that's I think.

Okay. Yeah, that's perfect. Thank you very much.

You're welcome Carol.

Thank you. The next question comes from the line of <unk> with Bradesco. Please go ahead.

Hi, Good morning, Guy I think most of my questions have been answered right now so I just wanted to do a quick question kept location Frank.

There has been a large <unk>.

So just wanted to get some more color on what you are expecting in terms of working hard for me to come in quietly.

Yeah Okay.

Okay, let me coming into that because.

Significant portion of their working Wwe's during these quarter was coming from dizziness.

Carlos Alba: If not, you're going to primarize even more the economy, which everybody knows is not very good. Sorry, no, thank you very much. You're welcome Carlos. Thank you.

So we were discussing in order to prepare the.

Pardon.

Need to build up the inventors of slept so.

Caio Ribeiro: Your next question comes from the line of Kaya Griner with BTG Pactual. Please go ahead. Good morning, guys. Just a confirmation from my side of the call quality is a little poor here. You guys mentioned your CAPEX estimates for 2020. Please repeat that. We didn't – I don't know if we mentioned it. We explained that we are speaking to have CAPEX for 2024 or $1.5 billion. A turnium and around $300 million for using it. Yeah.

A month ago and through the <unk>.

The the the.

That would be to use that that lasts all the there was a.

Dilute it would've been complete that reduction in the relationship.

There was also some capital reaction than we are.

To sustain this excuse me the level of working capital.

In the coming quarter, we mentioned, we are not expecting to see not deeper into the cost of of our product because my theory on some decrease in the price of all of that so.

Similarly online what the what you saw these score with the Internet.

Maximo Vedoya: Remember, Kaya, our expected CAPEX for turnium in 2023 was $1 billion, but because of some of the delays in the contract of Pesqueria, that CAPEX is going to be $850 million. Only turnium. This $850 is going to go to $1.5 because all the investment in Pesqueria start coming in. And Inusimina is going to decline from 600, I think 650, this year, to 300. I think it has. Okay. Thank you very much. You're welcome, Caio.

Good to see next quarter.

Mmm.

Okay. Thank you.

Operator: Thank you.

You're welcome.

Thank you I would.

And I'd like to turn the call back over to turn M. C. E O for closing remarks. Please go ahead.

Thank you.

Thank you all very much for participating in today's call as usual.

Feel free to contact us if you have any question.

Thank you again and goodbye.

Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Camilla Barder: The next question comes from the line of Camilla Barder with Bridesco. Please go ahead. Hi, good morning, guys. I think most of my questions have been answered right now, so I just wanted to answer a quick question, capital location trend. There has been a large working capital release quarter. So just wanted to get some more color on what you're expecting in terms of working capital in the coming quarter. Yeah, okay.

[noise] [noise] [noise] [noise] [noise].

[noise].

Pablo Gritia: Camilla, let me comment into that because a significant portion of the working capital release during this quarter was coming from just Minas. As we were discussing in order to prepare the relimes of the last furnace, Minas need to build up the inventors of slaps. So as the man can go through the relime in process, the 30 to use. That that slaps all the was capital working capital reduction in relationship to in the case of turning the office also some working capital reduction and we are expecting to sustain a similar level of working capital in the coming in the coming quarter.

Pablo Gritia: As we mentioned, we are expecting to see much differences the cost of our product in the cost of raw material and some decrease in the price of our price. Similarly, online what the what you saw this quarter in turn is what we are expecting to see next quarter in in turn into. Okay, thank you. You're welcome. Thank you.

Maximo Vedoya: I would now like to turn the call back over to turn EM CEO for closing remarks. Please go ahead. Thank you and thank you all very much for participating on today's goal as usual.

Maximo Vedoya: Feel free to contact us if you have any questions. Thank you again and goodbye.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.