Q1 2024 Ternium SA Earnings Call
Hello, and thank you for standing by at this time I would like to welcome everyone. <unk> first quarter 2024 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'd like to ask a question. During this time simply press star one.
Followed by the number of cell number one on your telephone keypad.
I would like to withdraw your question again, Please press star one.
Speaker Change: I would now like to.
Speaker Change: I'll turn the conference call over to Sebastian Marti.
Sebastian Marti: Go ahead.
Sebastian Marti: Yeah.
Sebastian Marti: Good morning, and thank you for joining US today My name is Sebastian Marti and I am telling you a snowball IR Uncomplaining senior director.
Sebastian Marti: Getting released yesterday its financial results for the first quarter of 2024.
Sebastian Marti: This call is complimentary to that presentation.
Speaker Change: Joining me today are Chinese Chief Executive officer of maximal with Roger and the Companys Chief Financial Officer, Mauricio will discuss <unk> business environment and performance.
Speaker Change: At the conclusion of our prepared remarks, there will be a Q&A session.
Speaker Change: Before we begin I would like to remind you that this conference call contains forward looking information and that actual results may vary from those expressed or implied.
Speaker Change: Factors that could affect we sell chart contained in our filings with the Securities and Exchange Commission and on.
Speaker Change: Page two in today's webcast presentation.
Speaker Change: What also find any reference to non <unk> financial measures reconciled to the most directly comparable <unk> measures in the press release issued yesterday.
Mr. Miller: With that I'll turn the call over to Mr. Miller.
Miller: Thank you Sebastien good morning to everyone and thank you very much for participating in today's call.
Miller: We began 2024 with strong performance and a healthy.
Miller: The cash flow generation, we delivered good results across all regions. Despite.
Miller: Macroeconomic challenges in some of them as we will discuss later on.
Miller: Our adjusted EBITDA margin reached a recurring level of 17%.
Miller: Or even by higher steel prices and cost efficiency.
Operator: Hello, and thank you for standing by. At this time, I would like to welcome everyone to the Ternium First Quarter 2024 Results Conference Call. All lines must be placed on mute to prevent any background noise.
Miller: We also continued showing a strong financial position, increasing our net cash to $2 billion.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1, followed by the number 1 on your telephone keypad. If you would like to withdraw your question again, please press star 1. I would now like to turn the conference call over to Sebastian Mart. Please do so.
Miller: At the end of March our operation in Mexico, where main market continued to show a positive performance near shoring in North America.
Miller: Intensifying as more manufacturing capacity relocate or expand in the region driven by advantage of geographic.
Miller: Got proximity lower logistic cost and shorter lead times. This trend is particularly favorable for our company as we have a strong presence.
Sebastin Mart: Good morning, and thank you for joining us today. My name is Sebastian Mart, and I am Ternium's Global IRM Compliance Senior Director. Ternium released yesterday its financial results for the first quarter of 2024.
Miller: Diversified product portfolio in this market.
Miller: Demand from the industrial sector grew in the first quarter compared to both the previous quarter.
Sebastin Mart: This call is complementary to that presentation. Joining me today are Ternium's Chief Executive Officer, Maximo Vedoya, and the company's Chief Financial Officer, Pablo Brizzio, who will discuss Ternium's 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 actual results may differ from those expressed or implied. Factors that could affect results are contained in our findings with the Securities and Exchange Commission and on page two of 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. With that, I'll turn the call over to Mr. Veloso.
Miller: The previous quarter and the same period last year.
Miller: The auto industry looks.
Miller: Especially this kind of deal with.
Miller: Good production levels and expectations of reaching 4 million units in 2024, which would be a new record.
Miller: The other hand, the home appliances, and then exit motor industries face some demand headwinds.
Miller: Finally, the commercial market.
Miller: Human activity. After these stocking phase in the first quarter triggered by a downturn in steel benchmark prices in North America.
Miller: Due to these positive trends, we are expecting to see is sequential.
Maximo Vedoya: Thank you, Sebastian. Good morning to everyone, and thank you very much for participating in today's call. Ternium began 2024 with strong performance and healthy cash flow generation. We delivered good results across all regions, despite some macroeconomic challenges in some of them, as we will discuss later on. Our adjusted EVDA margin reached a recurring level of 17%, driven by higher steel prices and cost efficiency. We also continue to show a strong financial position, increasing our net cash to $2 billion at the end of March.
Miller: Increase in shipments in the second quarter of the year.
Miller: Another positive development.
Miller: The recent implementation of a new input tariff by the Mexican government to prevent unfair competition in the local market.
Miller: Over 500 products across various industries adapt our jobs checked.
Miller: Correct.
Miller: Duties, ranging from 20% to 35% <unk> target imports from countries that have no trade agreement with Mexico, such as China.
Miller: And aim to level the playing field for local producer I believe this is an important development that set a positive example to other countries in the region.
Maximo Vedoya: Our operation in Mexico, our main market, continues to show a positive performance. Nearshoring in North America is intensifying as more manufacturing capacity relocates or expands in the region, driven by advantages of geographical proximity, lower logistics costs, and shorter lead times. This trend is particularly favorable for our company as we have a strong presence and a diversified product portfolio. Demand from the industrial sector grew in the first quarter compared to both the previous quarter and the previous quarter and the same period last year.
Miller: Moving to Brazil steam consumption started 2024 on a positive note showing a slight improvement over the previous year.
Miller: The construction sector is slowly picking up driven by lower interest rates.
Miller: Consumer confidence and infrastructure project in the auto industry, the lightest production forecast point to a 6% increase in this year.
Miller: With a medium term view this should benefit us immune activity as it is the largest supplier of steel to the automobile industry in Brazil.
Maximo Vedoya: The auto industry looks... good production levels and expectations of reaching 4 million units in 2024, which would be a new record. On the other hand, the home appliances and electric motor industries face some demand headwinds. Finally, the commercial market is resuming activity after a restocking phase in the first quarter triggered by a downturn in steel benchmark prices in North America. Due to these positive trends, we are expecting to see a sequential increase in shipments in the second quarter of the year.
Miller: <unk> has a competitive edge in terms of quality.
Miller: Our logistics as it operates two strategically located in the southern region of Brazil.
Miller: Those two the main auto clusters.
Miller: On the other hand, the Brazilian steel industry faced a significant challenge from the surge of imports and it still might get under unfair trade conditions, increasing by 16% in the first quarter compared to last year. Most of these imports are coming from China.
Miller: This challenge Brazil.
Miller: Executive Management Committee recently decided to raise import tariffs to 25% for several key products that supports a certain quarter level. This is expected to take effect in 30 days once officially published and to be valid for 12 months.
Maximo Vedoya: Another positive development is the recent implementation of a new import tariff by the Mexican government to prevent unfair competition in the local market. Over 500 products across various industries are subject to duties ranging from 20 to 35%.
Miller: This measure is perhaps less comprehensive than.
Miller: What other countries in the region have implemented but we consider it.
Miller: It is a first step in the right direction.
Maximo Vedoya: These targets imports from countries that have no trade agreement with Mexico, such as China, and aim to level the playing field for local producers. I believe this is an important development that sets a positive example to other countries in the world. Moving to Brazil, steam consumption started 2024 on a positive note, showing a slight improvement over the previous year. The construction sector is slowly picking up, driven by lower interest rates. Consumer Confidence and Infrastructure Projects
Miller: Together with the recovery of its domestic market because <unk> has been focused on restoring its operational efficiency. Following the restart of its main blast furnace in the last quarter of 2023.
Miller: This furnace is now operating and <unk>.
Miller: We expect the level for this stage, resulting in lower seed production costs than in the previous quarters.
Miller: Despite the challenges that remain as phases. It is determined to improve its operational efficiency by applying benchmarking and implementing best practice in various areas across the company.
Maximo Vedoya: In the auto industry, the latest production forecast points to a 6% increase this year. On a medium-term view, this should benefit CIMINA's activity as it is the largest supplier of steel to the automobile industry in Brazil. Luceminas has a competitive edge in terms of quality, service, and logistics, as it operates two mills strategically located in the southern region of Brazil, close to the main autoclave. On the other hand, the Brazilian steel industry faces a significant challenge from the surge of imports into its steel market under unfair trade conditions, increasing by 16% in the first quarter compared to last year. Most of these inputs are coming from China.
Speaker Change: You mean as new management has shown remarkable leadership and competence.
Speaker Change: They took office less than a year ago. However, we must be realistic and acknowledge that this is a gradual process I am confident that <unk> will achieve its goal and overcome its difficulties.
Miller: C Media has also announced a de carbonization goal, which is to reduce scope, one and two emissions intensity rate by 15% by 'twenty 30 relative to 2019 baseline following the world still methodology. This goal.
Miller: Reflects its commitment to global effort to mitigate climate change and to.
Miller: And to the sustainable development of the steel industry in 2024, we will work on formulating our consolidated the coordination roadmap with excuse me yes.
Maximo Vedoya: To address this challenge, Brazil's... Executive Management Committee recently decided to raise import tariffs to 25% for several steel products that support a certain quota level. This is expected to take effect in 30 days, once officially published, and to be valid for 12 months. This measure is perhaps less comprehensive than what other countries in the region have implemented, but we consider it to be a first step in the right direction. Together with the recovery of its domestic market, Cosiminas has been focused on restoring its operational efficiency following the restart of its main blast furnace in the last quarter of 2023.
Miller: Turning now to Argentina shipment declined sharply in the first quarter reflected the negative short term impact of the government's economic stabilization measures on the construction and industrial sectors.
Miller: Argentina is medium term outlook still remain uncertain, but we anticipate a gradual recovery in steel shipment as the economy adjusts to the new policy framework and inflation moderates in the second quarter.
Miller: Expect the agribusiness and the energy and mining sector to lead the recovery.
Miller: We remain confident in the long term potential of Argentina, a country that has abundant natural resources, a diversified industry industrial base and highly skilled workforce.
Maximo Vedoya: This furnace is now operating and at the expected level for this stage, resulting in lower steel production costs than in the previous quarter. Despite the challenges that Jusemina faces, it is determined to improve its operational efficiency by applying benchmarking and implementing best practices in various areas across the company. Ximena's new management has shown remarkable leadership and competence since they took office less than a year ago. However, we must be realistic and acknowledge that this is a gradual process.
Miller: If they come in and succeed in.
Miller: Instead, we decided to be sizing the macroeconomic situations and deregulate.
Miller: Yes.
Miller: Economy.
Miller: Dana will offer many opportunities for growth and development in various sectors.
Miller: Relevant for our operation.
Speaker Change: Before I conclude my remarks, I would like to highlight some key aspect of our strategy and performance that will shape our future in the next few years.
Speaker Change: A crucial part of our strategy plan is to deliver it.
Maximo Vedoya: I am confident that Usiminas will achieve its goal and overcome its difficulties. Uciminas has also announced a decarbonization goal, which is to reduce SCOPE 1 and 2 emissions intensity rates by 15% by 2030, relative to 2019, following the World Steel Methodology. This goal reflects its commitment to the global effort to mitigate climate change and to the sustainable development of the steel industry. During 2024, we will work on formulating a consolidated decarbonation roadmap with. Turning now to Argentina, shipments declined sharply in the first quarter, reflecting the negative short-term impact of the government's economic stabilization measures on the construction and industrial sector.
Miller: Our upstream and downstream project at our industrial century, persicaria on time and within budget.
Miller: We're making good progress in building a significant increase in value added capacity from breaking nine from peak into galvanizing customizing. The first stage of this project we can.
Miller: So financial in 2024 with a peak in line in the first line.
Miller: Our customers.
Miller: Process in the second half of the year. Moreover, the new slab, making mill when complement and integration process that was started more than a decade ago with the construction of the cold rolled and galvanized line at that pace.
Maximo Vedoya: Argentina's medium-term outlook still remains uncertain, but we anticipate a gradual recovery in steel shipments as the economy adjusts to the new policy, framework, and inflation model. In the second quarter, we expect the agribusiness and the energy and mining sector to lead this recovery. We remain confident in the long-term potential of Argentina, a country that has abundant natural resources, a diversified industrial base, and a highly skilled workforce. If the comments succeed
Miller: <unk>, our first Greenfield facility in Mexico.
Miller: The new facility will be capable of producing the whole range of automotive grade <unk> with the lowest carbon emission level in the Americas.
Miller: These projects are vital for our long term success in the region.
Miller: Will allow us to benefit from the near shoring of manufacturing capacity advance, our cotwo emissions roadmap and reinforce.
Miller: Our strong competitive position to replace imports in the Mexican steel market.
Miller: Another key aspect a key element of our strategy for the coming years is to unlock the full potential of <unk>. We believe that <unk> has a great opportunity to enhance its profitability in the long run.
Miller: It will require a steady and consistent effort.
Maximo Vedoya: Stabilizing the macroeconomic situation and deregulating the economy. Sponsored ADR Before I conclude my remarks, I would like to highlight some key aspects of our strategy and performance that will shape our future in the next few years. A crucial part of our strategy plan is to deliver our upstream and downstream projects at our industrial center in Pescaria on time and within budget. We are making good progress in building a significant increase in value-added capacity from peaking to galvanizing and customizing.
Miller: And we will stand by you Simeon as management to help them achieve this goal.
Miller: Okay. Pablo please give us an overview of tenure performance in the first quarter.
Pablo: So its multimodal and good morning to everyone.
Pablo: Before we start I would like to let you know.
Pablo: Really flying supervision and segments to reflect the integration of who should be in the corporation.
Pablo: The new segments.
Pablo: SYGMA.
Pablo: Segment inclusive of.
Pablo: Another product we won that.
Pablo: Mining segment sales of iron ore produced both in Brazil.
Pablo: Yeah.
Pablo: Now, let's review our company's operations.
Speaker Change: I myself himself on the webcast presentation for a more detailed picture of our performance.
Maximo Vedoya: The first stage of this project will come online in 2024 with a pre-clean line and the first line in our customer's process in the second half of the year. Moreover, the new slab making mill will complement an integration process that was started more than a decade ago with the construction of the cold roll and galvanized line at Pesqueria, our first greenfield facility in Mexico. The new facility will be capable of producing the whole range of automotive grade seals with the lowest carbon emission level in the Americas.
Speaker Change: Let's begin with page number three.
Pablo: Turning because I'm afraid to love US performance during the first quarter of this year Mark.
Pablo: Margins on sustain higher sales volume.
Pablo: EBITDA for the first quarter was $855 million up 31% from the prior quarter.
Pablo: Representing.
Pablo: Adjusted EBITDA margin reached 30%.
Pablo: Yeah.
Pablo: These positive operating pro forma was a result of improved pricing and reduced cost.
Pablo: 56.
Pablo: Medium gain related to what we adjusted.
Maximo Vedoya: These projects are vital for our long-term success in the region, as they will allow us to benefit from the near-shoring of manufacturing capacity, advance our CO2 emissions roadmap, and reinforce our strong competitive position to replace imports in the Mexican steel market. Another key aspect or key element of our strategy for the coming years is to unlock the full potential of Usiminas. We believe that Usiminas has a great opportunity to enhance its profitability in the long run. It will require a steady and consistent effort, and we will stand by UCMina's management to help them achieve this goal. Okay, Pablo, please give us an overview of Ternium's performance in the first quarter.
Pablo: And it gives it the trough with transmission cost in Mexico.
Pablo: Looking forward to the second quarter this year and anticipate a decline in recurring adjusted EBITDA. This is mainly due to a decrease in EBITDA margin, partially offset by increased shipments.
Pablo: The decrease in EBITDA margin result, mainly.
Pablo: Hum.
Pablo: Expected decline in revenue per ton within the steel segment across most of the market.
Speaker Change: Moving on to results.
Pablo: Both net income of <unk> eight year demonstrates the significant trend during the first quarter due to our strong operating performance, partially offset by losses associated with FX, we felt the.
Pablo: The basement of scepter hunting boots other bonds holdings, who will go deeper into these results later in the presentation.
Pablo Daniel Brizzio: Thanks, Maximo, and good morning to everyone. Before we start, I would like to let you know that Ternium has redefined its operational segment to reflect the integration of Busy Minas operations. The new segments are Steel and Mining. The Steel segment includes the sales of steel and other products. Meanwhile, the Mining segment includes the sales of iron ore produced both in Brazil and in Mexico. Now, let's review our company's operational and financial results in the webcast presentation for a more detailed picture of our platform. Let's begin with page number three.
Speaker Change: Let's shift our focus to the performance of our three segments.
Pablo: But.
Pablo: With Mexico.
Pablo: Shipments remained strong during the period.
Pablo: Volume experienced a slight decrease sequentially.
Pablo: This decline is attributed to transitory destocking in Mexico commercial steel market.
Pablo: However.
Pablo: It was largely mitigated by strong demand for industrial gas turbines.
Pablo: Moving forward.
Pablo Daniel Brizzio: Ternium has demonstrated strong performance during the first quarter of this year, marked by revamped immersions and sustained high-strength steel-chased bodies. Adjusting the VBA for the first quarter was $855 million, up 31% from the prior quarter, representing a higher Adjusting the VBA margin that reached 17%. This positive operating performance was a result of improved pricing, reduced costs, and a 50-feet Medium Gain Related to a Readjustment of Electricity Transmission Costs in Mexico. Looking forward to the second quarter of this year, Ternium anticipates a decline in the recurring adjustment in the DTA.
Pablo: Shipments in Mexico are expected to increase in the second quarter.
Pablo: Shipments in Brazil were stable sequentially the year over year.
Pablo: The increase reflects the consolidation of issued meaningful on the third quarter of last year.
Pablo: The southern region shipments experienced a significant decline in the fourth quarter of 2020.
Pablo: Sure.
Pablo: We need to reduce the level of Argentina, I'm talking processing boosting value chain due to the negative.
Pablo: Effect of the government of Colombia Southern decision measures.
Pablo: The outlook for Argentina.
Pablo: And in certain yet.
Pablo: Recovery is low can shipments.
Pablo: Starting in the second quarter of this year.
Pablo: Let's now too.
Pablo: In the <unk> segment profitability on the next page focusing on the upper left chart.
Pablo: Sure.
Pablo: See decrease in the first quarter, mainly as a result of the lower shipments.
Pablo Daniel Brizzio: This is mainly due to a decrease in the DTA margin, partially offset by increased shipments. The decrease in the EVDA margin results mainly from an expected decline in revenue per ton within the steel segment across most of Ternium's market. Moving on to results, both net income and earnings per ADS demonstrated significant strength during the first quarter due to a strong operating performance partially offset by losses associated with the effects of the divestment of certain Argentine sovereign bonds holdings. We will go deeper into these results later in the. Let's shift our focus to the performance of our three segments. Page 4.
Pablo: Steel revenue per ton, so slight sequential increase of 2% and Mexico realized steel prices increased by 8%, reflecting the likelihood of industrial contract prices.
Speaker Change: I'll tell you.
Speaker Change: The weak market conditions led to a 6% sequential decline in realized price in the Southern Division moving hip we expect lower realized prices.
Speaker Change: Prices in the upcoming quarter with decreases in most of the new market.
Speaker Change: In the top right chart. We have included two measures of profitability of skill set.
Speaker Change: Cash operating income per ton on cash operating income margin.
Speaker Change: Operating income.
Speaker Change: Because operating income adjusted to exclude depreciation and amortization as well as certain.
Pablo Daniel Brizzio: In Mexico, Ternium's teaching must remain strong during the period. In volume, it experienced a slight decrease sequentially. This decline is attributed to a transitory beef stocking in Mexico's commercial steel market. However, it was largely mitigated by a strong demand for industrial gasoline. Looking forward, Ternium steel shipments in Mexico are expected to increase in the second quarter. The achievements in Brazil were stated sequentially.
Speaker Change: Noncash items you can find a detailed reconciliation of these non-GAAP measures.
Speaker Change: End of the quarter results press release.
Speaker Change: Yes.
Speaker Change: Cash operating income per ton margin for this segment were strong in the first quarter. This was driven by lower cost of purchased life flood and raw material along with improved operating efficiencies as you mean steel facilities in England.
Pablo Daniel Brizzio: The year-over-year increase reflects the consolidation of UC Minas from the third quarter of last year. However, in the southern region, shipments experienced a significant decline in the third quarter of 2024, attributed to the reduced activity level of Argentina and a distorting process in the steel value chain due to the negative short-term effects of government economic stabilization measures. The outlook for Argentina remains uncertain, yet Ternium anticipates a gradual recovery in its local shipments.
Speaker Change: But the previously mentioned gain related to the readjustments.
Speaker Change: Adjustments over the future transmission charges in Mexico had a positive impact on the cost of sales for the division.
Speaker Change: Now, let's turn our attention to page six we examining the performance of the mining segment.
Speaker Change: We observed the Nip case for the mining segment decreased sequentially as a consequence review shipments and lower iron ore prices during the period.
Speaker Change: Primarily due to decreased production levels in Brazil as anticipated.
Pablo Daniel Brizzio: Let's now zoom in on the Steel Segment Profitability on the next page, focusing on the upper left chart, the steel product. Sales decreased in the first quarter mainly as a result of the lower shipments, a steel revenue per ton, so a slight sequential increase of 2%. In Mexico, realized steel prices increased by 8%, reflecting the lack of industrial contract prices at higher levels.
Speaker Change: Do you have any profitability the mining segment cost of operating income per ton a multi in the first quarter so attractive levels although.
Speaker Change: Lower sequentially, mainly to education revenue per ton.
Speaker Change: Now, let's go through the adjusted EBITDA and net income on page seven as previously committed.
Speaker Change: The main drivers behind the sequential increase in adjusted EBITDA.
Pablo Daniel Brizzio: On the other hand, weak market conditions in Argentina led to a 6% sequential decline in realized steel prices in the South. Looking ahead, we expect lower realized steel prices in the upcoming quarter, with decreases in most of Ternium's markets. In the top right chart, we have included two measures of profitability in the steel sector. CAST Operating Income Per Ton and CAST Operating Income Per Ton, Caspo Peretti-Ninca equals operating income adjusted to exclude depreciation and amortization, as well as certain certain non-cash items.
Speaker Change: A significant reduction in the cost and increase in the steel revenue per ton and the gain related to the reassessment of the electricity already mentioned this.
Speaker Change: Were partially offset by a lower contribution from the mining segment.
Speaker Change: The chart at the bottom maybe income in the first quarter, reflecting a sequential increase in operating foreign exchange losses.
Speaker Change: Due to fluctuation of the Mexican peso and Brazilian real compared to FX gains in the prior year quarter.
Speaker Change: And best of FERC tax it yourself, which caused an unusually low effective tax rate in this quarter.
Speaker Change: Now, let's move onto the next slide 12 shows our cash flow performance cash flow from operation were closely despite the $256 million increase in working capital related to an increase in inventories and in case another placebo during the fourth quarter.
Pablo Daniel Brizzio: You can find a detailed reconciliation of these non-GAAP measures at the end of the quarterly result pre-release issued year. Cash operating income per ton and margin for the steel segment were strong in the first quarter. This was driven by lower costs of purchase slabs and raw materials, along with improved operating efficiencies at Uzumina Steel facilities in particular.
Speaker Change: Capital expenditure increased sequentially in the first quarter, primarily due to the completion of the remaining of.
Pablo Daniel Brizzio: Furthermore, the previously mentioned gain related to a readjustment of electricity transmission charges in Mexico has had a positive impact on the cost of sales for the state. Now, let's turn our attention to page 6, where we will be examining the performance of the mining sector. On the left chart, we observe that net sales for the mining segment decreased sequentially as a consequence of the reduced shipments and lower iron ore prices during the. It will be primarily due to the decreased iron ore production levels in Brazil as anticipated.
Speaker Change: The main blast furnace in putting a proceeding on a reduction in the above premium to equipment manufacturers related to the construction of all the new facility.
Speaker Change: The industrial center into studio.
Speaker Change: Finally, we continue to have a very solid financial position with net cash flows.
Speaker Change: So a slight increase in the quarter, mainly related to a valuation of telling you imagined by holding.
Speaker Change: Argentine sovereign bonds.
Speaker Change: Okay.
Speaker Change: We are pleased with our prepared remarks. Thank you very much for your attention and time and now we can open.
Speaker Change: Any question that you may have operator please.
Speaker Change: Let's begin with the Q&A session.
Speaker Change: Now open for your questions.
Speaker Change: To ask a question this time.
Pablo Daniel Brizzio: Regarding profitability, the mining segment, cash-operated income per ton, and margin in the first quarter showed attractive levels, although they were lowered sequentially mainly due to a decrease in revenue. Now let's go to the adjusted EVDA and its income on page 7. As previously commented in the top chart, the main drivers behind the sequential increase in adjusted EVDA were a significant reduction in steel cost, an increase in steel revenue per ton, and the gain related to the reassessment of the electricity revenue. These were partially offset by a lower contribution from the mining sector.
Keybanc: Star then the number one of yourself from Keybanc.
Speaker Change: We've got a path for just a moment to compile the Q&A roster.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: No.
Speaker Change: The first question comes from the line of Carlos de Alba.
Speaker Change: Go ahead.
Speaker Change: Yes, good morning, gentlemen.
Speaker Change: The first question is just a clarification on the $56 million gain related to the <unk>.
Pablo Daniel Brizzio: In the chart at the bottom, net income in the first quarter reflected a sequential increase in operating income. Foreign exchange losses due to a fluctuation of the Mexican peso and the Brazilian real compared to effects gained in the prior quarter and better referred tax results, which caused an unusually low effective tax rate in this quarter. Now, let's move on to the next slide to assess our cash flow performance. Cash flow for the operation was healthy despite the 266 million increase in working capital related to an increase in inventories and in trade and other receivables during the first quarter. Capital expenditure increased sequentially in the first quarter, primarily due to the completion of the relaying of the main gas furnace in Ipatinga, Brazil, and the reduction in the advance payment to equipment manufacturers related to the construction of the new facility at the industrial center in Brazil.
Speaker Change: <unk> of electricity transmission charges in Mexico.
Speaker Change: And maybe I don't know about a macro can you provide some color is this something that you overpaid in the past that you pay more than what you should have and now he's just been reverse back and therefore, you kept it at that.
Speaker Change: Sort of an operational item in your reports.
Speaker Change: Hi, Carlos how are you basically we've also changed the authorities in Mexico introduce some years ago that we have of course, we did not agree with.
Carlos: We have a provision on that.
Carlos: And then we went to court in order to challenge that.
Speaker Change: Finally, we were successful in that so these final by now so we have reversed a 100% of the provision but without undue should not be included anymore in our numbers.
Speaker Change: Alright, Okay, that's clear and then.
Speaker Change: When Argentina two questions one is.
Pablo Daniel Brizzio: Finally... We continue to have a very solid financial position, with net cash that saw a slight increase in the quarter, mainly related to the valuation of Ternium and Argentine holdings of the Argentine Sovereign Board. With that, we have finished with our prepared remarks. Thank you very much for your attention and time. And now we can open the floor to any questions that you may have. Operator, please, let's begin with the Q&A session. We are now open to your questions. To ask a question this time, please press start.
Pablo Daniel Brizzio: I heard that you said that you expect a gradual recovery in volumes.
Speaker Change: No there wasn't a very sharp decline quarter on quarter in the first quarter. So can you maybe provide a little bit more color on it too.
Speaker Change: To interpret a gradual recovery.
Speaker Change: And the other part of the question is on the Argentine Bond holdings that the companies do you have you.
Speaker Change: You saw some in the first quarter.
Speaker Change: But you highlighted in the release that there is still around 240 million on negative comprehensive income in connection to the bonds that used to hold.
Operator: Now open to your questions. To ask a question this time, please press start, then the number 1 on your telephone keypad. We're going to pause for just a moment to compile the Q&A roster. The first question comes from the line of Carlos de Alba. Please go ahead.
Speaker Change: What is the expectation there.
Operator: Planning on potentially selling those bonds.
Speaker Change: What is that yes. Thank you.
Speaker Change: Yes, Hi, Carlos how are you Ah I would take the first one Argentina.
Speaker Change: I mean, there is still a lot of uncertainty in Argentina. So.
Speaker Change: I don't want to give you an exact number on whatever number you have to know that it's it can change.
Speaker Change: Because of the situation, but as I said in my initial remarks.
Carlos De Alba: Yeah, good morning, gentlemen. The first question is just a clarification on the $56 million gain related to the readjustment of electricity transmission charges in Mexico. Maybe, I don't know, Pablo, Maximo, can you provide some color? Is this something that you overpaid in the past, or you paid more than what you should have, and now it's just being reversed back, and therefore you kept it as a sort of an operational item in your report?
Speaker Change: We think that the path is correct.
Speaker Change: Argentina is doing what is necessary to do that.
Carlos De Alba: The first quarter as you saw in the graphic was a huge decline I think it was.
Speaker Change: 40% decline.
Carlos De Alba: If I have to take a number of the second quarter will be.
Carlos De Alba: A decline.
Carlos De Alba: 20%.
Carlos De Alba: The year before not of each quarter and that should give us an increase of 25% or something like that.
Maximo Vedoya: Hi Carlos, how are you? Basically, this was a change that the authorities in Mexico introduced some years ago that we have now. Of course, we did not agree with that; we have a provision for that, and then we went to court in order to challenge that, and finally, we were successful in that, so, and it's final by now, so we have reversed 100% of the provision that we have, and this should not be included anymore in our number.
Speaker Change: Quarter.
Maximo Vedoya: Quarter against quarter. So those are the numbers we are seeing today. So there is a recovery.
Maximo Vedoya: And that is a number we expect but it shouldn't be a fixed number as you know that.
Maximo Vedoya: Develops in Argentina, you should you go very quickly.
Speaker Change: I hope I answered the question with that yeah. That's very clear. Thank you very much and I will not hold you to it.
Carlos De Alba: All right, okay. And then on Argentina, two questions. One is, I heard that you said that you expect a gradual recovery in volumes. You know, there was a very sharp decline quarter-on-quarter in the first quarter. So can you maybe provide a little bit more color as to how to interpret a gradual recovery?
Speaker Change: [laughter]. Thank you Pablo the second one okay.
Speaker Change: Quite complex explain but let me try to we are as simple as possible.
Carlos De Alba: What we have been in the first quarter was that the company.
Carlos De Alba: And the other part of the question is on the Argentine bond holdings that the company still has. You sold some in the first quarter, but you highlighted in the release that there is still around $240 million in negative comprehensive income in connection to the bonds that you still hold. What is the expectation there? Are you planning on potentially selling those bonds? Or what is the idea? Thank you.
Carlos De Alba: Selling all the bonds that we received as a dividend payment from Argentina.
Carlos De Alba: The holding company.
Carlos De Alba: And all the bonds, but the government.
Carlos De Alba: <unk>.
Carlos De Alba: Put in place in order to pay.
Carlos De Alba: Players that were not paid by the former government.
Carlos De Alba: Occurred during the first quarter.
Carlos De Alba: So.
Carlos De Alba: At this point, we needed to reflect the loss.
Maximo Vedoya: Yes, hi Carlos, how are you? I will take the first one.
Carlos De Alba: But the value of these bonds that have been nominal value and then the real.
Speaker Change: Value in.
Maximo Vedoya: Yeah.
Speaker Change: Going through the financial results of the company. The result, we're readying ourselves so.
Maximo Vedoya: Argentina, I mean, there is still a lot of uncertainty in Argentina, so I don't want to give you an exact number and whatever number you have to know that it..., because of the situation, but as I said in my initial remarks... We think that the path is correct, and Argentina is doing what is necessary to do. The first quarter, as you saw in the graphic, was a huge decline. I think it was a 40% decline. If I have to say a number for the second quarter, it will be a decline of about 20 percent.
Maximo Vedoya: At the balance sheet level, there was no change, but these need to be moved from that reserve to the financial results.
Maximo Vedoya: On the audio side with a finite life would be so you will see not any.
Maximo Vedoya: The impact of these in the coming quarter.
Maximo Vedoya: This was not related to the holdings that we have in Argentina, especially related to bonds that the government issue to pay back.
Maximo Vedoya: of the year before, not of this quarter. And that should give us an increase of 25% or something like that. It's a number we expect, but it shouldn't be a fixed number, as you know. It develops in Argentina. You should go very quickly. I hope I answered the question with that.
Maximo Vedoya: Layer on bonds that we have.
Maximo Vedoya: Related to the dividend paid last year from Argentina. So it wasn't a significant impact during the quarter, but is finalized so no impact in relationship to that will be seen in the coming quarters and those have been clear in terms of what I'm, saying is not that easy issue to explain.
Speaker Change: No that does.
Maximo Vedoya: I think so just you then have a loss position in the bonds that you still hold of around $240 million and he's already recorded in comprehensive income right.
Maximo Vedoya: Thank you very much, and we will not call you on it.
Maximo Vedoya: Thank you. Pablo, the second one? Okay.
Pablo: Exactly thats a comprehensive income.
Pablo Daniel Brizzio: That is quite complex to explain, but let me try to be as simple as possible. What we had during the first quarter was that the company ended selling all the bonds that we received as a dividend payment from Argentina into the holding company, and all the bonds that the government put in place in order to pay suppliers that were not paid by the former government. That happened during the first quarter. So at this point, we need to reflect on the value of these bonds, which have a nominal value and then the real value in dollars, going through the financial results of the campaign.
Pablo: You have seen that reserve reviews for $450 million to $250 million and that will depend on the valuation of the bonds that were having.
Pablo Daniel Brizzio: So if there is a third of a reevaluation of the bonds that we said, we will be able to use but again.
Pablo Daniel Brizzio: So we must be reflected in the movement of the reserve will be reflected in the financial result up to the enrollment that we've had to do something with that one.
Speaker Change: Got it thank you very much.
Speaker Change: Youre welcome. Thank you Thomas.
Pablo Daniel Brizzio: Yes.
Coyote data: Our next question comes from the line of Coyote data.
Pablo Daniel Brizzio: North America.
Speaker Change: Go ahead.
Pablo Daniel Brizzio: Okay.
Speaker Change: Yes. Good morning, Thanks for the opportunity. So my first question is on the recently announced the quota as import tariffs for steel products in Brazil, and I know that you commented on them in your initial remarks.
Pablo Daniel Brizzio: These results were already in the reserve, so at the balance sheet level, there was no change. But this needed to be moved from that reserve to the financial reserve. On the other hand, we have finalized this, so you will not see any other impact of this in the coming quarter. This was not related to the holdings that we have in Argentina as cash in hand. This was related to bonds that the government issued to pay back suppliers and bonds that we have related to the dividend paid last year from Argentina.
Speaker Change: But I just wanted to explore a bit further right and whether you think that the measures that were already announced are sufficient enough to quell the pressure from imports that we've been seeing over the past year.
Pablo Daniel Brizzio: Perhaps and also generate an opportunity for price hikes to recompose, our profitability in Brazil in the short term. So over the next few months. So how do you see that playing out and then secondly, you mentioned in your press release that there was an unexpected outage at one of your blast furnaces in Brazil, So I just want.
Pablo Daniel Brizzio: So, it had a significant impact during the quarter, but it has been finalized. So, no impact in relationship to that will be seen in the coming quarters. I don't know if I've been clear because, as I say, it's not an easy issue to explain.
Speaker Change: To see if you can share some more details on that you know what the timing is on resolving this issue and whether you can share any expected impacts on costs as well. Thank you.
Speaker Change: Thank you Kyle I'll take both questions.
Carlos De Alba: That's clear, I think. So you still then have a lost position in the bond that you still hold of around $240 million, and it's already recorded in the comprehensive income, right?
Pablo Daniel Brizzio: The announcement of the measures in Brazil.
Carlos De Alba: As I said.
Carlos De Alba: In my initial remarks, I think that the measurements.
Carlos De Alba: Sure.
Carlos De Alba: Our first.
Pablo Daniel Brizzio: Exactly, that's a comprehensive income, and as you have seen, that reserve was reduced by $400 or $450 million to $250 million, and that will depend on the evaluation of the bonds that we have in hand. So if there is a further revaluation of the bonds, that reserve will be reduced. But again, this reserve will not be reflected, or the movement of this reserve will not be reflected in the financial result up to the moment that we decide to do something with these bonds. Got it.
Carlos De Alba: Step in the right direction.
Pablo Daniel Brizzio: With these measures be NASS.
Pablo Daniel Brizzio: Two two.
Pablo Daniel Brizzio: To combat unfair trade practices, mainly from China.
Speaker Change: I'm not sure I think that a little bit more is needed.
Speaker Change: As you know, we I don't have the exact.
Pablo Daniel Brizzio: Description of how this is going to be implemented as you know it was made public in a conference call, but I don't have yet the details of how it is going to be implemented.
Carlos De Alba: Got it. Thank you very much. You're welcome. Thank you, Carlos.
Pablo Daniel Brizzio: But as I saw it.
Carlos De Alba: The numbers.
Caio Burger Ribeiro: Our next question comes from the line of Caio Ribeiro with Bank of America. Please go ahead.
Carlos De Alba: <unk> in the quarter that is allowed to be imported in some of the product it still.
Caio Burger Ribeiro: Unimportant quarter. So I don't know if it's going to have an impact in prices, but again.
Caio Burger Ribeiro: Yes, good morning. Thanks for the opportunity.
Maximo Vedoya: So my first question is on the recently announced quotas and import tariffs for steel products in Brazil. And I know that you commented on them in your initial remarks, but I just wanted to explore it a bit further, yes, and whether you think that the measures that have already been announced are sufficient enough to quell the pressure from imports, you know, that we've been seeing over the past year and, perhaps, also generate an opportunity for price hikes to recompose profitability in Brazil in the short term, right, so over the next few months.
Caio Burger Ribeiro: As I said I think it's a good first step.
Maximo Vedoya: We should continue working as other government are working I know these measures.
Maximo Vedoya: Are being made in the U S in Mexico in Europe in Turkey, a lot of countries have taken this measurement because of what is happening in China as you realize.
Maximo Vedoya: Last month was one of the highest exports of the heater is China.
Maximo Vedoya: It's more than 10 million tons in one format.
Maximo Vedoya: So how do you see that playing out? And then secondly, you mentioned in your press release, right, that there was an unexpected outage at one of your blast furnaces in Brazil. So I just wanted to see if you could share some more details on that, you know, what the timing is on resolving this issue and, you know, whether you can share any expected impacts on costs as well. Thank you.
Maximo Vedoya: So China eats dumping steel everywhere now and most of the countries are shutting down that unfair trade imports.
Maximo Vedoya: So.
Maximo Vedoya: It's not enough, but it's a good first step.
Speaker Change: I Hope I answer that question with with this the first question Tayo.
Maximo Vedoya: Thank you, Caio. I'll take both questions.
Maximo Vedoya: The announcement of the measures in Brazil, as I said... In my initial remarks, I think that the measure... Step in the right direction. Will these measures be enough?
Caio: Yes, absolutely very clear thank you.
Maximo Vedoya: The blast furnace.
Maximo Vedoya: This will fluctuate as number one in in.
Maximo Vedoya: In <unk> in Brazil.
Maximo Vedoya: And then in Brazil facility in Israel.
Maximo Vedoya: Experience.
Maximo Vedoya: But just a temporary disruption due to some unexpected outage in.
Maximo Vedoya: To combat unfair trade practices, mainly from China, I am not sure. I think that a little bit more is needed. I mean, as you know, I don't have the exact description of how this is going to be implemented. As you know, it was made public in a conference call, but I don't yet have the details of how it's going to be implemented. But, as I saw it...
Maximo Vedoya: In the last days.
Maximo Vedoya: Although the first quarter I think it wasn't the 28, it's nine.
Maximo Vedoya: March.
Maximo Vedoya: We are now the blast furnace is now undergoing a restart process. So there is a huge.
Maximo Vedoya: When a blast furnace.
Maximo Vedoya: A little bit you have a long process for their research storage all of the restart process.
Maximo Vedoya: We are now in that restart process.
Maximo Vedoya: The numbers or the quota that is allowed to be imported, for some of the products, it's still an important quota. So I don't know if it's going to have an impact on price. But again, as I said, I think it's a good first step. We should continue working as other governments are working. I know these measures are being made in the U.S., in Mexico, in Europe, in Turkey. A lot of countries are taking these measurements because of what is happening in China. As you know, last month was one of the highest exports in the history of China in steel products, more than 10 million tons in one single month.
Maximo Vedoya: Having known the problem, we already purchased enough slaps.
Maximo Vedoya: To comply with all our commitment with our customers. We don't expect any noticeable impact on our shipment also we have already purchased all the swaps we need so we don't expect.
Maximo Vedoya: Any main impact on our shipments.
Speaker Change: Understood. Thank you Maximo and very clear.
Speaker Change: Thank you Kyle.
Maximo Vedoya: Okay.
Maximo Vedoya: Our next question comes from the line of Timna Tanners. Please go ahead.
Speaker Change: Yeah, Hey, good morning, Thanks for the time I wanted to probe that guidance commentary a bit more so you talked about lower pricing in most markets, what what mark it might not be seen lower prices and then you talked about EBITDA and EBITDA margin is that can we talk about cost a bit more and a spin.
Maximo Vedoya: So China is dumping its steel everywhere, and most of the countries are shutting down that unfair trade input. Um, so... It's not enough, but it's a good first step. I hope I answered that question with this, the first question, Caio.
Caio: Specifically when you might see the benefit of some declines and coking coal prices.
Caio: Hi, Yeah.
Maximo Vedoya: I mean in all markets, we are seeing a little bit of a lower prices.
Maximo Vedoya: In Brazil.
Caio Burger Ribeiro: Yes, absolutely. Very clear. Thank you.
Speaker Change: But it depends on the exchange rate that will trend a little bit on the exchange rate when do you see it in dollar terms.
Maximo Vedoya: The platform is, this is the platform number one in, in, in, in. The Ternium Brazil facility in Rio experienced, what you say, a temporary disruption due to some unexpected outage in the last days of the first quarter. I think it was the 28th or 29th of March.
Maximo Vedoya: What we are going to see in Mexico is that you will have a lower prices in the contract.
Speaker Change: Brian in the contract sales because of the lack of every.
Maximo Vedoya: Border, we have but prices in the commercial end market or.
Maximo Vedoya: Our increasing right now so it's a mix between a lower price because of the contract.
Maximo Vedoya: And we are now, the platform is now undergoing a restart process. So there is a huge, when a platform is.., a little bit, you have a long process for the restart process, and we are now in that restart process. Having known the problem, we had already purchased... Enough slaps to comply with all our commitments with the customers. We don't expect any noticeable impact on our shipment. Also, we have already purchased all the slabs we need. So we don't expect any major impact on shipments.
Caio Burger Ribeiro: I understand. Thank you, Maximo. Very clear.
Maximo Vedoya: And an increase.
Caio Burger Ribeiro: In prices that we're seeing in our shipments to the commercial market overall, the price with probably a little lower than the ones can beat in this quarter.
Caio Burger Ribeiro: Yeah.
Speaker Change: Okay, if you want.
Speaker Change: How are you going to do with cost site of a question of equation.
Caio Burger Ribeiro: What we are expecting to see sustained level of course, because it was a mixture of different things we are.
Caio Burger Ribeiro: We are going to reflect as usual with price of lots that we bought.
Caio Burger Ribeiro: And our quarters ago, and then we have no good.
Caio Burger Ribeiro: The decline in the price of that raw material.
Caio Burger Ribeiro: There's also a change in the in the cost of the iron ore that.
Kimna Tanners: Our next question comes from the line of Kimna Tanners. Please go ahead.
Caio Burger Ribeiro: He is more immediate to see that that impact in our in our member.
Kimna Tanners: Hey, good morning. Thanks for the time.
Kimna Tanners: The increased profitability in the U C media.
Kimna Tanners: Number or do you mean that production will be also be reflective beauty beauty next quarter. The following as multimodal explaining the performance.
Kimna Tanners: I wanted to probe the guidance commentary a bit more. So you talked about lower prices in most markets. What market might not be seeing lower prices? And then you talked about EBITDA and EBITDA margins, but can we talk about costs a bit more and specifically when you might see the benefit of some declines in coke and coal prices?
Kimna Tanners: Four months of the blast furnace number three offers are really starting to get up to expected levels.
Speaker Change: Uh huh.
Maximo Vedoya: Hi Simna, yeah, I mean, in all markets, we are seeing a little bit of lower prices, not exactly in Brazil, but it depends on the exchange rate. That will depend a little bit on the exchange rate when you see it in dollar terms. What we are going to see in Mexico is that you will have lower prices in the contract. Right, in the contract sales, because of the lack, every...
Kimna Tanners: You mean as presented the numbers yesterday, you will have the impact of the increased price of brokers in the market that will be impacting during the second.
Maximo Vedoya: Second quarter.
Maximo Vedoya: So all in all it's.
Maximo Vedoya: Why we are expecting to see.
Maximo Vedoya: Arguably a stable level of cost for for next quarter.
Simna: Okay, and cooking call it sounds like it takes a while to flow through them.
Simna: Yeah, well, yeah, exactly it's something that we are buying for our operation in Brazil, and it takes an N of one four or 42, we reflected.
Maximo Vedoya: Sponsored ADRs are increasing right now, so it's a mix between a lower price because of the contract and an increase in prices that we are seeing in our shipments to the commercial market. Overall, the price will probably be a little lower than it is in this quarter.
Maximo Vedoya: In our company.
Maximo Vedoya: Yeah.
Speaker Change: Okay. Thanks for that and then I wanted to ask a little bit about the cadence of ramp up that you could remind us on a path to getting out you have that.
Maximo Vedoya: Galvanizing lines and you also then of course have the D. I F complex. So if you could remind us about the timing and also any update on project costs given that we've seen some broad inflation across many of these types of projects how are you tracking there.
Pablo Daniel Brizzio: Okay, if you want, we are going to the cost side of the question. What we are expecting to see is a sustained level of cost because there was a mixture of different things. We are going to reflect, as usual, the price of glass that we bought a couple of quarters ago, and then we have not yet seen the decline in the price of that raw material. There is also a change in the cost of iron ore, so it is more immediate to see that impact in our nation.
Speaker Change: Yes timna.
Pablo Daniel Brizzio: Of course, we don't have any update besides the one we gave the last quarter.
Pablo Daniel Brizzio: While we increased a little bit.
Pablo Daniel Brizzio: Yes.
Speaker Change: Yeah, we're seeing that the cost will be that one I think it was $3 4 billion.
Pablo Daniel Brizzio: It'll cost of all the.
Pablo Daniel Brizzio: <unk> three as we call it project.
Pablo Daniel Brizzio: Regarding timing the first line that is coming online it's coming in July.
Pablo Daniel Brizzio: With a ramp up curve of course, it's the became line.
Pablo Daniel Brizzio: And then the customers' lines are starting one also in July.
Pablo Daniel Brizzio: The increased profitability in the Yuciminas numbers or the Yuciminas production will also be reflected during the next quarter and the following, as Maximo was explaining that the performance of blast furnace number three after the relining is starting to get up to the expected levels. Though, as Yulia presented the numbers yesterday, you will have the impact of the increased price of slush purchased in the market that will be affecting during the second quarter. So, all in all, this is why we are expecting to see a relatively stable level of cost for next quarter.
Pablo Daniel Brizzio: And going forward the other four.
Pablo Daniel Brizzio: And two months each one so by the end of the year, we would have the five lines of the customers' lines working.
Pablo Daniel Brizzio: Then we have the galvanized line the galvanize towards we call it.
Pablo Daniel Brizzio: It's going to start by the end of 2025.
Pablo Daniel Brizzio: The b the cold Rolling nine the PLT cm too as we call. It that is going to start in March of 2026.
Pablo Daniel Brizzio: And then we have the yes, yes, DRA facility that is going to start with.
Pablo Daniel Brizzio: Appointed to the middle of 2026.
Pablo Daniel Brizzio: Okay, and cook-and-call. It sounds like it takes a while to flow through, then.
Pablo Daniel Brizzio: Okay.
Pablo Daniel Brizzio: Yes, well, yeah, exactly. It's something that we are buying for our operation in Brazil, and it takes a little while for it to be reflected in our costs.
Speaker Change: Just to clarify what what do you mean by a customize line I'm just not familiar with that term.
Pablo Daniel Brizzio: O online.
Pablo Daniel Brizzio: Finishing products I mean to finish our cold rolled hot rolled and galvanized products.
Kimna Tanners: Okay thanks for that and then I wanted to ask a little bit about the cadence of ramp up if you could remind us on Pescadillo you have the galvanizing lines and you also then of course have the DRI EAF complex so if you could remind us about the timing and also any update on project costs given that we've seen some broad inflation across many of these types of projects how are you tracking there?
Pablo Daniel Brizzio: And to serve the customers directly.
Speaker Change: Okay got it thanks again.
Speaker Change: You're welcome.
Speaker Change: Our next question comes from the line of thin margins.
Speaker Change: Go ahead.
Kimna Tanners: Yeah.
Speaker Change: Hi, Thank you for taking my question.
Kimna Tanners: First question regarding capital allocation, we're seeing 10 and delivering strong results should we expect an increase in dividends.
Maximo Vedoya: Yes, Timna. Post, we don't have any update besides the one we gave the last quarter, where we increased the cost a little bit, but we are seeing that the cost will be that one. I think it was $3.4 billion, the total cost of all the Pesquera 3, as we call it, projects. Regarding timing, the first line that is coming online is coming in July, with a ramp-up curve. Of course, it's the peak in line.
Maximo Vedoya: Also I understand youre going through an investment cycle.
Maximo Vedoya: Bob.
Maximo Vedoya: But just.
Speaker Change: Do you guys have anything on the pipeline or are you thinking of any other opportunities maybe in other regions outside Mexico. After this investment cycle is completed.
Speaker Change: Thank you.
Speaker Change: Okay. How are you limited take first the question on dividend.
Maximo Vedoya: Yeah.
Maximo Vedoya: As we know the companies are increasingly using payment that we have.
Maximo Vedoya: And then the customers' lines are starting, one also in July, and going forward, the other four, two months each one. So by the end of the year, we will have all five customers' lines working. Then we have the galvanized line, the galvanized two, as we call it, that is going to start by the end of 2025. The cold rolling line, the PLTCM2, as we call it, that is going to start in March of 2026. And then we have the EIF DRI facility that is going to start; we are pointed to the middle of 2021.
Maximo Vedoya: Increased these.
Maximo Vedoya: With the results of last year to three three.
Maximo Vedoya: Yes.
Maximo Vedoya: Some increase in comparison to the one that we paid last year.
Speaker Change: Though you're right that we have.
Maximo Vedoya: The financial resources in order to keep sustaining this level of dividend payment you also need to take into consideration all the capex number we have on all the things that we need to do in our work with.
Speaker Change: What we said.
Speaker Change: We've commented on this.
Maximo Vedoya: Your conference call.
Maximo Vedoya: Whenever we.
Maximo Vedoya: The company decides to increase the dividend payment because we we.
Maximo Vedoya: We understand we have the resources to sustain at least this level.
Maximo Vedoya: Then of course year after year.
Maximo Vedoya: It could be there.
Maximo Vedoya: The board continues to propose to the shareholders' meeting the final number but with these new increased level of dividend is the one that we think that the company can sustain the knee so.
Maximo Vedoya: Okay, Maximo, just to clarify, what do you mean by a customized line? I'm just not familiar with that term.
Maximo Vedoya: Oh, a line for finishing products. I mean, to finish cold-rolled and galvanized products and to serve customers directly. Okay. Got it. Thanks again.
Maximo Vedoya: So nicely.
Maximo Vedoya: We are not expecting any specific movement, there, but but lead to sustain the current level of.
Maximo Vedoya: But.
Maximo Vedoya: And I guess what was the second question again, because we didn't hear very well here.
Speaker Change: Oh, sorry about that it was just on the pipeline of Nex investments any other pertinent is maybe in other regions.
Enrique Marcus: Our next question comes from the line of Enrique Marcus. Please go ahead.
Enrique Marcus: Hi. Thank you for taking my question.
Enrique Marcus: Outside of Mexico.
Enrique Marcus: Well you know we are always analyzing opportunities.
Pablo Daniel Brizzio: First question regarding capital allocation. We've seen Ternium delivering strong results. Should we expect an increase in dividends? And also, I understand you're going through an investment cycle, but just... Do you guys have anything in the pipeline or are you thinking of any other opportunities, maybe in other regions outside Mexico after this investment cycle is completed?
Pablo Daniel Brizzio: In Mexico and outside Mexico, So our.
Pablo Daniel Brizzio: Pipeline today is very full as you may well be aware and so we are not seeing any particularly today.
Speaker Change: But of course, there are regions outside Mexico that are also very important to us as we always said our focus is been in the Americas, we are not going to go to.
Pablo Daniel Brizzio: Okay, how are you? Let me take the first question on dividends. As you know, the company has been increasing the dividend payment we have, increased this year with the result of last year to 3.3 dollars per ADF. That was an increase in comparison to the one that we paid last year. Though you are right that we have the financial resources in order to keep sustaining this level of dividend payment, you also need to take into consideration all the capex plan that we have and all the things that we need to do in our. What we said, and I think we commented on this in the prior conference call, is that whenever we or the company decides to increase the dividend payment, it is because we understand and we have the resources to sustain at least this level.
Pablo Daniel Brizzio: Two other parts of the World We think there is.
Pablo Daniel Brizzio: Good.
Pablo Daniel Brizzio: <unk> do you need to show good opportunities for us to continue growing to continue implementing all the things that we're doing in this region in the Americas, but.
Speaker Change: We don't have any specific to give you today.
Speaker Change: Got it thanks, just a quick follow up on the blast furnace question.
Pablo Daniel Brizzio: Yeah.
Pablo Daniel Brizzio: The flattish cost outlook is it already considering the purchase of extra slabs or.
Pablo Daniel Brizzio: Yes, sure see some impact from it coming from it.
Pablo Daniel Brizzio: No no it's considering the buying of steps.
Pablo Daniel Brizzio: Then, of course, year after year, the board of directors needs to propose to the shareholders meeting the final number, but this new increased level of dividend is the one that we think that the company can sustain the median value. We are not expecting any specific movement there, but at least to sustain the current level of dividend.
Speaker Change: Got it thanks.
Speaker Change: Youre welcome.
Pablo Daniel Brizzio: There are no further questions at this time, so I'll turn the call back over to Tony.
Pablo Daniel Brizzio: Yes.
Speaker Change: Thank you.
Pablo Daniel Brizzio: <unk>.
Speaker Change: Well, we appreciate your interest in and attention to this call. Thank you very much for participating.
Pablo Daniel Brizzio: <unk>.
Pablo Daniel Brizzio: If you have any questions don't doubt two to ask us so called us.
Speaker Change: Good day and take care Bye bye.
Speaker Change: This concludes today's conference call you may now disconnect.
Enrique Marcus: And Enrique, what was the second question again? Because we didn't hear very well here.
Enrique Marcus: Yeah.
Enrique Marcus: Oh, sorry about that. It was just in the pipeline of next investments, any other opportunities, maybe in other regions outside Mexico.
Speaker Change: Ask us or call us.
Speaker Change: Good day and take care Bye bye.
Maximo Vedoya: Well, you know, we are always analyzing opportunities. In Mexico and outside Mexico also, our... The pipeline today is very full, as you may well be aware, and so we are not seeing any particularly opportunities today.
Maximo Vedoya: But of course, there are regions outside Mexico that are also very important to us. As we always said, our focus is on the Americas. We are not going to go... to other parts of the world. We think there is. Sponsored ADR, but we don't have any specifics to give you today.
Enrique Marcus: Got it, thanks. Just a quick follow-up on the last part of the question. Yes. The Flatish Cost Outlook, is it already considering the purchase of AXIOS Labs or... Yes. Should we see some impact from it coming from it? No. No, no. It's considering the buying of slabs.
Pablo Daniel Brizzio: There are no further questions at this time, so I turn the call back over to 38HCU.
Operator: Thank you. Well, we appreciate your interest in and attention to this call. Thank you very much for participating. If you have any questions, don't hesitate to ask us or call us. Have a great day and take care. Bye-bye.
Operator: This concludes today's conference call. You may now disconnect.
Operator: or call us. Have a great day and take care. Bye-bye.