Q3 2025 Ternium S A Earnings Call

Speaker #1: Good morning , ladies and gentlemen , and thank you for standing by . My name is Kelvin , and I will be your conference operator today .

Operator: Good morning ladies and gentlemen and thank you for standing by. My name is Kelvin and I will be your conference operator today. At this time I would like to welcome everyone to Ternium S.A.'s third quarter 2025 results 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, please press STAR one again. Thank you. I would now like to turn the call over to Sebastián Marti. Please go ahead.

Speaker #1: At this time , I would like to welcome everyone to Ternium SA third quarter 2020 results call . All lines have been placed on mute to prevent any background noise .

Speaker #1: 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 followed by the number one on your telephone keypad.

Speaker #1: If you would like to withdraw your question , please press star one again . Thank you . I would now like to turn the call over to Sebastien .

Speaker #1: Marty, please go ahead.

Speaker #2: Good morning and thank you for joining us . My name is Sebastian and I'm turning global . IR and compliance and senior director .

Máximo Vedoya: Good morning and thank you for joining us. My name is Sebastián Marti and I'm Ternium's Global IR & Compliance Senior Director. Yesterday we announced our financial results for the third quarter and first nine months of 2023. This call is meant to provide additional context to that presentation. I'm joined today by Máximo Vedoya, Ternium's Chief Executive Officer, and Pablo Brizzio, the company's Chief Financial Officer, who will discuss Ternium's business environment and performance. After our prepared remarks, we will open up the floor to your questions. 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. Factors that could affect results are contained in our filings with the Securities and Exchange Commission and on page two in today's webcast presentation.

Speaker #2: Yesterday we announced our financial results for the third quarter and first nine months of 2025 . This call is meant to provide additional context to that presentation .

Speaker #2: I'm joined today by Maximo Vedoya Ternium SA , Chief Executive Officer , and Pablo Brizzio , the company's chief financial officer , who will discuss turning business , environment and performance .

Speaker #2: After our prepared remarks , we will open up the floor to your questions . Before we begin , I would like to remind you that this conference call contains forward information and that actual results may vary from those expressed or implied .

Speaker #2: Factors that could affect results are contained in our filings with the Securities and Exchange Commission . And on page two . In today's webcast presentation .

Speaker #2: 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.

Máximo Vedoya: 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. Vedoya. Thank you, Sebastián. Good morning and thank you all for joining our quarterly conference call. In the third quarter of the year, Ternium continued to improve its performance. We saw an increase in EBITDA driven mainly by a decreasing cost per tonne, supported by the continued execution of Ternium's competitiveness plan. Our cash generation remains strong with operating activities contributing over half a billion dollars during the quarter. Additionally, Ternium's board of directors declared an interim dividend of $0.90 per ADS, which keeps the payment level the same as last year. Meanwhile, the business environment continues to be marked by uncertainty, largely resulting from the ongoing changes in the U.S. tariff framework.

Speaker #2: With that, I'll turn the call over to Mr. Vedula.

Speaker #3: Thank you . Sebastian .

Speaker #2: Good morning .

Speaker #3: And thank you all for joining our quarterly conference call in the third quarter of the year . continued to improve its performance . We saw an increase in EBITDA , driven mainly by a decrease in cost per ton , supported by the continued execution of Ternium SA competitiveness plan .

Speaker #3: Our cash generation remains strong with operation operating activities contributing over half $1 billion during the quarter . Additionally , Ternium SA board of directors declared an interim dividend of $0.90 per Ads , which keeps the payment level the same as last year .

Speaker #3: Meanwhile , the business environment continues to be marked by uncertainty , largely resulting from the ongoing changes in the US tariff framework . Ten new Within this environment , the US , Mexico Trade Agreement stood out as particularly significant for our business .

Máximo Vedoya: Within this environment, the USMCA stands out as particularly significant for our business. In recent weeks we have engaged in dialogue with stakeholders on both sides of the border. This conversation has revealed support for policies that strengthen the USMCA framework and promote deeper regional integration. The Fortress North America concept is gaining traction, highlighting the importance of deeper economic and industrial ties among the USMCA members. As trade negotiations progress, the focus remains on maintaining fair competition, addressing imbalances, and reinforcing rule of origins, all of which are important to ensure the long term resilience and growth of the industry in the region. Along these lines, the first formal steps have already been taken for the planned USMCA review, with consultations launched to obtain feedback on the agreement from interested parties. In Mexico, uncertainty resulting from U.S. trade policies has had a significant impact on steel demand during 2025.

Speaker #3: In recent weeks , we have engaged in dialogue with stakeholders on both sides of the border . This conversation has revealed support for policies that strengthen the Usmca framework and promote deeper regional integration .

Speaker #3: The Fortress North America concept is gaining traction, highlighting the importance of deeper economic and industrial ties among the USMCA members. As trade negotiations progress, the focus remains on maintaining fair competition.

Speaker #3: Addressing imbalances and reinforcing rule of origins . All of which are important to ensure the long term resilience and growth of the industry in the region .

Speaker #3: Along these lines, the first formal step has already been taken for the planet. The USMCA review, which consultations launched to obtain feedback on the agreement from interested parties in Mexico and Central America, resulting from US trade policies, has had a significant impact on steel demand during 2025.

Speaker #3: Recognizing the challenges created by this period of trade volatility , the Mexican government is prioritizing efforts to fortify the country's value chain , aiming to promote greater self-sufficiency and resilience against external competitive pressures .

Máximo Vedoya: Recognizing the challenges created at this period of trade volatility, the Mexican government is prioritizing efforts to fortify the country's value chains, aiming to promote greater self-sufficiency and resilience against external competitive pressures. These incentives are closely aligned with U.S. priorities. Throughout 2025, the Mexican government has taken a proactive stand by launching issues such as the Plan Mexico, implementing targeted measures to counter unfair competition from certain Asian countries and imposing tariffs on imports from nations without a trade agreement with Mexico. For example, in September, a proposal was published to increase tariffs on close to 1,500 categories including steel and its derivatives for imports originating from countries without a trade agreement. It is expected that tariffs on steel, currently at 25%, and its products, auto parts, engines, and appliances, will rise to 35%.

Speaker #3: These incentives are closely aligned with US priorities throughout 2025 . The Mexican government has taken a proactive stance by launching initiatives such as the Plan Mexico Implementing targeted measures to counter unfair competition from certain Asian countries and imposing tariffs on imports from nations without a trade agreement with Mexico , for example , in September , a proposal was published to increase tariff on close to 1500 categories , including steel and its derivatives for imports originating from countries without a trade agreement .

Speaker #3: It is expected that tariffs on steel , currently at 25% , and its product auto parts engines and appearance will rise to 35% .

Speaker #3: In the case of light vehicles , the tariff is expected to increase to 50% versus the current 20% are is expected in November , following the approval of the final proposal for the tariff increase .

Máximo Vedoya: In the case of light vehicles, the tariff is expected to increase to 50% versus the current 20%. A ruling is expected in November following the approval of the final proposal for the tariff increase. These efforts are primarily aimed at increasing local value, promoting more resilient North America supply chains, and reducing reliance on imports from Asia. We strongly support these policies and they are vital for the region's economic development and for the continuous growth of the steel industry. In Brazil, industrial activity continued to expand even in the face of high interest rates. The overall steel environment remains healthy with expectation of 5% growth in apparent steel demand in 2025. In addition, our ongoing efforts to increase the efficiency of our operations in the country are yielding positive results with continued decrease in cost per tonne.

Speaker #3: These efforts are primarily aimed at increasing local value , adding promoting more resilient North American supply chains and reducing reliance on imports from Asia , we strongly support these policies and they are vital for the region's economic development and for the continuous growth of the steel industry in Brazil .

Speaker #3: Industrial activity continued to expand even in the face of high interest rates . The overall steel environment remains healthy , with expectations of 5% growth in apparent steel demand in 2025 .

Speaker #3: In addition , our ongoing efforts to increase efficiency of our operations in the country are yielding positive results with continued decrease in cost per tonne .

Speaker #3: But still , the Brazilian market continued to face a high level of trade imports , primarily from China . In the first nine months of 2025 , imports of finished products rose by 33% .

Máximo Vedoya: The Brazilian market continues to face a high level of unfairly traded imports, primarily from China. In the first nine months of 2025, import of finished steel products rose by 33% in Brazil as excess production from China flows to international markets. Unlike the United States, Europe, or Mexico, Brazil still lacks effective trade defense mechanisms. It is crucial that ongoing anti-dumping investigations conclude with imposition of duty, whether preliminary or final, under relevant products under review. To address these challenges and defend the domestic industry, turning to Argentina after a period of growth, activity across the steel value chain leveled off due to increased uncertainty leading up to the midterm elections. Now that the elections are behind us, I am optimistic that Argentina may be entering a period of structural reforms, paving the way for significant growth opportunity across steel value chains.

Speaker #3: In Brazil, as excess production from China flows to international markets, unlike the United States, Europe, or Mexico, Brazil still lacks effective trade and defense mechanisms.

Speaker #3: It is crucial that ongoing anti-dumping investigations conclude with imposition of duty , whether preliminary or final , on under relevant products and the review .

Speaker #3: To address these challenges and defend the domestic industry , turning to Argentina after a period of growth , activity across steel value chain leveled off due to increased uncertainty leading up to the midterm elections .

Speaker #3: Now that the elections are behind us , I am optimistic that Argentina may be entering a period of structural reforms , paving the way for significant growth opportunities across steel value chains .

Speaker #3: This is especially true in the country's most dynamic sectors , like agriculture , mining and oil and gas . Before moving on , I am pleased to share that this quarter we received a Stevie Award for excellence in Sustainability from the World Steel Association .

Máximo Vedoya: This is especially true in the country's most dynamic sectors like agriculture, mining, and oil and gas. Before moving on, I am pleased to share that this quarter we received a Steel Award for Excellence in Sustainability from the World Steel Association. This award recognizes Ternium's Wind of Change renewable energy project, our first renewable energy initiative in Argentina. The wind farm now provides approximately 90% of our externally sourced electricity in the country, significantly reducing our environmental footprint and delivering considerable cost savings. To sum up, the U.S. transformation of the global trade framework has brought significant challenges, but these adjustments are necessary in light of aggressive trade practice by China and other Asian countries to navigate the global trade environment. The evolving global trade environment, we are focused on strengthening our market position through ongoing optimization and cost reductions.

Speaker #3: This award recognizes Ternium SA wind of Change project . Our first renewable energy initiative in Argentina . The wind farm now provides approximately 90% of our externally sourced electricity in the country , significantly reducing our environmental footprint and delivering considerable cost savings .

Speaker #3: To sum up , the US transformation of the global trade framework has brought significant challenges . But these adjustments are necessary in light of aggressive trade practices by China and Asian and other Asian countries to navigate the environment .

Speaker #3: Global trade environment . The evolving global trade environment . Sorry , we are focused on strengthening our market position through ongoing optimization and cost reductions .

Speaker #3: This effort ensures Ternium SA remain resilient , efficient and able to deliver sustainable value to stakeholders while adapting to change and pursuing growth .

Máximo Vedoya: This effort ensures Ternium remains resilient, efficient, and able to deliver sustainable value to stakeholders while adapting to change and pursuing growth. Thank you very much for your continued support.

Speaker #3: Thank you very much for your continued support . Okay , thanks , Maximo . And thanks , everybody for sharing today . This with us .

Pablo Brizzio: Okay, thanks Máximo and thank you everybody for sharing today this conference with us. Let me review our operational and financial performance following the webcast presentation beginning on page three. Adjusted EBITDA increased sequentially in the third quarter, driven by improved margins. Looking ahead, we expect a slight decline in adjusted EBITDA for the fourth quarter, primarily driven by the usual seasonal slowdown in shipments across all our markets. Adjusted EBITDA margin should remain consistent with the previous quarter. As expected, decreasing revenue per ton in Mexico and Argentina is projected to be largely offset by continued reduction in cost per ton. Let's move on to the next slide. Our net result for the third quarter of 2025 was a loss of $270 million.

Speaker #3: Let me review our operational and financial performance following the webcast presentation . Beginning on page three , adjusted EBITDA increased sequentially in the third quarter , driven by improved margins .

Speaker #3: Looking ahead , we expect a slight decline in adjusted EBITDA for the fourth quarter , primarily driven by the usual seasonal slowdown in shipment across all our markets .

Speaker #3: Adjusted EBITDA margin should remain consistent with the previous quarter as expected , decrease in revenue per ton in Mexico and Argentina is projected to be largely offset by continued reduction in cost per ton .

Speaker #3: Let's move on to next slide . Our net result for the third quarter of 2025 was a loss of 270 million . This figure reflects firstly , a 405 million non-cash loss related to the write down of the Fair assets at Usiminas .

Pablo Brizzio: This figure reflects partly a $405 million non-cash loss related to the write-down of deferred tax assets at Usiminas and secondly a $32 million loss related to the quarterly update of the value of a provision for ongoing litigation concerning our decision of stake in Usiminas. This was driven by interest accrual and by the appreciation of the Brazilian real in the quarter. Without these effects, net income would have been $167 million in the third quarter and earnings per ADS would have been $0.73.

Speaker #3: And secondly, a $32 million loss related to the quarterly update of the value of a provision for ongoing litigation concerning our decision to stake in Usiminas.

Speaker #3: This was driven by interest accrual and by the appreciation of Brazilian real in the quarter . Without these effects , net income would have been $167 million in the fourth quarter , and earnings per ads would have been $0.73 .

Speaker #3: You can also see that compared to the second quarter of 2025 , the largest impact was related to the write down of deferred tax at Usiminas and also to a 143 million decrease in income tax results , mainly due to lower deferred tax , results in the third quarter .

Pablo Brizzio: You can also see that compared to the second quarter of 2025, the largest impact was related to the write-down of deferred tax at Usiminas and also to a $143 million decrease in income tax results, mainly due to lower deferred tax result in the third quarter. There was a significant gain in the second quarter driven by the appreciation of the Mexican peso against the U.S. dollar. Let's move to page five to review our steel segment performance. Shipments posted the most increase during the quarter, driven by growth in Mexico and Brazil. This was partially offset by lower volumes in other markets and somewhat in the southern region. In other markets, weaker shipments to the U.S. were partially offset by higher sales volume in other destinations.

Speaker #3: Our significant gain in the second quarter , driven by the appreciation of the peso against the US dollar . Let's move to page five .

Speaker #3: To review our segment performance . She posted a modest increase during the quarter , driven by growth in Mexico and Brazil . This was partially offset by lower volumes in other markets and somewhat in southern .

Speaker #3: In the southern region . In other markets , we achievements to the US were partially offset by higher sales volumes in other destinations .

Speaker #3: Looking forward to the fourth Mexican sequential reduction in shipments in Mexico . In Mexico , influenced by softer construction activity and the typical seasonality in Brazil .

Pablo Brizzio: Looking forward to the fourth quarter of 2025, the company anticipates a sequential reduction in shipments in Mexico, influenced by softer construction activity and the typical year-end seasonality in Brazil. Despite persistent challenges stemming from unfair trade, steel imports, particularly from an Asian producer, Usiminas continues to enhance its competitiveness through cost efficiency initiatives and operational improvements. These efforts are expected to result in a more favorable cost of terms compared to the previous quarter, and in Argentina we are positive about demand growth opportunities throughout the company's value chain. Turning now to page six, cash operating income in the steel segment continued improving mainly due to a margin increase. Although there was a slight decrease in revenue per ton, this was more than offset by a lower cost per ton as a result of lower prices for raw materials and purchased slabs, as well as ongoing efficiency improvements.

Speaker #3: Despite persistent challenges from unfair trade , steel imports , particularly from Asian producers , Usiminas continues to enhance competitiveness through cost efficiency initiatives and operational improvements .

Speaker #3: These efforts are expected to result in a more favorable cost per tonne compared to the previous quarter . Argentina . We are positive about demand growth opportunities throughout the company's value chain .

Speaker #3: Turning now to page six . Cash operating income in the steel segment continued improving , mainly due to a margin increase , although there was slight decrease in revenue per tonne .

Speaker #3: This was more than offset by a lower cost per tonne . As a result of lower prices for raw materials and purchased slabs , as well as ongoing efficiency improvements .

Speaker #3: On the following slide , let's review the performance of our mining segment . Net sales declined quarter over quarter , primarily due to slightly lower iron achievements and a decrease in the margin , mostly due to an increase in cost per tonne in Las Encinas , one of our Mexican mining operations .

Pablo Brizzio: On the following slide, let's review the performance of our mining segment. Net sales declined quarter over quarter primarily due to slightly lower iron ore shipments and a decrease in the margin, mostly due to an increase in cost per ton in La Encinas, one of our Mexican mining operations, as a result of a temporary decrease in production. Looking forward, production levels in Mexico are expected to normalize in the fourth quarter. Let's review now our cash flow and balance sheet performance on page eight. During the third quarter, we had solid operating cash generation supported by a further reduction in working capital, largely attributable to lower unit cost. In terms of inventories, capital expenditures peaked in the second quarter and totaled $711 million in the third quarter, reflecting our ongoing progress in developing new facilities at the Pesquería Industrial Center in Mexico.

Speaker #3: As a result of a temporary decrease in production . Looking forward , production in Mexico are expected to normalize in the fourth quarter .

Speaker #3: Let's review now our cash flow and balance sheet performance on page eight . During the third quarter , we had solid operating cash generation supported by a further reduction in working capital , largely attributable to lower unit costs in inventories .

Speaker #3: Capital expenditures peaked in the second quarter , and total 711 in the third quarter , reflecting our ongoing progress in developing new facilities at the industrial center in Mexico .

Speaker #3: Net cash position continued to decrease , decreasing in the third quarter , driven by the funding requirements with ongoing expansion . Together with the 114 million decrease in the fair value of Argentine securities as of the end of September , which have since then been regained .

Pablo Brizzio: Net cash position continues decreasing in the third quarter, driven by the funding requirements associated with the ongoing expansion, together with a $114 million decrease in the fair value of Argentine securities as of the end of September, which have since then been regained as of yesterday's market prices. Let's now turn to the final slide where we will summarize our performance for the nine months of the year. Adjusted EBITDA decreased in the first nine months of the year mainly due to lower margin and shipments. The margin reduction was primarily driven by lower steel prices, partially offset by improved cost performance. We had a robust cash from operation in the period, boosted by working capital decrease and CapEx increase compared to last year, as 2025 is a peak year for the growth project in Pesquería.

Speaker #3: As of yesterday , market prices . Let's now turn to the final slide , where we will summarize our performance for the nine months of the year .

Speaker #3: Adjusted EBITDA decreased in the first nine months of the year , mainly due to lower margin and shipments . The margin reduction was primarily driven by lower steel prices , partially offset by improved cost performance .

Speaker #3: We had robust cash from operations in the period , boosted by working capital decrease and CapEx increase compared to last year . As 2025 is a peak year for the growth projects in Pascagoula .

Speaker #3: As a final remark yesterday , our board of directors approved an interim dividend of $0.90 per Ads , unchanged from last year . Interim dividend , together with the $1.80 per ads in May .

Pablo Brizzio: As a final remark, yesterday our Board of Directors approved an interim dividend of $0.90 per ADS, unchanged from last year. Interim dividend together with the $1.80 per ADS paid May. This brings the total distribution during 2025 to $2.70 for ADS, equivalent to a dividend yield of 7%. This interim dividend will be paid on November 11th. With this, I'm concluding my prepared remarks. We are now ready to take any questions that you may have. Operator, please open the floor for the Q&A session.

Speaker #3: This brings the total distribution during 2025 to $2.70 per Ads , equivalent to a dividend yield of 7% . This interim dividend will be paid on November 11th , with this , I'm concluding my prepared remarks .

Speaker #3: We are now ready to take any questions that you may have. Operator, please open the floor for the Q&A session.

Speaker #1: Ladies and gentlemen , we will now begin the question and answer session . I would like to remind everyone to ask a question .

Máximo Vedoya: Ladies and gentlemen, we will now begin.

Operator: The question and answer session. I would like to remind everyone to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press STAR one again. One moment please, for your first question. Your first question comes from the line of Carlos De Alba of Morgan Stanley. Please go ahead.

Speaker #1: Please press the start button, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again.

Speaker #1: One moment please . For your first question . Your first question comes from the line of Carlos de Alba of Morgan Stanley . Please go ahead .

Speaker #3: Good morning .

Máximo Vedoya: Yeah, good morning, Máximo and Pablo. Thank you for the opportunity. Two questions. One is, given the results of the elections, midterm elections in Argentina, what sort of strategic opportunities do you see in trying to make more efficient the ownership structure of the company with potential stakes in Siderar or Ternium in Argentina? Mexico. Yes, good morning, Carlos. I mean, I think the election doesn't change the project that we have. You remember that we have an opportunity to, you know, we analyzed simplifying the structure. It couldn't be done. We are not seeking that right now. The things that can come online, not because of the election. I think the change in the election is that we are going to leave behind the noise of everything that will happen in the market in Argentina.

Speaker #4: Maximo . Pablo . Thank you for for the opportunity . My two questions . One is given the results of the elections in mid-term elections in Argentina .

Speaker #4: What sort of strategic opportunities do you see in trying to make more efficient the the the ownership structure of the company ? With potential stakes in Cidra or turning Argentinian Antonio in Mexico .

Speaker #3: Yes . Good morning . Carlos . I mean , I think the election doesn't doesn't change the project that that we what you have .

Speaker #3: Do you remember that we we have an opportunity . We have an opportunity to know we analyze simplifying the structure . It couldn't be done .

Speaker #3: We are not seeking that right now . But I think that can come online , but not because of the election . I think that the change in the election is that , well , we are going to left behind the noise of of everything that what happened in the market in Argentina , I think with this election , there are going to come structural reforms in Argentina that probably will make more competitive industry .

Máximo Vedoya: I think with this election there are going to come structural reforms in Argentina that probably will make a more competitive industry. I mean, Argentina is in need of these reforms. I think we can see in the future a growth in the market, but also a growth in the competitive Argentina, which is what we need in Argentina. I think those are the changes of the election. Under what circumstances would you try that initiative that you presented in the past that didn't work to make the structure more efficient? I think it doesn't depend on us. Remember that a good part of the share of Ternium Argentina is in the ANSES.

Speaker #3: I mean , But also a growth in the competitive of Argentina , which is what we need in Argentina . I think those are the changes of the election .

Speaker #3: Argentina is in need of these reforms and I think we can see in the future a market , a growth in the market .

Speaker #3: .

Speaker #4: And then on the what circumstances would you try that initiative that you that you presented in the past that didn't work to make the structure more efficient ?

Speaker #3: I think it doesn't depends on us . Remember that a good part of the share of Argentina is in the anses . So that's it doesn't depend on us to do that .

Pablo Brizzio: So that.

Máximo Vedoya: It doesn't depend on us to do that. I don't know, Pablo, if you want to add anything else to that.

Speaker #3: I don't know , Pablo . If you want to add anything else to that , yes , yes . Hi , Carlos . Do you know that we as Maximo mentioned , we have tried in the past doing that is is is also , as he mentioned , nothing that we can do at this moment .

Pablo Brizzio: Yes. Hi, Camilla. You know that as Máximo mentioned, we have tried in the past. Doing that is also, as you mentioned, nothing that we can do at this moment. This is a project that continues to be in our mind. If there is in the future an opportunity to move forward with this, it is something that we will take in consideration. It will require a full analysis on the process and the project, but it's clearly something that we may consider. I think that first of all, you need to see in order to start thinking about this kind of project, the reforms that the government will try to pass, how these are evolving, how are these evolving and the way they are approved in Congress. With all of that behind us, probably opportunities could appear to further analyze this project.

Speaker #3: will it will require a full analysis on the process and the project . But it's clearly something that we may consider . I think that first of all , you need to see in order to start thinking about this kind of projects , the reforms that the government will try to pass , how they are .

Speaker #3: These are evolving . How are these evolving and the way they are approved in Congress ? So with with all of that behind us , probably opportunities could appear to further analyze this project .

Pablo Brizzio: Again, a lot of things moving on in Argentina. We need to see this evolution is going on the positive direction. Probably after that there will be a possibility to further analyze this project.

Speaker #3: probably after that there will be a possibility to further analyze this project .

Speaker #4: All right . Great . Thank you . And then my second question is related to what what would I mean ? I know that you guys are talking to the government in Mexico and in the US .

Máximo Vedoya: All right, great. Thank you. My second question is related to what would. I know you guys are talking to the government in Mexico and in the U.S. The Mexican government is still negotiating with the U.S. government. What would be terms planned or action planned if the U.S. keeps the melt and pour conditions for steel using products that are imported into the U.S.? We are going to continue with the plan we already put forward. The new investment was exactly because of this. Remember, we have 2.5 million tons of flat products. I'm not including long products there of melt and pour. With the new steel shop, we were going to have 2.6 million additional to that. We are investing because I think that a melt and pour in some cases, as in the automotive industry, is something that is going to stay or it can be increased.

Speaker #4: The Mexican government is still negotiating with the US government , but what would be Ternium SA planned or action plan if the US keeps the mouth and poor conditions for a still using products that are imported into the US ?

Speaker #3: Well , we are going to continue with the plan . We already put forward . I mean , the the new investment was exactly because of this .

Speaker #3: Remember , we have 2.5 million tons of flat products , not including long products . There of melt and pour . And with the new steel shop , we were going to have 2.6 additional to that .

Speaker #3: So we are investing because I think that the melt and pour in some cases , us in the automotive industry is something that is going to stay or it increased .

Speaker #3: So that's why we made those huge investments . Carlos .

Speaker #3: So that's why we made those can be . I mean , if the negotiation or looking forward that if we are going to have a Usmca that has to change the the the vision or the path we see is that it has to be melt and pour in the region .

Máximo Vedoya: That's why we made those huge investments, Carlos. All right, I understood that right now it has to be melt and pour in the U.S. Sorry, yeah, you're right about that. That is not to pay. You're right, I misunderstood the question. I thought you were talking about the USMCA. The negotiation or looking forward that if we are going to have a USMCA, that has to change. The vision or the path we see is that it has to be melt and pour in the region. It cannot be melt and pour only in the U.S. If we have to have a negotiation, you cannot have an agreement where you only have U.S. melt and pour. Got it. In the meantime, there are some customers of us. Probably your question also goes through that. There are some customers of us that are, you said are.

Speaker #4: All right . I understood that right now it has to be melt and pour in the US . Not not in Mexico . Doesn't .

Speaker #3: Oh . sorry . Well , yeah , you're right about that . That is not to pay . You're right . I misunderstand the question .

Speaker #3: It cannot be melt and pour only in the US if we have to have a negotiation . You cannot have an agreement where you only have us melt and pour .

Speaker #4: Got it ? Okay .

Speaker #3: In the meantime , in the meantime , there are some customers of us probably your question also goes through that . There are some customers of us that are .

Speaker #3: As you said , are . Well , some are in , I don't know , some affections because of it , because there are some still derivative products , as you said , that if they melt and pour in the US , they have discounting in the tariff .

Máximo Vedoya: Some, I don't know, some affections because of it, because there are some steel derivative products as you said that if there are melt and pour in the U.S., they have discounting in the tariff they pay. We are working with each of these customers for each of these products in particular to support their sales so that we don't lose any volume. This is a temporary thing, I guess. Excellent. Thank you very much, Máximo and Pablo. Thank you to you, Carlos.

Speaker #3: They pay . But we are working with each of these customers for each of these products in particularly to support their sales . So that we don't lose any volume .

Speaker #3: But this is a temporary thing . I guess .

Speaker #4: Excellent . Thank you very much , Maximo . Pablo .

Speaker #3: Okay . Thank you to you , Carlos .

Speaker #1: Your next question comes from the line of Rich Emerson of Goldman Sachs . Please go .

Operator: Your next question comes from the line of Rich Emerson of Goldman Sachs. Please go ahead.

Speaker #5: Hello , guys . Can you hear me ?

[Analyst]: Hello guys, can you hear me?

Speaker #3: Yes . Rich .

Máximo Vedoya: Yes, Rich.

Speaker #5: Okay , good morning . Thank you everyone . I have two questions . The first one looking at for Q2 outlook . I'd like to understand a little bit more on first the the cash cost outlook .

[Analyst]: Okay. Good morning. Thank you everyone. I have two questions. The first one, looking at the Q4 outlook, I'd like to understand a little bit more on first the cash cost outlook. You guys mentioned that there are ongoing efficiencies in the operation, but could you please just break this down between the cash cost performance at Usiminas and at Mexico and Argentina. Looking ahead, you guys expect cost to improve also in the operations in Mexico and Argentina. This is the first one, and the second one in terms of prices. I understand that Mexico is undergoing a subdued activity in the construction segment, and prices in Argentina continue to be subdued as well. What can you guys share in terms of what you can expect on prices for Argentina and Mexico going forward? This is the second point on the first question, and just another point on CapEx.

Speaker #5: You guys mentioned that there are ongoing efficiencies in the operation , but could you please just

Speaker #5: break this ahead down between the cash cost performance at Usiminas and at Mexico and Argentina . So looking ahead , you guys expect cost to improve .

Speaker #5: Also in the operations in next in Argentina . So this is the first one . And the second one in terms of prices I understand that Mexico is undergoing a subdued activity in the construction segment .

Speaker #5: And pricing Argentina continue to be subdued as well . So what can you guys share in terms of what can you expect on prices for Argentina and Mexico going forward ?

Speaker #5: So this is the second point on the first question . And just another point on CapEx in this quarter . There was a small decline .

[Analyst]: In this quarter there was a small decline. I'm just trying to understand if you guys still plan to reach the $2.5 billion for this year or if indeed we should see lower CapEx for the year considering that we saw this decline in Turkey.

Speaker #5: So just trying to understand if you guys still plan to to reach the 2.5 billion for this year or indeed we should see lower CapEx for the year , considering that we saw this decline in in curriculum , that's it .

Máximo Vedoya: That's it. Thank you. Thank you, Rich. I start from the third one and going up CapEx. Yeah, we had said that second Q was the highest of our CapEx. It was around $800 million. This quarter is $700 million. Probably in the fourth quarter, the number we are seeing is around $600 million, putting the total CapEx of the year between $2.5 and $2.6 billion. For 2026, CapEx will be probably $1.9 billion. Probably every quarter will be around $500 million, and in 2027 probably will return to $1.1 billion. As I said before, the peak of all these CapEx investments, of all this CapEx plan, was in the second quarter. I hope I answer the third one with that. Second, you're talking about prices.

Speaker #5: Thank you .

Speaker #3: Thank you . Reach I start from the third one and going up CapEx . Yeah , we had said that second . Q was the highest of our topics .

Speaker #3: It was around 800 billion . This this quarter is seven . Million , probably in the fourth quarter . The number we are seeing is around 600 million .

Speaker #3: Putting the total CapEx of the year between 2.5 and 2.6 billion for 2026 . CapEx will be probably 1.9 billion . So probably every quarter will be around $500 million million dollars .

Speaker #3: And in the 2027 probably will return to 1.11 billion . So as I said before , the the peak of all this CapEx investment of all this CapEx plan was in the second quarter , that I hope I answer the third one with that second , you're talking about prices , prices are for the fourth quarter , are going to have a little bit of a decrease in Mexico and Argentina , but only slightly .

Máximo Vedoya: Prices for the fourth quarter are going to have a little bit of a decrease in Mexico and Argentina, but only slightly, and some part of that is because of the mix. Remember, the fourth quarter is usually a low volume quarter. Also, the mix changes a little bit, so prices, when you see our prices in the fourth quarter, could be a little bit low, but not very much. Prices in the North American region are stable, and prices in Mexico have recoupled a little bit from the U.S., but we are not seeing any decrease and probably are going to start seeing some increases in some of the sectors in Mexico late in the fourth quarter, early in the first quarter. And the first one. Pablo. Yeah, perfect.

Speaker #3: And some part of that is because of the mix . Remember , the fourth quarter is usually a low volume quarter . And also the mix change a little bit .

Speaker #3: So prices when you see our prices in the fourth quarter could be a little bit low , but not very much . Prices in the North American region are stable and prices in Mexico has the couple a little bit from the US , but we are not seeing any decrease .

Speaker #3: And probably are going to start seeing some increases in some of the sectors in Mexico late in the fourth quarter or early in the first quarter .

Speaker #3: And the first one , Pablo . Yeah , perfect . Hi , Rick . Let me try to to answer your question by dividing the cash cost from the different variations .

Pablo Brizzio: Let me try to answer your question by dividing the cash cost from different operations. Before doing that, in a general view, you have seen that our margin during the third quarter has increased in comparison to the third. That was somewhat expected and something that we announced during our last conference call. This was due to two different things. First of all, of course, there was a reduction in raw material and purchased slabs, which are very important for our cost structure. There was also the implementation of our cost reduction plan that is expected to be fully implemented by the end of this year. These are the two components of why we have been reducing cost. If you split up between the different markets where we are, you have an increase of margins in Argentina, somewhat in Mexico, and in Brazil.

Speaker #3: But before doing that , in a general view , you have seen that our margin during the third quarter has increased in comparison to to the third .

Speaker #3: That was somewhat practical and something that we announced during our last conference call . And this was due to two things . First of all , of course , there was a reduction in raw material and purchased slabs , which are very important for for our cost structure , but also there was the implementation of our cost reduction plans .

Speaker #3: That is expected to be fully implemented by , by by the end of this year . So this is the two components of why we have been reducing cost .

Speaker #3: And if you split up between the different regions where we operate, you have an increase in margins in Argentina, somewhat in Mexico, and in Brazil. Taking into consideration the numbers that you see as presented to the market last week, you have also seen some increase in the expectation for the fourth quarter. We expect to further increase our cost reduction, and if all other things were equal, our margins should increase.

Pablo Brizzio: Taking into consideration numbers that Usiminas presented to the market last week, you have seen also some increase in margin. The expectation for the fourth quarter is to further increase our cost reduction. If all other things were equal, our margin should increase. We know, we have said, and Máximo has just answered one question to you, where you will see that our average price both in the Mexican and the Argentine market will decline a little bit, but we will be able to sustain our margins in the different market. That's why the outlook for the fourth quarter is for sustained EBITDA margin and more reduction in volumes. That's where we will see our EBITDA generation. All in all, we continue. Are we expecting to continue to have better margins in the different regions where we operate? That will be clearly reflected in the cash cost.

Speaker #3: But we know and we have said , and Maximo has just answered one question to you , where you where you will see that our average price , both in the Mexican and the Argentine market , will decline a little bit .

Speaker #3: But we will be able to sustain our margins in the different markets . That's why the outlook for the fourth quarter is for sustainable margin and a small reduction in volumes .

Speaker #3: And that's where we will see our generation . But all in all , we continue our expecting to continue to have a better margins in , in , in in the different regions where we operate .

Speaker #3: And that will be clearly reflected in the cash cost .

Speaker #5: All right . Very clear . Thank you very much .

[Analyst]: All right, very clear. Thank you very much.

Speaker #3: You're very welcome .

Pablo Brizzio: You're very welcome.

Speaker #1: Your next question comes from the line of Alfonso Salazar of Scotiabank . Please go ahead .

Operator: Your next question comes from the line of Alfonso Salazar of Scotiabank. Please go ahead.

Speaker #6: Thank you . And good day , everyone . I have two questions . The first one is regarding the outlook for demand in Mexico for 2026 .

Máximo Vedoya: Thank you and good day, everyone. I have two questions. The first one is regarding the outlook for demand in Mexico for 2026. I mean, we know that 2025 was, and if you think that there is going to be a recovery in 2026, I would like to know what's going to drive that recovery. More generally, what is the outlook in your view for North America? We know that the situation with tariffs now with Canada, an extra 10%, it's very unclear what's going to happen with tariffs the next week and then one month from now. If you can help us to understand first how the U.S. has been sourcing all the steel that they need this year so far with the tariffs and how you think it's going to be once the situation normalizes, let's say two years from now.

Speaker #6: I mean , we know that 2025 was the very weak and if you think that there is going to be a recovery in 2026 , I would like to know what's going to drive that that recovery .

Speaker #6: And more generally , what is your outlook in your view for North America ? We know that the situation with tariffs . Now with Canada and extra 10% , it's very unclear what's going to happen with tariffs .

Speaker #6: The next week . And then one month from now . But if you can , if you can help us to understand first how the US has been sourcing all the steel that they need to this year , so far with the tariffs and how is how you think it's going to be once you know the situation normalizes , let's say two years from now , if we can think of a normalization of the steel trade situation that we are facing today , that would be very helpful .

Máximo Vedoya: If we can think of a normalization of the steel trade situation that we are facing today, that would be very helpful. Any comments on that would be very helpful. Thank you. Good morning, Alfonso. I will try to make magic and answer the second question. First, the outlook of Mexico. Demand in Mexico in 2025 is not good. As you said last week, I think the World Steel Association is disclosing the SRO for the whole world and apparent consumption in Mexico is probably going to be down 10%. In Mexico, still apparent consumption, which is a very, very big number. What we are seeing for 2026 is a recovery in Mexico demand.

Speaker #6: Any comments on that would be very helpful. Thank you.

Speaker #3: Good morning . Alfonso , I will try to make magic and answer the second question . But first , the outlook of Mexico .

Speaker #3: Yeah , demand in Mexico in 2025 is not good . As you said last week . I think the worst still . Disclosing the the SRO for the whole world and apparent consumption in Mexico is probably going to be down 10% in Mexico .

Speaker #3: Still apparent consumption , which is a very , very big number . What we are seeing for 2026 is a recovery in Mexico demand .

Speaker #3: We're still put this at 4% , but probably if the infrastructure I mean , part of that decrease in the in the apparent consumption in 2025 is due to , well , it's always in a new year from a government , always infrastructure down .

Máximo Vedoya: We're still putting this at 4% but probably if the infrastructure, I mean part of that decrease in the apparent consumption in 2025 is due to, it's always in a new year from a government, always infrastructure down. Infrastructure is down like 28% to 29% in the first nine months of the year. That's a huge number, and it's steel intensive. This is going to grow. Next year construction will probably start growing again. Stabilization in the trade between the U.S. and Mexico, I think that's something that is also a driver of improving demand or going back to the demand we have in 2024. In this sense, for Mexico, we are optimistic that demand is going to recover at least partially in 2026. Outlook for North America, you said what is going to happen in two years. Clearly, today imports in the U.S. are decreasing.

Speaker #3: Infrastructure is down like 28 or 29% in the first nine months of the year . So that's a huge number . And it's still intensive .

Speaker #3: So this is going to grow next year . Construction will probably start growing again and the stabilization in the trade between the US and Mexico , I think that's something that is also a driver of improving demand or going back to the demand .

Speaker #3: We have in 2024 . So in the sense for Mexico , we are optimistic that demand is going to recover at least partially in 2026 .

Speaker #3: Outlook for the North America . You said what is going to happen in two years ? Clearly , I mean , today , imports in the US are decreasing .

Speaker #3: There are still some countries that are paying the tariff of 50% and shipping to the US . But in general , imports are decreasing .

Máximo Vedoya: There are still some countries that are paying the tariff of 50% and shipping to the U.S., but in general imports are decreasing. I think that at least in the region, I am confident. I don't know if confidence is the word, but I think that USMCA is going to be renegotiated and at least trade between the USMCA countries is going to be liberalized. I think that the U.S. has a clear vision that manufacturing industrialization has to come back to the region. I think that including Mexico and Canada, but I'm speaking about Mexico in this region, of how to improve the industrialization in the region, is a better outlook for everybody. Everybody, I think, has the same vision. When is this going to happen? It's not clear, but the renegotiation has already started.

Speaker #3: I think that . At least in the region , I am . Confident . I don't know if the confidence is the word , but but I think that Usmca is going to be renegotiated .

Speaker #3: And , and in at least trade between the Usmca countries is is going to be liberalized . I think that the US has a clear vision of that manufacturer .

Speaker #3: Industrialization has to come back to the region . And I think that including Mexico and Canada . But I'm speaking about Mexico in this region of how to improve the industrialization in the region .

Speaker #3: I think it's a better outlook for everybody . And everybody . I think has the same vision . When is this going to happen ?

Speaker #3: It's not clear , but the renegotiation is already started . So I guess that by the mid part of next year we are going to have an outlook of where this negotiation goes and how tariffs between the two countries start diminishing .

Máximo Vedoya: I guess that by the mid part of next year we are going to have an outlook of where this negotiation goes and how carry between the two countries starts diminishing. That's at least our vision. I hope I also give some clarity. Maybe just a follow-up on what you mentioned. The fact that we already see some bottlenecks for this reshoring of manufacturing. One of them is certainly labor. The second one is energy. With data centers consuming so much energy, if you want to make more steel using electric furnaces, that's also going to require a lot of energy. You're right, Alfonso. That's why I think that a vision of a region more than only the U.S. is what is in the best interest of everybody, including the U.S.

Speaker #3: That's at least our vision . I hope Alfonso , I give some clarity .

Speaker #6: Yeah , maybe just just a follow up on what you mentioned . The fact that we already see some bottlenecks for this . You know , reshoring of manufacturing , one of them of certainly labor .

Speaker #6: The second one , is energy . You know , we data centers consuming so much energy , you know , if you want to make more steel using electric furnaces , that's also going to require a lot of energy .

Speaker #3: You're right , Alfonso . That's why I think that a vision of a region more than only the US is what is in the best interest of everybody , including the US .

Speaker #3: I think Mexico can be a partner if it follows the rule of the Usmca can be a very , very good partner to help with the vision the US has .

Máximo Vedoya: I think Mexico can be a partner if it follows the rule of the USMCA, can be a very, very good partner to help with the vision the U.S. has. I think that's a common understanding of everybody.

Speaker #3: And I think that's a common understanding of everybody .

Speaker #6: Okay . Well , thank you , Matthew .

Operator: Thank you, Matthieu.

Speaker #3: Thank you for .

Máximo Vedoya: Thank you.

Pablo Brizzio: Aponson.

Speaker #1: Your next question comes from the line of Alex Hacking of City . Please go ahead .

Operator: Your next question comes from the line of Alex Hacking of Citi. Please go ahead.

Speaker #7: Yeah . Thanks . Morning . I guess just following up on the the trade point . Have any of your auto customers started to rebalance production back to the US and away from Mexico ?

Pablo Brizzio: Yeah, thanks.

Máximo Vedoya: Morning. I guess just following up on the trade point. Have any of your auto customers started to rebalance production back to the U.S. and away from Mexico? Thanks. Thank you, Alex. They still didn't rebalance production. Our discussion with our customers are how they, I mean they are sourcing steel from the U.S., they are sourcing steel from U.S. in Mexico, and they are also sourcing steel from some Asian countries. We are discussing if we are able to source that steel that they are bringing from, let's put Asian countries, back to Mexico. We have very good discussions with them trying to make a ramp up of that sourcing from a broad point of view. I mean the U.S. consumes somewhere around 16 million units in light vehicles per year. They produce to date 8 million, and Mexico exports 2.5, 2.3, 2.5.

Speaker #7: Thanks .

Speaker #3: Thank you . They still didn't rebalance production . Our discussion with our customers are how they I mean they are sourcing steel from the US .

Speaker #3: There's also steel from us in Mexico . And they are also sourcing steel from some Asian countries . And we are discussing how to if we are able to source that , that steel that they are bringing from .

Speaker #3: Let's put Asian countries back to Mexico . And so we have very good discussions with them trying to to make a ramp up of , of of that sourcing .

Speaker #3: I from a broad point of view , I mean , the US consumes . Somebody around 16 million units in light vehicles per year .

Speaker #3: They produced to date eight millions and Mexico exports 2.5 , 2.3 , 2.5 . I mean , I understand that what the Trump administration is trying to accomplish is to increase that 8 million units .

Máximo Vedoya: I mean I understand that what the Trump administration is trying to accomplish is to increase that 8 million units, and I think that's possible, but.

Speaker #3: And I think that's possible . But I don't think that that this is going to be an taking an account in Mexico production , probably it's going to take account or it's going to gain market share production in the US against other suppliers , because you have to put that every car that is exported from Mexico to us at least , has between 35 and 45 US content .

Pablo Brizzio: I don't.

Máximo Vedoya: think that this is going to be on taking an account in Mexico production. Probably it's going to take account, it's going to gain market share production in the U.S. against other suppliers. You have to put that every car that is export from Mexico to the U.S. at least has between 35% and 45% U.S. content. In the interest of everybody, if you are going to produce more in the U.S. you have to substitute imports of cars from outside the region and not from Mexico. That's the vision I think everybody is looking to. I hope I did answer the question, Alex. Yeah, no, it's very clear and it makes sense. I guess a second question would just be, you know, I've seen various news reports about Mexico increasing their own steel tariffs.

Speaker #3: So in the exchange of everybody , if you're going to produce more than us in the US , you have to substitute imports of cars from outside the region and not from Mexico .

Speaker #3: So that's the vision . I think everybody is looking to I hope I did answer the question , Alex .

Speaker #7: Yeah . No , it's very clear and it makes sense . I guess a second question would just be , you know , I've seen various , you know , news reports about Mexico increasing their own steel tariffs .

Speaker #7: I guess what is the current proposal and what would be the timing of implementing any changes ? Thanks .

Máximo Vedoya: I guess what is the current proposal and what would be the timing of implementing any changes? Thanks. Look, there are several initiatives in Mexico that are following in a sense also what the U.S. not because the U.S. is asking, I think, but because this was a clear vision of this new administration. I think the new president, before she was even elected and when she was already elected but not in office, said that the vision of the plan Mexico was to increase value added content in Mexico and in the region. There's a lot of initiatives. There's one initiative that I said, I think in my initial remarks that there are almost 1,500 products that are ready in Congress to increase tariff. Those include those of steel and some steel derivatives from 25% to 35%. This should be approved in November.

Speaker #3: There are several initiatives in Mexico that are following , in a sense also what the US not because the US is asking . I think , but because this was a clear vision of this new administration .

Speaker #3: I think the new president , before she was even elected and when she was already elected , but not in office , said that the vision of the plan Mexico was to I mean , to increase added content in Mexico and in the region .

Speaker #3: So there's a lot of initiatives . There's one initiative value think in my initial remarks that there are almost 1500 products that are already in Congress to increase tariff .

Speaker #3: Those include those of steel and some steel derivatives from 25% to 35% . This should be approved in November , and there are also other initiatives .

Máximo Vedoya: There are also other initiatives I know they're discussing to try to limit imports whenever it's possible to produce that in the region that's in the North American region. Okay, thanks. I guess just one final one, if I may. I assume that would generally be in favor of sort of creating fortress North America for steel where Mexico, Canada, the U.S. have steel import policies, tariff policies that are fairly aligned with each other, but then relatively free trade amongst each other. I assume that's something that Ternium S.A. would generally be in favor of and would be quite positive opportunity. Yes. I have been outspoken about that. Yes, I can say without any doubt, I think that each country has to have some differences because the production matrix of the countries are different.

Speaker #3: I know they're discussing to to limit imports whenever it's possible to produce that in the region that's in the North American region try .

Speaker #7: Okay ,

Speaker #7: thanks . And then I guess just one final one , if I may . I mean , I assume that would generally be in favor of sort of creating Fortress North America for steel , where , you know , Mexico , Canada , the US have steel import policies , a tariff , policies that are fairly aligned with each other .

Speaker #7: But then , you know , relatively free trade amongst each other . I assume that's something that Ternium would generally be in favor of and would be quite positive for Ternium SA .

Speaker #3: Yes . And I have been outspoken about that . So yes , I can say without any doubt , I think that each country has to have some differences because the production matrix of the countries are different .

Speaker #3: But I think in friendly to say that we are in favor of a North American fortress and we are actively asking for that .

Máximo Vedoya: I think it's early to say that we are in favor of a North American fortress and we are actively asking for that. Okay, thanks. Best of luck with everything.

Speaker #7: Okay . Thanks . Best of luck with everything . Yeah .

Pablo Brizzio: Yeah, you're welcome, Alejandro.

Speaker #3: You're welcome . Alex .

Speaker #1: Your next question comes from the line of Rafael Barcelos of Bradesco . BB . Please go ahead .

Operator: Your next question comes from the line of Rafael Barcelos of Bradesco BBI. Please go ahead.

Speaker #8: Hey . Good morning . Thanks for taking my questions . So first question I would say that over the past few years , you worked to simplify the overall shareholder structure of your subsidiaries , right ?

Pablo Brizzio: Good morning.

Máximo Vedoya: Thanks for taking my questions. First question, I would say that over the past few years you worked to simplify the overall shareholder structure of your subsidiaries. I just wanted to understand how comfortable you are with the current structure across regions. The second question, if you could provide an update of the Pesquería project. If you can go through the expected startup CapEx, after the recent CapEx revision, whether you are now comfortable with your estimate and, given the overall market conditions, if there's any change in your commercial strategy for the project.

Speaker #8: So I just wanted to to understand how comfortable you are with the current structure across regions . And and the second question , if you could provide an update of the project , I mean , if you can go through , you know , the start up CapEx , I mean , after the recent CapEx revision , whether you are now comfortable with your estimate and given the overall market conditions , if there's any change in your commercial strategy for the project , thank you .

Operator: Thank you.

Speaker #3: Thank you . Rafael , I'll start with the second one . I mean , you know , the Pescaria has several projects . The first one or the first part is the galvanized .

Máximo Vedoya: Thank you, Rafael. I start with the second one, Pesquería. I mean, you know, the Pesquería has several projects. The first one or the first part is the new galvanized line and the new PLTCM and the cold rolling mill. The galvanized line is going to start the running curve in December, is in time, we are going to start it in December and the PLTCM is going to start it in January. Remember this has, they're very complicated lines, so the ramp up curve is not very, it's not short.

Speaker #3: The new galvanized line and the new pltc and the cold rolling mill . The galvanized line is going to start the running corp in December is in time .

Speaker #3: We are going to start it in December . And the LTCM is going to start it in January . Remember , this has the very complicated line .

Speaker #3: So the ramp up curve is not very it's not short , but we are going to start production in December and we are going to start production in January , plus or minus some days .

Pablo Brizzio: We are going to start production.

Máximo Vedoya: In December, we are going to start production in January, plus or minus some days. We are confident of that. The other project is the DRI and the EIF facility that is going on time. We have on our budget that it is going to start in the fourth quarter of 2026. If you see the site, it's impressive, it's really worthwhile going to visit the site because it's clearly amazing. The tower and 140 meters of the EIF facility go direct to the Eiffel without any hot DRI. We have a lot of efficiency in energy, and today we have the same budget as we announced. I think it was $2.7 billion. We are in that budget. Of course, it's still one year until we start the production, but so far it's going very good. We have added the structure.

Speaker #3: And so I mean , we are confident of that . The other project is the dry and the facility that is going on time .

Speaker #3: I mean, we have on our budget that is going to start in the fourth quarter of 2026. If you see the site.

Speaker #3: I mean , it's impressive . It's really worthwhile going to visit the site because it's clearly amazing . And the tower and 140m of facility going direct to the EAF without any , I mean , the dry .

Speaker #3: So we have a lot of efficiency in energy , but and today we have the same budget as we announced , I think it was $2.7 billion .

Speaker #3: We are in that budget, of course, still one year until we start the production. But so far, it's going very well.

Speaker #3: And then we have added the structure . Pablo . Yeah . Hi , Rafael . How are you ? You know that we have been discussing this at length during many conference calls on on our idea to simplify the corporate structure .

Pablo Brizzio: Yeah. Hi Rafael, how are you? You know that we have been discussing this at length during many conference calls on our idea to simplify the corporate structure. Clearly, we are not comfortable with the structure that we currently have. We think it would be a plus for Ternium S.A. to simplify its corporate structure. You know that it's not a simple proposition. It's not just a decision that from one day to the other we can achieve. We need to be very cautious on the message that we pass, that clearly we are not comfortable, clearly something that at some point we would like to simplify. The process to do that is not straightforward. We will analyze and we will continue to analyze, not only from an economic standpoint, but also from a formal standpoint how we can achieve that.

Speaker #3: So clearly we are not comfortable with the structure that we currently have . We think would be a plus for , for ternium to simplify corporate structure .

Speaker #3: But also , you know , that is not a simple proposition . It's not just a decision from that from one day to the other .

Speaker #3: We can we can achieve . So we need to be very cautious on the message that we pass , that clearly we are not comfortable .

Speaker #3: Clearly is something that at some point we would like to simplify . But the process to do that is not straightforward . And we will analyze and we will continue to analyze not only from an economic standpoint , but also for a formal standpoint , how we can achieve that .

Speaker #3: But again , I guess that we answer this question also from our point of view during this call . It's something that we keep in our in our short list of things to , to be done in the future .

Pablo Brizzio: I guess that we answer this question also from our point of view during this call. It's something that we keep in our short list of things to be done in the future. Nothing that we can do at this specific point, but it's something that we will try at some point to achieve.

Speaker #3: Nothing that we can do at this specific point , but it's something that we will try at some point to , to achieve .

Speaker #8: Okay . Thank you very much .

[Analyst]: Okay, thank you very much.

Speaker #3: Thank you . Rafael .

Máximo Vedoya: Thank you, Rafael.

Speaker #1: Once again , ladies and gentlemen , to ask a question , please press Star One on your telephone keypad . Your next question will come from the line of Parthian candini of JPMorgan .

Operator: Once again, ladies and gentlemen, to ask a question, please press star one on your telephone keypad. Your next question will come from the line of Tathian Candini of J.P. Morgan. Please go ahead.

Speaker #1: Please go ahead .

Speaker #9: Good morning everyone . Thank you for having my questions . So I would just like to follow up a little bit on the questions that my colleagues did .

[Analyst]: Good morning everyone. Thank you for having my questions. I would just like to follow up a little bit on the questions that my colleagues did. The first one is a little bit about your expectations for 2026. I think there is like the magical number of EBITDA per ton that we always discuss, $150 per ton. I would just like to understand if this is your expectation for next year. If not, what is the level that you guys have confidence that you might deliver and what is the premises that you have been considering for this number. Does this include like anti-dumping structures for Brazil or is this like base case that we are not going to have anything at Usiminas' level? Just to understand a little bit your rationale here.

Speaker #9: And the first one is a little bit about your expectations for 26 . So I think there is like the magical number of EBITDA per tonne that we also , like always discuss $150 per tonne .

Speaker #9: And I would just like to understand if this is your expectation for next year . If not , what is the level that you guys have confident that you might deliver ?

Speaker #9: And what are the premises that you have been considering for this number? So, does this include like anti-dumping structures for Brazil, or is this like a base case that we are not going to have anything at all?

Speaker #9: So just to understand a little bit your rationale here , and I think lastly , we discussed like every earnings call a little bit on what is the update or the most recent update on Compactus .

[Analyst]: Lastly, we discussed like every earnings call a little bit on what is the update or the most recent update on Compactos, if this is going to be like a project that you have on your pipelines for Usiminas for the coming year. I think the last update that we had is this is going to be a discussion for 2026. I would just like to understand if there is space or room for maybe a postponement. Seems like we don't have the best environment right now in the market or if this is a priority since like the iron ore mining project. Thank you for having my questions.

Speaker #9: If this is going to be like a project that you have on your pipelines for Usiminas for coming year , I think the last update that we had is this is going to be a discussed for 2026 , but I would just like to understand if if there is a space or room for maybe a postponement since like we don't have the best environment right now in the market , or if this is a priority since like iron ore mining project .

Speaker #9: Thank you for having my questions.

Speaker #3: Thank you . I'll start with the compactors and as I think I said before , in some of the conference , I mean , the decision of the compactors , we don't have to take a decision and deal next year .

Máximo Vedoya: Thank you, Tatiane. I'll start with the Compactos. As I think I said before in some of the conference, I mean the decision of the Compactos, we don't have to take a decision until next year. I think it was mid or late next year. In the meantime, we are working on all the alternatives and we are asking the environmental permissions and we are going through the analysis of the project. There are several alternatives now for the Compactos project, so we are analyzing the different alternatives. In the meantime, we are doing some work in Musa, where we are extending a little bit the life of all the non-Compactos process interface. We have some more work to do or more time in feeding Usiminas and selling the rest to the market.

Speaker #3: I think it was mid or late next year . In the meantime , we are working on all the alternatives . And we are asking the environmental permissions and we are going through the analysis of the projects .

Speaker #3: There are several alternatives now for the compactors . So , so we are analyzing the different alternatives . In the meantime , we are doing some work in Musa where we are extending the life of all the non-compact offsets Interfet .

Speaker #3: But so we have some more work to do or more time in feeding usiminas and selling the rest to the market . So I mean , again , we are analyzing different options , different plant structure for for the compactors , different way of taking the the iron ore out of the mine and probably we have an update by mid 2026 .

Máximo Vedoya: Again, we are analyzing different options, different plant structure for the Compactos, different way of taking the iron ore out of the mine. Probably we have an update by middle 2026.

Speaker #3: The first one, Pablo, debits the ratio. Yes. How are you? So, you know you're right that this has been our target.

Pablo Brizzio: The first one.

Máximo Vedoya: Pablo, the EBITDA ratio. Yes.

Pablo Brizzio: Hi, how are you? You know, you're right that this has been our target, and in fact, we have been above this number for a very long period of time.

Speaker #3: And in fact we have been above this number for for a very long period of time . After the the increase of our participation as we mentioned , that then you need to sum up both things .

Máximo Vedoya: After.

Pablo Brizzio: The increase of our participation in Usiminas, as we mentioned that. You need to sum up both things. If you take into consideration what Usiminas commented last week in their own conference call, the margin that they presented was 7%. If you take the margin, as I mentioned in answering the previous question of our operations in Argentina and Mexico, we are without closer to 12% EBITDA margin. Clearly is something that we need to keep working. We already comment that we are expecting to increase our margins marginally or some during the rest of this year, 2025, and also Usiminas, as mentioned, exactly the same. Of course we will not arrive to this number during the rest of this year, meaning the fourth quarter of 2025. It will depend on many different things, the possibility of reaching that number during 2026.

Speaker #3: And if you take into consideration what you mean as a comment , last week in their own conference call , the margin that they presented was 7% .

Speaker #3: And if you take the margin , as I mentioned in answering the previous question of our operations in Argentina and Mexico , we are without a close to 12% EBITDA margin .

Speaker #3: Clearly is something that we need to keep working . We already comment that we are expecting to increase our margins marginally or some during the rest of this year , 2025 , and also using you mentioned , exactly the same .

Speaker #3: So of course we will not arrive to this number during the rest of this year , meaning the fourth quarter of 2025 . It will depend on many different things .

Speaker #3: The possibility of reaching that number during 2026 . You mentioned some of then the tariff , the some reduction of imports in Brazil , improvements on our side .

Pablo Brizzio: You mentioned some of them, the tariff, some reduction of imports in Brazil, improvements on our side, we are doing a lot of things. We are fully implementing our cost reduction plans in order to sustain the reduction of our own cost. At the very end also will depend on the scenario, on the trade negotiations, the growth in the different markets where we are. It's very difficult for us, especially with uncertainty related to the trade discussions, to put a number today to 2026 EBITDA margins. Clearly we continue to have this as a goal. Clearly is something that we will pursue. We are improving. We are entering into 2026 with a margin about 10%. Last one was 11%. We will continue to work onto the direction so we are not that far from that goal.

Speaker #3: We are doing a lot of things. We are fully implementing our cost reduction plans in order to sustain the reduction of our costs.

Speaker #3: But at the very end , also will depend on the scenario , on the trade negotiations , the growth in the different markets where we are .

Speaker #3: It's very difficult for us , especially with uncertainty related to the trade discussions , to put a number today to 2026 margins . Clearly , we continue to have this as a goal .

Speaker #3: Clearly is something that we will pursue . We are improving . We are entering into 2026 with a margin of 10% . Last one was 11% .

Speaker #3: And and we will continue to work until the election . So we are not that far from that goal . Clearly is one target that we have , and we will keep working to achieve a as much as we can during the rest of 2026 .

Pablo Brizzio: Clearly is one target that we have and we will keep working to achieve as much as we can during the rest of 2026.

Speaker #9: Thank you guys .

[Analyst]: Thank you, guys.

Speaker #3: Thank you . You're welcome .

Pablo Brizzio: Thank you. You're welcome.

Speaker #1: There are no further questions at this time . And with that I will turn the call back to Ternium SA . Ternium SA CEO , please go ahead .

Operator: There are no further questions at this time. With that, I will turn the call back to Ternium CEO. Please go ahead.

Speaker #3: Okay . Thank you to all of you for participating in today's call . We really appreciate your insight and encourage you to share any feedback and have a great day .

Máximo Vedoya: Okay. Thank you to all of you for participating in today's call. We really appreciate your insight. I encourage you to share any feedback, and have a great day. See you in three months.

Speaker #3: See you in three months .

Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect.

Máximo Vedoya: Sam Sa.