Q2 2026 Ternium Argentina SA Earnings Call

August 5, 2026

Speaker #2: Good morning, ladies and gentlemen. Welcome to Ternium's conference call to discuss the results for the second quarter 2026. We would like to inform you that this event is being recorded and all participants will be listen-only mode during the company's presentation. question-and-answer session, and at that time further instructions will be given.

Operator 2: Good morning, ladies and gentlemen. Welcome to Ternium's conference call to discuss the results for Q2 2026. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question-and-answer session. At that time, further instructions will be given. We would like to remind you that this conference call is intended exclusively for investors and market analysts. We request you that any questions from journalists be dedicated to the media relations through our website in the press section. With this, I would like now to turn the floor over to Mr. Sebastián Martí. You may proceed.

Operator: Good morning, ladies and gentlemen. Welcome to Ternium's conference call to discuss the results for Q2 2026. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question-and-answer session. At that time, further instructions will be given. We would like to remind you that this conference call is intended exclusively for investors and market analysts.

Speaker #2: presentation. After the company's remind you that this conference call is intended exclusively for investors and market analysts. We request you that any question from journalists be dedicated to the media relations through our website and the press section.

Operator: We request you that any questions from journalists be dedicated to the media relations through our website in the press section. With this, I would like now to turn the floor over to Mr. Sebastián Martí. You may proceed.

Speaker #2: this, I would like now to turn the floor over to Mr. Sebastian Marty, who may With proceed.

Sebastián Martí: Hello? Okay. It seems we have some technical issues. I hope you can hear us now. Okay, let's go again. Good morning, and thank you for joining us today. My name is Sebastián Martí, and I am Ternium's Global IR and Compliance Senior Director. Yesterday, we announced our financial results for Q2 and H1 2026. Today's call is intended to provide additional context to that presentation. I'm joined by Máximo Vedoya, Ternium's Chief Executive Officer, and Pablo Brizzio, the company's Chief Financial Officer, who will discuss Ternium's operating environment and performance. Following our prepared remarks, we will open up the call 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.

Speaker #3: Hello? Okay. It seems we had some technical issues. I hope you can hear us now. Okay, let's go again. Good morning. Thank you for joining us today.

Speaker #3: My name is Sebastian Marty, and I am Ternium's global IR and compliance senior director. Yesterday we announced our financial results for the second quarter and first half of 2026.

Speaker #3: Today's call is intended to provide additional context to that presentation. I'm joined by Máximo Bedoya, Ternium's chief executive officer, and Pablo Briceo, the company's chief financial officer, who will discuss Ternium's operating environment and performance.

Speaker #3: Following our prepared remarks, we will open up the call 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.

Sebastián Martí: Following our prepared remarks, we will open up the call 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.

Speaker #3: Factors that could affect results are contained in our filings with the Securities and Exchange Commission and on page 2 in today's webcast presentation. You will also find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measure in the press release issued yesterday.

Sebastián Martí: 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. You will also find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measure in the press release issued yesterday. With that, I'll turn the call over to Mr. Vedoya.

Speaker #3: With that, I'll turn the call over to Mr. Bedoya.

Speaker #4: Good morning, everyone, and thank you for joining us. Yesterday we reported a significant increase in Ternium's result in the second quarter. Adjusted EBITDA was 50% higher sequentially, and our EBITDA margin reached 16.5%.

Máximo Vedoya: Good morning, everyone, and thank you for joining us. Yesterday, we reported a significant increase in Ternium's results in Q2. Adjusted EBITDA was 50% higher sequentially, and our EBITDA margin reached 16.5%. Our balance sheet remained strong, with net debt of only $112 million. With the peak of our investment program in Mexico behind us, we expect CapEx to keep declining further down the road. Before turning to our markets, let me say a few words on safety. Two weeks ago, we held Ternium's Safety Week, which we run every year across all of our operations. We stopped our production lines, and more than 21,000 people took part in safety awareness routines. Stopping production across the company sends a clear message of our priority. Moving to Mexico, shipments increased and margin expanded. The business environment is slowly getting better.

Speaker #4: Our balance sheet remained strong, with net debt of only $112 million. And with a peak of our investment program in Mexico behind us, we expect capital expenditures to keep declining further down the road.

Speaker #4: Before turning to our markets, let me say a few words on safety. Two weeks ago, we held Ternium's safety week, which we run every year across all of our operations.

Speaker #4: We stopped our production lines and more than 21,000 people took part in safety awareness routines. Stopping production across the company sends a clear message of our priority.

Speaker #4: Moving to Mexico, shipments increased and margin expanded. The business environment is slowly getting better. Government measures against unfair trade are already helping steal volumes recover.

Máximo Vedoya: Government measures against unfair trade are already helping steel volumes recover, and the country continues to strengthen its trade defenses. The commercial market improved during the quarter, supported by restocking along the value chain, which is bringing inventories back to a more balanced level. We are also gaining market share in this segment, helped by lower imports and by our stronger performance versus peers, as customers continue to value Ternium's reliability, service, and ability to respond quickly. Steel demand in the industrial market did not grow at the same pace. The auto sector remains healthy, and HVAC is improving on demand from data centers, but Section 232 tariffs are affecting our customers in this and other manufacturing sectors. We expect volumes to continue recovering gradually in Q3. We are supplying steel for new gas pipeline projects and replacing Asia-imported steel from several automotive OEMs.

Speaker #4: And the country continues to strengthen its trade defenses. The commercial market improved during the quarter, supported by restocking along the value chains, which is bringing inventories back to a more balanced level.

Speaker #4: We are also gaining market share in this segment, held by lower imports and by our stronger performance versus peers as customers continue to value Ternium's reliability, service, and ability to respond quickly.

Speaker #4: Steel demand in the industrial market did not grow at the same pace. The auto sector remains healthy, and HVAC is improving on demand from data centers, but Section 232 tariffs are affecting our customers in this and other manufacturing sectors.

Speaker #4: We expect volumes to continue recovering gradually in the third quarter. We are supplying steel for new gas pipeline projects and replacing Asia-imported steel for from several automotive OEMs.

Speaker #4: Public infrastructure projects under the agreement to promote the Mexican steel industry should add further demand ahead. Moving to trade, the US and Mexico have held three meetings in the last month to work towards a new framework.

Máximo Vedoya: Public infrastructure projects under the agreement to promote the Mexican steel industry should add further demand ahead. Moving to trade, the US and Mexico have held three meetings in the last month to work towards a new framework. These talks have advanced, although they have not yet produced concrete results. For the Mexican government, Section 232 remains a top priority. These tariffs are hard to justify in the case of steel, as the US runs a large trade surplus with Mexico, and it's by far its larger external supplier. At the same time, there is still excess steel capacity in the world, and this makes it necessary to keep working on the trade front. A fourth round of talks will take place in Washington in early September.

Speaker #4: These talks have advanced, although they have not yet produced concrete results. For the Mexican government, Section 232 remains a top priority. These tariffs are hard to justify in the case of steel, as the U.S. runs a large trade surplus with Mexico and it is by far its largest external supplier.

Speaker #4: At the same time, there is still excess steel capacity in the world, and this makes it necessary to keep working on the trade front.

Speaker #4: A fourth round of talks will take place in Washington in early September. Turning to pesquería, our new downstream lines continue to ramp up, and the slab facility is progressing well.

Máximo Vedoya: Turning to Pesquería, our new downstream lines continue to ramp up, and the slab facility is progressing well, with startup expected in early 2027. This new capacity positions Ternium well for a more integrated and better-defended North American market, where local supplies become a competitive advantage. Ternium is prepared to serve that demand with local capacity, short lead times, and the technical support that industrial customers require. On top of that, the steel from our new slab mill will reach the automotive industry with a carbon footprint well below that of the blast furnace-based steel that still supplies most of the region's automotive. Before moving on to other markets, let me mention two recognitions we received in Mexico since our last call.

Speaker #4: With startups expected in early 2027. This new capacity positions Ternium well for a more integrated and better defended North American market, where local supplies become a competitive advantage.

Speaker #4: Ternium is prepared to serve that demand with local capacity short lead times and the technical support and industrial customers require. On top of that, the steel from our new slab mill will reach the automotive industry with a carbon footprint well below that of the blast furnace-based steel that still supplies most of the region's automotive footprint.

Speaker #4: Before moving on to other markets, let me mention two recognitions we're receiving in Mexico since our last call. Caterpillar distinguished Ternium through its Supplier Excellence Recognition Program for the fourth year in a row.

Máximo Vedoya: Caterpillar distinguished Ternium through its Supplier Excellence Recognition program for the 4th year in a row, we also received Trintech's Premier Supplier Award in the steel category. Awards repeated over time and across industries show that our customers value the quality of our products and the service of our team. Turning to Brazil, trade defense is advancing. In June, the steel quota system was renewed until June 2027. The anti-dumping case on hot rolled coils from China should reach a final decision during this year. More is still needed, but the direction is positive. Demand across consuming sector remain uneven. Automotive is solid, with production expected to grow by 6% this year. Road and infrastructure equipment remains dynamic. Other sectors are weaker, affected either by slow demand or unfair competition from imported finished goods. Against this backdrop, Usiminas has improved its profitability over the last few quarters.

Speaker #4: And we also received Trinity's Premier Supplier Award in the steel category. Awards repeated over time, and across industries show that our customers value the quality of our products and the service of our team.

Speaker #4: Turning to Brazil, trade defense is advancing. In June, the steel quota system was renewed until June 2027, and the anti-dumping case on hot-rolled coils from China should reach a final decision during the remainder of this year.

Speaker #4: More is still needed, but the direction is positive. The manner across consuming sector remains uneven. Automotive is solid, with production expected to grow by 6% this year.

Speaker #4: And road and infrastructure equipment remains dynamic. Other sectors are weaker, affected either by slow demand or unfair competition from imported finished goods. Against this backdrop, Usiminas has improved its profitability over the last few quarters.

Máximo Vedoya: This came from better industrial performance, strict cost control, and higher productivity. A key milestone for this competitiveness was the completion of the pulverized coal injection project, a structural step forward that brings great efficiency and lower cost, while also reducing emissions intensity. We also receive important customer recognitions. General Motors named us Supplier of the Year in the Industrialization and Trust category. Honda Motors granted us a Gold Best Supplier award. In Argentina, shipments increased sequentially in Q2, mostly for seasonal reasons. Our view on this market has not changed. We continue to expect energy, mining, and agriculture to be the most dynamic sectors, with construction recovering gradually from still low levels. Manufacturings remain weak, held back by soft demand and strong competition from imports. In July, we published Ternium's 2025 Sustainability Report.

Speaker #4: This came from better industrial performance, strict cost control, and higher productivity. A key milestone for this competitiveness was the completion of the pulverized cold injection project, a structural step forward that brings great efficiency and lower cost, while also reducing emissions intensity.

Speaker #4: We also receive important customer recognitions. General Motors name a supplier of the year in the industrialization and trust category, and Honda Motors ranked it as a gold-based supplier award.

Speaker #4: In Argentina, shipments increased sequentially in the second quarter, mostly for seasonal reasons. Our view on this market has not changed. We continue to expect energy mining and agriculture to be the most dynamic sectors, with construction recovery gradually from steel low levels.

Speaker #4: Manufacturing remains weak, held back by soft demand and strong competition from imports. In July, we published Ternium's 2025 sustainability report. One of the main updates in this revision is, sorry, is the revision of our 2030 decarbonization target, which now includes Usimina's and USIS 2024 as a new base year.

Máximo Vedoya: One of the main updates in this revision is the revision of our 2030 decarbonization target, which now includes Usiminas and uses 2024 as a new base year. We are committed to reducing emissions intensity per ton of hot rolled steel by 50%, covering scope 1, 2, and 3 under GHG protocol methodology. The report also covers our progress in energy efficiency, environmental management, safety, and the community engagement. I encourage you to read it. It gives a complete view of the work Ternium is doing in all these fronts. This was a quarter with a solid recovery in profitability and a balance sheet that remains very strong. Looking ahead, we expect performance to continue showing good results in Q3, supported by the recovery in Pesquería, a more balanced trade environment in Brazil, and steady progress on our strategic project.

Speaker #4: We are committed to reducing emissions intensity per ton of hot-rolled steel by 50%, covering Scope 1, 2, and 3 under the GHG Protocol methodology. The report also covers our progress in energy efficiency, environmental management, safety, and community engagement, and we encourage you to read it.

Speaker #4: It gives a complete view of the work Ternium is doing in all these fronts. This was a quarter with a solid recovering profitability and a balance sheet that remains very strong.

Speaker #4: Looking ahead, we expect performance to continue showing good results in the third quarter, supported by the recovery in Mexico and more balanced trade environment in Brazil, and steady progress on our strategic projects.

Speaker #4: All of this rests on the daily work and commitment of all our people, and I want to thank them all. With this, I'd like to move to a review of our quarterly performance.

Máximo Vedoya: All of this rests on the daily work and commitment of all our people, I want to thank them all. With this, I'd like to move to a review of our quarterly performance. Pablo, please go ahead.

Speaker #4: Pablo, please go ahead.

Speaker #5: Thanks, Máximo, and thanks, everybody, for participating in this call. So, let me turn to our operational and financial performance for the second quarter of this year.

Pablo Brizzio: Thanks, Máximo, and thanks, everybody, for participating in this call. Let me turn to our operational and financial performance for Q2 of this year. Adjusted EBITDA rose in Q2, driven by higher volumes and better margin, with adjusted EBITDA margin expanding to 16.5% from 12.2% in Q1. Performance benefited from the strengthened market fundamentals in Mexico and more constructive steel market environment in Brazil. The key drivers behind this result was improvement in realized steel prices, mainly in Mexico and Brazil. Looking ahead, we expect adjusted EBITDA to increase sequentially in Q3, driven by higher shipments and an improved adjusted EBITDA margin. This margin expansion should reflect higher revenue per ton, partially offset by an increase in cost per ton across our markets. Net income reached $465 million in Q2, primarily driven by strong operating performance.

Speaker #5: Adjusted EBITDA rose in the second quarter, driven by higher volumes and better margin, with adjusted EBITDA margin expanding to 16.5% from 12.2% in the first quarter.

Speaker #5: Performance benefited from the strengthened market fundamentals in Mexico and more constructive steel market environment in Brazil. The key drivers behind this result was improvement in realized steel prices mainly in Mexico and Brazil.

Speaker #5: Looking ahead, we expect adjusted EBITDA to increase sequentially in the third quarter, driven by higher shipments and an improved adjusted EBITDA margin. This margin expansion should reflect higher revenue per ton, partially offset by an increase in cost per ton across our markets.

Speaker #5: Net income reached $465 million in the second quarter, primarily driven by strong operating performance. Compared to the first quarter, the improvement in operating income was partially offset by lower net financial results mainly from foreign exchange losses and lower deferred tax gains.

Pablo Brizzio: Compared to Q1, the improvement in operating income was partially offset by lower net financial results, mainly from foreign exchange losses and lower deferred tax gains. Let's review the steel segment shipments now. Consolidated shipments increased by 4% sequentially in Q2. In Mexico, volumes continue to rise, supported by a strengthening in the commercial market, lower imports from more effective trade defense against unfair trade practices, and efforts to improve market share, as already was explained by Máximo. In Brazil, sales volume have grown steady versus Q1, with Usiminas maintaining focus on margin rather than volume. In the southern region, volume picked up in a typical seasonality recovery, even as the underlying demand continues to hold steady.

Pablo Brizzio: Compared to Q1, the improvement in operating income was partially offset by lower net financial results, mainly from foreign exchange losses and lower deferred tax gains. Let's review the steel segment shipments now. Consolidated shipments increased by four percent sequentially in Q2. In Mexico, volumes continue to rise, supported by a strengthening in the commercial market, lower imports from more effective trade defense against unfair trade practices, and efforts to improve market share, as already was explained by Máximo. In Brazil, sales volume have grown steady versus Q1, with Usiminas maintaining focus on margin rather than volume. In the southern region, volume picked up in a typical seasonality recovery, even as the underlying demand continues to hold steady.

Speaker #5: Let's review the steel segment shipments now. Consolidated shipments increased by 4% sequentially in the second quarter. In Mexico, volumes continue to raise, supported by strengthening in the commercial market.

Speaker #5: Lower inputs from more affected trade defense against unfair trade practices and efforts to improve market share, as already was explained by Máximo. In Brazil, sales volume had broadly stayed versus the first quarter, with Usimina's maintaining focus on margin rather than volume.

Speaker #5: In the southern region, volume picked up in a typical seasonal recovery, even as the underlying demand continues to hold steady. Looking ahead, we expect shipments to keep recovering mainly in Mexico, supported by sustained commercial market momentum, and also in Brazil as trade measures take hold and inventories normalize.

Pablo Brizzio: Looking ahead, we expect shipments to keep recovering, mainly in Mexico, supported by sustained commercial market momentum, and also in Brazil as trade measures take hold and inventories normalize. Moving to the steel segment performance, steel cash operating income rose by $240 million sequentially. With higher volume and realized steel prices, revenue cost per ton increased slightly, which is the revenue per ton and margins to continue improving in Q1. Turning now to the mining segment. Shipments normalized in Q2, reflecting the seasonal recovery of iron shipments in the Brazilian operations. Cash operating income declined slightly sequentially as lower realized iron ore prices were partially offset by higher sales volume. Let's review now the cash flow and balance sheet.

Speaker #5: Moving to the steel segment performance, steel cash operating income rose by $240 million, sequentially. With higher volume and realized steel prices and cost per ton increased slightly.

Speaker #5: We should see revenue per ton and margins continue to improve in the first quarter. Turning now to the mining segment, shipments normalized in the second quarter, reflecting the seasonal recovery of iron shipments in the Brazilian operations.

Speaker #5: Cash operating income declined slightly sequentially, as lower realized iron ore prices were partially offset by higher sales volume. Let's now review the cash flow and balance sheet.

Speaker #5: Although we had a significant increase in operating results, these were partially offset by a $418 million build-up in working capital. Consistent with higher sales and increased raw material prices and steel costs.

Pablo Brizzio: Although we had a significant increase in operating results, these were partially offset by a $418 million build-up in working capital, consistent with higher sales and increased raw material prices and steel costs. Capital expenditure reflect our progress in the expansion of the industrial center in Pesquería, now mostly focused on the construction of the new slab facility. During the quarter, we also paid a dividend to shareholders of $255 million, corresponding to the balance of the total dividend declared for the fiscal year 2025. With this, we end June 2026 with a net debt position of $112 million, compared to a net cash position of $327 million at the end of March. Finally, let me close with a quick look at our H1 performance.

Speaker #5: Capital expenditures reflect our progress in the expansion of the industrial center in Pesquería, now mostly focused on the construction of the newest lab facility.

Speaker #5: During the quarter, we also paid a dividend to shareholders of $255 million, corresponding to the balance of the total dividend declared for the fiscal year 2025.

Speaker #5: With this we end June 2026 with a net debt position of $112 million, compared to a net cash position of $327 million at the end of March.

Speaker #5: Finally, let me close with a quick look at our first half performance. In the first six months, adjusted EBITDA was $1.2 billion, raising 65% year over year, with EBITDA margins expanding to 14% from 9% in the same period of last year.

Pablo Brizzio: In H1, adjusted EBITDA was $1.2 billion, rising 65% year over year, with EBITDA margins expanding to 14% from 9% in the same period of last year. Net income for H1 amounted to $837 million, resulting in shareholders earning of $2.84 per ADS, almost double the prior year level, supported by stronger operational results on higher steel margins. Cash from operations totaled $473 million, with a year-over-year decline mainly driven by higher working capital needs, with higher inventory values and higher receivables associated with an increase in steel prices as well as higher raw material costs. Capital expenditure reached $837 million in H1, reflecting continued investment in the Pesquería expansion. With this, we are leaving behind the peak of our investment cycle and expect CapEx of $1.6 billion for the full year 2026, moderating to around $1.2 billion next year.

Pablo Brizzio: In H1, adjusted EBITDA was $1.2 billion, rising 65% year over year, with EBITDA margins expanding to 14% from nine percent in the same period of last year. Net income for H1 amounted to $837 million, resulting in shareholders earning of $2.84 per ADS, almost double the prior year level, supported by stronger operational results on higher steel margins. Cash from operations totaled $473 million, with a year-over-year decline mainly driven by higher working capital needs, with higher inventory values and higher receivables associated with an increase in steel prices as well as higher raw material costs. Capital expenditure reached $837 million in H1, reflecting continued investment in the Pesquería expansion. With this, we are leaving behind the peak of our investment cycle and expect CapEx of $1.6 billion for the full year 2026, moderating to around $1.2 billion next year.

Speaker #5: Net income for the first half amounted to $837 million, resulting in shareholders' earnings of $2.84 per ADS, almost double the prior-year level, supported by stronger operating results on higher steel margins.

Speaker #5: Cash from operations totaled $473 million, with a year-over-year decline mainly driven by higher working capital needs, with higher inventory values and higher receivables associated with an increase in steel prices, as well as higher raw material costs.

Speaker #5: Capital expenditure reached $837 million in the first half, reflecting continued investment in the Pesquería expansion. With this, we are leaving behind the peak of our investment cycle.

Speaker #5: Unexpected capex of $1.6 billion for the full year 2026, moderating to around $1.2 billion next year. With this, I conclude the and we conclude our prepared remarks.

Pablo Brizzio: With this, we conclude our prepared remarks. We would like now to welcome your questions. Please, operator, go ahead.

Speaker #5: We would now like to welcome your questions. Operator, please go ahead.

Speaker #4: Thank you. We will now begin the questioners and answer session. Just a question. Please press raise hand to withdraw your question. You can leave the queue by clicking put hand down.

Operator 2: Thank you. We will now begin the question and answer session. To ask a question, please press raise hand. To withdraw your question, you can leave the queue by clicking put hand down. Our first question comes from Mr. Rafael Barcellos from Bradesco BBI. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. To ask a question, please press raise hand. To withdraw your question, you can leave the queue by clicking put hand down. Our first question comes from Mr. Rafael Barcellos from Bradesco BBI. Please go ahead.

Speaker #4: Our first question. Our first question comes from Mr. Rafael Barcellos from Bradesco BBE. Please go ahead.

Speaker #6: Good morning, and thanks. Thanks for taking my questions, and congratulations on the results. So, looking at your price realization in the second quarter, I mean, it was very strong.

Rafael Barcellos: Good morning. Thanks for taking my questions and congratulations for the results. Looking at your price realization in Q2, it was very strong. Looking at how Mexican steel prices have performed over the past few months and given the contract lags, it seems that your Q2 price realization could have been even better than what you published in Q2, right? That said, does it mean that you have an even stronger price realization in Q3, growing quarter over quarter even more than what you published in Q2? On top of that, if you can comment a bit on the overall market environment in Mexico. How do you see prices evolving from now on?

Speaker #6: But looking at the how Mexicans steel prices have performed over the past a few months and the, you know, and given the contract legs, I mean, it seems that your second Q price realization could have been even better than what you published in the second Q, right?

Speaker #6: So that said, does it mean that you have an even stronger price realization the third Q? I mean, growing quarter over quarter, even more than what you published in the second Q?

Speaker #6: And on top of that, if you can comment a bit on the overall market environment in Mexico—I mean, how do you see prices evolving from now on?

Speaker #6: And as a second question regarding the USMCA discussion, I mean, our understanding is that the likelihood of seeing deals made sector by sector is more likely than a broader USMCA revision.

Rafael Barcellos: As a second question regarding the USMCA discussion, we're understanding that the likelihood of seeing deals made sector by sector are more likely than a broader USMCA revision. Just wanted to understand whether you believe this statement is correct, and what is the likelihood of seeing any sort of agreement with the US happening before the year-end? Thank you.

Speaker #6: So, I just wanted to understand whether you believe this statement is correct, and what is the likelihood of seeing any sort of agreement with the US happening before year-end.

Speaker #6: Thank you. Thank you, Rafael. The first question is about prices. So, the prices in Mexico in particular—one of the things that's happening, as I said in the initial remarks, is that we are having more shipments in the commercial market than in the industrial market.

Pablo Brizzio: Thank you, Rafael. The first question about prices, the prices in Mexico in particular. One of the things that's happening, as I said in the initial remarks, we are having more shipments in the commercial market than in the industrial market. The mix that we're selling is different of what it was in the past. As I said, the 232 tariffs are affecting, it's not very big, but they are affecting the production of all the industrial base

Speaker #6: So the mixed that we are selling is a different is different of what it was in the past. I mean, as I said, the Q3, Q2 tariff are affecting it's not very big, but they are affecting the production of all the industrial base customers we have in Mexico.

Máximo Vedoya: customers we have in Mexico. They are a little bit cautious on what they are doing, that makes the mix of what we are selling a little different. Prices in the commercial market are more on a spot basis. That's why, I guess, your comment on the realization price are a little bit lower of what you expect. We expect some changes in the Q3, don't expect huge movements because this dynamic is still going on in Mexico. Regarding market environment in Mexico, I think that resumes also. Mexico is improving demand, but the demand in Mexico is not that it's increasing very much. World Steel released, the other day, what the annual consumption improvement of steel would be in Mexico, they said the growth was going to be 4%, I kind of agree with that number.

Speaker #6: And so they are a little bit cautious about what they are doing, and that makes the mix of what we are selling a little different.

Speaker #6: And prices in the commercial market are more on a spot basis. And so that's why I guess your comment on that realization price are a little bit lower of what you expect.

Speaker #6: We expect some changes in the third quarter, but don't expect huge movements, because this dynamic is still going on in Mexico. And regarding market and environmental in Mexico, I think that that resumes also.

Speaker #6: I mean, Mexico is improving demand, but the demand in Mexico is not that it's increasing very much. I mean, world steel release the other day, what the annual consumption improvement of steel would be in Mexico.

Speaker #6: And they said the growth was going to be 4%. And I kind of agree with that number. Our steel shipments are increasing a little bit more because we are gaining more market share against imports, which I think is a very good thing.

Máximo Vedoya: Our steel shipments are increasing a little bit more because we are gaining more market share against imports, which I think is a very good thing. The market is growing, it's growing at a phase that still needs to improve more. I think part of this is the discussions US and Mexico are having. Regarding USMCA, there's a lot of speculations of all the talks that are being held between the US and Mexico. I don't want to speculate more of all the things that have been said. What I think it's happening also is, for one part, being several deals or making a huge deal, priorities for Mexico is, the 232 in all the sectors, which is very correct.

Speaker #6: But the market is growing, but it's growing at a pace that still needs to improve more. And I think part of this is the discussions the US and Mexico are having.

Speaker #6: Regarding US MCA, there's a lot of speculations of all the talks that are being held between the US and Mexico. I mean, I don't want to speculate more of all the things that have been said.

Speaker #6: What I think is happening also is, I mean, for one part, being several deals or making a huge deal priorities for Mexico is the Q3, Q2 in all the sectors, which is very correct.

Speaker #6: And priority for the US is that Mexico step up its defense against unfair trade, not only steel, but in other products, which I think it's also correct.

Máximo Vedoya: Priority for the US is that Mexico step up its defense against unfair trade, not only steel, but in other products, which I think is also correct. Both things, how we move in both directions, I think both of them are positive for us and for the Mexican market. I hope that they start making some new steps in the direction of these objectives really soon. I hope with this, Rafael, I answer a little bit your questions.

Speaker #6: And both things I mean, how we move in both directions I think it's both of them are positive for us and for the Mexican market.

Speaker #6: So I hope that they start making some new steps in the direction of this objectives really soon. I hope with this, Rafael, I answer a little bit your questions.

Speaker #6: Yes. Just as a quick follow-up, just to clarify—on the first part, on the first question, on the price side—you mentioned that we should not expect many changes. But I understand there may be changes in terms of mix, right?

Rafael Barcellos: Yes. Just as a quick follow-up, just to clarify.

Máximo Vedoya: Yeah.

Rafael Barcellos: On the first part, on the first question, on the price side, you mentioned that we should not expect many changes, but I understand, in terms of mix, right? The mix should not change much in Q3. Of course, price realization, we will see an increase in price realization quarter-over-quarter, kind of similar to what we saw happen in Q2, right?

Speaker #6: So the mix should not change much in the third Q. But of course, price realization will be we will see like an increase in price realization quarter over quarter kind of similar to what we saw happen in the second Q, right?

Speaker #6: You're right about that, Rafael. Yeah, that's completely correct, Rafael. Okay, very clear. So the mix will not change, but prices will go up like you published in the second Q.

Máximo Vedoya: You're right about that, Rafael.

Rafael Barcellos: Makes sense, right?

Máximo Vedoya: Yeah, that's completely correct, Rafael.

Rafael Barcellos: Okay, very clear. The mix will not change, but prices will go up like you published in the Q2. Okay. Thank you very much.

Speaker #6: Okay, thank you very much. Something like that, yeah.

Máximo Vedoya: Something like that. Yeah.

Speaker #1: Thank you. Our next question comes from Emerson Vieira from Goldman Sachs. Please go ahead.

Operator 2: Thank you. Our next question comes from Emerson Vieira from Goldman Sachs. Please go ahead.

Operator: Thank you. Our next question comes from Emerson Vieira from Goldman Sachs. Please go ahead.

Speaker #6: Good morning, everyone. Thank you for the opportunity. I have two questions as well. One on volumes in Mexico. I think one of the most difficult parts here is trying to estimate what could be the incremental volumes that the company is perceiving right now due to the infrastructure projects, right?

Emerson Vieira: Good morning, everyone. Thank you for the opportunity. I have two questions as well. One on volumes in Mexico. I think one of the most difficult parts here is trying to estimate what could be the incremental volumes that the company is perceiving right now due to the infrastructure projects, right? Can you share any sensitivity here, in terms of what could be the incremental steel demand for Ternium because of those projects that are being delivered or actually are starting, right? By Pemex, CFE, and et cetera. What could be the upside here to volumes in your view? Is it correct, my understanding, that this impact is coming earlier than anticipated? If I'm right, in the last quarter, you guys mentioned that you could expect those higher volumes only coming in the end of the year, and now this is being anticipated.

Speaker #6: So can you share any sensitivity here in terms of what could be the incremental steel demand for Ternium? Because those projects that are being delivered are actually starting, right?

Speaker #6: By Pemex, CFE, and et cetera, what could be the upside here to volumes in your view? And is it correct my understanding that this impact is coming earlier than anticipated?

Speaker #6: If I'm not—if I'm right, in the last quarter, you guys mentioned that you could expect those higher volumes only coming at the end of the year, and now this is being anticipated.

Speaker #6: So this is the first question. And then I will move on to the second one later on. Thank you. Okay, thank you. Emerson, for your question.

Emerson Vieira: This is the first question. I will move on to the second one later on. Thank you.

Máximo Vedoya: Okay. Thank you, Emerson, for your question. What is happening with all the infrastructure is that infrastructure is starting to pick up. If you see the numbers of Mexican economy and consumption in infrastructure, it decreased in 2025. It didn't move up in 2026 much. Now there are some projects gaining momentum. Infrastructure projects are not projects that you are going to start one quarter, and improve a lot to the other quarter. They are taking some time. We are discussing, and this is a number. You cannot put it in our projections. With this agreement that we make with the Mexican administration, the steel industry, we are discussing projects of around 600,000 to 700,000 tons. This is not coming in one quarter. These are projects at least for one year and a half. How much of that we will realize in the following quarters?

Speaker #6: I mean, what is happening with all the infrastructure is that infrastructure is starting to peak up. You know, if you see the numbers of Mexican economy and consumption in infrastructure, it decreased in 2025.

Speaker #6: It didn't move up much in 2026, but now there are some projects gaining momentum. Infrastructure projects are not projects that you're going to start in one quarter and see a lot of improvement in the next quarter.

Speaker #6: I mean, they're taking some time. We are discussing, and this is a number, but you cannot put it in our projections. But with this agreement that we made with the Mexican administration, the steel industry, we are discussing projects of around 600,000 to 700,000 tons.

Speaker #6: But this is not coming in one quarter. These are projects at least for one year and a half. How much of that will be realized in the following quarters?

Speaker #6: Not much of that. This is taking time. I hope I kind of clarified that, Emerson. All right, so 600, 600 to 700 is considered our project that you guys have entered into partnerships, right?

Máximo Vedoya: Not much of that. This is taking time. I hope I kind of clarified that, Emerson.

Emerson Vieira: All right. 600 to 700 is considered all project that you guys have entered into partnerships, right?

Speaker #6: Yeah, yeah. But you have to take at least one or two years to develop all that. All right, thank you. And then my second question, please, just on capital allocation.

Máximo Vedoya: Yeah, you have to take at least one or two years.

Emerson Vieira: Okay

Máximo Vedoya: to develop all that.

Emerson Vieira: All right. Thank you. My second question, please, is just on capital allocation. In May, the company revised down the proposed dividends, right, when the geopolitical scenario was more uncertain. Of course, uncertainty still exists, but we are seeing earnings improving at a faster pace. Would it make sense to believe that dividends could be raised, maybe return to prior levels or even above? What is the company's view here on the dividend payments going forward in light of those changes? Thank you.

Speaker #6: In May, the company revised it down. They proposed a dividend, right? When the geopolitical scenario was more uncertain—of course, uncertainty is to be expected—but I mean, we are seeing earnings improving at a faster pace.

Speaker #6: So, what do you make of the sense that dividends could be raised and maybe return to prior levels or even above? I mean, what is the company's view here on the dividend payments going forward in light of those changes?

Speaker #6: Thank you. Thank you, Emerson. That's a great question. I mean, let me put a view first on our capital allocation and then specific on the dividends, probably Pablo can answer that.

Máximo Vedoya: Thank you, Emerson. That's a great question. Let me put a view first on our capital allocation and then specific on the dividends. Probably Pablo can answer that. If you see our CapEx, we are coming out of a period of a significant CapEx for us. You know all this, all the Pesquería project, all the investment we have to do in Usiminas, in the different operations. In 2027, CapEx is going to decrease. I think Pablo mentioned the number, $1.2 billion, $1.3 billion from a CapEx of this year of around $1.6 billion. The priority probably next year in this CapEx allocation would be to take advantage and consolidate all that we have made through this year, last year investments. We have to consolidate this industrial system and focus on the operation and startup of all these facilities.

Speaker #6: But I mean, if you see our capex and I mean, we are coming out of a period of a significant capex for us. You know all this, all the Pecaria project, all the investment we have to do in UC Minas, in the different operations.

Speaker #6: So I mean, in 2027, capex is going to decrease. I think Pablo mentioned the number, 1.2, 1.3 billion US from a capex of this year of around 1.6.

Speaker #6: So the priority, probably next year in this CapEx allocation, would be to take advantage and consolidate all that we have made through this year and last year's investments.

Speaker #6: So we have to consolidate this industrial system and focus on the operation and startup of all these facilities. And you're right about the uncertainty, but we are still operating in a quite uncertain environment.

Máximo Vedoya: You're right about the uncertainty, but we are still operating in a quite uncertain environment. Things look a little bit better. The amount of uncertainty in the world economy is not over yet, and we are monitoring that very deeply. Nevertheless, we continue having the return of investment, or the return to shareholders as a key part of our capital allocation. I don't know, Pablo, if you want to put a little more in the numbers.

Speaker #6: So things look a little bit better. But the amount of uncertainty in the world economy is not over yet. And we are monitoring that very deeply.

Speaker #6: Nevertheless, we continue having the return on investment, or the return to shareholders, as a key part of our capital allocation. I don't know, Pablo, if you want to add a little more on the numbers.

Speaker #6: Yes, yes, yes, Maximo. Yes, it's very clear what you said. That some things that we have seen in the past are still there, but it's also very clear as Emerson, you have put there that the return of the company are improving.

Pablo Brizzio: Yes, Maximo. It's very clear what you said, that some things that we have seen in the past are still there, but it's also very clear, as Emerson, you have put there, that the return of the company are improving. That is a very good piece of news, and that we are moving into a coming year in which we will have improved results and reduced CapEx. As we have seen in the past, this company has a tradition, and have shown that at the moment that we increase result, and we believe that we could sustain an increase in dividend, this is a possibility that a company will put forward. The conditions are there. We need to see if there is changes in the near future, because we are not yet at the moment of a definition of dividend.

Speaker #6: That is a very good piece of news. And that we are moving into coming year in which we will have improved results and reduced capex.

Speaker #6: So as we have seen in the past, this company has a tradition and have shown that at the moment that we increase result, we and we believe that we could sustain this and increase in dividend, this is a possibility that the company will put forward.

Speaker #6: So the conditions are there. We need to see if there is changes in the near future because we are not yet at the moment of a definition of dividend, but clearly that what you mentioned is clearly a possibility.

Pablo Brizzio: Clearly, what you mentioned is clearly a possibility.

Speaker #6: All right, thank you, Maximo, Pablo, Sebastian. Have a good. You're welcome, Emerson.

Emerson Vieira: All right. Thank you, Máximo, Pablo, and Sebastián. Have a good one.

Máximo Vedoya: You're welcome.

Pablo Brizzio: Yes.

Operator 2: Our next question comes from Caio Ribeiro from Bank of America. Please go ahead.

Operator: Our next question comes from Caio Ribeiro from Bank of America. Please go ahead.

Speaker #2: Our next question comes from Caio Ribeiro from Bank of America. Please go ahead.

Speaker #6: All right, good morning. Thank you for the opportunity. So I have two questions on the trend of North America's steel markets, right? So first off, looking at the HRC prices in Mexico and the US, there's quite a large gap, right, of around $300 per ton, which has been expanding over the past year.

Caio Ribeiro: All right. Good morning. Thank you for the opportunity. I have two questions on the trend of North America steel markets. Right. First off, looking at the HRC prices in Mexico and the US, there's quite a large gap, right, of around $300 per ton, which has been expanding over the past year. Just curious to hear from you, if you can talk a little bit about how lead times, inventory levels look in Mexico, just to try and understand how they compare to the US, where lead times are well above average at 9 weeks, inventory is quite low. On this note, if the trigger to narrow that spread is really just a reduction in tariffs for Mexico, or if you see any other triggers here. Secondly, HRC prices in the US have clearly had a strong run over the past year.

Speaker #6: So, you know, just curious to hear from you if you can talk a little bit about how lead times, inventory levels, look in Mexico, just to try and understand, you know, how they compare to the US where lead times are well above average at nine weeks, inventory is quite low.

Speaker #6: And on this note, you know, if the trigger to narrow that spread is really, you know, just a reduction in tariffs for Mexico or if you see any other triggers here, and then secondly, HRC prices in the US, right, have clearly had a strong run over the past years, over the past year.

Speaker #6: And, you know, as you look ahead, I just wanted to see, you know, how you view the restart of that large blast furnace, Gary works that was idled for maintenance and the startup of Nucor's new capacity later this year.

Caio Ribeiro: As you look ahead, I just wanted to see how you view the restart of that large blast furnace, Gary Works, that was idled for maintenance, and the startup of Nucor's new capacity later this year, and whether you see those as risks that could generate a price inflection point, and if current price levels are already encouraging a pickup in imports. Those are my questions. Thank you.

Speaker #6: And whether you see those as risks that could generate a price inflection point. And if current price levels are already encouraging a pickup in imports.

Speaker #6: Those are my questions. Thank you. Thank you, Caio. I mean, regarding the first point, the gap between Mexico and U.S. prices, I don't think the gap is due to different lead times or inventory.

Máximo Vedoya: Thank you, Caio. From the first, the gap between Mexico and US prices, I don't think the gap is due to these different lead times or the inventory. If you see the price in Mexico, price in Mexico are following the same trend as the US. They are increasing, and I think lead times inventory are quite similar to what is happening in the US. There is a difference, of course, is the 232 in the US, and that the trade measures in Mexico are not as effective as the ones in the US, notably this 232. The trend in Mexico is going to continue as it's been in the several last month, but the gap is going to start closing once, I think, these discussions between the US and Mexico start putting some conclusions.

Speaker #6: If you see the price in Mexico, price in Mexico are following the same trend as the US. They are increasing and I think lead times inventory are quite similar to what is happening in the US.

Speaker #6: There is a difference, of course, with the 232 in the US, and that the trade measures in Mexico are not as effective as the ones in the US, notably this 232.

Speaker #6: So the trend in Mexico is going to continue, as it's been in the several last months, but the gap is going to start closing once I think this discussions between the US and Mexico start putting some conclusions.

Speaker #6: I mean, if you go, I said it before, I mean, what Mexico is asking is to get rid of the 232 between Mexico and the US and US is asking to put more tough trade measures in Mexico.

Máximo Vedoya: I said it before, what Mexico is asking is to get rid of the 232 between Mexico and the US, and US is asking to put more tough trade measures in Mexico. As I said, both are quite good and both have reasons to ask that. An agreement can be reached, I think, in those sense. In that part, the gap between both prices will probably reduce. That's regarding Mexican prices. The increasing capacity in the US, the US is decreasing the import volume, but if you see the demand is still not picking up, demand in the US. The consumption of steel in the US is still the same this year and last year. It should increase, and the new capacity should be swallowed by this increase in demand and the decrease in imports. I don't see a huge risk there, Caio.

Speaker #6: And as I said, both are quite good and both have reasons to agreement can reach, can be reached, I think, in those sense. And in that part, the gap between both prices will probably reduce.

Speaker #6: So that's regarding Mexican prices. The increasing capacity in the US, I don't think, I mean, the US is increasing the import volume. And but if you see the demand, it's still not picking up demand in the US.

Speaker #6: The consumption of steel in the US is still the same this year and last year. It should increase. And the new capacity should be swallowed by this increase in demand and the decrease in imports.

Speaker #6: I don't see a huge risk there, Caio. Clearly, it could be some moments when prices decrease or it's a little bit more offer than demand.

Máximo Vedoya: Clearly, it could be some moments when prices decrease, there is a little bit more offer than demand, but I don't see a huge impact of this restart of capacity. I hope that answered the question, Caio.

Speaker #6: But I don't see a huge impact of those of this restart of capacity. I hope that answered the question, Caio. Yes, that's very clear.

Caio Ribeiro: Yes, that's very clear. Thank you very much.

Speaker #6: Thank you very much. You're welcome.

Máximo Vedoya: You're welcome.

Operator 2: Our next question comes from Alfonso Salazar from Scotiabank. Please go ahead.

Operator: Our next question comes from Alfonso Salazar from Scotiabank. Please go ahead.

Speaker #2: Our next question comes from Alfonso Salazar from Scotiabank. Please go ahead.

Speaker #5: Thank you. Two questions for you, Maximo. The first one, and they're both are regarding the Mexican market. The first one is, can you share what's the move among clients in Mexico, you know, we saw the decision of Toyota moving part of the production of the Tacoma to the US?

Alfonso Salazar: Thank you. Two questions for you, Máximo. The first one, and they both are regarding the Mexican market. The first one is, can you share what is the mood among clients in Mexico? We saw the decision of Toyota moving part of the production of the Tacoma to the US. Want to hear what is the mood regarding when you have conversations with your clients in Mexico, what they are thinking, what are the challenges that they are facing? For example, if the 232 goes away, they will face higher prices for steel. Just wondering, what are the conversations that you are having with them? The second question that I have is, your view on Mexico regarding where it stands in the new global auto market or the new global auto arena.

Speaker #5: So I want to hear, you know, what is the move regarding when you have conversations with your clients in Mexico, what they are thinking, what are the challenges that they are facing?

Speaker #5: For example, if there is the 232 goes away, you know, they will face higher prices for steel. So just wondering, you know, what are the conversations that you're having with them?

Speaker #5: The second question that I have is, your view on the on Mexico regarding where it stands in the new global auto market, on the new global auto arena, because we see the US buys pickups and SUVs, China leads the electric vehicle and the low-cost auto markets.

Alfonso Salazar: We see the US buys pickups and SUVs, China leads the electric vehicle and the low-cost auto markets, and OEMs are losing market share basically everywhere except in the US. What is the future for the US? I think it is a good time to rethink about that now that the Pesquería plant, the new slab facility is close to complete.

Speaker #5: And the OEMs are losing market share basically everywhere except in the U.S. So, what is the future for the U.S.? I think it's a good time to rethink that now that the Pesqueria plant's new slab facilities are close to completion.

Speaker #6: Thank you. Alonso, I mean, what is the move of our customers? And I guess you are talking about the industrial customers in Mexico. As I said, I think customers, especially those of U.S. origin, are expecting to have a resolution in the 232.

Máximo Vedoya: Thank you, Alfonso. What is the mood of our customers? I guess you are talking about the industrial customers in Mexico. As I said, I think customers, especially those of US origin, they are expecting to have a resolution in the 232 and in these USMCA discussions. I think that most of the customers think that there is going to be a solution or an agreement, and they are waiting for that because they have a huge supply chain operation in Mexico and the US. I think that the objectives that the Trump administration is moving in reducing the trade deficit that they have with Asia, they are going to do it with an agreement with Mexico. They are in this mood of waiting, and I think the bigger challenge is the 232.

Speaker #6: And in this USMCA discussions. I think that most of the customers think that there is going to be a solution. Or an agreement. And they are because they have a huge supply chain operation in Mexico and the US.

Speaker #6: And I think that the objectives that the Trump administration is moving in, in reducing the trade deficit that they have with Asia, they are going to do it with an agreement with Mexico.

Speaker #6: So they are in this move of waiting. And I think the bigger challenge is the 232. I don't think that customers think that without the 232, the cost is going to increase.

Máximo Vedoya: I don't think that customers think that without the 232, the costs are going to increase. What they think is, without the 232, they can have really the opportunities to produce in Mexico and the US and have a more strong regional market, and they are going to take advantage of that. I think that's the challenge really today. In the same page, the OEMs are also expecting this resolution, I think. In Mexico, remember, the Mexican auto producing around 4 million units a year, they are not decreasing the production. The production is quite the same year, 2025 to 2026. They are expecting to solve 232 and have a regional market strong. If you go to the US market, US are producing a little bit more of 8 million units, but they are importing sort of 8 million units.

Speaker #6: What they think is, without the 232, they can really have the opportunities to produce in Mexico and the US and have a stronger regional market.

Speaker #6: And they are going to take advantage of that. So I think that's the challenge, really, today. At the same time, the OEMs are also expecting this resolution, I think.

Speaker #6: It's not that in Mexico. Remember, the Mexican auto industry is producing around 4 million units a year. They are not decreasing production; the production is quite the same from 2025 to 2026.

Speaker #6: So they are expecting to solve 232 and have a regional market strong. If you go to the US market, US are producing a little bit more of 8 million units, but they're re importing sort of 8 million units.

Speaker #6: So there's a huge opportunity there for integration between Mexico and the US. And I think that they are expecting that. But of course, this should take effect when and when conversation between US and Mexico move forward.

Máximo Vedoya: There's a huge opportunity there for integration between Mexico and the US, and I think that they are expecting that. Of course, this should take effect when conversation between US and Mexico move forward. I hope I answer your question with this.

Speaker #6: Alonso, I hope I answer your question with this.

Speaker #5: Yes, just to follow up. So yes, for the industrial customers for sure, you're right with the 232. For commercial market or your commercial customers, they may face higher steel prices, right?

Alfonso Salazar: Yes. Just a follow-up.

Máximo Vedoya: Yes.

Alfonso Salazar: Yes, for the industrial customers, for sure, you're right with the 232. For commercial market or your commercial customers, they may face higher steel prices, right? That would be the implication of no 232?

Speaker #5: That would be the implication of not 232.

Speaker #6: The, I don't know if they're going to face higher prices. Alfonso, I think they're going to pay they're going to have the prices of the market that doesn't reflect unfair competition.

Máximo Vedoya: I don't know if they're going to face higher prices, Alfonso. I think they're going to have the prices of the market that doesn't reflect unfair competition. They know that, and they are okay with that. I think for commercial customers today, the main issue is how demand and how growth pick up in Mexico. Mexico has not been growing very much. As I said, last year, steel consumption decreased by 10%. That's a huge number. This year, steel consumption is expected to increase by 4%, still way back of our peak in 2023. What the commercial customers are expecting is a growth in construction, a growth in infrastructure programs, a growth in the demand of steel, and they're expecting that. We're waiting for that. That's the biggest challenge they have today. That's the usual talk we have with all our customers in the commercial market.

Speaker #6: They know that, and they're okay with that. I think for commercial customers today, the main issue is how demand and how growth pick up in Mexico.

Speaker #6: Mexico has not been growing very much as I said. Last year, steel consumption decreased by 10%. That's a huge number. This year, steel consumption is expected to increase by 4%.

Speaker #6: Steel is way back off our peak in 2023. So what the commercial customers are expecting is growth in construction, growth in infrastructure programs, and growth in the demand for steel, and they're expecting that.

Speaker #6: We're waiting for that. That's the biggest challenge they have today. And that's the usual talk we have with all our customers in the commercial market.

Speaker #5: Fair enough. Thank you very much, Maximo.

Alfonso Salazar: Fair enough. Thank you very much, Mateo.

Speaker #6: Thank you, Alfonso.

Máximo Vedoya: Thank you, Alfonso.

Operator 2: We remind you to use the raise hand feature if you would like to ask a question. Our next question comes from Daniel Sasson from Itaú BBA. Please go ahead.

Operator: We remind you to use the raise hand feature if you would like to ask a question. Our next question comes from Daniel Sasson from Itaú BBA. Please go ahead.

Speaker #2: We'll remind you to use the raise hand feature if you'd like to ask a question. Our next question comes from Danielle Sasson from Itaú BBA.

Speaker #2: Please go ahead.

Speaker #7: Hi, everyone. Thank you so much for taking my questions, and congrats on the results. My first question is actually related to your capital allocation decisions.

Daniel Sasson: Hi, everyone. Thank you so much for taking my questions. Congrats on the results. My first question is actually related to your capital allocation decisions. After you've mentioned Pesquería a number of times during the call. We are nearing conclusion of the project. You guys should enter a period of much stronger free cash flow generation, right? I wanted to understand better how you're thinking about it. Could we see dividend payments increasing over the next few years? Maybe you guys that have always been conservative in regards to your balance sheet position now think that it's better to keep more cash on hand in light of the geopolitical turbulences and things like that.

Speaker #7: After you've mentioned pesqueria a number of times during the call and we are nearing conclusion of the project, and then you guys should enter a period of much stronger free cash flow generation, right?

Speaker #7: So I wanted to understand better how you're thinking about it. Could we see dividend payments increasing over the next few years or maybe you guys that have always been conservative in regards to your balance sheet position, now think that it's better to keep more cash on hand in light of the geopolitical turbulences and things like that?

Daniel Sasson: That would be great to understand how you're thinking about capital allocation, and if that could include, for instance, buying all remaining Usiminas shares, if it would make sense at all for you to unlist or delist the company in Brazil. My second question is actually related to Pesquería. If you could give a little bit more color on how we should model your reduced needs for slab purchases from third parties after the project starts up versus other additional costs, like related to your energy matrix, related to iron ore needs and so on and so forth. That would be nice for us to understand the delta in EBITDA coming exclusively from Pesquería in 2027 versus 2026, everything else kept equal. Those are my questions, guys. Thank you so much for your time.

Speaker #7: So that would be great to understand how you're thinking about capital location and if that could include, for instance, buying all remaining Uzminas shares if you could, if you could make sense at all for you to unlist or delist the company in Brazil.

Speaker #7: And my second question is actually related to pesqueria. If you could give a little bit more color on how we should model your reduced needs for slab purchases from third parties after the project starts up versus other additional costs like related to your energy matrix, related to iron ore needs and so on and so forth.

Speaker #7: That would be nice for us to understand the delta in EBITDA coming exclusively from pesqueria in 2027 versus 2026. Everything else kept equal. Those are my questions, guys.

Speaker #7: Thank you so much for your time.

Máximo Vedoya: Hi, Daniel. Thank you very much for the questions. I start with the second one first. Remember, Pesquería is going to start, the slab facility is going to start at the beginning of the year, but it's a very complex and huge project. The ramp-up will take us several quarters. You are not going to see a lot of changes in 2027, at least from an EBITDA ratio point of view. What the Pesquería facility gives us is that we are going to sell or we are going to supply to our automotive customers with steel melt and pour in the region that are needed with the change of the USMCA. To do that, we need not only to ramp up our facility, but to have all the certification process ready, which takes a lot of time.

Speaker #6: Hi, Danielle. Thank you very much for the questions. I'll start with the second one first. Pesquería—remember, Pesquería is going to start; the slab facility is going to start at the beginning of the year.

Speaker #6: But it's a very complex and huge project. So the ramp up will take us several quarters. So you are not going to see a lot of changes in 2027, at least from EBITDA ratio point of view.

Speaker #6: You're going to, I mean, what the pesqueria facility give us is that we are going to sell or we are going to supply to our automotive customers with melt and pour steel, melt and pour in the region that are needed with the change of the USMCA.

Speaker #6: So and to do that, we need not only to ramp up our facility, but to have all the certification process ready which takes a lot of time.

Speaker #6: I mean, it's quicker in some of the items, but it's very long in other items. We still have we now have and we are discussing with all the customers probably more inquiries for changing to pesqueria ourselves that we the capacity we have in pesqueria.

Máximo Vedoya: It's quicker in some of the items, but it's very long in other items. We now have, and we are discussing with all the customers, probably more inquiries for changing to Pesquería ourselves than the capacity we have in Pesquería. We are very enthusiastic about what is Pesquería, but don't expect in 2027 a huge impact because of what I'm telling you. We are going to focus in 2027 with the ramp-up and with all the certification. The certification process for more than 2.5 million tons takes a lot of time. That's the focus in 2027. I hope that answers the second question, Daniel. For the first question, capital allocation, I think, Pablo, you answered a little bit, but give it more detail, please. Yes. Okay. Hi, Daniel. How are you? Okay. Let me summarize a little bit what do we do in respect to capital allocation.

Speaker #6: So we are very enthusiastic about what is pesqueria. But don't expect in 2027 a huge impact because of what I'm telling you. I mean, we are going to focus in 2027 with the ramp up and with all the certification.

Speaker #6: But the certification process for more than 2.5 million tons takes a lot of time. So that's the focus in 2027. I hope that answers the second question Danielle for the first question, capital allocation, I think Pablo, you answered a little bit, but give it, I mean, more detail please.

Speaker #7: Yes, okay. Hi Danielle, how are you? Okay, let me summarize a little bit what do we do in respect to capital allocation. And clearly we have different things.

Máximo Vedoya: Clearly, we have different things. First of all, you're right

Speaker #7: First of all, you're right that our results are improving. Second, at Maximo, just explaining, we have—or we are at—the very end of our big capex plan, but we need to take one or two years to digest everything that we are doing.

Pablo Brizzio: Our results are improving. Second, as Máximo was just explaining, we are at the very end of our big CapEx plan, but we need to take one or two years to digest everything that we are doing. As Máximo explained, it's a very complex process to ramp up the new facility and to obtain and achieve all the certification to fully take advantage of the new facility that we have. Why we are saying that or why I'm saying that is because it's very difficult for Ternium at this point to have or to launch any new big CapEx project in the very near future. Of course, we have certain things to mention, like all the maintenance CapEx and things that we're doing. We already mentioned that we will be doing $1.2 billion in CapEx next year.

Speaker #7: And as Maximo explained, it's a very complex process to ramp up the new facility and to obtain and achieve all the certification to fully take advantage of the new facility that we have.

Speaker #7: So why we are saying that or why I'm saying that is because it's very difficult for Ternium at this point to have or to launch any new big capex project in the real near future.

Speaker #7: Of course, we have certain things to mention, like all the capex as maintaining capex and things that we're doing. We already mentioned that we will be doing $1.2 billion in capex next year.

Speaker #7: At some point, we will need to take a decision in respect to the mining activity in Brazil. So we have certain things to move around.

Pablo Brizzio: At some point, we will take a decision in respect to the mining activity in Brazil. We have certain things to move around. We will have room to take that and two things. One, to increase dividends if the sustain in better results is confirmed. Secondly, something that you mentioned, and you're right, that we tend to be a little more conservative than some companies, and we prefer to have a very strong financial position in order to support future alternatives that could happen. You mentioned things like acquiring shares. You know that the theoretical answer to that in the long run is the answer is yes, because we have as a goal to simplify our corporate structure. There are certain conditions yet, especially expecting such shares, that makes us a little difficult to move forward in the short run.

Speaker #7: But we will have room to take that and do two things. One, to increase dividends if the sustained better results are confirmed. And secondly, something that you mentioned—and you're right—we tend to be a little more conservative than some companies, and we prefer to have a very strong financial position in order to support future alternatives that could happen.

Speaker #7: You mentioned things like acquiring shares. You know that theoretical response to that in the long run is the answer is yes because we have as a goal to simplify our corporate structure.

Speaker #7: But there are certain conditions yet in especially respect to that shares that makes us a little difficult to move forward in the short run.

Speaker #7: But again, as a general point of view, we, of course, would like to sustain a strong financial position. We would like to maintain a positive, and if possible, growing dividend payment.

Pablo Brizzio: Again, as a general point of view, of course, we would like to sustain a strong financial position. We would like to sustain a positive and, if possible, growing dividend payment and take advantage of all the things that we have been doing up to now. In that respect, things can happen in the future, and we will be prepared to take advantage of that.

Speaker #7: And take advantage of all the things that we have been doing up to now. In that respect, things have happened in the future and we will be prepared to take advantage of that.

Speaker #6: Thank you so much, guys. Super clear. Thank you, Danielle.

Daniel Sasson: Thank you so much, you guys. Super clear.

Pablo Brizzio: Thank you.

Máximo Vedoya: Thank you, Daniel.

Speaker #2: Thank you. That concludes the questioners and answer session. I would like to turn it back over to Mr. Maximo Vendoia for closing remarks.

Operator 2: Thank you. That concludes the question and answer session. I would like to turn it back over to Mr. Maximo Vedoya for closing remarks.

Operator: Thank you. That concludes the question and answer session. I would like to turn it back over to Mr. Maximo Vedoya for closing remarks.

Speaker #6: Okay, thank you all of you for joining us today. We welcome any feedback you have or any additional questions. And have a great day.

Máximo Vedoya: Okay. Thank you all of you for joining us today. We welcome any feedback you have or any additional questions, have a great day. See you in a couple of months.

Speaker #6: See you in a couple of months.

Operator 2: Ternium's conference call has now concluded. Thank you for attending today's presentation. You may now disconnect and have a good day. Goodbye.

Operator: Ternium's conference call has now concluded. Thank you for attending today's presentation. You may now disconnect and have a good day. Goodbye.

Speaker #2: Ternium's conference call has now concluded. Thank you for attending today's presentation. You may now disconnect and have a good day.

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Q2 2026 Ternium Argentina SA Earnings Call

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