Q2 2026 Ternium SA Earnings Call
Speaker #1: The dedicated to the media relations through our website and the press section. With this, I would like now to turn the floor over to Mr. Sebastian Marty, you may proceed.
Speaker #2: Good morning. Thank you for joining us today. 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 #2: Today's call is intended to provide additional context to that presentation. I'm joined by Maximo Vedoya, Ternium's chief executive officer, and Pablo Brizzio, the company's chief financial officer, who will discuss Ternium's operating environment and performance.
Speaker #2: 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 #2: 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.
Speaker #2: With that, I'll turn the call over to Mr. Vedoya.
Speaker #3: 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%.
Speaker #3: 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 #3: 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 #3: 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 #3: 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.
Speaker #3: 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 #3: 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.
Speaker #3: 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 #3: 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 #3: Public infrastructure projects under the agreement to promote the Mexican steel industry should add further demand ahead. Moving to trade, the U.S. and Mexico have held three meetings in the last month to work toward a new framework.
Speaker #3: These talks have advanced, although they are not yet produced concrete results. For the Mexican government, Section 232 remains a top priority, this tariffs are hard to justify in the case of steel, as the U.S.
Speaker #1: Say what the annual consumption improvement of steel would be in Mexico, and they said the growth was going to be 4%. And I kind of agree with that number.
Speaker #1: 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 #1: 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.
Speaker #3: 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.
Speaker #1: 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.
Speaker #1: But the market is growing, but it's growing at a pace that's still needs to improve more, and I think part of this is the discussions US and Mexico are having.
Speaker #1: With that, I'll turn the call over to Mr. Vedoya.
Speaker #3: 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.
Speaker #2: 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%.
Speaker #3: 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 #2: 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 #3: 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 past furnace-based steel that still supplies most of the region's automotive market.
Speaker #2: 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 #2: 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 #3: 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.
Speaker #2: Moving to Mexico, shipments increased and margin expanded. The business environment is slowly getting better. Government measures against unfair trade are already helping steel volumes recover.
Speaker #3: 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 #2: 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 #3: 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 during this year.
Speaker #2: 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.
Speaker #3: More is still needed, but the direction is positive. The manner across consuming sectors remains uneven. Automotive is solid, with production expected to grow by 6% this year.
Speaker #2: 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 #3: And road and infrastructure equipment remains dynamic. Other sectors are weaker, affected either by slow demand or unfair competition from imported finishing finished goods. Against this backdrop, Usimina has improved its profitability over the last few quarters.
Speaker #2: 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 several automotive OEMs.
Speaker #3: 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 #2: Public infrastructure projects under the agreement to promote the Mexican steel industry should add further demand ahead. Moving to trade, the U.S. and Mexico has held three meetings in the last month to work toward a new framework.
Speaker #2: These talks have advanced, although they are not yet produced concrete results. For the Mexican government, Section 232 remains a top priority, this tariffs are hard to justify in the case of steel, as the U.S.
Speaker #3: We also receive important customer recognitions. General Motors name a supplier of the year in the industrialization and trust category, and Honda Motors granted us a gold-based supplier award.
Speaker #2: It runs a large trade surplus with Mexico, and it's by far its largest 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.
Speaker #3: 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 #2: 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.
Speaker #3: 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.
Speaker #2: 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 becomes a competitive advantage.
Speaker #2: 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 plastic furnace-based steel that still supplies most of the region's automotive offer.
Speaker #3: 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, and encourage you to read it.
Speaker #2: 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.
Speaker #3: 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 #2: 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 #3: 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 #3: All of these rest 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.
Speaker #2: 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 during this year.
Speaker #3: Pablo, please go ahead.
Speaker #2: Thanks, Maximo, 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.
Speaker #2: More is still needed, but the direction is positive. Demand across consuming sectors remains uneven. Automotive is solid, with production expected to grow by 6% this year.
Speaker #2: Adjusted EBITDA rose in the second quarter, driven by higher volumes and bear margin, with adjusted EBITDA margin expanding to 16.5 from 12.2% in the first quarter.
Speaker #2: And road and infrastructure equipment remains dynamic. Other sectors are weaker, affected either by slow demand or unfair competition from imported finishing finished goods. Against this backdrop, Usimina has improved its profitability over the last few quarters.
Speaker #2: 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 #2: 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 #2: 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 #2: 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.
Speaker #2: We also receive important customer recognitions. General Motors NEMA supplier of the year in the industrialization and trust category, and Honda Motors granted us a gold best supplier award.
Speaker #2: Let's review the steel segment shipment now. Consolidated shipments increased by 4% sequentially in the second quarter. In Mexico, volumes continued to raise, supported by strengthening in the commercial market.
Speaker #2: 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.
Speaker #2: Lower input from more affected trade defense against unfair trade practices and efforts to improve market share, as already was explained by Maximo. In Brazil, sales volume had broadly stayed below versus the first quarter, with Usimina's maintaining focus on margin rather than volume.
Speaker #2: With construction recovery gradually, from steel low levels. Manufacturings remain 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 uses 2024 as a new base year.
Speaker #2: In the southern region, volume picked up in a typical seasonally 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 measure takes hold and inventories normalize.
Speaker #2: 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 #2: We are committed to reducing 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, and encourage you to read it.
Speaker #2: We should see revenue per ton and margins to continue improving 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 #2: 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 #2: 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 #2: Looking ahead, we expect performance to continue showing good results in the third quarter, supported by the recovery in Mexico, a more balanced trade environment in Brazil, and steady progress on our strategic projects.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: Capital expenditure reflect our progress in the expansion of the industrial center in Pesqueria, now mostly focused on the construction of the newest lab facility.
Speaker #2: Pablo, please go ahead.
Speaker #3: Thanks, Maximo, and thanks everybody for participating in this call. So let me turn to our recreational and financial performance for the second quarter of this year.
Speaker #2: 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 #3: 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 #2: 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 #2: Finally, let me close with a quick look at our first half performance. In the first six months, adjusted EBITDA was 1.2 billion dollars, raising 65% year over year, with EBITDA margins expanding to 14% from 9% in the same period of last year.
Speaker #3: Performance benefits and 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 #3: 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 #2: Net income for the first half amounted to $837 million, resulting in shareholders earning of 2.84 per ADS, almost double the prior year level, supported by a stronger operation results on higher steel margins.
Speaker #3: 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.
Speaker #2: Cash from operations totaled $473 million, 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 #2: Capital expenditure reached $837 million in the first half, reflecting continued investment in the Pesqueria expansion. With this, we are leaving behind the peak of our investment cycle.
Speaker #2: 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.
Speaker #2: So we would like now to welcome your questions. Please operator, go ahead.
Speaker #3: 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.
Speaker #3: Our first question. Our first question comes from Mr. Rafael Barcellos from Bradesco BBE. Please go ahead.
Speaker #2: Good morning and thanks. Thanks for taking my questions and congratulations for the results. So looking at your price realization in the second Q, I mean, it was very strong.
Speaker #2: But looking at the how Mexicans steel prices have performed over the past a few months and the, you know, and given the contract lags, 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 #2: 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 #2: 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 #2: And as a second question, regarding the US MCA discussion, I mean, we understanding that the likelihood of seeing deals made by like sector by sector are like more likely than a broader US MCA revision.
Speaker #2: So 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.
Speaker #2: Thank you.
Speaker #1: Thank you, Rafael. The first question about prices. So and the prices in Mexico in particularly, one of the things that's happening and as I said in the initial remarks, we are we are having more shipments in the commercial market than in the industrial market.
Speaker #1: 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 2 tariff are affecting it's not very big, but they are affecting the production of all the industrial base customers we have in Mexico.
Speaker #1: And so they are a little bit cautious on what they are doing. And that makes the mix of what we are selling a different a little different.
Speaker #1: 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 #1: 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.
Unexpected capex: $1.6 billion for the full year 2026, moderating to around $1.2 billion next year.
Speaker #1: 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.
With this, I conclude the and we conclude our prepared remarks. So we would like now to welcome your question, please. Operator. Go ahead.
Speaker #1: 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.
Session, please check a question. Press 'raise hand' to withdraw your question. You can leave the queue by clicking 'put hand down.'
Our first question.
Speaker #1: But the market is growing, but it's growing at a pace that's steel needs to improve more. And I think part of this is the discussions US and Mexico are having.
Our first question comes from Mr. Rafael Barcelo from Bradesco BBI. Please go ahead.
Good morning, and thanks. Uh, thanks for taking my questions, and congratulations on the results.
So, uh, looking at your, uh, price realization in the second quarter, I mean, it was very strong.
Speaker #1: 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.
But looking at the, the Mex, how Mexican steel prices have performed over the past few months and, you know, and given the contract lags, I mean, it seems that your second quarter—
Speaker #1: 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 2 in all the sectors, which is very correct.
Price realization could have been even better than what you published in the second quarter, right? So, that said, does it mean—
Speaker #1: 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.
Speaker #1: 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 #1: 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 #2: Yes. Just as a quick follow-up, just to clarify. So 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?
Speaker #2: 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 #1: You're right about that, Rafael. Yeah, that's completely correct, Rafael.
Speaker #2: Okay, very clear. So the mix will not change, but prices will go up like you published in the second Q. Okay, thank you very much.
Speaker #1: Something like that. Yeah.
Speaker #3: Thank you. Our next question comes from Emerson Vieira from Goldman Sachs. Please go ahead.
Speaker #2: 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?
Speaker #2: So 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 are actually are starting, right?
Speaker #2: 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 #2: If I'm not 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 #2: So this is the first question. And then I will move on to the second one later on. Thank you.
Speaker #1: Okay, thank you, Emerson, for your question. 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 #1: It didn't move up in 2026 much, but now there are some projects gaining momentum. Infrastructure projects are not projects that you're going to start one quarter and improve a lot to the other quarter.
Speaker #1: Regarding USMCA, 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 #1: I mean, they're taking some times. We are discussing and this is a number, but you cannot put it in our projections, but with this agreement that we make with Mexican administration, the steel industry, we are discussing projects of around 600 to 700,000 tons.
Speaker #1: 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 232 in all the sectors, which is very correct.
Speaker #1: 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.
Speaker #1: But this is not coming in one quarter. These are projects at least for one and one year and a half. How much of that will realize in the following quarters?
Speaker #1: 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 #1: Not much of that. This is taking time. I hope I kind of clarified that, Emerson.
Speaker #1: So 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 #2: All right, so 600, 600 to 700 is considered our project that you guys have entered into partnerships, right?
Speaker #1: Yeah, yeah. But you have to take at least one or two years to develop all that.
Speaker #2: Yes. Just as a quick follow-up, just to clarify, so 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, so the mix should not change much in the third Q.
Speaker #2: All right, thank you. And then my second question, please, just on capital allocation. In May, the company revised it down the proposed dividends, right?
Speaker #2: When the geopolitical scenario was more uncertain, of course, uncertainties to exit, but I mean, we are seeing earnings improving at a faster pace. So what do you make sense to believe that dividends could be raised and maybe return to prior levels or even above?
Speaker #2: 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 #2: I mean, what is the company's view here on the dividend payments going forward in light of those changes? Thank you.
Speaker #1: You're right about that, Rafael. Yes, that's completely correct, Rafael.
Speaker #1: 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.
Speaker #2: Okay, very clear. So the mix will not change, but prices will go up, like you published in the second quarter. Okay, thank you very much.
Speaker #1: Something like that, yeah.
Speaker #1: 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 #3: Thank you. Our next question comes from Emerson Vieira from Goldman Sachs. Please go ahead.
Speaker #2: 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?
Speaker #1: 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 #2: 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 #1: 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, last year investments.
Speaker #2: My PMX, 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 #1: 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.
Speaker #2: If I'm not if I'm right, in the last quarter you guys mentioned that it could expect those higher volumes only coming in the end of the year and now this is being anticipated.
Speaker #1: 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 #2: So this is the first question. And then I will move on to the second one later on. Thank you.
Speaker #1: Okay, thank you, Emerson, for your question. 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 #1: 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 #1: It didn't move up in 2026 much, but now there are some projects gaining momentum. Infrastructure projects are not projects that you're going to start one quarter and improve a lot to the other quarter.
Speaker #4: Yes, yes, yes, Maximo. Yes, it's very clear what you said. That the. 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.
Speaker #1: I mean, they're taking some times. We are discussing, and this is a number, but you cannot put it in our projections, but with this agreement that we make with Mexican administration, the steel industry, we are discussing projects of around 600 to 700,000 tons.
Speaker #4: 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 #4: So as we have seen in the past, this company has a tradition and have shown that at the moment that we increase results, we and we believe that we could sustain these and increase in dividend, this is a possibility that the company will put forward.
Speaker #1: But this is not coming in one quarter. These are projects at least for one year, one year and a half. How much of that will realize in the following quarters?
Speaker #1: Not much of that. This is taking time. I hope I kind of clarified that, Emerson.
Speaker #4: 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.
Speaker #2: All right, so 600, 600 to 700 is considered our project that you guys have entered into partnerships, right?
Speaker #1: Yeah, yeah, but you have to take at least one or two years to develop all that.
Speaker #2: All right, thank you, Maximo, Pablo, Sebastian. Have a good.
Speaker #2: All right, thank you. And then my second question, please, just on capital allocation. In May, the company revised it down, they proposed a dividend, right?
Speaker #1: You're welcome, Emerson.
Speaker #3: Our next question comes from Caio Ribeiro from Bank of America. Please go ahead.
Speaker #2: When the geopolitical scenario was more uncertain—of course, uncertainties do exist—but, I mean, we are seeing earnings improving at a faster pace. So, would it make sense to believe that dividends could be raised and maybe return to prior levels, or even above?
Speaker #2: 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.
Speaker #2: I mean, what is the company's view here on the dividend payments going forward in light of those changes? Thank you.
Speaker #2: 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 #1: 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.
Speaker #2: 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 #1: 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 #2: 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.
Speaker #1: 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 #2: 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 #1: 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, last year investments.
Speaker #2: Those are my questions. Thank you.
Speaker #1: Thank you, Caio. I mean, from the first, the gap between Mexico and US prices, I don't think the gap is due to this different lead times or inventory.
Speaker #1: 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.
Speaker #1: 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 #1: There is a difference, of course, is the Q3, Q2 in the US and that the trade measures in Mexico are not as effective as the ones in the US, notably this Q3, Q2.
Speaker #1: 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 #1: 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 #1: 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 #2: Yes, yes, yes, Maximo. Yes, it's very clear what you said—that some things we have seen in the past are still there. But it's also very clear, as Emerson, you have put there, that the returns of the company are improving. That is a very good piece of news.
Speaker #1: I mean, if you go, I said it before, I mean, what Mexico is asking is to get rid of the Q3, Q2 between Mexico and the US and US is asking to put more tough trade measures in Mexico.
Speaker #2: And that we are moving into coming year in which we will have improved results and reduced capex. 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 #1: And as I said, both are quite good and both have reasons to ask that. And so one agreement can reach, can be reached, I think, in those sense.
Speaker #1: And in that part, the gap between both prices will probably reduce. 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.
Speaker #2: 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.
Speaker #1: And but if you see the demand, it's still not picking up demand in the US. The consumption of steel in the US is still the same this year and last year.
Speaker #2: All right, thank you, Maximo, Pablo, Sebastian. Have a good.
Speaker #1: 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 #1: You're welcome, Emerson.
Speaker #3: Our next question comes from Caio Ribeiro from Bank of America. Please go ahead.
Speaker #2: All right, good morning. Thank you for the opportunity. I have two questions on the trend of North America's steel markets. First off, looking at the HRC prices in Mexico and the US, there's quite a large gap of around $300 per ton, which has been expanding over the past year.
Speaker #1: Clearly, it could be some moments when prices decrease or it's a little bit more offer than demand. But I don't see a huge impact of those of this restart of capacity.
Speaker #1: I hope that answered the question, Caio.
Speaker #2: 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 #2: Yes, that's very clear. Thank you very much.
Speaker #1: You're welcome.
Speaker #3: Our next question comes from Alfonso Salazar from Scotiabank. Please go
Speaker #1: Ahead .
Speaker #2: 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 #2: Thank you . Two questions for you . Maximo . The first one . And they're both . Both are regarding the Mexican market The first one is can you share what's the most among clients in Mexico ?
Speaker #2: 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.
Speaker #2: You know , we saw that the of Toyota moving part of the production of the Tacoma to the US . So I want to hear , you know , what is the mood regarding , you know , when you have conversations with your clients in Mexico , what they are thinking , what are the challenges that they are facing ?
Speaker #2: 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 #2: For example , if there is the two , three , two . Goes away , you know , they will face higher prices for steel .
Speaker #2: Those are my questions. Thank you.
Speaker #1: Thank you, Caio. I mean, regarding the gap between Mexico and U.S. prices, I don't think the gap is due to these different lead times or inventory.
Speaker #2: So just wondering , you know , what are the conversations , the conversations that you're having with them The second question that I have is your view on the on Mexico regarding where it stands in the new global auto market or the new global auto arena ?
Speaker #1: 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 #2: Because we see the US buys pickups and SUVs . China leads the electric vehicle and the low cost auto markets , and the OEMs are losing market share in basically everywhere except in the US .
Speaker #1: 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.
Speaker #2: So what is the future for for the US ? I think it's a good time to to rethink about that . Now that the Pesqueria plant is this the new facilities close to complete
Speaker #1: Notably, this 232. So, the trend in Mexico is going to continue, as it's been in the last several months. But the gap is going to start closing once, I think, these discussions between the US and Mexico start putting some conclusions.
Speaker #3: Thank you Alonso . I mean , what is the move of our customers and I guess you are talking about the industrial customers in Mexico I as I said , I think customers , especially those of us origin , they are expecting to have a resolution in the two , three , two .
Speaker #1: 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 the US is asking to put more tough trade measures on Mexico.
Speaker #3: And in this Usmca discussions . I think that that the most of the customers think that there is going to be a solution or , or an agreement , and they are waiting for that because they have a huge supply chain operation in Mexico and the US .
Speaker #1: And as I said, both are quite good and both have reasons to ask that. And so an agreement can reach, can be reached, I think, in those sense.
Speaker #1: And in that part, the gap between both prices will probably reduce. So, that's regarding Mexican prices. The increasing capacity in the U.S.—I don't think, I mean, the U.S. is increasing the import volume.
Speaker #3: And I think that the , the , the , the objectives that the Trump administration is , is moving in reducing the trade deficit that they have with Asia .
Speaker #3: They they are going to do it with an agreement with Mexico . So they are in this mood of waiting . And I think that the the bigger challenge is the two , three , two .
Speaker #1: And but if you see the demand, it's still not picking up demand in the US. The consumption of steel in the US is still the same this year and last year.
Speaker #3: I don't think that customers think that the . Without the two three , two , the cost can increase . What they think is .
Speaker #1: 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 #3: Without the two , three , two , they can have really . The opportunities to produce in Mexico and the US and have a , a more strong regional market .
Speaker #3: And they are going to take advantage of that . So I think that's the challenge really today , in the same page , the OEMs are also expecting this resolution .
Speaker #1: Clearly, it could be some moments when prices decrease or it's a little bit more offer than demand. But I don't see a huge impact of those of this restart of capacity.
Speaker #3: I think it's not that in Mexico . Remember the Mexican auto producing around 4 million units a year . They are not decreasing the production .
Speaker #1: I hope that answered the question, Caio.
Speaker #2: Yes, that's very clear. Thank you very much.
Speaker #1: You're welcome.
Speaker #3: The production is quite the same year 2025 2026 . So they are expecting to solve two , three , two and have a regional market A strong .
Speaker #3: Our next question comes from Alfonso Salazar from Scotiabank. Please go ahead.
Speaker #4: Thank you. Two questions for you, Maximo. The first one, under 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.
Speaker #3: 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 #3: 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 .
Speaker #4: So I want to hear, you know, what is the move regarding you know, when you have conversations with your clients in Mexico, what they are thinking?
Speaker #4: What are the challenges that they are facing? For example, if there is the 232 goes away, you know, they will face higher prices for steel.
Speaker #3: What , when and when when conversation between US and Mexico move forward . Alonso I hope I answered your question with this .
Speaker #4: So just wondering, you know, what are the conversations that you're having with them? 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.
Speaker #2: Yes . Just just to follow up . So yes , for the industrial customers , for sure . You are right . With the two , three , two for commercial market or your commercial customers .
Speaker #2: They may face higher steel prices , right . That that would be the impact implication of not two , three , two .
Speaker #3: The the I don't know if they're going to face higher prices . Alfonso . I think they're going to bear they're going to have the prices of the market .
Speaker #4: China leads the electric vehicle and the low-cost auto markets. And the OEMs are losing market share in basically everywhere except in the US. So what is the future for the US?
Speaker #3: 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 .
Speaker #4: I think it's a good time to rethink about that now that the pesquería plant is the new slab facilities close to complete.
Speaker #1: 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 US region, they are expecting to have a resolution in the 232.
Speaker #3: As I said last year , steel consumption decreased by 10% . That's a huge number this year . Still , consumption is expected to increase by 4% .
Speaker #3: Still way back of our peak in 2023 . So what the commercial customers are expecting is a grow in in construction , a growing infrastructure programs , a growth in the demand of steel .
Speaker #1: 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 waiting for that because they have a huge supply chain operation in Mexico and the US.
Speaker #3: And they're expecting that waiting for that . That's the biggest challenge they have today . And that's the , the usual talk we have with with all our customers in the commercial market .
Speaker #2: Fair enough . Thank you very much . Maximum .
Speaker #1: And 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.
Speaker #3: Thank you . Alfonso
Speaker #4: Remind you to use the raise hand feature if you would like to ask a question Our next question comes from Danielle Sasson from Itau BBA .
Speaker #4: Please go ahead
Speaker #1: 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.
Speaker #5: Hi everyone . Thank you so much for for taking my questions . Congrats on the results . My first question is actually related to your capital allocation decisions .
Speaker #5: After you've you've mentioned this idea , a number of times during the call , and we are nearing conclusion of the project . And then you should you guys should enter a period of much stronger free cash flow generation , right ?
Speaker #1: 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.
Speaker #5: So I wanted to , 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 .
Speaker #1: And they are going to take advantage of that. So I think that's the challenge really today. In the same pace, the OEMs are also expecting this resolution, I think.
Speaker #1: It's not that 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.
Speaker #5: Now think that it's better to keep more cash on hand in light of the , you know , geopolitical turbulences and things like that .
Speaker #5: So 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 you could , if it would , if it would make sense at all for you to unlist or delist the company in Brazil .
Speaker #1: 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 are importing sort of 8 million units.
Speaker #5: And my second question is actually related to if you could give a little bit more color on how we should model , you know , your reduced needs for xlab 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 #1: 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.
Speaker #5: That would be nice for us to understand the delta in EBITDA coming exclusively from Pesqueria in 2027 versus 2026 . Everything else kept equal .
Speaker #1: Alonso, I hope I answer your question with this.
Speaker #4: Yes, just to follow up. So yes, for the you're right with the 232. For commercial market or your commercial customers, they may face higher steel prices, right?
Speaker #5: Those are my questions , guys . Thank you so much for your time .
Speaker #3: Hi , Daniel . Thank you very much for the questions . I start with the second one first Pesqueria remember , Pesqueria 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 .
Speaker #4: That would be the implication of not 232.
Speaker #1: The I don't know if they're going to face higher prices. Alfonso, I think they're going to have fair they're going to have the prices of the market that doesn't reflect unfair competition.
Speaker #3: 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 a BDR ratio point of view .
Speaker #1: 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.
Speaker #3: You're going to I mean , what the facility gives 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 #1: 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 #1: Steel way back of our peak in 2023. So 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 are expecting that.
Speaker #3: So the . 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 #3: I mean , it's 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 for changing to Pesqueria ourselves that we the capacity we have in Pesqueria .
Speaker #1: 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 #4: Fair enough. Thank you very much, Maximo.
Speaker #1: Thank you, Alfonso.
Speaker #3: So 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 , but the certification process for more than 2.5 million tons takes a lot of time .
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 #5: Hi everyone. Thank you so much for taking my questions. Congrats on the results. My first question is actually related to your capital location decisions.
Speaker #3: So that's the focus in 2027 . And I hope that answers the second question . Daniel And for the first question , capital allocation , I think , Pablo , you answered a little bit , but give it I mean , more detail , please .
Speaker #5: After you've mentioned Pesquería a number of times during the call, and we are nearing the conclusion of the project, then you guys should enter a period of much stronger free cash flow generation, right?
Speaker #5: 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?
Speaker #3: Yes .
Speaker #6: Okay . Hi , Daniel . 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 .
Speaker #6: First of all , you're right that our results are improving . Second , and Maximo , just explaining , we have or we are at the very end of our big CapEx plan .
Speaker #6: But we need need to take 1 or 2 years to digest everything that we we are doing . 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 #5: 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 it would make sense at all for you to unlist or delist the company in Brazil.
Speaker #6: So why we are saying that or why I'm saying that is because it's very difficult for telling you at this point to have or to launch any new big CapEx project in the in the real near future .
Speaker #5: And 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.
Speaker #6: Of course , we have certain mention , like all the CapEx as maintained and CapEx and things that we're doing , we already mentioned that we will be doing $1.2 billion in CapEx next year .
Speaker #6: 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 .
Speaker #5: 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.
Speaker #6: But we will have room to take that and to two things . One , to increase dividend . If the sustain in better results is confirmed .
Speaker #5: Thank you so much for your time.
Speaker #1: Okay. 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: And 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 .
Speaker #1: But it's a very complex and huge project, so 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.
Speaker #6: You mentioned things like acquiring shares . You know , that theoretical answer to that in the long run is the answer is yes , because we have , as a goal to simplify our corporate structure .
Speaker #1: You're going to I mean, what the pesquería 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: But there are certain conditions yet in especially in respect to that , shares , that makes us a little difficult to to move forward in the in the short run .
Speaker #6: But again , as , as a general point of view , we of course , we would like to sustain a strong financial position .
Speaker #6: 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 we really prepare to take advantage of that
Speaker #1: So the 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 #1: 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 Pesquería ourselves than the capacity we have in Pesquería.
Speaker #5: Thank you so much , you guys . Super clear .
Speaker #3: Thank you . Thank you Daniel
Speaker #4: Thank you . This concludes the questions and answer session . I would like to turn it back over to Mr. Maximo Vedoya for closing remarks .
Speaker #1: So we are very enthusiastic about what is Pesquería. But don't expect in 2027 a huge telling you. I mean, we are going to focus in 2027 with the ramp up and with all the certification.
Speaker #3: 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 .
Speaker #3: See you in a couple of months .
Speaker #1: 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.
Speaker #1: For the first question, capital allocation, I think Pablo, you answered a little bit, but give it I mean, more detail please.
Speaker #3: Yes. Okay. Hi, Danielle. How are you? Okay. Let me summarize a little bit about what we do with respect to capital allocation. And clearly, we have different things.
Speaker #3: 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.
Speaker #3: 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 #3: 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 #3: 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 dollars in CAPEX next year.
Speaker #3: 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.
Speaker #3: But we will have room to take that and to two things. One, to increase dividend if the sustain in better results is confirmed. And secondly, something that you mentioned and you're right that we tend to be a little more conservative, that some companies and we prefer to have a very strong financial position in order to support future alternatives that could happen.
Speaker #3: You mentioned things like acquiring shares. You know that theoretical answer to that in the long run is the answer is yes because we have as a goal to simplify our corporate structure.
Speaker #3: But there are certain conditions yet, especially with respect to those shares, that make it a little difficult to move forward in the short run.
Speaker #3: But again, as a general point of view, we of course we would like to sustain a strong financial position. We would like to sustain a positive and if possible growing dividend payment.
Speaker #3: 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 #5: Thank you so much, guys. Super clear.
Speaker #3: Thank you.
Speaker #1: Thank you, Danielle.
Speaker #2: Thank you. That concludes the questioners and answer session. I would like to turn it back over to Mr. Maximo Vendoya for closing remarks.
Speaker #1: 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.
Speaker #1: See you in a couple of months.
