TX

In Mexico, apparent steel consumption fell around 10% in 2025, driven by uncertainty triggered by U.S. trade actions. In 2026, however, we see an improvement. The Mexican government has been actively working to mitigate the negative effects of U.S. trade measures on the Mexican economy by defending the local industry against unfair imports from Asia. These actions not only support the continued development of the Mexican industry, but are closely aligned with the U.S. government's own trade strategy. Plan Mexico is also central to this effort. It promotes industrial development, increased domestic content in manufacturing, and strengthens regional supply chains. In this same line, last week, the steel industry and the Mexican government signed a landmark agreement to prioritize domestically produced steel in all public procurements, a clear sign of the opportunity ahead.

Taken together, these policies support our expectation of a recovery in Mexican steel demand. In this context, we expect volumes in Mexico to continue improving in the second quarter, driven mainly by the commercial market. The significant destocking that took place across the value chain in 2025 is now giving way to a normalization of apparent demand. Beyond that, we are seeing early movements in several infrastructure projects, which could add meaningful demand in the coming quarters. Turning to our Pesquería project in Mexico, the ramp-up curve of the cold rolling mill and the galvanizing line are running ahead of plan. We expect both lines to be operating close to a full capacity by October. The slab facility is also advancing in line with expectation. This project is central to our strategy.

It will significantly increase our vertical integration in Mexico, reduce our reliance on externally sourced slabs, and enhance our product capabilities across automotive, industrial, and construction applications. Importantly, as the automotive USMCA rule of origin enter into effects next year, this facility will position Ternium as a key player in meeting a growing demand. In this respect, I am pleased to share that we have been granted a patent in the United States for our new electrical steelmaking process, which will enable us to produce exposed steel at scale. This innovation leverage the integration of direct reduction at the same site. In addition, innovations such as virtual stamping solution, which utilize artificial intelligence to streamline certification process for the automotive industry, reinforcing our drive for operational excellence. This commitment continue to be recognized by our customers.

In February, we were honored by Ariston Group with their Strategic Partner Award, the highest recognition for quality and partnership. In April, Ternium México received the 2025 John Deere Crop Award and achieved the partner level, John Deere's highest distinction for cost-effective and long-term collaboration. Brazil steel consumption remains broadly stable, with some sectors showing resilience and other facing more pressure. The automotive industry continues to perform well, with production expected to grow around 4% this year. On the other hand, sectors like agribusiness have seen weaker demand. A key challenge in the quarter was a significantly increase in steel imports, up around 30% versus the previous quarter. Import accelerated ahead of the government's anti-dumping measures on cold rolled and coated products.

This has resulted in elevated inventory levels of imported material in the market, which we expect to normalize by the second half of the year. As these trade defenses measure gain traction and inventories level normalize, we expect to see Usiminas' market share to improve. However, it is also worth noting that import pressures is not limited to China. Volumes from Southeast Asia, particularly South Korea and Vietnam, has increased significantly, reflecting the indirect effect of China oversupply on the region's trade flow. In March, we were honored to welcome President Lula to the official inauguration of the Roberto Rocca Technical School located near our Rio de Janeiro plant. School provides full funded technical education to young people from the surrounding communities, offering them access to a world-class education.

Built with an investment of $50 million, we expect to welcome close to 600 students by next year. In Argentina, at 2024 record one of the lowest steel consumption levels in 2 decades, the market began to recover in 2025. However, 2026 did not start as we had expected. Demand is growing unequally. Mining, energy, and agriculture are performing well. Automotive remains at reasonable levels. Constructions remain soft. Metal mechanical and home appliance sectors are lagging, affected by weak domestic consumption. As I bring my remarks to a close, I am pleased to share that Ternium has once again been recognized as a sustainability champion by the World Steel Association. This recognition is granted to companies that integrate sustainability into their core strategy, combining environmental management, safety performance, innovation, and responsible community engagement.

Looking ahead, we are constructive on our market and our ability to continue improving performance. In Mexico, the combination of normalizing demand, supportive industrial policies, and the ramp-up of our downstream projects position us well for the quarters ahead. In Brazil, as trade defenses measures gain traction and imports inventory normalize, we expect to see a healthy competitive environment. In Argentina, we continue to monitor the recovery closely while maintaining our operational discipline. Across all our operations, our teams remain focused on driving efficiency and lowering cost, and we're already seeing the benefits. Overall, the recognition we continue to receive from our customers reflects the quality of what we are doing every day. We are confident in Ternium's ability to deliver even stronger performance in the periods ahead. With that, I'd like to move to a review of our quarterly performance. Pablo, please go ahead.

Thanks, Máximo, and thanks everybody for participating in our call. Let's review our operation and financial performance for the first quarter of this year. Starting the webcast presentation on page 3, we can see that the adjusted EBITDA increased sequentially by 21% in the first quarter, in line with our expectations and reflecting margin improvements. Looking ahead, we expect adjusted EBITDA margin to continue increasing, supported by higher revenue per ton, particularly in Mexico and Brazil, partially offset by higher cost per ton across our main markets. Let's move to the next slide. Net income for the first quarter of 2026 reached $372 million. This reflects improved operating performance, stronger net financial results, primarily driven by foreign exchange gain in Mexico, Argentina, and Brazil, and positive deferred tax results.

Deferred tax gain amounted to $122 million, driven mainly by currency fluctuations in Argentina and Brazil and inflation effects in Argentina. Net income in the quarter also included a $48 million loss from the quarterly update of the value of a provision from ongoing litigation related to the acquisition of a participation in Usiminas in 2012. Let's turn to page 5 to review the steel segment performance. Shipments were broadly in line with the previous quarter. In Mexico, volumes increased, supported by solid commercial market activity. This was driven by more effective trade defenses against unfair imports, healthier inventory level across the value chain, and a seasonal recovery in demand. In Brazil, Usiminas prioritized profitability in the face of increased cost volatility, particularly in energy and logistics, resulting in a modest sequential decline in shipments.

In the southern region, demand softened, reflecting weaker industrial activity in Argentina alongside typical seasonal factors, leading to a sequential decrease in shipments. Ahead, we expect shipments to trend higher, mainly driven by Mexico and Argentina, as trade measures gain traction in Mexico and demand conditions gradually improve across both markets. Let's turn to page 6 to review the performance of our steel segment. Steel cash operating income improved during the period, driven by higher margins resulting from realized prices gains, which were partially offset by higher raw material and purchased slab costs. On next slide, the mining segment reflects a different dynamic. In this case, shipment declined sequentially due to operational disruptions in Brazil caused by the unusual intense rainfall. Finally, let's turn to the cash flow and balance sheet performance on page 8. The company continues to generate strong cash flow from operations.

Although this quarter we saw an increase in working capital driven by an increase in trade receivables, mainly due to higher steel prices and volumes in Mexico. We anticipate that sales will grow in the second quarter of this year, likely requiring a further rise in working capital.

Capital expenditures continue to reflect our progress in the expansion of our industrial center in Pesquería, now mostly focused on the construction of the slab making facility. We ended the quarter with a net cash position of $327 million. On top of our CapEx needs, the cash position decline included a $350 million payment for the acquisition of the Usiminas shares from Nippon Steel. Partial offset by a $150 million loan collection from Techgen, our non-consolidated energy joint venture that supplies power to our operations in Mexico. This concludes our prepared remarks for the first quarter. We will now be happy to take your questions. Please proceed with the Q&A session.

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 on put hand down. Our first question comes from Mr. Rodolfo Angele from J.P. Morgan. You may proceed.

Hi. Good morning. I think, now you can hear me.

Yes.

Okay. I wanted to just hear your thoughts on two aspects that I think are relevant for ArcelorMittal's future performance. First, there's been a lot of discussion on USMCA. If you could share your thoughts on what happens there and what it means in terms of different scenarios for the company's performance. I also wanted to hear from you a little bit about the expectations for the slab market in terms of pricing outlook for, you know, the remaining of the year, especially. That's all. Thank you.

Thank you, Rodolfo. Let me start with the USMCA question. As you know, there have been a lot of discussion and on talks about USMCA. I believe that there will be a trade deal between U.S. and Mexico. As you know, the U.S. administration, through the USTR and the Mexican government through the Secretariat of Economy, holding meetings. There is a formal meeting on the 25 of May, which is going to start formally the revision or the discussions of the USMCA. Most of that discussion are probably going to be on discussing mainly stricter rule of origin and some other issues that have arisen. I think my thoughts on this is that this is gonna take some time.

I am positive there is going to be an agreement, but I don't know exactly the timeline. Probably won't be by the 1st of July, and probably would get most of this year. This is, I mean, my thoughts of what it's happening in the USMCA. There is also some discussions going on on the Section 232. As you know, I don't think, My thought is, and I always said, there is no incompatibility between Section 232 and USMCA. It doesn't make sense, makes Mexico subject to 232 in steel, as the U.S. has a steel trade surplus, a very big steel trade surplus with Mexico.

I know the Mexican administration has also starting stated that there is a priority while the USMCA is negotiate, that there has to be a relief in steel and automotive Section 232. I know they are discussing this during these following weeks. Nevertheless, I think it's important that the Mexican administration, as I said a little bit in my remarks, Rodolfo, has been very proactive in launching initiatives to strengthen the steel consumption in Mexico. While all this is going on, the Plan Mexico, the target measures against unfair competition, the imposition of tariff for countries that don't have trade agreement with Mexico, all this, I think it's a very proactive way of the Mexican government to attack the problems of the Mexican economy while these two things are negotiated.

In the end, I think USMCA, as I said, is gonna be renewed, probably with much tougher rule of origin, which I think it's a very good thing. I'm not that certain on the timing. Probably the timing it takes a little bit more longer. I hope with this last large answer, I did answer your question, Rodolfo.

Yes, you did. Thank you very much.

The slab markets, what do you refer with the slab market, exactly?

Just, you know, it's just a market that I think it's more unique overall in terms of how pricing dynamics work. I just wanted to hear your thoughts on what you see, especially on pricing, you know, what do you expect for the coming quarters?

Prices as it has been in most of steel products has been increasing recently. Clearly, the increase in fuel increases the logistic for slabs, and also there has been some increase in iron ore and in other raw materials, which have made the slab market a little bit more expensive. Do you know I mean, from all our production, our buying of slab is not as big as it used to be because most of the slabs come from our Ternium Brazil facility. Nevertheless, we are buying in the market and we are seeing some increase in that. It's compensate probably with increase in prices in finishing products also.

Okay. Thank you very much.

You're welcome, Rodolfo.

Our next question comes from Mrs. Timna Tanners from Wells Fargo Securities. You may proceed.

Hello?

Hello. Yes, Timna, we can hear you.

Oh, fantastic. Sorry.

Yeah

ask if I could about a few things. One is to follow up on the USMCA discussions. The U.S. government is more interested in granting relief on tariffs if there's a construction of production in the U.S. Just wondering if you would expand your U.S. presence. Also wondering along those same lines about a hearing about a Mexican dumping case against U.S. galvanized imports, if you could address those.

Timna, we are not thinking in making some production or increased production in the U.S. now. We don't have that as a plan today. Second, there is a dumping case against cold rolling products. There's no dumping case against galvanized in Mexico. At least to the U.S.

And-

There is a dumping case in galvanized against Vietnam and I think other countries going on.

Okay. I've heard that Mexico was working on one against the U.S. I thought that could be positive for your operations. We'll stay tuned there. Second, can you expand a bit more on the mention of electrical steel, electrical sorry, EAF capabilities to make exposed automotive and remind us what might be the timeframe for doing that?

Yes, for sure. I mean, as you probably remember, the steel shop is gonna start the ramp up in the last quarter of between the last quarter of this year and early next year. As you know, the operation, it's, I mean, the facility is huge. I hope all of you can one day visit it because it's worth visiting it, the facility. The ramp up facility, the ramp up curve should take at least all 2027. In the meantime, during all this ramp up, we are going to work with the automotive customers to certify our products. A certification process for all automotive products, not only the exposed material, but also all the other parts of the car needs certification.

We are working very close with all of them because they are very eager to accelerate the certification process. We are working already with them on how to accelerate the certification process as much as possible. We have recently increased the capacity of our Ternium lab in Pesquería, which we are working in certifying all the lab equipment, so we can certify part of the process they need in that site. And, and the, I mean, the capacity that this EAF is gonna have to have the capacity of producing exposed material in a sustainable way and in a continuous way is gonna be unique because of the process we are doing and all the patents we are developing, especially to decrease all the nitrogen that the EAF usually have.

This is a unique process that we are developing with our technical people and the supplier of the equipment, that is Tenova, a sister company of us. I mean, again, the timing should be around next year. Probably by the third and fourth quarter of next year that we are going to supply in a sustainable way to the automotive industry.

you'd be qualified for 2028 or qualified.

Yeah

2027?

No. The idea is to qualify everything for 2028.

Got it. Okay. Great.

Thank you.

You're welcome.

Our next question comes from Mr. Alfonso Salazar from Scotiabank. Please, Mr. Alfonso, you may proceed.

Hey. Sorry.

Yeah

a couple questions on my end. The first one is regarding the outlook in Argentina. I want to see if you can give us more color on what's going on and what are your expectations for future demand. Also try to understand better what's the situation regarding imports. It seems to be more problematic than in the past. Also, exports from Argentina to other Latin American countries. What is the outlook there? Because of same thing, you know, imports from to other countries from Asia. The second question is, some comments on the decarbonization trends in Latin America.

It seems that we always knew that it was going to take, you know, longer than Europe, but any comment on what is the outlook there as well, these trends of decarbonization and green steel?

Yeah. Thank you, Alfonso. Outlook in Argentina, I mean, in the short term, shipments in the second quarter are going to increase because as you know, the first quarter in Argentina is always a seasonably low, low water, no? January and February usually are holidays in Argentina, the demand is quite Further down the road, I think some of the sectors present a good opportunity: mining, oil and gas, and agriculture. They are compensate by others like mechanical goods and like electro.

White goods.

electrical and.

White goods.

White goods, sorry. That demand is not very good in the final goods. It's gonna be a little bit better, but we don't expect a huge growth compared to 2025. Imports, although there has been a lot of talks about imports, we are not seeing imports in our products. We had seen some imports in the value change, but these are stable today. I think the problem in our value change is that the demand or the consumption is not very good. That the situation we have in Argentina. Decarbonization in Latin America, you're saying the path is lower than in Europe. I think the pace in Europe has also decreased a lot.

I mean, there's a lot of project that has been announced in Europe that today are not going through, and they continue building up in blast furnace. In Latin America, I can say two things. I think, one, there is increasing in Mexico, where you have the opportunity to change from coal to natural gas. Mexico will continue on a path of having probably the lowest steel production emissions per ton of production of probably the world. In Brazil, there's more difficulty to change blast furnace, so the decarbonization there is going to go through by small decreases by efficiency, but still working with blast furnace.

Thank you. The outlook for other Latin American countries, demand in other countries that you source from Argentina?

No. The regional countries, I mean, usually they don't have a huge impact in the shipments. We'll continue to ship to Uruguay, Paraguay. Those are the countries that we ship from Argentina, but the consumption there is marginal. It's not gonna have a huge impact in our shipments.

Fair enough. Thank you.

You're welcome, Alfonso.

Our next question comes from Mr. Marcio Farid from Goldman Sachs. Please, Mr. Marcio, you may proceed.

Great. Morning. Thanks for the opportunity. Obviously another follow-up on USMCA and Section 232. I think what's changed maybe this time is that obviously Mexico has put some import barriers to steel coming into the U.S., coming into Mexico, to try and reduce triangulation as well or rerouting. I'm just wondering, right? Once assuming, you know, Section 232 to Mexico is either removed or reduced, do you think the competitive environment would be different versus where we were, you know, a few years ago when we did not have those import barriers? I remember well, I think Mexico imports about 40% of all the steel that you need.

Just wondering if you can think about a structural change in terms of the competitive environment between North America or Mexico and the U.S. Second point, demand was very weak in Mexico last year. I think it was down 10%. Part of the reason was, as you mentioned, de-stocking, but also weak activity as companies wait for better visibility on their relationship with the U.S. You mentioned restocking has been helping pricing. I'm just wondering if you're seeing demand or activity also recovering, or we need to see a final agreement with the U.S. for investments to really resume in Mexico. Those are my questions. Thank you.

Thank you, Marcio. I mean, the first question about the triangulation and the efforts that the Mexican administration is doing control this. I think there is already a structural change. I think, the Mexican administration, way before Trump was elected and all this discussion begin, was very focused on increasing the value-added content of all what is produced in Mexico. I mean, Mexico was a huge exporter, but the value added of those product, the regional content of those products were not very high. Plan Mexico, which President Sheinbaum already announced in the campaign, in her campaign, was a plan for doing exactly this, for changing this dynamic.

All the things that the Mexican administration is doing, as you mentioned, are a way of decreasing the dependency of Asian products, especially in those product that Mexico or the region is able to produce. The clear example of that is steel. I think there is already a structural change, and probably this is gonna be even better, once the 232, as you said, is reduced or removed, from the site between Mexico and the U.S. Clearly you are correct in your assessment. Regarding the second question, Marcio, there is a demand increase in Mexico. It's not as high. World Steel is has just released that the demand in Mexico is gonna grow around 4% in the year.

Considering that the demand decreased by 10%, as you said, in 2025, it's not a huge increase, but it is an increase, and we are seeing some recovery in demand. I expect that this is gonna be higher once the USMCA, where the USMCA is going is more clear. We are seeing this increase, at least in a small space, but we are seeing it today. I hope that answered the question, Marcio.

Yes, for sure. Thank you very much for the details.

You're welcome.

Our next question comes from Mr. Rafael Barcellos by Bradesco BBI. Please, Mr. Barcellos, you may proceed.

Good morning. Thanks for taking my questions. First question, last week, the Mexican government signed an agreement, which I believe they called as an agreement for the promotion of the Mexican steel industry, right? I mean, when do you expect that these measures, you know, will finally translate into, you know, incremental demand for the country? What else you think the government can, you know, promote to incentivize the sector in the short term?

As a second question, in your outlook, you know, you mentioned a bit of the cost pressure that we have seen, you know, for all industries, and I understand that, you know, steel is not an exception. If you can elaborate a bit more on what we can expect for cost in the third Q, for example, could be helpful. Thank you.

Thank you, Rafael. Well, the agreement in Mexico, as I said, is an agreement between the government and the steel industry of Mexico to commit that all of the government use of steel is Mexican steel used in those main infrastructure. I think it's very important because there was already a commitment to use Mexican steel. In some cases, especially all this new infrastructure that is coming by Pemex, by CFE, that is the electricity company, that are joint investment between public and private sectors. This is gonna be an impact in the demand of steel, especially with all the investment in gas lines, in renewable energy, solar and wind. You know, it has a huge consumption of steel.

It is important in that sense. I don't expect the investments to start in the next quarter or the following, but I think that by year-end, all this effort that the government is doing will have an impact in demand. Too early to say how much, but it's gonna have an impact. The second question Sorry?

The cost.

The cost. Well, I mean, it's gonna be an impact in cost, but for Ternium, it's not gonna be a huge impact. The big impact is gonna be in logistic and import of some slabs, and some logistic cost in Brazil and probably in Argentina. It's probably that is gonna compensate, as we said in the outlook, by also the price increases. I think that the real risk, let me say, of the conflict in the Middle East is that if it's not resolved quickly, it could cost more a recession. We are thinking that that's the real risk for us. We see a little bit increase in cost, but again, more than compensate by the increased prices of steel are having.

As a follow-up, sorry.

Yeah.

Can you just elaborate on what you're seeing as for cost trends in the 3rd Q? On the price side, I understand that, you know, prices are outpacing, you know, the cost increase. Can you just help us understand in your view, what is the main driver for this recent good price momentum that we are seeing in Mexico?

Well, the good momentum I think is everywhere. You see in Europe prices increasing. You see in Brazil. You even see in China prices increasing. I think part of that is motivated by the increase of cost. It is bigger that increase in Southeast Asia and is bigger in Europe than it is in the Americas. I think that's the motivation, Rafael.

Okay. Thank you.

Our next question comes from Mr. Caio Ribeiro from Bank of America. Please, Mr. Ribeiro, you may proceed.

All right. Good morning. Thank you for the opportunity. I have 2 questions linked to your investments at Pesquería. First off, as you complete your upstream investments this year, what are some of the investment avenues that you're contemplating right now, right? Where does the Musa expansion fit in within your list of priorities? Secondly, assuming that you don't green light another investment right away or, you know, a large investment like the Pesquería upstream, downstream investments that you've done in the past years, those CapEx figures, they should drop considerably, you know, versus your recent run rate. Which together with that earnings increase that you'll get from your investments should drive significantly higher free cash flow generation in the coming years, right?

With that in mind, just wondering how you think about dividend payments going forward. You know, is there room in your view to boost those to cover a larger part of that positive free cash flow generation that you should have in the coming years? Those are my questions. Thank you.

Thank you, Caio. Well, yeah, the upstream investment, as you know, will, as I said before, we will start the ramp up curve by the end of the year or early next year. I mean, we're still, but it's still a long way to go. Today, the big investment that, as you say, we are analyzing is the expansion of Musa. Usiminas continue to analyze the different alternatives we have regarding CapEx and the cost of production and the material that we can take and on each one of these alternative. By the end of the year or early next year, we have to take a decision, or we will have a decision on where to go on that.

Those are, so far, the investments we are considering. I mean, we are not seeing yet a necessity or, I mean, the willingness to make another large investment so close as to bring in Pesquería project online. Yeah, CapEx is gonna decrease. As you remember, 2025, we have $2.5 billion of CapEx. This year it's gonna be lower than that, much lower than that. Probably in 2027 is gonna be even lower, around $1.2 billion or $1 billion. Yeah. I mean, regarding the dividend, if the numbers improve and we have generation. As you know, we have a track record that Our dividend has a very good yield.

Although we decrease a little bit the dividend, or the board decided to decrease a little bit the dividend because of the uncertainty, which I completely agree. Still the yield dividend with the price of Ternium ADR today, it's around 5%. We will probably continue with this policy of taking a good dividend.

That's clear. Thank you very much.

Our next question comes from Mr. Caio Greiner by UBS. Please, Mr. Caio, you may proceed.

Hello. Good morning, everyone. Two questions. The first one on Brazil. I wanted to hear your thoughts on the strategy that the company has following the recent anti-dumping duties implementation for the operations that you have there, especially at Usiminas. I wanted to know if you're gonna favor over the next few quarters and maybe even years, higher prices, higher profitability, value over volume, somewhat of what we saw during the first quarter, or if the strategy is going to be more in the sense of gaining market share, expanding volumes. If that's the case, I wanted to know, how much do you see in terms of volume gain potential over the next, again, quarters and years?

If you believe that you have enough capacity for this amount of volumes that you could increase going forward. If you don't, what would be the strategy there? Relighting a blast furnace? Could it be on the pipeline or is that more in the sense of just purchasing more shares and raising capacity utilization? The second one, just a follow-up to the previous capital allocation question. Pablo, Máximo Vedoya, you mentioned that you don't have plans of doing another large CapEx project while you still have the Usiminas investment.

Could you still maybe could it be in the on the pipeline to again perform corporate simplification measures, more bottom-up or in-house initiatives like the Usiminas stake that you acquired during the first quarter or anything related to Argentina? That would be very, very helpful. Thank you.

Thank you, Caio. I mean, if we have to choose between the two strategy you said, probably is the first one, and we don't want to produce more in order to sell something that the market doesn't need. We will always prefer the first strategy. It's clear that, with all the measures that the Brazilian government is taking, as I said, Brazil is kind of a little bit late. I mean, Mexico, U.S., Canada, Europe, even India are taking measures a little bit more quickly than Brazil. Nevertheless, what the trade measures in Brazil, it's a very good first step in the very right direction. If unfair trade comes down, probably we'll increase also volume.

we are very gonna be very cautious. regarding our capital allocation, Pablo?

Oh, thanks for let me answer one question.

Welcome

Hi, Caio. How are you? Yes, regarding capital allocation, and following on what Máximo said before, we are in the middle of a huge capital allocation structure, take into consideration the rest of the capital expenditure in the facility in México, with the dividend payment and with the capital working capital increase because of the increasing volumes and the increasing prices that we saw. This year, as you know, we will be moving from a net cash position to a net debt position. Next year, you are totally right, we will be reducing the level of CapEx, we will sustaining probably the other outflows of capital.

This could lead to an increase on our position, our cash position, which is not bad and would prepare us for any opportunity that may appear in the market. Among these opportunities, you know that we have talked a lot in the past and we have worked a lot in order to simplify our corporate structure, this is our on our list of priorities. If there is an opportunity to move in that direction, clearly something that we need to fully analyze and to carefully analyze because it's not that you have an opportunity and you can take it immediately. You need to do all the calculations in order to see the best way to proceed. Together with that, as Máximo Vedoya already explained, continuing with the dividend is a policy that we have.

If there is opportunities to improve that, if the number reflect it's something that we will consider. Additionally to that, we take, if you want some rest, analyzing the next CapEx plan, internal CapEx plan, because the effort that we have to put in order to take this project to work is very significant. As Máximo explained, we need to go through the ramp-up, through certification, so this takes some time. That's why usually when we have this big CapEx plan, we take at least one or two years to design the new ones. As also was explained here, we still believe that Ternium has opportunities to grow in all our markets, especially Mexico and in Brazil.

There will be opportunities for us to analyze, but it will take some time for us to analyze them and present it to you.

Maybe just to follow up to the first actually to the second one as well. In terms of volume gains in Brazil, Máximo, you mentioned that if an unfair trade comes down, you should be able to increase volumes as well. Do you see the current capacity that you have in Brazil as enough for the volume gain that you could have for an expected market share gain? Could you have think about an alternative of, again, relighting one of your blast furnaces there? Think about maybe relighting or revamping Cubatão. Thank you very much.

Yeah, Caio. I mean, today we have spare capacity in Brazil, especially in the Cubatão plant. As you know, it's a plant that is not working at full capacity, and we will also have slabs available from our Ternium facility in Rio once we don't have to ship as much slabs to Ternium México because of the new mill coming, the upstream project coming online. I mean, yes, we have capacity in Brazil to grow, and I think it will be enough, I mean, if imports go down in Brazil.

Thank you very much, gentlemen.

You're welcome, Caio.

That concludes the question and answer session. I would like to turn it back over to Mr. Máximo Vedoya for closing remarks. Please, Mr. Máximo Vedoya, you may proceed.

Well, thank you very much all for joining us. We welcome, as usual, any feedback or additional question that you have. In the meantime, have a great day. Bye.

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

Thank you for standing by. My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to Ternium S.A. Fourth Quarter 2025 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one, on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Sebastián Martí. Please go ahead.

Good morning, and thank you for joining us. My name is Sebastián Martí, and I am Ternium S.A.'s Global IR Compliance Senior Director. This morning, we released our results for the fourth quarter and full year 2025. Today’s call is intended to add context to that presentation. Joining me today are Maximo Vedoya, our Chief Executive Officer, and Pablo Daniel Brizzio, the company’s Chief Financial Officer, who will review Ternium S.A.'s operating environment and performance. Following our prepared remarks, we will open up the floor to your questions. Before we begin, I would like to remind you that this conference call contains forward-looking information and that actual results may vary from those expressed or implied. Factors that could affect results are contained in our filings with the Securities and Exchange Commission, and on page two in today’s webcast presentation. You will also find any references to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued today. With that, I will now turn the call over to Maximo Vedoya.

Thank you, Sebastián, and good morning, everyone. We appreciate you being here today in our conference call. Can you deliver resilient results in 2025, overcoming challenging market conditions by adapting rapidly and acting roughly to protect profitability. The company's cost reduction and efficiency program generated $250,000,000 in savings in 2025 over 2024. Key initiatives included enhancing blast furnace stability, negotiating service contracts, optimizing iron ore sourcing, and improving logistics. As a result, our EBITDA margin reached 10%. Our performance, however, was affected by a fatal accident at Turnure Mexico in 2025 and another at Ternium Brazil during this quarter. Usiminas also experienced a fatality in 2025. We take safety extremely seriously and consider these events a significant setback. Such outcomes are unacceptable prompting us to reinforce our safety programs. In response, we are ramping up preventive actions with a special focus on critical risk. Let me now review the latest changes in the global trade environment. The United States took significant trade measures in 2025. To counter unfair trade practices from China and other Asian countries. And this is reshaping the global steel market. As other countries around the world are following a similar path. In Mexico, the government recently raised import

tariffs

more than 1,400 tariff lines for countries without a free trade agreement. In the case of steel, import tariffs increased from 25 to 35%. Meanwhile, negotiations surrounding the North American region trade framework are ongoing. Many stakeholders from both sides of the border continue to engage in discussions. We have taken an active role in sharing the concerns and priorities of the manufacturing industry throughout this process. I see broad support for public policies that promote greater regional integrations. The aim is to keep trade fair addressing balance, avoid transshipment, and reinforce rule of origins. It is important to mention that an agreement to intensify trade flows should evolve restrictions on intra regional trade. Like those based on section two three two. As a USMCA, joint review take place removing restriction to trade among its member will be essential to ensuring the benefit of deeper integration. Ternium is also doing its part in this process of greater regional integrations. Since our arrival in Mexico over twenty years ago, we have significantly expanded our footprint in the country, investing in state of the art technology to offer a wider range of high value added products to our customers in the region’s manufacturing industry. In this line, I am pleased to share some exciting news. rolling mill We have started production in our new cold and also in our galvanized line at the Pesqueria facility. This achievement completes our downstream expansion at the site made possible by outstanding teamwork. The entire project also added a picking line and a finishing line center. All these facilities are now operational with the cold rolling and the galvanized lines starting the ramp up phase. Meanwhile, construction of the slab plant is moving ahead as plant. As we expect to start up the facility by the end of the year. This new plant will allow us to produce high quality automotive steel with a lower c o two emission per ton in the industry. Adding a touch of color, in 2025, we secure a 1 and a quarter billion dollar loan through a green financing facility to support this project. The loan received several awards last quarter, including IFR's Sustainable Loan of the Year, the GBM awards sustainable loan deal of the year in Latin America and Caribbean, and honorable mention from Latin finance. Coming to Brazil, the recent implementation of anti dumping measures and the increase in import taxes of nine steel products represent a significant shift the market environment. These decisive action signal a stronger government commitment to support local producers and achieve a balanced competitive

landscape.

Looking ahead, will be key to monitor the market closely to prevent attempts to circumvent these measures, ensuring that these new continue to support fair competition. In Argentina, growing concerns have emerged regarding unfair trade practice from China. In this situation, the new trade agreement between Argentina and The United States is important because both countries have agreed to work together to address unfair trade policies from other nations. While we believe Argentina should further integrate with the global economy, it is crucial to approach this process with cautions, particularly in view of China's excess production capacity and predatory trade tactics. Samiva, I am optimistic about Tarmium's outlook for the coming years. I expect Ternium I expect Ternium's profitability improve in 2026, starting from the first quarter. On one hand, we will continue working on reducing costs and enhancing operational efficiency. On the other, although there are still several important trade issues to be worked out, I am encouraged by the growing support of market economy governments around the world for addressing unfair trade practices. A discussion between The United States and Mexico Advance, I am confident that a mutually beneficial agreement will be reached as a world structure agreement is good for all parties involved. Mexico has demonstrated its commitment to reinforce regional defenses against unfair trade practices and encouraging investment within the region. Align strategy with that of The United States in ongoing negotiations. In addition, promising changes in Brazil steel market environment and advancing economic reform in Argentina give us give us hope for the future in South America. In this context, we have reached an important milestone in the largest industrial expansion in our company's history. Together, these developments will put us in a unique positions as they will help create a stronger foundation for growth across the region. Thank you all for your attention. And before I hand it over to Pablo, let me thank especially our colleagues in in Brazil all the analysts there who made it join us during the Carnival season. So I hope you have a very good holiday. So, Pablo, please go ahead. Thanks, Maximo. Thanks, everybody, for being today with us. In in this conference call. So let me begin with a review of our operational and financial performance. If we move to the page three in the webcast presentation, you you can see that adjusted EBITDA declined slightly sequentially. In the fourth quarter. It was in line with our expectations. EBITDA margin remained relatively stable and there was small seasonal decrease in shipment. As as we move into the 2026,

we anticipate a sequential higher adjusted EBITDA mainly driven by an increase in EBITDA margin as well as growth our shipments. Let’s move to the next slide. Net income for the fourth quarter totaled $171,000,000 in the fourth quarter, We show a lower operating income mainly impacted by one time charges, mostly related to an impairment in less one of our mining operations in Mexico. On the other hand, we have a better income tax refund. Along with stronger financial results. In the sequential comparison, we have deferred tax write down using in the register in the third quarter. Let’s turn to page five to review the performance of our steel segment. Shipments declined mostly during the quarter. Primarily due to weaker volumes in other markets. Mainly in The US and in Brazil, reflecting seasonally slower activity. This effect were mostly offset by higher volumes in Mexico and in the southern region. In Mexico, we saw better volumes to the commercial market as a result of government measures aimed at curbing unfair trade practices. Looking forward to the first quarter, we anticipate a sequential increase in shipments mainly as a result of the stronger demand in Mexico. Turning to Page six. Steel cash operating income decreased sequentially. Driven by slightly lower sales volume and a decline in realized steel prices. Which was partially offset by reduced raw material purchase lab costs together with efficiency gains. Turning to the next slide, The mining cash operating income increased sequentially, driven by stronger shipments and higher realized iron ore prices partially offset by higher unit cost. We will review our cash performance and balance sheet performance on page eight where we see that in the fourth quarter, we record another solid level of cash generation by operations. Supported by a reduction in working capital primarily driven by a decrease in trade and other receivables. Also, offset by a decrease in trade payables and other liabilities. We are now past the peak of our capital expenditures. Which in the fourth quarter totaled $463,000,000 primarily reflecting continued progress in the construction of new facilities at the Turner Industrial Center in Pesqueria. Mexico. Our net cash position remains stable in the fourth quarter of the year. And we have a neutral free cash flow. In addition, dividend payments to shareholders and minority interest were largely offset by an increase in the value of financial security. Let’s now turn to the final slide to summarize our full year performance. In a challenging year for the steel industry, we were able to defend profitability as we had proactively to mitigate the impact of the drop of steel prices and volumes. And as a result, our EBITDA margin achieved a two digit level. In 2025, cash generated by operation reached strong $2,300,000,000 allowing us to finance demanding CapEx requirement as we completed the downstream project in Pesqueria and keep working on the slab facility. Looking forward, we anticipate a decrease in CapEx in 2026 to a level of around $2,000,000,000. In this context, Therneos was board of directors has proposed an annual dividend of 2.7 per a d dollars per ADS for fiscal year twenty twenty five. Keeping at the same level as for the year 2024. Of this total, we have already anticipated and paid 90¢ as an interim dividend in November. The proposal showed our confidence in the company's prospects even though we are currently undergoing a phase of significant capital expenditure. As the current market price of 10 new NDAs this implies a dividend yield of over 6%. With this, we conclude our prepared remarks. I will now turn the call over to the operator to begin the Q&A session. Thanks.

At this time, I would like to remind everyone, in order to ask a question, press star and one on your telephone keypad. Your first question comes from the line of Rafael Barcellos from Bradesco BBI. Your line is live.

Hello. Good morning, and thanks for taking my questions. So firstly, would like to get a bit more color on your outlook. For the Mexican market. So demand today is still running well below the peak levels we saw a

few years ago. So I am trying to better understand how do you see the recovery path from here. Specifically, I mean, with the recently announced TRC Mexico, I mean, how do you how should we think about the potential impact on demand growth for thousand twenty six? And other than that, I mean, how are you thinking about the likelihood of the timing of a USMCA deal What showing impact if a significant part of this impact could be captured in 2006 or if it is a war story for 2027 and beyond. Could be helpful. And as a second question, turning to Brazil, I would like to get your thoughts on the recently announced anti dumping measures I mean, how do you expect these measures to place into pricing dynamics? Over the past few quarters? Should we think about a relatively quick pass through into domestic prices or is the impact to be a more gradual depending on, inventories and competitive behavior And and if you could even, like, give some color on the magnitude of a potential hikes here. Thanks.

Thank you, Rafael. Let’s start with the first question. The next

Mexican market and demand. Your quite, right demand is very low. It was very low in Mexico in 2025. Apparent consumption of steel decreased 10% That it is a huge decrease. I have never seen something like that in Mexico. To be honest. And this was even worse if you separate long products and flat products. The the upon consumption in flat products, which is our main market, this was 14% below that of 2024. So this is a huge decrease. Ternium in that

our shipment in Mexico were a little bit

the decrease was smaller because we managed to to gain market share in the flat products. So so it was an important measure. I think in 2026, the the estimation of of Canacero is that the market is gonna grow 4%. But I think all these measures are going to allow the local steel mills to gain more market

share against imports. You have to remember that

in Mexico, there is still a huge amount almost 9,000,000 tons of finished products that are reimported in Mexico. So our target with all these measures is to gain

more market share as we did in 2025,

And although the market is not growing as much

as we expect, gain in our shipment with the market share.

In 2026, so the timing then the timing in the USMCA it is very difficult at the moment. I mean,

there is a target that is that in July, USMCA should be renewed. I I really do not

know at this moment if that is gonna be achievable. In our projections, we are not seeing a lot of of increase

of the of the timing of the USMCA for 2026. And we are putting that more in the 2027. I mean, of course,

we hope that this is sooner, but we have to expect or we are making our plans

in order that it is a little bit later.

Then

the the the the second question was regarding Brazil.

And and the dumping measures.

I mean, to give a little more color, I think this is a very important step. If you remember,

have not been Brazil has not been very much advocate in the last years of defending industries again unfair trade policies, the predatory

tactics by by China. But this change with four dumping cases, The the plate one, the the repainting, and and last week, the the cold rolled and the So this is a very important news a very important first step that Brazil joined most of the rest of the economies. I mean, from Europe to India to Mexico to The US, all the countries are are fighting unfair trade from China and from Asia. Impact on prices, I think the impact will be gradual. I do not expect a huge increase in prices because of this. Again, this is a first step But it is gonna be a a more gradual, as you said, impact in in in the future. I think, Rafael, I answered your questions, but I do not know if you you want more clarity.

That is perfect. Thank you. Thanks a lot.

Your next question comes from the line of Carlos de Alba from Morgan Stanley. Your line is live.

Good morning, everyone. Thank you very much. Maybe, Maximo, first of all, clarification. You said that Canacero sees demand up 4% or down 4% in 2026?

Up 4% in 2026.

Great. Thank you.

Fantastic. Okay. And then, my my two questions will be first,

on USMCA. And what would be

in the event that there is not a a renewal of USMCA and and so that Mexico cannot reach a commercial agreement, stand alone with the US.

What would be attorney's plan b?

Given that a lot of the particularly on the auto side,

you the volumes going to that sector and then

Mexico exports a significant amount of the cards that that that are producing in the country. And and my second question, if you can give us maybe a little bit of an outlook on how do you see earnings volumes performing in 2026? What are the expectations in terms of volume growth, in the different in the different countries where you are or operation where you are

actively right now.

Yeah. Can you repeat the first question of the USMCA? Because we Yeah. We did not hear very well. Yeah. Sorry. Just what would be what is Theranos plan b? What would be your strategy if if there is not a renewal of of the trade agreement? And also Mexico does not reach an agreement exclusively with the US. Yeah. I mean, we operate all twenty twenty five with these premises. There is no I mean, on a sense, the USMCA, if it is renewable, the the great benefit is that the section two three two is gonna disappear between Mexico and The US. I do not see a renewal of agreement with the two three two onboard. And and that would be the biggest benefits of the renewal. So in 2025, we operate without it it is a USMCA, but the two three two in in steel derivative and a lot of products

made it the way to operate if there is not a renewal.

Again, I think that some of these measures are going to be taken away, although prob if or the the renewal is postponed. So we are operating in this environment, Carlos.

The

volumes of 2026 Okay. Let me take that one. I am not sure.

As as you know, as you hear, you know, we are at you know, with Outlook, we are expecting volumes to start increasing already through the first quarter. And in this case, mainly coming from from Mexico. So let let me divide the the the answer to this question into a different market where we are. Because there we have different situation. In in in South America, the first quarter is the seasonally lowest quarter. Of the year. So you are not seeing any any increase during the first part of of of the year, during the first quarter. And the opposite situation is in Mexico where we seasonality is coming at the last part of the fourth quarter. So taking into consideration what Maximo said that expectation is at least an increase of 4% in peak consumption for the year. And the possibility of, further increases in our market share because of the volumes that we will be able to increase and produce with the new facilities. And even even without taking into consideration the the possible outcome of the USMC annualization and the consequences of that, we are positive that that the increase in the Mexican shipments will be above at least the numbers that Maximo mentioned and expectation for for for the for the for the Mexican market. In the case of Argentina or the southern region, you know that volumes were decreased, at the beginning of the 2025 because we were getting out from a big recession in Argentina. So numbers tend to recover volumes tend to recover in the part of the year. So we are expecting to have a positive number coming out in in the second vision. In initiating in the second quarter of the year, not during the first quarter. Differently, the situation in Brazil where we saw volumes, but healthy level during 2025, and going with the increase of the GDP growth of the country. So expectation for Brazil is to keep growing at moderate levels. So volumes will be more related to these changes in the general economy of the country.

Thank you.

Thank you, Carlos.

Your next question comes from the line of Timna Tanners from Wells Fargo. Your line is live.

Yeah. Hey. Good morning. I wanna to drill down, if I could, please, on the EBITDA margin in the past, you have guided to a normalized level of 15 to 20%. And in the second quarter call, you had said you expected 15%, the low end by the fourth quarter. I am just wondering, you know, the last two years have been challenging. I I I acknowledge that. But just trying to get a sense of what it takes to get back to that 15 to 20%. Could could we see that in 2026? What, you know, what what are gonna be the puts and takes to to get there again? Thanks.

Hi, Timna. This is Paulo. How are you? So let me let me try to answer your question, which first of all, you are right. We were expecting further recovery in the last part of last year that at the very end did not materialize because among other things, the the the impact of of certain things are happening in the different markets the the impact on on in Brazil because of of the imports, especially coming from China and the lack of of anti dumping measures at the moment. So depressing prices in the market. The impact on the changes in the new rules of of trade coming from The US that impacted especially industrial sector during the second semester of the year. And the increase of the two three two margin during the year. So that is put a lot of pressure on on margins and and did allow us to to reach the original expectation. In the in the meantime, taking that into consideration, we implemented a cost reduction program that, as Maximo explained, gained more than around $250,000,000 during the year and, clearly, we will continue.

Doing that. So

the kind of explanation why we were not able to reach the number that we were expecting. I I have probably would not say exactly the same, but we have the chance to reach the number by the end of this year because we we will not reach that number during the first part of the year for sure. Though even we are announcing and and it will allow us very clear on that, that we will increase the margins during during this first part of the year. Because of, increases in prices across the board, of course, that we also have an impact on cost that will be also increased, but we are expecting to have better margins during the first quarter of the year. We will continue to work, as I mentioned, in in further core reduction program to further increase this margin. But a lot will depend on what we have been discussing up to now and Maximo described at length. Which is the consequence or the situation related to the negotiation of February and the impact that is we have. So again, not initially, we will not be able to read the number, We have a chance, and we will work for that to reach the number which is, as you know, our goal. You mentioned between 15 to 20% All I am saying is to try to reach initially 15%. And and and keep you working on that. As you know, the company is always working with that goal and trying to find ways to reduce our cost and to be able to take advantage of the situation that appear in the market.

So, again,

hopefully, this year, we will do right.

Okay. Very helpful. If if I could follow-up on that, I saw with interest in the DIO CCIL yesterday. You have the announcement that Mexico is doing a dumping investigation into cold rolled imports. From The US. And I guess it just prompted me to think that you know, is is it enough to to have the trade action so far in Mexico and Brazil especially when you have 50% tariffs in The US, but also the 50% coming in steel action plan in in Europe. And the CBAM, of course, already implemented. So even if the, you know, Mexico and Brazil started some actions, the rest of the world is taking even more aggressive actions. So I am just wondering if you think these are enough to move the needle, as much as as as necessary to to reach those goals you have just enumerated.

Thank you, Steven. Hello. How are you? You made a very good point. I think all the things that you are saying are very positive. I mean, again, I think that, as I said before, Brazil this is a very good first step. As you say, The US, Canada, even Mexico, Europe, are much more ahead in this trade measures against unfair trade. Than than Brazil. But it changed a lot from last quarter to this one. All these change of mood in in Brazil. And Mexico the the dumping case against the cold rolled, it is it is not only from The US. US, Malaysia, and China. Remember? And and I think, again, we will continue

presenting dumping cases if we see

that they were pursuing. In the in this case, we think it is, and the Mexican government accept the petition to open it. So they they see some merit or they see merit in this investigation. But Mexico is also going continue probably with some measures to not duplicate by but trying to be similar to The US market.

And so all these measures are are counting, and I think

more are coming. So you are right. They are not sufficient, but they are in the right path.

Okay. Great. Thank you.

You are welcome.

Your next question comes from the line of John Brandt from HSBC. Your line is live. Hey, good morning, guys. Thanks for taking my question.

First wanted to ask about CapEx. I know you said $2,000,000,000 for 2026. Presumably, that continues to fall as we go into 2027 and 2028. So I am I am hoping you can give us a little bit of guidance as to what those numbers might might be or what a normalized CapEx number might be as the major CapEx is rolling off and the projects are are completed. And then, you know, what then does that mean for, you know, the additional free cash flow that you have? Right? I mean, you you painted a good picture of increasing demand, increasing prices, improving profitability, falling CapEx means there is some free cash flow. So I am wondering about capital allocation, if we should see your net cash position has also fallen over the years as these CapEx has ramped up. Should we expect the net cash position to rise? Or are there other alternatives for this cash? And I guess my second question is kind of related to that Now that you have sort of completed the acquisition of Nippon stake and Usiminas, is there any sort of additional consideration about potentially taking out the minorities in Usiminas Have you analyzed what sort of benefits or cost savings you would have if if you own that a 100% Anything you could tell us there would be great. Thanks.

Thank you, John. Good morning. CapEx,

CapEx as you said, 2,000 this year would be around 2,000,000,000.

2027 will be around 1,200,000,000.0, so it is decreasing. And then in 2028, we do not have an exact number, but it is gonna be around 800. Million, the CapEx. That is a regular CapEx This is including Usiminas. So you are right. The capital allocation for

probably the 2027 We are gonna have a different view. Today, 2026,

we still are are going to have a a huge CapEx, and probably we have to increase, our working capital. Because the last three week three quarters, we have a decrease in capital. So I do not know if I do not think it is gonna change lot, but I do not know if you want to add something, Pablo, to that. Yes. Okay. Hi, John. How are you?

Let me add a little bit into that because 2256 for for sure will be a year in which we will be using cash and capital because if you add up the $2,000,000,000 in CapEx, The dividend that we are paying and the the amount that we, as you mentioned, already paid for the shares of of Usiminas from from Nippon. So these these add up more than or close to $3,000,000,000 and and and most probably the the cash generation that we were describing will be in in with this year or even higher, but also take into consideration that we will reverse the reduction working capital and probably we will need to allocate certain certain cash over there. So for sure, we will be reducing our net cash position that we end up at the 2025 with $700,000,000 of net net cash. This will be reversed

So we will move

to a net debt position but again, at very low levels. And then move to 2027, as Maximo mentioned, we will be reducing our CapEx. We will be we will we will not know yet the how the outlook for the working capital will be will continue with the payment. So probably, we will be able to regenerate a little bit the the the or reduce the net debt position at this moment. But we are not seeing significant changes in in our capital allocation at the moment. We will continue the CapEx. We will continue with the dividend. And we already made an investment in in the case of of. So, clearly, 2026 will be a year to use and probably 2027 will be a year to recover a little bit of cash. But, Martin, I think that you have a well, there was a different part of the question from from John. Yeah. Then the the the Nippon and

and the minority shares of Usiminas Today, we are not considering launching a tender offer or buying share the the the rest of the shares of of convenience. To be clear. But, you know, Brazil for us, Fortunium is a very important market. We have already a significant footprint in in country with our stake in Usiminas, with our operation in Tamil Brazil, in in Rio De Janeiro, also know we have a a huge commitment to the community investing $45,000,000 in the new technical school for the community of of Santa Cruz near our plant in Rio De Janeiro.

So we will continue looking to to further opportunities

As I said, we do not have any plans today. Of doing anything, but we are continuously looking for for new opportunities to grow. I hope, John, I answered the question there.

That is great. Thanks, Maxwell.

You are welcome.

As a reminder, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your next question comes from the line of Henrique Marquez from Goldman Sachs. Your line is live.

Hi, everyone. Thanks for taking my question. Just wanted to get more details on the upstream project in Piscataea. Think that is in the end increasing volumes. Relies a lot on on the market situation. But do you think there is room for higher

steel volumes when you finish the project? And

also, if you could share more details on how much you expect to save in terms of cost, with your own slide production versus third party purchase, that would also be great. Thank you.

Yeah. Remember, the the Pesqueria project, we have the the upstream project was always focused for the automotive industry. As you remember, when the USMCA was negotiate, was a clause for 2027 where most of the automotive industry has to have melt and pour for gaining origin. So this project

is going through that.

Probably, it is gonna allow us to sell even more volume to the automotive industry that we are selling today We have a footprint of around 2,000,000 tons for the automotive industry. And probably with this project, we will be able to sell much more. These 2,000,000 tons today comes from slabs that we make in in Brazil, and we shipped to Pesqueria for the hot roll, cold roll, and galvanize. So we are changing that and probably will allow us to replace more volume from Japan, from Korea, from other region, from even Europe that are selling in Mexico. So it is not a a a safe cost. Then again, we have more capacity today of hot rolled. So if the market improve, we will be able to serve other different sectors with our spare capacity that we have today in Mexico.

I I hope, Enrique, this was clear or

if you want more

more on this.

Yeah. No. Just sorry. I I think I I just wanted to

better understand, like,

when you produce in these labs in Mexico, like, how much of that connection, like, save you in terms of cost, in terms of logistics, Just to to try to better understand the I know it is the motive of of the project is is also strategic, but just to try to get, like, the benefits from the from the production project. Apart from increasing volumes in the in the outdoor in the outdoor industry.

Hi, everybody. This is Paulo. Let me try to add a little bit to them. As as I was explaining, we are, substituting slabs that we are bringing from some other places or even from Brazil or the ones that we will produce. So there, you will gain part of the margin because you will move from from buying to produce. Which is already an important saving, then this will be a very efficient and sophisticated facility And and and, also, the this will allow us to produce products that we were not able to produce before with our own with our own facility. So that will also add savings in logistics, savings in in the way we produce, and also we will have we will give out the possibility. Of course, probably this will take a a little longer. To be realized the possibility to increase volumes of sales because we have a higher capacity of the one that we are utilizing today for the auto sector. And if the market continues to grow as we expect, after a good negotiation with USMCA, this could allow us further increase volume. So all in all, it is it is a key project for for Ternium. For for many different reasons. And among that reasons is because of the savings and the reduced cost that we were able to take from from that process.

Right. Thank you.

You are welcome.

Your final question comes from the line of Caio Greiner from UBS. Your line is live.

Hello. Good morning. Thank you, everyone. Two follow ups from me. The the first one on on to Timna’s question. I wanted to understand what do you guys see in terms of margin potential for Turing that does not rely on on The US removing or lowering section two three two. So what what level of so how how much more do you see EBITDA margin rising over the next couple of quarters? Again, assuming that Section two thirty two is not withdrawn or is not lowered, by The US. And the second question, also a follow-up to to John’s question on on capital allocation. So thank you guys for the visibility that you provided for for 2026 and 2027. That is that is really helpful. But I think, it would be interesting to hear your, your thoughts for Ternium post 2027. So we still have a a hard time understanding what the company, looks like, in the next five years, in the next ten years. And what are management’s priorities? And we do know that in the batch, you have talked about corporate simplification, especially with focus on Argentina. Again, John has asked specifically about the Ximena’s minority stake Also, I wanted to know if any of these again, are your priorities or you could have other priorities going forward being that growing through M and A, being that doing working on other projects in Mexico, organic projects and, or it is all of this is still or or if management management still has little visibility on all of this provided that that we still do not have visibility on the USMCA agreement and so on. Be I would be keen to hear your talk on this. Thank you.

Thank you, Caio. Did you take the first one, Pablo? I will the first one. Relationship to emergency. After a good negotiation of the SNCA for for first of all, Cairo, thanks for the question. First of all, the as already was mentioned during one of of the answers, the the real impact of a good negotiation of recent 2027. So if that is the case, there should be an adjustment on pricing environment in the North American market where there needs to be a reaction of the impact of the tariff and this will help help using that one and increasing margins for for premium with of course, we never know where this will end up being. And, also, if that is the case, there should be an and this is not merging, but this is volumes and increasing volume that will help us numbers of of of of forward. Again, there is still a lot of of discussion, negotiations to be take that needs to take place. And and that is is something that we will see during this year. There is uncertainty the timing on the agreement. There is uncertainty on the expected result. Of that agreement. So we are positive on the outcome, as Maximo explained very clearly. And so we should we are positive on the on the outlook and the possibility of of turning increasing and enhancing margin. And, again, this was part of of the answer, as you mentioned, to to team language we are expecting that margins to increase and to get back to the places or or the place where we used to be in the past. And and regarding the capital allocation, CAIO for the further for the long term, as as you put it, five, ten years,

Simplification is still a goal that we have. And and we always are we are are going to see when is the best moment on when or when it can be done.

Depending on which part,

But it is always in in in our to do list in a sense.

I think that we tend to shareholders where so we would always be

a priority in our capital allocation. And I do see further opportunities

then in the long term or the medium term both in Brazil and Mexico. As you know,

both markets are growing,

And and and as I said before, Mexico has a huge opportunity of of growing against, imports

and the market our customers have very willingness to to to buy from us. So I think there is still opportunities over there. I think it is too early to to try to to put them on on a paper or make it public, but we are always analyzing these opportunities in time, in Brazil and Mexico. Think, Caio That is great. That answer your question, but

Yes. That is that is great. So just just maybe two follow ups, if I may. Pablo, I think you mentioned that you see margins recovering towards the normalized range of 15 to 20% And I am just not sure, if if you if you mentioned that that is including, the upside potential from, from US sensing renegotiations or if that is, those factors. My my question was, if, assuming that, that the current environment stays. So it is assuming that nothing changes regarding the USMC agreement, what level, what level of margin, of what level of margin upside do you do you still see that Ternium can reach without without that specifically? Thank you.

Yeah. Sorry. Sorry. Probably, I did not answer it correctly what you what you were asking for, but my intention was that because we believe, as Maximo said, that the impact of the USMC negotiation is positive as we believe will not be during this year. So this is more for for 2027. So my answer before, our intention for answering that we will work and we will be enhancing our margin that we have, we could have a possibility of reaching the 15% of the lower part of the range that we are looking for was without taking into consideration any impact of of the negotiation. We are already expecting an enhanced on our margins during the first part of the year. Of course, not reaching 15%, and we will continue working. We think there is a chance that possibility for Telion to reach by the end of the year a better margin than the one that we will have during the first part, hopefully reaching that target by the end of the year. Of course. After failing on on the presentation last year, we will be be more conservative and cautious on on making the same one during this year, but the chance exists.

Understood. Thank you. And since since I am the last question, I will I will I will take the opportunity and and ask another follow-up and, to to Maximo on capital allocation. Maximo so from from your answer, I can understand that that the company is still sees still sees great opportunity for growth at its main markets. So is that gonna be a priority instead of, potentially raising dividends further or creating a dividend policy that could maybe increase the company’s dividend potential going forward or even a buyback program? Thank you very much, guys.

Thank you, Caio.

I think that the the two priorities for us, increase dividends, I mean, returning to shareholders and looking opportunities in our main markets that we know that we can value a lot of profitability or add added to our business growing in those markets. I think they are both. I I do not think at

as we have discussed in the past, I do not think the share buyback

is something we are gonna do because of

of how much shares are in the market. But the the other two are one priority. Both are priorities for us.

Caio.

Thank you very much, guys.

We actually have one more question from John Brandt from HSBC. Your line is live.

No.

John, your line is live.

Guys. Sorry about that. Thanks for taking my follow-up. Kyle’s question actually got me thinking a little bit. You mentioned there were some opportunities to grow in in the main markets, and that is kinda one of the things you are looking for And I think I know the answer to the question, but I will ask it anyways. CSN have said they are looking for a potential partner or to do something with their their steel assets in in Brazil. I am wondering if is that a potential opportunity for you to grow? Or can you sort of rule out any, say, pot with them? Thanks.

Thank you, John.

Yeah. We we we heard what what CSN is doing. Its main focus is the cement and and I think the infrastructure assets they have. Regarding the steel, we at this moment, we are not analyzing any of the any thing with CSN. But as I said, before and I said several times, Brazil is important for us. So we are always open to analyze different opportunities if they appear. But at this time, with this CSM, we are not analyzing anything.

Okay. Thank you.

You are welcome, John.

Concludes the question and answer session. I would now like to turn the call back over to Ternium S.A. CEO for closing remarks.

Okay. Thank you all for joining us today, and please feel free to

share any comment with us. And goodbye. Have a good day. Thank you very much.

That concludes today’s meeting. You may now disconnect.