Group 1 - The history of Ternium (TX) shows signs of recovery, and the market is beginning to notice this trend, although it has not yet recognized its full price potential [1] Group 2 - The investment approach focuses on value companies with solid long-term potential, indicating a strategy that may align with Ternium's recovery narrative [2]

Financial Data and Key Metrics Changes - Adjusted EBITDA increased by 25% in the second quarter, primarily driven by stronger realized steel prices in Mexico, partially offset by a slight increase in cost per ton [14] - Net income for the second quarter amounted to $259 million, including a $40 million provision adjustment related to ongoing litigation [15] - Adjusted net income, excluding the provision, was $299 million, supported by better operational performance and favorable deferred tax results due to a 7.5% revaluation of the Mexican peso [15] Business Line Data and Key Metrics Changes - Shipments in the steel segment declined primarily in Mexico and the U.S., partially mitigated by higher volumes in the southern region [16] - Iron ore shipments rose quarter over quarter driven by increased production levels, although net sales remained broadly unchanged due to lower realized prices [18] Market Data and Key Metrics Changes - The Mexican market is experiencing a cautious business environment, with government measures contributing to a decrease in steel imports, creating a more level playing field [6][8] - The Brazilian steel market faces significant challenges due to a surge of unfair imported steel, particularly from China, undermining local competitiveness [8] - Argentina saw a significant increase in shipments during the second quarter, driven by seasonal factors and a recovering macroeconomic environment [9] Company Strategy and Development Direction - The company is focused on reducing costs to strengthen competitiveness, with ongoing initiatives aimed at optimizing production processes and supply chains [10][11] - The expansion project in Pesqueria is a cornerstone of the company's growth strategy, with expectations of increased shipments in Mexico [8][10] - The company is committed to sustainable industrial development, as highlighted in their sustainable report [11] Management's Comments on Operating Environment and Future Outlook - The operating environment remains uncertain and volatile, with expectations of a sequential improvement in the third quarter, particularly in Mexico [4][5] - Management is optimistic about ongoing negotiations between the U.S. and Mexico leading to mutually beneficial agreements [7] - The company anticipates a mixed performance across key markets, with growth expected in Mexico and steady shipments in Argentina, while Brazil continues to face headwinds [17] Other Important Information - Cash from operations totaled $1 billion in the second quarter, aided by a significant reduction in working capital [19] - The company’s net cash position decreased primarily due to elevated capital expenditures and dividend distributions, but remains solid at $1 billion [20] Q&A Session Summary Question: Can you elaborate on the state of steel supply in Mexico? - Management indicated that recent trade measures have led to lower imports, and they expect to gain market share due to these developments [22][23][25] Question: What is the outlook for cost reduction initiatives? - Management expects a total of $300 million in cost efficiency improvements for the year, with various initiatives contributing to this target [29][61] Question: What is the expected improvement in EBITDA? - Management anticipates reaching an average EBITDA margin closer to 15% by the fourth quarter, supported by cost reduction measures [40][41] Question: What is the status of the CSN litigation? - The litigation remains pending, with an appeal filed and awaiting a decision from the Supreme Court of Justice in Brazil [50][52] Question: What are the plans for capital allocation and dividends? - The company plans to sustain dividend payments while managing significant capital expenditures, with a peak expected this quarter [71][75]

Financial Data and Key Metrics Changes - Ternium's adjusted EBITDA increased by 25% in Q2 2025, primarily driven by stronger realized steel prices in Mexico, despite a slight increase in cost per ton [15][16] - Net income for Q2 2025 amounted to $259 million, including a $40 million provision adjustment related to ongoing litigation, with adjusted net income excluding this provision at $299 million [16][22] - Cash from operations totaled $1 billion in Q2 2025, supported by a significant reduction in working capital [21][22] Business Line Data and Key Metrics Changes - Shipments in the steel segment declined primarily in Mexico and the U.S., partially mitigated by higher volumes in the southern region [17][18] - Iron ore shipments rose quarter over quarter due to increased production levels, although net sales remained broadly unchanged due to lower realized prices [20] Market Data and Key Metrics Changes - The Mexican steel market is experiencing a cautious environment with pending clarity on U.S. trade policy, while the Brazilian market faces challenges from a surge in unfair imported steel [6][8] - Argentina saw a significant increase in shipments during Q2 2025, driven by seasonal factors and a recovering macroeconomic environment [10] Company Strategy and Development Direction - Ternium is focused on reducing costs to strengthen competitiveness, with ongoing initiatives aimed at optimizing production processes and supply chains [11][12] - The company is committed to its expansion project in Pesqueria, which is seen as a cornerstone of its growth strategy [7][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a sequential improvement in shipments for Q3 2025, particularly in Mexico, supported by government measures against unfair trade practices [6][18] - The operating environment remains uncertain and volatile, with management emphasizing the need for concrete measures to defend the Brazilian industrial base [9][10] Other Important Information - Ternium released a sustainable report reaffirming its commitment to long-term value creation through sustainable industrial development [12] - The company anticipates a peak in capital expenditures (CapEx) in Q2 2025, with projections for a decrease in the following quarters [73][74] Q&A Session Summary Question: State of steel supply in Mexico - Management indicated that recent trade measures have led to lower imports, which may help rebalance the steel market, and Ternium is well-positioned to capture market share [25][30] Question: Cost outlook and reduction initiatives - Management expects a $300 million decrease in cost efficiency for the year, with various initiatives contributing to this target [32][33] Question: Magnitude of potential EBITDA improvement - Management anticipates a recovery in EBITDA margins, aiming for around 15% by Q4 2025, supported by cost reduction measures [42][43] Question: Update on CSN litigation - There have been no significant developments in the CSN litigation, and the next steps involve awaiting a decision from the Supreme Court of Justice [52][53] Question: CapEx cycle and allocation strategy - Management confirmed that the peak of CapEx occurred in Q2 2025, with a projected decrease in the following quarters, while maintaining dividend payments [73][77]

Second Quarter 2025 Performance - Adjusted EBITDA increased by 25% sequentially in 2Q25, driven mainly by higher realized steel prices in Mexico, with a slight offset from higher steel costs[10] - Net income in 2Q25 includes a provision adjustment charge of $40 million accounting for interest accrual and the appreciation of the BRL vs the US dollar in connection with the ongoing litigation related to the acquisition of a participation in Usiminas in 2012[14] - Steel segment shipments decreased sequentially in 2Q25, but higher realized steel prices, mainly in Mexico, contributed to financial performance[20] - Steel Cash Operating Income increased to $350 million in 2Q25, compared to $276 million in 1Q25[22] - Steel Cash Operating Income per Ton increased to $94/ton in 2Q25, with a margin of 9%[25] - Mining shipments increased sequentially, driven mainly by higher iron ore production, but international iron ore prices decreased[29] - Mining Cash Operating Income decreased to $54 million in 2Q25, compared to $57 million in 1Q25[32] - Mining Cash Operating Income per Ton decreased to $16/ton in 2Q25, with a margin of 19%[30] Cash Flow and Balance Sheet - Cash from operations reached $1044 million in 2Q25, a significant increase compared to $207 million in 1Q25[34] - Net cash position declined in 2Q25 to $1 billion, after a $353 million dividend payment and a significant increase in CAPEX[36]

Group 1 - The analyst focuses on undercovered stocks primarily in Brazil and Latin America, with occasional insights on global large caps [1] - Contributions are made to platforms like TipRanks and TheStreet, indicating a broad reach in financial analysis [1] Group 2 - There are no disclosed positions in any mentioned companies, suggesting an unbiased perspective in the analysis [2] - The article expresses personal opinions and is not influenced by compensation from companies mentioned [2]

Core Insights - The article emphasizes the importance of identifying high-quality and mispriced investment opportunities, suggesting that great investment ideas should be intuitive and involve purchasing strong companies at favorable prices [1]. Group 1 - The focus is on the role of an investment analyst in uncovering valuable investment ideas that are not immediately apparent [1]. - The article highlights the belief that successful investments stem from a combination of quality companies and attractive pricing [1].

Group 1 - Ternium is a significant player in the Latin American industrial sector, not just a steel producer, with nearly twenty years of operational history [1] - The company has successfully integrated the entire steel production process, a feat that few in the sector have achieved [1]

Group 1 - Moretus Research provides high-quality equity research focused on U.S. public markets, aiming to deliver clarity, conviction, and alpha for serious investors [1] - The research framework identifies companies with durable business models, mispriced cash flow potential, and intelligent capital allocation, emphasizing a structured and repeatable approach [1] - Valuation methods are based on sector-relevant multiples tailored to each company's business model and capital structure, prioritizing comparability, simplicity, and relevance [1] Group 2 - Research coverage focuses on underappreciated companies experiencing structural changes or temporary dislocations, where disciplined analysis can yield asymmetric returns [1] - Moretus Research aims to elevate the standard for independent investment research by providing professional-grade insights and actionable valuation [1]

Financial Performance - Adjusted EBITDA increased, driven by enhanced margins and increased shipments of steel and iron ore[8] - In Q1 2025, net income includes a $45 million loss due to an adjustment for interest accrual and currency fluctuation related to the Usiminas acquisition litigation[15] - Mining net sales increased 13% sequentially, mainly driven by higher iron ore realized prices[28] Steel Segment - Steel shipments in Q1 2025 were 1.911 million tons, with Mexico accounting for 49.5%, Brazil 26.1%, Southern Region 12.7%, USA 6%, and other markets 11.7%[20, 21] - Steel shipments rose in Q1 2025, driven by increases in Brazil and the US markets, partially offset by a decrease in Mexico[24] - Steel revenue per ton decreased sequentially in most of Ternium's markets in Q1 2025[24] - Steel cash operating income per ton was $72/ton in Q1 2025 with a margin of 7%[23] Mining Segment - Mining shipments rose slightly sequentially to 3.059 million tons in Q1 2025, driven by higher production in Mexico and Brazil[26, 28] - Mining cash operating income per ton was $18/ton in Q1 2025 with a margin of 20%[26] - Margins declined in the 1Q25 due to higher production costs, partially offset by an increase in realized iron ore prices[27] Cash Flow and Balance Sheet - Net cash position decreased primarily due to cash outflows related to Ternium's capital expenditure program[33] - Capex in Q1 2025 was $518 million, mainly reflecting progress on the expansion projects at Ternium's Pesquería Industrial Center[32, 36]

Financial Performance - Net sales for the three-month period ended March 31, 2025, were $3,932,808 thousand, a decrease of 17.7% compared to $4,778,297 thousand in the same period of 2024[10] - Gross profit for the same period was $530,950 thousand, down 51.9% from $1,103,553 thousand year-over-year[10] - Operating income decreased to $131,826 thousand, a decline of 80.5% compared to $674,856 thousand in the prior year[10] - Profit for the period was $142,331 thousand, representing a 72.6% decrease from $491,431 thousand in the previous year[10] - Basic and diluted earnings per share for profit attributable to equity holders of the company were $0.03, down from $0.18 in the same period of 2024[10] - Total comprehensive income for the period was $405,027 thousand, a decrease of 45.6% compared to $744,542 thousand in the prior year[11] - Net cash provided by operating activities was $207.0 million, down from $475.5 million in the previous year[23] - Capital expenditures for the period were $517.8 million, compared to $449.2 million in the same quarter of 2024[23] - The company reported a net foreign exchange loss of $30,695 thousand in Q1 2025, compared to a gain of $41,008 thousand in Q1 2024[59] - For the three-month period ended March 31, 2025, revenues amounted to $462 million, a decrease of 11.8% compared to $524 million for the same period in 2024[91] - Net profit from continuing operations was $36 million, down 86.3% from $263 million in the prior year[91] Assets and Equity - Total assets as of March 31, 2025, were $23,715,575 thousand, an increase from $23,128,547 thousand at the end of 2024[12] - Total equity increased to $16,536,596 thousand from $16,131,569 thousand at the end of 2024[12] - As of March 31, 2025, total equity stood at $16.5 billion, an increase from $16.1 billion at the beginning of the year[14] - Property, plant and equipment increased to $8,803,071 thousand as of March 31, 2025, from $7,855,930 thousand at the end of Q1 2024, an increase of approximately 12%[60] - Total assets as of March 31, 2025, were $5,668 million, a slight decrease from $5,726 million as of December 31, 2024[91] - Total liabilities decreased to $689 million from $790 million as of December 31, 2024, reflecting a reduction of 12.8%[91] Usiminas Acquisition - The company reported a provision for ongoing litigation related to the acquisition of a participation in Usiminas amounting to $45,300 thousand for the current period[10] - The company increased its participation in Usiminas Control Group, indicating a strategic move towards market expansion[9] - As of June 30, 2023, Ternium owned 242.6 million ordinary shares of Usiminas, representing 34.4% of Usiminas' ordinary shares and 20.4% of its total share capital[32] - On July 3, 2023, Ternium completed the acquisition of 57.7 million ordinary shares of Usiminas for $118.7 million, increasing its participation in the Usiminas control group to 51.5%[35] - The fair value of net assets acquired from Usiminas amounted to $3,593.3 million, with significant assets including inventories valued at $1,707.3 million and property, plant, and equipment at $904.8 million[41] - Ternium recognized a loss of $441.4 million related to the remeasurement of its previously held interest in Usiminas, alongside a bargain purchase gain of $270.4 million, resulting in a net loss effect of $171.0 million[39] - The Usiminas control group, post-acquisition, holds 61.3% of the voting rights, with Ternium and NSC each nominating three members to the board of directors[36] - Ternium recognized non-controlling interests in Usiminas at $2,575.9 million, based on the proportionate share of the acquired net identifiable assets[45] - Provisions for contingencies recognized as part of the business combination totaled $856.2 million, including tax-related contingencies of $432.5 million[47] - Ternium has established a "put" and "call" option mechanism with the NSC group regarding their remaining shares in Usiminas, allowing for future transactions at specified prices[42] - The total purchase consideration for the acquisition was $118.7 million, with a significant portion allocated to the remeasurement of previously held interests[41] - Ternium began fully consolidating Usiminas' balance sheet and results of operations in its financial statements starting July 2023[37] Segment Performance - The Steel segment reported net sales of $3,801,118 thousand for the three-month period ended March 31, 2025, a decrease from $4,690,004 thousand in the same period of 2024, reflecting a decline of approximately 19%[54] - The Mining segment generated net sales of $131,690 thousand in Q1 2025, compared to $88,293 thousand in Q1 2024, indicating an increase of about 49%[54] - Operating income for the Steel segment in Q1 2025 was $243,546 thousand, significantly lower than $593,211 thousand in Q1 2024, a decline of about 59%[54] - The cost of sales for the three-month period ended March 31, 2025, was $3,401,858 thousand, down from $3,674,744 thousand in the same period of 2024, reflecting a decrease of approximately 7%[57] - Selling, general and administrative expenses decreased to $396,200 thousand in Q1 2025 from $431,166 thousand in Q1 2024, a reduction of about 8%[58] Legal and Tax Matters - Retained earnings included in the financial statements may not be wholly distributable due to Luxembourg law[16] - The estimated current tax expense related to OECD Pillar Two for the three-month period ended March 31, 2025, is $3.8 million, with a total provision of $25.3 million[68] - The potential indemnification amount related to the Usiminas acquisition could reach approximately $336.4 million, based on the latest court decisions[73] - Ternium Brasil has a commitment of approximately $106.2 million under a supply agreement with Petrobras S.A. due to terminate in February 2026[76] - The company recognized provisions for tax contingencies of $432,488 thousand as part of the business combination, up from $329,141 thousand previously[48] - Labor lawsuits related to the Cubatão Plant amounted to $57,343 thousand as of March 31, 2025, down from $34,459 thousand at the acquisition date[48] Shareholder Information - The company proposed an annual dividend of $0.27 per share, totaling approximately $530 million, which includes an interim dividend of $0.09 per share already paid[66] - As of March 31, 2025, Techint Holdings S.à r.l. indirectly owned 65.03% of the company's share capital, while Tenaris Investments S.à r.l. held 11.46%[79] Economic and Regulatory Environment - The company has significant foreign exchange restrictions in Argentina, impacting its operations and financial transactions[86] - Ternium Argentina's financial position in ARS included $341 million in monetary assets and $202 million in monetary liabilities as of March 31, 2025[94] - On February 1, 2025, the U.S. government announced tariffs on all products imported from Mexico, Canada, and China, with specific exemptions for USMCA-compliant products[96] - A 25% tariff was imposed on virtually all imports of steel and certain steel derivatives starting March 12, 2025, revoking previous exemptions[96] - Reciprocal tariffs with a minimum of 10% were announced on April 2, 2025, but Mexico and Canada were exempt from these tariffs[96] - A 25% tariff under Section 232 on all imported automobiles produced outside the U.S. was confirmed on April 2, 2025, affecting only non-U.S. specific content[96] - Other countries have announced retaliatory tariffs against U.S. exports, creating uncertainties for Ternium[97] - Ternium is currently unable to predict the impact of the new tariffs on its business or financial condition due to these uncertainties[97]