Ternium S.A.

Ladies and gentlemen, thank you for standing by and welcome to Turnium fourth quarter 2020 results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to Mr. Sebastián Martí. Please go ahead.

Good morning and thank you for joining us today. My name is Sebastián Martí and I am Ternium's investor relations and compliance director. Today we list yesterday's financial results for the fourth quarter and full year 2020. This call is complementary to that presentation. Joining me today are Ternium's chief executive officer, Maximo Vedoya, and the company's chief financial officer, Pablo Brizzio. We'll discuss Ternium's business performance and environment. At the conclusion of our prepared remarks, there will be a Q&A session. 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 findings with the Securities and Exchange Commission and on page two in today's webcast presentation. With that, I'll turn the call over to Mr. Vedoya.

Thank you, Sebastián, and good morning. Thank you very much to all of you for participating in this conference call and your interest in internium. I am glad to share with you today a very good set of results for the last quarter of the year, which have been actually been better than the ones we expected on our last conference call. Even though the pandemic continued to impose operating On all our facilities, in the fourth quarter of 2020, we took steel shipments to pre-pandemic levels, reaching 3.1 million tons. We were also able to take advantage of an attractive steel business environment, showing a significant increase in our margins to 25% in the fourth quarter, while never losing sight of a strict cost control. Our current expectation is that Ternium's margin and EBITDA will continue to increase in the first quarter of the year. I'll let Pablo elaborate on this later on. Turning now to Ternium's full year results, in 2020, we repeated the EBITDA of $1.5 billion we recorded in 2019. As all of us are aware 2020 was a particularly difficult year to manage an industrial operation like Tarnium's. It required the full dedication and commitment of all our people. The results we were able to obtain show this successful team effort. Tarnium's performance and results over the second half of 2020 were outstanding. Taking this into account, Terminus Board announced yesterday its dividend proposal for the year with an amount in line with our comments on previous conference calls of $2.10 per ADS to be paid in May after the expected approval of the shareholders' meeting. The return to shareholders is embedded in our company's culture something that can be reflected in the long track record of progressively higher dividend payments over the last 15 years. We intend to continue returning capital to our shareholders as we have done in the past, while at the same time growing our company profitably when we see an opportunity to do so. We trust we are going to be able to do this while maintaining, as usual, a strong balance sheet. In yesterday's board meeting, the board also discussed In that, several initiatives related to sustainability. The care for the environment is a key aspect of Ternium's operations. The steel industry, as many others, has been increasingly allocating resources towards improving its environmental footprint. In the last five years, Ternium invested approximately $300 million in environmental and energy efficient related projects throughout its facilities. We have launched now an additional $460 million plan, the majority of which will be implemented over the next six to seven years. Climate change was also a key part of the board's discussions. as we have been working for some time now in a plan to reduce our CO2 emissions. The results of this work is our first roadmap to decarbonization with a medium term target of 20% reduction of CO2 emissions per ton of steel produced by 2030. The main initiatives we intend to pursue to achieve this target are increasing the participation of energy from a new oil source in our facility to approximately 40%, increasing the scrap share in metallic mix, increasing carbon capture capacity at our DRI facilities in Mexico, partially replacing net coal with charcoal in Brazil and Argentina, and prioritizing lower specific emissions in making technologies. and we are also working on plan to continue the carbon-sizing our operations beyond 2030. To better manage all these issues, we have recently put in place a reorganization of our environmental functions with two distinctive structures. One to tackle with long-term strategic environmental decisions and another to oversee the day-to-day environmental issues. In addition, the Board of Directors has nominated one representative of the Board to oversee, in a quarterly basis, Ternium's climate change strategy. Carbon neutrality is a goal that can only be achieved If all parts of society work together, I expect there will be many more things in years to come that we will be able to do to improve our carbon footprint, so you will continue hearing more from us on this subject in the near future. Let me now make a quick comment regarding the business environment in our main markets. In Mexico, we are having strong demand from industrial customers, mostly driven by finished goods exports. Although industrial customers improve demand, it is widespread. The household appliance industry currently stands out as the strongest sector, and the outdoor industry as the relatively weakest, as it's been affected by a semiconductor logistic bottleneck and its supply chain. Until the beginning of last week, our facilities in the country had been running at full capacity, but extreme weather conditions in the southern U.S. and northern Mexico caused the interruption of a stable provision of natural gas and energy in this area, with a negative effect on production for approximately 80,000 tons. All facilities in the area are currently back to normal operations. As a result of these events, we expect shipments in Mexico in the first quarter of this year to remain at levels similar to those of the first quarter of 2020, instead of sequentially growing. Our expansion projects in the country continue advancing as planned, with a new hot rolling mill at the Pesquería facility expected to begin operations in four months. Mexico is our biggest market in the region and we believe we are uniquely positioned to take advantage of the opportunities the USMCA and especially the reshoring of manufactured capacity will offer us in the future. The decision we took three years ago to expand our capability to supply sophisticated industrial customers in the region is finally coming to fruition, and I really believe this will transform our company. In Argentina, our achievement continues increasing in the fourth quarter, even after significant recovery in the third quarter, driven by growing demand for durable goods and building materials. These mostly reflect a shift in consumption patterns to our home improvement expenditures as it happened in other markets in the region. Even though the first quarter of the year is decisionally weakest in the Argentinian market, we expect shipments in the first quarter of 2021 to remain at high levels. Finally, turning now to Brazil, This is the market that most swiftly recovered activity after the pandemic induced lockdowns. Our slab facility in Rio de Janeiro is working at full capacity, and we are increasing its integration with Ternium Mexico in the first quarter, so we expect lower sales of slabs to third parties compared to the fourth quarter of last year. 2021 will be a pivotal year for Pernium. We are going to be adding significant scale of real capacity in Mexico, expanding our product range and at the same time increasing the cost efficiency of our operations. This new capacity will also allow us to integrate even more our industrial system in the Americas with the help of our strong steel base in Brazil to better serve customers all over the region. In Colombia, we recently commissioned our Greenfield River Facility. Colombia's president, Mr. Iván Duque, was present at the event, as well as several members of his cabinet, and on his inaugural speech, he was very supportive of the commitments of the country's government to prevent unfair trade. This new facility will significantly strengthen our presence and competitive position in Colombia. Wrapping up my remarks, first, I would like to acknowledge our people effort in last year, which made possible the amazing results we showed. I am proud of their commitment and teamwork in this very, very difficult year. Going forward, the following years will be a turning point in Ternium's life. First, the new Hot Rolling Meal at Pesquería facility will substantially increase our capability to serve the market with sophisticated products. Second, I have no doubt the USMCA region will continue providing opportunities to develop our company. And finally, we will continue working towards thallium sustainability and decarbonization. This is key to continue delivering value to all of our stakeholders. I leave you now with Pablo, who will review our performance in the fourth quarter. Please, Pablo, go ahead.