Ternium S.A.

Good morning. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the Trinium third quarter 2021 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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, again, press star one. Thank you. Sebastian Marti, you may begin your conference.

Good morning, and thank you for joining us today. My name is Sebastian Marti, and I'm Ternium's Global Investor Relations and Compliance Senior Director. Ternium released yesterday its financial results for the third quarter of 2021. This call is complimentary to that presentation. Joining me today are Ternium's Chief Executive Officer, Maximo Berogia, and the company's Chief Financial Officer, Paolo Briccio, who will discuss Ternium's business environment and performance. 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. You will also find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued yesterday. With that, I'll turn the call over to Mr. Bedosa.

Thank you, Sebastian, and thank you all for joining us today. Ternium reported outstanding results in the third quarter, with record EBITDA, sales, margins, and net income. With a strong performance expected also for the fourth quarter, we are headed to a record year in 2021. Let's now review the state of our steel markets. The global steel business environment remains healthy. The USMCA market continues to be relatively tight, although there are some signs this situation is moderating. Steel inventories in the US are increasing, but continue to be at relatively low levels, and lead times are also slowly normalizing. In a recent development, the US and Europe announced an agreement to relieve European steel imports from Section 232 tariffs, subject to certain conditions, including a specified maximum tonnage and the need for the steel to be melted and poured in Europe. In this environment, benchmark steels in the US currently remain at high levels. We continue to believe that steel prices are going to begin a downtrend at some point in the following month, although we don't expect them to reach the lows we saw back in 2020. There are several reasons for us to have this view. Steel demand in the region is steady, especially in industrial markets. Global supply chains continue having significant disruptions. Backlogs in certain industries like automotive and whitewood should help sustain good steel demand levels into 2022. We are seeing near-shoring of manufacturing capacity to the USMCA region and steel production in China is decreasing in line with the country's efforts to control carbon emissions. Looking ahead, After a tight steel market in 2021, we expect the steel supply demand environment to gradually balance in 2022 with steady steel demand and a normalization of global supply chains. Let's move now to a review of our main markets. The Mexican steel market is currently showing two different business environments. On one side, the natural market made up of the different manufacturing industries in the country is working at a very high level of utilization to meet strong end product demand. The only exception to this is the automotive industry, which in the third quarter continues to be significantly affected by the semiconductor supply chain disruption. This is preventing OEMs from utilizing their full production capacity. So, it is possible that Mexican auto industry production in 2021 ends up being similar to that of last year. Opposite to this broadly positive environment in the industrial market, the construction sector in Mexico continues to weaken. This sector has not been able to recover to pre-pandemic activity levels yet, as the industrial sector did. Going to Argentina, steel shipment in this market has been pretty healthy for the last 12 months. After a lengthy restocking process following the COVID-19 related lockdowns, Inventories in the value chain in Argentina are now back to normal level. The best performing sectors are currently the agro-business industry, the automotive industry and construction. We expect to see relatively stable shipments in Argentina during the fourth quarter with some seasonally lower volumes by December. Nevertheless, Argentina continues to suffer from significant uncertainty regarding its main macronomic variables and its capacity to renegotiate its debt with the IMF. Activity in 2022 will depend on how these pending issues are addressed. I would like now to make a quick comment regarding the process on some of our sustainability initiatives in the quarter. In February, we announced a mid-term target to reduce by 20% Ternius CO2 intensity rate by 2030, together with the main initiatives needed to achieve this. One of these initiatives is the expansion of carbon dioxide capture capacity in our facilities in Mexico. This is not new for us. We have been capturing CO2 in our three DRI models for many years. These models in Monterrey and Puebla are among the greenest in the world, and there are actually very few of this kind out there. In September, we finished the first stage of our new carbon capture program with the expansion of the carbon capture system of the DRI models at the Monterey facility, with an increase of 38% in its capture and usage capacity. The CO2 is sold to industries, to different industries, avoiding new CO2 emissions and favoring circular economy. After this expansion, we expect to have yearly carbon capture and usage capacity of 285,000 tons of CO2 between our facilities in Monterrey and Puebla. This represents the annual emission of approximately 61,000 cars. And we have a second stage in the making that will increase this even more. Another development in this field, since our last conference call, is the signature of an MOU with Vale, our main iron ore supplier, to jointly develop steel-making decarbonizing solutions. We are analyzing different alternatives from this. like an iron ore briqueting plant located at Ternium Brazil facility and plants to produce metallic products with low carbon footprint using valid TechnoRed technology, Ternium's HYYL and other technologies for iron ore reduction. Also, as part of our ESG program, we received in September confirmation from UN Women to our application to be a signatory of the women's empowerment principle, which promotes gender equality. Diversity and inclusion are two important topics in Ternium agenda. We work to create a workplace environment that attracts and develops talent across all gender, nationalities, and generations, valuing our individual differences. Another positive development in the quarter was Ternius Board of Directors announcement of an interim dividend payment of 80 cents per ADS. This decision reflects the strong business environment and the significant cash generation the company has achieved so far during this year. It also marks the transition from an annual dividend payment schedule to a 20-year payment, with an advance in November and a fine line payment in May. I believe this change, if in our dividend payment schedule, is a very positive development that underscores our long-term commitment to the return to our shareholders. Before finishing my remarks, I would like to make a quick update about the status of COVID-19 pandemic interneum. Active COVID-19 cases among Tarlim's personnel are currently very low, reflecting a decrease in the rate of infections in Latin America over the last month. Despite this good news, we continue applying strict sanitary protocols in all our facilities. The government vaccination program has progressed well in the different countries where we have operations. And at the moment, 92% of Pernium's employees have received at least one dose of COVID vaccine, and almost 70% are fully vaccinated. Okay, I will stop here and let Pablo go over our performance in the third quarter. Pablo, please go ahead with the Whitecap presentation.