Ternium S.A.

Ladies and gentlemen, thank you for standing by and welcome to the Turnium third quarter 2022 earnings 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, please 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. Thank you for joining us today. My name is Sebastian Marti, and I am Turing's Global Investor Relations and Compliance Senior Director. Turing released today's financial results for the third quarter of the first nine months of 2022. This call is complementary to that presentation. Joining us today are Turing's Chief Executive Officer, Maximo Redoja, and the company's Chief Financial Officer, Pablo Grillo, who will discuss Turing'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 this morning. With that, I'll turn the call over to Mr. Bedouin.

Thank you, Sebastian. Good morning, and thank you all for participating in our conference call today. Ternium reported a good set of results for the third quarter, with adjusted EBITDA of $679 million on a margin of more than $200 per ton. This is equivalent to adjusted EBITDA margin of 16% of sales, a level that is within Ternium's historical margin range. On top of this, we had a very strong cash generation in the quarter. Cash from operations was more than $1 billion, aided by a significant working capital release. Last year, we transitioned from an annual dividend payment schedule to a twice-a-year payment, with an advance in November and a final payment in May. I believe this change in our dividend payment schedule was a positive development that underscores our long-term commitment to the return to our shareholders. In this line, Permian's Board of Directors announced today an interim dividend payment of 90 cents per ADS, equivalent to $177 million, that will be paid on November 17th. This represents an increase of 10 cents per ADS compared to last year's interim dividend payment. Looking ahead, we are facing a complex global economic situation with uncertainty driven by policy and geopolitics like monetary tightening, the war in Ukraine, and China's economic slowdown. Rising interest rates combined with high inflation are undermining economic confidence and slowing down investment as well as household spending. Focusing on the U.S., according to the World Steel Association short-term outlook that was just released, steel demand is not expected to get into negative territory despite a softening economy. Construction activity in the private sector will decrease due to a downturn in the housing market. But balance in this, the non-residential sector is still strong, and an increase in infrastructure investments due to infrastructure law and rising investment in the energy sector will support growth in steel demand. In addition, the automotive sector is expected to maintain a positive momentum on the back of pent-up demand and the gradual easing of supply chain constraints. In Mexico, our expectations are very similar to those in the US, as both markets are very related. The construction sector recovery has been slow, and as a result, activity in this sector is expected to remain below pre-pandemic levels in 2023. In addition, the manufacturing sector which has performed better since the pandemic, also faces a weakening outlook in relative industries like household appliances and small HVAC. On the other hand, like in the US, the automotive sector will still see growth thanks to an easing of supply constraints. It is worth noting that even though activity in the North American region is slowing down, we are not expecting shipments in Mexico to decline. There are several forces at work that should help us sustain and probably increase our shipments in the market during 2023. The ensuring of manufacturing capacity is a development that is gaining momentum as we speak. There has been a spike in investment announcements for new manufacturing capacity in the north of Mexico, the majority of which has been made by companies that are new to the region. As a result of this, construction activity related to industrial facilities has been strongly increasing there. In the future, many of these new facilities will also turn into still consuming customers for us. Another aspect of our activity in Mexico is our progress with the certification of new products. As we advance with the ramp up of the new hot-screen meal in Pesqueria, the capabilities provided by our new R&D center in this facility are significantly speeding up the certification of new products. This has enabled us to broaden our product range, and as a result, we are booking new supply contracts for 2023 that will help us grow our treatments gradually throughout next year. Over the last 10 years, We have invested in our facility to expand and enhance our product offering. This new capacity puts us in a unique competitive position in the Mexican market to take advantage of these new opportunities, enable turning to increase its market share against imports and other local producers. Turning now to Argentina, still demand remains stable as it has been for more than a year now. The construction sector is healthy, and industries like household appliances, automotive, and energy are working at good levels. Although we expect stable shipments in this market for the fourth quarter, we need to continue making a warning regarding the unstable macro situation in the country. Let me now share some thoughts on safety. Two weeks ago, One of our employees was fatally injured in our Rio de Janeiro facility in Brazil. We are deeply moved by this development, and our thoughts reside with his family and friends. We hadn't had a facility interview for more than four years. I traveled to Brazil right after I heard the news and worked with our team there to understand what happened. and we will continue investigating the causes of this tragic event, and we are set to learn from our findings. Let me now make a brief note about our mining activity in the south of Mexico and the effects of September's earthquake in our facility and surrounding communities. On September 19, there was a 7.7 intensity earthquake in Michoacán, which center was about 120 kilometers from our mining facilities. After the event, we had our tailing dams, both from Pernium and Pena, Colorado, inspected twice by a third-party expert, and their findings were that the dams are in perfect condition. Unfortunately, the situation was not the same for some of our surrounding communities. where infrastructure was significantly affected. As a result, we have created a fund to help rebuild some schools and a medical clinic in these remote communities. To wrap up my prepared remarks, I would like to say that we are positive regarding our achievement levels for the following quarters, even in a softening microeconomic environmental as the one expected. We are confident Our efforts to increase terrarium competitiveness and expand its product range will help us sustain and gradually increase shipments during 2023, mainly by substituting imports in Mexican markets that serve the manufacturing sector. With this, I let Pablo go ahead with the analysis of our results in the third quarter. Thank you very much.