Investor Presentation April 2022 - As of April 26, 2022
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investor Presentation
April 2022
Ternium
As I April 2022
of April 26, 2022 1
Forward-Looking Statements
This presentation contains certain forward-looking statements and information relating to Ternium S.A. and its
subsidiaries (collectively, “Ternium”) that are based on the current beliefs of its management as well as assumptions
made by and information currently available to Ternium. Such statements reflect the current views of Ternium with
respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the
actual results, performance or achievements of Ternium to be materially different from any future results, performance or
achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in
general economic, political conditions in the countries in which Ternium does business or other countries which have an
impact on Ternium’s business activities and investments, changes in interest rates, changes in inflation rates, changes in
exchange rates, the degree of growth and the number of consumers in the markets in which Ternium operates and sells
its products, changes in steel demand and prices, changes in raw material and energy prices or difficulties in acquiring
raw materials or energy supply cut-offs, changes in business strategy and various other factors. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated, expected or targeted. Ternium does not
intend, and does not assume any obligation, to update these forward-looking statements.
Ternium I April 2022
2
Profile
Ternium I April 2022
3
Ternium’s Profile
A leading steel company in Latin America
20,000
Net sales of $16.1 billion in 2021 Countries Employees
Steel shipments in 2021 of 12.1 million tons
Industrial facilities in Mexico, Argentina, Brazil, 24
Integrated
Distribution
Colombia, USA and Central America Integrated
Facilities
Centers
Facilities
Steel Shipments 2021 22 12
Service Downstream
Centers Facilities
Other; 2%
Mexico; 54%
Colombia; 5%
Vertically integrated, from iron ore mines to
USA; 8%
service centers
Other Markets 25%
Focus on high value-added products
Brazil; 10%
Participation in Usiminas1 control group
Southern Region; 21%
1Usiminas: a leading company in the Brazilian flat steel market
Ternium I April 2022
4
Sustainable Profitability
A comprehensive approach to value creation
Quest for excellence in industrial management Economic Value Generated and Distributed1 (2021)
and technology
Focus on differentiation through sophisticated Suppliers
$9.1 B
products and services
Community
Employees
investments
Proactive approach to environment, health and $17.9 M
$940 M
safety
Economic
Recruitment, training, and retention of talent value
generated
Research &
Strengthening of steel value chain development
$16.7 B Capex
$9.8 M $524 M
Deep ties with our communities
Commitment to integrity
Capital
Taxes
providers
$1.8 B
$596 M
1 According to GRI Standards
Ternium I April 2022
5
Sustainable Profitability
Delivering Ternium’s business strategy
Focus on high-margin value-added products Annual Dividends ($ per ADS)
Net dividends proposed by the Board of Directors on February 15th, 2022
Pursue strategic growth opportunities Dividends paid 2.6
2.1
Implement Ternium’s best practices
Maximize the benefits arising from Ternium’s 1.1 1.2
distribution network
-
Enhance Ternium’s position as a competitive steel
2017 2018 2019 2020 2021
producer
Net Debt (Cash) ($ billion)
Quest for excellence in industrial management and
technology 0.4
0.2 0.2
(0.3)
(1.2)
dic-20 mar-21 jun-21 sep-21 dic-21
Ternium I April 2022
6
Sustainable Profitability
Improving our health and safety performance
Occupational health and safety (OH&S) policy Lost time injury frequency rate
(# of events / million hours worked)
Standardized and certified OH&S management
system
Safety-focused capital expenditure plan 1.0
0.8 0.8
0.7 0.7
Integral program for critical steel production
processes and iron ore tailings dams 2016 2017 2018 2019 2020
Management tours at the facilities, training,
workshops and conferences to raise awareness
Extensive communication to engage and commit
Ternium's and contractor's employees
Initiatives to promote healthy and safe operations in
the steel industry value chain
Ternium I April 2022
7
Sustainable Profitability
Roadmap to decarbonization
Emission Intensity (Scopes 1 & 2)
Target of 20% reduction of CO2 emissions intensity (tons of CO2 emitted per ton of crude steel produced)
1.68 1.69 1.73 1.68
(scope 1 and 2) by 2030 (base 2018) by:
1.40
intensifying the use of renewable energy
increasing scrap in the metallic mix
augmenting carbon capture capacity
partially replacing met coal with charcoal 2016 2017 2018 2019 2020
prioritizing lower specific-emission technologies Scope 1 Scope 2
Analysis of additional strategies to decarbonize its
operations over the longer term, based upon:
current and developing technologies
availability of renewable energy and steel scrap
Board of Directors quarterly oversight of Ternium’s
Climate Change strategy
Ternium I April 2022
8
Sustainable Profitability
Minimizing Ternium’s environmental footprint
New environmental investment plan:
encompassing Ternium’s steelmaking facilities
in Mexico, Brazil and Argentina
$460 million capex (’21-’27)
Responsible use of natural resources
Focus on excellence in environmental performance
Reintroduction of endangered species, such as the yaguareté, in Esteros del Iberá
Certified environmental management system
Management performance accountability
Sustainable building solutions at new facilities
Biodiversity protection
New environmental monitoring center at Ternium’s Rio de Janeiro unit in Brazil
Ternium I April 2022
9
Sustainable Profitability
Strengthening Ternium's value chain
Promoting a collaborative network to foster
excellence in performance:
Universities
Business schools
Government agencies
Industrial associations
Helping 1,800 SMEs, customers and suppliers, grow:
Training programs “ProPymes has helped create an industrial network
that encourages the professionalization and quest
Industrial projects and business consultancy for excellence of SMEs.”
Institutional initiatives
Commercial support and financial assistance
Ternium I April 2022
10Sustainable Profitability
Helping our communities thrive
Fostering education:
Ternium’s technical school in Pesquería
Refurbishing of community schools
Special education program for children
Financial support to high-school, undergraduate
and graduate students
Supporting initiatives that strengthen our communities: Roberto Rocca Technical School in Pesquería, Mexico
Funding of health care infrastructure and equipment
Sponsorship of diverse cultural exhibitions and
events
Sponsorship of city races and other sport activities
Special funding program of $6.4 million to help our
communities face the COVID-19 pandemic
New robotic and automation laboratories at a technical school in San Nicolás,
Ternium I April 2022 Argentina 11Sustainable Profitability
Commitment to integrity through strong corporate governance
Audit committee (all independent directors)
Internal Audit Department reporting to the
Chairman and the Audit Committee
Business Conduct Compliance Officer reporting
to the CEO
Compliance department that oversees SOX
certifications, related party transactions and
conflict minerals
Employee accountability and training to ensure a
transparent behavior
Confidential channels to report non-compliant
behavior
Ternium I April 2022
12Latin American Steel Markets
Ternium I April 2022
13Latin America Steel Markets
Ternium has a leading position in the Mexican steel market
The Mexican market is among the largest in Latin America
Growth in Mexico’s steel consumption over the last decades was driven mainly by a dynamic
manufacturing industry
Mexico, Brazil, Argentina and Colombia accounted for approximately 80% of Latin America’s steel
consumption in 2021
Apparent steel use (million tons)
Brasil Argentina 4.9
26.6 Colombia
Mexico
24.5 4.0
2.7
9.7
6.6 1.1
1990 2000 2010 2021e
2020 1990 2000 2010 2021e
2020
Source: Alacero Oct 2021
Ternium I April 2022
14Mexico
Attractive steel market with a significant demand for high-end steel products
Developed industrial sector (approximately 59% of
shipments in Mexico)
Access to the North American steel market through Steel shipments by sector (2021)
USMCA
Ternium’s focus on value added products and services: Automotive; 27%
Other industries 12%
Service center network
Nationwide coverage through distribution centers
White goods; 10%
and regional distributors
Customer digital connectivity
HVAC / lighting;
New capabilities to provide sophisticated steel 10%
products for industrial customers Commercial; 41%
Ternium I April 2022
15Mexico
Developing our industrial center in Pesquería
State-of-the-art industrial center provides Ternium with high-end value-added product portfolio
Greenfield facility started operations in 2013 with cold-rolling and galvanizing lines
Additional hot-dipped galvanizing and painting lines commissioned in 2019 with the most advanced painting
technology in Mexico
Start-up of new hot-rolling mill in mid-2021, enabling the expansion of Ternium’s product range to
encompass a broader dimensional offering and the most advanced steel grades
New investment program announced in February 2022
with additional downstream lines:
cold rolling mill
hot-dip galvanizing line 36%
push-pull pickling line
finishing lines
Ternium I April 2022
16Mexico
Ramping-up the new hot-rolling mill in Pesquería
Significant technological upgrade to expand TX’s Apparent flat steel use (2021)
product range and improved customer service Industrial Commercial Local Net Imports
The new mill increases Ternium’s capabilities to 69%
substitute imports, which in 2021 accounted for 52% 52%
48%
of Mexico’s flat steel use 31%
Targeting the automotive industry, as well as the 0
white goods, machinery, energy and construction
sectors
Annual production capacity of 4.4 million tons (option
to increase capacity to 4.8 million tons) 36%
Source: Canacero / Ternium estimates
Ternium I April 2022
17Argentina
Third largest steel market in Latin America with a developed industrial sector
Significant industrial sector representing 48% of
steel shipments in Argentina
Steel shipments by sector (2021)
Focus on value added products and services:
Service center network
Short notice delivery and just-in-time Other industrial
17%
agreements Commercial 52%
Agribusiness 9%
Customer digital connectivity
Joint product research and development Automotive 9%
projects with our value chain (mainly white
Canning 6%
goods, transportation and renewable energy)
White goods 5%
Oil & gas 2%
Ternium I April 2022
18Colombia
New rebar mill in Colombia inaugurated in November 2020
Colombian steel market is the fourth largest in Latin America
Imports account for a significant share of long steel consumption
Ternium expanded its participation in the construction sector in the north/northwest of Colombia
Approximately 50% of steel rebar consumption
No local production
Expensive logistics from the mills in central Colombia
New greenfield rebar facility
Annual capacity of 520,000 tons
Total investment of $90 million
Started up in November 2020
Ternium I April 2022
19Ternium’s Performance
Ternium I April 2022
20Ternium’s Performance
EBITDA and Net Income
EBITDA ($ million) EBITDA Margin (% of net sales)
1,881 41%
1,505 36% 35%
1,420 33%
1,209 28%
1,057
1Q21 2Q21 3Q21 4Q21 1Q22 1Q21 2Q21 3Q21 4Q21 1Q22
EBITDA per Ton1 ($) Net Income and Earnings per ADS
Net Income ($ million)
612
Earnings per ADS
532 6.12
463 5.21 5.08
409
341 3.95
3.07
1,366
1,158 1,136
878
707
1Q21 2Q21 3Q21 4Q21 1Q22
1
1Q21 2Q21 3Q21 4Q21 1Q22
Consolidated EBITDA divided by steel shipments.
Ternium I April 2022
21Ternium’s Performance
Steel Shipments
Mexico (thousand tons) Other Markets (thousand tons)
1,699 1,735 1,697 Slabs
12% 1,574
1,403
778 748 805 -2% 791
697
281 185
466 386 384
1Q21 2Q21 3Q21 4Q21 1Q22 1Q21 2Q21 3Q21 4Q21 1Q22
Southern Region (thousand tons) Steel Shipments 1Q22
Mexico 53%
USA 11%
623 636 626 618 -5% 587
Brazil 6%
Colombia 6%
Other Markets
1Q21 2Q21 3Q21 4Q21 1Q22 Other 4% 27%
Southern
Region 20%
Ternium I April 2022
22Ternium’s Performance
Net Sales
Total Shipments (thousand tons) Revenue per Ton ($/ton)
3,099 3,068 3,071 Mexico 1,564
2,827 4% 2,951 1,525 0%
Southern Region 1,438 -8%
Consolidated 1,528
1,427 -5%
1,505
1,093
1,066
1,026
1Q21 2Q21 3Q21 4Q21 1Q22 1Q21 2Q21 3Q21 4Q21 1Q22
Net Sales ($ million)
4,592 Shipments partially recovered in Mexico in 1Q22 from soft
4,330 4,305
3,920 4Q21 volumes.
3,249
Sequentially lower realized steel prices in 1Q22, from record
revenue per ton in 4Q21.
In 2Q22, volumes expected to further recover in Mexico.
Revenue per ton expected to increase in 2Q22.
1Q21 2Q21 3Q21 4Q21 1Q22
Ternium I April 2022
23Ternium’s Performance
Cash Flow and Balance Sheet
Cash from Operations ($ million) Changes in Working Capital ($ million)
331
1,135 Includes income tax
payments of $868 million.
692 (158)
628 586
328 (666) (652)
(1,141)
1Q21 2Q21 3Q21 4Q21 1Q22 1Q21 2Q21 3Q21 4Q21 1Q22
Capex and Free Cash Flow ($ million) Net Debt (Cash) ($ billion)
Capex
Free Cash Flow 1,013
0.2 0.2
567
467 475 (0.3)
198 161
130 111 122 125 (1.2)
(1.6)
1Q21 2Q21 3Q21 4Q21 1Q22 mar-21 jun-21 sep-21 dic-21 mar-22
Ternium I April 2022
24Conclusion
Ternium I April 2022
25Conclusion
A leading steel company in Latin America with a
comprehensive management approach
Successful implementation of business strategy geared
toward sustainable profitable growth
Solid financial position
Resilience in times of crisis
Start-up of new hot-rolling mill and new investment program
in Pesquería provide opportunity to strengthen business in
the region
Continued focus on generating long-term stakeholder value
Ternium I April 2022
26Ternium I April 2022
27Appendix
Corporate Structure
Production Capacity
Shipments and Net Sales
Income Statement
Cash Flow Statement
Balance Sheet
Historical Performance
Ternium’s Debt Profile
Ternium I April 2022
28Corporate Structure
Techint Group: 65%
Tenaris: 11%
Ternium (treasury shares): 2%
Subsidiaries Joint operations Non-consolidated companies
Public: 21%
71% 100% 50%
Ternium México
29% Las Encinas Peña Colorada
62% 38% Other
Ternium Argentina3 50%
4% Nippon Steel Corp: 19% ArcelorMittal
17% TenarisConfab: 3%
Usiminas
CEU: 3% Economic participation
100%
Ternium Brasil4 Other: 55%
Direct Indirect
2
Total
51% 49% Ternium Mexico 71% 18% 89%
Tenigal Nippon Steel Corp 3
Ternium Argentina 62% 62%
100% Ternium Brasil4 100% 100%
Ternium Colombia 1
Usiminas 17% 2% 19%
100% Ternium del Atlántico Tenigal 51% 51%
Ternium Colombia 100% 100%
100% Ternium USA TX Int. Guatemala 100% 100%
TX USA 100% 100%
100%
Ternium Int. Guatemala Las Encinas 71% 18% 89%
Peña Colorada 36% 9% 44%
48% 30% Tecpetrol 1 Participation based on total shares distributed
Techgen
2
22% Net of non-controlling interest in TX Argentina
50% 3 Formerly known as Siderar
Exiros 50% Tenaris 4 Formerly known as CSA
Ternium I April 2022
29Production Capacity
In million metric tons per year
(1)
Mexico Argentina Other Total
Slabs 2.5 3.2 5.0 (2) 10.6
Billets 1.6 0.2 1.9
Crude steel 4.1 3.2 5.2 12.5
Hot rolled coils 9.9 2.9 12.8
Rebars & wire rods 1.2 0.7 1.9
Cold rolled coils 3.8 1.8 5.6
Tinplated products 0.2 0.2
Galvanized products 2.4 0.8 0.4 3.5
Pre-painted products 0.8 0.1 0.2 1.1
Service center 3.9 2.3 1.3 7.5
(1)Brazil, Southern US, Colombia and Central America
(2)Corresponds to Ternium Brasil
Ternium I April 2022
30Shipments and Net Sales
Net Sales ($ million) Shipments (thousand tons) Revenue / ton ($/ton)
1Q 2022 4Q 2021 Dif. 1Q 2022 4Q 2021 1Q 2022 4Q 2021
Mexico 2,262.5 2,194.9 3% 1,574 1,403 1,438 1,564
Southern Region 895.1 945.0 -5% 587 618 1,525 1,528
Other Markets 1,054.3 1,115.3 -5% 791 805 1,333 1,385
Total steel products 4,211.9 4,255.2 -1% 2,951 2,827 1,427 1,505
Other products (1) 92.9 64.7 44%
Total steel segment 4,304.8 4,320.0 0%
Total mining segment 102.8 159.4 -36% 897 1,019 115 156
Total steel and mining segments 4,407.6 4,479.4 -2%
Intersegment eliminations (102.8) (149.7)
Total net sales 4,304.8 4,329.7 -1%
Net Sales ($ million) Shipments (thousand tons) Revenue / ton ($/ton)
1Q 2022 1Q 2021 Dif. 1Q 2022 1Q 2021 1Q 2022 1Q 2021
Mexico 2,262.5 1,810.8 25% 1,574 1,699 1,438 1,066
Southern Region 895.1 680.8 31% 587 623 1,525 1,093
Other Markets 1,054.3 687.7 53% 791 778 1,333 884
Total steel products 4,211.9 3,179.3 32% 2,951 3,099 1,427 1,026
Other products (1) 92.9 59.7 56%
Total steel segment 4,304.8 3,239.0 33%
Total mining segment 102.8 123.4 -17% 897 1,035 115 119
Total steel and mining segments 4,407.6 3,362.4 31%
Intersegment eliminations (102.8)
Total net sales 4,304.8 3,249.3 32%
(1) The item “Other products” primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
Ternium I April 2022
31Income Statement
$ million 1Q2022 1Q2021
(Unaudited)
Net sales 4,304.8 3,249.3
Cost of sales (2,984.2) (2,138.3)
Gross profit 1,320.6 1,111.0
Selling, general and administrative expenses (281.3) (210.4)
Other operating income (expenses), net 19.7 5.1
Operating income 1,059.0 905.8
Finance expense (6.6) (7.2)
Finance income 24.3 16.3
Other financial income (expenses) income, net (78.6) 6.9
Equity in earnings (losses) of non-consolidated companies 58.7 46.5
Profit before income tax expense 1,056.9 968.3
Income tax expense (179.4) (261.6)
Profit for the period 877.5 706.7
Attributable to:
Owners of the parent 775.6 602.9
Non-controlling interest 101.9 103.7
Profit for the period 877.5 706.7
Ternium I April 2022
32Cash Flow Statement
$ million 1Q2022 1Q2021
(Unaudited)
Profit (loss) for the period 877.5 706.7
Adjustments for:
Depreciation and amortization 149.5 151.6
Equity in (earnings) losses of non-consolidated companies (58.7) (46.5)
Changes in provisions (2.6) 4.4
Net foreign exchange results and others 81.5 61.9
Interest accruals less payments 1.9 1.7
Income tax accruals less payments (688.3) 114.3
Changes in working capital 331.4 (666.2)
Net cash provided by operating activities 692.3 327.8
Capital expenditures (124.8) (129.7)
Proceeds from the sale of property, plant and equipment 0.4 0.6
Acquisition of non-controlling interest - (0.8)
(Increase) decrease in other investments 82.2 149.3
Net cash (used in) provided by investing activities (42.3) 19.4
Finance Lease Payments (12.2) (11.0)
Proceeds from borrowings 79.9 18.1
Repayments of borrowings (202.8) (36.7)
Net cash used in financing activities (135.1) (29.5)
Increase in cash and cash equivalents 514.9 317.8
Ternium I April 2022
33Balance Sheet
March 31, December 31, March 31, December 31,
$ million $ million
2022 2021 2022 2021
Capital and reserves attributable to the owners of the parent 11,415.7 10,535.0
Property, plant and equipment, net 6,406.4 6,431.6 Non-controlling interest 1,803.8 1,700.0
Intangible assets, net 903.9 902.3
Total Equity 13,219.5 12,235.0
Investments in non-consolidated companies 936.7 751.5
Deferred tax assets 183.1 160.7 Provisions 93.1 83.3
Receivables, net 179.3 177.8 Deferred tax liabilities 182.1 186.2
Trade Receivables, net 0.2 0.2 Other liabilities 535.3 506.9
Other investments 76.2 67.3 Trade payables 1.0 1.0
Total non-current assets 8,685.8 8,491.4 Lease liabilities 213.7 215.3
Receivables, net 424.1 357.7
Borrowings 654.0 656.5
Derivative financial instruments 0.4 4.4 Total non-current liabilities 1,649.1 1,649.1
Inventories, net 3,780.5 3,908.3 Current income tax liabilities 235.0 873.8
Trade receivables, net 1,902.7 1,767.2 Other liabilities 406.3 345.1
Other investments 1,134.7 1,290.5 Trade payables 1,422.2 1,126.0
Cash and cash equivalents 1,790.3 1,276.6 Derivative financial instruments 4.0 1.9
Total current assets 9,032.8 8,604.6 Lease liabilities 45.9 44.4
Borrowings 708.2 822.6
Non-current assets classified as held for sale 1.9 1.9
Total current liabilities 2,821.6 3,213.8
Total assets 17,720.5 17,097.9
Total liabilities 4,501.0 4,862.9
Total equity and liabilities 17,720.5 17,097.9
Ternium I April 2022
34Historical Performance
EBITDA and Net Income
Consolidated Shipments (million tons) Ebitda ($ million) and Ebitda Margin (% of net sales)
Slabs 36%
13.0 12.5
11.6 12.1
11.4 6% 5,863
1.4 2.9 3.1 1.6 24%
2.3 20%
17%
15%
2,698
1,931
1,526 1,525
2017 2018 2019 2020 2021 2017 2018 2019 2020 2021
Net Income and Earnings per ADS Annual Dividends ($ per ADS)
Net Income ($ million) 19.49 Net dividends proposed by the Board of Directors on February 15th, 2022
Earnings per ADS
4,367 Dividends paid 2.6
2.1
7.67
4.51 3.97
2.87
1.1 1.2
1,662
1,023 868
630
-
2017
4Q20 2018
1Q21 2019
2Q21 2020
3Q21 2021
4Q21 2017 2018 2019 2020 2021
Ternium I April 2022
35Historical Performance
Cash Flow and Balance Sheet
Cash from Operations ($ million) Changes in Working Capital ($ million)
2,677
573
353
1,739 1,648 1,761
(229)
(865)
384
(2,618)
2017 2018 2019 2020 2021 2017 2018 2019 2020 2021
Capital Expenditures ($ million) Free Cash Flow ($ million)
2,154
1,219 1,201
1,052
520 560 524 595
409
2017 2018 2019 2020 2021 (26)
2017 2018 2019 2020 2021
Ternium I April 2022
36Debt Profile
Comfortable maturity schedule
$1.4 billion gross debt as of Mar 2022 Debt maturity profile Mar’22 ($/million)
Main outstanding syndicated loans: Tx Mexico Synd. Loan Tx Investments Synd. Loan
Tx Brasil Synd. Loan Other outstanding long-term debt
Ternium Brasil: $500 million Revolving credit facilities
Ternium Mexico: $250 million
Ternium Investments S.à.r.l.: $188 million 712
525
Other outstanding long-term debt:
Peña Colorada: $44 million
138
Tenigal: $25 million 9
Revolving credit facilities (uncommitted) of $377 2022 2023 2024 2025
million outstanding, mainly in Mexico and
Colombia
Ternium I April 2022
37www.ternium.com
Ternium I April 2022
38You can also read
