TX — Ternium S.A.

Ternium Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted EBITDA: Increased by 21% sequentially, reflecting margin improvement.
• Net Income: Reached $372 million, benefiting from improved operational performance and foreign exchange gains, despite a $48 million loss related to ongoing litigation.
• Earnings Margin: Improved to 12%, supported by a recovering market environment in Mexico and a focus on profitability in Brazil.
• Net Cash Position: Ended the quarter at $327 million, impacted by a $350 million payment for Usiminas shares.

2. Strategic Updates and Business Highlights

• Market Recovery: Mexican steel consumption is expected to improve following a 10% decline in 2025, aided by government initiatives to support local industry and infrastructure projects.
• Pesqueria Project: The ramp-up of the cold rolling mill and galvanizing line is ahead of schedule, expected to reach near full capacity by October 2026.
• Innovation: Ternium received a patent for a new electrical steelmaking process, enhancing its capabilities in producing automotive steel.
• Sustainability Recognition: Ternium was recognized as a Sustainability Champion by the World Steel Association.

3. Forward Guidance and Outlook

• Mexico: Anticipates continued improvement in steel demand driven by commercial market activity and infrastructure projects. The company expects higher volumes in Q2 2026.
• Brazil: Expects a healthier competitive environment as trade measures take effect and inventory levels normalize.
• Argentina: Monitoring demand recovery closely; however, the outlook remains mixed across sectors.

4. Challenges and Points of Concern

• Brazilian Market Pressure: A significant increase in steel imports (up 30% vs. previous quarter) has led to elevated inventory levels, impacting pricing and market dynamics.
• Argentina's Uneven Recovery: Despite some sectors showing growth, overall steel consumption remains weak, particularly in construction and home appliances.
• Cost Pressures: Rising costs associated with logistics and raw materials could impact margins, although price increases are expected to offset some of these pressures.

5. Notable Q&A Insights

• USMCA Discussions: Management is optimistic about a renewed agreement with tougher rules of origin but uncertain about the timeline. They believe structural changes are occurring in Mexico's steel market due to government initiatives.
• Investment Strategy: Ternium is cautious about new large investments following the completion of the Pesqueria project, focusing instead on optimizing existing capacities.
• Decarbonization Trends: The pace of decarbonization in Latin America is slower than in Europe, with Mexico potentially leading in lower emissions due to a shift from coal to natural gas.
• Volume Strategy in Brazil: Ternium prefers to prioritize profitability over volume growth, indicating a cautious approach to increasing production in response to market conditions.

Overall, Ternium's Q1 2026 performance reflects a recovery in certain markets, ongoing strategic initiatives, and a balanced approach to growth amid external challenges.