TX — Ternium S.A.

Ternium Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income: $171 million for Q4 2025.
• EBITDA Margin: 10% for the year, with a slight sequential decline in Q4.
• Cash Generated by Operations: $2.3 billion for the full year.
• Capital Expenditures (CapEx): $463 million in Q4; expected to decrease to $2 billion in 2026, $1.2 billion in 2027, and around $800 million in 2028.
• Dividend: Proposed annual dividend of $2.7 per ADS, maintaining the same level as 2024.

2. Strategic Updates and Business Highlights

• Cost Reduction Initiatives: Achieved $250 million in savings through efficiency programs, including optimizing logistics and iron ore sourcing.
• New Facilities: Started production in the new cold rolling mill and galvanized line at the Pesqueria facility, with a slab plant expected to begin operations by year-end.
• Green Financing: Secured a $1.25 billion loan for the slab facility, recognized with several sustainability awards.
• Market Positioning: Increased market share in Mexico despite a 10% decline in apparent steel consumption.

3. Forward Guidance and Outlook

• 2026 Expectations: Anticipate a sequential increase in EBITDA and shipments, with a projected 4% growth in the Mexican steel market.
• Profitability Outlook: Optimistic about improving profitability in 2026, driven by cost reductions and favorable trade measures.
• Long-Term Goals: Aim to return to EBITDA margins of 15%-20%, with a focus on operational efficiency and market share growth.

4. Bad News, Challenges, or Points of Concern

• Safety Incidents: Notable fatalities at Ternium Mexico and Ternium Brasil, prompting a review and reinforcement of safety programs.
• Market Conditions: Declining steel prices and volumes, particularly in the U.S. and Brazil, impacted operating income.
• Trade Uncertainties: Ongoing negotiations regarding the USMCA and potential impacts of Section 232 tariffs create uncertainty in future operations and pricing dynamics.
• Competitive Pressures: Increased import tariffs and antidumping measures in Brazil and Mexico may affect pricing dynamics and market competition.

5. Notable Q&A Insights

• Mexican Market Recovery: Ternium expects a 4% growth in the Mexican steel market in 2026, despite current low demand levels. The company aims to capture more market share against imports.
• USMCA Negotiations: Uncertainty remains regarding the timing and impact of USMCA negotiations, with expectations leaning towards 2027 for significant outcomes.
• Brazil Antidumping Measures: Recent measures are seen as a positive step, but the impact on pricing is expected to be gradual rather than immediate.
• Future Capital Allocation: Management emphasizes a balanced approach to capital allocation, focusing on growth opportunities while maintaining dividends, with no immediate plans for share buybacks.

Overall, Ternium's performance in 2025 reflects resilience in a challenging environment, with strategic initiatives aimed at enhancing profitability and market position, despite facing significant safety and market-related challenges.