TX — Ternium S.A.

Ternium S.A. Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income: $171 million for Q4 2025.
• EBITDA Margin: 10% for the quarter, with adjusted EBITDA slightly declining sequentially.
• Cash Generation: Strong operational cash generation of $2.3 billion for the full year, allowing for capital expenditures and dividends.
• Capital Expenditures: $463 million in Q4, with a projected decrease to $2 billion in 2026 and further down to $1.2 billion in 2027.
• Dividend: Proposed annual dividend of $2.70 per ADS, consistent with 2024 levels, reflecting confidence in future prospects.

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 new cold rolling and galvanized lines at the Pesqueria facility, enhancing capacity for automotive steel.
• Green Financing: Secured a $1.25 billion loan for the Pesqueria project, recognized with multiple sustainability awards.
• Market Positioning: Actively participating in discussions to address unfair trade practices, particularly in the context of USMCA negotiations and regional trade agreements.

3. Forward Guidance and Outlook

• Market Recovery: Anticipates a 4% growth in the Mexican steel market in 2026, despite a 10% decline in apparent steel consumption in 2025.
• Profitability Improvement: Expected sequential increase in EBITDA and margins in 2026, driven by operational efficiencies and market share gains.
• Long-term Strategy: Focus on further cost reductions and operational enhancements, with a goal to reach EBITDA margins of 15% to 20% in the future.

4. Bad News, Challenges, or Points of Concern

• Fatal Accidents: Two fatal accidents reported in 2025, prompting a reassessment of safety protocols and a commitment to enhance safety measures.
• Market Conditions: Declining steel prices and volumes in key markets, particularly in the US and Brazil, have pressured margins.
• Trade Uncertainty: Ongoing uncertainties regarding the USMCA renewal and its implications for trade dynamics, particularly concerning tariffs and import restrictions.
• Competitive Pressures: Increased competition from imports and the need for effective measures against unfair trade practices, particularly from China.

5. Notable Q&A Insights

• Mexican Market Recovery: Management acknowledged the significant drop in demand in 2025 but expressed optimism for recovery in 2026, aided by government measures against unfair trade.
• USMCA Negotiations: Uncertainty surrounding the timing and outcomes of USMCA negotiations, with management projecting a more favorable impact in 2027 rather than 2026.
• Brazilian Market Dynamics: Recent anti-dumping measures are seen as a positive step, but the impact on pricing is expected to be gradual.
• Capital Allocation: Management emphasized a balanced approach to capital allocation, prioritizing growth opportunities while maintaining dividends, but ruled out immediate share buybacks.
• Future Growth Opportunities: While open to potential acquisitions, particularly in Brazil, management is not currently pursuing any specific opportunities with CSN.

This summary encapsulates Ternium's financial performance, strategic initiatives, and outlook while addressing the challenges faced in the current market environment.