Ternium S.A. Sponsored ADR Aktie

Good morning, ladies and gentlemen. Welcome to Ternium's conference call to discuss the results for the first quarter 2026. We would like to inform you that this event is being recorded. [Operator Instructions]

We would like to remind you that this conference call is intended exclusively for investors and market analysts. We request that any questions from journalists be dedicated to the Media Relations through our website in the Press section.

With this, I would like now to turn the floor over to Mr. Sebastian Marti. You may proceed.

Good morning, and thank you for joining us. My name is Sebastian Marti, and I am Ternium's Global IR and Compliance Senior Director. Yesterday, we announced our financial results for the first quarter of 2026. Today's call is intended to provide additional context to that presentation.

I'm joined by Maximo Vedoya, Ternium's Chief Executive Officer; and Pablo Brizzio, the company's Chief Financial Officer, who will discuss Ternium's operating environment and performance. Following our prepared remarks, we will open up the call to your questions.

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 filings with the Securities and Exchange Commission and on Page 2 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 yesterday.

With that, I'll turn the call over to Mr. Vedoya.

Thank you, Sebastian. Good morning, everyone, and thank you for joining our conference call. Earnings margin in the first quarter continued on a recovery path, reaching 12%. This improvement reflects a combination of factors: an improving market environment in Mexico, a focus on profitability over volume in Brazil, and the continued work of our teams to increase efficiency across our industrial operations. In Mexico, apparent steel consumption fell around 10% in 2025, driven by uncertainty triggered by U.S. trade actions. In 2026, however, we see an improvement. The Mexican government has been actively working to mitigate the negative effects of U.S. trade measures on the Mexican economy by defending the local industry against unfair imports from Asia. These actions not only support the continued development of the Mexican industry but are closely aligned with the U.S. government's own trade strategy.

Plan Mexico is also central to this effort. It promotes industrial development, increases domestic content in manufacturing and strengthens regional supply chains. In this same line, last week, the steel industry and the Mexican government signed a landmark agreement to prioritize domestically produced steel in all public procurements, a clear sign of the opportunity ahead. Taken together, these policies support our expectation of a recovery in Mexican steel demand.

In this context, we expect volumes in Mexico to continue improving in the second quarter, driven mainly by the commercial market. The significant destocking that took place across the value chain in 2025 is now giving way to a normalization of apparent demand. Beyond that, we are seeing early movements in several infrastructure projects, which could add meaningful demand in the coming quarters.

Turning to our Pesqueria project in Mexico. The ramp-up curve of the cold rolling mill and the galvanizing line are running ahead of plan. We expect both lines to be operating close to a full capacity by October. The slab facility is also advancing in line with expectation. This project is central to our strategy. It will significantly increase our vertical integration in Mexico, reduce our [ resilience ] on externally sourced slabs and enhance our product capabilities across automotive, industrial and construction applications. Importantly, as the automotive USMCA rule of origin enters into effect next year, this facility will position Ternium as a key player in meeting a growing demand.

In this respect, I am pleased to share that we have been granted a patent in the United States for our new electrical steelmaking process, which will enable us to produce exposed steel at scale. This innovation leverages the integration of direct reduction at the same site. In addition, innovations such as virtual stamping solution, which utilizes artificial intelligence to streamline certification process for the automotive industry, enforcing our drive for operational excellence. This commitment continues to be recognized by our customers. In February, we were honored by [ Ariston Group ] with their [ Strategic Partner ] award, the highest recognition for quality and partnership. And in April, Ternium Mexico received the 2025 John Deere Crop Award and achieved the partner level, John Deere's highest distinction for cost-effective and long-term collaboration.

Brazil steel consumption remains broadly stable with some sectors showing resilience and others facing more pressure. The automotive industry continues to perform well, with production expected to grow around 4% this year. On the other hand, sectors like agribusiness has been weakened -- have seen weaker demand. A key challenge in the quarter was a significant increase in steel imports, up around 30% versus the previous quarter.

Imports accelerated ahead of the government's antidumping measures on cold-rolled and coated products. This has resulted in elevated inventory levels of imported material in the market, which we expect to normalize by the second half of the year. As these trade defensive measures gain traction and inventories level normalize, we expect Usiminas' market share to improve. However, it is also worth noting that import pressure is not limited to China. Volumes from Southeast Asia, particularly South Korea and Vietnam, have increased significantly, reflecting the indirect effects of China oversupply on the region's trade flow.

In March, we were honored to welcome President Lula to the official inauguration of the Roberto Rocca Technical School located near our Rio de Janeiro plant. The school provides full-funded technical education to young people from the surrounding communities, offering them access to world-class education. Built with an investment of $50 million, we expect to welcome close to 600 students by next year.

In Argentina, after a 2024 record, one of the lowest steel consumption levels in 2 decades, the market began to recover in 2025. However, 2026 did not start as we had expected. Demand is growing unequally. Mining, energy and agriculture are performing well. Automotive remains at reasonable levels. Constructions remain soft. Metal, mechanical and home appliance sectors are lagging, affected by weak domestic consumption.

As I bring my remarks to a close, I am pleased to share that Ternium has once again been recognized as a Sustainability Champion by the World Steel Association. This recognition is granted to companies that [ integrate ] sustainability into their core strategy, combining environmental management, safety performance, innovation and responsible community engagement.

Looking ahead, we are constructive on our market and our ability to continue improving performance. In Mexico, the combination of normalizing demand, supportive industrial policies and the ramp-up of our downstream projects position us well for the quarters ahead. In Brazil, as trade defensive measures gain traction and imports inventory normalize, we expect to see a healthy competitive environment. In Argentina, we continue to monitor the recovery closely, while remaining -- maintaining our operational discipline. Across all our operations, our teams remain focused on driving efficiency and lowering cost, and we're already seeing the benefits. Overall, the recognition we continue to receive from our customers reflects the quality of what we are doing every day. We are confident in Ternium's ability to deliver even stronger performance in the periods ahead.

With that, I'd like to move to a review of our quarterly performance. Pablo, please go ahead.

Thanks, Maximo, and thanks, everybody, for participating in our call. So let's review our operational and financial performance for the first quarter of this year. Starting the webcast presentation on Page #3, we can see that the adjusted EBITDA increased sequentially by 21% in the first quarter, in line with our expectations and reflecting margin improvement. Looking ahead, we expect adjusted EBITDA margin to continue increasing, supported by higher revenue per ton, particularly in Mexico and Brazil, partially offset by higher cost per ton across our main markets.

Let's move to the next slide. Net income for the first quarter of 2026 reached $372 million. This reflects improved operating performance, stronger net financial results, primarily driven by foreign exchange gain in Mexico, Argentina and Brazil, and positive deferred tax results. Deferred tax gain amounted to $122 million, driven mainly by currency fluctuations in Argentina and Brazil and inflation effects in Argentina. Net income in the quarter also included a $48 million loss from the quarterly update of the value of a provision from ongoing litigation related to the acquisition of the participation in Usiminas in 2012.

Let's turn to Page 5 to review the Steel segment performance. Overall, shipments were broadly in line with the previous quarter. In Mexico, volumes increased, supported by solid commercial market activity. This was driven by more effective trade defenses against unfair imports, healthier inventory level across the value chain and a seasonal recovery in demand. In Brazil, Usiminas prioritized profitability in the face of increased cost volatility, particularly in energy and logistics, resulting in a modest sequential decline in shipments. In the Southern region, demand softened, reflecting weaker industrial activity in Argentina, alongside typical seasonal factors, leading to a sequential decrease in shipments. Looking ahead, we expect shipments to trend higher, mainly driven by Mexico and Argentina, as trade measures gain traction in Mexico and demand conditions gradually improve across both markets.

Let's turn to Page 6 to review the performance of our Steel segment. Steel cash operating income improved during the period, driven by higher margins, resulting from realized prices gains, which were partially offset by higher raw material and purchased slab costs.

On next slide, the Mining segment reflects a different dynamic. In this case, shipment declined sequentially due to operational disruptions in Brazil caused by an unusual intense rainfall.

Finally, let's turn to the cash flow and balance sheet performance on Page 8. The company continues to generate strong cash flow from operations, although this quarter, we saw an increase in working capital, driven by an increase in trade receivables, mainly due to higher steel prices and volumes in Mexico. We anticipate that sales will grow in the second quarter of this year, likely requiring a further rise in working capital.

Capital expenditures continue to reflect our progress in the expansion of our industrial center in Pesqueria, now mostly focused on the construction of the slab making facility. Finally, we ended the quarter with a net cash position of $327 million. On top of our CapEx needs, the cash position decline included a $350 million payment for acquisition of Usiminas shares from Nippon Steel, partially offset by $150 million loan collection from Techgen, our nonconsolidated energy joint venture that supplies power to our operations in Mexico.

Okay. This concludes our prepared remarks for the first quarter. We will now be happy to take your questions. Thanks, and please proceed with the Q&A session.

[Operator Instructions] Our first question comes from Mr. Rodolfo Angele from JPMorgan.

Okay. So I wanted to just hear your thoughts on 2 aspects that I think are relevant for Ternium's future performance. So first, there's been a lot of discussion on USMCA. So if you could share your thoughts on what happens there and what it means in terms of different scenarios for the company's performance? And I also wanted to hear from you a little bit about the expectations for the slab market in terms of pricing outlook for the [ remainder ] of the year, especially. And that's all.

Thank you, Rodolfo. Let me start with the USMCA question. And as you know, there have been a lot of discussion and talks about USMCA. Look, I believe that there will be a trade -- a deal between U.S. and Mexico. And as you know, the U.S. administration through the USTR and the Mexican government through the Ministry -- or Secretary of Economy holding meetings. There is a formal meeting on the 25 of May, which is going to start formally the revision -- or the discussions of the USMCA. Most of that discussions are probably going to be on discussing mainly stricter rule of origin and some other issues that have [ arisen ]. And I think my thoughts on this is that this is going to take some time. So I am positive, there is going to be an agreement. But I don't know exactly the timeline, probably won't be by the 1st of July and probably would get most of this year. So this is, I mean, the -- my thoughts of what is happening in the USMCA.

There's also some discussions going on, on the Section 232. As you know, I don't think -- my thoughts is, and I always said, there is no -- there's incomparability between Section 232 and USMCA. It doesn't make sense, makes Mexico subject to 232 in steel as the U.S. has a steel trade surplus -- a very big steel trade surplus with Mexico. I know the Mexican administration has also stated that there is a priority while the USMCA negotiate that there has to be a relief in steel and automotive Section 232. And I know they are discussing this during the following weeks. Nevertheless, I think it's important that the Mexican administration, as I said a little bit in my remarks, Rodolfo, has been very proactive in launching initiatives to strengthen the steel consumption in Mexico.

While all this is going on, the Plan Mexico, the target measures against unfair competition, the imposition of tariffs for countries that don't have trade agreement with Mexico, all this -- I think it's a very active way of the Mexican government to attack the problems of the Mexican economy, while these 2 things are negotiated. So in the end, I think USMCA, as I said, is going to be renewed probably with much tougher rule of origin, which I think is a very good thing. But I'm not that certain on the timing. Probably the timing -- it takes a little bit more longer. So I hope with this large answer, I did answer your question, Rodolfo.

Yes, you did.

The slab market, what did you refer with the slab market?

It's just a market that -- I think it's more unique overall in terms of how pricing dynamics work. So I just wanted to hear your thoughts on what do you see, especially on pricing, what do you expect for the coming quarters?

Prices, as it has been in most of steel products, has been increasing recently. Clearly, the increase in fuel increases the logistics for slabs. And also, there has been some increase in iron ore and in other raw materials, which have made the slab market a little bit more expensive. I mean, from all our production -- our buying of slab is not as big as it used to be because most of the slabs come from our Ternium Brazil facility. But nevertheless, we are buying in the market, and we are seeing some increase in that. It's compensated probably with the increase in prices in finishing products also.

Our next question comes from Mrs. Timna Tanners from Wells Fargo Securities.

So I wanted to ask, if I could, about a few things. One is to follow up on the USMCA discussions. The U.S. government is more interested in granting relief on tariffs if there is a construction of production in the U.S. So just wondering if you would expand your U.S. presence. Also wondering along those same lines about -- hearing about a Mexican dumping case against U.S. galvanized imports. If you could address those?

Timna, we are not thinking in making some production or increased production in the U.S. now. We don't have that as a plan today. And second, there is a dumping case against cold rolling products. There's no dumping case against galvanized in Mexico, at least in the U.S. There is a dumping case in galvanized against Vietnam and I think other countries.

Okay. I heard that Mexico was working on one against the U.S. I thought that could be positive for your operations. So we'll stay tuned there.

Second, can you expand a bit more on the mention of electrical steel -- sorry, EAF capabilities to make exposed automotive and remind us what might be the time frame for doing that?

Yes, for sure. I mean, as you probably remember, the steel shop, it's going to start the ramp-up in the last quarter of -- between the last quarter of this year and early next year. As you know, the operation, it's -- I mean, the facility is huge. I hope all of you can one day visit it because it's worth visiting the facility. So the ramp-up facility -- the ramp-up curve should take at least all 2027. In the meantime, during all this ramp-up, we are going to work with the automotive customers to certify our products, certification process for all automotive products. Not only the exposed material, but also all the other parts of the car need certification. But we are working very close with all of them because they are very eager to accelerate the certification process.

And so, we are working already with them on how to accelerate the certification process as much as possible. We have recently increased the capacity of our Ternium Lab in Pesqueria, which we are working -- certifying all the lab equipment, so we can certify part of the process they need in that site. And I mean, the capacity that this EAF is going to have to have, the capacity of producing exposed material in a sustainable way and in a continuous way is going to be unique because of the process we are doing and all the patents we are developing, especially to decrease all the nitrogen that the EAFs usually have. So this is a unique process that we are developing with our technical people and the supplier of equipment that is Tenova, some sister company of us. So I mean, again, the timing should be around next year, probably by the third and fourth quarter of next year, that we are going to supply in a sustainable way to the automotive industry.

So it'll be qualified for 2028 or qualified for 2027?

No. The idea is to qualify everything for 2028.

Our next question comes from Mr. Alfonso Salazar from Scotiabank.

A couple of questions from my end. The first one is regarding the outlook in Argentina. I want to see if you can give us more color on what's going on and what are your expectations for future demand. Also trying to understand better what's the situation regarding imports. It seems to be more problematic than in the past. And also exports from Argentina to other Latin American countries, what is the outlook there because of the same thing, imports from -- to other countries from Asia?

The second question is, some comments on the decarbonization trends in Latin America, it seems that -- we always knew that it was going to take longer than Europe. But any comment on what is the outlook there as well, these trends of decarbonization and green steel?

Yes. Thank you, Alfonso. So outlook in Argentina, I mean, in the short term, shipments in the second quarter are going to increase because, as you know, the first quarter in Argentina is always a seasonably low quarter. January and February usually are holidays in Argentina. So the demand is quite -- then further down the road, I think, some of the sectors present a good opportunity, mining, oil and gas, and agriculture. They are compensated by others like mechanical goods and like electrical and white goods, sorry. That demand is not very good in the final goods. So it's going to be a little bit better, but we don't expect a huge growth compared to 2025.

Imports, although there have been a lot of talks about imports, we are not seeing imports in our products. We have seen some imports in the value chains, but these are stable today. I think the problem in our value chains is that the demand or the consumption is not very good. So that's the situation we have in Argentina.

Decarbonization in Latin America, [ you're seeing ] the path is slower than in Europe. I think the pace in Europe has also decreased a lot. I mean, there's a lot of projects that have been announced in Europe that today are not going through, and they continue building up in blast furnace. In Latin America, I can say 2 things. I think one, there is increasing -- in Mexico, where you have the opportunity to change from coal to natural gas. So Mexico will continue on a path of having probably the lowest steel production emissions per ton of production of probably the world. And in Brazil, there's more difficulty to change blast furnace. So the decarbonization there is going to go through -- by small decreases by efficiency, but still working with blast furnace.

And the outlook for other Latin American countries, demand in other countries that you source from Argentina?

No. The regional countries, I mean, usually, they don't have a huge impact in the shipments. We continue to ship to Uruguay, Paraguay. Those are the countries that we ship from Argentina. But the consumption there is marginal. So it's not going to have a huge impact on our shipments.

Our next question comes from Mr. Marcio Farid from Goldman Sachs.

Obviously, another follow-up on USMCA and Section 232. I think what's changed maybe this time is that obviously, Mexico has put some import barriers to steel coming into Mexico to try and reduce triangulation as well or rerouting. And I'm just wondering, right, once -- assuming Section 232 to Mexico is either removed or reduced, do you think the competitive environment would be different versus where we were a few years ago when we did not have those import barriers? And I remember well, I think in Mexico, import is about 40% of all the steel that you need. So just wondering if you can think about a structural change in terms of the competitive environment between North America, Mexico and the U.S.

And second point, demand was very weak in Mexico last year. I think it was down 10%. Part of the reason was, as you mentioned, destocking, but also weak activity as companies wait for better visibility on their relationship with the U.S. You mentioned restocking helped -- has been helping pricing. I'm just wondering if you're seeing demand or activity also recovering or we need to see a final agreement with the U.S. for investments to really resume in Mexico. Those are my questions.

Thank you, Marcio. Yes, I mean, the first question about the triangulation and the efforts that the Mexican administration is doing to control this, I think there is already a structural change. I think the Mexican administration, way before Trump was elected and all this discussion began, was very focused on increasing the value-added content of all what is produced in Mexico. I mean, Mexico was a huge exporter, but the value added of those products, the regional content of those products were not very high.

The Plan Mexico, which President Sheinbaum already announced in the campaign, in her campaign, was a plan for doing exactly this, for changing this dynamic. So all the things that the Mexican administration is doing, as you mentioned, are a way of decreasing the dependency of Asian products, especially in those products that Mexico or the region is able to produce. The clear example of that is steel. So I think there is already a structural change. And probably this is going to be even better once the 232, as you said, is reduced or removed from the site between Mexico and the U.S. So clearly, you are correct in your assessment.

There is a demand -- regarding the second question, Marcio, there is a demand increase in Mexico. It's not as high. We are -- well, World Steel has just [ released ] that the demand in Mexico is going to grow around 4% in the year. Considering that the demand decreased by 10%, as you said, in 2025, it's not a huge increase, but it is an increase, and we are seeing some recovery in demand. I expect that this is going to be higher once the USMCA -- or where the USMCA is going is more clear. We are seeing this increase at least in a small space, but we are seeing it today. I hope that answered the question, Marcio.

Yes, for sure.

Our next question comes from Mr. Rafael Barcellos by Bradesco BBI.

So first question, last week, the Mexican government signed an agreement, which I believe they called as an agreement for the promotion of the Mexican steel industry, right? And so, I just wanted to understand, I mean, when do you expect that these measures will finally translate into incremental demand for the country? And what else you think the government can promote to incentivize the sector in the short term?

And as a second question, in your outlook, you mentioned a bit of the cost pressure that we have seen for all industries, and I understand that steel is not an exception. But if you can elaborate a bit more on what we can expect for cost in the third Q, for example, it could be helpful.

Thank you, Rafael. Well, the agreement in Mexico, as I said, is an agreement between the government and the steel industry of Mexico to commit that most -- that all of the government use of steel is used -- Mexican steel is used in those infrastructure -- main infrastructure. I think it's very important because there was already a commitment to use Mexican steel. But in some cases, especially all this new infrastructure that is coming by Pemex, by CFE, that is the electricity company, that our investment -- joint investment between public and private sectors, this is going to be -- it's going to be an impact in the demand of steel, especially with all the investment in gas lines, in renewable energy, solar and wind. It has a huge consumption of steel. So it is important in that sense. I don't expect the investments to start in the next quarter or the following. But I think that by year-end, all this effort that the government is doing will have an impact in demand. Too early to say how much, but it's going to have an impact.

The second question, sorry?

Cost.

The cost. Well, I mean, it's going to be an impact in cost. But for Ternium, it's not going to be a huge impact. The big impact is going to be in logistics and import of some slabs and some logistic costs in Brazil and probably in Argentina. But it's -- probably, that is going to compensate, as we said in the outlook, by also the price increases. I think that the real risk, let me say, of the conflict in the Middle East is that if it's not resolved quickly, it could cost more a recession. So we are thinking that, that's the real risk for us. We see a little bit increase in cost, but again, more than compensated by the increase the prices of steel are having.

As a follow-up, sorry, can you just elaborate on what you're seeing as for cost trends in the third Q? And on the price side, I understand that prices are outpacing the cost increase. But can you just help us understand, in your view, what is the main driver for this recent good price momentum that we are seeing in Mexico?

Well, the good momentum, I think it's everywhere. You see, in Europe, prices increasing. You see in Brazil. You even see, in China, prices increasing. So I think part of that is motivated by the increase of cost, which is bigger than increase in Southeast Asia and is bigger in Europe than it is in the Americas. So I think that's the motivation, Rafael.

Our next question comes from Mr. Caio Ribeiro from Bank of America.

So I have 2 questions linked to your investments at Pesqueria. So first off, as you complete your upstream investments this year, what are some of the investment avenues that you're contemplating right now? Where does the MUSA expansion fit in within your list of priorities?

And then, secondly, assuming that you don't greenlight another investment right away or a large investment like the Pesqueria upstream, downstream investments that you've done in the past years, those CapEx figures, they should drop considerably versus your recent run rate, which, together with that earnings increase that you get from your investments, should drive significantly higher free cash flow generation in the coming years, right? So with that in mind, just wondering how you think about dividend payments going forward? Is there room in your view to boost those to cover a larger part of that positive free cash flow generation that you should have in the coming years? Those are my questions.

Thank you, Caio. Well, yes, the upstream investment, as you know, will -- as I said before, we will start the ramp-up curve by the end of the year or early next year. But I mean, we are still -- but it's still a long way to go. Today, the big investment that, as you say, we are analyzing is the expansion of MUSA. Usiminas has continued to analyze the different alternatives we have regarding CapEx and the cost of production and the material that we can take on each one of these alternatives. And by the end of the year or early next year, we have to take a decision -- or we will have a decision on where to go on that. Those are so far the investments we are considering. I mean, we are not seeing yet a necessity or, I mean, the willingness to make another large investment so close as to bring in heavier project online. So yes, CapEx is going to decrease. As you remember, 2025, we have $2.5 billion of CapEx. This year, it's going to be lower than that -- much lower than that. Probably in 2027, it's going to be even lower, around $1.2 billion or $1 billion.

So yes -- and I mean, regarding the dividend, if the numbers improve and we have generation, as you know, we have a track record that the dividend -- our dividend has a very good yield, although we decreased a little bit the dividend -- or the Board decided to decrease a little bit the dividend because of the uncertainty, which I completely agree. Still, the yield dividend with the price of Ternium's [ ADS ] today, it's around 5%. So we will probably continue with this policy of taking a good dividend.

Our next question comes from Mr. Caio Greiner by UBS.

Two questions. The first one on Brazil. I wanted to hear your thoughts on the strategy that the company has following the recent antidumping duties implementation for the operations that you have there, especially at Usiminas. I wanted to know if you're going to favor, over the next few quarters and maybe even years, higher prices, higher profitability, value over volume, somewhat of what we saw during the first quarter? Or if the strategy is going to be more in the sense of gaining market share, expanding volumes? And if that's the case, I wanted to know how much do you see in terms of volume gain potential over the next, again, quarters and years, and if you believe that you have enough capacity for this amount of volumes that you could increase going forward? And if you don't, what will be the strategy there? Relighting blast furnace, could it be on the pipeline? Or is that more in the sense of just purchasing more shares and raising capacity utilization?

And the second one, just a follow-up to the previous capital allocation question. Maximo, you mentioned that you don't have plans of doing another large CapEx project while you still have the MUSA investment. But could you still maybe -- could it be on the pipeline to, again, perform corporate simplification measures, more bottom-up or in-house initiatives like the Usiminas stake that you acquired during the first quarter or anything related to Argentina? That would be very, very helpful.

Thank you, Caio. The first one, I mean, if we have to choose between the 2 strategies you said, probably it's the first one. And we don't want to produce more in order to sell something that the market doesn't need. And so, we are going to start to -- we will always prefer the first strategy. It's clear that with all the measures that the Brazilian government is taking -- as I said, Brazil is kind of a little bit late. I mean, Mexico, U.S., Canada, Europe, even India are taking measures a little bit more quickly than Brazil. But nevertheless, the trade measures in Brazil, it's a very good first step in the very right direction. So if unfair trade comes down, probably it will increase also volume. But we are very -- going to be very cautious.

Regarding our capital allocation, Pablo?

Thanks for letting me answer one question. So yes, regarding capital allocation and following on what Maximo said before, we are in the middle of a huge capital allocation structure, taking into consideration the rest of the capital expenditure in the facility in Mexico with the dividend payment and with the capital -- working capital increase because of the increasing volumes and decreasing prices that we saw. This year, as you know, we will be moving from a net cash position to a net debt position. And next year, you are totally right that we will be reducing the level of CapEx, but we will be sustaining probably the other outflows of capital. This could lead to an increase on our position, our cash position, which is not bad and will prepare us for any opportunity that may appear in the market. Among these opportunities, you know that we have talked a lot in the past and we have worked a lot in order to simplify our corporate structure, and this is on our list of priorities. And if there is an opportunity to move in that direction, clearly something that we need to fully analyze and to carefully analyze because it's not that you have an opportunity and you can take it immediately. You need to do all the calculations in order to see the best way to proceed.

With that, as Maximo already explained, continuing with the dividend is a policy that we have. And if there are opportunities to improve that, if the numbers reflect it, it's something that we will consider. Additionally to that, we take -- if you want some rest -- our analyzing the next CapEx plan -- internal CapEx plan because the effort that we have to put in order to take this project to work is very significant. And as Maximo explained, we need to go through the ramp-up to certification. So this takes some time. That's why usually when we have this big CapEx plan, then we take at least 1 or 2 years to design the new ones. But as also was explained here, we still believe that Ternium has opportunities to grow in all our markets, especially in Mexico and in Brazil. So there will be opportunities for us to analyze, but it will take some time for us to analyze them and present it to you.

Maybe just a follow-up to the first -- actually to the second one as well. So in terms of volume gains in Brazil, Maximo, you mentioned that if the unfair trade comes down, you should be able to increase volumes as well. Do you see the current capacity that you have in Brazil as enough for the volume gain that you could have for an expected market share gain? Or could you have -- think about an alternative of, again, relighting one of your blast furnaces there, think about maybe relighting or revamping Cubatao?

Yes, Caio, I mean, today, we have spare capacity in Brazil, especially in the Cubatao plant. As you know, it's a plant that is not working at full capacity. And we will also have slabs available from our Ternium facility in Rio once -- we don't have to ship as much slabs to Ternium Mexico because of the new mill coming -- the upstream project coming online. So I mean, yes, we have capacity in Brazil to grow. And I think it will be enough, I mean, if imports go down in Brazil.

That concludes the question-and-answer session. I would like to turn it back over to Mr. Maximo Vedoya for closing remarks. Please, Mr. Maximo, you may proceed.

Well, thank you very much all for joining us. We welcome, as usual, any feedback or additional questions that you have. In the meantime, have a great day. Bye.

Ternium's conference call has now concluded. Thank you for attending today's presentation. You may now disconnect, and have a good day.

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Ternium Fourth Quarter 2025 Results Call. [Operator Instructions] I'd now like to turn the call over to Sebastian Marti. Please go ahead.

Good morning, and thank you for joining us. My name is Sebastian Marti and I am Ternium Senior Director. This morning, we released our results for the fourth quarter and full year 2025. Today's call is intended to add context to that presentation. Joining me today are Maximo Vedoya, our Chief Executive Officer; and Pablo Brizzio, the company's Chief Financial Officer, who will review Ternium's operating environment and performance. .

Following our prepared remarks, we will open up the floor to your questions. 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 filings with the Securities and Exchange Commission and on Page 2 in today's webcast presentation, you will also find any references to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued today. With that, I'll turn the call over to Mr. Vedoya.

Thank you, Sebastian, and good morning, everyone. We appreciate you being here today in our conference call. Ternium delivered resilient results in 2025 overcoming challenging market conditions by adapting rapidly and acting actively to protect profitability. Company's cost reduction and efficiency program generated $250 million in savings in 2025 over 2024. Key initiatives included enhancing blast furnace stability, negotiating service contracts, optimizing iron ore sourcing and improving logistics.

As a result, our EBITDA margin reached 10%. Our performance, however, was affected by a fatal accident at Ternium Mexico in 2025 and another at Ternium Brazil during this quarter. Usiminas also experienced a fatality in 2025. We take safety extremely seriously and consider these events a significant setback. Such outcomes are unacceptable, prompting us to reinforce our safety programs. In response, we are ramping up preventing actions with a special focus on critical risk.

Let me now review the latest changes in the global trade environment. The United States took significant trade measures in 2025 to counter unfair trade practices from China and other Asian countries. And this is reshaping the global steel market as other countries around the world are following a similar path.

In Mexico, the government recently raised import tariffs on more than 1,400 tariff lines for countries without a free trade agreement. In the case of steel, import tariffs increased from 25% to 35%. Meanwhile, negotiations arising in the North American region trade framework are ongoing. Many stakeholders from both sides of the Board continue to engage in discussions. We have taken an active role in sharing the concerns and priorities of the manufacturing industry throughout this process.

I see broad support for public policies that promote greater regional integrations. The aim is to keep trade fair addressing balance, avoid transshipment and reinforce rule of origins. It is important to mention that an agreement to intensify trade flows should avoid restrictions on interregional trade like those based on Section 232. As the USMCA joint review take place, removing restrictions to trade among its member will be essential to ensuring the benefit of deeper integration. Ternium is also doing its part in this process of greater regional integrations. Since our arrival in Mexico over 20 years ago, we have significantly expanded our footprint in the country. investing in state-of-the-art technology to offer a wider range of high value-added products to our customers in the region's manufacturing industry.

In this line, I am pleased to share some exciting news. We have started production in our new cold rolling mill and also in our galvanized line at the Pesqueria facility. This achievement completes our downstream expansion at the site made possible by outstanding teamwork. The entire project also added a picking line and a finishing line center. All these facilities are now operational with the cold rolling and the galvanized lines starting the ramp-up phase.

Meanwhile, construction of the slab plant is moving ahead as planned, as we expect to start up the facility by the end of the year. This new plant will allow us to produce high-quality automotive steel with lower CO2 emission per ton in the industry. Adding a touch of color, in 2025, we secured a $1.25 billion loan through a green financing facility to support this project. The loan received several awards last quarter, including IFR's sustainable loan of the Year, GBM awards Sustainable Loan Deal of the Year in Latin America and Caribbean and arable mention from Latin Finance.

Turning to Brazil. The recent implementation of antidumping measures and the increase in import taxes of 9 steel products represent a significant shift in the market environment. This decisive action signals a stronger government commitment to support local producers and achieve a balanced competitive landscape. Looking ahead, it will be key to monitor the market closely to prevent attempts to circumvent these measures, ensuring that this new environment continue to support fair competition.

In Argentina, growing concerns have emerged regarding a fair trade practice from China. In this situation, the new trade agreement between Argentina and the United States is important because both countries have agreed to work together to address unfair trade purchases from other nations. While we believe Argentina should further integrate with the global economy, it is crucial to approach this process with cautions, particularly in view of China's excess production capacity and predatory trade tactics.

Saliba, I'm optimistic about Ternium outlook for the coming years. I expect Ternium profitability to improve in 2026, starting from the first quarter. On 1 hand, we will continue working on reducing costs and enhancing operational efficiency. On the other, although there are still several important trade issues to be worked out, I am encouraged by the ongoing support of market economy governments around the world for addressing unfair trade practices. A discussion between the United States and Mexico advance, I'm confident that a mutually beneficial agreement will be reached as a well structured agreement is good for all parties involved. Mexico has demonstrated its commitment to reinforce regional defenses against unfair trade practices and encouraging investment within region, align its strategy with that of the United States in ongoing negotiations.

In addition, promising changes in Brazil steel market environment and advanced and economic reform in Argentina give us hope for the future in South America. In this context, we have reached an important milestone in the largest industrial expansion in our company's history. Together, this development will put us in a unique position as they will help create a stronger foundation for talent growth across the region. Thank you all for your attention. And before handing over to Pablo, let me thank especially our colleagues in Brazil, all the analyst there who made it join us during the Carnival season. So I hope you have a very good holidays. So Pablo, please go ahead.

Thanks, Maximo, and thanks, everybody, for being today with us in this conference call. So let me begin with a review of our operational and financial performance. If we move to the Page 3 in the webcast presentation, you can see that adjusted EBITDA declined slightly sequentially in the fourth quarter, which was in line with our expectations. EBITDA margin remained relatively stable, and there was a small seasonal decrease in shipment. As we move into the first quarter of 2026, we anticipate a sequential higher adjusted EBITDA mainly driven by an increase in EBITDA margin as well as growth in our shipments.

Let's move to the next slide. Net income for the fourth quarter totaled $171 million in the fourth quarter. We saw a lower operating income, mainly impacted by onetime charges, mostly related to an impairment in Les, 1 of our mining operations in Mexico. On the other hand, we had a better income tax refund, along with stronger financial results. In the sequential comparison, we had deferred tax write-down is in mine receptor in the third quarter.

Let's turn to Page 5 to review the performance of our Steel segment. Shipment declined mostly during the quarter, primarily due to weaker volumes in other markets, mainly in the U.S. and in Brazil, reflecting seasonally lower activity. This effect were mostly offset by higher volumes in Mexico and in the Southern region. In Mexico, we saw better volumes to the commercial market as a result of government measures aimed at curbing unfair trade practices.

Looking forward to the first quarter, we anticipate a sequential increase in shipment, mainly as a result of the stronger demand in Mexico. Turning to Page 6. still cash operating income decreased sequentially, driven by slightly lower sales volume and a decline in realized steel prices, which was partially offset by reduced raw material purchase slab costs together with efficiency gains.

Turning to the next slide. The mining cash operating income increased sequentially, driven by stronger shipments and higher realized iron ore prices partially offset by higher unit costs. We will review our cash performance and balance sheet performance on Page 8. We will see that in the fourth quarter, we record another solid level of cash generation by operations, supported by a reduction in working capital, primarily driven by a decrease in trade and other receivables, partially offset by a decrease in trade payables and other liabilities.

We are now past the peak of our capital expenditures, which in the fourth quarter totaled $463 million primarily reflecting continued progress in the construction of new facilities at the Teen Industrial Center in Peoria, Mexico. Our net cash position remained stable in the fourth quarter of the year, and we have a neutral free cash flow. In addition, dividend payments to shareholders and minority interest were largely offset by an increase in the value of financial securities. Let's now turn to the final slide to summarize our full year performance. In a challenging year for the steel industry, we were able to defend profitability as we proactively to mitigate the impact of the drop of steel prices and volumes. And as a result, our EBITDA margin achieved a 2-digit level.

In 2025, cash generated by operations reached strong $2.3 billion, allowing us to finance demanding CapEx requirements as we completed the downstream project in Pesqueria and keep working on the slab facility. Looking forward, we anticipate a decrease in CapEx in 2026 to a level of around $2 billion. In this context, Ternium's Board of Directors has proposed an annual dividend of $2.70 per ADS for fiscal year 2025, keeping at the same level as for the year 2024.

Of this total, we have already anticipated and paid $0.90 as an interim dividend in November. The proposal shows our confidence in the company's prospects, even though we are currently undergoing a state of significant capital expenditure at the current market price, Australian, this implies a dividend yield of over 6%.

With this, we conclude our prepared remarks. So please, let's go to the Q&A session. So please, operator, let's begin with it. Thanks.

[Operator Instructions] Your first question comes from the line of Rafael Barcellos from Bradesco BBI.

So firstly, I would like to get a bit more color on your outlook for the Mexican market. So demand today is still running well below the peak levels we saw a few years ago. So I'm trying to better understand how do you see the recovery path from here, specifically, I mean, with the recently announced Ternium Mexico, I mean how should we think about the potential impact on demand growth for 2026? And other than that, I mean, how are you thinking about the likelihood of the timing of USMCA deal, what impact is a significant part of this impact could be captured in 2026? So if it's a more story for 2027 and beyond could be helpful.

And as a second question, turning to Brazil, I would like to get your thoughts on the recently announced antidumping measures. I mean how do you expect these measures to place into pricing dynamics over the past few quarters, should we think about a relatively quick as through into domestic prices or is the impact to be a more gradual depending on inventories and competitive behavior? And if you could even like give some color on the magnitude of a potential hikes here?

Thank you, Rafael. I'll start with the first question, the Mexican market and demand. You're quite right, demand is very low. It was very low in Mexico in 2025. Apparent consumption of steel decreased 10%, it's a huge decrease. I've never seen something like that index ago, to be honest. And this was even worse if you separate long products and flat products. The apparent consumption in flat products, which is our main market, was 14% below that of 2024.

So this is a huge decrease. Ternium in that sense, our shipments in Mexico were a little bit -- the decrease was smaller because we managed to gain market share in the flat products. So it was an important measure. I think in 2026, the estimation of Cana sero is that the market is going to grow 4%. But I think all these measures are going to allow the local steel mills to gain more market share against imports. You have to remember that in Mexico, there's still a huge amount, almost 9 million tonnes of finished products that are imported in Mexico. So our target with all these measures is to gain more market share as we did in 2025.

And although the market is not growing as much as we expect a gain in our shipment with the market share. In 2026, so the timing -- then the timing in the USMCA, it's very difficult at the moment. I mean there is a target that in July, USMCA should be renewed. I really don't know at this moment is that it's going to be achievable. In our projections, we are not seeing a lot of increase of the timing of the USMCA for 2026, and we're putting that more into 2027.

I mean, of course, we hope that they see sooner, but we have to expect or we are making our plans in order that it's a little bit later.

Then the second question was regarding Brazil and the dumping measures, I mean, to give a little bit of color, I think this is a very important step. If you remember, we haven't been -- Brazil hasn't been very much advocate in the last years of defending industries, against unfair trade policies against the present tactics by China. But this change with 4 dumping cases, the plate one, the prepainting and last week, the cold rolled and the galvanize. So this is a very important news, a very important first step that Brazil joined most of the rest of the economies. I mean, from Europe to India to Mexico to the U.S., all the countries are fighting unfair trade from China and from Asia.

Impact on prices, I think the impact will be gradual. I don't expect a huge increase in prices because of this. Again, this is the first step, but it's going to be a more gradual as you said, impact in the future. I think, Rafael, I answered your questions, but I don't know if you want more clarity?

That's perfect. Thank you -- thanks a lot. .

Your next question comes from the line of Carlos De Alba from Morgan Stanley.

Maybe Maximo clarification. You said that Canasta demand up 4% or down 4% in during 2016?

Up 4% in 2026.

Okay. And then my 2 questions will be, first, on USMCA. What would be in the event that there is not a renewal of USMCA and see Mexico cannot reach a commercial agreement stand-alone with the U.S. What would be turning plan be given that a lot of the -- particularly on the auto side, your volumes go into that sector and then Mexico exports a significant amount of the cars that are producing in the country. And my second question, if you can give us maybe a little bit of an outlook on how do you see turns volumes performing in 2026? Where are the expectations in terms of volume growth in the different countries where you -- or operations where you are actively right now?

Yes. Can you repeat the first question on the USMCA -- because we didn't hear very well.

Yes, sorry. Just what would be -- what is Ternium plan B? What would be your strategy? If there is not a renewal of the trade agreement? And also Mexico doesn't reach an agreement exclusively with the U.S.

Yes. I mean, we operate all 2025 with these premises. There's no -- I mean, on a sense, the USMCA, if it's renewable, the great benefit is that the Section 232 is going to disappear between Mexico and the U.S. I don't see a renewal of agreement with the 232 on board. And that would be the biggest benefit of the renewal. So in 2025, we operate without -- it is a USMCA but the 232 in steel, derivative and a lot of products made it the way to operate if there's not a renewal. Again, I think that some of these measures are going to be taken away, although if the renewal is postponed. So we are operating in this environment, Carlos. The volumes of 2026...

Okay. Let me take that one, Matt. As you know, you hear in our outlook, we are expecting volumes to start increasing already through the first quarter and in this case, mainly coming from Mexico. So let me divide the answer to this question into a different market where we are because we have different situation. In South America, the first quarter is the seasonal lower quarter of the year. So you are not seeing any increase during the first part of the year during the third quarter.

And the opposite situation is in Mexico where the seasonality is coming at the last part of the fourth quarter. So taking into consideration what Maximo said, that the expectation is at least an increase of 4% in free consumption for the year and the possibility of further increases in our market share because of the volumes that we will be able to increase and produce with the new facilities. And even without taking into consideration the possible outcome of the USMCA unitization and the consequences of that, we are positive that the increase in the Mexican shipments will be above at least the numbers that Maximo mentioned an expectation for the Mexican market.

In the case of Argentina, our Southern region, we know that volumes were replaced, especially at the beginning of the 2025 because we were getting out from refer in Argentina. So numbers tend to recover -- volumes tend to recover in the second part of the year. So we are expecting to have a positive number coming out in the Solenis initiating in the second quarter of the year, not during the first quarter.

Differently the situation in Brazil, where we saw volumes at healthy level during 2025 and going with the increase of the GDP growth of the country. So the expectation for Brazil is to keep growing at lower levels. So volumes will be more related to these changes in the general economy of the country.

Your next question comes from the line of Timna Tanners from Wells Fargo.

I wanted to drill down, if I could, please, on the EBITDA margin. In the past, you've guided to a normalized level of 15% to 20%. And in the second quarter call, you had said you expected at 15%, the low end by the fourth quarter. I'm just wondering, the last 2 years have been challenging, I acknowledge that. But just trying to get a sense of what it makes to get back to that 15% to 20%. Could we see that in 2026? What are going to be the puts and takes to get there again?

Emma, this is Pablo. So let me try to answer the question, which first of all, you're right, we were expecting further recovery in the last part of last year that at the very end, didn't materialize because among other things, the impact of certain things that are happening in the different markets, the impact on in Brazil because of the imports, especially coming from China, and the lack of antidumping measures at the moment, so depressing prices in that market, the impact on the changes in the new rules of trade coming from the U.S. that impacted especially in industrial sector during the second semester of the year. And the increase of the 232 margin during the year.

So that put a lot of pressure on margins, and this will allow us to reach the original expectation. In the meantime, taking that into consideration, we implemented a cost reduction program, but as Maximo explained, yield more than around $250 million during the year. And clearly, we will continue doing that. So the kind of explanation why we were not able to reach the number that we were expecting. I probably will say exactly saying that we have the chance to reach the number by the end of this year because we we will not reach that number during the first part of the year for sure, though even we are announcing and we our very clear on that, that we will increase the margins during this first part of the year, because of increases in prices across the board, of course, that will also have an impact on cost that will be also increased, but we are expecting to have better margins during the first part of the year.

We will continue to work, as I mentioned, in further cost reduction program to further increase this margin. But a lot will depend on what we have been discussing until now and Maximo described at length, which is the consequence of the situation related to the negotiations of the 2 of the impact that this we have. So again, not initially, we will not be able to reach that number. We have a chance, and we will work for that to reach that number, which is, as you know, our goal. You mentioned between 15% to 20%. All I'm saying is to take reach initially 15% and keeping working on that.

As you know, the company is always working with that goal and trying to find ways to reduce our costs and to be able to take advantage of the situations that appear in the market. So again, hopefully, this year, we will revise.

Okay. Very helpful. If I could follow up on that. I saw with interest in the RCCL yesterday, you had the announcement that Mexico is doing a dumping investigation into cold rolled imports from the U.S. And I guess it just prompted me to think that it isn't enough to have the trade action so far in Mexico and Brazil, especially when you have 50% tariffs in the U.S., but also the 50% coming in steel action plan in Europe and the CBAM, of course, already implemented.

So even if the Mexico and Brazil started some actions, the rest of the world is taking even more aggressive actions. So I'm just wondering if you think these are enough to move the needle as much as necessary to reach those goals you've just enumerated?

You made a very good point. I think all the things that you're saying are very positive. I mean, again, I think that, as I said before, Brazil, this is a very good first step. As you say, the U.S., Canada, even Mexico, Europe are much more ahead in these trade measures against unfair trade than Brazil. But it changed a lot from last quarter to this one. Call this change of Moody in Brazil. Mexico, the dumping case against the cold rolled, it's not only from the U.S., it's U.S., Malaysia and China, remember. And I think, again, we will continue presenting dumping cases if we see that they're worth pursuing, in this case we think it is and the Mexican government accept deputation to open it. So they see some merit or they see merit in this investigation. .

But Mexico is also going to continue probably with some measures to not duplicate but trying to be similar to the U.S. market. And so all these measures are accounting, and I think more are coming. So you're right. They're not sufficient, but they are in the right path.

Your next question comes from the line of Jon Brandt from HSBC.

I first wanted to ask about CapEx. I know you said $2 billion for 2026. Presumably, that continues to fall as we go into 2027 and 2028. So I'm hoping you can give us a little bit of guidance as to what those numbers might be? Or what normalized CapEx number might be as the major CapEx is rolling off and the projects are completed. And then what then does that mean for the additional free cash flow that you have, right? I mean you've paint a good picture of increasing demand, increasing prices, improving profitability. Following CapEx means there's some free cash flow, some I'm wondering about capital allocation. If we should see -- your net cash position has also fallen over the years as these -- as CapEx has ramped up, should we expect the net cash position to rise? Or are there other alternatives for this cash?

And I guess my second question is just kind of related to that now that you've sort of completed the acquisition of Nippon stake and in -- is there any sort of additional consideration about potentially taking out the minorities in Usiminas? Have you analyzed what sort of benefits or cost savings you would have if you own that 100%? Anything on your thoughts there would be great.

Thank you, John. CapEx. CapEx, as you said, this year will be around $2 billion, 2027 will be around $1.2 billion, so it's decreasing. And then in 2028, we don't have an exact number, but it's going to be around $800 millions the CapEx. That's a regular CapEx. This is including Usiminas. So you're right, the capital allocation for probably the end of 2027 we are going to have a different view. Today, 2026, we still are going to have a huge CapEx and probably we have to increase our working capital because the last 3 weeks -- 3 quarters, we have a decrease in capital. So I don't know if -- I don't think it's going to change a lot. But I don't know if you want to add something Pablo to that?

Yes, okay. Let me add a little bit into that because 2026 for sure will be a year in which we will be using cash and capital because if you add up the $2 billion in CapEx, the dividend that we are paying and the amount that we , as you mentioned, already paid for the shares of Usiminas from Nippon. So this add up more than or close to $3 billion and most probably, the cash generation that we were describing will be in line with this year or even higher, but also take into consideration that we will reverse the reduction in working capital and probably we will need to allocate certain cash over. So for sure, we will be reducing our net cash position that we end up at the end of 2025 with $700 million of net cash. This will be reversed.

So we will move to a net debt position, but again, at very low levels. And then moving to 2027, as Maximo mentioned, we will be reducing our CapEx. We will be -- we will not know yet how the outlook for the working capital will be. We will continue with the dividend payments. So probably, we will cease little bit or reduce the net debt position at this moment. But we are not seeing significant changes in our capital allocation at the moment. We will continue with the CapEx. We will continue with the dividend and we already made an investment in the case of Nippon. So clearly, 2026 will be near to use that and probably 2027, we begin to recover a little bit of cash. But Maximo, I think that you have -- it was the second part of the question from John.

Yes. Then the Nippon and the minority shares of Usiminas Today, we are not considering launching a tender offer or buying the rest of the shares of Usiminas to be clear. But Brazil, for us, for Ternium, is a very important market. We have already a significant footprint in the country with our stake in Usiminas with our operation in Ternium Brazil in Rio de Janeiro. You also know we have a huge commitment to the community, investing $45 million in the new technical school for the community of Santa Cruz, near our plant in Rio de Janeiro, so we will continue looking to other opportunities. As I said, we don't have any plans today of doing anything, but we are continuously looking for new opportunities to grow. I hope, John, I answered the question there.

[Operator Instructions] Your next question comes from the line of Enrique Marquez from Goldman Sachs. .

I just wanted to get more details on the upstream project in Pesqueria, I think that in the end, increasing volumes relied a lot on the market situation, but do you think there is room for higher steel volumes when you finish the project? And also, if you could share more details on how much you expect to save in terms of cost with your own slab production versus third-party purchase would also be great?

Yes. Remember, the Pesqueria project, the upstream project was always focused the automotive industry. As you remember, when the USMCA was negotiated, there was a clause for 2027, where most of the automotive industry has to have melt and pool for gaining origin. So this project is going through that. Probably, it's going to allow us to sell even more volume to the automotive industry that we are selling today. We have a footprint of around 2 million tons for the automotive industry. And probably with this project, we will be able to sell much more. These 2 million tons today comes from slabs that we made in Brazil, and we shipped to Pesqueria for the hot roll controlled and galvanized.

So we are changing that and probably will allow us to replace more volume from Japan, from Korea, from other regions, from even Europe that are selling in Mexico. So it's not a safe cost. Then again, we have more capacity today of hot rolled. So if the market improves, we will be able to serve other different sectors with our spare capacity. We have today in Mexico. I hope Enrique this was clear or if you want more on this?

Yes. I just -- sorry, I think I just wanted to better understand like when you're producing these slabs in Mexico, like how much of that could action like save you in terms of cost, in terms of logistics, maybe just to try to better understand the -- I know it's -- the mode of the project is also strategic, but just to try to get like the benefits from the upstream project, that's apart from increasing volumes in the auto industry?

It's Pablo. Let me try to add a little bit to that. As I was explaining, we are substituting slabs that we are bringing from some other places or even from Brazil or the ones that we will produce. So there, you will gain part of that margin because you will move from buying to produce, which is very a important savings, then this will be very efficient and sophisticated facility. And also, this will allow us to produce product that we were not able to produce before with our own facility. So that will also add savings in logistics, savings in the way we produce and also will leave the possibility, of course, probably this will take a little longer to be realized the possibility to increase volumes of sales because we have a higher capacity than the 1 that we are utilizing today for the auto sector. And if the market continues to grow as we expect, after a good negotiation of USMCA, this could allow us to further increase volume. So all in all, it's a key project for Ternium for many different reasons. And among that reason is because of the savings and the reduced cost that we will be able to take from that process. .

Your final question comes from the line of Caio Greater from UBS.

Two follow-ups from me. The first 1 I'll talk to Tim's question. I wanted to understand what do you guys see in terms of margin potential for Ternium that doesn't rely on the U.S. removing or lowering Section 232. So what level of -- so how much more do you see EBITDA margin rising over the next couple of quarters. Again, assuming that Section 232 is not withdrawn or is not lowered by the U.S.

And the second question, also a follow up to John's question on capital allocation. So -- thank you guys for the visibility that you provided for 2026 and 2027. That's really helpful. But I think it would be interesting to hear your thoughts for turning post 2027. So we still have a hard time understanding what the company looks like in the next 5 years and the next 10 years, in what are management's priorities. And we do know that in the past, you have talked about corporate simplification, especially with focus on Argentina again, John asked specifically about the Usiminas minority stake. I wanted to know if any of these -- again, are your priorities or used to have or other priorities going forward being that growing through in the NA being that doing -- working on other projects in Mexico organic projects. And -- or is all of this management still has little visibility on all of this provided that we still don't have visibility on the USMCA agreement and so on. became hear your thoughts on this.

Thank you, Caio, you take the first one.

Relationship to emerge after the good negotiation of. First of all, Caio thanks for your question. First of all, the -- as already was mentioned during 1 of the answers, the real impact of a good negotiation recency probably will be seen not during this year or just at the very end of this year or fully during 2027. So if that's the case, there should be an adjustment on pricing environment in the North American market, where there needs to be a reaction of the impact of the tariff, and this will help reducing that one and increasing margin for Ternium, of course, we never know where this will end up being.

And also, if that's the case, there should be and this is not margin, but this is volumes and increase in volume that will help us numbers of Ternium going forward. Again, there is still a lot of discussion negotiations to be -- that needs to take place. And that is something that we will see during this year. There is a certainty on the timing on the agreement, there's uncertainty on the expected results of that agreement.

So we are positive on the outcome as Maximo explained very clearly. And so we are positive on the outlook and the possibility of Ternium increasing and enhancing margins. And again, this was part of the answer, as you mentioned, to Finland, which we are expecting that margins to increase and to get back to the places or the place where we used to be in the past. And regarding the capital allocation, Caio, for the further -- or the long term, as you put it, 5, 10 years, simplification is still a goal that we have. And we always -- we are going to see when is the best moment on when or when it can be done dependent with part -- but it's always in our to-do list in a sense.

I think that return to shareholders will always be a priority in our capital allocation. And I do see further opportunities then in the long term on the medium term, both in Brazil and Mexico. As you know, both markets are growing and as I said before, Mexico has a huge opportunity of growing against imports and the market -- our customers are very willingness to buy from us. So I think there are still opportunities over there. I think it's too early to try to put them on a paper or make it public, but we are always analyzing these opportunities in Ternium, Brazil and Mexico.

I think Caio that answer your question.

Yes, or it's great. So just -- just maybe 2 follow-ups, if I may. Pablo, I think you mentioned that you see margins recovering towards the normalized range of 15% to 20% and I'm just not sure if you mentioned that, that's including the upside potential from USMCA renegotiations or if that's excluding those factors? My question was assuming the current environment stays, so assuming that nothing changes regarding the USMCA agreement. What level of margin -- what level of margin upside do you to still see that Ternium can reach without that specifically?

Yes. Sorry. Sorry, probably I didn't answer it correctly, what you were asking for. But my intention was that because we believe, as Maximo said, that the impact of the USMCA is positive, as we believe, will not be during this year. So this is more for 2027. So my answer before our intention for answering that we will work and we will be enhancing our margin that we have -- we could have a possibility of reaching the 15% of the lower part of the rates that we're looking for, worse without taking into consideration any impact of the negotiation.

We are already expecting and enhance on our margin during the first part of the year, of course, not reaching 15%. And we will continue working. And we think there is a chance and the possibility for Ternium to reach by the end of the year, weather margin than the 1 that we will have during the first part, hopefully reaching that target by the end of the year.

Of course, after failing on differentiation. -- last year, we will be more conservative and cautious on making the same 1 during this year, but the chance exists.

Understood. And since I'm the last question, I'll take the opportunity and ask another follow-up and to Maximo on capital allocation, maximum. So from your answer, I can understand that the company still see great opportunity for growth at its main markets. So is that going to be a priority instead of potentially raising dividends further or creating a dividend policy that could maybe increase the company's dividend potential going forward or even a buyback program?

Thank you, Caio. I think that the 2 priorities for us increase dividends I mean returning to shareholders and looking opportunities in our main markets that we know that we can value a lot of profitability or added to our business growing in those markets. I think they're both. I don't think, as we have discussed in the past, I don't think the share buyback is something we are going to do because of how much shares are in the market. But the other 2 are 1 of our priorities, both are priorities for us. Caio.

Thank you very much, guys. .

We actually have 1 more question from Jon Brandt from HSBC.

Caio's question actually got me thinking a little bit. You mentioned there were some opportunities to grow in the main markets, and that's kind of 1 of the things you're looking for. And I think I know the answer to the question, but I'll ask it anyways. CSN have said they are looking for a potential partner or to do something with their steel assets in Brazil. I'm wondering if -- is that a potential opportunity for you to grow? Or can you sort of rule out any tie with them?

Thank you, Jon. Yes. We heard what CSN is doing. Its main focus is the cement, and I think this restructure assets they have. Regarding the steel, we -- at this moment, we are not analyzing any thing with CSM. But as I said before and I said several times, Brazil is important for us. So we are always open to analyze different opportunities if they appear. But at this time with CSM, we are not analyzing anything. .

That concludes the question-and-answer session. I'd now like to turn the call back over to Ternium's CEO for closing remarks.

Okay. Thank you all for joining us today, and please feel free to share any comment with us. And goodbye, and have a good day. Thank you very much. .

That concludes today's meeting. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to Ternium's Third Quarter 2025 Results Call.

[Operator Instructions] I would now like to turn the call over to Sebastian Marti. Please go ahead.

Good morning, and thank you for joining us. My name is Sebastian Marti, and I'm Ternium's Global IR and Compliance Senior Director. Yesterday, we announced our financial results for the third quarter and first 9 months of 2025. This call is meant to provide additional context to that presentation.

I'm joined today by Maximo Vedoya, Ternium's Chief Executive Officer; and Pablo Brizzio, the company's Chief Financial Officer, who will discuss Ternium's business environment and performance. After our prepared remarks, we will open up the floor to your questions.

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 filings with the Securities and Exchange Commission and on Page 2 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 yesterday.

With that, I'll turn the call over to Mr. Vedoya.

Thank you, Sebastian. Good morning, and thank you all for joining our quarterly conference call. In the third quarter of the year, Ternium continued to improve its performance. We saw an increase in EBITDA, driven mainly by a decrease in cost per ton supported by the continued execution of Ternium's competitiveness plan.

Our cash generation remains strong with operating activities contributing over $0.5 billion during the quarter. Additionally, Ternium's Board of Directors declared an interim dividend of $0.90 per ADS, which keeps the payment level the same as last year. Meanwhile, the business environment continues to be marked by uncertainty, largely resulting from the ongoing changes in the U.S. tariff framework.

Within this environment, the U.S.-Mexico trade agreement stands out as particularly significant for our business. In recent weeks, we have engaged in dialogue with stakeholders on both sides of the border. This conversation had revealed support for policies that strengthen the USMCA framework and promote deeper regional integration. The Fortress North America concept is gaining traction, highlighting the importance of deeper economic and industrial ties among the USMCA members. As trade negotiations progress, the focus remains on maintaining fair competition, addressing imbalances and reinforcing rule of origins, all of which are important to ensure the long-term resilience and growth of the industry in the region.

Along these lines, the first formal step have already been taken for the planned USMCA review with consultations launched to obtain feedback on the agreement from interest parties. In Mexico, uncertainty resulting from U.S. trade policies has had a significant impact on steel demand during 2025. Recognizing the challenges created at this period of trade volatility, the Mexican government is prioritizing efforts to fortify the country's value chain, aiming to promote greater self-sufficiency and resilience against external competitive pressures.

These incentives are closely aligned with U.S. priorities. Throughout 2025, the Mexican government has taken a proactive stance by launching initiatives such as the Plan Mexico, implementing targeted measures to counter unfair competition from certain Asian countries and imposing tariff on imports from nation without a trade agreement with Mexico.

For example, in September, a proposal was published to increase tariff on close to 1,500 categories, including steel and its derivatives for imports originating from countries without a trade agreement. It is expected that tariff on steel currently at 25% and its product, auto parts, engines and [indiscernible] will rise to 35%.

In the case of light vehicles, the tariff is expected to increase to 50% versus the current 20%. A ruling is expected in November following the approval of the final proposal for the tariff increase. These efforts are primarily aimed at increasing local value adding, promoting more resilient North America supply chains and reducing reliance on imports from Asia. We strongly support these policies, and they are vital for the region's economic development and for the continuous growth of the steel industry.

In Brazil, industrial activity continued to expand even in the face of high interest rates. The overall steel environment remains healthy with expectation of 5% growth in apparent steel demand in 2025. In addition, our ongoing efforts to increase efficiency of our operations in the country are yielding positive results, with continued decrease in cost per ton. But still, the Brazilian markets continue to face a high level of unfairly trade imports, primarily from China.

In the first 9 months of 2025, import of finished steel products rose by 33% in Brazil as excess production from China floods to international markets. Unlike the United States, Europe or Mexico, Brazil still lacks effective trade defense mechanisms. It is crucial that ongoing antidumping investigations conclude with imposition of duty, whether preliminary or final, under relevant products under review to address these challenges and defend the domestic industry.

Turning to Argentina. After a period of growth, activity across the steel value chain leveled off due to increased uncertainty leading up to the midterm elections. Now that the elections are behind us, I am optimistic that Argentina may be entering a period of structural reforms, paving the way for significant growth opportunity across steel value chains. This is especially true in the country's most dynamic sectors like agriculture, mining and oil and gas.

Before moving on, I am pleased to share that this quarter, we received a Steelie Award for excellence in sustainability from the World Steel Association. This award recognizes Ternium's Winds of Change project, our first renewable energy initiative in Argentina. The wind farm now provides approximately 90% of our externally sourced electricity in the country, significantly reducing our environmental footprint and delivering considerable cost savings.

To sum up, the U.S. transformation of the global trade framework has brought significant challenges, but these adjustments are necessary in light of aggressive trade practice by China and other Asian countries. To navigate the environment in global trade environment -- evolving global trade environment, we are focused on strengthening our market position through ongoing optimization and cost reductions. This effort ensures Ternium remain resilient, efficient and able to deliver sustainable value to stakeholders while adapting to change and pursuing growth.

Thank you very much for your continued support.

Okay. Thanks, Maximo, and thank you, everybody, for sharing today this conference with us. Let me review our operational and financial performance following the webcast presentation.

Beginning on Page 3, adjusted EBITDA increased sequentially in the third quarter, driven by improved margins. Looking ahead, we expect a slight decline in adjusted EBITDA for the fourth quarter, primarily driven by the usual seasonal slowdown in shipments across all our markets. Adjusted EBITDA margin should remain consistent with the previous quarter as the expected decrease in revenue per ton in Mexico and Argentina is projected to be largely offset by continued reduction in cost per ton.

Let's move on to the next slide. Our net result for the third quarter of 2025 was a loss of $270 million. This figure reflects, firstly, a $405 million non-cash loss related to the write-down of deferred tax assets at Usiminas. And secondly, a $32 million loss related to the quarterly update of the value of a provision for ongoing litigation concerning our acquisition of stake in Usiminas. This was driven by interest accrual and by the appreciation of the Brazilian real in the quarter.

Without these effects, net income would have been $167 million in the fourth (sic) [ third ] quarter, and earnings per ADS would have been $0.73. You can also see that compared to the second quarter of 2025, the largest impact was related to the write-down of deferred tax at Usiminas and also to $143 million decrease in income tax results, mainly due to lower deferred tax results in the third quarter, our significant gain in the second quarter, driven by the appreciation of the Mexican peso against the U.S. dollar.

Let's move to Page 5 to review our steel segment performance. Shipments posted the most increase during the quarter, driven by growth in Mexico and Brazil. This was partially offset by lower volumes in other markets and somewhat in the southern region. In other markets, weaker shipments to the U.S. were partially offset by higher sales volume in other destinations. Looking forward to the fourth quarter of 2025, the company anticipated a sequential reduction in shipments in Mexico influenced by softer construction activity and the typical year-end seasonality.

In Brazil, despite persistent challenges stemming from unfair trade steel imports, particularly from Asian producer, Usiminas continues to enhance in competitiveness through cost efficiency initiatives and operational improvements. These efforts are expected to result in a more favorable cost per ton compared to the previous quarter. And in Argentina, we are positive about demand growth opportunities throughout the company's value chain.

Turning now to Page 6. Cash operating income in the steel segment continued [ improving ], mainly due to a margin increase. Although there was slight decrease in revenue per ton, this was more than offset by a lower cost per ton as a result of lower prices for raw materials and purchased slabs as well as ongoing efficiency improvements.

On the following slide, let's review the performance of our Mining segment. Net sales declined quarter-over-quarter, primarily due to slightly lower iron ore shipments and a decrease in the margin, mostly due to an increase in cost per ton in Las Encinas, one of our Mexican mining operation as a result of a temporary decrease in production. Looking forward, production levels in Mexico are expected to normalize in the fourth quarter.

Let's review now our cash flow and balance sheet performance on Page 8. During the third quarter, we had solid operating cash generation, supported by a further reduction in working capital, largely attributable to lower unit cost in [ passive ] inventories. Capital expenditures peaked in the second quarter and totaled $711 million in the third quarter, reflecting our ongoing progress in developing new facilities at the Pesqueria industrial center in Mexico.

Net cash position continued decreasing in the third quarter, driven by the funding requirements associated with the ongoing expansion, together with $114 million decrease in the fair value of Argentine securities as of the end of September, which have since then been regained as of yesterday market prices.

Let's now turn to the final slide where we will summarize our performance for the 9 months of the year. Adjusted EBITDA decreased in the first 9 months of the year, mainly due to lower margin and shipments. The margin reduction was primarily driven by lower steel prices, partially offset by improved cost performance. We had a robust cash from operations in the period, boosted by working capital decrease and CapEx increase compared to last year as 2025 is a peak year for the growth projects in Pesqueria.

As a final remark, yesterday, our Board of Directors approved an interim dividend of $0.90 per ADS, unchanged from last year interim dividend. Together with the $1.80 per ADS paid in May, this brings the total distribution during 2025 to $2.70 per ADS, equivalent to a dividend yield of 7%. This interim dividend will be paid on November 11.

With this, I'm concluding my prepared remarks. We are now ready to take any questions that you may have. Operator, please open the floor for the Q&A session.

[Operator Instructions] Your first question comes from the line of Carlos De Alba of Morgan Stanley.

My 2 questions. One is, given the results of the elections -- mid-term elections in Argentina, what sort of strategic opportunities do you see in trying to make more efficient the ownership structure of the company with potential stakes in Siderar or Ternium Argentina and Ternium Mexico?

Yes. I mean, I think the election doesn't change the project that we -- what you have. You remember that we have an opportunity now. We analyze simplifying the structure. It couldn't be done. We are not seeking that right now. but the things that can come online, but not because of the election. I think that the change in the election is that, well, we are going to left behind the noise of everything that will happen in the market in Argentina.

I think with this election, there are going to come structural reforms in Argentina that probably will make more competitive the industry.

I mean, Argentina is in need of these reforms. And I think we can see in the future a market -- a growth in the market, but also a growth in the competitiveness of Ternium Argentina, which is what we need in Argentina. I think those are the change of the election.

And then, under what circumstances would you try that initiative that you presented in the past that didn't work to make the structure more efficient?

I think it doesn't depend on us. Remember that a good part of the share of Ternium Argentina is in the ANSeS. So that -- it doesn't depend on us to do that. I don't know, Pablo, if you want to add anything else to that.

Yes. Carlos, you know that -- as Maximo mentioned, we have tried in the past doing that. It's also, as he mentioned, nothing that we can do at this moment. But this is a project that continues to be in our mind. So, if there is, in the future, an opportunity to move forward with this, it's something that we will take in consideration. It will require a full analysis on the process and on the project, but it's clearly something that we may consider.

I think that, first of all, you need to see in order to start thinking about this kind of project, the reforms that the government will try to pass, how these are evolving -- how are this evolving and the way they are approved in Congress. So, with all of that behind us, probably opportunities could appear to further analyze this project. So, again, a lot of things moving on in Argentina. We need to see if this evolution is going on the positive direction. And probably after that, there will be a possibility to further analyze this project.

Great. And then my second question is related to what would -- I mean, I know that you guys are talking to the government in Mexico and in the U.S. The Mexican government is still negotiating with the U.S. government. But what would be Ternium's planned, or action planned if the U.S. keeps the melt and pour conditions for steel using products that are imported into the U.S.

Well, we are going to continue with the plan we already put forward. I mean, the new investment was exactly because of this. Remember, we have 2.5 million tons of flat products, not including long products there of melt and pour. And with the new steel shop, we are going to have 2.6 million additional to that. So, we are investing because I think that the melt and pour, in some cases, as in the automotive industry, is something that is going to stay or it can be increased. So that's why we made those huge investments, Carlos.

All right. I understood that right now, it has to be melt and pour in the U.S., not in Mexico that's included…

Well, yes, you're right about that. That is not to pay -- you're right, I misunderstand the question. I thought you were talking about the USMCA. I mean, if the negotiation or looking forward, that if we are going to have a USMCA, that has to change. The vision or the path we see is that it has to be melt and pour in the region. It cannot be melt and pour only in the U.S. if we have to have a negotiation. You cannot have an agreement where you only have U.S. melt and pour.

In the meantime, there are some customers of us -- probably your question also goes through that. There are some customers of us that are -- as you said, are -- well, some I don't know, some affections because of it because there are some steel derivative products, you said that if there are melt and pour in the U.S., they have discounting in the tariff they pay. But we are working with each of these customers for each of these products in particularly to support their sales so that we don't lose any volume. But this is a temporary thing, I guess.

Your next question comes from the line of [ Rich Emerson ] of Goldman Sachs.

Can you hear me?

Yes, Rich.

Okay. I have 2 questions. The first one, looking at the 4Q outlook, I'd like to understand a little bit more on, first, the cash cost outlook. You guys mentioned that there are ongoing efficiencies in the operation. But could you please just break this down between the cash cost performance at Usiminas and at Mexico and Argentina? So, looking ahead, you guys expect cost to improve also in the operations in Mexico and Argentina. So, this is the first one.

And the second one, in terms of prices, I understand that Mexico is undergoing a subdued activity in the construction segment. And prices in Argentina continue to be subdued as well. So, what can you guys share in terms of what you expect on prices for Argentina and Mexico going forward? So this is the second point on the first question.

And just another point on CapEx. In this quarter, there was a small decline. So, just trying to understand if you guys still plan to reach the $2.5 billion for this year or indeed we should see lower CapEx for the year, considering that we saw this decline in 3Q?

Thank you, Rich. I'll start from the third one and going up. CapEx, yes, we had said that 2Q was the highest of our CapEx. It was around $800 million (sic) [ $800 million ]. This quarter it's $7 million (sic) [ $700 million ]. Probably in the fourth quarter, the number we are seeing is around $600 million, putting the total CapEx of the year between $2.5 billion and $2.6 billion.

For 2026, CapEx will be probably $1.9 billion. So probably every quarter will be around $500 million. And in the 2027, probably will return to $1.11 billion. So, as I said before, the peak of all this CapEx investments, of all this CapEx plan was in the second quarter. That -- I hope I answered the third one with that.

Second, you're talking about prices. Prices for the fourth quarter are going to have a little bit of a decrease in Mexico and Argentina, but only slightly and some part of that is because of the mix. Remember, the fourth quarter is usually a low volume quarter and also the mix change a little bit. So, prices -- when you see our prices in the fourth quarter, could be a little bit low, but not very much.

Prices in the North American region are stable and prices in Mexico has recovered a little bit from the U.S., but we are not seeing any decrease and probably we are going to start seeing some increases in some of the sectors in Mexico late in the fourth quarter or early in the first quarter.

And the first one, Pablo?

Yes. Perfect. Rich, let me try to answer your question by dividing the cash cost from the different operations. But before doing that, in a general view, you have seen that our margin during the third quarter has increased in comparison to the third. That was somewhat practical and something that we announced during our last conference call. And this was due to different things.

First of all, of course, there was a reduction in raw material and purchased slabs, which are very important for overall cost structure. But also, there was the implementation of our cost reduction plan that is expected to be fully implemented by the end of this year. So, this is the 2 components of why we have been reducing cost. And if you split up between the different markets where we are, you have an increase of margins in Argentina, somewhat in Mexico and in Brazil, taking into consideration numbers that Usiminas presented to the market last week, you have seen also some increase in margin.

The expectation for the fourth quarter is to further increase our cost reduction. And if all other things were equal, our margin should increase. But we know what we have said and Maximo has just answered one question to you, where you will see that our average price, both in the Mexican and the Argentine market will decline a little bit, but we will be able to sustain our margins in the different market.

That's why the outlook for the fourth quarter is for sustained EBITDA margin and a small reduction in volumes, and that's where we will see our EBITDA generation. But all in all, we continue or we're expecting to continue to have better margins in the different regions where we operate, and that will be clearly reflected in the cash cost.

Your next question comes from the line of Alfonso Salazar of Scotiabank.

I have 2 questions. The first one is regarding the outlook for demand in Mexico for 2026. I mean, we know that 2025 was pretty weak. And if you think that there is going to be a recovery in 2026, I would like to know what's going to drive that recovery. And more generally, what is your -- the outlook in your view for North America? We know that the situation with tariffs now with Canada an extra 10%. It's very unclear what's going to happen with tariffs the next week and then 1 month from now. But if you can help us to understand, first, how the U.S. has been sourcing all the steel that they need this year so far with the tariffs? And how you think it's going to be once the situation normalizes, let's say, 2 years from now, if we can think of a normalization of the steel trade situation that we are facing today. That would be very helpful. Any comments on that would be very helpful.

Alfonso, I will try to make magic and answer the second question. But first, the outlook of Mexico. Yes, demand in Mexico in 2025 is not good, as you said. Last week, I think the Worldsteel disclosed the SRO for the whole world and apparent consumption in Mexico is probably going to be down 10% in Mexico, steel apparent consumption, which is a very, very big number.

What we are seeing for 2026 is a recovery in Mexico demand. We'll still put this at 4%. But probably if the infrastructure -- I mean, part of that decrease in the apparent consumption in 2025 is due to -- well, it's always in a new year from a government, always infrastructure down. Infrastructure is down like 28% to 29% in the first 9 months of the year. So that's a huge number, and it's still intensive.

So, this is going to grow next year. Construction will probably start growing again. And the stabilization in the trade between the U.S. and Mexico. I think that's something that is also a driver of improving demand or going back to the demand we have in 2024. So, in the sense for Mexico, we are optimistic that demand is going to recover at least partially in 2026.

Outlook for the North America, you said what is going to happen in 2 years? Clearly, I mean, today, imports in the U.S. are decreasing. There are still some countries that are paying the tariff of 50% and shipping to the U.S. But in general, imports are decreasing. I think that at least in the region, I am confident. I don't know if the confident is the word, but I think that USMCA is going to be renegotiated and in at least trade between the USMCA countries is going to be liberalized.

I think that the U.S. has a clear vision of that manufacture, industrialization has to come back to the region. And I think that including Mexico and Canada, but I'm speaking about Mexico. In this region was, how to improve the industrialization in the region, I think it's a better outlook for everybody. And everybody, I think, has the same vision.

When is this going to happen? It's not clear, but the renegotiation, it's already started. So, I guess that by the mid part of next year, we are going to have an outlook of where this negotiation goes and how tariff between the 2 countries start diminishing. That's at least our vision. I hope that also -- I give some clarity.

Yes. Maybe just a follow-up on what you mentioned. The fact that we already see some bottlenecks for this reshoring of manufacturing, one of them is certainly labor. The second one is energy with data centers consuming so much energy. If you want to make more steel used electric furnaces, that's also going to require a lot of energy.

You're right, Alfonso. That's why I think that a vision of a region more than only the U.S. is what is in the best interest of everybody, including the U.S. I think Mexico can be a partner, if it follows the rule of the USMCA, can be a very, very good partner to help with the vision the U.S. has. And I think that's a common understanding of everybody.

Your next question comes from the line of Alex Hacking of Citi.

I guess just following up on the trade point. Have any of your auto customers started to rebalance production back to the U.S. and away from Mexico?

They still didn't rebalance production. Our discussion with our customers are, how they -- I mean, they are sourcing steel from the U.S. They are sourcing steel from us in Mexico, and they are also sourcing steel from some Asian countries, and we are discussing how to -- if we are able to source that steel that they are bringing from, let's put Asian countries back to Mexico. And so, we have very good discussions with them trying to make a ramp-up of that sourcing.

From a broad point of view, I mean, the U.S. consumes somewhere around 16 million units in light vehicles per year. They produce today 8 million and Mexico export 2.5 million; 2.3 million, 2.5 million. I mean, I understand that what the Trump administration is trying to accomplish is to increase that 8 million units. And I think that's possible. But I don't think that this is going to be on taking an account in Mexico production. Probably it's going to take account or it's going to gain market share of production in the U.S. against other suppliers because you have to put that -- every car that is exported from Mexico to the U.S. at least has between 35 and 45 U.S. contents.

So, in the interest of everybody, if you're going to produce more in the U.S., you have to substitute imports of cars from outside the region and not from Mexico. So that's the vision I think everybody is looking to. I hope I did answer the question, Alex.

Yes. No, that's very clear, and it makes sense. I guess a second question would just be, I've seen various news reports about Mexico increasing their own steel tariffs. I guess, what is the current proposal and what will be the timing of implementing any changes?

Look, there are several initiatives in Mexico that are following in a sense also what the U.S. -- not because the U.S. is asking, I think, but because this is what a clear vision of this new administration. I think the new President before she was even elected and when she was already elected but not in office, said that the vision of the Plan Mexico was to -- I mean, to increase value-added content in Mexico and in the region.

So, there's a lot of initiatives. There's one initiative that I said, I think, in my initial remarks, that there are almost 1,500 products that are ready in Congress to increase tariff. Those include those of steel and some steel derivatives from 25% to 35%. This should be approved in November. And there are also other initiatives I know they're discussing to try to limit imports whenever it's possible to produce that in the region. That's in the North American region.

Okay. And then I guess just one final one, if I may. I mean I assume that Ternium would generally be in favor of sort of creating Fortress North America for steel, where Mexico, Canada, the U.S. have steel import policies -- tariff policies that are fairly aligned with each other, but then relatively free trade amongst each other. I assume that's something that Ternium would generally be in favor of and would be quite positive for Ternium.

Yes. And I have been out talking about that. So yes, I can say it without any doubt. I think that each country has to have some differences because the production matrix of the countries are different. But I think internally to say that we are in favor of a North American fortress, and we are actively asking for that.

Your next question comes from the line of Rafael Barcellos of Bradesco BBI.

So, first question, I would say that over the past few years, you worked to simplify the overall shareholder structure of your subsidiaries, right? So, I just wanted to understand how comfortable you are with the current structure across regions.

And the second question, if you could provide an update of the Pesqueria project. I mean, if you can go through the expected start-up CapEx, I mean, after the recent CapEx revision, whether you are now comfortable with your estimate. And given the overall market conditions, if there's any change in your commercial strategy for the project?

Thank you, Rafael. I'll start with the second one, Pesqueria. I mean, you know the Pesqueria has several projects. The first one or the first part is the galvanized, the new galvanized line and the new PLTCM, the cold-rolling mill. The galvanized line is going to start the running curve in December, is in time. We are going to start it in December. And the PLTCM is going to start it in January.

Remember, this has -- they are very complicated line. So, the ramp-up curve is not very -- it's not short, but we are going to start production in December, and we are going to start production in January, plus/minus some days. And so -- I mean, we are confident of that. The other project is the DRI and the EAF facility. That is going on time. I mean we have on our budget that is going to start in the fourth quarter of 2026.

If you see the site, I mean, it's impressive. It's really worthwhile going to visit the site because it's clearly amazing and the tower and 140 meters of the DRI facility going direct to the EAF without any -- I mean, hot DRI. So, we have a lot of efficiency in energy. But -- and today, we have the same budget as we announced. I think it was $2.7 billion. We are in that budget. Of course, still 1 year until we start the production. But so far, it's going very good.

And then, we have the structure, Pablo?

Yes. You know that we have been discussing this at length during many conference calls on our idea to simplify the corporate structure. So, clearly, we are not comfortable with the structure that we currently have. We think it would be a plus for Ternium to simplify its corporate structure. But also, you know that it's not a simple proposition. It's not just a decision that from one day to the other, we can achieve.

So, we need to be very cautious on the message that we passed that clearly, we are comfortable. Clearly, it's something that at some point, we would like to simplify. But the process to do that is not straightforward, and we will analyze, and we will continue to analyze not only from an economic standpoint, but also from a formal standpoint, how we can achieve that.

But again, I guess that we answered this question also from our point of view during this call. It's something that we keep in our short list of things to be done in the future. Nothing that we can do at this specific point, but it's something that we will try at some point to achieve.

[Operator Instructions] Your next question will come from the line of [indiscernible] of J.P. Morgan.

So, I would just like to follow up a little bit on the questions that my colleagues did. And the first one is a little bit about your expectations for '26. So, I think there is like the magical number of EBITDA per ton that we like always discuss, $150 per ton. And I would just like to understand if this is your expectation for next year. If not, what is the level that you guys have confidence that you might deliver?

And what is the premises that you have been considering for this number? So, does this include like antidumping structures for Brazil or this is like base case that we are not going to have anything at Usiminas level. So just to understand a little bit your rationale here.

And I think lastly, we discussed like every earnings call a little bit on what is the update or the most recent update on Compactos, if this is going to be like a project that you have on your pipeline for Usiminas for coming year. I think the last update that we had is, this is going to be a discuss for 2026. But I would just like to understand if there is a space or room for maybe a postponement since like we don't have the best environment right now in the market? Or if this is a priority since like the iron ore mining project still.

I'll start with the Compactos. As I think I said before in some of the conference, I mean, the decision of the Compactos, we don't have to take a decision until next year, I think it was mid or late next year. In the meantime, we are working on all the alternatives. And we are asking the environmental permissions, and we are going through the analysis of the projects. There are several alternatives now for the Compactos. So, we are analyzing the different alternatives.

In the meantime, we are doing some work in MUSA, where we are extending a little bit the life of all the non-Compactos with [ interfit ]. But so, we have some more work to do or more time in feeding Usiminas and selling the rest to the market. So, I mean, again, we are analyzing different options, different plant structure for the Compactos, different way of taking the iron ore out of the mine. And probably we have an update by mid-2026.

The first one, Pablo, the EBITDA ratio.

So, you're right that this has been our target. And in fact, we have been above this number for a very long period of time. after the increase of our participation in Usiminas, we mentioned that then you need to sum up both things. And if you take into consideration what Usiminas comment last week in their own conference call, the margin that they presented was 7%. And if you take the margin that I mentioned in answering the previous question of our operations in Argentina and Mexico, we are without Usiminas closer to 12% EBITDA margin.

Clearly, it is something that we need to keep working. We already commented that we are expecting to increase our margins marginally or some during the rest of this year, 2025. And also, Usiminas has mentioned exactly the same. So of course, we will not arrive to this number during the rest of this year, meaning the fourth quarter of 2025. It will depend on many different things, the possibility of reaching that number during 2026. You mentioned some of them, the tariff, some reduction of imports in Brazil, improvement.

On our side, we are doing a lot of things. We are fully implementing our cost reduction plans in order to sustain the reduction of our own cost. But at the very end, also will depend on the scenario on the trade negotiations, the growth in the different markets where we are. It's very difficult for us, especially with uncertainty related to the trade discussions to put a number today to 2026 EBITDA margins.

Clearly, we continue to have this as a goal. Clearly, it's something that we will pursue. We are improving. We are entering into 2026 with a margin above 10%. The last one was 11%, and we will continue to work on to that direction. So, we are not that far for that goal. Clearly, it is one target that we have, and we will keep working to achieve as much as we can during the rest of 2026.

There are no further questions at this time. And with that, I will turn the call back to Ternium's CEO. Please go ahead.

Okay. Thank you to all of you for participating in today's call. We really appreciate your insight and encourage you to share any feedback. And have a great day. See you in 3 months.

Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect.

Hello, and welcome to Ternium's Second Quarter 2025 Results Conference Call. Please note that this call is being recorded.

I would now like to hand the call over to Sebastián Martí. Please go ahead, sir.

Good morning, and thank you for joining us. My name is Sebastián Martí, and I am Ternium's Global IR and Compliance Senior Director. Yesterday, we announced our financial results for the second quarter and the first half of 2025. This call is meant to provide additional context to that presentation.

I'm joined today by Maximo Vedoya, Ternium's Chief Executive Officer; and Pablo Brizzio, the company's Chief Financial Officer, who will discuss Ternium's business environment and performance. After our prepared remarks, we will open up the floor to your questions.

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 filings with the Securities and Exchange Commission and on Page 2 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 yesterday.

With that, I'll turn the call over to Mr. Vedoya.

Good morning, and welcome to Ternium's conference call. In the second quarter of the year, we delivered an improved EBITDA relative to the first quarter. This better performance was mainly driven by higher realized prices in Mexico and a relatively stable cost per ton despite a slight dip in shipments. The operating environment remains uncertain and volatile, and our main markets are no strangers to these developments. In this context, our focus is on reducing costs to strengthen the competitiveness of our company.

We are positive on the outcome of these initiatives and on the future of Ternium. In line with this, we are already anticipating a sequential improvement in EBITDA. In the third quarter, we expect a slightly increase in shipments, lead primarily by Mexico with the possibility of some additional support from Argentina and relatively stable volumes in Brazil.

In Mexico, the business environment is currently marked by cautious, pending clearer information regarding U.S. trade policy and the conclusion of ongoing tariff negotiations with the United States. In response to this volatile environment, the Mexican government has taken some measures to increase domestic production defense against unfair trade practices, especially from Asian countries. These actions have recently contributed to some decrease in steel imports in Mexico, creating a more level playing field in local markets. This supports our expectations of higher sequential shipments in Mexico in the third quarter.

I remain confident that ongoing negotiations between the U.S. and Mexico will eventually yield a reasonable and mutually beneficial agreement. This conviction strengthens our commitment to the steady progress of our expansion project in Pesqueria, which continues as planned and serve as a cornerstone of our growth strategy.

Unlike the recent developments in Mexico, the Brazilian steel market is facing significant challenges due to a surge of unfair imported steel. Imports continue to flow this market, undermining the competitiveness of local manufacturers and rising their margins. It is crucial in our view that the Brazilian government responds decisively to this unfair trade practice.

The impact expands well beyond the steel industry, affecting the wider manufacturing sector and putting at risk investments, jobs and the long-term stability of these industries. Concrete measures are urgently needed to defend Brazil industrial base, ensure a level playing field and foster a sustainable market environment. In this challenging context, Usiminas is actively working on its cost structure in order to improve its competitiveness.

Moving to Argentina. The country has experienced a significant increase in shipments during the second quarter, driven by seasonal factors as well as a gradually recovering macroeconomic environment. The automotive industry continues to operate at a healthy level of activities and the agricultural machine sector is experiencing good demand. By contrast, the construction sector is not improving significantly and certain market segments such as home appliances and packaging are being affected by an increase in imports of finishing goods.

In face of ongoing uncertainty and volatility in global trade, we continue to focus on strengthening operational efficiency and improving margins. Throughout 2025, we have concentrated our strategy approach to cost management, seeking opportunities to optimize Ternium's production process and supply chain and eliminate inefficiencies.

Our competitiveness improvement plan centered on optimizing our logistics network to streamline transportation and reduce cost, improving our procurement through better supplier negotiation and cost control, enhancing production facility process for a greater efficiency and boosting labor productivity by incorporating technology and innovation across our 3 production lines. These measures support our goal of strengthening profitability and fortifying our competitive position in a dynamic market environment.

Before I wrap up my remarks, I would like to take a moment to highlight the release of our sustainable report, reaffirming our commitment to the creation of a long-term value throughout sustainable industrial development. The report details our efforts to advance environmental performance, foster social responsibility and promote transparency across our operations. I encourage you to review it for a comprehensive overview of Ternium's strategies supporting long-term sustainability.

In conclusion, trade policy continue to evolve rapidly. We are seeing the United States adopt a more assertive approach in negotiating bilateral agreements and implementing targeted trade action. While this shift has introduced a high degree of volatility, we recognize the U.S. government's intention to address predatory trade practices by many Asian countries, most notably China, and to work towards restoring further competition across the region. Mexico shares this perspective and is following a similar path.

Even in this uncertain environment, Ternium's strong position in the region help us face this challenge. I expect that our ongoing project and focus on improving operations will enable Ternium to adjust to market changes and reach our goals.

All right. This concludes my prepared remarks. Pablo, please go ahead with your comments about our performance last quarter.

Thanks, Maximo, and thanks, everybody, for being here today with us in this call. So let's start looking at the webcast presentation for a closer look at the operational and financial performance of the company. Beginning on Page 3, we note that Ternium's adjusted EBITDA increased by 25% in the second quarter, mainly driven by stronger realized steel prices in Mexico, partially offset by a slight increase in cost per ton. We expect this positive trend to continue into the third quarter, mainly supported by ongoing cost efficiency measures and operational improvements.

Turning to the next page. Net income for the second quarter of 2025 amounted to $259 million. These figures includes a $40 million provision adjustment related to the ongoing litigation associated with the acquisition of a participation in Usiminas back in 2012. The adjustment reflects both [indiscernible] and the appreciation of the Brazilian real against the U.S. dollar during the quarter.

Adjusted net income, excluding this provision amounted to $299 million. This was mainly supported by a better operational performance and favorable deferred tax result due to a 7.5% revaluation of the Mexican peso during the period. On the other hand, we had a decline in net financial result, primarily driven by the same Mexican foreign exchange fluctuation.

Now turning to Page 5. Let's review the performance of our Steel segment. During the quarter, shipments declined primarily in Mexico and the U.S. This was partially mitigated by higher volumes in our Southern region. For the third quarter, we anticipate a mixed performance across our key markets. In Mexico, we expect some sequential growth in shipments supported by recent government measures aiming at curbing unfair trade practices.

In contrast, Usiminas in Brazil continues to face headwinds. The Brazilian market remains under pressure due to a sharp increase in unfair trade steel imports, primarily from China, which is undermining local competitiveness and impacted demand. Meanwhile, in Argentina, following strong increase in the second quarter, driven by seasonal demand and gradual macroeconomic improvement, we are expecting somewhat shipments to hold steady on the positive side.

Let's now turn to Page 6 of the presentation. In the second quarter, there was an increase in average selling price, especially in Mexico, although this was offset by lower shipments. Margins improved, supported by the higher price with a modest impact from increased cost per ton.

Turning to Slide 7. We will now review the performance of our Mining segment. Iron ore shipments rose quarter-over-quarter, driven by increased production levels. Despite these higher volumes, net sales remained broadly unchanged in the second quarter as lower realized iron ore prices offset volume gains. The segment margin slightly declined reflecting the impact of weaker prices, although this was partially offset by lower operating cost per ton.

Let's proceed to the final slide of the presentation to review our cash flow performance and balance sheet position. Cash from operations in the second quarter totaled $1 billion, aided by a significant reduction in working capital. This reflects our work on adjusting inventory volume as well as a decrease in trade receivables. In addition, a high level of CapEx contributed to an increase in commercial debt. CapEx increased this quarter as a result of ongoing expansion at the Pesqueria Industrial Center in Mexico. This trend is consistent with the project expenditure forecast, which identified 2025 as the peak year for investments.

Finally, net cash position decreased in the second quarter, primarily as a result of the elevated CapEx level and the distribution of the $353 million dividend during the period. This was partially offset by the robust operational cash flow generation. And nevertheless, the cash position of the company continues to be very, very solid, totaling $1 billion at the end of June.

Okay. This also concludes my prepared remarks. We are ready now to take your questions. Please, operator, go ahead with the Q&A session. Thanks.

[Operator Instructions] And our first question comes from the line of Caio Greiner from UBS.

So my first question on the state of supply, steel supply in Mexico. Can you guys elaborate a bit better on the supply picture in the country, touching on 2 points. The first one, as you mentioned, Mexico's recent implementation of trade measures, which eventually led to lower imports. And the second one, ArcelorMittal reported an incident over these last few days at the steel works, which is supposed to impact 30% of their production.

So touching on those 2 points, do you think that these are enough to rebalance steel markets in Mexico? To what extent are they actually going to help the supply-demand picture, help to raise prices back to normalized levels? And is Ternium well positioned to capture a higher market share from these 2 events?

The second question on the cost outlook that you provided. You mentioned that you expected cost reduction to drive higher margins for the third quarter. Can you elaborate a bit more on those operational enhancement and cost reduction initiatives that you discussed? How much of the cost decline that you anticipate is coming from these bottom-up initiatives versus lower raw material costs. We're seeing coal prices decline. We're seeing slab prices declining.

So maybe break that down would be really helpful. And maybe if you could also quantify the level of cost reduction that we should expect into the third quarter.

Okay. Thank you, Cairo. Let's start with the first one, Mexico. As you know, Mexico, let me split it in 2. One is the flat products. Flat product has an import -- around 40% of market share in Mexico is from imported steel. And as you know, apparel consumption in Mexico decreased a little bit this year. And in the third part, with all the investment we have been doing and the increasing productivity, today, we have capacity to start gaining market share, and it's what we are doing. And I think we are going to improve this in the following quarters. That because of the lower imports and the effort for one side, the government is doing in this fighting unfair trade.

And on the other side, our own job in trying to be a good alternative for all these customers. So I think from the flat side products, I think you are going to see an increase in market share. This is -- you're not going to see a huge increase in shipments because, as I said, compared to last year, the consumption in Mexico because all the things we discussed is a little bit low.

Regarding ArcelorMittal, well, we just find out yesterday or Monday about the problem in ArcelorMittal. I don't know exactly what the problem is yet but that is in the long products. So yes, we are probably going to gain a little bit share while this problem arose in the long product market. But as you know, long products, there are not a lot of imports in long products, and there are several players in the long product market in Mexico. So that gain is going to be only marginal, I guess. But the gain is going to be in the flat products, which is our main market. So that's for the first question.

The second question, cost reduction. So additionally, to the decrease, as you said, in iron ore [ in flat ], we anticipate, I think, in our Analyst Day in June that we are seeking an additional $300 million decrease in cost efficiency during the whole year. Part of that, we already have realized in the first quarter, almost 1/3 of that and 2/3 of that volume is going to be realized in the next 2 quarters. And this is several initiatives from our procurement front, but expecting renegotiations and new suppliers and enhanced controls almost $70 million, improving through different initiatives, the stability in several of our processes also $50 million, a change in the supplier of metallic in the EIF, rebalancing, as you said, in Mexico, we are rebalancing the production, and we are shutting some of the lines and improving productivity in other with decrease in cost.

So there are several -- the wind farm in Argentina, which, of course, is giving energy much -- at a much lower cost than we used to. So all these in total are the $300 million we said besides the decrease in raw materials that you mentioned. I hope with this, Caio, it is clear the numbers.

Maybe if I can, just a quick follow-up on the import -- on the trade import measures that Mexico took. I just wanted to understand if you think these are sufficient to balance local steel markets in Mexico.

Thank you, Caio. Very good question. I think it's a good start, a very good start. But clearly, Mexico is analyzing more measures. I think in the sense as the U.S. is doing and Canada also doing. So at the end, I'm expecting that the whole North American market, we have a defense mechanism similar in each country. So if you compare Mexico's measures to the U.S. measures, I think there's still a gap. But I understand that the Mexican government is analyzing to reduce that gap.

Our next question comes from the line of Carlos De Alba from Morgan Stanley.

Just a couple of questions, if I may. First, on EBITDA, one short term and one long term. Can you maybe give us a better sense of the magnitude of the potential improvement sequentially, given that you already seems to have bottomed out and start improvement, the step-up in that recovery that you see ahead will be important. And a little bit more longer term, can you maybe quantify, give us a range of the expected boost in EBITDA in millions of dollars that you see coming from the ongoing and recent investments in Mexico?

Carlos, let me take at least the first part of your question. Clearly, as we have described in recent calls, we have bottom up from the lowest level of EBITDA generation. Clearly, there was an important increase during this quarter. Our expectation is for this to continue. There are a lot of variables, of course, moving around, but the expectation is something that we already mentioned in the past to reach by the fourth quarter, an amount of an average EBITDA margin closer to around 15% as you know, has been our goal for the company in the short run.

So we believe that with all the measures that Maximo described on our plans to reduce cost and be more efficient, we will be able to achieve that in a normal market environment. And we are working for that. And the third quarter should be the case and the follow should be an additional increase in order to achieve these levels.

In the longer-term view, I think Maximo, you can take that.

Longer-term view of the project, remember, the projects at the end of this year, we are going to start the galvanized line and the new cold rolling mill, the PLTCM 2. This is going to increase -- it's going to give 1.5 million tons a year of new capacity. But remember that all this equipment has a very long ramp-up period. So you're not going to see in the 2026 huge increase. But it's 1.5 million. Of that, probably 0.5 million tons we are going to close very old capacity. Remember, the Guerrero cold rolling mills or the Universidad cold rolling mills are very old capacity with one single stance. So very, very inefficient.

So part of that is going to have an increased margin or EBITDA of $30, $40 because of the cost efficiency. And the other part, probably we have an EBITDA per ton of around $150 to $200 a ton. So you can make the math. But again, they have a long ramp-up period.

Let me add more. This is just the part that we are...

Yes, you're right.

By the year-end. Then we have the second part of [indiscernible] plan, but it will be 2027.

2027, exactly.

Okay. Got it. 2027 will be the year, yes.

Yes. And again, a long ramp-up period, even longer.

Okay. All right. That's helpful. Then the 2 short ones, well, hopefully, one is not that short, but we'll see. On the CSN litigation or the Usiminas alleged share under control -- change in control, where do we stand? And what would be the next steps in that litigation?

And then one small one. The Shreveport facility in the U.S., you typically import material from, I think, Mexico into that plant for the processing. With the 50% tariff, what is the strategy there?

Yes. Let me start with the second one, which is very simple -- I mean, today, we are buying most of our supply from local suppliers. clearly, the 50% tariff, it make us buy more locally. Brazil and CSN, I mean, regarding the litigation with CSN, to be honest, there haven't been significant development later. The last development we reported in the fourth quarter of last year. So there haven't been -- we -- in that quarter, I think, was that we changed, we adjust the provision we had because of that development. But since then, there hasn't been much update to that. So I...

And going forward, what are the next steps in the legal process for eventually get a final resolution on this?

No, no, we already appealed and the Supreme Court of Justice has to decide if the -- our appeal is going to the Supreme Federal Tribunal, the STF, as you call it, in Brazil. This is still pending. To be clear, I mean, we filed an extraordinary appeal against the [ SAP ] quota, no decision. And we are waiting for that appeal. That was, I think, in February.

Our next question comes from the line of [indiscernible] from GS.

I have 2 follow-ups. The first one is on the cost reduction target of $300 million. I just wanted to understand if that compared to 2024 figures or to a run rate figure from the 4Q 2024. So I just understand what is the comparison base for this cost reduction and if that includes Usiminas.

A second question is just on the impact that this lower imports into Mexico is having on steel prices. And so you guys believe that this should support further increases going into the third Q? That's it.

Thank you, [indiscernible]. On the first question, this $300 million are compared to 2024 without the effect of the change of raw material prices, of course. So to see it in the ship balance, it's a little bit difficult, but we are continuously following that and making this improvement compared to 2024. Usiminas is not included on this number. Usiminas, we are making Usiminas a very aggressive competitiveness plant, but it's not included in this number.

The second part of prices in Mexico, prices in Mexico will probably increase a little bit. But as I said, we are probably going to gain market share, but the change in prices, they are not going to improve radically. It's going to be a mild improvement.

Okay. And just a follow-up on the Mexican measures as well. Can you just elaborate a little bit on it? I mean, are we talking about quota systems, antidumping? And if you can provide us some insights into the next measures that the government is analyzing, as you mentioned, that would be helpful.

Well, what they are doing is revising all the several abuses that were in the system -- in the imports in Mexico, not only from steel and the tax authority and the Economy Minister or the Secretary of Economy are doing different schemes to shut down all the loops that were for dumping cases and the tariff that Mexico today is.

For example, all temporary imports. They are revising because a lot of that was clearly a loophole that people were using. And so they are closing all those loopholes. And also, they are taking -- we are seeing a much more analyzing in new dumping cases. So they are enhancing the capability of analyzing all different dumping cases. And I hope soon, we will have good news about that.

[Operator Instructions] And our next question comes from the line of Rafael Barcellos from Bradesco BBI.

I have 2 questions related to capital allocation. So the first one, if you could please elaborate further on your CapEx cycle. I mean, whether we should see the peak of the CapEx level closer to the end of this year or more to the beginning of next year. If you could give us a sense of when you're planning to post the peak of this CapEx level? And on this point, also if you could provide more color on the execution of the Pesqueria project, could be interesting as well.

Then the second question it's more -- it's a broader question in the sense of -- I wanted to hear from you what are your thoughts on the overall capital allocation strategy going forward? I mean, whether you believe you could increase dividends in the coming years? And given the ongoing difficulties in Brazil following the recent increase in imports, I mean, how is your appetite to keep investing in the country?

Thank you, Rafael. CapEx, probably this quarter -- the $800 million of CapEx of this quarter will probably be -- or definitely will be the top quarter of this cycle. I mean, for the remaining of the year, our projection is to be between the $2.5 billion and the $2.6 billion of CapEx that we said last conference call. With that, the next 2 quarters are going to be very high on the order of $700 million, but lower than this quarter. Next year, 2025 (sic) [ 2026 ] will probably be around $1.9 billion. 2027 will probably be around $1.1 billion, $1.2 billion. So as you see, this year is the peak. And this quarter particularly will be probably the peak of all this CapEx investment.

The execution in Pesqueria, to be honest, is doing very good. As I said, the PLTCM and the galvanized are going to start the ramp-up in December. That was the original date for the galvanized, and we are moving forward 2 months the one in the PLTCM. So I mean, very comfortable with that. The steel shop and the direct reduction unit, well, they're going well. If you like, there are some videos in our web pages or in the media, which you realize the -- how the investment is going through, the size of the investment and the challenge. But as you would see from the videos, it's going very, very well and on time. So with that, we are very comfortable today, of course, looking -- I mean, making a lot of efforts to deliver that in time and in budget.

The third one, Brazil, you are very correct. I mean, Brazil has to -- I mean, as a country, they have to take some measures because it's not clearly, not only steel industry, but a lot of industries cannot compete with unfair from China, not the steel, not the automotive, anybody. I know the automotive industry in Brazil just released a very tough memo about all this. So this is something that probably Brazil has to figure out before investments are going there.

But the long-term dividends, Pablo?

Yes. The question, of course, was including dividends and also the capital allocation of the company. As you know, we are in the middle of a very, very significant CapEx plan for Ternium, $4 billion. We are in the middle of that. As Maximo mentioned, this year, total CapEx, $2.5 billion, next year, close to $2 billion. So we are in the middle of significant capital allocation that we need to cover.

With this level of CapEx, we also mentioned and we also confirm that we will sustain our level of dividend payment, and we have been doing that lately. So we have a significant outflows of capital to be allocated within the project and within the dividend that we are planning to have. Of course, as usually happen with our big CapEx plan, then we take a year or a little more to digest all the investment that we have been doing. As Maximo mentioned before, the ramp-up period of these CapEx plans are significant, especially these ones that are very, very sophisticated.

So we think that we have a very clear view on what we will be doing in the near future. We have, as you know, other plans if they are feasible for the future. But the main focus of the company, at least for the next couple of years is to, of course, get a better level of EBITDA, level -- better level of margins for the company to sustain our dividend payment and to sustain all the CapEx plan that we are performing right now.

Okay. Just a quick follow-up. So just to confirm, so you mentioned that the peak of the CapEx was the second Q, right? So in the coming quarters, your CapEx level should go down slightly, right?

Exactly. We are putting the number at $1.4 billion for the next semester, around $700 million each quarter, a little bit more or less, but that is a number approximately compared to the $800 million of this quarter.

There are no further questions. I will now turn the call back over to our CEO for closing remarks.

Okay. Thank you very much all for joining us in today's call. As usual, we value very much your feedback. And so call us with any doubt, and have a great day. Thank you very much.

The meeting has now concluded. Thank you all for joining. You may now disconnect.