Ladies and gentlemen, thank you for standing by and welcome to the Ternium First Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Sebastián Martí. Thank you. Please go ahead, sir. Sebastián Martí: Thank you. Good morning. Thank you for your participation in our conference call today. My name is Sebastián Martí. I'm Ternium's Investor Relations and Compliance Director. Yesterday, Ternium issued a press release containing its financial results for the first quarter 2020. This call is complementary to that presentation. Joining me today are Máximo Vedoya, Ternium's CEO; and Pablo Brizzio, the company's CFO, who will discuss Ternium's business environment and performance. At the conclusion of our prepared remarks, there will be a Q&A session. 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 two in today's webcast presentation. With that, I'll turn the call over to Mr. Vedoya. Máximo Vedoya: Thank you, Sebastián. Good morning to everyone and welcome to our first quarter 2020 conference call. Thanks, again, for your interest in our company, and taking time to be with us today, especially in this unprecedented circumstance. I hope all of you and your families are well and keeping safe. I would like to dedicate my initial remarks to share with you our view regarding how the COVID-19 outbreak is affecting the steel market and our company and what we are doing to mitigate these effects. After this, Pablo will…

Thanks, Máximo. Good morning to all. Let me review Ternium performance following the webcast presentation starting on page three. Our results for the first quarter improve sequentially as expected. In this slide, you can see that Ternium EBITDA in the first quarter 2020 increased to $302 million and EBITDA margin also improved, which is 13% of net sales. EBITDA per ton was $101. Further in the presentation, we are going to review the drivers of this increase. We were actually expecting better performance in the quarter. Argentina and Colombia authorities imposed lockdowns from March 20 to mitigate COVID-19 spread, preventing us from shipping products with assertion of safe to essential sectors such as food, health and energy in both countries. Looking forward, considering the scenario raised discussed we expect a sequential decrease in EBITDA with significantly lower shipments by more than a decrease in EBITDA per ton. As for net income in the first quarter of 2020, we reported a loss of $19 million or $0.06 per ADS. These results include $189 million non-cash deferred tax loss due to a 20% depreciation of the Mexican peso against the US dollar. This deferred tax result is equivalent to $0.96 cents loss per ADS, so adjusted net income per ADS to exclude these non-cash item, the result would have been net income of per ADS of $0.19 in the third quarter. In the next page, page four, we can analyze our shipment performance in each region. As you can see, in the first quarter of 2020, shipments in Mexico increased sequentially and on a year-over-year basis. Of note, during the first quarter, we were able to increase our participation in the commercial market despite a soft environment for construction activities. Our commune -- we are continuing ramping up our new galvanized and…

Yes, sir. [Operator Instructions] Your first question comes from Tanners with Bank of America.

Oh, hey, good morning. This is Timna Tanners. I wanted to ask first, if you could give us any thoughts on what conditions the Board might require to resume the dividends. So as you point out, your cash flows were still strong in the first quarter. Is it a question of visibility uncertainty, or is it a question of something else, if you have any thoughts on that? Máximo Vedoya: Okay. Thank you, Timna. I mean, as I said in my remarks, I mean, we have been giving dividends for the last 10 years and increasing them year-over-year. I think in this, there is no anything else. There's nothing else that what I said, I mean, the uncertainty around what these affect this virus or this recession we have, in all our steel market is still uncertainty. And so the -- they both considered very, very prudent to withdraw the proposal until we see more clarity on the steel demands. We have always been a very -- let's put it conservative, a company in our financial position and so these is -- goes with this. I don't know, if Pablo, you want to add something else to this.

Yes. Clearly, I agree with what you said. We consider it very important to have strong financial position. In fact, we have reinforced our customer's cash position without changing net debt. As you can see, we have reduced net debt during the quarter. But in the meantime, we have taken some new debt facilities available to us to reinforce our cash position, just to be prepared or to any scenario could appear in the next couple of quarters. Clearly, we understand that the Board has stood up this -- the prudent way to take in front of this uncertainty. And clearly, whenever is uncertainty, so were the board of regulator would consider following the steps.

Okay. Perfect. Thank you. And then the other question I wanted to ask is really to try to pin down a little bit more of your thoughts on volumes going forward. And to completely recognize that it's challenging and visibility is not great, as we were just talking about. But on the one hand, I wanted to ask about slabs from Brazil, you said that you could offset some of the weaker domestic market through export. But I'm just having a hard time understanding, where the exports will go, because so many countries with extra supply are talking about exports, and I wonder to whom they're shipping? And then on the same lines, in terms of, the auto recovery in Mexico, how do we think about the timing there? Because they'll certainly be some inventory to work down first. So, the shipments start to materialize more in the third quarter or how do you think about that? Thanks. Máximo Vedoya: Thank you, Tina. It's a wonderful question. And as you said, it's a big -- it's a challenge to answer that today in these times. I would try to make an effort. The volumes -- I can answer very specific on the volumes on the second quarter, most likely our volumes will come down here somewhere near 30% in the whole market of Ternium. That's it the shipments we are going to decrease in the second Q. From that onwards, today we see our visibility that they are going to start increasing somehow in how the recovery is, we don't see a V recovery as some economists are saying, it's more like an U. So these increases are not going to be very, very steep. But I think that -- that most of the countries where we operate are going…

Yes. Very helpful. Thank you and stay healthy. Thanks. Máximo Vedoya: You too.

Your next question is from Carlos with Morgan Stanley.

Thank you very much. I hope everyone is doing well. So, just going back to the dividend topic, since the shareholders meeting was postponed. I want to understand if there is a possibility that the board decides to bring back at a [Audio Gap] Máximo Vedoya: Carlos?

Yes, hello. Can you hear me? Máximo Vedoya: No, no, we lost you for a minute.

All right, sorry. So the question is on dividends, is there a possibility that the board decides to reinstate the dividend at a later date in 2020 given that you're the shareholders meeting was defer, and he may still take place this year? Or is this a dividend that is for gone completely for the year? I understand that it is a board decision, but maybe you can provide some color. And then my second question has to do with volumes in Argentina. Clearly, the first quarter saw the lowest or the weakest volumes in history that we have in our model, at least even worse than that in the first quarter of 2009. How bad was April? And how much worse can I get in Argentina? And then finally, if I can squeeze out their question is on the CapEx. How do you see the CapEx this year based on the postponements that you were mentioning earlier? Thank you. Máximo Vedoya: Okay, thank you Carlos. I take the -- I start with the last one and go up from there. CapEx, if you remember in the last conference call CapEx was -- for 2020, $850 million, 850 and for 2021, we make a -- we said it would be around $550 million. What we are seeing today, the plans we're making today is for 2022 be between $550 million and $600 million. So it's a decrease between $250 million and $300 million and in 2021 to be around $600 million. We expect to finish the steel -- the cost really in Pesqueria with the CapEx -- with this CapEx and postponing some of the things that we're doing in 2020 to 2021. So overall we are expecting a decrease not only in this year but on both the two years with the CapEx. The second thing is volumes in Argentina, clearly volumes in Argentina in the first quarter were very bad, and the second quarter are going to be slower, remember Argentina make a lockdown, a very hard lockdown. So only one of our plants were operating and most of the construction industry was closed. I mean, they were not construction permitted, so our volumes in April are going to be very low and -- but they are going to increase in March -- in May and June. And we hope by the third quarter will be kind of the same as in the first quarter. So yes, Argentina is taking, an impact on the way they are managing these pandemic. And -- but again, Argentina, the measures we are taking in Argentina -- are making that the company is not burning cash or anything like that. So, so we are very optimist that the company will go through these in a very healthy way. And the third one was dividend, Pablo why don't you answer that?

Yes. Okay. Carlos as you know every year the profitability size of the year relies on the shareholders meeting, but clearly the Board of Directors saying on the proposal and clearly we cannot say that no change can happen close to the end of the year. If there is a change, this will happen. It's difficult to see the scenario at the moment in the recent term, once a year and we pay dividend around this period of time every year, so between April and May every year. The most conservative way to answer your question is that at the end of year since the situation change entering into the end of the year, most probably the reset of the dividend will come on the following one. But we can not say that this is not a possibility because at the very end the shareholder meeting and therefore could propose something closer to the end of the year, just a low probability in our view at the moment that these could happen. But we cannot take out that.

Thank you very much. Good luck. Sebastián Martí: Thank you, Carlos.

Thank you.

[Operator Instructions] Your next question is from Thiago. Thiago Ojea, your line is open.

Hi, good morning, everyone. This is Thiago Ojea, Goldman Sachs. I'm just curious if you can provide any type of expectations on the Tuesday in Argentina and the measures of opening for the lockdown. And if you believe that the activity in CSA, if you can really rack the volumes to the external market given that no other regions in the world are also suffering a lower demand on steel, what would be perhaps the minimum level that you think that would be profitable in terms of volumes to operate CSA. Thank you. Máximo Vedoya: Thank you, Thiago. I couldn't hear your first question, but I won't -- I'm going to answer the second one. And then I ask you to repeat the first one, because it was a noise in the line, I'm sorry about that. And as you said, Ternium Brazil, Ternium Brazil is now operating, as I said, to around 9,000 tons a day that's a decrease of around 38% from what we were operating in the first Q. And with that in mind, all the shipments in the second Q we have already secured and we are shipping the orders in the second quarter. We don't have any problem with the second quarter. And we think we can continue operating at that level in the third quarter, because we are going to need those slabs for the Mexican --from our own Mexican operation. So if we don't have any place to place the slabs, because still the money still weak in the third quarter, most of those slabs are coming from our Mexican operations. So I don't see any problem. Or I don't see problems today in operating our Ternium Brazil operation at that level. I hope at least I answered the second part of the question, Thiago.

Sure. The first question was the similar one but related to the Argentina operations. We saw a big drop in the first quarter. I imagine that the drop remain in the second quarter would be even worse. What would be a reasonable level operation that you could to be profitable in Argentina and if you have a better outlook for the third and fourth quarters? Máximo Vedoya: Yes. Argentina, as I said, the locking down in Argentina was profound. I mean was very hard. Let's put it but I don't know if that's the word but it was very hard. And so we did only operate the San Nicolas plan, which is the one that has the platform is. Again the platform is there each operating also have a technical minimum. And with that, in the first quarter, as you see we were profitable in Argentina. So, I don't see any problems in the third and fourth quarter to continue at this level of the minimum in the blast furnace. Again, Argentina is not -- we are not expected to be let inventory in the second quarter, although this decrease in the shipment -- again, we are reducing the production of our blast furnace. We also expect that the lockdown is kind of improving to say something and achievements will resume in May and June, and we'll start to grow in the third quarter. I mean, you have very low volumes in Argentina and I don't think that the volumes can remain this low. So, I'm confident again that Argentina could -- we can sustain the production minimum for the second quarter and in the third quarter, we will start increasing our shipments. I hope with this, I answered the question.

Yes, you did. Thank you.

Our next question is from Chicago [ph] from BBI.

I guess they have a problem with Thiago, right; it's Thiago Lofiego from BBI. Hi, guys. Thank you. So, most of my questions were answered. So, just -- actually, two remaining ones here. One is about the costs associated with the measures you're taking because of the COVID-19. So, do you have an estimate of those costs? And just a second one, going back to the volume questions that were already asked, just to get a little bit more clarity, you mentioned an average 30% drop in the second quarter. Can you give us a little bit more detail? I mean, is Argentina going to be even more than 30% drop in the second quarter offset by Mexico and Brazil? Or is it pretty much even across the -- all of the units there? Máximo Vedoya: Okay. Thank you very much, Thiago. I'm going to answer first the second one. As I said in answering Tina's question, I mean, it's really a challenge to predict volumes. And so the drop I mention around 30% is what we expect today. These can change upwards or downwards, although, we only have two months to go, because the uncertainty is still big. But I think the drop will be a little bit higher in Argentina or is going to be a little bit higher in Argentina. For third-parties, the drop is going to be almost zero in Brazil. Remember, we have the same volume of slab for third-party in Brazil in the first quarter as in the second quarter. And so -- and it's going to be around that for Mexico. That's what we are expecting today. And I think with this I answer the second question. Pablo, can you answer the first one of Thiago?

Yes, of course. Let me add to that answer Máximo, clearly also Colombia, we probably see a reduction in volume. Máximo Vedoya: You're right

But we'll be -- Thiago, we'll be compensated by the ones that we mentioned in Brazil. But going to your first question Thiago, clearly, it's very difficult to put a number to that, but I think that the best way to answer your question is what we said in our press release, in our opening remarks, which is, though we are seeing a reduction in volumes and Máximo mentioned the number, we are seeing small reaction -- or trying to sustain the level of -- with the margin of the company. This clearly is coming from the level of measures we are taking in order to reduce costs, reduce working capital, and adjust our facility to the new level of sales that we are having. And the way to reflect that is precisely there. Sustaining or trying to sustain as much as we can deliver of EBITDA margin that the company will resolved. So, clearly this is a way we have to sustain profitability in our company. As you know, the company is always working and looking for ways to reduce our costs. And clearly especially in situations like this one. So, those are difficult to put a number to that. Therefore the company is doing -- it's very, very strong. And the reflection will be in a small reduction of our EBITDA margin.

Yes. That will actually meant more on the specific expenses associated to COVID-19. So, like, sending people to work at home or postponing the project. So, what is the cost of just basically postponing the project? Do you have some specific cost associated to that? But that I understand, the lower fixed cost solution issues and et cetera but it's more on the specific costs or expenses associated to COVID-19.

Yes. We are not seeing a huge -- an increase in the cost of that. I mean, the project for example, the CapEx and the project we are postponing, we don't see an increase in the CapEx there, once we resume operations. In fact, to be honest, we are seeing some reduction in the total amount. We are going to invest in cost in fiscal year. Because we are seeing ways and renegotiations of some contracts that we are seeing some savings there. So, overall we cannot see a huge impact on that cost, as of as of today. I mean, it's true that there are some people at their home, especially the vulnerable ones, the one that has preconditions that make their health more vulnerable. But apart from that, we are seeing only reduction in our costs. I hope with that analysis, it is more, clear to everyone.

No. That's clear. Thank you, guys.

You're welcome.

[Operator Instructions] Your next question is from Alex Hacking with Citi.

Good morning. And thanks for getting my name correct. I was excited to see, what do you calling. Just following up, you mentioned a small reduction in EBITDA per ton in the second quarter. I guess could you describe a little bit more like your cost structure in the second quarter, because obviously, we're going to see low volume. We're going to see lower prices. And maybe some of the levels that are allowing you to, I guess moderate what you're expecting on EBITDA per ton declines. Thank you very much.

Okay. Alex, as you heard let me take this one. Clearly, what we are seeing is different things. You're right that we see a new volume. You are right. Then we will see pricing. But it is also prove that we are expecting to see, some reductions in raw material costs. And more significantly than that is that we are seeing -- we are expecting to adapt our facilities to produce the level that we really need to supply our customers. Specifically, for example, in the case of Brazil where we are expecting to ship basically the same level of volumes to third parties, and we are reducing the shipments to our own facilities in Mexico just to adapt the production level to real need of facility and not to increase our inventory. This is clearly another way for us to reduce the cost of the training, level of inventory. Same thing in Argentina where we were able to reduce the level of output of our blast furnace to the current needs of our facility. Beyond that, we are working very thorough as we always do, but now we need to do it in a shorter period of time. We are reducing the cost of any contract that we can have or we the overhead cost in our in our system. So, we are working as Máximo mentioned with our suppliers also to work together to go over the situation trying to test and to reduce if we can the impact of these costs in our -- overall time. So, we are working in many different fronts, probably the only cost that is not reducing in line with the other is the iron ore, but besides that we are seeing a reduction and we are making a lot of effort in the rest of our facilities to adjust to new current situation. This is the way -- the best way we have to cope with reduction on prices and sustaining as much as we can the level of EBITDA margin.

Thanks, Pablo, and then just a follow-up. I mean, so you would view the cost savings and the EBITDA per ton generation in 2Q as sustainable in those market conditions. So it's not just a one-off effect of inventory revaluation or something like that. Ternium could sustainably operate at these lower volumes and lower prices, obviously, we expect some kind of rebound, but Ternium sustainably operate at those levels, you know, for a longer period of time. Do you understand my question? Does that make sense?

Yes, that makes sense, Alex, but clearly so we are looking for as we said the reduction in volume probably in our case will be lower than other in our company. Clearly, the situation that we have in Mexico is one in which we can moderate the reduction because the level of imports that all will reduce first than the local producer. But -- and we don't -- we can operate at a reduced level. We are seeing already -- was already mentioned the call the some smaller lease trends more recovery, for example in the uncertain market. In the case of Brazilwe can switch because we have contributed to that is that it's a reduction of sales to third parties to move ship -- move volumes to our own facilities in Mexico. And clearly, Mexico where we have main market if there is a revert of the auto sector that was already discussing and all -- and reopening should see in the medium term. After the second quarter, that's at better level of volume. In any case, clearly, we have adapted our facility to produce and to be relatively profitable at the current level of demand. Clearly, the level of profitability is below our target level. But we believe that if there is a recovery volume that we could go back to these specific levels.

Okay, thanks. And then just one follow up, if I may. Any estimate for working capital for the rest of the year? Thank you.

Yes. Working capital, as Máximo already mentioned that all-in-all just to run the numbers, we are expecting to have $600 million this year or next year. So, as you know, we already mentioned that we invested you in the first quarter $250 million. Over the rest of the year is a difference to around $600 million. So, we have reduced the level of CapEx and this is clearly the number. I think that was your question, Alex.

Sorry. It was just about working capital, not CapEx.

Sorry, sorry. There was some noise in the line, so I thought it was CapEx. So, yes, working capital, clearly, we continue working in reducing the level of our working capital. As you know, when you have a significant reduction in volume, it's difficult to adapt very, very fast to have a reduction in working capital to be at the same level needed for the production level. We were able to have a positive working capital reduction during the first quarter. Clearly, we believe that we will continue, at least, during the second quarter to make an effort to do that. So, should be also positive number during the second quarter.

Thanks, Pablo. Take care.

You too. Thank you.

At this time, there are no further questions. I would now like to turn the call back over to the CEO for closing remarks. Máximo Vedoya: Okay. Thank you all again for the interest on our conference call. Please contact us if you need any further support or comments. And in the meantime, take care and stay safe all of you. And hope to see you or hear from you all in our next conference call. Thank you very much and goodbye.

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