Ternium S.A. · NYSE:TX
Ternium — Investor Day (June 2016)
34 slides from Ternium's investor day presentation, Jun 16, 2016
Slide 1: Ternium Investor Day 2016
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Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains certain forward-looking statements and information relating to Temium S.A. and its subsidiaries (collectively, “Temium) that are based on the current beliefs of its management as well as assumptions made by and information currently available to
Slide 3: Event Schedule
Event Schedule 8:30am Registration and breakfast 9:15am Presentation by Daniel Novegil, CEO 10:00am Q&A session with Ternium management 11:00am Closing remarks Ternium investor Day 2016
Slide 4: Speakers
Speakers Daniel Novegil, Chief Executive Officer Mr. Novegil, who has been Ternium's CEO since 2008, is an Industrial Engineer. He graduated from Universidad de Buenos Aires and has a Master of Science in Management degree from Stanford University. Mr. Novegil is a member of the Board of the World S
Slide 5: Safety and Environment
Safety and Environment Global Steel Markets. Performance Investment in Usiminas Ternium’s Markets Conclusion
Slide 6: Safety and Environment
Safety and Environment
Slide 7: Safety and Environment
Safety and Environment Ternium’s core projects well advanced * Safety and environmental projects * Critical processes program EroleCe (DuPont assistance) * OHSAS 18001 safety certification + ISO 14001 environmental certification — Jani4 Junt7 + Energy efficiency program Jani5 Dect7 2013 © 2014-2015
Slide 8: Global Steel Markets
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Slide 9: Global Steel Markets
Global Steel Markets From globalization to regionaliz Apparent steel use (ASU) (roy growth rate) a siycapita (k 2015 2016 2017f - U.S. and Mexico, bright spots © [china 54% 40% ~ 3 |Wordexchina| -1.0% 1.8% » China steel consumption decreasing » World ex-China regaining momentum » Brazil and Argentin
Slide 10: Global Steel Markets
Global Steel Markets » Cases against steel unfair trade growing strongly worldwide » China is the main target of unfair trade cases in more than 20 countries » World reacting against unfair Chinese steel trade conditions » G7 expressed concern regarding excess global steelmaking capacity » European
Slide 11: Performance
Performance
Slide 12: Performance: Solid results in a difficult environment
Performance Solid results in a difficult steel industry environment » Focus on high margin value-added EBITDA Margin (% of net sales) products 18% 11% 17% 18% 15% 14%, » Flexible production configuration 13%] Average . * Diversified cost structure ry, 7 » Upstream and downstream 20 2012 2013. +2014.
Slide 13: Performance: Strong cash generation and solid financial position
Performance Strong cash generation and solid financial position » Declining net debt to EBITDA ratio (1x as of Mar'16) » Sustained cash generation » High free cash flow yield » Attractive dividend payments Annual Dividends (USD per ADS) (USD perADS) | 0.75 0.75 0.65 0.90 2011 2012 2013 2014-2015 Ter
Slide 14: Continuous focus on profitability
Performance Continuous focus on profitability Comp' ive app! toi ing » Customer integration » Labor productivity (white and blue collar) » Working capital optimization » Logistics management » Contractors management » Energy efficiency » Continuous improvement Ternium investor Day 2016
Slide 15: Differentiating through customer service
Performance Differentiating through customer service Increasing customer integration » 64% of total order items currently placed through Webservice+B2B » 6.4x increase in Webservice+B2B orders since 2012 in Mexico » Higher integration increases loyalty and reduces transactional costs » Main features
Slide 16: Increasing labor productivity
Performance Increasing labor productivity White collar productivity » 43% increase in Mexico supported by Ternium’s integrated commercial and industrial IT system » Commercial department » Supply chain management * Technical assistance Blue collar productivity » 30% increase in Ternium’s main integr
Slide 17: Relentless pursuit of operating performance gains
Performance Relentless pursuit of operating performance gains Ci i ion records i every year » Streamlining of operational practices » Internal benchmarking » Equipment re-engineering » Training programs Average monthly production records 54 32 33 og 2012 2013 2014-2015 YTD 2016. Ternium investor Day
Slide 18: Techgen: Successful project management
Performance Techgen: Successful project management » New 900 MW combined cycle power plant in Pesqueria » Joint venture among Ternium, Tenaris and Tecpetrol » Project completed on time and on budget » Competitive and reliable supply of electricity » Best available environmental care technology TTech
Slide 19: Investment in Usiminas
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Slide 20: Underperformance of Brazilian economy
Investment in Usiminas Underperformance of Brazilian economy » Challenging business environment in Brazil » Steel industry impacted by depressed manufacturing activity » Automotive production down 35% from 2013 peak Vehicle production (thousand units) 3,382 3,418 3,403 sls. 2010 ' 2011 * 2012, Terni
Slide 21: Restructuring necessary to regain competitiveness
Investment in Usiminas Restructuring necessary to regain competitiveness » Weak financial performance led to debt restructuring » Recent execution of term-sheets with financial creditors » Usiminas’ shareholders approved a capital increase of BRL1 billion (USD290 million) » Need to continue with ope
Slide 22: Ternium's Markets: Mexico
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Slide 23: Mexico became the largest steel market in Latin America
Ternium’s Markets - Mexico Mexico became the largest steel market in Latin America » Highest per capita apparent steel use in Latin America (201 kilograms/year) » Ternium is the leader of the Mexican flat steel market » Mexico accounts for two-thirds of Ternium’s shipments Steel shipments in Mexico
Slide 24: Solid growth in shipments to the industrial market
Ternium’s Markets - Mexico Solid growth in shipments to the industrial market » Shipments to the industrial market continued growing in 2015 » Home appliance manufacturers » Automotive industry » Increasing customer requirements Full product range Customized products (service centers) Product develo
Slide 25: Largest automotive industry in Latin America
Ternium’s Markets - Mexico Largest automotive industry in Latin America » Strong production growth in the last five years » Record 3.4 million units light vehicle production in 2015 (+6% vs 2014) » Record local vehicle sales in 2015 (+19% vs 2014) » Production expected to reach 4.9 million units by
Slide 26: New galvanizing line to deepen differentiation strategy
Ternium’s Markets - Mexico New galvanizing line to deepen differentiation strategy * Tenigal to double automotive galvanized steel production capacity » New line’s yearly production capacity of 430,000 metric tons » Capex estimated at USD300 million » Commissioning in 2019 * Total hot-dip galvanizin
Slide 27: Increasing high-end product range
Ternium’s Markets - Mexico Increasing high-end product range Broader product range enabled by upgrading of re-rolling facility New production capabilities for advanced high-strength steel (AHSS) for the automotive industry & AHSS includes: dual phase; ferrite-bainite; martensitic; complex phase Next
Slide 28: Ternium's Markets: Argentina
Ternium’s Markets: Argentina
Slide 29: Economic transition towards medium-term growth
Ternium’s Markets - Argentina Economic transition towards medium-term growth Steel consumption to adjust in 2016 Apparent ne Use oe ‘milion tons) » High-base comparison 53 (2015 national elections) SH =o 4g 54 » New infrastructure plans to 46% materialize gradually » Decrease in Brazilian demand for
Slide 30: Adapting to new economic conditions
Ternium’s Markets - Argentina » Adapting to new economic conditions Operations rebalance (1 blast furnace, 1 continuous caster, coking production) Renegotiation of supply and service contracts » Raising awareness about unfair trade » China: non-market economy Updating of AD and CV regulations Legal
Slide 31: Argentine steel demand growth and production opportunities
Ternium’s Markets - Argentina Direct and indirect steel demand growth coming from: » Agricultural sector Agro-machinery, warehousing, infrastructure, silos » Infrastructure projects Roads, water supply, railways, ports » Energy and mining Renewable energy, gas lines & distribution systems Gold, copp
Slide 32: Conclusion
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Slide 33: Conclusion
Conclusion » Outperforming peers in a challenging industry environment Opportunity to increase profitability through continuous differentiation and cost reduction initiatives » Market regionalization following broad reaction against unfair trade » Successful development of Tenigal and Techgen projec
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