Ternium S.A. · NYSE:TX
Ternium — Investor Day (June 2017)
36 slides from Ternium's investor day presentation, Jun 29, 2017
Slide 1: Ternium Investor Day 2017
TERNIUM INVESTOR DAY 2017 SOLOMON R.GUGGENHEIM MUSUM. Thursday, June 29th, 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains certain forward-looking statements and information relating to Ternium S.A. and its subsidiaries (collectively, “Ternium”) that are based on the current beliefs of its management as well as assumptions made by and information currently available
Slide 3: Event Schedule
Event Schedule 8:30am Registration and breakfast 9:15am Presentation by Daniel Novegil, CEO, and Ternium management 10:00am Q&A session 11:00am Closing remarks Ternium Investor Day 2017
Slide 4: Speakers
Speakers Daniel Novegil, Chief Executive Officer Mr. Novegil, who has been Ternium’s CEO since 2005, is an Industrial Engineer 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 Steel Associati
Slide 5: Index
INDEX Safety and Environment Global Steel Markets Profile Ternium’s Markets Business Strategy Next Steps – Opportunities for Ternium Conclusion
Slide 6: Safety and Environment
SAFETY AND ENVIRONMENT
Slide 7: Safety: Continuous performance improvement
Safety Continuous performance improvement • 4-year long safety projects and Lost time injuries frequency rate (# of events / million hours worked) certification of facilities to be completed by year-end __ • OHSAS 18001 safety certification __ __ • Critical process program (DuPont 2.6 assistance) 1.
Slide 8: Environment: Continuous reduction of Ternium's environmental impact
Environment Continuous reduction of Ternium’s environmental impact • ISO 14001 environmental certification ISO 14001 environmental certification (% of employees and contractors working in • 97% of employees working in certified certified production facilities) production facilities • LEED certificat
Slide 9: {PSSST
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Slide 10: Global Steel Markets: World ex-China with positive growth expectations
Global Steel Markets World ex-China with positive growth expectations • Strong expectations for U.S.’s steel Apparent steel use (ASU) ASU use growth based on: (y-o-y growth rate) (kg/pers) • Rebound of manufacturing industry 2016 2017f 2018f 2018f • Infrastructure investments World 1.0% 1.3% 0.9% 20
Slide 11: Global Steel Markets: NAFTA renegotiation status
Global Steel Markets NAFTA renegotiation status • No significant impact on shipments to U.S. international trade1 in 2016 industrial customers so far (USD billion) • NAFTA renegotiation as an opportunity to Export Import Trade Deficit Share improve treaty (rules of origin) China 116 463 579 -347 46%
Slide 12: Profile
PROFILE
Slide 13: Profile: Consistently superior performance
Profile Consistently superior performance • Focus on high margin value-added products EBITDA margin (% of net sales) 21% • Flexible production configuration 17% 17% 15% • Diversified cost structure 14% 14% 13% • Upstream and downstream integration Average 6% • Best practices 5% • Broad distribution
Slide 14: Profile: Solid financial position and attractive dividend yield
Profile Solid financial position and attractive dividend yield • 5% dividend yield1 in 2016 Dividends paid (USD per ADS) +54% • 54% dividend increase in last 5 years 1.00 • Agreement to acquire CSA to increase net 0.90 0.90 0.75 debt to EBITDA ratio to 1.50x - 1.75x by 0.65 3Q172 Dividend yield 2013
Slide 15: Ternium's Markets
TERNIUM’S MARKETS
Slide 16: Well positioned in Latin America's largest steel markets
Ternium’s Markets Well positioned in Latin America’s largest steel markets • Leading supplier of flat steel products in Mexico and Argentina • Participation in Usiminas controlling group • Agreement to acquire CSA in Brazil • Operations in Colombia, the U.S. and Central America Ternium’s steel shipm
Slide 17: Mexico: Mexican flat steel market growing consistently
Ternium’s Markets – Mexico Mexican flat steel market growing consistently Most attractive steel market in Latin America Apparent flat steel use – Mexico (million tons) • 36% increase in flat steel consumption Local Imports 15.0 15.6 since 2011 12.6 11.5 • Opportunity to substitute imports of high-en
Slide 18: Mexico: Strong industrial steel demand
Ternium’s Markets – Mexico Strong industrial steel demand • Light vehicle production expected to Light vehicle production continue growing (million units) 4.1 3.4 3.5 3.2 • Production up 14% YTD, to reach 4.1 2.9 2.9 million units in 2017 • New OEM capacity starting up during 2017 • Production expec
Slide 19: Mexico: Strong growth of Ternium's shipments
Ternium’s Markets – Mexico Strong growth of Ternium’s shipments Ternium outpacing Mexican steel consumption Ternium steel shipments in Mexico (million tons) growth through import substitution +8% Industrial Commercial 6.4 5.9 • 500,000-ton shipment increase in 2016 5.6 5.0 5.0 • Volume growth higher
Slide 20: Mexico: New investment targeting the industrial market
Ternium’s Markets – Mexico New investment targeting the industrial market • New hot-dipped galvanizing and pre-painting lines in Pesquería • High-end value-added products for the home-appliance, heating-ventilation-air conditioning (HVAC) and automotive industries • Annual production capacity of 300
Slide 21: Argentina: Activity recovering in 2017 and positive outlook for 2018
Ternium’s Markets – Argentina Activity recovering in 2017 and positive outlook for 2018 • Economic reforms to improve Argentina’s Apparent flat steel use (ASU) – Argentina (million tons) performance in following years: +10% +10% -19% • 2016: GDP -2.2% / ASU -19% 3.1 3.0 2.8 2.7 • 2017: GDP +2.6% / A
Slide 22: Argentina: Activity recovering in 2017 and positive outlook for 2018
Ternium’s Markets – Argentina Activity recovering in 2017 and positive outlook for 2018 • Higher agro production and investment Agro equipment sales Implements Seeders (thousand units) Tractors Harvesters • Production: +14% in ’16/’17 season 20.4 +41% • Bright spots: sales of agro machinery 17.2 17.
Slide 23: Business Strategy
BUSINESS STRATEGY
Slide 24: Main elements of Ternium's business strategy
Business Strategy Main elements of Ternium’s business strategy Envisioning Strategic Agenda • Leader in key markets, high • Expansion in North America, market share mainly Mexico • Focus on high-end and value- • Increase in high-end product added products offering • Differentiation • Operational exc
Slide 25: Growth in Mexico: Leader in the Mexican flat steel market
Business Strategy Growth in Mexico: Leader in the Mexican flat steel market Ternium’s shipments to industrial 2005 - Hylsamex customers (million tons) 2007 - Grupo Imsa +65% 3.3 2.9 2013 - Industrial center at Pesquería 2.6 2.0 2.1 2013 - Tenigal 2016 - Techgen 2017 - New galvanizing and pre-painted
Slide 26: Differentiation through value-added products
Business Strategy Differentiation through value-added products • Advanced high strength steel qualities for auto industry • Lighter vehicles • Increased cargo capacity for trucks • New functional coatings for home appliances • Textured and stainless steel-looking surfaces • Chrome-free systems (RoHS
Slide 27: Operational excellence to sustain profitability
Business Strategy Operational excellence to sustain profitability Breakthrough initiatives to increase differentiation and reduce costs • Customer integration • Labor productivity • Exiros • Working capital optimization • Logistics management • Contractors management • Energy efficiency • Continuous
Slide 28: Slab supply strategy to provide a solid base for growth
Business Strategy Slab supply strategy to provide a solid base for growth • Ternium short-slab since the acquisition of Slab purchases for Ternium Mexico Grupo Imsa in 2007 (million tons) +45% 3.7 • Decision to delay integration investments 2.5 following 2008/2009 downturn • Take advantage of world’
Slide 29: Agreement to acquire CSA
Business Strategy Agreement to acquire CSA • CSA is a Brazilian state-of-the-art steel slab producer • 5 mtpy capacity of high-grade steel slabs • 490 MW combined cycle power plant • Deep-water harbor • Compact, efficient and environmentally friendly facility • Just-in-time iron ore supply (railroad
Slide 30: Next Steps - Opportunities for Ternium
NEXT STEPS - OPPORTUNITIES FOR TERNIUM
Slide 31: Opportunities for Ternium in the next five years
Next Steps Opportunities for Ternium in the next five years Strategic Agenda Next five years • Expansion in Mexico • Continue growing in the Mexican market • Increase in high-end product • Capitalize on the integration of offering CSA into Ternium’s industrial system • Operational excellence • Conti
Slide 32: Capitalize on CSA to continue growing in the Mexican market
Next Steps Capitalize on CSA to continue growing in the Mexican market Strong foundation to continue growing • Integrate CSA into Ternium to take it to its full potential • Reevaluate all downstream opportunities in Mexico • Increase competitiveness in the high-end steel market vis-à-vis imports • I
Slide 33: Next Steps - Operational Excellence: SMART Factory
Next Steps - Operational Excellence SMART Factory • Ternium already completed two decisive stages in its IT evolution: • Technology base to maximize data availability, connectivity and processing power • Expanded that technology to the entire value chain • Next step: SMART Factory, a new concept of
Slide 34: Conclusion
CLUSION CONC
Slide 35: Conclusion
Conclusion • Consistently superior results in attractive steel markets in Latin America • Solid financial position and strong dividend payments • Successful implementation of business strategy geared toward sustainable profitable growth • CSA as an opportunity to grow and strengthen business in the
Slide 36: Ternium Investor Day 2017
Ternium Investor Day 2017