Ternium S.A. · NYSE:TX
Ternium — Investor Day (April 2008)
27 slides from Ternium's investor day presentation, Apr 11, 2008
Slide 1: Investor Day
Solomon R. Guggenheim Museum, New York Investor Day
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
08:30am Continental breakfast and registration 09:30am Presentation by Daniel Novegil, CEO 10:30am Coffee break 11:00am Q&A with Ternium’s management 12:00pm Lunch Event Schedule
Slide 4: Steel Market Trends
Competitive Positioning Conclusions Mexico Growth Steel Market Trends
Slide 5: Steel Market Trends
Competitive Positioning Conclusions Mexico Growth Steel Market Trends
Slide 6: Steel Use Growing Worldwide
Source: IISI Committee on Economic Studies / Global Insight. 1 CAGR: Compounded Annual Growth Rate. 2 PPP: Purchasing Power Parity World Apparent Crude Steel Use (thousand tons) Steel Use Growing Worldwide
Slide 7: Capacity utilization rates at record levels
• Worldwide capacity expansion not as strong as anticipated a year ago, and in some cases already slowing down (e.g. China): World Apparent Crude Steel Use (thousand tons) Source: IISI / Credit Suisse / Ternium • Raw material availability • Infrastructure bottle-necks • Environmental issues • Engine
Slide 8: Key Input Prices on the Rise
Source: Clarksons (Panamax - 70000 dwt) Source: NYMEX Source: BMA / Source: Vale Iron Ore Pellet (US$/ton) Natural Gas (US$/MMBTU) Freight (US$ thousand per day) Coal (US$/ton) Key Input Prices on the Rise
Slide 9: Price Cycle & Cost Pressures
Cost-pushed Price-pulled Supply Driven Demand Driven Privatization Consolidation Source: CRU / WSD / * In constant US dollars (base April 2008) ** 2008 estimate assumes iron ore pellet and lump price increases of 87% and 66% respectively and coal increase of 200% Cost: Hot rolled band operating cost
Slide 10: Key Industry Trends
US crude steel production China’s net steel exports US steel service center inventories US steel imports Source: IISI/MAR/Merrill Lynch Source: U.S. Imports Administration Source: MSCI Source: AISI Key Industry Trends
Slide 11: Competitive Positioning
Competitive Positioning Conclusions Mexico Growth Steel Market Trends
Slide 12: Ternium's Leadership in Latin America
Source: Ternium / Corporate Websites Sidor Hylsa IMSA Ternium’s total steel shipments (1) ( finished + semifinished steel in mtpy) Top players in Latin America (2007 finished steel shipments (1) in mtpy) Siderar (1) Imsa included from Jan 07. Shipments from U.S. assets sold to Blue Scope are not inc
Slide 13: Strong Market Share in Fast Growing Markets
(1) Imsa included from Jan 07. Shipments from U.S. assets sold to Blue Scope are not included. Strong Market Share in Fast Growing Markets Shipments by region (million tons) Source: Ternium’s Network +58% Ternium’s Markets * Coated steel
Slide 14: Ternium's Relatively Low Exposure to Raw Material Price Increases
Impact of 2008 raw material price increases on cash cost of produced slab Iron ore supply (2007 in mtpy) Source: • One third of Ternium’s iron ore needs is provided by its own iron ore mines in Mexico. • Three quarters of Ternium’s crude steel production rely on natural gas instead of coal. *** self
Slide 15: Ternium's Business Model
Planning & Operations Steel Procurement • Centralized & lean functional organization facilitates know-how and best practice sharing, accelerates learning and experience curves, and provides economies of scale and scope. • Strong focus in IT & IS (Visual Flash tool, unified SAP, etc.) • Flexible busi
Slide 16: Mexico
Competitive Positioning Conclusions Mexico Growth Steel Market Trends
Slide 17: Integration of Ternium Mexico strengthens leading position in Latin America
Industrial Market share in Mexico (flat steel) Commercial Ternium’s shipments in Mexico (tons) Ternium Mexico’s production capacity Source: Integration of Ternium Mexico strengthens leading position in Latin America
Slide 18: Mexico's Semifinished Steel Balance
• Local slab sourcing in Mexico, minimizing logistics costs Average operating conditions (million tons per year) Source: * Slabs & Billets Mexico’s Semifinished Steel* Balance
Slide 19: Slab-HRC Spread
Source: CRU World Apparent Crude Steel Use (US$/tons) Slab-HRC Spread
Slide 20: Integration Synergies
— Mills specialization — Procurement & logistics — Management reorganization — Working capital reduction — Marketing consolidation Larger runs, dedicated mills, rationalization of attributes, higher efficiencies • Pre-tax synergies estimated to be US$200 million per year in the medium term: Improved
Slide 21: Growth
Competitive Positioning Conclusions Mexico Growth Steel Market Trends
Slide 22: US$3.0 billion organic growth plan
Upstream Downstream Brownfield projects Mining Concentration Pelletizing Upgrading of Steelshop & existing facilities Casting Rolling through US$3.0 billion organic growth plan (next four years) Coating Customizing Warehousing Distribution Greenfield projects Increase iron ore self-sufficiency Balan
Slide 23: Capex Plans (organic growth)
Includes investments under study (e.g., CRC and HDG in Argentina) Capacity Expansions (million tons) Capex Plan (million US$) Source: Capex Plans (organic growth)
Slide 24: Expanding Our Mining Footprint in Mexico
Note: Proven and Probable Reserves detailed in this slide include Measured and Indicated Resources Iron Ore Reserves Projection (concentrate equivalent million tons) Iron Ore Mines Source: Expanding Our Mining Footprint in Mexico § Current reserves at 130 million tons, representing approximately 30
Slide 25: Conclusions
Competitive Positioning Conclusions Mexico Growth Steel Market Trends
Slide 26: Conclusions: Strengths & Growth Opportunities
• Regional leadership, strong market share in fast growing markets. • Cost advantages relative to competitors. • Logistical advantages (short lead-times, lower freight rates, duty exemptions). • High vertical integration, from iron ore mines to service centers. • Experienced management team with suc
Slide 27: Ternium
Ternium