Ternium S.A. · NYSE:TX
Ternium — Investor Day (May 2014)
30 slides from Ternium's investor day presentation, May 29, 2014
Slide 1: Investor Day
Investor Day Solomon R. Guggenheim Museum May 29, 2014 TERNIUM l Investor Day – May 29, 2014
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 10:00am Q&A Session with Ternium management 11:00am Closing remarks TERNIUM l Investor Day – May 29, 2014 3
Slide 4: Speakers
Speakers Daniel Novegil, Chief Executive Officer Mr. Novegil is the Chief Executive Officer of Ternium. 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: Agenda: Safety, Competitive Positioning, Operational Excellence
Safety Competitive Positioning Operational Excellence Strategic Agenda Conclusion TERNIUM l Investor Day – May 29, 2014 5
Slide 6: Safety
Safety Lost time injuries • Safety program launched in 2010 frequency rate (LTIFR) resulted in significant improvement in Ternium‟s safety performance 3.6 worldsteel benchmark: World-class < 0.7 • In wake of the Guerrero facility Annual world avg accident in July 2013, new initiatives 2.2 were i
Slide 7: Agenda: Competitive Positioning
Safety Competitive Positioning Operational Excellence Strategic Agenda Conclusion TERNIUM l Investor Day – May 29, 2014 7
Slide 8: Competitive Positioning: Latin America in Focus
Competitive Positioning Latin America in Focus Latin * ** USA/Can China India Asean-5 CIS America Population (million) 616 352 1361 1252 528 278 Nominal GDP 8.0% 25.1% 12.4% 2.6% 2.7% 3.7% (as % of world GDP) GDP per capita ('000 USD) 9.7 52.9 6.8 1.5 3.8 9.9 Apparent steel use 110 314 515 59 113 21
Slide 9: Ternium Footprint in the Americas
Competitive Positioning Ternium Footprint in the Americas • 9 million tons of steel products shipped in 2013 USA • NAFTA accounts for 60% of total 0.4 mt (5%) shipments Shipments 2013 Ternium Mexico • Ternium participates in Usiminas‟ Usiminas 5.0 mt control group (55%) Colombia • MEX, BRA, ARG, COL
Slide 10: Mexican Steel Market
Competitive Positioning Mexican Steel Market Mexican flat steel market 11 million tons in 2013 • 19 million tons of annual steel consumption 4.7 mt Commercial 6.5 mt 42% • Strong link to US industry 58% Industrial • Increasing demand of high-end steel Net indirect steel exports • Substantial opportu
Slide 11: Industrial Market in Mexico
Competitive Positioning Industrial Market in Mexico Shipments by market • Positioning in new markets through: 2010 2015e o New product development o Certification of new steel grades 14% 25% 59% 49% o Ramp-up of Pesquería and Tenigal 27% 26% o Early involvement in customers‟ product development Cons
Slide 12: Tenigal
Competitive Positioning Tenigal Mexican automotive coated steel market (million tons) 2.0 • Completed on time and on budget 1.5 • Certification process ongoing, 1.0 Other expected to be completed in 2014 • Tenigal to reach full auto-grade Ternium 0.6 0.5 production by second half 2015 2010 2015 2020
Slide 13: Construction Market in Mexico
Competitive Positioning Construction Market in Mexico Shipments of 2.6 million tons to Construction market in 2013 • Positive demand prospects Rebars 20% o National Infrastructure Plan Hot-rolled 36% o Energy Reform Wire rod 6% Tubes & • High value added portfolio enhances Profiles 9% commercial dif
Slide 14: Argentine Steel Market
Competitive Positioning Argentine Steel Market • Healthy steel demand in 2013 Ternium shipments • Despite softening demand in 2014, 13% opportunities in the medium term for: 52% o Infrastructure development 35% o Energy industry • Gaining market share in the automotive Construction Automotive Other
Slide 15: Energy Industry in Argentina
Competitive Positioning Energy Industry in Argentina Non-conventional natural gas resources (Tcf) • Vaca Muerta in Argentina is second 1 China 1,115 largest shale gas reserve in the world 2 Argentina 802 (technically recoverable) 3 Algeria 707 • Natural gas accounts for 54% of 4 USA 665 energy consu
Slide 16: Agenda: Operational Excellence
Safety Competitive Positioning Operational Excellence Strategic Agenda Conclusion TERNIUM l Investor Day – May 29, 2014 16
Slide 17: Superior Operating Results
Operational Excellence Superior Operating Results • Strong market share in growing markets • Focus on value-added products • Industrial expertise • Diversified production base EBITDA margin 19% 18% 17% 15% 14% 12% 7%8% 5% 2009 2010 2011 2012 2013 Ternium Long steel Americas Global Player USA Minimil
Slide 18: New Initiatives: Logistics management program
Operational Excellence New Initiatives Logistics management program • Reduce logistics costs through streamlining of the supply chain, from raw material procurement to steel product distribution • Annual logistics costs of USD890 million Supply Operations Distribution Ships, Barges, Raw materials Ow
Slide 19: New Initiatives: Labor productivity
Operational Excellence New Initiatives Labor productivity White-collar headcount („000) 4.6 • New program aimed at optimizing -7% organizational structure: 2.9 2.7 o Automation of commercial processes (IT tools) o Outsourcing of non-core activities 2005 2012 2014f o Increase of span of control Hot r
Slide 20: New Initiatives: Contractor management program
Operational Excellence New Initiatives Contractor management program • Innovative program to improve Selected service contracts productivity of Ternium‟s services (% of expenditures) suppliers 6% • Focus on 150 contracts which represents USD275 million annual expenditures 29% 43% • Program based on:
Slide 21: Energy cost savings in Mexico - Techgen
Operational Excellence New Initiatives Energy cost savings in Mexico - Techgen • Ternium among the largest private energy consumers in Mexico • USD320 million electricity expenses in 2013 • New 900 MW combined cycle power plant in Pesquería, Monterrey • Project to be completed by the end of 2016 at
Slide 22: Usiminas Turnaround: EBITDA improvement
Operational Excellence Usiminas Turnaround Substantial improvement in Usiminas performance Adjusted EBITDA • Increase of EBITDA and EBITDA margin (R$ million) 21% EBITDA o Focus on domestic market EBITDA margin o Increase iron ore shipments 8% o Increased labor productivity 538 514 655 441 313 218 1
Slide 23: Usiminas Turnaround: shipments, headcount, leverage
Operational Excellence Usiminas Turnaround Substantial improvement in Usiminas performance Steel shipments to Brazilian market Iron ore shipments (million tons) (million tons) 11% 21% 4.9 5.0 5.4 6.1 6.8 5.6 2011 2012 2013 2011 2012 2013 Headcount Net Debt to EBITDA ratio („000) -25% 30.6 4.9x 25.0
Slide 24: Agenda: Strategic Agenda
Safety Competitive Positioning Operational Excellence Strategic Agenda Conclusion TERNIUM l Investor Day – May 29, 2014 24
Slide 25: Investment Plan 2011-2014
Strategic Agenda Investment Plan 2011-2014 Capex focused on differentiation and cost reduction Market positioning in high-end and value-added products • Automotive hot-dip galvanizing mill (Tenigal) • Pesquería cold-rolling mill Capex • Slab caster and vacuum degassing station (USD million) • Hot-di
Slide 26: A New Commercial Profile
Strategic Agenda A New Commercial Profile Increasing shipments to NAFTA market Shipments growth Shipments mix • Expected growth of 42% (base 1000 = 2010) 2015f between 2010 and 2015 142 • NAFTA will account for 66% of 110 100 66% total shipments by 2015 34% 2010 2015f NAFTA Non-NAFTA Increasing high
Slide 27: Envisioning Ternium's Future
Strategic Agenda Envisioning Ternium’s Future Envisioning Strategic Agenda • Leader in key markets, high • Expansion in North market share America market, mainly Mexico • Focus on value-added products • Increase in high-end product offering • Differentiation • Slabs supply strategy • Profit sustaina
Slide 28: Agenda: Conclusion
Safety Competitive Positioning Operational Excellence Strategic Agenda Conclusion TERNIUM l Investor Day – May 29, 2014 28
Slide 29: Conclusion
Conclusion • Ternium is a leading steel company in an attractive market with substantial growth opportunities • Positioning in the Mexican industrial market through investments in new facilities to supply high-end products • Superior results based on industrial expertise, focus on value-added produc
Slide 30: TERNIUM l Investor Day – May 29, 2014
TERNIUM l Investor Day – May 29, 2014 30