Investor Day 2018

Sep 7, 2018

Slides

Good morning. Thank you for joining us today at Investor Day. My name is Sebastian Marti. I am Ternium's Investor Relations Director. Firstly, a quick note on safety. If in the unlikely case of an emergency, please follow the exit sign at the end of the room. Joining me today is Ternium's CEO, Mr. Daniel Ho, sorry. Mr. Maximo Vedoya, too many years. And several members of Ternium's management team. Okay. Let me show you the agenda for today. It's a very straightforward agenda. We'll have a presentation by Mr. Vedoza and then we'll go directly to the Q and A session. Let me remind you that this presentation 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 presentation. With that, we're ready to begin. Leave you with Mr. Vedoso. Thank you very much. Okay. Thank you, Sebastian, and good morning, everyone. Welcome again to the Sternium's Investor Day. I'm very glad that you can all join us today. Before starting, let me introduce the management team that is joining me today in this Investor Day. Let's start by the old ones, the one that has been coming here for a long time: Pablo Bricio, our CFO Martin Berardi, President of Ternium Argentina or Carmen Terro, which is Planning and Business and Global Business Development General Manager and Sebastian Marti, which is our Investor Relations Manager. And the new ones that comes here to the Investor Day for the first time, Marcelo Chara. Marcelo Chara is today since we acquired CSA in Brazil, Ternium's Brazil president, he has been working with us for more than thirty years and he has several position mainly in the industrial department. Before coming the CEO of Ternium Brazil, he was the industrial vice president in Ternium Argentina. He was also industrial vice president in Usiminas. So he has a large experience working in different industries or different sites of Ternium in Venezuela, Brazil and in Argentina. And last but not least, Cesar Jimenez. Cesar Jimenez has also more than thirty years of experience in the steel industry. He works first with Ilsa and then with IMSA and he came to work with Ternium in 2007 when we acquired IMSA. He works there in the commercial department, in the supply chain department. And the last years, he's been Ternium's Mexico Vice President in the commercial side. And before that, he was the CEO of Tenegal, the joint venture that we have there in Monterrey with Nippon Steel. So as you know and you can see for what Sebas said, this is my first year Asternium CEO. I have been participating in a lot of investor days as Ternium's Mexico President, but this is the first Investor Day that I take as CEO of Ternium, so please be kind at least in the first one. And as I said previously, I I think you all know my my trajectory, but previously, I've been living in Monterrey for six years as I was Ternios Mexico president. I will continue living in Monterrey. I know Daniel was living in Argentina, but but I will stay in Monterrey. And from there, we'll we'll manage the company and travel around. Hope this works. No? Oh yes, perfect. So we are going to cover a lot of topics. I will try to go as fast as I can and so we let we leave a lot of space for Q and As. First, we will go over our management approach. We have, as we have been seeing in the last investor days, a track record of being a very profitable company, but that's not the only aspect of the business that we work to ensure that our business runs for the long time. Then we will go over the stage of the steel markets and our main markets. And finally, we are going to review the transformation process that Ternium is going on, which was triggered mainly by the acquisition of CSA in Brazil. Sustainability. As I said, we have a consistent track record of being a very profitable company. As you can see, I think, in the right chart over there, our performance for the last years has been better than that of our peers in the region. But the way we think of success is a more comprehensive way. Leading profitability goes hand in hand with many other aspects that you can see over there: environment, health and safety, industrial excellency, relationship with our community, integrity, recruiting, training and retention of talent, market leadership and also the development of our value chain. And I will go quickly through many of these aspects in the next slides. First, environmental health and safety. We devote a significant amount of resources to this and we believe this is key for our long term sustainability. We have an EHS management system in all our facilities. We train all our employees and management is responsible for EHS in all our plants. If we talk about safety, you can see it there in the upper chart. We reached a lost time injury frequency rate of only zero point seven. And if you look the charts, we are decreasing that rate year after year. To take to make a mention of what the number means, world steel the benchmark that world steel does is that that rate is one. So we are much lower in injury rate than the media of all the world steel companies. Many years ago, we deployed this system with the help of DuPont. We started certifying our operations in 2015 in OSAS 1801. And today, without Brazil, 85 of our people work in facilities that are certified under this international standard. Brazil, we are working on tailings Brazil and it's going to be certified in June. We also have environmental certification in most of our facilities. Again, without taking into account Brazil, 99% of our people work in facilities that are certified environmentally and the ISO or ISO 14,001, which is a very tough environmental certification and we expect to certify Brazil, our new facility in Brazil, next month by this certification also. On the other hand, when we acquired Ternium Brazil, when we acquired CSA, they have been certified in ISO 50,001, which is an energy saving certification, which to be honest we like it very much. So we are taking that program to all the other facilities. We hope next year to certify the San Nicolas plant in Argentina and the Pesqueria plant in Monterrey and from that on all the other facilities. Also, our environment performance has been recognized by the Mexican government. Most of our facilities in Mexico are Industri Olympia, that's what it's called. It's clean energy. And we have a certification every year, so we have to work hard to get that certification. And also they have been recognized by the Green Building Council here in The U. S. Pesqueria plant is the second facility, industrial facility in all Mexico that obtained the LEED certification by this building the Green Building Council. The LEED certification is a certification in leadership in energy and environmental design. So to close, we invest last year $70,000,000 in our facilities to reduce our environmental footprint and the risk we have in operation. And this year, in 2019, we are going to invest almost €100,000,000 in that. Second, integrity. Integrity is a key part of our long term sustainability. Cardium is committed to build a corporate culture of integrity based on ethical behavior and obedience to the law. As you can see, we have a very strong corporate governance. The Audit Committee is formed by three independent members. We have another department, Interbium, that reports to the Chairman of the Board and to this independent Audi Committee, so that strengthens its independence. We have a BCCO, a Business Conduct Compliance Officers, that reports directly to me. We have a Code of Conduct that reflects the best practice in ethic and integrity. We have a Business Conduct Policy that regulates our relationship with public officers. These both norms are mandatory and are conditioned to employment. All our employees receive these, acknowledge these and get trained on how to recognize and deal with no transparency issues. We have a compliance department that design, maintain and test all of our internal control model aimed to ensuring the SOC certification. We also have confidential channels that everybody can use to report irregularities. To make an example, 2017, we received 130 this anonymous compliance and 30% of those was proven to be true and measures we are taking. So in short, we believe integrity and compliance are key for a long term sustainability of the company, and we will continue working hard to making our corporate governments as strong as possible. Let me now talk a little bit about our efforts to make our value chain stronger, especially with the small and medium enterprise. We launched a program that's called PROPIMES. PROPIMES is small and medium enterprise in Spanish in Argentina in 02/2002. And we took this program in 2006 to Mexico. And we are thinking in launching this program next year in Brazil. What is this program about? The idea of this program is to help our customers to increase their business to consume more steel and also to help our suppliers to be more competitive, to be more productive so it can also increase the competitiveness of Ternium. How we do it? We do it by training, by develop of industrial projects, by business consultancy. We do also institutional assistance. These are very small companies, so they need that. We gave them commercial support and in some cases financial aid, not to run the business, but financial aid for special purpose, for special investment so that they can grow the company. Some numbers of twenty seventeen, 1,600 companies were included in this program or participated in this program during last year. We have eighty six thousand hours of training to these companies, 400 management consulting projects in 2017. We partnered with several universities and business schools. You can see it all over there, probably the best in Argentina and in Mexico so that they can deliver this training to all of these companies. So it's a very strong program and you know the growth you see the growth of our community. Last year, we have an event, for example, in Monterrey. We have both events in Argentina and in Monterrey. But last year, we have this event in Monterrey. The Secretary of Economy came event to speak to make a conference to all. We were more than 1,500 people in the conference. He was quite impressed because no association, not even CONCAMIN, which is the Association of Industries in Mexico and they are very devoted to the SME enterprises could get so many people involved in a program like this. We also believe in deep ties with the community. It's fundamental for the company to grow with the community for our long term sustainability. We actively participate in all the communities we operate mainly through education programs, but also we do something in health and to promote culture. But let me show you a video of one of our projects in this sense that we made in Pesqueria. This is the last project that we have. I think it's very clear of what we do in the community. Okay. I hope you like it. We are quite proud of what we made in this school in Pesqueria. It's expensive, but it's a project that has a huge impact in the community. It's really transforming Pesqueria. Pesqueria, although it's 30 miles from Monterrey, which is one of the richest city in Mexico, was one of the poorest counties in Mexico. It's a big difference. And as I said, as the video said, only two out of 10 students continue their high school education. So eighty percent of the kids when they were 15 years old, they stopped studying there. So I think this make a huge impact. We most of these kids would never dreamed of studying a high school and the first generation is going to be graduated in June next year. And talking with them, with the 128 people kids, half of them are already thinking in going to the university. So I think it's a huge, huge impact. Of course, we do this in all the communities, not that school, but we help with the local school. We improve the facilities of the school. We give scholarship to the kids they need it. We do scholarship also in higher education. We do even scholarships in PhD in the University of Autonomy and Leon or with the Tech of Monterrey. And we also make several programs with after school. In most of our communities, Pesqueria, Colima in West Mexico, Santa Cruz near our plant of Rio De Janeiro, those are communities where the kids study only with four or five hours. So they have a lot of time or spare time that they spend on the treats. So we are producing a lot of after school program with sports and with science so the kids stay in a place and they don't have to be around with other people with the dangers that I think that represents. So in short, we foresee education and welfare of our community through high impact initiatives as a way of making the community stronger. We see that our growth has to come with the growth of our community, too. Summing up, our comprehensive business strategy is giving positive results. We decreased our industry frequency rate. We are certifying our operation in EHS management systems used internationally. We are producing a significantly positive impact in our community, both on a human level, as you can see, but also in an economic development point of view. And we do all this help while achieving a very good operating performance and maintaining a solid balance sheet. And also, as you can see in the lower chart, by increasing dividend payments to shareholders over time. So this is what I'm trying to convey when talking about a comprehensive and sustainable business strategy that all shareholders are taking in mind when we plan for the long term. Well, let's go now to talk a little bit about steel market and what's going on. I start with the global what's going on in the global from a global point of view and let me talk for three specific things. First, the world is growing and this has a positive impact in the steel consumption. We expect that steel consumption is going to grow 3% this year. This is a big number if you compare to the last ten years. Only two years in this ten were bigger than this. And one of the important part in this number is that most of the regions are growing. It's not only China, but The U. S, Europe, Canada, some parts of Asia. Only Argentina and South Korea are not growing South Korea for another problem. But most of the region are growing and this is very good as it helps, I don't know, reduce but attack the problem of overcapacity that the steel industry has. So what happened in these last years? Last year? Three things. First, trade measures. There is a lot of trade measures, discussions and things going on. And I think that from a steel point of view or from a turning point of view, this is a very good thing. If you remember, we have been advocating for for fair trade to combat unfair trade and and and subsidies for a long time with not a lot of of of of hearing from the governments. I mean, it was not very successful. But in the last years, this started to change. And two years ago, we managed to create the global firm for excess steel capacity in the G20. This is the only subject that the G20, the 20 most advanced economy in the world, is the only subject from a business perspective that is talking in the G20. They acknowledge the problem and we with the government are finding solutions. But these solutions take time. In the last year, some of the governments that were a little bit impatient that measures were not take start more aggressive trade remedies. The most notable was Section two thirty two by The U. S. But also Canada, Mexico, Turkey, Europe and some countries in Asia are also taking measures to save what save warts for this overcapacity or unfair trade issue. Again, I think increasing awareness of this problem, awareness of the unfair trade that the steel industry is subject to is a very good thing for companies that operate under fair trade as us. Second thing that happened is NAFTA, and this is very significant for Ternium. Last week, The U. S. And Mexico signed an agreement, well, not signed, got an agreement. It's already it has to be signed in ninety days with the renewal of a new There's a lot of things that are changing in this new NAFTA. NAFTA, but I think there are two or three things important and very significant. The first is the sunset clause. If you had been seeing what it what was the discussion of of NAFTA, one of the most, tough, things that the US government was asking was that the new NAFTA will be canceled every five years unless U. S. Specific both countries specifically renew it. That was kind of tough. The new sunset clause is the sunset clause that was closed last week, the NAFTA is going to last for sixteen years. And from the six years onwards, people are going to discuss if they renew it again or they change a little. So they have ten years to get an agreement for a renewal for another sixteen years. So this gives much more certainty to investments. The second thing is the rule of origins, especially in the car industry and this is very important for us. The car industry in the old NAFTA has a rule of origin of 62%. That means if 62% of the car with a formula was made in the region, it was considered NAFTA. If not, they have to pay duties to go to The U. S, for example. The new rule of origin elevates that number from 62% to 75%, increasing 3% every year. So in a couple of years, it's going to be 75%. That means that more regional components has to be made in the region. But there's another thing that is important and it's regarding steel and aluminum. Steel was not part of the NAFTA. I mean if you produce Sador with steel and you produce it in Mexico, it is Mexican regardless if the steel was coming from China or was coming from The U. S. Or was coming from Mexico. And in the new NAFTA, 70% of steel and aluminum has to be produced in the region. So for us, that's quite an accomplishment. And the last part again, there's a lot of things and we can discuss NAFTA in the Q and A if you want. But the last part that I think is very, very important is regarding section two thirty two for cars. If you look at the news a couple of months ago, the Trump administration launched this investigation of a two thirty two for cars saying that the imports of car were damaging national security and so, Will Ross, the secretary of economy, has to analyze if this is true. And if it's true, he has to put tariff or quotas in the imports of cars. That if that goes through, it would have a huge impact on Mexico. I mean, Mexico exports almost 1,800,000 cars to The U. S. And almost €70,000,000,000 of auto parts to The U. S. So in this new agreement of NAFTA, what they signed is a signed letter that says if The U. S. Is in sometimes putting this measure of two thirty two or other measure of safeguard against the car imports. Mexico, have a quota. And we have a quota that is higher than the one export today, both in cars and in auto parts. So again, they're going to restrict the growth of Mexico in that in car, but still they have a huge amount of imports or exports to get to that quota. So the quota is bigger. It's 2,400,000 cars, for example, and I think €100,000,000,000 export in auto parts. So I think those three things are very good. I don't know if a Section two thirty two in cars the U. S. Administration is going to put a Section two thirty two in cars. But I think that at least this is a safeguard for Mexico if this goes through. Third thing is what is going to happen now with the two thirty two of steel that is affecting, of course, the steel industry in Mexico. As you know, from June, Mexico's export to The U. S. Are tariff with a 25% tariff. So we have been discussing that. We were in Washington all the week all last week discussing this. There's no agreement yet, But I think the solution in next month will come from two ways. One, two thirty two is going to be eliminated from Mexico. That's the logical thing to do once you sign NAFTA. Or the other one is that if Mexico if The U. S. Don't want to take off the two thirty two from the table, the two thirty two against steel, Mexico is going to mirror that tariff for the export of The U. S. To Mexico. And as you know, U. S. Export more steel to Mexico than what Mexico export to The U. S. So it doesn't make any sense they choose that one. But again, I think those are the two options that the Mexican government is discussing and there can be one in the middle with quarters as they do in cars, but those quarter has to be high enough not to damage the Mexico steel industry. So I think we are not going to have a settlement in the next couple of weeks, but I think that in two or three months we are going to have a solution to the February and it has to be in the three ways I told you. So to continue, I will ask Cesar Jimenez to give you as an update of how Mexico is doing and how we are doing in Mexico. Please, Cesar. Good morning, everyone. Thank you for attending this presentation. What I will try to do in a very short period of time is to show you a little bit part of our results, talk to you a little bit about some of our strategies and give you a quick overview of the Mexican steel market. As you can see on the top right chart, Pernio Mexico shipments have been growing constantly during the past few years. We consider Mexico a very attractive steel market for three main reasons. The first one is a growing use of high end steel using mostly for industrial customers. The second is a big large base of customers requesting and requiring higher levels of service. And third and more important is because competitiveness is based more on product and service offerings than on pricing. Don't get me wrong, pricing is always important, but it is not the main factor to make a decision. Participation of industrial sales, as you can see also on the chart on our total sales mix, also have been increasing constantly over the years from 46% in 2013 of industrial products shipped into Mexico as part of our mix to 55% in 2017. This is a reflection of the very good activity on the industrial market in Mexico and the success of our sales activities there. Now 2018 is a different year, peculiar, kind of uncommon for three also three big reasons as Maximo mentioned. The first one is a long and ongoing negotiation process with United States and Canada for a new free trade agreement. The second one is the tariffs imposed by the U. S. Administration under the Section two thirty two on steel and aluminum products and also the retaliation that the Mexican government did against this. And last, but not least, we have just ended up a couple of months ago, one of the biggest election process in in our history. We elected at the July a new president, both the congress and the senate, nine state governors, and 30 state congresses. As you can imagine, all these events, changed the dynamics of the market in Mexico and that also affected the steel industry. All in all, we believe that in 2018, steel consumption in Mexico will be slightly below the number that we had in 2017. I will go in deeper detail about what is happening on industrial market and also on construction market because they show very different dynamics. Industrial activity in Mexico has been surprisingly strong during 2018, taking into consideration all the challenges that I just mentioned. If we take a look to the automotive industry, for example, after a very good year in 2017 in car production, growing 13% against 2016, we expect this year to that number to be slightly above from 3,900,000 to maybe around 4,000,000 cars produced in Mexico. But as you may know, there are still some companies who are ramping up production in Mexico such as the Compass facility in Aguascalientes. And there are companies that will be starting production in Mexico in the next years, the BMW facility in San Luis Potosi and the Toyota facility in Guanajuato. So these are good news for Ternium. Also, if the NAFTA negotiation processing fee is finished and signed, as Maximo mentioned, the companies will require a higher integration of North American components that we believe they will be very good for our customers and also very good for us. Now if we take a look on the left side to other industries other than car manufacturing, you can see that almost all the industrial segments with the only exception of electrical energy and energy equipment has been showing very positive activity indicators in the 2018. We believe that this activity will continue to be strong on the rest of the year and also in 2019, basically driven by the good economic performance of The United States economy. What are we doing on this segment? Basically, are reinforcing our differentiation strategy, developing new high steel grades and using every day more of the high end steel slabs that are coming from our Rio De Janeiro facility. This has several advantages for us in Mexico. First, we are expanding our product offering. Second, we are improving service time to our customer. Third, we are reducing also time to market of new products. So that also is strengthening us with our strategy for this market. Now if we go to the construction activity, on commercial market, I will talk mostly about construction activity because this is the main driver. You will see on the chart that construction activity has been relatively stable during the past years as the growth in on private investment was offset by a decrease in public infrastructure spending. I will admit that I'm not very optimistic on the short term outlook of this market for the following reasons. As you know, we are in the middle of a transition process in Mexico after the elections. We have a long transition period from July to December. And there is a new party that's going to take charge on the government. This period in the past has been characterized by, lowering of public infrastructure projects during the transition period. So we believe that this will be happening. We are already seeing it in the second half of this year and maybe it will continue until the 2019. After that, I believe that infrastructure is going to pick up again, is going to improve. The new government has announced several projects devoted to infrastructure. They are talking about the new train in the Mayan Peninsula, revamping of existing oil refineries and the building of a new one, improving infrastructure spending in roads and ports. So that will mean if they are going through with these projects that they will continue increasing public infrastructure and we have a kind of deficit in Mexico. Also, with the new NAFTA, if signed, that could trigger also additional private investing. So we feel confident that in 2019, that will end up in a positive way. What we are doing in this segment as a strategy is to continue reinforcing our service office our service offer to our customers in Mexico by the intensive use of information technology and Industry four point zero tools. This has been helping us to optimize inventory management, enhance our service offer to our customers among other benefits. So as a quick summary, TENIM has been showing very good results in the past. Industrial activity seems to be on the good track and continue to be very strong on the next years. Construction activity maybe will not be so strong in the next month, but we believe it will pick up on 2019. Our differentiation strategy and our service offering strategy will help us to continue delivering good results. Thank you. Thank you, Cesar. Why don't you join us so I'm not that lonely up here? As you see, I mean, we continue being positive in Mexico, especially industrial sector. It's true that there is a transition and always in transition there are some backups in Mexico. But to tell you the truth, I am seeing this transition much better than the ones before. I mean, after the election, the first week after the election, mister Lopez Obrador, the new elected president, had already chosen all the secretaries. So all the people that is going to work with him was already nominated. That's unprecedented in Mexico. They usually wait until late November to do that. And we have met with several of them and they are already working. So I think or I'm optimistic that this transition period is going to be much better than the previous one. Also, last Tuesday, in Monterrey, I met with the elected president, Lopez Obrador. We have a meeting with him and part of the team. And I was quite positive with all the plans that the new administration has. We also talked with him about the new investments in Mexico, but we are going to talk about that a little bit later. Well, now Martin will have the very easy job to enlighten us about what is going on in Argentina. Hi. Good morning to everybody and thank you for being with us today. I was I will try to be short. Last year, you may recall that we were forecasting an apparent steel use flat steel use of 2,700,000 tonnes, and we did better than expected. We reached 2,900,000 tonnes. But this year, we are forecasting a decline of 5%. Why? The agricultural business is affected by the worst drought in the last fifty years, increasing the production of grain by 20%. And this effect became evident in April, May, the time of the harvest, putting pressure on the financial market, putting pressure on the Argentine peso. This together with a significant volatile international financial markets, capital outflows for many emerging markets and especially from Argentina. This caused the devaluation of the peso by 100% in the beginning of the year and 40% in the last sixty days. Of course, this affects the economy dramatically in the second half of the year. Economists were saying that at the beginning of the year that the GDP will be growing by 2.5%, 3% this year. And now they are forecasting a 1% to 2% decline because of the recession in the second part of the year. Of course, in this situation, we are having soaring interest rates reaching 50% to 70% annual rate for the peso. That is creating a destocking in the whole distribution network. Of course, the market for vehicles, durable goods, vehicles, home appliance are suffering. That's why we are projecting a 5% decline despite the fact that the first quarter the steel use was 16% greater than the year before. So the situation changed dramatically in April, May. Looking forward, we never lose our hope. We are foreseeing some rebound in the economy driven by many factors that are still working and they're doing very well. I think that the agricultural sector will give us back 1.5%, maybe 2% for the economy growth next year. Grain production is projected to reach record levels, maybe 20% more. The development of Vaca Muerta is going very well. Investment in this area are at a pace of 2,500,000,000.0 to $3,000,000,000 a year. The production of shale gas will reach more than 25,000,000 cubic meters per day. That will be replaced that will be will be able to the country will be able to replace all the imports of LNG, liquid natural gas. And that will have a lot of impact in the economy because the value chain of all the non conventional investment is highly integrated in Argentina and will have also the impact of export. Argentina will be exporting natural gas in the next summer, so there will be a surplus of natural gas in the coming years. The construction sector, there is some uncertainty. Of course, we will be seeing some decline in government spending in the infrastructure sector because they have new fiscal targets to comply. But that could be offset by the kickoff of the public private infrastructure projects that maybe will start in the last quarter of this year. Also, the renewable energy projects are underway. All the projects approved by the government covers account for almost 15% of the national generation capacity generating capacity. So these four factors could we think that could offset the fall in the general consumption of the public. And maybe we are projecting for next year our best scenario is a rebound in our steel market of 3%, reaching 2,800,000 tonnes next year, with much lower than the 3,000,000 that we have projected last year. But we are quite optimistic that once this financial volatility is over, the country can grow again next year. Thank you, Maximo. Thank you, Martin. Stay with us please. We have more. Next, Brazil. Brazil is an important market for Ternium but in different ways. For one, we have the new facility in Rio De Janeiro or Ternium Brazil, but that facility is not affected very much of what can happen in the Brazilian market because it's an export mainly an export facility. So it's more cost driven and Marcelo is going to talk a little bit about this in a couple of slides. But the market or the consumption of steel of how the economy is doing in Brazil has or affect Pusiminas for one side and also our industrial customers in Argentina that are very linked to export to the Brazilian market. And Brazil is doing a little bit better. After four years of decrease in consumption from 2013 to 2016, steel consumption in Brazil decreased by 35%. It's a huge number decrease. Fortunately, in 2018 this year, steel consumption start growing a little bit more. We expect to be 6% higher and you can see that improvements in the numbers of Usiminas. Shipments in Usiminas are increasing. EBITDA in Usiminas is increasing. 2017 was not a bad year and 2018, at least the first half, is looking very good. And also the net debt to EBITDA ratio is moving back to normal. It's around two today. But in the years before that, it was much, much higher. So I think the situation in Brazil is improving. I know there are elections. I know we have a very bad news yesterday and I really don't know today. I cannot say today what is going to happen with the attempt of one of the candidates, the leading candidate in Brazil. But from economic point of view, we see that Brazil is recovering and the slowdown was so big that I think it's going to continue recovering next year. Also this year, we signed an agreement with Nippon Steel regarding the governments of Fusulinas. This was a very important step in our relationship and we will continue working together always for the benefit of Usiminas. Last of the markets, Colombia. We never show Colombia here in the Investor Day, but Colombia is the fourth largest steel market in Latin America and it's becoming an important part of Ternium. Colombia is mainly a construction market. There's not much industry there in Colombia, so our operations focus on long products. But there's not enough capacity to produce oil production and a big part of the market is supplied by imports. So last September, we announced a new investment in a rolling min for rebars. It's going to be located if you see the map in the north of the country in Barranquilla. It's going to be a mill that produces 500,000 tonnes of rivers and it's going to be started at the end of next year. The important part of the mill is if you see all the other dots that are in the map, those are the production facilities of long products in Colombia. And they are all in a center part of the country. And this country has three range mountains, so it's very complicated to translate. Logistic costs are very high. But almost 50% of the consumption is from there upwards. So putting a meal in the north part give us better logistic access to almost 50% of the market, which I think is going to be a significant improve. The total investment we are doing is almost $90,000,000 So last chapter. Well, since in last Investor Day, W made some big changes that somehow are transforming the company in many positive ways. One of those was the CEO and I hope that one is one of the positives, but you'll say that. But the integration of the new SLAF facility in Brazil triggers significant opportunity growth for us not only in Brazil but in all of the other countries. So I would like to talk in this last chapter of how Ternium industrial system is changing, what are the opportunities we see in this change and how we are changing our management approach so that we can take the best of these opportunities. We have another video that kind of show what I'm talking about. Ternium integrates one of the world's most modern steel plants into its industrial system. The new plant has it is the platform for a new era of added growth for Ternium in The Americas. With a total crude steel capacity of 12,400,000 tons a year, We are now the largest steel producer in Latin America with operations in Argentina, Brazil, Colombia, Guatemala, Mexico and The United States. U. U. And the the industrial center in Pesqueria and a new reinforcing bar production facility in Columbia, which more than doubles our capacity in the country. We the the 20 pleased Chief We are to spread across five countries to improve grow every day our offer of high end steel products and enhance our differentiation. Our work and research and development fuels the innovation of steel to meet ever increasing customer demands and market needs. We are developing steel that becomes lighter, more durable, steel that is clean and that can be recycled infinitely to create a strong future for our continent. We build our differentiation on the foundations of industrial and technological excellence and on customer service. From our mills to our customers, to the millions of people across The Americas who benefit from Ternium Steel, Ternium continues to evolve and integrate. Turning sustainable growth for The Americas. Okay. Thanks. Well, I hope you see a little bit in the video what I'm talking about when I said that Ternium was kind of transforming in a different company. Today is exactly one year since we took over the CSA facility in Rio De Janeiro. And for this chapter, let me ask Marcelo Chara to give us an idea of what is going on in Rio and what we have been doing for this last year. Every time I see this film, I really feel emotion. And if you walk around through the mill, it's really impressive. As we mentioned, it's one of the most modern facilities for making steel in the industry. What we have focused with our team in Rio basically and mainly has been improving the efficiency of our industrial system. So in the last in the very first nine months of operation, we have increased the throughput nearly 5% in most of the lines, most of the operations. We have also concentrated in strategic maintenance practices and doing benchmarking and getting the best of our industrial experiences through The Americas in increasing the availability of critical processes. That not only helped us to increase production level, but also to influence to improve the efficiency of some key process to get a better cost efficiency operation. For instance, we increased the scrap and solid charges of the converters up to record levels of 9%. We increased the fuel injection in the blast furnaces. We improved the raw materials mix of the blast furnaces using more sinters since we increased capability of the sinter plant. And all that initiatives and several more that we developed for during the last twelve months helped to make a more sustainable, more stable operation. Another very important thing was we developed a strategic plan, midterm plan to surpass the original design capacity of the plant. We will surpass that in the next times. Another very important initiative as we can see in some of these graphs that we tried to explain to you is we focus on productivity at whole. Since we have fully integrated our operation, our matrix management system, Termium, we avoided the duplication of some tasks and we did a much more lean structure. So in terms of the structure, white collar headcount, we have reduced in the first nine months 15%. And looking as a whole in parallel with all the operations and apply a benchmarking of best practices of how to operate facilities and all the processes, we find some improvement opportunities to improve productivity at home. We have incorporated some automation processes even where we have installed for robots in the platform of continuous casting machine, not only to improve the labor productivity but also to improve the safety conditions of the operations. Summing all having all these initiatives working together, when we compare the last quarter with the first quarter of our operation, we have increased as a whole 9% the total productivity of the facility. In terms of efficiency, in terms of cost, we have incorporated our Exidos procurement area, global purchasing area into our facility in Rio that helped us to incorporate its important list as a supplier on a very competitive basis in all the supplies that means to feed a plant of 5,000,000 tonnes capacity. Definitely another very important factor was to strengthen deeply our supply chain processes. So planning, production scheduling, logistic, order management, all that was deeply developed with IT tools. And now it works like one piece in the line supply chain line with our rolling mills and finishing facilities in The Americas to improve the efficiency of the whole industrial system. Thank you very much for your attention. Thank you Marcelo. Quite impressive job for one year only. A few weeks later that when we took over the facility in Rio De Janeiro, we announced the investment in a new hot rolling mill in Pesqueria. This was I think October. And this facility is the missing link between our new facility in Brazil and the modern state of the art facilities, cold rolling mill and the galvanizing lines in Pesqueria. So when this facility is running, we are going to have a totally integrated industrial system that is going to be, I think, the most sophisticated in The Americas. If you see the chart over there, this hot stream mill will expand our product range a lot, at least from a dimensional point of view. The orange one is the new capabilities of the new compared to the other four we have. So it's a huge expansion from a dimensional point of view. And it's also a huge expansion from a quality point of view because this mill is going to process the most advanced steel sheet in the world that are going to come from the facility in Rio De Janeiro, which is today able to produce the most advanced slabs. The investment is $1,100,000,000 It's going to be running at the 2020 and the capacity is 4,100,000 tonnes. It can be increased that capacity almost to 5,000,000 tonnes with very little investment, but we are going to decide that later. I told you that we met with the new elected president and Garcia Marquez, the Secretary of Economy. This was the new Secretary of Economy. This was one of the subject we discussed and they were quite pleased that we are going to continue with the investment in Mexico, to be honest. The other one, we are building a galvanized and a painting line You see by the pictures, it's quite advanced. The painting line is going to start production in March and the galvanized line is going to start production in May. These, again, are lines dedicated for industrial customers, but automobile industry, but but all the other industries that Cesar talked about in his presentation. And all these efforts are targeting mainly the Mexican steel market or the NAFTA steel market. I mean Mexico is not only the largest market in steel market in Latin America, but it's also the most sophisticated. And the customers require high end products and value added services. And with these last investments, we are going to be able to supply to them all this. Today, part of this supply, they buy it from imports. You see in the lower chart the different industries, how much imports those are in millions of tons how much imports enter a flat part of Mexico today. So we have a big opportunity to grab part of that import. We know the customers because they are our customers today. We know their needs. We have just in time services with them. And now we are going to produce the full range of products they needed. So I think we are very well prepared to this challenge. Well, all these changes that we are talking are causing a significant transformation of Ternium Industrial System. If you see in the top chart after the acquisition of our plant in Rio, our crude steel capacity grew by 71%. After the investment in the hot stream mill is finished, our hot coil capacity is going to increase by 50. Our galvanized capacity is going to increase by 28%. And look at the number because it's going to grow because of the new investment, but the new investment is going to give us 350,000 tonnes. And it's going to grow for other initiatives that I'm going to tell you a little bit later. So this is a much bigger and complex industrial system that demands changes in the way we manage the company. So this as I tell you, this demand changes in how we manage the company. Ternium needs to be more integrated now. I mean with operations in several countries, we need to have Aternium more integrated that we can leverage from this bigger size as we take full advantage of the opportunities that are around us. For that, we create one of the things we create is a new central industrial management system. They're going to be responsible for engineering, for automation, for environment, health and safety and for the deployment of the new technologies that we are bringing to the company. But how we test it in one facility and then they deploy it very quickly to all of our facilities. So this is an area that has a cross facility approach using benchmarks. We optimize investment. We optimize maintenance. We increase productivity quality. We decrease cost by sharing main practices or by seeing technologies around the world. And let me give you an example because it's not simple to describe this in only three minutes, but I use an example to describe the changes we are making. In October, when I was nominated CEO, we make a test of this new structure in a smaller part of our process, in Galvanize. So Galvanize, if you take apart Tenigal, the joint venture, we have 11 Galvanize lines in Ternium in seven different facilities in four different countries. So it's a complex system. Most of those facilities have their manager and they run it very well. I mean they are very capable people and they run it very well. But we put this new structure to coordinate the efforts of this facility. After six months of analysis, we discover or we find that with an investment of a little bit more of $40,000,000 we are going to increase capacity in those 11 lines by 350,000 tonnes. So remember the numbers of the line before. With 15% of the cost, we are going to have a new line. So this is a huge impact in Health Tarnium. And part of that, we are going we already because part of that we are doing without any investment at all. So the lines are producing today more. So with this, we are bringing from March onwards this approach to the whole company. So there's today an engineer and industrial manager, depends direct from me and he is responsible of deploying all these initiatives with responsible in each of the process. He has, of course, many other things. We talked last Investor Day of a smart factory and all our job to try to bring the new technologies to our mills. We are doing that, but they are going to deploy that much more quickly to all the facilities. Also a change we are doing is that we are doing our R and D department. We used to have R and D, but our efforts in R and D we are making in developing new products to try to find or to try to get to what the customers want. Today, we are making a department. We already invested in a new R and D center in the Pesqueria facility. We staff that center and the Rio facility with PhDs and Master in Metallurgic that were consultants to us but were not working full time with us And we partnered with different institutions and research that you can see over there in the lower part of the slide to make this R and D more quickly with them. I mean they have huge facilities and a lot of resources in metallurgic, in galvanized, in lamination. So I think they are going to help us in deploying all these initiatives quite more quickly than doing it only together. The focus of this new R and D approach or department is not only in product developed. I mean we are continuing with the product developed. But we have huge opportunities in how we improve the production process, in how we make different steel or the same steel more productive, more with better quality and very important with less cost. So it's a comprehensive, our total approach to R and D with again this new facility. Okay. Let's go to conclusions or to the summary. I hope we are quite all right. Conclusions. Steel consumption is growing around the world. Most of the countries, as I said, are having an increase in steel consumption and that I think is good for overcapacity and steel margins. There is an increased awareness of unfair trade around the world and this is particularly very important for our region which was not still very aware of this and now they are. We have a sustainable business model with superior profitability and a very solid balance sheet. We put, as you see, a lot of effort on achieving excellence in industrial management and deploying the last technologies to all our facilities. We are on track of becoming a company with an even stronger competitive position based on differentiation of products and services. This is very important in Mexico. And last, but I think not least, we will continue to focus on generating long term value to all our shareholders. So with that, thank you very much and we open to Q and A. I hope this is my first one. As I said, the easy ones are coming for me. The hard ones are for them. I ask Pablo and Ocaro if they can join us. Yes. Hello. Good morning. Thank you very much. I have a few questions, but let's start with you, Maximo, an easy one, I guess. In your meeting with AMLO and his team members, did you discuss any specific policies that the new government will have for the steel sector? And since you are also a miner in Mexico for the mining industry the country, then maybe for Martin, how quickly can the company or is the company passing through the impact of the devaluation in prices in the domestic market? Can you keep or try to keep your price level in dollars in Argentina? And why would you expect, in general terms, the profitability trend in the country to be in the next few quarters or you very much. I'll start with Mexico and then Martin with Argentina. Meeting with AMBLO, meet with him and I meet several times with other secretaries. To be honest, I think they have a very clear understanding that industry is quite important for Mexico. And and and they know that their role should be a little bit in Pemex, in CFE, but they also want to have a very solid financial position. I mean, they don't want to get involved in more debt and to increase the debt ratio to the GDP. So they understand that the industrial sector is one of the most important in Mexico. And talking with Graciella Marquez, she has a very clear view of how to help develop more the industry, the value change. I mean, things that we have been talking for a long time in Ternium, they know it very well. I mean, Gracila Marquez is a PhD in economic history from Harvard. So she knows these things and I think very capable and also they have business persons in the government. Regarding steel and mining, mining was a big topic but I think it was over exaggerated. Yesterday, the Secretary of Conny was with the mining sector, our miner, Diego Ferrari, the head of mining was with her in that meeting. They want a responsible mining. And in mining, there are good companies and there are bad companies and we all know that. But they're going to respect the good ones and I think they're going to help because they even are talking of decreasing the amount of parameters of paperwork that they have. Mean, you to make an investment in mining today, you have to go to seven different offices to ask the same. I mean, it's kind of a lot of bureaucracy and they are thinking of doing that. So and still, of course, they know very much what is happening in February. They know our investment plans. They are very eager to help us and to discuss with The U. S. A solution to February. So I am quite pleased. Well, regarding Argentina, as you may know, with the devaluation, we gained competitiveness. 30% to 35% of our costs are denominated in pesos. At the beginning of these strong devaluations, prices go down a little bit. We are shock absorbing the effect for the value chain at the beginning, but prices when are going to reach international levels in one or two months. I mean, that's always happening in Argentina. Some effect in one, two months and then going back to international levels. We always be very tied to prices in Brazil. The prices in Brazil for our value chain are very important, so that will be the price in the market for in the midterm. Regarding our EBITDA margin, I would say that it will be suffering a little bit because of volume lower volumes, lower tonnage sold in the next quarter and in the second half of the year, recovering in the next year, I would say. Here and there. In terms of the preliminary agreement between Mexico and The U. S. On the NAFTA modernization, mentioned this increase in the rule of origin that in principle may be positive for the industry. However, this other part, 40% to 45% portion to be made basically in The U. S. And Canada because of the salaries, couldn't be this a negative for the steel sector in Mexico? I am not seeing any negative. I understand there is a 40%, but the 40%, first, it has to be in a long time and then there's a 15% of that that can be in R and D and white collar, so you accomplished that already. And so parts are going to come from The U. S. To be ensembled in Mexico. So the Mexican industry is going to still produce the same or more and some parts instead of coming from China has to come from The U. S. Those parts are the ones that are going to have $16 an hour on labor. And so I don't see again, the final text the agreement are not public. Some of them we have it because we are in the room in the war room they call it or something like that. I don't know why. And we participate very eagerly in all the things. So we know the text in some cases. But the final, final text, we don't know. So we are going to have a very detailed analysis of that, I hope in two or three months they are public and we can sit down and see everything. But what we had seen, we are not seeing a negative. I mean, I understand some parts are going to be made in The US, but those parts were made today in China or in Korea. And so it does I mean the parts that are labor intensive are continually made in Mexico for sure. And Maximo, if I can complement that. As far as we understand, even if the car doesn't comply with the rule of origin, the tariff that that car will pay is 2.5% going to U. S. So That's very small. Okay. Thank you. In another subject, Maximo, if I may, there was this noise a couple of some weeks ago regarding this payment of people from Teck Inte into the Venezuelan government? And what is the situation and what how that may affect this company? It's a very good question. Seth, I mean, in relation to the case that is reported in the Argentine press, what we know about this is from the Argentine press. I don't know anything more than that. But it's our company, Ternium, current understanding that no director, no officer and no employee of Ternium played any role in these payments. I know that at the GIN officer, the press said about at the GIN officer, but from Tanium's perspective, no officer, no director or no employee has any role at all in that. I was wondering if you could expand on the currency question that you talked about a bit in Argentina. Just across all operations, we've seen currencies weaken across the board from Mexico, Colombia, Brazil and Argentina. And I was wondering if you could give us a general feel for how these currency moves will affect operations? Specific to Argentina, I'm curious, can you migrate operations more towards the export market given the significant weakness in the currency? And then a different question. I was wondering if you could talk a bit about dividends. I noted the chart you had there of sort of progressively higher dividends per share over the last few years, which is something I don't always attribute Ternium to. So I was wondering if you could expand on your dividend policy if you have one. And in the context of this expanded capacity program that you have over the next few years, how you see dividends evolving going forward? Okay. Thank you. Let's start with dividends if you want, and that's a question that Pablo Grincho likes a lot. He is going to answer it. Okay. Yes. First, let me tell you, as you mentioned, that Ternium does not have a formal dividend policy, but traditionally, we have been increasing our dividend payment every time that we increase our results. And this, as you mentioned, have been the case in the last last five years. The the increase in dividend payment in the last five year was more than 65%. And not only that, the dividend yield has been quite impressive in in in in the last years. Last year was almost 4%, which is quite a lot if you compare that to other steel companies in in the region. I'm not only referring to to to Latin America, but also to to The US. Again, we if we see and if the board of directors of the company and the shareholders meeting see that the results of the company continues to be positive, Clearly, there is a chance for the company to increase the dividend payments in the coming years. The company is generating a very good level of cash flow, a very good level of EBITDA generation. So even with the CapEx plan that Maximo and we showed you in the presentation, clearly, is room for sustaining or even increasing our dividend payment. So we will need to wait because this is the size once a year, But clearly, not only the trend but the capability of our company are showing that we have the possibility of even increasing the dividend payment that we have been seeing in the last years. And and back to currency. And I think currency, a different how it affects us in in the different markets. If we start with Brazil, the depreciation of the real for Ternium is not much of an issue. It rather helps because all of the slabs of the Ternium facility are priced in dollars and most of them are exported. So a devaluation decrease your costs. So from a Brazil point of view, it's not bad. Mexico, the Mexican peso has been more stable, although it goes ups and downs. It's around between 2018 and 2019. And again, when we have big devaluations or big changes in the peso, prices are not 100% in dollars, but industrial customers are in dollars and commercial customers tend to be in dollars two or three months later. So we don't have also a big effect. In Argentina, it's different because devaluation in Argentina has been quite substantial and the problem is not the cost or the prices. The problem is that the market can decrease. So the problem will be if we have less volume to sell. Martin said and he can comment now, we are not seeing that the market is decreasing as much as the problems in the newspaper would tend to, but that would be the main problem. I don't know, Martin. Yes. What we are seeing that, our domestic sales will go down in the second half of the year by 10% to 15% roughly, and we are going to compensate half of that with more export to the neighboring countries. So our operation level will be pretty the same in the second half of the year. That's our perspective. Thank you. Hi. When the if the proposal with the agreement with The U. S. Is implemented and you're fully implemented the 70% content rules, is it possible to roughly quantify how much more steel demand that will mean for North American producers versus Asian or whoever else is supplying it? That's a good question. We don't have the number yet. I mean but just to give you an idea, the car industry in Mexico imports between the car industry and the auto power industry imports around 4,000,000 tonnes of steel. So is that or higher? And 4,000,000 is a lot of tonnage. So we have to analyze also what is going on in The U. S. Because we don't have the numbers of The U. S. But in Mexico, if Mexico produces the same cars as they produce today, today the imports are 4,000,000 tons. Thank you. I wanted to explore a little bit more the Pesqueria rolling mill. And, you know, if you look at it, you are one of the only global steel companies we know of that's adding capacity, and it's it's a substantial amount. So it's it's a testament to your view of the world, one would think. But your great minds think alike and ArcelorMittal is also adding capacity and rolling capacity in Mexico. There's two other galvanized lines coming on in Mexico as well. So I appreciate you talked about how there's demand for your capacity, but just wondering if you could talk a little bit more broadly about with the additional capacity and how you think about adding capacity in a world that people are complaining is oversupplied. Just your perspective on that. Thanks. Yes. Well, we are not adding steel capacity. We are adding rolling capacity. Yes. We are displacing. But rolling capacity is different than steel because slabs travel very quickly. High end value added products are more difficult to travel. Although they do travel, they have a lot of constraints. So but you're right. I mean, ArcelorMittal supposedly is building a new facility also in Lazaro Cardenas. It's a different facility because it's targeting the commercial market, as we said. It's a 2,000,000 tonnes facility. So in total, the additional capacity will be 6,000,000 tonnes. If you see the export, the imports are 8,000,000 tons, a little bit more today. And we are going to decrease 1,000,000 tons of capacity because I don't know if I said that, but we surely express it several ways several times. In Mexico, we have three hot strip mills, number one, two and three, very original. The number one is the oldest one. It was a very old facility that was in Ilsa with a very narrow dimension range of products and quality and a lot of quality issues. So we are going to shut down that. So that will decrease almost 1,000,000 tons. Also, we import hot coils in Mexico for our Pesqueria plant. We import almost 600 to 700,000 tonnes. So that's also is going to be decreased. So the impact of our hot stream mill will be around 2,500,000 tonnes, not 4,000,000 tonnes. And again, it's going to go to the value added products that probably the new as I said as we see how they are investing in Nacero Cardenas that goes more to the commercial market. So I see it plays. Again, in galvanized also, I mean the GFE Nucor facility galvanize imports more than 2,000,000 tons today in Mexico. And we have our technical facility and the new facilities that goes to the industrial customers 100% saturated. So there is place for going after that imports. Of course, we have to fight for those imports, but I think it's more easy than to fight between us. Thank you. And continue talking about competitive dynamics in the Mexican market. AMSA, although they recently postponed their investment, but they are thinking about a new continuous caster for auto grade steel. If and when they decide to bring it back on, how would that affect the dynamics of the auto sector competition in Mexico? And how would that affect your strategy for that industry? Yes. For us, it would be very good because they are going to investment in the steel mill to produce slabs. And to be honest, today, after several years where we were buying slabs, I mean for the last ten years, Ternium has a deficit in slabs. When we bought CSA, we have a surplus, a little surplus of slabs, although we continue buying and selling. But when you make the numbers, we have a surplus. But when we put the new hot stream in, we are going to have again a deficit of slabs. So we are going to buy roughly 4,000,000 tonnes of slabs or 3,000,000 tonnes of slabs. So having AMSAB every once in a while sell us slabs. So having a slab facility that can produce better grades for us is good. They are not increasing rolling capacity. So I see that as a good better alternative for buying slabs instead of buying slabs from other sources. At least in the short term until they invest in rolling perhaps. Well, yes, but I mean investing in rolling is $1,000,000,000 So you have to do it. It's not that easy. Thank you. And my last question, I think, is on the investigation on Tequint. If I may ask, is there any ongoing investigations or information request from the authorities in Argentina to Ternium or for Ternium documents? Because at the end of the day, while Ternium may not have been involved whatsoever on this process, it did benefit from the event, the ultimate result of what the press has discussed led to those payments, which was the compensation on the one hand of the Venezuelan government for the cedar asset and also maybe helping some of the Argentine employees and families that were in Venezuela? Yeah. No. There's no there's no authority or no request at all for nobody from Ternium. But but let me specify a a little bit more about about what you say. Tavium didn't benefit from what supposedly this Tejin officer made. Again, I'm I'm I'm what I'm saying is what the press said is saying, but the detention officer appears to have stated that these statements were made at the request of the Argentine authorities to intercede with the Venezuelan government in order to avoid the harassment and consummation of threats against physical integrity of more than 200 expatriates that the TECIN group has in five different companies. And that's it. Those payments were made during 2008 only. And if you remember, compensation came much later than that Mhmm. For for pernium, Sidoro for Sidoro. Mhmm. Thank you for your presentation and your time. Looking at the CSA acquisition, it looks great. Congratulations. It seems like you've integrated it quite quickly. And given the Pesqueria line coming up in 2020, obviously, lot of that material is going to go straight there. I know also that you have contracts in Alabama as well. Are those still are you looking to renegotiate those in the future? Or would you continue are you looking to send most of that CSA production straight to your new line in Pelskaria? Thank you. Well, the contract with Alabama ends 02/2020. Thousand twenty. 02/2020. So we are going to continue supplying Alabama until the end of that contract at least. Later, we'll see. I mean it depends, think, more of what Calvert or the Alabama plant wants to do. I mean we are very as you know, we buy and sell slabs, So we are very good at that. And if it's from a product range, it makes sense to sell to Alabama, we can continue to do that. But I don't know if, Carre, if you Yes. Want as to comment a little bit you mentioned, when we bought a CSA, there was already in place a contract between CSA and Calvert Plant in Alabama. And that contract, there there was a remaining of of 4,000,000 tons of slabs to be shipped to to, to Calvert and with a schedule that would have finished at the 2019 or 2019. So Calvert asked us to reschedule the those 4,000,000 tons in a way that for them, they will, you know, allow them to to program the end of that contract. And at the end of the at at the same time, it was beneficial for us because we were thinking in the new steel plant in Pecaria, the the new rolling mill, that would start in 2020. So for us, having those 4,000,000 remaining tons in a longer period of time instead in a shorter period of time will help us to, you know, not to to stop the that shipment to The US. And and, otherwise, we will not be able to match our capacity with the production of slabs. So, we rescheduled. We amended that contract, and we rescheduled the remaining 4,000,000 tons. And now the end of that contract will be December 2020, so we'll match the initial operation of our new rolling mill. As Maximo says, at that moment of time, we will have the possibility of continue shipping to them on a spot basis, or we could also, you know, talk about a new contract if if they want, and and we we could have to we could do that. And at the same time, purchase slabs from other parts of the world, taking advantage that in some volume, we will need a low quality and CSA have a capacity to produce high grade. So, you know, it doesn't make sense to to use that capacity to produce low quality. So in that way, we could produce and sell high quality slabs and purchase low quality and make a difference in prices opportunity. Thank you for the presentation. I wanted to follow-up on this topic. So you've elaborated about the how the industrial system becomes more complex. If we think about Ternium and its past history, look in Latin America, it seems to be that manufacturing steel in these with these currencies as your base currency ends up being a competitive advantage when prices are set in North America. So we're we could be seeing a new normal with $2.32 and The U. S. Setting tariffs. So my question specifically is you've alluded to the benefits of having excess slab capacity after the CSA acquisition. So net debt to EBITDA is less than one times. Pablo, you're not wet to a dividend policy. So clearly, there's going to continue to be more deleveraging. How much sense does it I mean, is it going to be beneficial for this new complex industrial system to have excess slab capacity? And would you consider owning industrial capacities in The U. S? Mean, you could arbitrage very easily right now buying in the market for Tenegal for Mexico and selling that slab capacity from CSA into The U. S. Because Brazil has a quota agreement with The U. S. So look, mean, you've got that backdrop of currencies that are going to be unless things change dramatically are going to be very favorable for the foreseeable future. And you know those markets. I mean, could talk about this, please? Yes. It's a very long question or a very long answer because it's part of what we analyze as our strategy. Clearly, know The U. S. Market because we have a facility there. We sell from Mexico also to The U. S. Market. If the question was, are you going to buy something in The U. S? Well, there's two possibilities. Now you can buy there's excess there's rolling capacity in Brazil that Vale has up for sale. Yes. And there's 3,000,000 tons there. You know exactly that market. And then the second question, which would tie in with your complex industrial system is perfectly The U. S. Market, which you as well know very well. Yes. Well, the Vale or the CES peak capacity, I don't know, I mean we are not looking at that right now. I mean I know that they are restructuring the DEF. I think that's the first thing they have to do. And but clearly, as most of our options, if they come to sale and we probably will look at that. But to be honest with you, during the last ten years, we have an excess well, not an excess, a need of slabs and we were quite comfortable with that because it gives you a lot of flexibility. If you remember in 02/2009, hope never comes again, but we decreased slabs from buying slabs, but our facilities of slabs continue producing at 100%. So it gives us a flexibility to have quite some flexibility not buying slab when a crisis arrives. Nevertheless, as I said, we can see it. USA is also a market. I mean we are very, very strong in Mexico and in all Latin America. We are not seeing anything in The U. S. Right now. I mean we are digesting CSA and we are launching all these investment plans. But you are right that in some point USA has to be a market where Ternium has to grow somehow. I don't know if I answer completely the question for your face. It's okay. We can talk about privately. Separately, Pablo, on the dividend policy? Yes. I mean if there's no specific dividend policy that is being discussed, excess cash flow generation, I mean what kind of debt levels are you targeting and what happens with that excess Yeah. Of all, remember that this year and next year and also in 2020, we will pick up our level of CapEx. So the cash flow that we will be generating, a significant portion of that will go to finance the new facilities that were mentioned during the presentation. Remember that between the three CapEx plans that were mentioned today, the rolling mill in Mexico, the galvanized and the painting lines in Mexico and the rolling facility in Colombia, we are discussing a number of our of around $1,500,000,000 So this is clearly a significant amount that we will be financing with new debt that we already took and with the cash flow generation by the company. Nevertheless, we will have ample capability of paying dividends and increasing if needed and if decided the level of dividend that the company will be paying. And clearly, we will continue to have a solid financial position. For us, this is key because of the history of this company. Having a very solid financial position give us the flexibility to analyze possible opportunities in the market and in the same time financing our internal growth in order to take advantage of the possibilities in the different markets that we are. So clearly, the company or our belief is that the company is very well balanced in all these respects. So we will or we are increasing our cash flow generation, but in the same time we are increasing our CapEx plans. Together with that, we can and we will continue, if it's the case, to pay higher dividends as we did in the in the past year. So we don't have a specific target on net debt to EBITDA. Clearly, for us, it's good to have a very strong financial position at a low net debt to EBITDA and allow us to finance through our internal cash flow generation and the debt that we are taking to the market all the projects that we are launching. Just to the CapEx that this year is $550,000,000 around 500,000,000 it's going to be. Next year is going to be $850,000,000 and 2020 is going to be a little bit over $1,000,000,000 So it's not it's big. Again, we have the financial structure to do that, but it's increasing from the last three or four years. I think there was another question. Yeah. You just answered my question. Thank you. I'm a visionary. I just follow-up with a last one? Sure. And it's a topic that has come up on conference calls, occasionally. Ternium, Incorporated in Luxembourg, Mexico is now 55%, 56% of cash flow generation. Sidrar has shrunk significantly. Sidor doesn't exist. So you've stayed in Mexico and the topic has come up on many occasions. Why not seek a Mexican lease listing? I mean, can you elaborate on on on topics like that? I think we've discussed thoroughly potential benefits of of of something like that. And look. At the end of the day, it's, like, phenomenal management, phenomenal track record. You guys are gonna continue to get penalized for Argentina. No. Not personal, but it's like, look. Mean, it's just what it is. So can you That's right also of of Pablo's favorite questions that we all ask him, not only you. Firstly, there are others that don't exist anymore. So See, there are others that don't exist anymore. It's Ternium Argentina right now. I still have all the filings of Ternium. Well, your question is something that we are looking very carefully and we discussed this For the last two years. Exactly, exactly. But the main target for a listing in Mexico, a listing anywhere is to be included in an index. Clearly, that's the main target of a listing. Unfortunately for us, listing in Mexico will not do a trick to be included in an index because in the case of Mexico, MCI is not allowing companies to take the full listing of Mexico and other markets. And the limits that you need to have in order to include will not be met if you do not sum up your listing or your floating in the Mexican market together with The U. S. Market, which is our current market. So clearly, we have a limitation over there. The only country where you can achieve that is in Argentina. And well, it's it's another it's another analysis. And in order to do that, we need to see what's going on with the shares that we do not own yet of our subsidiary in Argentina as as Martin is saying say is saying is now starting with Argentina. But clearly, are analyzing. We know that we can improve their, the We can improve Ternium's perspective to the market, but it's not an easy an easy job and nothing that we can do immediately. Clearly, if we have the chance and there was you know, there is a quick solution to achieve that, we will go for it. But, unfortunately, it's not the case. But it's something that is, as Maximo mentioned at the very beginning, the comprehensive approach that we want to have for for Ternium, this is part of that. And we are thinking very thoroughly on different alternatives on achieving the goal that you are looking for, which is also you can imagine that it's a goal for Ternium. So, we will continue working on that. We will continue analyzing alternatives, opportunities. And if we find something clearly, be sure that we will take it. Thank you for the opportunity. Just a quick follow-up there in linking this to the user proceeds and the CapEx. And I think we all agree that there is a gap of valuation given the listing issue and the recent events in Argentina. When you think about buybacks and the way that you see the returns related to the buyback vis a vis what you get in the CapEx plan? How do you see that? And one not taking that route eventually to take advantage of the valuation gap eventually? Thanks. Can I take it up? JACQUES Okay. That's also a question. Of course, clearly, share buyback is a way of generating value for the shares and is very much utilized in many U. S. Companies. The difference that we have is that our floating is a limited number. Our current floating is around 24%. So if we go through this route, probably we will generate other programs, which would be reducing the level of floating, which is something that we achieved and we were able to increase in the in some years ago to a level that today is a reasonable level. So going to that direction probably will be damaging the position of the company. And clearly for us, the importance of being listed is there and was mentioned during this presentation. So in our particular case, we believe that is not the way to go because the damages that we can generate we believe are higher than the possible benefits that this type of operation could have. Well, if there's no more question there's no? Okay. Thank you very much. It was a pleasure being with you with all of you today and I hope to see you all soon. Thanks a lot.