Ternium Argentina S A : Docunento de Información Financiera

TERNIUM ARGENTINA S.A.

Guillermo Etchepareborda

Investor Relations / Responsable de Relaciones con el Mercado

[phone] ar.ternium.com

Ternium Argentina files with BYMA and CNV first quarter of 2023 financial reports

Buenos Aires, April 25, 2023 - Ternium Argentina S.A. (BYMA: TXAR) filed today with Bolsas y Mercados Argentinos (BYMA) and Comisión Nacional de Valores (CNV), its financial reports for the first quarter ended March 31, 2023.

The financial and operational information contained in this press release is based on Ternium Argentina's operational data and consolidated condensed interim financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and presented in Argentine Pesos (ARP) and metric tons.

Summary

Ternium Argentina's steel shipments in the first quarter of 2023 were 561,000 tons, down 6% compared to those in the fourth quarter of 2022 mainly reflecting seasonally lower shipments in the Argentine market. Compared to the prior-year same quarter, steel shipments in the first quarter of 2023 decreased 2% on lower exports, as the company adjusted the import of supplies to stipulated limits, partially offset by slightly higher volumes in the local market. Shipments in the Argentine market in the first quarter of 2023 amounted to 97% of total sales. Ternium Argentina's consolidated net result in the first quarter of 2023 was a gain of ARP50.3 billion, including operating income of ARP43.4 billion on a sales margin of 26%.

Ternium Argentina's capital outlays in property, plant and equipment, and intangible assets were ARP4.8 billion in the first quarter of 2023. Among the works completed during the period, of note were the new equalization and sedimentation pools in the San Nicolás unit, aimed at optimizing processing and incorporating state-of-the-art technology in the treatment of process water. The company is implementing an ambitious medium-term investment plan focused on environmental and health performance improvements, and the development of a new wind farm in Olavarría.

Outlook

In the second quarter of 2023, Ternium Argentina's shipments are expected to increase moderately mainly reflecting higher sales in the Argentine market, following a seasonal decrease in the first quarter of the year. Export volumes are expected to remain at relatively low levels.

Among steel consuming sectors, vehicle exports, mining activity and infrastructure investment in connection with the development of Vaca Muerta continue to depict favorable performances. A dwindling agribusinesses output, due to an intense draught, is expected to negatively affect activity levels at related sectors and the country's trade balance. These circumstances, as well as the high level of uncertainty in connection with the performance of the country's main macroeconomic variables, could negatively affect steel demand in the future.

The price of diverse imported inputs used by the steel industry continued fluctuating at relatively high levels in 2023. The markets of these inputs are expected to remain pressured, mainly in consideration of an increased level of activity in China. Moreover, the company will continue developing its medium-term investment plan, focused on environment and safety projects and the construction of a new wind farm in Olavarría.

Analysis of First Quarter of 2023 Results

	1Q 2023	4Q 2022	1Q 2022
Shipments (tons)	560,700	598,700	569,600
Net sales (ARP million)	165,532	153,834	92,904.0
Operating result (ARP million)	43,447	36,579	19,017.0
Financial result (ARP million)	5,838	(622)	(3,655.0)
Equity result (ARP million)	15,865	(27,532)	14,922.0
Net result (ARP million)	50,349	(10,543)	28,533.0
Per share net result1 (ARP)	11.15	(2.33)	6.32

Net result in the first quarter of 2023 was a gain of ARP50.3 billion, equivalent to a per share net gain1 of ARP11.15.

Net sales in the first quarter of 2023 were ARP165.5 billion, compared to net sales of ARP92.9 billion in the first quarter of 2022. Shipments were 560,700 tons in the first quarter of 2023, an 8,900-ton decrease compared to shipment levels in the prior-year first quarter.

	Total shipments		Domestic shipments		Export shipments
Thousand tons	1Q 2023		1Q 2022		1Q 2023	1Q 2022		1Q 2023		1Q 2022
Hot rolled	219.4	224.6	208.3	199.2	11.1	25.4
Cold rolled	108.5	110.8	106.3	104.2	2.3	6.6
Coated & other	208.4	224.8	206.8	221.7	1.6	3.2
Semi-finished	24.4		9.3		24.4	9.3		-		-
Total	560.7	569.6	545.7	534.4	15.0	35.2

1 Per share net result was calculated based on 4.517.094.023 shares issued and outstanding during the period.

Ternium Argentina's shipments in the domestic Argentine market were 545,700 tons in the first quarter of 2023, a 11,300-ton increase compared to shipment levels during the first quarter of 2022, including a 15,100-ton increase in semi-finished product shipments. Exports totaled 15,000 tons in the first quarter of 2023, a 20,200-ton decrease compared to shipment levels during the first quarter of 2022. Of the exports in the first quarter of 2023, 98% were shipped to South and Central America, with 2% shipped to Europe and other destinations.

Cost of sales in the first quarter of 2023 totaled ARP108.1 billion, a ARP42.0 billion increase compared to the ARP66.0 billion recorded in the first quarter of 2022, due to higher cost per ton, partially offset by lower shipments. Of note in the cost per ton change were higher costs of raw materials and other inputs, an increase in labor, maintenance and services costs, and higher depreciations and amortizations.

Selling, General and Administrative (SG&A) expenses in the first quarter of 2023 totaled ARP14.3 billion, with an 8.6% SG&A expense to net sales ratio, compared to ARP7.9 billion expense recorded in the first quarter of 2022, with a ratio of 8.5%.

Financial net results in the first quarter of 2023 were a gain of ARP5.8 billion, compared to a loss of ARP3.7 billion in the first quarter of 2022. Net interest results during the first quarter of 2023 were a gain of ARP2.3 billion, compared to a gain of ARP1.9 billion in the prior-year first quarter. Changes in fair value of financial instruments resulted in a net gain of ARP3.6 billion in the first quarter of 2023, due to an increase in the value of investments, while in the first quarter of 2022 it resulted in a net loss of ARP1.8 billion. Net foreign exchange results were a gain of ARP248 million in the first quarter of 2023, compared to a loss of ARP3.7 billion in the prior-year same period.

The equity in the result of associated companies in the first quarter of 2023 was a gain of ARP15.9 billion, on a gain in the investment in Ternium México of ARP14.9 billion and a gain in the investment in Usiminas of ARP975 million. In the first quarter of 2022, the equity in the result of associated companies was a gain of ARP14.9 billion.

Income tax expense in the first quarter of 2023 was ARP14.8 billion, compared to income tax expense of ARP1.8 billion in the first quarter of 2022.

Cash Flow and Liquidity

Net cash provided by operating activities in the first quarter of 2023 was ARP50.2 billion. Working capital decreased ARP5.6 billion in the first quarter of 2023 due to an aggregate ARP6.5 billion net increase in accounts payable and other liabilities and a ARP2.7 billion decrease in inventories, partially offset by an aggregate ARP3.6 billion increase in trade and other receivables. Of note in the inventory value decrease in the period were a lower value of raw materials and steel products, partially offset by an increase in their volumes.

Cash flow related to capital expenditures in the first quarter of 2023 totaled ARP4.8 billion. Borrowings increased ARP240 million in the period, and payments of leasing liabilities were ARP468 million. Ternium Argentina invested ARP47.0 billion in securities in the first quarter of 2023.

Consolidated condensed interim income statement

ARP million	1Q 2023	1Q 2022
Net sales	165,532	92,904
Cost of sales	(108,058)	(66,014)
Gross profit	57,474	26,890
Selling, general and administrative expenses	(14,297)	(7,933)
Other operating (expenses) income, net	270	60
Operating income	43,447	19,017
Financial expense	(362)	(148)
Financial income	2,647	2,011
Other financial income (expense), net	3,553	(5,518)
Result of the equity in associated companies	15,865	14,922
Income before income tax expense	65,150	30,284
Income tax expense	(14,801)	(1,751)
Profit for the period	50,349	28,533

Consolidated condensed interim statement of financial position

ARP million	March 31, 2023	December 31, 2022
Property, plant and equipment, net	169,907	144,016
Intangible assets, net	7,194	6,046
Investments in associated companies	464,865	378,680
Deferred tax assets	8,316	5,164
Other receivables	2,229	1,849
Other investments	18,280	10,695
Total non-current assets	670,791	546,450
Other receivables	15,854	11,970
Inventories, net	141,601	122,688
Trade receivables	23,359	19,514
Other investments	279,457	206,387
Cash and cash equivalents	24,842	24,411
Total current assets	485,113	384,970
Total assets	1,155,904	931,420
Capital and reserves attributable to the company's equity holders	1,043,559	840,955
Non-controlling interest	2	2
Total equity	1,043,561	840,957
Provisions	809	726
Other liabilities	3,234	2,910
Leasing liabilities	12,203	10,642
Total non-current liabilities	16,246	14,278
Current income tax liabilities	14,996	10,538
Other liabilities	17,754	19,808
Trade payables	61,663	44,462
Leasing liabilities	1,435	1,376
Borrowings	249	1
Total current liabilities	96,097	76,185
Total liabilities	112,343	90,463
Total equity and liabilities	1,155,904	931,420