Ternium S A : Informe Anual 2023 (en inglés)

ANNUAL REPORT 2023

TERNIUM S.A.

Annual Report 2023

INDEX

• Company Profile

• Consolidated Management Report 5 Performance Indicators

• Operating and Financial Review and Prospects
  14 Research and Development
  16 Next Steps
  17 Corporate Governance
  19 Risks Factors
  42 Alternative Performance Measures

45 Consolidated Financial Statements

143 Audited Annual Accounts of Ternium S.A. Société Anonyme

Ternium S.A. is a Luxembourg company (société anonyme) and its American Depositary Shares, or ADSs, are listed on the New York Stock Exchange (NYSE: TX).

This annual report and any other oral or written statements made by us to the public may contain "forward-looking statements" within the meaning of applicable securities laws, including with respect to certain of our plans and current goals and expectations relating to Ternium's future financial condition and performance. Forward looking statements are provided to allow potential investors the opportunity to understand management's beliefs and opinions in respect of the future so that they may use such beliefs and opinions as one factor in evaluating an investment in Ternium's securities. All forward-looking statements are based on management's present expectations of future events and are subject to a number of factors and uncertainties that cause actual results, performance or events to differ materially from those expressed or implied by those statements. These risks include but are not limited to risks relating to the steel industry and mining activities, risks relating to countries in which we operate, risks relating to our business, including uncertainties as to gross domestic product, related market demand, global production capacity, tariffs, cyclicality in the industries that purchase steel products, price and availability of raw materials, risks relating to the Company's structure and regulatory and litigation risks, as well as other factors beyond Ternium's control.

The financial and operational information contained in this annual report is based on Ternium's operational data and on the Company's consolidated financial statements, which were prepared in accordance with IFRS as issued by the IASB and adopted by the European Union and presented in U.S. dollars ($) and metric tons.

For a detailed description of Ternium's main risks and uncertainties, please see the section "Risk Factors" included in this annual report. By their nature, certain disclosures relating to these and other risks are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses that may affect Ternium's financial condition and results of operations could differ materially from those that have been estimated. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this annual report. Except as required by law, we are not under any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of changes of circumstances or management's estimates or opinions, new information, future events or otherwise.

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Annual Report 2023

Certain Defined Terms

In this annual report, unless otherwise specified or if the context so requires:

• References to "Adjusted Net Results", "Adjusted Equity Holders' Net Results", "Adjusted Earnings per ADS", "Adjusted EBITDA", "Net Cash", "Net Debt" and "Free Cash Flow" correspond to non-IFRS alternative performance measures. The reconciliation of non-IFRS alternative performance measures to the most directly comparable IFRS measures is included in the section "Alternative Performance Measures" of this annual report;
• References to "ADSs" are to the American Depositary Shares, which are evidenced by American Depositary Receipts;
• References to "billions" are to thousands of millions, or 1,000,000,000;
• References to the "Company" are exclusively to Ternium S.A., a Luxembourg société anonyme;
• References to "finished steel products" are to steel products other than steel slabs;
• References to "San Faustin" are to San Faustin S.A., a Luxembourg société anonyme and the Company's controlling shareholder;
• References to "Techgen" are to Techgen S.A. de C.V., a Mexican corporation, 48% owned by Ternium, 22% owned by Tenaris and 30% owned by Tecpetrol International S.A., a wholly owned subsidiary of San Faustin;
• References to "Tenaris" are to Tenaris S.A., a Luxembourg société anonyme and a shareholder of the Company;
• References to "Tenigal" are to Tenigal S.R.L. de C.V., a Mexican company, 51% owned by Ternium and 49% owned by Nippon Steel Corporation, or NSC;
• References to "Ternium," "we," "us" or "our" are to Ternium S.A. and its consolidated subsidiaries;
• References to the "Ternium companies" are to the Company's manufacturing subsidiaries, namely Ternium México S.A. de C.V., or "Ternium Mexico," a Mexican corporation; Ternium Brasil Ltda., or "Ternium Brasil" (formerly, CSA Siderúrgica do Atlântico Ltda.), a Brazilian corporation; Ternium Argentina S.A., or "Ternium Argentina", an Argentine corporation; Ternium Colombia S.A.S., or "Ternium Colombia", a Colombian corporation; Ternium del Atlántico S.A.S., a Colombian corporation; Ternium Internacional Guatemala S.A., a Guatemalan corporation; Ternium USA Inc., a Delaware corporation; Las Encinas S.A. de C.V., or "Las Encinas," a Mexican corporation; Consorcio Minero Benito Juárez Peña Colorada S.A. de C.V., or "Consorcio Peña Colorada," a Mexican corporation, and their respective subsidiaries; and to Usiminas.
• References to "Ternium Investments" are to Ternium Investments S.à r.l., a Luxembourg société à responsabilité limitée, and a wholly owned subsidiary of the Company;
• References to "tons" are to metric tons; one metric ton is equal to 1,000 kilograms, 2,204.62 pounds or 1.102 U.S. (short) tons; and
• References to "Usiminas" are to Usinas Siderúrgicas de Minas Gerais S.A. - USIMINAS, a listed Brazilian corporation controlled by Usiminas control group, which is composed by Ternium Investments, Ternium Argentina, and Tenaris's subsidiary, Confab Industrial S.A. (all of which conform the T/T Group), NSC, Metal One Corporation and Mitsubishi Corporation (all of which conform the NSC Group) and Usiminas' pension fund Previdência Usiminas.

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TERNIUM S.A.

Company Profile

Company Profile

Ternium is a leading steel producer in the Americas. The company provides advanced steel products to a wide range of manufacturing industries and the construction sector.

We foster a culture of industrial and technological excellence and promote equal opportunity and equal treatment. We operate with a strong focus on environmental sustainability as we advance Ternium's decarbonization roadmap. We also support the development of our communities, specially through educational programs in Latin America. Finally, we foster the development of small and medium-sized customers and suppliers in Argentina and Mexico.

Ternium has grown across the Americas through a strategy mainly based on organic investments and acquisitions, consolidating its regional markets by seeking import substitution and expanding its commercial presence. At the heart of our growth strategy is our industrial center in Pesquería, Mexico. Built from the ground and fully based on a sustainability philosophy, the Pesquería Industrial Center combines the latest technological developments to achieve efficient, high- quality production with a strong focus on people's safety along with an environmentally conscious approach.

Also, in July 2023, Ternium increased its participation in Usiminas control group, a leading flat steel manufacturing company in the Brazilian market, and entered into new shareholders agreements setting forth a new governance structure for Usiminas.

Climate Change

We set a medium-term goal to reduce our emissions intensity by 20% by 2030 compared to a 2018 baseline (scopes 1 and 2) along with a clearly defined roadmap based on six fundamental axes: energy efficiency; use of renewable energy; development of new raw materials in collaboration with business partners to partially replace coal and traditional iron ore pellets; use of low-emission technologies; expansion of carbon capture capacity in existing plants, along with an increase in the use of scrap in the metal mix. Our new slab steel mill currently being built in the industrial center in Pesquería will be equipped with carbon capture capability as well as the possibility of using green hydrogen when market conditions permit, allowing Ternium to further advance its decarbonization roadmap. We continue to explore additional initiatives as part of our ambition to achieve carbon neutrality.

Environment, Health and Safety

Ternium is committed to protecting the health and safety of its employees, contractors and the communities where it operates. We engage our employees as well as our customers and suppliers to embrace our safety vision and objectives. We have standardized environment and health and safety (EHS) management systems and devote significant resources to EHS projects. Our evaluation of risks and EHS management are integrated in our business processes and reflected in our policies and procedures.

Social

The talent and determination of Ternium's employees are the cornerstone of our leadership. Through Ternium University, we offer a wide array of training programs to support our teams' efforts in their quest for innovation, continuous improvement and performance excellence. We work together with local institutions to enhance our communities' education and welfare. We are aware that, to be successful, industrial projects must thrive along with surrounding communities.

We have built and operate a technical school in Mexico, and we are building a technical school in Brazil. We provide scholarships, internships, teachers' training and infrastructure funding to local schools. We also organize and fund volunteering programs and health prevention campaigns, and we sponsor sports, social events and arts exhibitions. Through ProPymes, we have been supporting small and medium-sized enterprises in the steel value chain for more than 20 years, strengthening our industrial network by enhancing our customers and suppliers' competitiveness.

Governance

Integrity is key to Ternium's long term success. The Company has appointed a business conduct compliance officer, who reports to the CEO. Ternium has mandatory training programs on the Company's Policy on Business Conduct and has adopted several policies, codes and procedures to ensure transparency and ethical behavior. In addition, the Company has put in place a Compliance Line to report violations to its code of conduct and principles.

Our compliance department oversees SOX certifications and related party transactions. The Company's board of directors has an audit committee solely composed of independent directors. The internal audit department, which meets organizational independence and objectivity standards, reports to the chairman of the Company's board of directors and, with respect to internal control over financial reporting, to its audit committee.

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Consolidated Management Report

Performance Indicators

STEEL AND MINING SHIPMENTS (000 tons)

Mexico

Brazil

Southern Region (3)

Other Markets

Total steel products

Mining products

ECONOMIC AND FINANCIAL INDICATORS ($ million)

Net sales

Operating income

Adjusted EBITDA (4)

Net income

Equity holders' net income

Adjusted net income (4)

Adjusted equity holders' net income (4)

Capital expenditures (5)

Free cash flow (4)

BALANCE SHEET ($ million)

Total assets Total liabilities

Capital and reserves attributable to the owners of the parent Non-controlling interest

Borrowings

Net cash (debt) (4)

STOCK DATA ($ per share/ADS) (6)

Basic earnings per share Basic earnings per ADS Adjusted earnings per ADS (4) Dividend per ADS (7)

Weighted average number of shares outstanding (8) (million shares)

2023(1)

8,355

2,014

2,271

1,573

14,213

4,128

17,610

2,198

2,740

986

676

2,092

1,686

1,461

1,040

24,179

7,367

12,419

4,393

2,146

1,886

0.34

3.44

8.59

3.30

1,963

2022

6,843

723

2,362

1,968

11,896

0

16,414

2,700

3,415

2,093

1,768

2,093

1,768

581

2,172

17,492

3,723

11,846

1,922

1,032

2,597

0.90

9.00

9.00

2.70

1,963

2021

6,534

1,160

2,503

1,868

12,065

262

16,091

5,271

5,863

4,367

3,825

4,367

3,825

524

2,154

17,098

4,863

10,535

1,700

1,479

1,155

1.95

19.49

19.49

2.60

1,963

2020

5,913

861

1,924

2,662

11,360

508

8,735

1,079

1,525

868

778

868

778

560

1,201

12,856

4,413

7,286

1,157

1,723

(371)

0.40

3.97

3.97

2.10

1,963

2019(2)

6,305

1,360

1,938

2,908

12,511

0

10,193

865

1,526

630

564

630

564

1,052

595

12,936

5,221

6,612

1,103

2,189

(1,453)

0.29

2.87

2.87

-

1,963

1. Ternium started to fully consolidate Usiminas balance sheet and results of operations in July 2023.
2. The functional currency of Ternium Argentina changed from the Argentine Peso to the U.S. dollar prospectively from January 1, 2020. This change did not affect the balance at December 31, 2019, nor results or cash flows for the year then ended.
3. Sales in the Southern Region encompass those made to customers located in Argentina, Bolivia, Chile, Paraguay and Uruguay.
4. The reconciliation of Adjusted Net Results, Adjusted Equity Holders' Net Results, Adjusted Earnings per ADS, Adjusted EBITDA, Net Cash, Net Debt and Free Cash Flow to the most directly comparable IFRS measures is included in the section "Alternative Performance Measures".
5. Capital expenditures in 2023 include advance payments to equipment suppliers.
6. Each ADS represents 10 shares.
7. Ternium's board of directors proposed that an annual dividend of $3.30 per ADS ($0.33 per share), or $649 million, be approved at the company's annual general shareholders' meeting, which is scheduled to be held on April 30, 2024. For further details see "Operating and Financial Review and Prospects".
8. The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $1.00 per share. As of December 31, 2023, there were 2,004,743,442 shares issued. All issued shares are fully paid. In addition, as of December 31, 2023, the Company held 41,666,666 shares as treasury shares, representing 2% of the subscribed capital.

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TERNIUM S.A.

Consolidated Management Report

Lost Time Injuries Frequency Rate*					Injuries Frequency Rate*
Quantity of day-loss injuries per million hours worked		Total quantity of injuries per million hours worked
1.0								3.5
0.8								2.8
0.6								2.1
0.4								1.4
0.2								0.7
0.0								0.0
2019	2020	2021	2022	2023			2019	2020	2021	2022	2023

Emission Intensity (Scopes 1 and 2)*						Energy Intensity*
Tons of CO2 emitted per ton of crude steel produced. Year-end		Gigajoules consumed per ton of crude steel produced. Year-end
2.5										25
2.0										20
1.5										15
1.0										10
0.5										5
0.0										0
2019	2020	2021	2022	2023			2019	2020	2021	2022	2023

Co-Products*							Investment in Product Research and Development
Million tons							$ million
6.0								20
4.8								15
3.6
							10
2.4
							5
1.2
0.0								0
2019	2020	2021	2022	2023			2019	2020	2021	2022	2023

Refer to materials produced in parallel to or, as a consequence of, the production of primary products or recovered for reuse and/or recycling, and poses potential value as defined by the worldsteel ME indicator.

• Does not include Usiminas. Ternium started to fully consolidate Usiminas balance sheet and results of operations in July 2023.

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TERNIUM S.A.

Consolidated Management Report

This review of Ternium's financial condition and results of operations is based on, and should be read in conjunction with, the Company's consolidated financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 (including the notes thereto), which are included elsewhere in this annual report. The Company's operational data and consolidated financial statements have been prepared in accordance with IFRS Accounting Standards (International Financial Reporting Standards) as issued by the International Accounting Standards Board and in conformity with IFRS Accounting Standards as adopted by the European Union. The information is presented in US dollars ($) and metric tons, except otherwise indicated. This review includes certain non-IFRS alternative performance measures such as Adjusted Net Results, Adjusted Equity Holders' Net Results, Adjusted Earnings per ADS, Adjusted EBITDA, Net Cash, Net Debt and Free Cash Flow. The reconciliation of these figures to the most directly comparable IFRS measures is included in the "Alternative Performance Measures" section. For a detailed description of Ternium's main risks, see the "Risk Factors" section. For information related to the holding of Company's own shares, see "Performance Indicators".

Operating and Financial Review and Prospects

In 2023, Ternium advanced several initiatives aimed at further strengthening its competitive position in Latin America. Ternium announced the construction of a new steelmaking facility and a direct reduction unit in Pesquería, Mexico, as well as a new port facility for raw material handling. In addition, Usiminas completed the relining of its main blast furnace at the Ipatinga facility.

The new projects in Mexico are progressing as planned. The new downstream lines in Pesquería are expected to allow the offer of new higher value-added products to our customers in the region. This capacity will be integrated with the new steel slab mill, which is currently under construction. This new facility will have a low carbon dioxide emission rate and would be able to produce the most technologically advanced automotive steel products in the Americas. It is expected to supply the full range of auto products, from exposed grades to advanced high strength steels. This slab mill will be based on electric- arc-furnace technology and includes a direct reduction iron facility with the capacity to capture carbon dioxide.

In July 2023, we acquired from Nippon Steel Corporation an additional participation in Usiminas control group. As a result of this transaction, Ternium holds 51.5% of Usiminas control group shares and 25.1% of its total shares. A new shareholders' agreement was entered into as a result of the transaction, pursuant to which the T/T Group (formed by Ternium Investments, Ternium Argentina and Tenaris' subsidiary Confab Industrial) has the right to nominate a majority of the members of Usiminas' board of directors, the CEO and four other members of Usiminas' board of officers. We began to fully consolidate Usiminas in July 2023.

The appointment of Usiminas' new management team took place in a transformational year for Usiminas, as it successfully relined its main blast furnace. Usiminas took bold decisions, including putting out of operation one of the smaller blast furnaces and one of its coking facilities.

Additional management decisions led to higher efficiency of the metallic charge in the upstream processes and lower fuel rate at the blast furnaces. This is part of a significant management initiative which focuses on the development of Usiminas' industrial system, with the aim at increasing its productivity, and it will continue to be Usiminas' focus throughout 2024.

In 2023, Ternium had a positive financial performance. Adjusted EBITDA, Adjusted Net Income and Cash from Operations were solid. As a result of these good results and a strong financial position, the Company's board of directors proposed an annual dividend of 3 dollars and 30 cents per ADS, a significant year-over-year increase. This is the highest annual dividend on record.

Steel Shipments by Region in 2023

Other Markets, 11%

Southern

Region, 16%

Mexico, 59%

Brazil, 14%

Growth in the Mexican steel market in 2023 was outstanding. According to CANACERO, consumption of flat steel reached an all-time-high of more than 18 million tons, equivalent to a yearly increase of 18%. Ternium's shipments in the country grew by 22%, with a significant market share gain, supported by the ramp-up of its new hot rolling mill in Pesquería. The market environment in Mexico continues to be healthy. Industrial activity remains strong and the auto industry is working at high levels of capacity, rebuilding stocks in the value chain. In 2023, automotive production increased 14%, reaching 3.8 million units. Construction activity in the country also

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Consolidated Management Report

remains at good levels, driven by non-residential projects like industrial warehouses, natural gas pipelines and other infrastructure projects. On the other hand, residential construction is being negatively affected by an increase in the prices of construction inputs, and apparent steel demand in the commercial market is showing short- term weakness due to a destocking tied to the recent downturn in steel spot prices in North America.

The nearshoring of manufacturing capacity is clearly one of the factors contributing to economic activity in the region. Mexico offers a compelling combination of geographic proximity, skilled labor, and a supportive business environment, contributing to increased supply chain resilience.

The construction of both our slab mill and downstream lines is progressing as planned, with suppliers already

assigned for the main equipment and works advancing as expected. We have updated our budget for these projects, and are now estimating a total investment of 3.5 billion, up 9% from the 3.2 billion initial estimation disclosed one year ago. This increase is mainly attributed to inflation affecting the pricing of equipment and fluctuations in foreign exchange rates.

In the Southern Region, steel shipments were relatively weak in 2023, mainly attributed to government-imposed restrictions on import of inputs, which affected Ternium's steel production rates in Argentina. Ternium is advancing on the construction of a wind farm in Argentina, which is expected to begin operations by the end of 2024. As part of our decarbonization roadmap, we target to use 40% renewable energy for our steel operations by 2030.

Summary Results

	2023		2022		Dif.
Steel shipments (thousand tons)	14,213	11,896	19%
Mining shipments (thousand tons)	4,128	0
Net sales ($ million)	17,610	16,414	7%
Operating income ($ million)	2,198	2,700	-19%
Adjusted EBITDA ($ million)	2,740	3,415	-20%
Adjusted EBITDA margin (% of net sales)	16 %	21 %
Net income ($ million)	986	2,093
Equity holders' net (loss) income ($ million)	676	1,768
Basic earnings per ADS ($)	3.44	9.00
Adjusted net income ($ million)	2,092	2,093
Adjusted equity holders' net income ($ million)	1,686	1,768
Adjusted earnings per ADS ($)	8.59	9.00

Steel Products Sales

Ternium's steel shipments in 2023 increased 2.3 million tons compared to shipment levels in 2022. The consolidation of Usiminas added 2.1 million tons to total steel shipments. Revenue per ton decreased year-over- year in 2023 reflecting lower realized steel prices in most of Ternium's markets, particularly in the USMCA region.

As mentioned before, Ternium's steel shipments in Mexico increased an outstanding 1.5 million tons year- over-year in 2023. However, this increase was partially offset by lower shipments in the Southern Region and in Other Markets. Our consolidation of Usiminas' operations resulted in a significant increase in reported steel volumes in Brazil.

Mining Products Sales

Ternium's iron ore shipments increased by 4.1 million tons year-over-year in 2023, due to the consolidation of Usiminas' shipments to third parties.

In 2022, Ternium's iron ore production from its mining activities in Mexico was fully allocated to our Mexican steelmaking facilities.

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Consolidated Management Report

Consolidated	Net Sales ($ million)			Shipments (thousand tons)		Revenue/Ton ($/ton)
	2023			2022			Dif.		2023			2022		Dif.		2023			2022			Dif.
Mexico	9,311		8,828			5%	8,355		6,843	22%	1,114		1,290			-14%
Brazil	2,279		582			292%	2,014		723	178%	1,132		804			41%
Southern Region	3,569		3,834			-7%	2,271		2,362	-4%	1,572		1,623			-3%
Other Markets	1,853			2,848			-35%		1,573			1,968		-20%		1,178			1,447			-19%
Total steel products	17,013			16,092			6%		14,213			11,896		19%		1,197			1,353			-12%
Mining products	329			0					4,128			0				80
Other products (8)	268			323			-17%
Net sales	17,610		16,414			7%

1. The item "Other products" primarily includes electricity sales in Brazil and Mexico.

Operating Income

Ternium's operating income decreased year-over-year in 2023, reflecting lower realized steel prices partially offset by a decrease in costs, due mainly to lower purchased slab, raw material and energy costs. The consolidation of

Usiminas in the second half of 2023 did not add significant results at the operating income level, due to Usiminas' very low level of profitability as it ramped-up its main blast furnace at its Ipatinga facility.

In $ million

		2023
Operating income		2,198
Net sales		17,610
Cost of sales		(14,051)
SG&A expenses		(1,472)
Other operating income (loss)	110

2022

2,700

16,414

(12,487)

(1,144)

(84)

Net Financial Results

In 2023, Ternium recorded a $130 million net interest gain, reflecting our strong net cash position during the year. In addition, Ternium recorded a $98 million net foreign exchange gain mainly due to the impact of the devaluation of the Argentine Peso versus the U.S. dollar on Ternium Argentina's net short local currency position.

Ternium's divestment of Argentine sovereign bonds in 2023 resulted in a loss of $58 million due to the recycling of changes in the fair value of financial instruments from Other Comprehensive Income to Financial Results. As of December 31, 2023, the balance of Ternium's Other Comprehensive Income in connection with its holdings of Argentine sovereign bonds amounted to a negative $527

In $ million

	2023
Net interest results	130
Net foreign exchange result	98
Change in fair value of financial assets	(58)
Other financial expense, net	(47)
Net financial results	123

2022

28

(164)

76

(10)

(70)

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TERNIUM S.A.

Consolidated Management Report

million. For information on exchange controls in Argentina and on Ternium Argentina's dividend payment in kind, see note 30 "Foreign exchange restrictions in Argentina" to Ternium's audited consolidated financial statements included in this annual report; and "-Risks Relating to the Countries in Which Ternium Operates - Argentina: Exchange controls in Argentina could negatively impact Ternium Argentina's operations, preventing Ternium from importing raw materials, paying dividends or transferring cash surpluses abroad, as a result of its inability to access the foreign exchange market".

Equity in Results of Non-Consolidated Companies

Equity in results of non-consolidated companies was a gain of $105 million in 2023, mainly related to Ternium's equity in the results of Usiminas and Techgen. Usiminas was accounted for as equity in results of non- consolidated companies in the first half of 2023, as Ternium started to consolidate Usiminas in July 2023.

Effect of the Increase of the Participation in Usiminas

In July 2023, Ternium increased its participation in Usiminas control group and began to consolidate Usiminas. For information on the acquisition of the additional participation in Usiminas, see note 3 "Acquisition of business - increase of the participation in Usiminas control group and new governance structure of Usiminas" to our consolidated financial statements included in this annual report.

As a result of this transaction, Ternium recorded a $1.1 billion non-cash net loss due to the following items:

Recycling of Currency Translation Adjustment (CTA) from Other Comprehensive Income to Net Results

Ternium recorded a loss of $935 million corresponding to items recognized as of June 30, 2023, in Other Comprehensive Income related to Ternium's previous stake in Usiminas. This negative reserve was mainly related to CTA losses due to the impact on Usiminas valuation of the depreciation, over the years, of the Brazilian Real against the U.S. dollar, as Usiminas uses the Brazilian Real as its functional currency. As a result of the increase in the participation in Usiminas, items recognized in Other Comprehensive Income related to Ternium's previous stake in Usiminas were recycled to the results of the period. The resulting $935 million loss is non-cash, it has no income tax effects and did not change the value of Ternium's equity.

Remeasurement of Ternium's stake in Usiminas

Ternium recorded a net loss of $171 million as a result of the purchase price allocation related to the business combination performed in the third quarter of 2023 and the remeasurement of Ternium's previous stake in Usiminas.

Income Tax Expense

Income tax expense was $334 million in 2023. This result included a deferred tax gain of $231 million. Deferred tax results reflect the impact of local currency fluctuations against the U.S. dollar on subsidiaries that use the U.S. dollar as functional currency, mainly Ternium Mexico, Ternium Argentina and Ternium Brasil, net of the positive effect of local inflation.

In $ million
	2023		2022
Current income tax expense	(565)	(600)
Deferred tax gain	231		27
Income tax expense	(334)	(574)
Result before income tax	1,321	2,666
Effective tax rate	25%	22%

Net Income

Ternium's Net Income in 2023 reflected the decrease in operating results and the negative impact of the $1.1 billion non-cash and non-taxable loss in connection with the process of fully consolidating Usiminas balance sheet and results of operations. These were partially offset mainly by better net financial results.

Non-controlling interest results in 2023 were mainly related to non-controlling interest in Ternium Argentina and Usiminas.

Adjusted Net Income equaled the year's Net Income, adjusted to exclude a loss of $1.1 billion in connection with the increase in the participation in Usiminas.

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