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Ternium S.A. Form 6-K Summary: Consolidated Financial Statements

Business Context and Reporting Period

This filing presents the unaudited consolidated condensed interim financial statements of Ternium S.A. for the six-month period ended June 30, 2024. Ternium is a global steel producer with operations primarily in Mexico, Brazil, and Argentina. The reporting period reflects the full consolidation of Usiminas, following the increase in Ternium's participation in the Usiminas control group completed in July 2023. The company operates two primary segments: Steel and Mining.

Key Financial Metrics (Six Months Ended June 30, 2024)

Note: All figures are in thousands of USD as per the source document, converted to millions for readability.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased by 24.0% to $9.29 billion, driven by the full consolidation of Usiminas and higher volumes in the Steel segment.
• Profitability Decline: Despite higher sales, the company reported a net loss of $251.7 million compared to a profit of $1.22 billion in the prior year. This reversal is primarily due to a non-cash provision of $783.0 million related to ongoing litigation regarding the Usiminas acquisition.
• Debt Reduction: Total borrowings decreased significantly from $3.80 billion to $1.98 billion, reflecting net repayments of $530.9 million against proceeds of $434.1 million.
• Segment Performance: The Steel segment generated operating income (management view) of $871.3 million, while the Mining segment reported a loss of $73.6 million.

Outlook, Risks, and Contingencies

Usiminas Litigation Provision: The most significant item impacting results is a $783.0 million provision recorded for ongoing litigation with Companhia Siderúrgica Nacional (CSN). On June 18, 2024, the Brazilian Superior Court of Justice (SCJ) reversed a previous decision, ruling that Ternium entities must pay indemnification. The potential aggregate indemnification could reach approximately $783 million (BRL 4.3 billion), though management maintains the claims are groundless and intends to appeal.

Argentina Foreign Exchange Restrictions: Ternium Argentina operates under complex foreign exchange regulations. While some restrictions were eased in late 2023, access to foreign currency for imports and dividend payments remains subject to Central Bank approval or specific mechanisms (e.g., BOPREAL bonds). The Argentine peso devalued by approximately 55% following the government change, creating volatility in the valuation of local assets and liabilities.

Other Contingencies:

• BP Energia Arbitration: An arbitration award ordered Ternium Mexico and affiliates to pay approximately $34 million plus VAT and interest. Management plans to request interpretation and nullity of the award.
• Commitments: Significant purchase commitments exist for iron ore, petcoke, and maintenance services, totaling hundreds of millions of dollars over the coming years.

Dividends: A net dividend of $0.22 per share ($2.20 per ADS) was paid on May 8, 2024, totaling approximately $441.0 million.

Investor Verification Checklist

• Usiminas Litigation Outcome: Verify the status of appeals against the SCJ decision and the final calculation of the indemnification amount, which currently drives the Q2 loss.
• Argentina FX Policy: Monitor the stability of Argentine foreign exchange regulations and the potential for further peso devaluation impacting the valuation of Ternium Argentina's assets.
• Debt Maturity Profile: Review the maturity schedule of the remaining $1.98 billion in borrowings to assess liquidity requirements.
• BP Arbitration Resolution: Track the outcome of the nullity request regarding the $34 million arbitration award.
• Usiminas Integration: Assess the operational and financial performance of Usiminas as a fully consolidated subsidiary in subsequent quarters.