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Business Context and Reporting Period

Ternium S.A. is a leading steel producer in the Americas, operating primarily in Mexico, Brazil, Argentina, and Colombia. The company is organized into two operating segments: Steel and Mining. This Form 20-F covers the fiscal year ended December 31, 2025. The reporting period was characterized by significant U.S. trade measures, including the reinstatement and increase of Section 232 tariffs on steel imports to 50%, which created uncertainty in the Mexican market and reduced apparent steel demand by approximately 10% year-over-year. Additionally, Ternium completed the acquisition of the remaining participation in the Usiminas control group from the Nippon Steel Corporation group in February 2026, increasing its control to 83.1%.

Key Financial Metrics (2025 vs. 2024)

Note: Net Cash is a non-IFRS measure defined as cash and cash equivalents plus other investments less total financial debt.

Material Changes vs. Prior Period

• Revenue Decline: Steel segment net sales decreased 13% to $15.0 billion, driven by a 10% decline in realized steel prices and a 4% drop in shipments. Mexico sales fell 16% due to weaker construction activity and U.S. tariff uncertainty. Conversely, the Southern Region (primarily Argentina) saw a 21% increase in shipments.
• Profitability Volatility: While operating income dropped 44% due to lower prices and volumes, Net Income attributable to owners improved significantly from a loss of $54 million in 2024 to a profit of $425 million in 2025. This improvement was largely due to a $222 million deferred tax gain (primarily from Mexican peso appreciation) and lower non-controlling interest losses compared to the prior year.
• Significant Charges: The 2025 results included a $405 million write-down of deferred tax assets at Usiminas and a $117 million charge related to the ongoing litigation provision regarding the Usiminas acquisition. A $23 million write-down of deferred tax assets at Las Encinas was also recorded.
• Investment Cycle Peak: Capital expenditures reached $2.5 billion, the peak of the current investment cycle, primarily funding the Pesquería Industrial Center expansion in Mexico (new downstream and upstream facilities).

Guidance, Outlook, and Risks

• Outlook: Management expects 2026 capital expenditures to range between $1.9 billion and $2.1 billion. The company is advancing the construction of a new steelmaking plant (DRI-EAF) in Pesquería, Mexico, expected to start up by the end of 2026.
• Dividend Proposal: The Board proposed an annual dividend of $0.27 per share ($2.70 per ADS) for 2025, subject to shareholder approval. This includes an interim dividend of $0.09 per share already paid in November 2025.
• Key Risks:
  • Trade Policy: Continued uncertainty regarding U.S. trade measures (Section 232 tariffs, USMCA review) poses a significant risk to Mexican demand and export competitiveness.
  • Geopolitical & Economic: Inflation and exchange rate volatility in Argentina and Brazil; potential for labor disputes; and security concerns in Mexican mining regions.
  • Legal Contingency: A longstanding lawsuit by CSN regarding the 2012 Usiminas acquisition remains pending. As of December 31, 2025, the provision for this litigation was $528 million, with potential exposure estimated at approximately $390 million for Ternium Investments and $138 million for Ternium Argentina if CSN prevails.
  • Climate & Regulation: Increasing environmental regulations and carbon pricing mechanisms in Mexico, Brazil, and Argentina could increase production costs and require significant capital expenditures.

Investor Verification Checklist

• Usiminas Litigation: Verify the status of the CSN lawsuit and the adequacy of the $528 million provision given the recent Superior Court of Justice (SCJ) rulings.
• Deferred Tax Assets: Assess the recoverability of Usiminas' deferred tax assets following the $405 million write-down and the impact of the functional currency change to USD effective January 1, 2026.
• Argentina FX Restrictions: Monitor the evolution of foreign exchange controls in Argentina, specifically regarding the repatriation of dividends and the valuation of Ternium Argentina's $803 million cash and investment portfolio held in local instruments.
• Capital Expenditure Execution: Track the progress and cost overruns of the Pesquería Industrial Center expansion, which represents the bulk of the 2025-2026 investment cycle.
• Trade Tariff Impact: Evaluate the long-term impact of the 50% U.S. Section 232 tariffs on Ternium's Mexican operations and the potential for trade diversion into other Latin American markets.