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Ternium S.A. Form 6-K Summary

Business Context and Reporting Period

This filing presents the unaudited consolidated condensed interim financial statements for Ternium S.A. for the six-month period ended June 30, 2013. Ternium is a global steel manufacturer organized into two reportable segments: Steel and Mining. The company operates primarily in Mexico, the Southern Cone (Argentina, Paraguay, Chile, Bolivia, Uruguay), and other markets including the United States and Central America. The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).

Key Financial Metrics (Six Months Ended June 30, 2013)

Note: Total borrowings for 2012 calculated as sum of current (1,121,610) and non-current (1,306,753) borrowings from the balance sheet.

Material Changes vs. Prior Period

• Revenue: Net sales decreased by approximately 1.6% ($69 million) compared to the prior year, driven primarily by a decline in the Steel segment's sales volume and pricing dynamics.
• Profitability: Despite lower sales, Gross Profit increased slightly by 0.6% due to cost management. Operating Income remained relatively flat, increasing by less than 1%.
• Net Income: Profit for the period was nearly flat, decreasing by 0.25%. However, profit attributable to equity holders decreased by 4.7% ($11.4 million), largely due to a higher share of profit allocated to non-controlling interests ($53.9 million in 2013 vs. $43.2 million in 2012).
• Cash Flow: Operating cash flow improved significantly by 25.5% ($113 million), aided by a positive change in working capital of $121.5 million compared to a negative $170 million in the prior year.
• Debt Reduction: Total borrowings decreased by approximately $197 million year-over-year, reflecting net repayments of $133.7 million during the period.
• Accounting Changes: Starting January 1, 2013, the company applied IFRS 11 to its interests in Peña Colorada and Exiros B.V., moving from equity method accounting to line-by-line consolidation of joint operations. This resulted in the removal of these investments from "Investments in non-consolidated companies" and the inclusion of their assets, liabilities, and results directly in the financial statements.

Guidance, Outlook, Risks, and Contingencies

Management Commentary & Outlook: The filing does not contain specific forward-looking guidance or numerical forecasts for the remainder of 2013. Management notes that the company's tax burden is not expected to increase significantly following its 2011 corporate reorganization, as dividend income from high-tax jurisdictions remains exempt under Luxembourg law.

Dividends: The company paid a dividend of USD 0.065 per share (USD 0.65 per ADS) totaling approximately USD 130.3 million in May 2013.

Material Contingencies and Risks:

• Usiminas Lawsuit (Brazil): Companhia Siderúrgica Nacional (CSN) filed a lawsuit alleging Ternium and affiliates were required to launch a tag-along tender offer for minority Usiminas shareholders following the 2012 acquisition. Ternium believes the allegations are groundless and is defending vigorously. No provision has been recorded as the outcome is not probable.
• Tax Disputes:
  • Argentina (Siderar): A dispute with the AFIP regarding income tax assessments for fiscal years 1995-1999. A provision of USD 1.7 million has been recognized.
  • Mexico (Ternium Mexico): A tax assessment regarding a 2004 capital reduction was settled in May 2013 for approximately USD 34 million under a tax amnesty program, avoiding further litigation.
• Commitments: Siderar has fixed commitments for raw material purchases totaling USD 336.6 million for 2013 and equipment acquisitions of USD 84.2 million.

Investor Verification Checklist

• Usiminas Performance: Verify the impact of Usiminas' reported net loss of USD 106 million (for the six months ended June 30, 2013) on Ternium's equity in earnings, noting the 22.71% ownership stake.
• Working Capital Fluctuations: Investigate the drivers behind the $291 million swing in working capital changes between 2012 (negative) and 2013 (positive), specifically regarding inventory and receivables management.
• Joint Operation Accounting: Confirm the financial impact of the IFRS 11 adoption for Peña Colorada and Exiros, ensuring the line-by-line consolidation is correctly reflected in segment reporting.
• Legal Exposure: Monitor the status of the CSN lawsuit in Brazil, as a ruling against Ternium could trigger a significant tender offer obligation.
• Dividend Capacity: Review the "Restrictions on the distribution of profits" note to confirm the availability of distributable retained earnings under Luxembourg law for future payouts.