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Ternium S.A. Form 6-K Summary

Business Context and Reporting Period

This filing contains the unaudited consolidated condensed interim financial statements for Ternium S.A. for the nine-month period ended September 30, 2011, and the three-month period ended September 30, 2011. Ternium is a global steel manufacturer organized into flat steel, long steel, and other product segments. The company operates primarily in South and Central America and North America. Effective January 1, 2011, the company transitioned from a tax-exempt holding company regime to an ordinary public limited liability company under Luxembourg law, subject to applicable corporate and withholding taxes.

Key Financial Metrics (Nine Months Ended Sept 30, 2011)

Note: All amounts in USD thousands unless otherwise noted. Borrowings decreased significantly due to refinancing and repayments.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 27.6% to $6.96 billion, driven by higher volumes and prices in both flat and long steel segments.
• Profit Decline: Despite higher operating income ($991.6M vs $920.3M), net profit attributable to equity holders fell 25% to $408.8M. This was primarily due to a significant reversal in "Other financial (expenses) income, net," which swung from a $91.6M gain in 2010 to a $197.6M loss in 2011, largely driven by a $164.3M net foreign exchange loss.
• Cash Flow: Net cash provided by operating activities decreased 65% to $202.2M, impacted by a $572.3M increase in working capital requirements (inventory buildup) and higher tax payments.
• Debt Reduction: Total borrowings decreased by approximately $1.65 billion year-over-year, reflecting debt repayments and refinancing activities.

Guidance, Outlook, Risks, and Unusual Items

• Sidor Nationalization Settlement: The company continues to receive payments related to the nationalization of its Sidor subsidiary in Venezuela. As of September 30, 2011, the carrying amount of the Sidor financial asset was $134.2M. The company recorded $9.3M in accretion income for the period.
• Tata Steel Arbitration Settlement: In June 2011, Ternium settled a long-standing arbitration dispute with Tata Steel regarding the termination of a steel slab off-take agreement. The total settlement amount was $124 million, with Ternium Procurement paying its share of $21.3 million.
• Share Repurchase: In February 2011, Ternium repurchased 41.7 million shares from Usiminas for $150 million. Usiminas no longer holds any Ternium shares.
• Dividends: The company paid dividends of $150.4 million in June 2011. Additionally, subsidiary Siderar approved a dividend of approximately $360 million payable from 2010 results, received in September 2011.
• Tax Regime Change: The transition to an ordinary Luxembourg holding company structure means the company is now subject to corporate income tax, though management expects the overall tax burden will not increase significantly due to participation exemptions on dividends from high-tax jurisdictions.

Investor Verification Checklist

• Foreign Exchange Exposure: Verify the magnitude of the $164M FX loss and the company's hedging strategies given the volatility in emerging market currencies.
• Working Capital Trends: Investigate the $572M increase in working capital usage, specifically the rise in inventory levels ($2.31B vs $1.95B prior year), to ensure it aligns with sales growth and is not indicative of obsolescence.
• Sidor Receivables: Confirm the status of the remaining $134.2M receivable from the Venezuelan government (CVG) and the security provided by Argentine state-owned entities.
• Debt Maturity Profile: Review the terms of the $1.0 billion refinancing in Ternium Mexico and the impact of the extended maturity dates on future liquidity.
• Dividend Sustainability: Assess the impact of the new Luxembourg tax regime on future distributable earnings and dividend payout ratios.