Sebastián Marti - Director Investor Relations Pablo Brizzio - Chief Financial Officer.

Carlos De Alba - Morgan Stanley Ivano Westin - Credit Suisse Diego LaSaga - Merrill Lynch Renato Antunes - Brasil Plural.

Good day, ladies and gentlemen and welcome to the Ternium First Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and the instructions will follow at that time. (Operator Instructions). As a reminder this conference call is being recorded.

I would now like to turn the call over to Sebastián Marti. You may begin..

Good morning and thank you for joining us today. My name is Sebastián Marti and I am Ternium’s Director of Investor Relations. Ternium issued a press release this morning detailing its results for the first quarter 2014. This call is complementary to that presentation. Joining me today is Ternium’s CFO, Mr.

Pablo Brizzio, who will discuss our performance. At the conclusion of our prepared remarks, we will open up the call to your questions. Before we begin, I would like to remind you that this conference call contains forward-looking information and that actual results may vary from those expressed or implied.

Factors that could affect results are contained in our filings with the Securities and Exchange Commission and in our press release issued today. With that, I’ll turn the call over to Mr. Brizzio..

Thanks, Sebastián and good morning to everyone. Thank you very much for participating in this call and we really appreciate your interest in our company. We’ll being with very brief description of our performance in the first quarter of the year and then we’ll go directly to the Q&A.

EBITDA during the first quarter of 2014 was $417 million, 7% higher than EBITDA in the fourth quarter 2013. As a result of an increase in steel shipment and slightly higher margins. The shipments reached 2.3 million tons in the quarter, 5% higher than in the fourth quarter 2013.

Shipments in Mexico increased 140,000 tons sequentially following an increase in commercial air force in the country in 2013, which began materializing in the first quarter and we expect will continue in the second quarter.

The ramp up of our new Pesquería facility is progressing according to plan and we expect it to gradually contribute to shipments in the following quarters. We are very pleased with the results we have been gaining from this new state-of-the-art cold-rolling mill in Monterrey.

At the same time, Tenigal our joint venture with Nippon to produce high specification galvanized steel for the auto industry in Mexico continues to advance with success in the certification processes need to become suppliers of the difference automakers in Mexico.

The auto industry in Mexico has very good prospects in the country as a result of their plans to process substantial addition of capacity in the following years.

Also important to mention, regarding the Mexico, the Mexican steel market [under reforms] that has been carried out by the government and the recent announcement of an increase in the budget for government sponsored infrastructure investment plan in the country over the next five years.

Shipments in the Southern region in the first quarter were 50,000 tons lower sequentially mainly due to seasonality in Argentina. We expect achievements to recover in the second quarter 2014, although steel consumption in this country could be affected in the following quarter or weakening expectations in some of the industry’s reserves.

Steel revenue per ton in the first quarter was 3% lower sequentially mainly as a result of revenue per ton decreasing 6% in the Southern region and 2% in other markets, [prices] remained relatively stable in Mexico. We are not expecting significant changes in revenue per ton in Mexico or Southern region in the second quarter 2014. Prices in the U.S.

have been strong lately impart as a result of extreme weather conditions in the North of the country and some other expected outage of capacity [refracting] supply of steel. We expect this strength to proceed during the second quarter as steel demand remains healthy.

Although over the longer term prevailing prices in Europe and Asia could have a negative impact on North American prices. Consolidated EBITDA per ton of steel was $179 in the first quarter compared to $175 in the fourth quarter and EBITDA margin reached 19% from 18% in the fourth quarter.

The reason for this slight margin increase was lower cost on SG&A mainly Argentina partially offset by the previously mentioned 3% decrease in revenue per ton. Net income in the first quarter 2014 was $188 million or a gain of $0.76 per ADS. The result compared with $171 million gain in the fourth quarter 2013 or $0.64 per ADS.

Net cash used by operation activities in the first quarter was $24 million, mainly as a result of an increase in working capital of $369 million, principally driven by an increase of $274 million in the inventories mainly reflecting the higher inventory volumes of slabs as a result of an increase in the steel volume and higher cost of raw materials, goods in process and finished goods.

Shipments in Mexico also increased as a result of our mandated sales level in the country. The increase in working capital in the first quarter 2014 included negative non-cash effect of $92 million, mainly reflecting a significant devaluation of the Argentinean peso to U.S. dollar exchange rate in the [previous year].

So, you see the Argentinean pesos are its functional currency and as a result the accounting of the devaluation of this non-cash effect in the cash flow, mainly in relations to inventory.

As most of our best CapEx projects are reaching an end, capital expenditure continues to decline with $104 million in the first quarter compared to $158 million in the fourth quarter 2013.

In addition to CapEx we use $44 million of investment and loans to Techgen [based on inventory vehicle], we are using to develop a power plant in Mexico, this project which is in the first stages of development is progressing according to plan and will enable us to obtain substantial savings in energy cost in Mexico by the end of 2016, when it is expected to be ready.

Finally, our financial position remains strong, as net debt stood a $1.6 billion at the end March 2014 equivalent to around 1.1 time net debt to last 12 month EBITDA, something that within distinguishes us from most of our -- of the companies in our industry.

So before we go to the Q&A, let me just remind you that we are going to host our Investor Day in New York on May 29. We hope to see you there as we are working hard to make an event that is informative that shows the current state of the company and terms next steps.

As usual, the members of our top management will be there including our CFO and myself. So now there are many issues I want to comment on, please operator we can begin the Q&A session now..

Thank you. (Operator Instructions). The first question is from Carlos De Alba of Morgan Stanley. Your line is open..

Yes, thank you very much. The first question will be regarding the working capital. It showed a negative reduction of almost 370 million in the quarter. I wonder if you can comment on how you see this going forward and any -- just a temporary situation that your company experienced there.

Also it seems that the capital expenditures in the quarter were a little bit low relative to your straight average of the guidance that you did, you gave earlier in the year.

Does this suggest that you may spend less than the guidance for the year, or is just the ramp up or the schedule that you have for different quarters? And then finally if I may ask about the potential impact that the [FIFO] accounting in your Siderar subsidiary could have or had in the first quarter that I think was positive impact and how that can reverse in the next few quarters? I don’t know if you just able to quantify this but if you can give us any comments there I would appreciate it.

Thank you..

Okay, good. Carlos, let me start by the working capital question. We in fact had some implication of the devaluation in Argentina. As I mentioned during my initial remarks, there were different issues affecting the working capital this quarter.

The first one is an increase inventories which is of course a real increase in inventories due to some commercial issues that make us to increase our inventory of slots. So this is one issue that most probably we will not repeat in the coming quarter which are very specific for this quarter.

Second there was increase in all the product that we produced due to the increased level of shipments, and this is something that will continue to reaching the level of shipments that we consider the standard one, so should probably increase a little bit but not that significantly.

Third point, there was an increase in Siderar and this was also having two reasons, one is again the increase in shipments and the second one is that due to some very specific tax issues in Mexico at the end of 2013 with the introduction of the new reforms, most of our customers decided prepay part of their receivables shut at year-end.

So we saw normal increase in receivables for the quarter. And this one won’t be repeated in the following quarters. Together with that and due to some accounting issues and due to devaluation in Argentina, we had a non-cash effect of almost little higher than $90 million that are impacting over here.

But of course, we are not expecting to see a significant devaluation in the coming quarter, will not be repeated in the coming quarter. Moving to your CapEx question. We tend to see the CapEx with the two issues that I mentioned, the $105 million and the $44 million that we invested in the new venture (inaudible).

So you put both together, we are still in the same level of number that we forecasted last quarter. We are still working with the same assumption that the number of CapEx for this year will be around $600 million or $650 million for the year.

The last question regarding the impact of the accounting issues, yes you’re right, the impact of FIFO first-in first-out policy has an impact during this quarter due to revaluation. Since we are realizing the inventories at a lower level than the ones that you’re looking at today, this has a positive impact during the quarter.

Of course, the revaluation has a positive impact in our cost structure related to all the costs that are based in pesos. Part of this benefit will continue in the following quarter, but most of that especially the ones related to inventories would start to disappear.

This is one of the reason why we are forecasting for some reduction, slight reduction in the margins of the company..

Thank you very much, Pablo..

You are welcome..

Thank you and the next question is from Diego LaSaga of Merrill Lynch. Your line is open. Please check if your line is on mute. And the next question is from Paolo (inaudible). Your line is open..

Good afternoon, gentlemen, thank you for the question.

My first question is about Argentina, I was wonder if you guys could speak to some price hike tension in the country potentially coming up especially in the context of some potential political push back given turbulent environment, and if you could also speak to how FX depreciation has impacted profitability in Argentina that would be very helpful? And then my second question if you allow me is on, what you think will be some potential impact from the Mexican rebound market from the recent SI dumping decision by the Department of Commerce in the U.S.

if you could speak generally that would be very helpful? Thank you..

Okay, let’s start by Paolo by Argentina, pricing trend in Argentina is still related to the international pricing and of course when you have a significant devaluation like the one that you had in Argentina, probably you cannot recover everything at the same moment.

Pricing continues to be in relationship to international markets and we have very good prices scenario in Argentina.

The FX situation in the country of course that has some impact in the results that we have, especially the one that I mentioned during the prior Carlos question, in the sense that it is part of our cost structure in Argentina is related to pesos, when we looked at the financials in dollar terms, this reduction in cost that is impacting our -- of course this is reals in around 35% or 30% of the cost structure of our Argentina subsidiary is related to pesos.

So, whenever you cover the devaluation, you have a positive result in that. The foreign exchange market has been quiet lately and depending on how the valuables move in the future, we depend how the foreign exchange rate will be seen in the coming quarter. We are not seeing much movements lately in the foreign exchange market. Okay.

We don't have, regarding your second question we are basically a local supplier of rebars. So, we are not expecting to export significant volumes to the U.S. And so in that sense, we are not seeing any impact in that respect (inaudible) to volumes and in relationship to (inaudible) being measures..

Okay. I meant asking that in a general sense for the Mexican market as a whole, not just specifically for Ternium. But that's clear. Thank you..

Okay..

Thank you. And the next question is from Ivano Westin of Credit Suisse. Your line is open..

Hi Pablo and Sebastián, thanks for the question.

The first one, I just want to go back to the demand side, you mentioned a positive result for Mexico especially on the expansion of your project Pesquería and you mentioned there is some let’s say challenge in (inaudible) for Argentina, I just wonder what is your forecast that you can disclose there in terms of until the total sales in the year compared to last year? And the second question would be on your Tenigal power plant in Mexico, do you have additional details to disclose? Thank you so much..

Okay. Ivano let’s start by the demand side. Yes, we are expecting positive demand or positive increase of demand coming out of Mexico especially from industrial sector.

And as I mentioned in the remarks, we have been working very hard during last year to have a better positioning within the different sectors in Mexico and the result of these are being captured by now and this is even before the two new plants that are being started to provide products into the markets from now on.

So in that respect, we tend to be quite positive on the industrial demand in Mexico. As you know we have been quite limited in the number of tonnage that we could sell into a market, in fact in the last year we have 9 million tons as a total sale and prior to that was around 8.8. So that was a limit that we found.

With these new facilities, when they are fully ramp up that is by 2015, the net increase in production should be around 1 million tons. So, in total we should expect after the full ramp up 10 million tons of finished product. Of course this will not be the case we see here because we are in the middle of process.

So, the number and if you start to see what we have sell during this quarter should be a midpoint between last year and full utilization after ramp up period. So, our target which is very important and difficult to obtain target is to be close to 9.5 million tones of product.

That is our estimate just by taking into consideration the full ramp up of the facility. We did mention that we saw during the first quarter we are in the right track..

Okay. Thank you.

And then on the second point on your power plant in Mexico, if you could provide some additional details would be highly appreciated as well?.

Sure yes. Well, this is a venture that will allow us to be as sufficient in the needs of energy and we the total investment is around $1.1 billion, of which we will have 48% of that the exposure of turning to that (inaudible) will be 48% which will be our percentage on the shareholder structure of the company.

And we will have 78% of the output of that facility. But the work already started so we are working with the commissioning of this facility by the last quarter of 2016.

As I said with this facility working we are expecting to be fully efficient in the needs of energy and that of course will be very important from a company production standpoint, but also from a cost standpoint..

Okay. That’s clear, Pablo. Thank you so much. And if you allow me just another point I wanted to ask is this is the main project that you have apart from your expansion in Mexico at this stage? You remain positive on your demand for finished products, steel products in Mexico. So looking ahead, you might still be able to generate additional cash.

So question is what are you going to do with that additional cash surplus? And on a broader perspective, does it make sense for you to have a greater position overall in Brazil? And the bottom-line is, are you interested in discussing or in acquiring shares that sits in Usiminas? Thank you so much..

Well you’re right that we are in the final stage of most of our big CapEx plan. Of course we finished the one in Mexico, we [are shutting] already the one in Argentina. The only new one that we announced is the one in (inaudible). So you’re right that if the numbers that we’re showing, generation continues, we will generate more cash than last year.

So the company, as always, we have answered this question in the past, especially last conference call, we also answered this question. The company will continue to analyze the different opportunities that it has. As I said, Mexico continues show ways to grow, it’s the market of course that we will consider.

But the company does not have at the moment the new project from the one that we mentioned. And we keep all our options open and we analyze all the CapEx plan possible. We are in the process of analysis, we don’t have any at the moment.

And regarding your question on the shares of Usiminas, we already answered this question in the last conference call, probably will repeat what I said in the last conference call is also one of the different territories that the company has.

We are probably not (inaudible) at this very moment but it is something that the company has in the portfolio of investment..

It’s very clear, Pablo. Thank you so much..

You are welcome..

Thank you. (Operator Instructions). The next question is from Diego LaSaga of Merrill Lynch. Your line is open..

Hi, good afternoon everyone. I have two questions. First one is a follow up on the recent questions.

Could you please provide an update on what your dividend outlook should be in the coming years given this higher cash usage should you not proceed any further expansions? And lastly could you provide an update also on your pricing scenario in Argentina? Should we expect depreciation of pesos to impact U.S.

dollar prices in the coming quarters continuously? Thank you..

Okay, Diego. Dividends, as you know during the shareholders’ meeting, the company announced -- we have the conference, the shareholders meeting next week, the company presented to the shareholders meeting a proposal $150 million dividend payment which is a little higher than what we had in last three year.

We are as you know, this decision is made at this level. We are starting to see significant valuations on this number. So at this point of time, the dividend payment should probably stay at this level but this decision is taken every year at the shareholders meeting.

With respect to pricing scenario Argentina, we are expecting to continue to have this level of pricing. We are expecting to see much moments from what we have at the moment which is a good level of pricing, very in line with international pricing. So we are starting to see significant change in for our plant.

As we mentioned already, we are not expecting to see, we haven’t seen much movement in the foreign exchange rates in Argentina and we there is no sign that this could change in the very, very short run. So that will depend on the market situation of the country, but this is what we are seeing these days.

So, it’s just we would agree, we are not expecting to see much movement in pricing in this coming quarter, which is very good news..

Okay. Thank you..

You are welcome..

Thank you. And the next question is from Renato Antunes of Brasil Plural. Your line is open..

Hi, good afternoon everyone. Thanks for the question. Just follow up on Argentina, do you guys expect any change to what finally Argentina has in some of your steel trade meaning do you see steel imports for Argentina either declining or exports from Argentina at some point becoming an interesting option for you guys? That’s the question. Thanks..

Okay. And so yes, we what we are seeing in Argentina and specially as a company, first of all, we are not seeing an increase on imports. If there is a decrease in demand, local demand us for the (inaudible) we are seeing in the automotive sector effected by different issues like reduction on demand from Brazil, from auto and local demand.

Of course the company will try to export these difference to our market.

So, this is a very possibly scenario in which we as a company will try to think the level of shipment of the company the level of production and supply this product is not able to be supplied in the local market to be actual market, mainly neighboring countries and regional market..

Thanks..

You are welcome..

Thank you. And I’m not showing any further questions in the queue at this time. I’ll turn the call back over to Pablo Brizzio for closing remarks..

Okay, thanks again for your interest in Ternium and your time today. I remind you again of our Investor Day timing on May 29th, in New York. So we are looking forward to remain in touch with you and as always please contact us if you have any additional question. Thanks a lot, bye-bye..

Thank you. Ladies and gentlemen this concludes today’s conference. You may now disconnect. Good day..