Sebastian Marti – Director, IR Daniel Novegil – CEO Pablo Brizzio – CFO.

Leonardo Correa – BTG Pactual Andre Pinheiro – Itau BBA Ivana Kestermann – Credit Suisse Milton Sullyvan – Brasil Plural.

Welcome to the Ternium Third Quarter 2014 Earnings Conference Call. (Operator Instructions). I would now like to introduce your host for today's conference, Mr. Sebastian Marti. Sir, you may begin..

Good morning and thank you for joining us today. My name is Sebastian Marti and I'm Ternium's Investor Relations, Director. Ternium issued a press release yesterday detailing its results for the third quarter 2014. This call is complimentary to that presentation. Joining me today are Mr. Daniel Novegil, Ternium's CEO and Mr.

Pablo Brizzio, the company's CFO, 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 & Exchange Commission and in our press release issued yesterday. With that, I'll turn the call over to Mr. Novegil..

Good morning to everyone and thank you very much for your interest in Ternium and for participating in our third quarter results call. I would like to start with a few highlights about Ternium's performance so far in 2014.

Then I will make some comment regarding the latest event related with our investment in Usiminas and right after I will ask Pablo Brizzio to make a brief comment about Ternium results in the third quarter of the year, before going into the Q&A session. So let me begin by saying that I'm very pleased with Ternium's performance during the year.

Our operating results and profitability compare very well against most of our peers in the industry and they improved compared to our performance last year. In the first nine months of the year, we had a steel shipment of more than 7 million tons already and we showed 17% EBITDA margin, equivalent to around $160 per ton.

So I'm very proud we have been able to show this performance in a complex and volatile economic market environment.

I think that our focus on high value-added products with a flexible production configuration and a diversified cost structure coupled with the different cost-cutting initiatives that we're pursuing and that I will comment afterwards, enable us to show a resilient and a consistent performance.

With a net debt of $1.7 billion, we continue to have a solid financial position, equivalent to around 1.1 times EBITDA, another feature that distinguished us from our competitors in the steel arena.

So Ternium's main steel market, Mexico and Argentina during this period, had a different performance, Mexico accounting for 60% of Ternium's shipment, our performance in Mexico has been extremely good with a 16% increase in sales in the first nine months of 2014 compared to the same period of 2013.

The bulk of this increase in shipments in Mexico was driven by the positive environment for the manufacturing industry with a choice high level of competitiveness and a healthy export being demanded from the U.S.

Ternium was able to capitalize this situation, developing an increased commercial effort that showed the result from the beginning of the year through a significant increase in market share against import, thanks to its superior service performance with delivery service assistance and so on and so forth.

So then on the other part of the coin, Argentina accounted for 24% of Ternium's shipment in 2014. Our shipments in this market decreased only 6% in the first nine months of 2014 compared with the same period in 2013.

This shipment showed normal levels up in the first quarter of the year which is the seasonality low quarter and then it stabilized on these slight lower levels during the second and third quarters. During the year, we have been working on ramping up facilities in Mexico and Argentina.

The (indiscernible) facility and Tenegal [ph] joint venture have been increasing their production levels in Mexico and we recently began to ship slabs to Mexico from our new continuous cast in Argentina.

To substitute parts of a slab from third parties with an effort to boost production from Argentina to Mexico in high end slab specifications, so allowing that to reduce the dependence on high end kind of products from third parties.

Finally, I would like to share with you two new initiatives related with a cost reduction and efficiency of which we're working on right now. As you might now, at Ternium we pursue industrial excellence as a key value of differentiation for our company vis-a-vis our peers.

So on top of the managing initiatives that we have on a standard basis, we’ve planned additionally an energy-saving program focused on the defined opportunities in the consumption of electricity, natural gas, helium, nitrogen and oxygen.

Also, we’re developing continuous improvement themes supervised by full-time dedicated management with an emphasis on production practices, quality and material yield. We'll continue working on these two initiatives on top of the standard initiatives and get back to you with more detail in the future for our investor day next year.

Also important to mention that we continue undertaking as I shared with you in the last investor day, the cost production programs in relationship with labor productivity, logistics and reduction of sub-contractors. All of these programs are doing very well and are showing interesting economic results.

So we can go in detail in the Q&A on some of the results of these programs or even better to go in detail of the impact of these programs during the coming investor day next year. But let me now update you on the latest events in Usiminas.

You may now during the third quarter, Usiminas board of directors, in a 5 to 5 position, dismissed (indiscernible), the company's CEO, together with two members of Usiminas management board, Pablo Vaceti [ph] who was in charge of Usiminas subsidiaries including mining and Marcelo Chara, Usiminas industrial vice president.

Also, through a 5 to 5 vote, the Usiminas board appointed (indiscernible) as interim transitory CEO. These decisions were taken at the request of Nippon Steel, who voted against the rest of the controlling group. As you know, Ternium and the Usiminas employees' pension fund also joined together with Nippon Steel, the control group of Usiminas.

And these decisions were made possible by a casting vote from Usiminas chairman of the board, Mr. Pablo Penido [ph], who at the same time is provider of consultancy services to Nippon Steel from whom he receives a significant economic compensation.

(Indiscernible) it is also important to note, that last week, Usiminas Supervisory Board for fiscal council passed a resolution that among other things, stated that there was no fraud, bad faith or interference of any event related to the issues on which the dismissal decision was based upon.

The same fiscal council also stated that the conclusions of the internal audit department report on which the Board of Directors' decision to dismiss the management was precipitated by and based on, a superficial examination of documentation.

The mentioned council voted 4 to 1 for these resolutions and only the Nippon Steel representative voted against it. We will name the decisions taken by the board of directors previously were illegal and the directors appointed by Nippon Steel breached the Usiminas shareholders agreement.

We also relate that these decisions will have a negative impact and a negative effect in Usiminas as they disrupted the turnaround process that enabled the company to significantly improve the performance and financial standing during the last two years as all of.

You know that we're always looking for Usiminas best interest and at the same time we intend to take all reasonable actions to protect our right and investment in Usiminas. We will keep you informed of any relevant event in relationship with this issue.

Let me now make a very short or very brief comment related with the same issue of Usiminas and based on our recent acquisition of 10% participation Usiminas ordinary shares from (indiscernible) Banco do Brasil pension fund. I consider that the price paid for the participation was R$12 per share.

In our view this is a reasonable price for the share and it is significantly lower than what I believe is their intrinsic value, considering the long term improvement capability of the company. I'm convinced Usiminas has a lot more to show and will do so with time and good management team.

We're committed to our investment in Usiminas and this commitment is shown in our increased participation in the company as within the acquisition of privy shares.

So then at this point of time, these are the main issues that I wanted to share with you today so that I will ask Pablo Brizzio to take over and give you a brief description on our performance in the third quarter and so please, Pablo, go ahead..

Thanks, Daniel. Good morning to everyone. As usual, I will describe our performance in the quarter and then we'll go directly to Q&A. EBITDA in the third quarter this year was $423 million, 28% higher than EBITDA in the second quarter this year.

The third quarter EBITDA included non-recurrent gain of $57.5 million related to income recognition of an insurance recovery in Ternium's Argentina subsidiary, Sideral [ph], in connection with damages in a blast firms and coking varities in Argentina during year 2012.

Excluding this non-recurring gain, EBITDA in the third quarter was approximately $35 million higher than in the second quarter and EBITDA margin went back to around 16% or $157 per ton.

Net sales reached $2.2 billion in the third quarter, a 1% sequential increase as a result of slightly higher revenue per ton and relatively stable shipments which were 2.3 million tons in the quarter. Steel revenue per ton in the third quarter was 2% higher sequentially with small increases in Mexico and in the southern regions.

Shipment to Mexico kept the strength shown in the first half of the year with 1.4 million tons sold in the third quarter. Shipments in the country increased approximately 0.5 million tons in the first nine months of 2014 compared to last year.

As Daniel mentioned, this growth was mainly driven by sales to the manufacturing industry in Mexico which is enjoying healthy demand from the U.S., while sales related to the construction sector remain stable.

As suspected realized, steel prices in Mexico showed a 2% sequential increase during the third quarter, although on a tracted level, steel prices in the region show some slight weakness since the end of the second quarter. So we expect somewhat lower prices in the fourth quarter 2014.

Shipments in the southern region were also relatively stable sequentially as expected and we believe they will remain at these levels during the last quarter of the year. Realized price in the southern region showed a 2% sequential increase in the quarter and we expect them to also show a slight decrease in the fourth quarter.

So as I mentioned before, excluding the income recognition on an insurance recovery in Sideral, consolidated EBITDA per ton of steel increased from $140 in the second quarter to $157 in the third quarter back in-line with our usual level of EBITDA per ton.

This increase in EBITDA per ton was mainly due to a $15 increase in revenue per ton as operating costs per ton remained stable. For the fourth quarter of the year, we expect operating income will remain at more or less the same level we show in the third quarter, again, excluding the insurance recovery.

This will be the result of slightly lower level of revenue per ton and cost per ton with slightly higher shipments in Mexico as we continue the ramp up of our facilities in a seasonally low quarter. The income tax line has seen some volatility in Ternium in the last couple of quarters.

This was because there were some specific income tax gains and losses in the second and third quarter of the year.

The biggest one was a non-recurring tax gain in the second quarter, related to a reduction of the first tax liability of one of Ternium's subsidiaries and there were also certain income tax expenses related to an amendment of a previous tax return in Mexico in the third quarter of the year, among other issues.

So the expected tax-rate in the second quarter was 10%, significantly lower than usual and in the third quarter, it was 43%, somewhat higher than usual.

These positive and negative effects compensate each other and throughout the first nine months of the year has effective tax-rates for the accumulated period was 32% which is in-line with the effective tax range of 30% to 35%, due to the spect in a longer ramp up (indiscernible).

This income tax effect also affected the quarterly sequential comparison of equity holding net income which in the third quarter was $112 million or a gain of $0.57 per AVS and in the second quarter 2014 was $129 million or a gain of $0.66 per AVS, from an accumulated perspective, earnings per AVS were $1.99 in the first nine months of 2014 compared to $1.68 in the same period last year, equivalent to an 18% increase in earnings per AVS.

So net income decreases $20 million sequentially in the third quarter, mainly as a result of higher income tax partially offset by higher operating income, but it increases $107 million year over year in the first nine months of 2014.

As a result of increase in operating income, lower net financial expenses may result from Usiminas and lower income tax spend. Let me now make a brief review of the cash flow statement. Net cash flow provided by operating activities in the third quarter was $288 million.

In the context of increased production and sales, working capital was $49 million higher, mainly as the result of an increase in inventories partially offset by a decrease in trove sea level and an increase in an account payable.

Inventories increased in the third quarter 2014, mainly reflecting higher volumes, raw materials and purchased slabs partially offset by lower cost of raw materials.

Capital expenditures continues in a downward trend as they were $99 million in the third quarter or $335 million in the first nine months of 2014, more than 50% reduction when compared to CapEx of $725 million in the first half of 2013.

So Ternium free cash flow reached $193 million in the third quarter and our financial position continues to be strong with net debt of $1.7 billion at the end of September, 2014, equivalent to 1.1 times net debt to last 12 months EBITDA. This compares to net debt of $2 billion at the end of June, 2014.

All right, these were the main issues I wanted to comment. Please now we can go directly to the Q&A session. Thanks..

(Operator Instructions). And our first question is from (indiscernible) from Merrill Lynch. Your line is now open..

As you can imagine, we have a lot of still questions on Usiminas, so if I may, I'll focus a couple of questions on that matter.

First, if you could help us understand what are the next steps on the legal steps and also when you believe you can be able to propose to the board to reinstate the new management or not, do we need to wait until April for that? If we could understand the next steps on that, on Usiminas, it would be great.

And my second question also on Usiminas, but on the shareholder agreement, is there any sort of close or trigger that could enable Ternium or Nippon to break out the shareholder agreement in 2016? That would be great to know also. Thank you..

All right, so what your question being what is the course of action from now on and what we believe is the most probably outcome from this issue and what are we doing to solve the issue.

What I can mention is that we will continue taking actions to protect our rights and interests in Usiminas, pursuing the reinstatement of the dismiss [ph] of the unfairly and illegally in our view, dismissed executives. We believe that we have a solid case, a solid legal case, a moral case and that we will prevail in court.

It is important to mention again, the last week resolution from Usiminas fiscal council in some European countries this concurrency is mentioned like a supervisory board, that stated very clearly that there was no fraud, but they put interference with any officials in the company from dismissed executives and that the board decision was wrong and baseless.

If you ask me when, that means if I could consider how long could it take in the Brazilian court and what will happen with Usiminas in the meantime. So we at the end, we'll have to retake consensus with Nippon Steel on how to put an end to the current crisis and move forward.

In the meantime, we've continued support no doubt the Usiminas because we consider that the turnaround process that now was interrupted by this action being promoted by Nippon Steel has to continue because the company was doing pretty much better as it has been considered unanimously by analysts and by economic actors in the steel world.

So regarding the last part of your question, I don't see what you mentioned in the shareholders agreement, but any change in the shareholders agreement to prevent future deadlocks like the current one had to be work and had to be understood with Nippon Steel in order to resolve the current crisis including how to address future deadlocks.

But Pablo, would you like to add something on this part of the question?.

Yes, I'm going to confirm what was just said specifically there is no clause in the current shareholders agreement where it says that in 2016 either Nippon Steel or ourselves can get out of the shareholders agreement. So there is such a confirmation. There is no clause in that respect..

Thank you. And our next question is from Leonardo Correa from BTG Pactual. Your line is now open..

So the first question, just before perhaps moving back to Usiminas, this is more of a strategic question something that has been already asked in the past several times.

But all around, just thinking on how the company views its current share price and how the company is viewing the trading level of shares, I know that shares for several reasons have been trading at the press valuation levels.

But just wanted to see with you, Daniel, if there was anything on the table that you're now looking to review or to adjust I mean any potential bump up in dividends to really potentially re-rate the share price or eventually even spin off the Mexican business? I mean you’ve quite solid fundamentals in Mexico.

I mean the entire index in Mexico trades on a quite high multiple. So I just wanted to get a sense of from a strategic view if Ternium is studying any measures to re-rate the current share price. That would be my first question.

And second on Usiminas, I know that you answered already several aspects of it, but just if we can focus on the next steps here.

I mean can you confirm if you have any talks underway with Nippon? I mean has – after the issues, I mean has Nippon and Ternium – have you gone together and is there any talks underway now to resolve the issue? And I just wanted to get your thoughts, Daniel, on how you view an independent management team if that is something that Ternium would be considering, given that Nippon has been expressing some interest in appointing a new, independent management team for Usiminas.

Those are the questions, thank you..

Well regarding the second part of your question and I will ask right afterwards to compliment my answer by Pablo Brizzio, right now at this time we're not considering any important measures any important initiatives in order to boost this year's price.

As you know, we’ve been performing quite well in comparison with peers, even when I recognize that maybe in terms of multiples, we could be having a better valuation, no doubt about that because of the fundamentals as you said and also because of the perspective and also because of the relative performance of our company vis-a-vis competitors and the potentiality of our market.

As we can mention afterwards, I really see a demand being quite strong and very good perspectives in North America and also price is an area that could be also giving us a nice environment. But to answer the first part of your question, before going to the second part, my answer is that at this time.

Right now, we're not considering any new initiatives or any positive initiatives to boost the share price through dividends flow or through trading or share buyback. But we’ve been discussing some other course.

But Pablo, would you expand on my comment?.

Yes of course, Daniel. First of all, we're not planning to (indiscernible) Mexico independently from Ternium that clear. You know that the dividend that the company pays is set once a year in the shareholders meeting and we always try to maintain at least certain level of dividend payments compared to our results.

So if our results get better, the dividend should reflect that. The only piece of news that appeared recently in publicly, is that probably there will be some amendments to the rules of MSCI in order to include different companies. And if this move forward, probably that could be the possibility to achieve Ternium being included as a Mexican company.

So this is something that has been widely discussed with you and some other people that this could help Ternium in the future. So this is my only comment to this point, Daniel..

Right. So going to the second part of your question, the first one was if we were speaking with Nippon about what is going on in Usiminas, you know, that Usiminas' well-being is our priority. Accordingly we're always open to discuss Nippon ways of putting an end to the current crisis.

But for example, although we will continue working on the reinstatement of the dismissed executives, we have recently proposed the appointment of Tulio Tipoletti [ph] as industrial vice president of Usiminas. Tulio is a former Tenaris employee, his appointment was unanimously accepted in the controlling group. Mr.

Tipoletti is already taking care of this new important fashion and in an interim fashion until a definite management theme is appointed. So that we will continue taking all possible actions and ways that could contribute to Usiminas best interest.

Needless to say, that we will also continue talking and taking actions to protect our rights, and interests in Usiminas, pursuing the reinstatement of the unfairly dismissed executives. To be honest, I cannot deny that the relationship with Nippon Steel is not in the best moment, no doubt about that.

But at the same time, we will continue taking actions to protect our rights and interests in Usiminas. As I said before, pursuing the reinstatement of the executives who have been unfairly and illegally dismissed. In the last part of your question you mentioned if we would agree to have an independent management in Usiminas.

I believe that what you meant is a management that is not appointed by either Ternium or Nippon Steel. And let me comment on that, that the appointment of management in Usiminas was made and has to be made by consensus, according with the shareholders agreement. Our objective was and is always to appoint the best possible management for Usiminas.

Any manager so appointed must be Usiminas managers, not Ternium or Nippon Steel managers. Let me comment on that, that we also believe that Nippon Steel practice of supplementing the compensation of these managers, nominated by Nippon Steel, for example like the case of the current chairman of the company, Mr.

Pablo Penido, in our view is questionable and against any good governance practice and management standards. So at the end, we will do whatever we can in order to have a better Usiminas. We will talk all the time that is necessary and at the same time.

We'll protect our right and we will be very firm in pursuing the restatement of the manager that has been unfairly and illegally dismissed..

Thank you and our next question is from Ivana Kestermann with Credit Suisse. Your line is now open..

Just going back to operations, on the volume side you were delivering the expansion in Mexico.

Just like you to comment on your guidance in terms of the volume growth in 2015 especially Mexico, but also in other business divisions and also in terms of price, I would much appreciate if you would comment on the outlook of price in Mexico and how sustainable they are compared to international price and what to expect in terms of Argentina as well.

Thank you so much..

So let me start by your comment on the market situation in Mexico and you know we’ve the target at the same time of gaining market share in Mexico mainly from import coming from overseas.

And we’ve been very successful in doing so especially in the last part of this year, when we're dedicating our main commercial efforts to gain market share in high end products and in the natural sector where we can have a price premium recognizing a superior service with delivery and better logistics vis-a-vis our operators especially as I said before, coming from overseas.

The ramping up of Tenegal has been successful so far. We see good prospects especially in Mexico, in relationship with a project related with energy and also especially after the energy reform that the government is pursuing and is undertaking through some different regulations.

Also the automotive industry is doing very well following the performance in the U.S. and we see very, very good perspectives there especially now that we're present in these markets through our Tenegal facility and through our new marketing approach of targeting high end and more sophisticated products.

The construction is lagging a little bit behind in the short run, but no doubt that even that Mexico has a very good demographic with a very young population and a positive demographic growth in the future.

We see that at the end and in the mid-term and long term, we will have also the contraction business very good prospects, so that all-in-all in Mexico we see the market doing well, we see the market being strong, healthy and we feel that we have good perspectives looking forward. Regarding your question on prices, you know is the $1 million question.

I mean we’ve now in the marketplace especially in Mexico different opposite forces interacting in the landscape. On one-side we have raw material prices going down especially iron ore and carbon.

Interesting also to mention between brackets, that our operation in glass furnaces is really very competitive and now with raw material prices have begun the more – maybe the most competitive force in our investor base.

Also looking at the landscape in raw materials, the gas prices are stable and low, the scrap price is stable and high, maybe with a downward trend in the medium term and in the pricing sector we see a decoupling – no doubt, an important decoupling between U.S.

domestic pricing against European domestic prices like Germany or Italy and also the China domestic prices.

But as you know at the end, the supply – the prices are a consequence of supply and demand dynamics as you knew this same week, it was announced by a clear middle U.S deal, a price increase that they are trying to pass into the market of around $20 per metric ton.

So that they are backing up this price increase in the fact that the demand in North America looks healthy. Well that's not the case for example, in China, where we will have only 1% increase in apparent consumption, when the GDP will grow around 7.5%.

So we're looking in China a reversal of the positive elasticity in steel demand vis-a-vis GDP growth, now the elasticity is negative. That means when the GDP is growing 7.5%, the steel demand or the apparent consumption only is growing at 1%.

But you know, all-in-all, putting this in perspective and taking into consideration these other factors, raw materials going down, gas and energy costs being stable and low and decoupling between different markets performance in domestic pricing and supply and demand dynamics.

I would say that all together, at the end, I see prices similar to recurrent levels for the quarter to come. Maybe being cautious I would say that – or being more cautious, I would say that maybe they can go down an additional $20 below the current level, that means that we could see the hot roll coal prices in the U.S.

market at levels between $680 to $710 per metric ton which is maybe $15 to $20 below the current level, being cautious. In Argentina, also the steel dynamics and the steel demand is growing quite well.

The market is going down only 6% in relationship with the market demand last year that was at all-time record for the consumption of steel in Argentina.

Taking out the 2013, also 2014 even when a little bit weaker than 2013 there is a kind of slow-down in some sectors of the economy, like automotive and like construction, but in any event, it's taking out the 2013 levels, the 2014 even with this slow-down is also an all-time record level for Argentina demand.

The pricing in Argentina as all you know, is also following the dynamics of the international prices so that we quote our prices taking into consideration our cost, our import competition and the dynamics of the demand and supply in the domestic market.

So I don't see any important changes in this respect and the prices in Argentina will follow the dynamics of the domestic market in developed countries..

I just went through follow-on on your initial comments on the positive outlook for Mexico. Is it possible at this stage to help us to quantify what expect in terms of volume, sales or growth in Mexico and in Argentina? Thank you..

Yes, we don't make this kind of speculations. We are always obviously looking with our forecast programs and so Pablo, could you comment on that? You are the specialist on this forecast..

Yes. Okay, Daniel, the only thing that we have already commented in the past which is fair to comment again is that with the new facilities that we have been ramping up in Mexico and also in Argentina especially Mexico.

We’ve been able to achieve basically the goals that we have for this year and we're still working to achieve the goals that we have for next year which is to have a net 1 million tons additional product to sell into the market.

So the goal for 2015 as you already know is to reach a level of shipment as a whole in Ternium of close of around 10 million tons and this year we're achieving basically mid-term between the 9 million tons that we shipped in 2012 and 2013 and the 10 expected or forecasted, tonnage that we're wanting to ship to the market in 2015.

So up to now, we've already shipped 7 million tons in both markets. So in all the markets that we’ve and we're expected to see somehow will increase in volumes coming out of Mexico, so if you project the fourth quarter to what we already have up to the start, we should be around this number..

To compliment your question as you know, we just are in the process of finishing our investment in Mexico, the BD PLDCM and the Tenegal line in Argentina, the new continuous caster and vacuum degasser that are allowing us to sell high end products, slab products in sophisticated specifications to Mexico, that's why also we're looking at decreasing the CapEx that we're showing this year in relationship with last year.

And the reason for that is that we've finished this huge product and now we're in the process of managing and administration of many, many, many different products to boost productivity, efficiency, yield rate and so on and so forth.

And sometimes it is difficult to manage on our side for engineering standpoint and managerial standpoint of managing all these projects at the same time. That's why the CapEx was down and it had a positive effect in the net debt of the company.

It was not mentioned yet, but I see that the net debt of the company going down in almost $300 million is a positive new and it's reflecting a continuous pursuant from the company side in betting off our numbers and betting off our old initiatives in the sense of reducing working capital and working logistics and so on.

So that's what I wanted to say..

Thank you. And our next question comes from the line of Milton Sullyvan with Brasil Plural. Your line is now open..

I have two questions actually. The first one is on CapEx, if you guys could give us a little bit more color on that, we saw this significant decline this quarter. I would like to know what should we expect from now on.

Do you see it decreasing a little bit more as you finish the last investments you still have to do? And the second question, coming back to the Usiminas issue once more, there are many – we saw that above the stake that you guys bought from privy, you guys already mentioned and the relevant fact that you don't think it triggers a mandatory public offering for minority holders.

However when we look at CVM's rules, this seems far from a precise calculation and many investors that we're talking to believe that the 1/3rd of the free flow limit was breached. Could you guys please share some color on why you think this assessment is wrong and if you already have an indication from CVM that no offer would be required? Thank you..

Okay, Daniel, let me take these two questions. First of all, in relationship to continue this trend, so by year-end we should be looking at numbers of $450 million for the year 2015 or around these numbers. Without any new announcement of new CapEx, we should be at same level that we announced before which is $500 million of CapEx for next year.

So basically demanding the level of CapEx we have at the moment with the current plan that we’ve and the one commented by Daniel, the processes that we're trying to implement and improve within the company. Going to your second question, I know that this has been a question analyzed by different persons, but we’ve been quite clear on this point.

The number of shares that we bought from privy has been from our side, in fact publicly announced that we went through the calculations, we and our lawyers. And we said that the numbers that we bought are below the threshold that would require a mandatory tender offer not only for us that, but also the privy with the seller of the shares.

As you know, they did not sell all the shares that they have because of the same reason so they also publicly announced that the number is below the same threshold that requires a mandatory tender offer.

We're very comfortable with our calculation which is based on the specific methodology that the CVM regulations and deputations are required to follow. As you know, anybody can ask the CVM to have a saying on this issue, but we're confident on the calculation that we made and that's why we went ahead and bought the shares..

Yes. To compliment your question and the question being at the end, why we bought the privy shares and as I mentioned and we mentioned together with Pablo in our remarks, we're convinced that Usiminas has a lot more to show and will do so with time and with a good management team.

Before the transaction, we had a 10% economic participation in Usiminas and this participation went up by 50% to right now, nowadays. We pay the premium, that's great.

But when we started to talk with privy about the sale of their stake in Usiminas, we believed we understood that this was an opportunity for a clean and swift transaction at a reasonable price according to our company valuations. So trying to acquire 10% of the company in the market could have entailed a lengthy process with an uncertain press time.

So that's why we went ahead with the transaction and as Pablo explained. We're very comfortable with our calculation which is based on the methodology specified by applicable CVM regulations and interpretations. So we feel comfortable and we don't see any trouble there..

Do you have any expectations on when CVM should have a say on this issue?.

This is a question of CVM (indiscernible) take their time having the same case. Remember in 2012 we acquired a share from Otrentito and Camargo [ph] and some minority shareholders asked the CVM to take a view on the possibility of a mandatory offer and after a month, they ruled out that possibility.

So probably you know better than me which is the timing of the CVM to comment on these issues..

Thank you. And our final question comes from the line of Andre Pinheiro from Itau BBA. Your line is now open..

Two quick questions, the first just going back to leverage, your leverage is currently low. You mentioned that before, it's only slightly higher than 1 times net debt to EBITDA. And historically we've seen Ternium go through a growth cycle and then deleverage very quickly right after that.

I would like to know if you are near to announcing a next growth step right now and what are the next growth steps that you would be considering right now? Would it be another strategic M&A opportunity to reduce your slab gap other projects even eventually increasing your stake in Usiminas through a tender offer or something of the sort to reduce the price you paid in the past? And on working capital, just going to the subject, working capital increased more than $500 million year to date.

We've seen actually this has been an increase because of production and higher inventories. Are you working on reducing working capital for next year or should we see working capital continue to increase with the ramp up of your projects? That's basically it..

Yes. Let me comment very short and then I will pass to more detailed explanation on the part of Pablo Brizzio. Regarding the first two questions, we're not considering at this point in time, right now, any new growth cycle as it was mentioned by you or any M&A opportunity, meaning either integration downstream or upstream.

We're not considering right now any step in that direction. Regarding the working capital, it is correct that the working capital went up, mainly because of two reasons. First because of seasonality effect in the river in Argentina, that affected the freight above (indiscernible) coming from the north through the Paladan River.

So that inventories of raw materials went up in Argentina, first. And second, the reason for an absolute time of an increase in inventories was because the market went up, we were gaining market share and we wanted to sustain a good service approach date upon a superior level of inventory.

But no doubt as you also mentioned in your question that there is room to reduce a working capital looking forward because we will stabilize our position regarding raw materials in Argentina when the river is going to be entering into a new anti-cycle on a seasonal basis and also because we will be working in MRO, spare parts and many, many different areas where we have chances to reduce working capital looking forward.

Pablo?.

Just a couple of issues, Daniel, we’re quite comfortable with the level of net debt that the company has. As you mentioned, we don't have any specific at the moment and we will continue to highlight which is the best alternative that the company has in the future. Regarding working capital, we're always working in ways to reduce it.

There were some specific issues like the ones Daniel mentioned this quarter, the evaluation in Argentina also has a very significant impact throughout the year especially at the third quarter of the year in Argentina and we would like to stabilize and keep working in ways to have reduce working capital in the future.

So you should see the company working in that respect not only next year, but from now on as we always do. So that's it..

Thank you. And at this time, I would like to turn the call back over to the CEO for any further closing remarks..

So just to thank you again for your interest in the company and in Ternium and for the time that you dedicated to us today. We really look forward to remaining in touch with you and to answer all – with all the information that we have in hand, all the questions you could have about the company doing.

And as always, please contact us if you have any additional questions or any quotations and I hope to see you in the next – or listen to you in the next call as well as to see you in our coming Investor Day. So have a nice rest of the day and thanks a lot..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now all disconnect. Everyone have a great day..