Ternium - Earnings Call - Q2 2020

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by, and welcome to the Ternium Second Quarter twenty twenty Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sebastien Marti. Thank you.

Please go ahead.

Speaker 1

Good morning and thank you for joining us today. My name is Sebastien Marti and I am Ternium's Investor Relations and Compliance Director. Ternium released yesterday's financial results for the second quarter and 2020. This call is complementary to that presentation. Joining me today are Ternium's Chief Executive Officer, Maximo Vedoya and the company's Chief Financial Officer, Pablo Brizio, who will discuss Ternium's business environment and performance.

At the conclusion of our prepared remarks, there will be a Q and A session. 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 on Page two in today's webcast presentation. With that, I'll turn the call over to Mr. Medoce.

Speaker 2

Thank you, Sebastian. Good morning and thank you very much for taking the time to join our call today. In my prepared remarks, I would like to review the effects of COVID-nineteen on our company during the second quarter, our actions to mitigate these effects and also the status and prospects of our main markets. After this, Pablo will comment on the results for the second quarter and then we will have a Q and A session. This second quarter has been one of the most challenging quarters I can remember.

Lockdowns or restrictions to operate were in effect in most of our markets during the quarter. Not without effort, we were able to adapt the company to this difficult market situation. In a very short period, we totally redesigned the way we operate our facilities in the current sanitary context with the aim at mitigating contagious risks to the extent possible with the health and safety of our employees, customers and suppliers as our main concern. In this regard, in addition to the sanitary measures I commented on our last quarter conference call, we continue developing innovative tools to increase the compliance with our protocols. Just as an example, during July, we implemented the use of artificial intelligence system to verify compliance with sanitary protocols within our industrial facilities to help prevent the spread of COVID-nineteen.

More than four hundred cameras at Thames facilities in Mexico, Brazil and Argentina are able to reinforce social distance policies and the use of face masks through video analytics that use in house developed algorithm. Yet our efforts in favor of mitigating the effects of COVID-nineteen pandemic are not stopping at our facilities gate. The field hospital we build in Monterrey, Mexico with 100 beds and a fully equipped intensive care unit has been very actively supporting the health needs of the local community in these difficult times. We also supply 25 intensive care units to two hospitals in Rio De Janeiro, Brazil and 100 beds to a field hospital in Ensenada, Argentina as well of intensive care equipment. Our aim was to help all of our communities in the regions.

To maximize the effectiveness of our help, we worked together with directors of key hospitals in each of Ternium's locations to determine the specific needs in each case. All in all, with a $5,500,000 dedicated fund, we were able to build a field hospital and donated beds, intensive care unit equipment, ventilators and other medical equipment as well as safety kits for health professional to 16 hospitals and healthcare facility in four countries. Our global procurement platform had a key role in this effort as it was able to purchase the requirement the required equipment and have it delivered to each location. Additionally, to foster the sharing of knowledge of treatment of COVID-nineteen, we created a network of medical professionals, 70 doctors from local communities in Mexico, Argentina, Brazil and Colombia participate in the virtual meeting with their colleagues at Humanitas, an Italian network of hospitals. Through this platform, Humanitas experience of dealing with COVID-nineteen outbreak in Italy is available at a public virtual campus.

I'm very proud of all we have been able to do to to support our communities in such a short period. Many of our initiatives in this regards and in all the spheres of our activity can be found in our new sustainability report, which was issued two weeks ago. The redesigned report intended to be an integral discussion of our progress towards achieving our objectives in a sustainable way. This is the first edition of our sustainability report to follow the Global Reported Initiative or GRI reporting guidelines. We believe GRI guidelines enable us enable our reporting to deliver a higher level of transparency and data comparability.

Additionally, we have committed ourselves to the UN Global Compact and to the advance its Sustainable Development Goals or SDGs. You will also be able to find more about our contribution to the UN SDGs in our latest sustainability report. Let's turn to our operation now. This has been times of swift and decision action. We usually say that our industrial system has significant operation flexibility.

With steel demand dipping during the second quarter, we saw many steel companies in the region in need of taking the costly decision of shutting down blast furnaces until demand recovers. In contracts, our blast furnaces in Brazil and Argentina were able to keep operating as they reduced production to technical minimums and increased shipments to other ten year facilities in the region, which in turn adjust their steel procurement and production lines. The cost competitiveness of our facilities and the capacity to rapidly change the degree of integration among Ternium's means allows for these quick adaptions to change in market environment. In addition, with the aim at sustaining our margins, we work hard on optimizing production and overhead cost and on reducing general expenses and extraordinary maintenance works across our facility. As a result of all these factors, in a very difficult environment in the second quarter when ships declined 18% sequentially, we were able to show a 13% EBITDA margin and EBITDA per ton of $91 just a slight decrease compared to our first quarter.

Another aspect of our company on which we concentrate our efforts was the balance sheet and cash flows, faced with significant uncertainty regarding the extent and duration of the effects of the pandemic on the global economy and in particularly on our markets, we took immediate action to increase liquidity and strengthen our financial position. We minimized inventory build ups, reduced purchase of raw material, third party steels and other items. We work with our supply chain to reduce working capital and we postponed several capital expenditure projects across our facilities. The result of these actions was more than $300,000,000 working capital release in the second quarter and a reduction of capital expenditure to less than half the level we had in the first quarter. Consequently, we had free cash flow of $393,000,000 in the second quarter, taking net debt down to a little over $900,000,000 at the June.

This is equivalent to a net debt to last twelve months EBITDA ratio of only 0.8 times. For the time being, we will continue taking a conservative stance regarding the management of our balance sheet. As while the effects of the pandemic seems to be abating in several parts of the globe, there is still no clarity regarding an end to its disruptions to the global economy and to our markets. Let me now make a quick description of the status of our main markets. In our Mexican facilities, we are approaching normal rates of production.

The easing of operation restrictions in the country is enabled a gradual return of activity in the auto industry as well as in other manufacturing industries, including household appliances and lighting. Coupled with an improvement in market share, this return to activity should support a recovery of shipments in Mexico during the third quarter. In the construction sector, after being mostly shut down during a good part of the second quarter, is beginning to slowly come back, although it remains quick. In Brazil, we have seen significantly increased production in our slab facility from the minimum technical levels reached during the second quarter due to the reduction in steel demand. This increased production rate is supported by a higher level of integration with the company's industrial system.

Additionally, improvements in economy activity in Brazil are driving a current recovery in local steel industry slab demand, which got close to disappeared during the second quarter. In Argentina, following record low shipments in the second quarter, we expect a sequential volume increase mainly driven by higher activity levels in construction, the agro business sector and the canning and white good industries. Steel production in Argentina has also been able to return closer to normal level as restrictions in many parts of the country are gradually being relaxed. In this context, the recent announcement of an agreement with international creditors for the restructuring of Argentina's debt government debt is a positive development, but this was a necessary step for a macroeconomic program to be successful. All right.

Just a note of healthy caution before I finish. I am very proud of the achievements our management team and all of Ternium employees have made so far during this unusual time. Their commitment and results were admirable, and I would like to thank them for their hard work. However, we are not back to normal yet. While all of our markets in Americas are showing signs of improvement and our expectation for demand and production rates in the third quarter are positive, uncertainty proceeds regarding a possible surge of COVID-nineteen and its effects in the economy.

You can rest assured, we will continue striving to make our company stronger and to mitigate the effects of the pandemics on the company and its stakeholders. Okay. These were the main points I wanted to touch today before we review the second quarter results and answer your question. Please Pablo go ahead.

Speaker 3

Thanks Maximo and good morning to all. Let's go through turning results for the second quarter and the first half of this year. Let's start with the company quarterly EBITDA and net results on Page three of the webcast presentation. As you can see, TANU EBITDA decreased sequentially in the second quarter to $224,000,000 as expected due to lower shipments and slightly lower EBITDA per ton. Net income in the period was $44,000,000 or $0.22 per ADS.

The results compared to net loss of $19,000,000 in the first quarter, a period that included the effect of significant depreciation of the Mexican peso and the Brazilian real to the U. S. Dollar, as we will analyze in more details in the following slides. As for EBITDA in the third quarter twenty twenty, we expect it to be in line with EBITDA in the second quarter, mainly reflecting higher steel shipments and lower steel prices in the North American market. Let's now turn to page four to see our steel shipments in the quarter.

All of our market showed the effect of the COVID-nineteen pandemic in steel demand. In Mexico, shipment decreased 25% on a year over year basis and 29% on a sequential basis. We are expecting shipments recovery in the country in the third quarter reflecting a return to activity coupled with improved market share. Shipments in the Southern Region decreased 32% year over year in the second quarter and 9% on a sequential basis. Achievements in the first quarter were already weak reflecting seasonality low activity.

Looking forward in the third quarter, we expect sequential volume increase in the Southern Region under a gradual relaxation or restrictions mainly Argentina. In the other market region, we can see on one hand finished steel shipments in blue decreasing year over year sequentially in the second quarter. And on the other hand, slab shipped to third parties in gray with slight sequential increase. The sequential increase in slab volumes in the second quarter reflects higher slab exports from Ternium's Brasilia facility to third parties, partially offset by lower volume shipped to third parties in Brazil. Looking forward, we expect Ternium's slab facility in Brazil to have sequentially higher utilization rate in the third quarter and to increase its integration with the company's system, reducing in term the volume of slabs shipped to third party.

The development, as you can see in the next page, resulted in consolidated steel shipment of 2,440,000 tons, decreasing 18% sequentially. Summarizing what we have discussed, we expect steel shipments to increase sequentially in the third quarter in our key markets with some offsetting from lower sales of slabs to third parties. Turning now to the upper right hand side chart, we see that the average realized price decreased 6% in the second quarter. This reflected lower realized price at Pernios main market. In Mexico, revenue per ton decreased in the second quarter, reflecting mainly lower steel prices in the spot market.

On a sequential basis, we expect lower average realized price in Mexico in the third quarter with weaker industrial contract realized price as a result of the lag price reset. Let me review now with the following page, the main sequential changes in EBITDA and net result in the second quarter of this year. EBITDA decreased as a result of lower shipments and EBITDA per ton. The decrease in EBITDA per ton was mainly due to lower revenue per ton, partially offset by lower operating cost per ton. Regarding changes in net results, on the bottom chart, the $19,000,000 loss in the first quarter included significant effect in connection with the 20 depreciation of the Mexican peso and 23% depreciation of the Brazilian real against the U.

S. Dollar. This effect in the first quarter included a loss of $189,000,000 on the first tax results at Ternium's Mexico subsidiary and a gain of $109,000,000 in net results of foreign exchange on the consolidated basis. Foreign exchange fluctuation decreased significantly in the second quarter, making the size of these effects decreasing as well in this period. Let me review now the main changes in the 2020 on a year over year basis in Page seven.

As shown in the chart on top, the year over year changes in EBITDA in the first half were the result of lower shipments and EBITDA per ton. The year over year decrease in EBITDA per ton in the first half, reflecting mainly lower steel prices partially offset by material energy maintenance, labor and service costs. Finally, before we go to the Q and A, let's review Ternium free cash flow, capital expenditure and net financial debt on Page nine of this presentation. After a strong set of numbers in the first quarter, we reported an even stronger set of second quarter twenty twenty numbers as Maximo anticipated. These numbers that reflect the measures taken to adjust the company operations to the reduction in sales and the decision to slow or postpone several projects across storing facilities enable us to further strengthen our balance sheet.

With free cash flow in the 2020 of $578,000,000 we reduced net debt by 40% in the semester to $917,000,000 to the June 2020, reaching the already mentioned number of 0.8 times of last twelve months EBITDA. All right. Once again, thanks very much for your time and attention. We are now ready to take your questions. Please operator proceed with the Q and A session.

Thanks.

Speaker 0

Your first question comes from Jim Spies from Morgan Stanley.

Speaker 4

Yes. Hello. Thank you for taking my questions. I just wondered how are you seeing the demand outlook for your different sectors in Mexico? Are there any particular sectors that you're worried about that could take longer to recover or to return to pre COVID levels?

And second question would be about slabs from your Brazilian operations. What's the outlook for slab exports to The U. S? Any sense of what the impact would have if The U. S.

Reduces the input quota for slabs from Brazil? And also if you could give us a sense of the current profitability there compared to past quarters? Thank you.

Speaker 2

Thank you, James. The first question about the Mexican demand and the different sectors. I think that demand in Mexico for the industrial sector is very good today. I mean, all the different sectors that produce cars, home appliances, lightning, electrical motors, they're running white goods, I don't know if at full capacity or at capacity before the pandemic, but very near that capacity. And I think they will continue to do that unless there are some revival of the COVID pandemic, they are going to continue doing that.

The sector that demand is lower is construction. And here, I would say, the private contraction that was one of the drivers for the last couple of years started to go below that number before the pandemic. And of course, with the pandemic, most of the private construction stopped. What we are seeing is that the infrastructure is starting to pick up. Infrastructure was very bad.

If you remember in the last several conference calls, infrastructure in Mexico was very bad. But today, it's improving with some of these big projects the government has. So overall, industrial production, very, very good. Construction below what we expected and but with infrastructure improving, but private construction not improving at all. I think that answered the first question then.

Second, slabs exports to The U. S, we are not seeing anything we are not seeing a change yet in anything of the quarter from slabs to The U. S. Nevertheless, I would say that with the prices or how the prices are today in The U. S, I think it's more profitable to export slabs somewhere else than to The U.

S. And so we are not extremely worried of what is will happen with The U. S. If there is a change in as you said, in slabs in the agreement that the governments of Brazil and the government of the U. S.

Has regarding slabs. I know there has been some press article about a proposal to change this agreement and putting some quota or reducing the level of the quota. I don't think that this I mean, it's very reasonable because they have an agreement, and I don't think they should change it. But if that happens, there's not going to be a lot of changes in our view for the third and fourth quarter because of the price difference today is very minimal. Okay.

That's very clear. Thank you. Okay. Thank you.

Speaker 0

Your next question comes from Rodolfo Angeli from JPMorgan.

Speaker 5

Hi. Good afternoon, everyone. Listen, it was a quarter that impressed us given the very challenging business environment that the industry faced. And in the case of Tx, in the case of Ternium, we were particularly impressed with the performance on the cost side. Volumes were down and yet you were able to reduce costs.

So I was just wondering if you could talk a little bit about how you got to that very interesting performance and how much of that can we expect to remain into the coming quarters? Thanks. That's all for me.

Speaker 2

Thank you, Rodolfo, and thanks for your comments. We will try to continue this way in the future. Of course, our aim, I mean, at all times is that to be able to reduce the run rates of our facility or if we have to reduce the run rates of our facility, to do so with the lowest possible impact on production cost. We tried always to have our fixed and semi fixed cost analyzed in a variable way. We are not 100% we don't have always 100% beef, but that's the objective we have.

And in part, that was what we accomplished in this quarter. This is possible mainly because our diversified industrial base, which provide operational flexibility, and we can integrate our facilities better or more depending on the market conditions. We as you also know, we performed strict control and reduction of general expenses. We reduced our overhead cost in the quarter. We reduced almost by half our contractors, our third party workers, and we replaced them with our own employees that were idle because those particular lines were not working.

So and of course, we have a reduction of freight in the quarter as we ship less. So I think that all those are all the things that we do, but we do it very quickly because our form of managing our fixed and semi fixed costs are more looking at them as a viable way. So I think that's the way, Rodolfo, that we try to work and gives these results. I don't know if I answered the full question, but

Speaker 5

Yes. No, sure. We'll probably have follow ups, but we'll do that with Sebastian after this. Thank you very much.

Speaker 2

Thank you, Rodolfo.

Speaker 0

Your next question comes from Caio Ribeiro from Credit Suisse.

Speaker 6

Yes. Hello, So my first question is on prices in North America, which you mentioned will be a headwind for second quarter results. I'm just wondering if you could talk a little bit more about what you believe are the main reasons that prices are under pressure right now given that demand seems to be sequentially improving with automakers resuming activities, other export oriented industrial sectors as well. Is it the addition of the capacity in The U. S, all the expansions that are coming online that's driving this pressure in your view?

And when do you believe that we could see a rebound for prices there and consequently in Mexico as well? And then my second question, just on the potential impact of these potential infrastructure stimulus packages that are being discussed in The U. S. With numbers ranging from $700,000,000,000 to $1,000,000,000,000 I just wanted to see if you have any initial assessment, right, on how you could benefit from that? And whether we could see a stimulus package infrastructure announced in Mexico as well for the coming years, which could help prop up steel demand?

Thank you.

Speaker 2

Caio, thank you very much for your questions. I'll try to answer the first one, but it's really a good question and it's the question that we all are having. I think that prices in North America are in a level that we haven't seen in quite a while, not the absolute number, but I think today or yesterday I think it was today that the prices index of the CRU was released for this week. And prices in The U. S.

Are almost like $30 below domestic prices in China. This has not happened since I don't remember when, I think the last time was 02/2009. So clearly, in The U. S. Are in a point that should change quite quickly.

Why is this? Why are the prices so low in The U. S? I think it's clearly that it's not a problem of import material as it was in the past. It's mainly the competition between domestic steel mills.

And of course, the problem that demand was very depressed. Some of the steel mills reduced capacity and some others did not. And this fight for market share produces the reduction of prices. My expectation and again, I don't think this has to be with the additional capacity that is being built in The U. S.

Because this has not come to realization yet. So this is more a problem of weak demand, which is improving, as you said, but still very weak, and the fight for market share of some of the companies. Having said that, again, prices in The U. S. Should improve rather soon than later because it doesn't make any sense these prices compare with prices in the rest of the world.

Infrastructure in The U. S, I don't think I think I answered, but I don't know if it's a full answer or you need any more of these prices in North America. No, no, no. That's very clear. Thank you for that.

Infrastructure in The U. S, I mean, I think it's a main issue for us still demand. Clearly, it's going to improve demand around North American around the North American market. If you said what's the impact specific to Telnu, we have not yet has an impact or managed to put an impact of this. We don't sell much to construction or infrastructure programs in The U.

S, as you know. But clearly, it's going to increase demand in The U. S. And that clearly is going to favor prices and shipments from all the companies in North America. In Mexico, although infrastructure is much needed, I don't think that we will have a program in the near future as big as The U.

S. I think it's necessary. But the government is still very cautious of the finance of the public numbers or the public financial numbers of the country. So I don't think they are willing to spend much more yet of what they are now spending in their big projects at the Mexican airport or the refinery in Tabasco. So I am not very optimistic that we'll have a program like in The U.

S. In the near future.

Speaker 6

Perfect. That's very clear. Thank you very much for your answers.

Speaker 0

Your next question comes from Tina Tanners from Bank of America.

Speaker 7

Yes. Hey thanks for all the great detail. I always enjoy your candid observations on the market. I wanted to just ask a little bit more about the guidance if I could because the sideways EBITDA move was a bit surprising. I understand the lag effects on pricing.

But I guess two questions around that. One is, is it just that the pricing is so much of a decline that it offsets all the positives elsewhere in terms of volume and what could surprise you? And then just in line with the comments about market share battles and oversupply in The U. S. Market, is it possible for the Mexican market to decouple from what's happening in The U.

S? Or do you think they're all inextricably intertwined? Thanks.

Speaker 2

Thank you, Tina, and thank you for your initial comment. Yes, I mean, the main driver of our outlook is prices in North America. You're right, volumes are increasing in all our markets in Colombia, Mexico, Argentina and even in Brazil slabs. Although shipments of slabs, as Pablo said, total shipment from the slab facility are going to improve, but to third parties are going to be lower. So you're going to see a lower shipment of slabs in the third quarter.

But as overall shipments are going to improve in Ternium. And the main driver is its prices. I mean, are still working we will continue to work on the cost base. But again, prices in North America today, you see the index are very, very low. I expect that prices start to rebound quite quickly.

As I said before, Tina, I think it doesn't make any sense, this level of prices. But in our outlook, we are cautious not to put a huge increase because we don't know if this is going to happen. And again, remember that some of our more than 50% of our sales in Mexico are lack in this contract based quarters. So you are going to have in the third quarter the prices of the second quarter, so no increase in that ones. Mexico decoupled, it's probably that in some sectors, is going to decouple if prices continue to be down.

I mean, again, our main competitors in Mexico are imports from a little bit from The U. S, but the price driver here was always imports from Asia. And with these prices, imports from Asia are going to decline. So if this tendency of these tendons of prices continue in The U. S, it's probably that in some of our markets in Mexico, we are going to decouple from The U.

S.

Speaker 7

Okay. That's really interesting. Thanks for that. I also apologize if I missed it. I had some connection problems because of the storm here last night.

But I was wondering if you commented on the dividend or your thoughts on that, if you wouldn't mind repeating if you already talked about that?

Speaker 2

No. We don't comment or nobody asked yet about dividends, and it's a great question. Thank you, Tina. Well, as you know, we suspended the dividends for this year. I believe with the information we have, I still believe that the Board decision to suspend this dividend payment was correct.

It still make a lot of sense. And although, as I said in the beginning, I see the third quarter positive and the fourth quarter also positive, uncertainty still persist that the spread of the COVID-nineteen and its effects in our market will have some rebound. So I think the decision was correct. Having said this, I have no doubt that Tenneul will resume payments of dividends next year as we have. And again, if situation or the Board will resume.

And I think that the business situation continued to improve as we are seeing today. I wouldn't rule that the Board's dividend proposal next February makes up at least a part of what we skipped of the dividend of this year.

Speaker 7

So they could compensate for some of the lost dividend you're saying as early as February, is that what you think?

Speaker 2

Yes, Tina. Again, this is a decision or is the Board make the not the decision, but make the recommendation. And I think that if things continue like this, I think the Board could or I'm sure that would at least compensate in part the skip leaving.

Speaker 7

Okay, great. Thank you very much.

Speaker 0

Your next question comes from Jonathan Brandt from HSBC.

Speaker 8

Hi, good morning, good afternoon gentlemen. Congratulations on a very strong quarter given the circumstances. I guess I wanted to ask you about free cash flow and balance sheet management. We've seen a pretty big reduction in working capital this quarter. So I'm just wondering, is that sort of a new sustainable level or should we expect as volumes increase as you're expecting in the second half, should we see a rebound in working capital levels?

And then I guess sort of related to that, given that you are free cash flow positive in a very difficult quarter, I would expect you to be free cash flow positive in the second half as well. Can you just sort of elaborate on your balance sheet management? And should we continue to see net debt continue to fall? Will the majority of free cash flow generation at least until you sort of resume dividends be put towards net debt reduction? Thank you.

Speaker 2

Thank you, John, and thank you for your initial comment. Clearly, have a very strong quarter regarding free cash flow. As you well said, part of that was working capital. As shipments and activities start to improve, we have to invest a little bit in working capital in this quarter and next quarter. So we are not going to have all that free cash flow.

But to bake very details, I ask Pablo to give you the details of it.

Speaker 3

Yes. Okay, okay. Maximo and hi, John. Clearly, as Maximo was saying, it's impossible to say or to believe that after a quarter where we have a significant reduction in working capital due to the reduction in volumes, we can sustain or achieve a similar number in the following quarter. On the other hand, clearly, we will as anticipated in our outlook, we are expecting to continue having positive EBITDA generation and consequently positive free cash flow generation.

But we though we will try to sustain at least the level that we have of working capital is very difficult for us to say that we can continue achieving similar reductions in working capital. So on a conservative tone, we could say that working capital even could increase a little bit because of increased volumes that we have been mentioning during our presentation and Maximo comments. So probably we need to invest some money there, but we will try to keep as low as we can this number. On the other side, we will generate a positive free cash flow because the CapEx plan for the following quarter are not returning yet to the levels that we have in the during the first quarter and will be more probably in line with the level that we saw during the second quarter. So all in all, we could see a little positive news still in the reduction in net debt during this third quarter, but not coming from a further reduction in working capital.

Speaker 8

Okay. Thanks Pablo. Thanks Maxwell.

Speaker 2

You're welcome. You're welcome.

Speaker 0

Your next question comes from Fabienne Grameen from Pictet Asset Management.

Speaker 9

Thank you very much for taking my question. And you'll no doubt agree with me that your stock today trades at a significant discount to fundamental value. Despite that, we really see no evidence of you trying to unlock that value, be it via a solid dividend policy linked to free cash flow, management buying back shares, a corporate structure simplification or via other means. Why is that?

Speaker 3

Fabian, thanks for your question. Let me try, Maximo, if you want to tackle this one. First of all, sorry to disagree with your comment. We think that we did a lot to try to unlock this value if you want. Clearly, we understand that we have a discount against our peers and we can discuss over that.

But we have been working quite a lot in simplifying our corporate structure. We have had a history of increasing dividends. The only times we did not pay dividends were during or preventing years where we have crisis like was the case of 02/2009. And this year, the company has been working very, very hard to sustain the profitability levels. And this is shown in the EBITDA margin that the company was able to sustain during the at least during the last five to ten years.

And also the reflection of that was the increase of the dividend payment in the last years, specifically during the same period, where we almost doubled the dividend payment from the company in that period. Of course, we are exposed to different markets and we have the risk of being exposed to different market that probably prevent the value of our company to be completely unlocked. Probably there are some other reasons that we can discuss on the level of floating of our company or where we are listed and some other things that we have commented in the past. But be sure that the company is always thinking in that and the company is looking for ways to improve that. And clearly, it's a goal that we as a company have very up in our priorities.

Speaker 9

Sorry, just to clarify that, does that mean we should expect an update on the listing issues as well as formulating a clear dividend policy potentially linked to free cash flow or earnings, which would probably not be our preference, but any

Speaker 2

Well, don't

Speaker 3

have a written dividend policy, tendency on the way we pay dividends. And if you look at what we have done during the last years, clearly, see the how we pay dividend, how we increase them year over year if we see an increase on results. And even not without an increase in result, sustain that increase dividend payment. In respect to the issue of listing, it's a very complex one, difficult to discuss during the call because there is some certain restrictions to do that. But it's also something that we have in our minds.

And if there is a chance a reasonable chance and a feasible chance because sometimes you can do certain things that will not yield the result that you're looking for. But if there is a chance, it's something that the company has been discussing and analyzing for a very long period of time.

Speaker 2

Perfect. I think that I mean, what you have to take clear is that we are working on this effect. I mean, are working on and we know that the price is undervalued for us. For us also, it's undervalued. And we have been working in trying to see what can be improved.

I know the dividend as I said before, the dividend was not helpful, but I think during the time and what we are seeing was a right decision in a way. And if we can, we can compensate part of that next year, and we will probably do. So the bottom line is that we are working on that, and we will continue to do so.

Speaker 9

Perfect. Could I just ask for an update on your project timelines and how this links together with CapEx for 2020, 2021, please?

Speaker 2

Yes, of course, Fabian. 2020, we will have a final CapEx of around $600,000,000 And 2021 will probably be around that number too. These are lower numbers than what we had six months ago, but I think that the other correct ones. Two projects, Colombia the project in Colombia is almost finished. The problem we have in Colombia is that the technical people who has to make the commission from the vendors of equipment, they cannot travel yet.

I think they will be in Colombia in October in September. And so I think the Colombian mill should start by the 2020. Regarding Pesqueria project, the big project, we are beginning to start or resume our construction. If you remember, by March, we have more than 4,000 people. And we are making plans to start today the hot shrimp mill by mid-twenty twenty one.

Why this delay? As I said before, and as I said in the last call, the safety of the people for us is the most important thing. And to have more than 4,000 people today with the pandemic still very high in the Monterrey area, I don't think is very reasonable for us if we say that safety is our first concern. So we are making a plan to as I said, to start the hot free meal in mid-twenty twenty one. And we are making a plan not to have so many people working at the facility instead of a peak of 4,000 people.

We are probably going to have a peak of 1,500 people, I think in November or December. But that's we are ultimately that detailed plan in the next couple of weeks.

Speaker 9

Fantastic. Thank you.

Speaker 2

You're welcome.

Speaker 0

And your next question comes from Isabella Vecasviglas from Bradesco BBI.

Speaker 10

Hi, guys. Thiago Lofiego here. You for the So I have two questions on my end. The first one, Maximo, you could comment on demand recovery in Argentina. You mentioned that utilization is almost back to normal levels there.

But just want to understand what's your base case in terms of shipments decline for this year on a percentage basis versus last year? And also what do you think is reasonable to consider for 2021? Second question on the slab side, so slab production turn in Brazil, where is it right now? And how are you seeing demand in the different markets? And also, if you could comment on where EBITDA per ton levels are at Ternium Brazil, especially considering the new FX level in the country?

Thank you.

Speaker 2

Thank you, Thiago. Demand recovery in Argentina, well, that's a good question. I don't know if you have a great answer for you. As you know, Argentina, although it has made some significantly advance with what happened with the debt agreement, It has it continued to have challenges in the near future and it needs reforms and time. So it's very difficult to see what is going to happen in Argentina in 2021.

In the near future, third quarters of shipments of third quarter or the next third quarter are going to be quite the same as we had the third quarter of last year. So there is a recovery. Remember, 2019 was not a great year, I mean but we are seeing the same level of shipments in the third quarter. There are some sectors in Argentina that are being very better than others. Agro business is very high.

Construction is very high, especially the private construction. I mean, if you see the cement sales in Argentina, when you see the small sales in bags, they are more than they are better than they were last year. But the big ones are lower because infrastructure in Argentina is not very good. By construction in general is very good. Agro business is very good.

Energy and automobile productions are not very good. So there are different scenarios in the different sectors. Slab side, the facility is running at almost full capacity today for two reasons. One is demand in our own facility is improving. So we are shipping from more from Brazil today.

And the second reason is that the demand is improving in other regions. Surprisingly, China is buying slabs, Turkey is buying slabs. So we are shipping slabs and all the manufacturers of Brazil are shipping slabs to China and to other markets. Also as demand is improving in Brazil, other steel producers in Brazil are needing a little bit more slabs. So we are resuming shipment to them, I think in September or October.

So I think in general, the slab demand, it's quite good right now. And that's why we increased the production rate in our slab facility in Brazil. I don't know if I missed something of the two questions, Thiago.

Speaker 10

No, that's all clear. Thank you, Massimo.

Speaker 2

Thank you.

Speaker 0

That was our last question. At this time, I will turn the call back over to Ternium CEO for closing remarks.

Speaker 2

Okay. Thank you very much again for your participation in our conference call today. Please contact us if you have any further questions or you didn't understand something. I hope to see you all or to hear from you all in the next conference call. And meanwhile, take care of all and stay safe.

Thank you very, very much.

Speaker 0

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.