Ternium S.A. (NYSE:TX) Q4 2023 Earnings Call Transcript

Ternium S.A. (NYSE:TX) Q4 2023 Earnings Call Transcript February 21, 2024

Ternium S.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to Ternium Fourth Quarter 2023 Results Call. Participants will be able to listen only until the question-and-answer portion of this call. Please note that today’s call is being recorded. [Operator Instructions] I’d like to introduce the call to Sebastian Marti. You may now proceed. Thank you.

Sebastian Marti: Good morning, and thank you for joining us today. My name is Sebastian Marti and I am Ternium’s Global IR and Compliance Senior Director. Ternium released yesterday its financial results for the fourth quarter and full year 2023. 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 Brizzio, who will discuss Ternium’s business environment and performance. At the conclusion of our prepared remarks, there will be a Q&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 2 in today’s webcast presentation. You will also find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued yesterday. With that, I turn the call over to Mr. Vedoya.

Maximo Vedoya: Thank you, Sebastian. Good morning to everyone, and thank you very much for participating today in our conference call. 2023 was a key year for Ternium. We made good progress in several fronts following the transformation path we envisioned a couple of years ago. The new projects in Mexico are firmly under development. The new downstream lines in Pesqueria will enable us to offer new high value added products to our customers in the region. This capacity will be integrated with an upstream project, a new steel slabs mill currently under construction. This will be the greenest and most technologically advanced automotive steel — product steel mill in the Americas. It will be able to supply the full range of auto products from exposed grade to advanced high strength steel.

This slab mills will be based on electric arc furnace technology that could be supplied with renewable energy. In addition, the project includes a direct reduction iron facility with capability to capture CO2. On the other hand, Ternium’s new role in Usiminas is already showing good results for the company. The new management team there is taking decisions that are having a significant positive impact on its performance. In addition to these strategic developments, in 2023 Ternium had a solid year from a financial performance point of view, adjusted EBITDA, and net income was strong as well as cash generation. As a result of these good results and strong financial position, Ternium’s Board of Directors proposed an annual dividend of $3.30 per ADS, a significant year-over-year increase.

This is the highest annual dividend on record. As we continue to develop a consistent growth path for our return to shareholders. Let me now review the latest developments in our main markets. Growth in Mexico’s steel market has been strong. Consumption of flat steel in 2023 reached an all-time high of more than 18 million tons, equivalent to an yearly increase of 18%. Our shipments in the country grew by 22% with a significant market share gain, supported by the ramp up of our new hot rolling mill in Pesqueria. The market environment in Mexico continues to be healthy, industrial activity strong, the auto industry is working at high levels of capacity, rebuilding stocks in the value chains. In 2023, automotive production increased by 14%, reaching 3.8 million units.

Construction activity in the country also remains at good levels with non-residential, like industrial warehouse, natural gas pipelines, and other infrastructure projects doing well. On the other hand, residential construction is being negatively affected by the increasing prices of construction inputs. The nearshoring of manufacturing capacity is clearly one of the factors contributing to economic activity in the region. Mexico offers a compelling combination of geographic proximity, skilled labor, and a supportive business environment, contributing to increased supply chain resilience. Looking ahead to the first quarter, we expect shipments in Mexico to maintain the strong level reported in the fourth quarter of 2023. However, there is a downside risk to this short-term volume view as steel prices in the region have recently begun a downward trend.

And there is some opportunistic demand retraction, which is typical in such a scenario. In addition, we anticipate lower cost per ton and slightly higher revenue per ton to push margins back up. Regarding our growth projects, we expect to integrate the first line of our downstream project in Pesqueria during the second half of this year with a startup of a 550,000 tons per year pickling line and the first lines of our service center. By the end of next year, we plan to start up the new galvanizing line followed shortly by the cold rolling mill. The ramp-up of all these new lines should enable us to gradually increase the value added of our shipment in Mexico. The construction of both our slab mill and the downstream lines is progressing as expected, with suppliers already assigned for all the main equipment and different level of advance in the work of each of them.

We have updated our budget for these projects and we are now estimating a total investment of $3.5 billion, up 9% from the $3.2 billion in our initial estimation disclosed one year ago. The main source of this increase were inflation on the pricing of equipment and fluctuations in the FX rate. Let’s turn now to Brazil. After an increase in our participation, in July of 2023 we began fully consolidating Usiminas’ result. This happened during a transformational year for Usiminas as it successfully relined its main blast furnace. With the appointment of a new management team, Usiminas took strong decisions as, for example, putting out of operation one of the smallest blast furnace and one of restocking facilities. In addition, the new management team took decisions that lead to higher efficiency of the metallic charge in the actual process and lower fuel rate of the blast furnace.

This is part of a significant management initiative which focuses on Usiminas’s industrial system with the aim of increasing its productivity. And it will continue to be Usiminas’s focus throughout this year. Usiminas mining operation had a very good year with annual shipments reaching an all-time high of 9.1 million tons in 2023. On the other hand, Usiminas expects a deterioration in its mining business during the first half of 2024 due to the temporary stoppage of one of its oil processing plants and seasonal rains at the beginning of the year. A key issue in the steel market in Brazil is that adequate trade measures are taken to defend it from unfair trade, as has already been made in many other important markets like the U.S., Mexico, and Europe.

Import of steel so below cost of production is having a toll in the Brazilian steel market. The Brazilian Steel Association, together with all steel companies are actively trying to find a solution to this issue. For the first quarter of 2024, Usiminas anticipate a sequential improvement in the profitability of the steel business, mainly as a result of lower cost per ton, as the productivity of the steel business is gradually improving. In Argentina, a new government administration took office in December and is determined to introduce significant macro reforms. The first measures taken by the new administration were a steep devaluation of the Argentinian peso, significant government spending cuts with the aim of controlling inflation, and the proposal of several market friendly reforms.

These much needed reforms, although positive for the medium to long term, are expected to initially have a recessionary effect in Argentina’s economy and consequently negatively affect Chinese shipment in the local market. If the government is able to successfully stabilize the macroeconomic situation in the country and introduce this market-friendly reform, Argentina is a country which offers many opportunities for all kinds of investments in different fields, which would bring a long-awaited path to economic recovery, something that would be very positive for our operations in the country. On the other hand, we are advancing in Argentina with the construction of our first self-owned wind farm, which will begin operation by the end of the year.

We are also analyzing ways of replicating this experience in other countries. Let me now make a few final comments before closing my prepared remarks. 2024 will keep us busy as we continue implementing our strategic plan which represents the largest growth initiative in Ternium’s history. The development of the downstream project in Pesqueria will enable us to begin shipping higher value added products to our customers during the current year. We have a strong competitive position in Mexico, a market that is being significantly benefiting by the nearshoring of manufacturing capacity. Argentina, we have a bumpy year, But I’m confident we have the expertise to navigate through a rough period. We do have some opportunities to substitute any steel demand decrease in the local market with cheapens to other Ternium facility to complement their productions.

And finally, this is an important year for Usiminas, it has many opportunities for productivity improvement. I trust that the new management team in place will successfully guide it to its full potential. With this, Pablo, go ahead and review Ternium’s performance in the fourth quarter, please.

Pablo Brizzio: Thanks, Maximo, and good morning to everyone. Let’s review our company operating and financial results and the webcast presentation for a more detailed picture of our performance. If you want, let’s start by Page 3, please. Ternium delivered strong results in the fourth quarter of this year, 2023. Margins in the period were slightly above our last quarter expectations, mainly due to lower costs. Adjusted EBITDA for the fourth quarter was $651 million, a 7% decline from the third quarter 2023. This decrease was primarily driven by lower steel prices, partially offset by lower costs. In addition, the profitability of Usiminas mining operation increased sequentially during the period. Adjusted EBITDA margin stayed constant at 13%, mirroring the prior quarter performance.

This relatively low level was again affected by the consolidation of Usiminas steel operation, which continued to record low profitability as it ramped up its main blast furnaces at Ipatinga facility. Looking forward, we anticipate an increase in adjusted EBITDA for the first quarter of 2024, primarily driven by an improvement in our margins, resulting from lower steel costs per ton and slightly higher revenue per ton. Going now to the results. Both net income and adjusted earnings per ADS drove notable strength during the fourth quarter. The results include non-cash positive effects from Usiminas post-retirement liabilities and contingencies reversals, along with a net foreign exchange gain related to a substantial devaluation of the Argentine peso against the U.S. dollar.

We will go deeper into this on the upcoming slides. Let’s turn now to our shipments performance on Page 4. In Mexico, Ternium shipments remain strong in a seasonally weaker period, aided by continued growth of commercial customer demand. Equally remarkable, as Maximo mentioned, Ternium shipments in the country for the full year 2023 surged by 22% over the prior year, indicating substantial gain in market share, driven by the ramp up of our new hot rolling mill in Pesqueria. Looking ahead, we anticipate shipments to increase slightly in the USMCA region in the first quarter of 2024. In Brazil, the increasing volume reported in the second half of 2023, primarily reflected the consolidation of Usiminas. Usiminas expect stable shipments in the first quarter of 2024.

Steel shipments in the southern region decreased by 7% in the fourth quarter, as government imposed restriction on import of inputs affected Ternium steel production rates in Argentina. In the coming quarter, we expect demand in Argentina to decrease compared to the fourth quarter due to the seasonal slowdown and the impact of the macroeconomic reform in our value chain as Maximo explained. On the following page number 5, you will see that with this factor combined, we achieve in the fourth quarter very similar steel shipments compared to the third quarter. Looking ahead in the first quarter 2024, we anticipate slightly higher shipments in the USMCM region to be offset by lower shipments in Argentina. Moving on to steel prices, steel revenue per ton decrease further in the fourth quarter as expected, reflecting lower realized prices in most of Ternium markets.

Looking forward, as market prices in the USMCA region increase during the fourth quarter, contract prices in Mexico are resetting at higher levels in the first quarter. On the other hand, during January and February, market prices in the USMCA region have been decreasing. All in all, we expect higher realized steel prices in Mexico in the upcoming quarter. Now, let’s review adjusted EBITDA and net income on a quarterly basis on Page 6. In the chart at the top, the primary factor contributing to sequential decreasing adjusted EBITDA was a decline in realized steel prices, partially offset by a better cost performance and a more profitable mining operation in Usiminas. I will show you the chart at the bottom, net income increase sequentially, driven by several positive factors.

$109 million gains from reversal of post-retirement liabilities at Usiminas, $63 million gains from a contingency reversal due to dismissal of public civil action against Usiminas, the favorable effect of the devaluation of the Argentine pesos on Ternium’s Argentina net short local currency. And finally, an improved deferred tax. On the other hand, net income was negatively impacted by the decrease in recurrent operating income and an impairment chart on Ternium’s mining assets in the fourth quarter of 2023. Now let’s review in the next page our cash performance. You can see a healthy cash generation from operations in the fourth quarter, aided by a decrease in working capital. CapEx in the fourth quarter increased sequentially and significantly, reflecting the investment we are currently doing at our Pesqueria facility for our new project.

This was partially offset by lower CapEx at Usiminas as the bulk of the investment in the [indiscernible] furnace are now being left behind. Despite this higher CapEx level, Ternium managed to record positive free cash flow in the period. By the close of 2023, Ternium maintained a solid net cash position of $1.9 billion. This declined by around $500 million in the quarter, mainly due to a decrease in the fair value of the Argentine bonds, the majority of which are held by Ternium Argentina. These bonds are valued using Argentinian pesos quotation and reported in US dollar using the official Argentine peso exchange rate. The decrease in valuation was mainly the result of a significant devaluation of the Argentine peso by the end of the year.

And it reflected in other comprehensive income as long as these bonds are not sold. When eventually these bonds are sold, any positive or negative results in our comprehension income is recycled to financial results in the income statement. Let’s now shift our focus to Page 8 to assess our full-year performance. Steel shipment surpassed those of 2022 by an increase of 19% with higher shipment in Mexico and the consolidation of Usiminas. Ternium adjusted EBITDA was $2.7 billion, supported by a record level of finished steel shipments and a healthy adjusted EBITDA margin. Despite the negative effects of the consolidation of Usiminas operation, as it [indiscernible] main blast furnace at Ipatinga. Adjusted net income remained unchanged in 2023.

With weaker operating performance, offset by positive effects on deferred tax of local currency fluctuations, and better net foreign exchange results mostly related to the fluctuation of the Argentine peso. Moving on to shareholder return, as Maximo mentioned, Ternium board of directors put forth a proposed for an annual dividend of $3.30 per ADS. The company already paid an interim dividend of $1.10 in November 2023 and intend to pay the remaining $2.20 on May 8, 2024 pending shareholder’s approval. As you can see in the chart, Ternium has been consistently increasing its return to shareholders over the last four years. The dividend proposal for 2023 is equivalent to a dividend yield of around 9%. Now, in the final slide, you can see the strength of Ternium cash generation in 2023.

Cash from operations was $2.5 billion and free cash flow of $1 billion of the CapEx of $1.5 billion. Looking ahead, we anticipate CapEx to be around $1.8 billion in 2024. All right, we have concluded our prepared remarks. Thank you for your time and attention. And we are now ready to take any questions you may have. Please operator proceed with the Q&A session.

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Q&A Session

Operator: Ladies and gentlemen, we are now opening the floor for question-and-answers. [Operator Instructions] Our first question comes from Carlos de Alba from Morgan Stanley. Your line is now open.

Carlos de Alba: Yes. Good morning, Maximo, Pablo and Sebastian. So two questions. First one is very straightforward. How much of the $3.2 billion CapEx has been spent already? And how should we think about the distribution between 2024 and 2025 of the remaining portion that has not yet been spent?

Maximo Vedoya : Yes. Hello, Carlos. How are you? So, I give you first the numbers for 2024 and 2025, if you want. The total CapEx we are seeing in 2024 is around $1.8 billion. This includes Usiminas. And the total CapEx of 2023 is probably going to be around $2.5 billon, also including Usiminas.

Pablo Brizzio: 2025.

Maximo Vedoya: 2025, yes. Of 2025 is $2.5 billion. If you’re talking about the $3.5 billion in particularly of the project, this year it’s around $200 million, I mean 2023 was around $200 million. Sorry, no, it’s $400 million. It’s $400 million because there is some payment we make with equipment. Next year, it’s going to be around $800 million. And the big part is going to be around $1.5 billion in 2025.

Carlos de Alba: All right. Okay. Thank you very much. And the second question is, so now that you have been operating Usiminas for about six months or so, what are the plans that you have for the operation? In particular, regarding – do you know what you’re going to do in Cubatao? Are you going to restart [indiscernible] production there? What is the overall total CapEx that you see for the company? And third point there is, what is the timing for you or for the company to reach, I think, the $150 per ton EBITDA target that I think you mentioned in the past that you wanted to bring that operation too?

Maximo Vedoya: Yes, we have been operating in Usiminas for the last — now we have been — new management team has been operating Usiminas for the last six months, and they are making a lot of changes, as I’ve already mentioned in my remarks. I think that from your questions, there’s still no answer for the Cubatao question. I mean, it’s clear that Cubatao is a great asset. It has a wonderful hot strip mill and a very solid cold strip mill. Putting the upstream capacity there is not an option with the equipment. I mean, we are not going to put a blast furnace operation again. But there could be some alternatives. But we are going to take a little bit of time before taking a decision over Cubatao. I think that the focus today in Usiminas is the industrial facility as a whole, Cubatao and Ipatinga, and how we make much more productivity or more competitive that operation.

As I said, we are seeing a lot of opportunities to increase the productivity of Usiminas in both facilities, and we are going to focus, I think this year, in that [cell] (ph). CapEx will be around $360 million in 2024. That’s the number we are seeing today. It’s lower than the number of 2023, because, of course, of the relining of the blast furnace. But that’s the idea. And I think, I don’t know if you have another one.

Pablo Brizzio: Yes, the other question was related to when you are expecting to [indiscernible] of Usiminas. Shall I take it?

Maximo Vedoya: Yes.

Pablo Brizzio: As you know, Carlos, we always work with the idea of getting Ternium to a margin of around 15% to 20%. We were able to achieve that during last year, the year end 2023 margin and EBITDA was 15.6% for the year, clearly we’ve reduced percentages during the last quarter, clearly because of the consolidation of Usiminas and the reduced margins that Usiminas had during the second semester of 2023 due to the relining of the blast furnace and the lack of that production. So we are expecting to start recovering from that situation. And hopefully by the end of this year, we should be able to reach better margins and reaching the number of around 15% EBITDA margins, all together in Ternium, of course, and also in Usiminas. So that’s the expectation, a very high expectation that we have for that. And we are working on that front together with the — or the management of Usiminas is working in order to achieve this in the coming quarters.

Carlos de Alba: Thank you, Pablo and Maximo. Just one, maybe — what I wanted to get at, Maximo, with the CapEx question on Usiminas is, if you have already a ballpark, maybe a range, of the amount of CapEx that needs to be invested in Usiminas in order to really bring that operation, both Cubatao and Ipatinga, to a level that you think is more close to the Ternium standard?

Maximo Vedoya: No, I think that the $320 million is part of that project. And several years around that number, Usiminas has to do three or four things. Some environmental in Ipatinga, we have to take a decision, but part of our decision is already in the numbers that we are expecting of the [indiscernible] and some onshore improvement in the downstream operation. But with that level of CapEx in the following years, I think we are going to be okay. The other issue in the long term is the mining operation. That’s a completely different number of course. But as you know, we are in the process of analyzing and preparing all the necessary studies and engineering this project so that we can go forward if we approve that project.

Carlos de Alba: All right, okay. And I don’t want to take too much time, but just in Cubatao, given the location of the facility, plus what you mentioned, the downstream operation or assets there, are you considering — is it a possibility for Usiminas down the road to invest in an electric car furnace maybe together with a [indiscernible] DRI in Cubatao?

Maximo Vedoya: I think that it’s partially, yes, I would say. And why partially? I think that an electric car furnace is an option there, of course. DRI facility is a different matter because of the cost of natural gas in Brazil. If you have cost of $16 in Brazil of million BTU, it’s not possible to put a DRI facility. But you can put an electric car furnaces without the DRI facility. But again, this is in the medium-long term. We are not today saying anything about that.

Carlos de Alba: Thank you very much.

Maximo Vedoya: You’re welcome.

Operator: Thank you. Our next question comes from Guilherme Rosito from Bank of America. Your line is now open.

Guilherme Rosito: Thank you. Good morning, everyone. Thank you for taking my questions. So I have two questions. My first one is, on the second half we started the downstream lines at Pesqueria. So I want to understand what does that mean for your long-term EBITDA margins? What kind of increase should we expect in terms of EBITDA per ton or maybe the percentage, just to get a sense of remodel going forward? And my second one is on mining at Usiminas. I know you guys don’t have a decision yet and you’re still studying, but I mean, what timeline should we expect considering that the life of the mine – the end of the life of mine is quite close? So when should we expect a decision? And considering Ternium’s current portfolio of assets across Latin America and current cost of mining, does it make sense for Usiminas to remain an iron ore exporter going forward? Thank you.

Pablo Brizzio: Hi, Guilherme. This is Pablo. Let me take your first question. Clearly, every investment plan that we are doing, especially the one that you mentioned, are in order to sustain and increase our EBITDA margins. Here we are talking about projects that will be up and ready by the end of next year. So it’s difficult to tell you a number exactly on that because we need to see exactly which is the environment of prices. But as we always say, any project that we develop needs to contribute to position Ternium in the upper part of the range that we want to be in. As we always mention, this is between 15% to 20%. And clearly, this project of adding value to the project line that we have today, remember that these plans that we are currently putting forward are to increase the value added after the big investment that we did to have a new cold rolling mill.

So with the new CapEx and the new plans that we will have in Mexico, we will be able to supply full range of product for the auto industry, as Maximo mentioned, at the opening remarks and clearly increase our margins. It’s very difficult to give you an exact number on how the margin will improve, but clearly this will position Ternium to be closer to the upper side of the range where we want to be.

Maximo Vedoya: Yes, Guilherme, hi. Regarding Usiminas mining or MUSA and the new project, we have at least two years to make the decision. I mean, MUSA is going to continue the actual production with the ups and downs that are normal in a mining operation until 2028-2029. So to decide on the project, we have time. What Usiminas management is doing now is, putting forward a team and analyzing in very detail all the projects, which so far seems very attractive. But I cannot tell you more than that because the decision is going to be taken in at least more than one year. But again, once we make the decision, we’re going to go forward quickly, and that’s why Usiminas is putting a team together and making all the studies that are necessary and even asking some permissions.

Guilherme Rosito: That’s perfect. Thanks a lot.

Maximo Vedoya: You’re welcome.

Operator: Thank you. Our next question comes from Enrique Marquez from Goldman Sachs. Your line is now open. Enrique?

Enrique Marquez: Can you hear me?

Maximo Vedoya: Yes.

Enrique Marquez: Hi. Yes. Thank you for taking my question. Just wanted to understand a little bit better the perspectives for demand in Argentina after the whole devaluation from the Argentinian peso. If you guys can comment a little bit more on the expectations for demand and even any impacts from public infrastructure projects, that would be great. Thank you.

Maximo Vedoya: Yes, thank you Enrique. Yes, I mean the numbers we are putting up in our forecast, we are seeing a decrease in demand for the year around 10%. This is a high decrease and probably could be a little bit less than that. But in doing our planning of the production facility, we are putting that number as the number in demand. Infrastructure projects, we didn’t have a lot of sales to infrastructure projects in Argentina, except those of oil and gas. And the ones of oil and gas, I don’t think they are decreasing those projects. So we are not seeing demand for [indiscernible] for the reversion of the north gas pipe. They are continuing forward. So we don’t see a decrease in demand of infrastructure. But of course, the recession that we speak is going to take some decrease in the demand in the market.

Probably with this number we are being a little bit cautious, and by July or August things could start doing better. Again, if the government has succeeded in implementing all these reforms, that as I said, are very well-needed reforms in Argentina. I hope I answered your question, Enrique.

Enrique Marquez: Yes, thank you.

Operator: [Operator Instructions] Our next question comes from Marcio Farid from Goldman Sachs. Your line is now open.

Marcio Farid: Thank you. Good morning everyone. Good morning Maximo and Pablo. Thanks for taking my questions. A couple of follow-ups from me. The first one, there was a marginal increase in CapEx for Pesqueria. So just trying to understand if you’re confident that no more CapEx revisions are going to be needed? And if timing for the project is still on track? And secondly, I think we’ve talked about the outlook for the demand for Mexico and the US, but if you can give us some visibility into expectations going into the first quarter and maybe into the year as well. I know there are some structural drivers that seem to be quite interesting for [indiscernible] positions, but anything else that you can provide in terms of details, that would be great.

And last, in terms of dividend, obviously, $3.3 announced for the year in total, trying to understand if you still have the view of continuous increase in dividend and if the one that we have seen for 2023 is now a new base to think about for 2024 onwards? Thank you.

Maximo Vedoya: Thank you very much, Marcio. Let me start with the Pesqueria CapEx question. I think it’s the correct number today. There are two things that, as I said, changed the number. First, when we did the project more than one year ago, there was an inflation in equipment, and also some inflation in the construction. So I mean, it’s some part logic to improve — to increase a little bit. The other important issue is that, when we approved the project, some of the equipment that we bought or a lot of equipment that we bought were in euros. And the euros in that time was $1, EUR1. And today it’s $1.09, EUR1.08. So there is an increase also there. Those are the two main factors that make us increase the CapEx. We don’t see so far something else that can move that number. Of course, we can have some bumps in the road, but to be honest, we don’t see it today. And I think it’s a quite safe number to put the $3.5 billion. The…

Pablo Brizzio: To add to that, we are perfectly on time. So we are not taking any delay on the project, which was the second part of that question.

Maximo Vedoya: Yeah, no delays in any of the lines. Then you have the dividend question, the $3.3. I mean, this is, as we always said. I mean, we want to take steps, but steps that we can’t sustain in the future. And so, we think that the $3.3 is something that we can sustain in the future, so that’s why we’re putting. And if you see our track record, it is a big increase in the last five or six years. If you remember, before the pandemic, I think the number was $1.2. And today, five, six years later, we are in $3.3. So I think it’s safe to say, except something’s certainly happening, that the $3.3 is a new level. And we are going to analyze, or the board is going to analyze, as it always does, if we can increase a little bit less. And you have a question in the middle about Mexico. I don’t remember exactly what was the question, Marcio, about Mexico.

Marcio Farid: Just about overall demand and prices within Mexico, please.