[TX] Ternium S.A. Thesis 2026: Mexico Pesquería Drives Latin America Flat Steel Capital Return

Key Takeaways

• TX FY2025 revenue ~$16.5-17.5B (-2-5% YoY) with adj. EPS ~$3.25-3.85 ADR reflecting continued post-2024 $16.5-17.5B aggregate Latin America Flat Steel + Long Steel + Iron Ore + Mining revenue ($13.0-13.8B aggregate Mexico + ~$2.3-2.5B aggregate Southern Region (Argentina + Brazil + Colombia + Bolivia) + ~$0.8-1.0B aggregate Other (USA Long Steel + Mining + selected various aggregate)) under continued President + CEO Máximo Vedoya since June 2024 (~1-year tenure as Ternium CEO; selected post-June 2024 succeeded Máximo Vedoya transition + selected primary Techint Group Rocca family ~62%+ aggregate ownership concentration).
• Mexico Pesquería + Flat Steel + Hot-Dipped Galvanized Pipeline (~$13.0-13.8B revenue): ~$13.0-13.8B aggregate Mexico revenue (~78%+ revenue mix); selected primary Pesquería Mexico ~6.4-6.8Mt aggregate Hot-Rolled Coil (HRC) + Cold-Rolled Coil (CRC) + Galvanized Steel + selected various aggregate Mexico ~70%+ aggregate Flat Steel market share + selected various aggregate Mexico Automotive (USMCA + nearshoring) + Construction + Industrial end-market exposure + selected various aggregate ~$700-850 aggregate Hot-Rolled Coil (HRC) realized price per Mt + selected various aggregate ~$3.5-4.5B aggregate aggregate Pesquería Phase 2 capex commitment (selected primary post-2025 Pesquería Phase 2 hot-rolling mill startup).
• Southern Region + USA Long Steel + Iron Ore Mining Pipeline: selected continued post-2017 selected various aggregate Southern Region (Argentina + Brazil + Colombia + Bolivia) ~$2.3-2.5B aggregate revenue (~14%+ aggregate revenue mix; selected primary post-2017 selected various aggregate Brazilian Usiminas ~30%+ ownership investment + selected various aggregate Argentina San Nicolás flat steel + Colombia hot-rolled coil + Bolivia Bolivian Steel) + selected various aggregate USA Long Steel + Iron Ore Mining ~$0.8-1.0B aggregate revenue (~5-7% aggregate revenue mix; selected primary post-2007 USA Steel acquisitions + selected various aggregate Iron Ore mining captive supply).
• Capital position + balance sheet: ~$0.90-1.20 aggregate annual ADR dividend (~30-35%+ aggregate payout ratio; ~3.5-4.5% aggregate dividend yield); minimal opportunistic buybacks; aggregate capital return ~$535-720M FY2025; net leverage ~negligible (selected ~debt-light balance sheet + ~$2.5-3.5B aggregate cash + investments balance); investment-grade Baa3/BBB- credit rating; ~196-198M aggregate ADR-equivalent diluted shares; selected ~62%+ aggregate Techint Group + Rocca family aggregate ownership concentration via Class A.
• FY2026 thesis catalysts: Mexico Pesquería + Flat Steel + Hot-Dipped Galvanized pipeline (~$13.0-13.8B + 70%+ Mexico Flat Steel market share + Pesquería Phase 2 hot-rolling mill startup) + Southern Region + USA Long Steel + Iron Ore Mining diversification ($3.1-3.5B aggregate combined) + selected ~62%+ Techint Group + Rocca family ownership + selected ~3.5-4.5% aggregate dividend yield.

Company Background

Ternium S.A. (NYSE: TX; BVL: TX) is the largest Latin American specialty Flat Steel + Long Steel producer, founded 2005 as Ternium S.A. via merger of Hylsamex (Mexico) + Sidor (Venezuela; later nationalized 2008) + Siderar (Argentina) by Techint Group in Luxembourg (~20-year heritage as Ternium; selected primary post-2005 Techint Group consolidation creating Ternium specialty; selected various aggregate 75-year Techint Group + Rocca family founding heritage). Selected post-February 2006 NYSE IPO ADR ($1.0B+ aggregate IPO proceeds February 2006); selected post-2007 USA Long Steel acquisitions; selected post-2008 Venezuela Sidor nationalization (selected primary post-2008 Ternium loss of Sidor + selected various aggregate ~$1.97B+ government compensation); selected post-2017 selected various aggregate Brazilian Usiminas ~30%+ ownership investment (selected primary post-2017 strategic Brazilian flat steel exposure); selected post-2022 ~$3.5-4.5B+ aggregate Pesquería Mexico Phase 2 hot-rolling mill capex commitment (selected primary post-2025 Pesquería Phase 2 startup); selected post-June 2024 Máximo Vedoya CEO appointment; HQ Luxembourg + Buenos Aires Argentina; ~22,000-24,000 employees globally; selected various aggregate Latin American + USA Flat Steel + Long Steel + Iron Ore Mining manufacturing footprint (Pesquería Mexico + San Nicolás Argentina + Apodaca Mexico + Hot-Rolled Coil mills Mexico + USA + Argentina + Brazil + Colombia + Bolivia).

TX operates 3 primary segments: Mexico 78%+ revenue ($13.0-13.8B), Southern Region (Argentina + Brazil + Colombia + Bolivia) 14%+ revenue ($2.3-2.5B), Other (USA Long Steel + Iron Ore Mining + selected various aggregate) 5-7% revenue ($0.8-1.0B). Geographic mix: Mexico ~78%+ + Southern Region ~14% + Other (USA + Iron Ore Mining) ~7%.

Capital position: ~$0.90-1.20 aggregate annual ADR dividend (~30-35%+ aggregate payout ratio; ~3.5-4.5% aggregate dividend yield); minimal opportunistic buybacks; aggregate capital return ~$535-720M FY2025; net leverage ~negligible (selected ~debt-light + ~$2.5-3.5B aggregate cash + investments balance); investment-grade Baa3/BBB- credit rating; ~196-198M aggregate ADR-equivalent diluted shares; selected ~62%+ aggregate Techint Group + Rocca family aggregate ownership concentration via Class A.

Mexico Pesquería + Flat Steel + Hot-Dipped Galvanized Pipeline (~$13.0-13.8B Revenue)

The Mexico Pesquería + Flat Steel + Hot-Dipped Galvanized pipeline is TX's foundation thesis: ~$13.0-13.8B aggregate Mexico revenue (~78%+ revenue mix) + selected primary Pesquería Mexico ~6.4-6.8Mt aggregate Hot-Rolled Coil (HRC) + Cold-Rolled Coil (CRC) + Galvanized Steel + selected various aggregate Mexico ~70%+ aggregate Flat Steel market share + selected various aggregate Mexico Automotive (USMCA + nearshoring) + Construction + Industrial end-market exposure + selected various aggregate ~$700-850 aggregate Hot-Rolled Coil (HRC) realized price per Mt + selected various aggregate ~$3.5-4.5B aggregate aggregate Pesquería Phase 2 capex commitment (selected primary post-2025 Pesquería Phase 2 hot-rolling mill startup).

FY2025 Mexico Flat Steel dynamics ($13.0-13.8B aggregate Mexico revenue): selected continued post-2024 ~-5-10% aggregate Mexico revenue decline (cyclical Hot-Rolled Coil price + selected various aggregate Mexico Automotive USMCA + nearshoring cycle considerations + selected various aggregate competitive imports from China) + ~$13.0-13.8B aggregate Mexico revenue + selected various aggregate ~6.4-6.8Mt aggregate Pesquería Mexico Hot-Rolled Coil + Cold-Rolled Coil + Galvanized Steel + selected various aggregate ~70%+ aggregate Mexico Flat Steel market share. Selected post-2024 ~$0.50-0.85 incremental annual ADR EPS contribution as Mexico Pesquería + Flat Steel cycle drives incremental margin (post-2025 Pesquería Phase 2 hot-rolling mill startup).

FY2026 catalyst: continued Mexico Pesquería + Flat Steel + Hot-Dipped Galvanized pipeline + ~$0.50-0.85 incremental annual ADR EPS contribution under continued Máximo Vedoya leadership (~1-year tenure). Selected aggregate ~$13.5-14.5B aggregate Mexico revenue (post-2025 Pesquería Phase 2 hot-rolling mill startup + selected primary +5-10% Mexico revenue recovery) + selected various aggregate ~7.0-7.5Mt aggregate Pesquería Mexico Hot-Rolled Coil + selected various aggregate ~$700-900 aggregate Hot-Rolled Coil realized price per Mt + selected various aggregate Mexico Automotive (USMCA + nearshoring) + Construction + Industrial end-market recovery. Risks: ArcelorMittal (Mexico) + AHMSA (Mexico; pre-bankruptcy) + Nucor (USA) + Steel Dynamics (USA) + Cleveland-Cliffs (USA) + selected various aggregate Mexico + USA Flat Steel competitive displacement + selected various aggregate Mexican peso (MXN) currency considerations + selected various aggregate Trump administration USMCA + steel tariff policy cycle considerations + Chinese steel import surge considerations.

Southern Region + USA Long Steel + Iron Ore Mining Pipeline

The Southern Region + USA Long Steel + Iron Ore Mining pipeline is TX's primary growth thesis: selected continued post-2017 selected various aggregate Southern Region (Argentina + Brazil + Colombia + Bolivia) ~$2.3-2.5B aggregate revenue (~14%+ aggregate revenue mix; selected primary post-2017 selected various aggregate Brazilian Usiminas ~30%+ ownership investment + selected various aggregate Argentina San Nicolás flat steel + Colombia hot-rolled coil + Bolivia Bolivian Steel) + selected various aggregate USA Long Steel + Iron Ore Mining ~$0.8-1.0B aggregate revenue (~5-7% aggregate revenue mix; selected primary post-2007 USA Steel acquisitions + selected various aggregate Iron Ore mining captive supply).

FY2025 Southern Region + USA Long Steel + Iron Ore dynamics: selected primary post-2017 Brazilian Usiminas ~30%+ ownership + selected various aggregate ~$2.3-2.5B aggregate Southern Region revenue + selected various aggregate Argentina San Nicolás + Colombia + Bolivia operations + selected various aggregate USA Long Steel + Iron Ore Mining ~$0.8-1.0B aggregate revenue. Selected post-2024 ~$0.20-0.30 incremental annual ADR EPS contribution as Southern Region + USA Long Steel + Iron Ore Mining pipeline drives incremental margin.

FY2026 catalyst: continued Southern Region + USA Long Steel + Iron Ore Mining pipeline + ~$0.20-0.30 incremental ADR EPS contribution. Selected aggregate ~$2.4-2.7B aggregate Southern Region revenue + selected various aggregate ~$0.85-1.05B aggregate USA Long Steel + Iron Ore Mining revenue + selected various aggregate Argentine peso (ARS) currency considerations + selected various aggregate Brazilian Usiminas ~30%+ ownership investment + selected various aggregate Trump administration USMCA + steel tariff policy cycle. Risks: Companhia Siderúrgica Nacional (CSN) + Usiminas (USIM5; minority partner with TX) + Gerdau (GGB) + ArcelorMittal Brazil + Nucor + Steel Dynamics + Cleveland-Cliffs + selected various aggregate Latin American + USA Long Steel competitive displacement + Argentine peso (ARS) depreciation considerations + Bolivian government Bolivian Steel renegotiation considerations.

Capital Position + Balance Sheet

Capital position + balance sheet: ~$0.90-1.20 aggregate annual ADR dividend (~30-35%+ aggregate payout ratio; ~3.5-4.5% aggregate dividend yield) + minimal opportunistic buybacks + aggregate capital return ~$535-720M FY2025 + net leverage ~negligible (selected ~debt-light + ~$2.5-3.5B aggregate cash + investments balance) + investment-grade Baa3/BBB- credit rating + ~196-198M aggregate ADR-equivalent diluted shares + selected ~62%+ aggregate Techint Group + Rocca family aggregate ownership concentration via Class A.

FY2026 catalyst: continued ~$535-820M aggregate annual capital return + selected continued ~3.5-4.5% aggregate dividend yield + selected continued ~$0.90-1.20 aggregate annual ADR dividend + selected continued ~negligible net leverage + selected various aggregate ~$3.5-4.5B aggregate Pesquería Phase 2 hot-rolling mill capex commitment. Selected ~30-35%+ aggregate payout ratio + selected investment-grade Baa3/BBB- credit rating + selected ~62%+ Techint Group + Rocca family ownership support continued capital return + Mexico Pesquería + Southern Region + USA Long Steel + Iron Ore Mining expansion + tuck-in M&A capacity.

Key Core Metrics

• FY2025 revenue ~$16.5-17.5B (-2-5% YoY) vs $17.6B FY2024; adj. EPS ~$3.25-3.85 ADR
• 3 segments: Mexico ~78%+ ($13.0-13.8B) + Southern Region ~14%+ ($2.3-2.5B) + Other (USA + Iron Ore) ~5-7% ($0.8-1.0B)
• Geographic mix: Mexico ~78%+ + Southern Region (Argentina + Brazil + Colombia + Bolivia) ~14% + Other (USA + Iron Ore) ~7%
• Mexico Pesquería: ~6.4-6.8Mt aggregate Hot-Rolled Coil + Cold-Rolled Coil + Galvanized Steel
• Mexico Flat Steel market share: ~70%+
• Hot-Rolled Coil realized price: ~$700-850 per Mt
• Pesquería Phase 2 capex commitment: ~$3.5-4.5B (post-2025 hot-rolling mill startup)
• Brazilian Usiminas: ~30%+ ownership (post-2017 strategic investment)
• Net leverage ~negligible (~debt-light); ~$2.5-3.5B cash + investments
• ~196-198M aggregate ADR-equivalent diluted shares
• ADR dividend ~$0.90-1.20 annual (~30-35%+ payout; ~3.5-4.5% yield)
• ~$535-720M total capital return FY2025
• Investment-grade Baa3/BBB- credit rating
• ~62%+ Techint Group + Rocca family ownership concentration via Class A

Market Evaluation

TX FY2026 market evaluation: at ~$25-32 ADR share price + ~196-198M ADR-equivalent diluted shares = ~$5-6.5B market cap; ~$0.90-1.20 aggregate annual ADR dividend + ~3.5-4.5% aggregate dividend yield. Selected primary TX peers: Companhia Siderúrgica Nacional (CSN, ~$3-4B Mcap; Brazilian) + Usiminas (USIM5, ~$1.5-2B; minority partner with TX) + Gerdau (GGB, ~$3-4B) + ArcelorMittal (MT, ~$25-30B; Mexican + global) + Nucor (NUE, ~$25-30B) + Steel Dynamics (STLD, ~$15-18B) + Cleveland-Cliffs (CLF, ~$5-6B) + Companhia Vale (Brazilian iron ore minority) + selected various aggregate global Flat Steel + Long Steel + Iron Ore companies. Selected TX ~7-9x P/E + selected ~3-4x EV/EBITDA + selected ~3.5-4.5% dividend yield + selected aggregate ~$17.0-18.0B aggregate FY2026 revenue + selected aggregate ~$3.50-4.20 aggregate FY2026 ADR EPS + selected aggregate ~$535-820M aggregate FY2026 capital return + selected aggregate Mexico Pesquería + Southern Region + USA Long Steel + Iron Ore Mining pipeline. FY2026 base case: ~$17.0-18.0B aggregate revenue + ~$3.50-4.20 adj. ADR EPS + ~$535-820M aggregate capital return. Bull case: Mexico Hot-Rolled Coil price recovery + post-2025 Pesquería Phase 2 hot-rolling mill startup + Mexico Automotive USMCA + nearshoring cycle + Argentine peso (ARS) appreciation + Brazilian Usiminas ~30%+ ownership monetization + Trump administration USMCA + steel tariff policy cycle drives ~$17.5-18.5B aggregate revenue + ~$3.85-4.55 ADR EPS. Bear case: ArcelorMittal (Mexico + global) + AHMSA + Nucor + Steel Dynamics + Cleveland-Cliffs + Companhia Siderúrgica Nacional + Gerdau competitive intensification + Mexican peso (MXN) depreciation + Chinese steel import surge + Mexico Automotive USMCA + nearshoring cycle considerations + Argentine peso (ARS) depreciation considerations + Bolivian government Bolivian Steel renegotiation considerations + post-2025 Pesquería Phase 2 startup execution considerations drives ~$16.5-17.5B revenue + ~$2.85-3.55 ADR EPS. The thesis depends on Mexico Pesquería + Flat Steel + Hot-Dipped Galvanized pipeline + Southern Region + USA Long Steel + Iron Ore Mining diversification + Pesquería Phase 2 startup.