Ternium Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2024

There are 8 speakers on the call.

Operator

Thank you for standing by. My name is Kaylin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ternium Third Quarter 2024 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

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

Speaker 1

Good morning and thank you for joining us. My name is Sebastien Marti, Ternium's Global IR and Compliance Senior Director. Yesterday, Ternium released its financial results for the Q3 and 1st 9 months of 2024. This call is intended to complement that presentation. I am joined today by Maximo Vedoya, Ternium's Chief Executive Officer and Paolo Grizzio, Ternium's Chief Financial Officer, who will discuss Ternium's business environment and performance.

Speaker 1

We will open up the floor to questions following our prepared remarks. 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'll turn the call over to Mr.

Speaker 1

Guedotia.

Speaker 2

Good morning, and thank you very much for participating in today's Ternium's 3rd quarter earnings calls. Ternium reported an adjusted EBITDA of $368,000,000 and a net income of $93,000,000 for the Q3. We experienced increased shipments across all our primary markets and as anticipated in the last quarter's call, our margins declined, primarily due to the decrease in realized price in our main market. Let's review the status of these markets. The steel market in Mexico remains healthy operating at a consistent levels after last year's significant 14% year over year increase in a steel consumption.

Speaker 2

In fact, in the Q3 of 2024, we had record high shipments in this market. For the Q4, we expect a decline in shipments as a result of this period being the seasonally weak of the year. Additionally, public investment has been soft recently, which is common in Mexico following a change of administration. Once this process is completed, we expect demand from infrastructure projects to return as the new government has announced plan to launch several projects aimed at enhancing the competitiveness of Mexican industry. Looking ahead, our outlook has several bright spots.

Speaker 2

In the Q1 of next year, we expect sequential shipment growth in this market. In part, this will be the result of our new PEEKLINE, which is boosting our capacity for automotive and industrial markets as it ramp up production. Furthermore, I'm optimistic about the Mexican market in the year to come. Automotive production increased by 7% year over year in the 1st 9 months of 2024 and is expected to reach 4,200,000 units in 2025, which would be a record high. Finally, near shoring trends are expected to persist, benefiting the steel market on both sides of the border.

Speaker 2

The new administration in Mexico recognized this opportunity for the country and has stated its commitment to pursuing a policy of industrialization and import substitution very much in line with what we have been advocating for many years. Moving to Brazil, we see healthy industrial activity and a dynamic distribution market. Steel consumption in Brazil market has been growing during the year, increasing 9% year over year in the 1st 9 months of this year. Vehicle production is growing as well with an expected 5% increase in 2024. On the other hand, flat steel import jumped 20% year over year in these 1st 9 months, mainly from China, as this country significantly increased its steel shipments to the international markets.

Speaker 2

As it has already happened in other countries, the Brazilian government noticed this increase in unfair trade from China and as a result of their still excess capacity and put in place a 1 year quote system under which still imports above certain quarter are subject to a 25% tariff. Unfortunately, these measures hasn't yield the expected results. Following this, several anti dumping investigations have been initiated over imports of cold rolled steel, coated steel and prepainted steel mainly from China. These measures are promising. We encourage the Brazilian government to continue this path to prevent more this industrialization in Brazil.

Speaker 2

Finally, let's review Argentina. Steel volumes in Argentina market has shown a recovery over the past several quarters, both within the industrial and the commercial market. In the Q4, we expect to maintain a stable level of steel shipments despite the seasonally slowdown in activity towards the end of the year. With a long term view, I think Argentina industrial and construction activity will improve in 2025 favoring a recovery in local steel demand. The Argentine government is implementing an ambition reform program that we expect will promote investments in the country.

Speaker 2

However, there is a risk in this market of an increase in imports of unfair trade and products made with steel. This will be an important issue to follow-up with the Argentina authorities during next year. Our wind farm in Argentina will begin operation by year end, boosting our use of self generated renewable energy and reducing reliance on external sources. The project is progressing as planning with the completion of 22 basis and installation of 14 wind turbines to date. We anticipate that the first unit will begin delivering energy in December with the project expected to reach full completion by January.

Speaker 2

This represents a significant milestone in our commitment to renewable energy and decarbonization. Let me now give you an update on the progress of our pension projects. The plating line and 3 of the 5 lines in the new finishing center in Pesqueria has started operation and are currently ramping up. These lines are at 550,000 tons per year of plinking capacity and 310,000 tons a year of customized products capacity. During the next 2 months, we plan to start up the 2 remaining lines in the finishing center.

Speaker 2

In addition, we are making steady progress on the 600,000 tons per year galvanizing line and the 1,600,000 tons per year cold rolling mill. We plan to start this operation at the end of 2025 and early 2026 respectively. We have completed the soil movement and the civil work and assembly of structure and buildings are advancing rapidly. Equipment shipments have already commenced. Lastly, for the construction of the 2,600,000 tonne perilla slab making facility in Pesqueria, we have completed the cleaning and soil movement in most areas.

Speaker 2

We are making progress in the civil work, foundation and structural installations. Also, key operational contracts have been awarded and are underway. We expect to start up this slab facility by mid-twenty 26. The new production lines in Pesqueria project will enable the company to enhance its product offering with a broader range of high quality steel products and capture to deliver diverse customer needs more effectively, meeting the high quality requirements of the automotive and appliance sectors. Moreover, the new slab facility is expected to significantly increase Ternium's raw steel production capacity in Mexico, ensuring a steady supply of slabs from downstream processing.

Speaker 2

This facility will also enhance Ternium operation efficiency and reduce dependency on external suppliers, leading to cost saving and improved profit margins. Finally, I would like to highlight the publications of Ternium's latest sustainability report. This report includes, among other new features, an update on Ternium's decarbonization target, detailing several enhancements introduced since our initial target was set in 2021. For the first time, our target includes Scope 3 emissions, which are not directly associated with our company. This include company 1 emission related to the production of semi finished products such as slabs and billets produced from 3rd party and category 10 emissions generated by our customers during the processing of our slabs and billets.

Speaker 2

In addition, we are expanding the boundaries of our CO2 emissions reporting beyond crude steel to include hot rolled steel production and we migrate to GHG protocols methodology to improve comparability with other indices and prepare for future regulatory requirements. The update target is a 15% reduction in emissions intensity by 2,030 using 2023 as a baseline. As in previous years, our greenhouse inventory for 2023 was audit by a third party following, as I said, both the GHG protocols and worst deal methodology. With these changes to our reporting, we're among the very few companies that include Scope 3 emissions in their targets. Our aim with this decision is to significantly increase transparency and accuracy in our emission report.

Speaker 2

We invite you to download the report from our website and review the extensive information on our sustainability initiatives. The detailed insights will offer a comprehensive understanding of our commitment to sustainable practices. To wrap up my initial remarks, I would like to say I'm confident in Ternium performance in 2025. I believe our main markets will offer several opportunities for our company with the strength of the neutral market in Mexico, the recovery of steel consumption in Brazil and the significant reforms to Argentina's economy. In addition, I expect our margin to gradually improve during the year with lower cost of raw material and truss and our continued work in cost cutting initiatives.

Speaker 2

With this, please, Pablo, you can now proceed with a review of standard performance of the Q3.

Speaker 3

Thanks, Maximo, and thanks, everybody, for participating in our conference call. Let's move to the webcast presentation for a detailed overview of our operations and financial results. If we start by Page 3, we see that as anticipated, our adjusted EBITDA declined this quarter. The main factors driving this result were lower realized steel prices across our main market, which were partially offset by a small decline in steel cost per ton and an increase in shipments. Looking ahead to the Q4, we expect a more sequential increase in adjusted EBITDA driven by slightly better margins, although this will be partially offset by a seasonal decrease in shipments.

Speaker 3

Turning to the next slide. Net income for the Q3 was $93,000,000 When comparing 2nd quarter adjusted net income to the 3rd quarter net income, we see lower deferred tax losses and improved financial results in the 3rd quarter, partially offset by a decline in operating income. The FX gains in the quarter reflect the favorable effect of the Mexican peso depreciation and the Brazilian real appreciation against the U. S. Dollar, cost and FX gain on Tanios Mexico net short local currency position and Luciminas U.

Speaker 3

S. Dollar denominated debt. Let's turn to our steel segment performance on Page 5. This quarter with significant increased shipments in our key markets. Looking ahead, we anticipate a decrease in shipments in the Q4 due to usual year end seasonality both in Mexico and in Brazil.

Speaker 3

Now let's take a look at the consolidated sales and profitability of the steel segment on the next page. Despite an increase in steel shipment, sales held steady compared to the previous quarter due to the decline in revenue per ton, driven by a decrease in realized steel prices in our primary market, which affected our margins. The price decline was partially offset by a small decrease in the field cost per ton as we continue to use previously both raw material and slabs during the Q3. And turning, using new bus furnace, operations recovered efficiency gains in the period, particularly in fuel consumption. In addition, labor and maintenance costs decreased sequentially in the 3rd quarter.

Speaker 3

Let's move on to Slide 7 to review the performance of our Mining segment. In the Q3, shipments rose by 13% sequentially, driven by higher production in our Mexican and Brazilian operations. Despite this quarter over quarter growth, net sales were relatively stable due to the offset of lower iron ore market prices. Our margins in the mining segment decreased in this quarter, mainly due to this drop in iron ore prices, while slight reduction in cost per ton had to soften the impact of this decrease. Let's move on to the next slide to review our cash flow performance.

Speaker 3

As of the end of September, Ternium net cash position declined to $1,700,000,000 with a decrease in cash flow from operations compared to the Q2, primarily to a decrease in EBITDA and an increase in working capital together with higher capital expenditure. Moving to the final slide, we can see a summary of our performance over the past 5 years. In the 1st 9 months of 2024, our capital expenditures show a significant year over year increase. We continue making progress, as Marcin explained, in the construction of new facilities in our Pasqueria industrial center as well in the new wind farm in Argentina. We expect to have a total CapEx of between $1,700,000,000 to $1,800,000,000 in 2024.

Speaker 3

To conclude this presentation, I would like to highlight that yesterday, Ternium's Board of Director announced the payment of an interim dividend of $0.90 per ADS totaling $177,000,000 Over the past 3 years, the company has structured a dividend so that the interim payment in November represents roughly a third of the total annual amount, with the remaining deferred distributed in May following shareholders' approval. We expect this time to follow the similar approach. So our total dividend payment corresponded to the fiscal year 20.24 percent would represent a dividend yield of about 8% based on the current share price and a 68 payout ratio based on adjusted net income for the past 12 months. Over the past 3 years, additionally, the Board has consistently decided to distribute a substantial dividend annually. The current dividend decision aligned with this established practice of providing an attractive dividend yield and allocating a significant portion of net income even during periods of increased capital expenditures.

Speaker 3

This capability is a result of Ternium's solid financial position. With this, we have concluded our initial prepared remarks. We would like now to go and to take any questions you may have. Operator, please begin the Q and A session. Thanks.

Operator

Our first question comes from the line of Marcio Ferreira with Goldman Sachs. Your line is open.

Speaker 4

A couple of questions on my side. Yes, can you hear me?

Speaker 2

Sorry, Marcio? Yes, now yes, I think.

Speaker 4

All right. Let me know if it's not good. Yes, morning. Thanks for the opportunity. A couple of things on my side.

Speaker 4

I think we started the call by showing still good conviction on Mexico's demand going into next year and somewhat profitability improvement as well on lower costs. Argentina

Operator

seems

Speaker 4

to be performing well and you also showed some good conviction as well. I understand obviously interest rate prices, benchmark prices have been lower and that's the main reason for weaker earnings in the Q3, right. But then the surprise was the dividend cut. Our initial understanding is that you would sustain stable to growing dividends through the cycle even if the cycle turn and that's one of the reason why balance sheet leverage has been kept at low levels to allow you to execute CapEx and at the same time keep the commitment on a flat to growing dividends, right? So it was a bit of a surprise to us.

Speaker 4

And when we hear about the constructive outlook, we're just trying to understand the reason why you've the Board decided to cut dividends this year. And if you can assume, eventually, we'll resume the $3.3 a share that you paid last year as well. And secondly, I mean, it's obviously a big topic today, the outcome of the U. S. Election.

Speaker 4

I think you've laid out some of the important actions that the Mexican administration has taken to support industrial activity in Mexico, to some extent reassuring, but also important institution as well. So obviously, we've seen some of the headlines suggesting higher taxation and potential debt, for instance, on Mexico's as it relates to renegotiation of the U. S. EMA agreement. So if you can talk about that as well, your initial thoughts and risks and opportunities for Ternium being in Mexico and directly and indirectly exposed to the U.

Speaker 4

S. And North America, that would be great. Thank you.

Speaker 2

Thank you very much, Marcio. I will start with the second part of your question and then we go to the dividends if you allow me. The outcome of the U. S. Election and you were very clear.

Speaker 2

I mean, I see this as an opportunity to be honest. I think, 1st of all, we are out of the uncertainty. We have 2 new administrations, 1 in Mexico that are already a month in the job and now we have now one in the U. S. So I think that's something good because now people can start talking and can start working together.

Speaker 2

I think from the Mexican point of view, the new administration, President Schoenfeld, I think she understands and share very much the concern that the U. S. And the Trump administration, especially Trump, has with China and with fair trade. She has been very clear and very vocal about this. As you know, you probably know, several weeks ago, we participate in the U.

Speaker 2

S.-Mexico CEO dialogue, which is a dialogue that's been going on for quite a few years between CEOs of Mexico and the U. S. And this was with the new administration in Mexico. I think there was a big consensus of all the participants that the opportunity to strengthen the North American region and to say what against violation of trade, especially by Asia. And in that meeting also, people were very positive about the good outcome of the new USMCA.

Speaker 2

I mean, the new USMCA, which was negotiated in 2018, bring a lot of benefits both from Mexico, but also from the U. S, which increased export to Mexico by more than 30% in that period of time. The other thing that the President of Mexico show up in said in that meeting was, she was very firm about the vision she had of, again, strengthening North America and reducing, I'm using her words, the trade deficit that Mexico has with Asia of about $200,000,000,000 So I think the alignments are quite similar. I think that it's positive. The discussion has to start.

Speaker 2

There's going to be a revision of the USMCA, which again I think it's very good, the USMCA, but clearly it has room to improve. So I'm positive about the outcome of these elections. I hope I answered the question or that part of the question, Mario. That

Speaker 4

was great. Thank you. Very detailed.

Speaker 2

And Pablo, why don't you call about dividends?

Speaker 3

Yes. Okay. Yes, Marc. I will do that. So if you want, the Board decision was for a nominal reduction of dividend payment.

Speaker 3

But if you consider on the broader spectrum, you will see that the dividend that was proposed and that was approved is a dividend that not only maintain or increase the dividend yield of the company, but significantly increase the payout ratio that the company is having and will have. Taking into consideration not only that the company has reduced the EBITDA generation during this year, but also has reduced a little bit the total net cash position. But also taking into consideration that we are entering into the part of the CapEx plan next year, which will be higher, as you know, than this year. So all in all, what the company is doing is sustaining a very strong deal impairment with a very high level of distribution. And as I said on the opening remarks, this is possible because, as you know, we discussed many times the strong financial position that the company is having that allow us to sustain a very strong financial position while we are doing a very, very important and transformation type of CapEx like the one that we are doing in Pascaria.

Speaker 3

So in our view, what we have done with this approval of the dividend payment is basically sustaining the high level of dividend payment that the company is having. We have increased substantially dividend payments in the last 3 or 4 years, and this continues to be the case. Of course, if you look just by the nominal number, there has been more reduction on that one. But if you look at the old comparisons and all ratio, the yield impairment continues to be very high. Again, hope to answer your question, Marshall.

Speaker 3

Yes. No, that's great.

Speaker 4

Is it fair to assume that we then should look at more of the dividend deals because obviously, the share price is down by about 20% year to date and that's helping the yields, right? But is it fair to say we should look more at the yields and the payout rather than the nominal term, nominal dividends?

Speaker 3

Exactly, because again, the payout ratio basically is about or around 70%, which is quite high in comparison to any other companies than what we have done in the past, in the past 3 or 4 years. So we are contributing significant amount of what we have generated during the year.

Speaker 4

Okay. That's great. Thank you very much.

Speaker 1

You're very welcome.

Operator

And your next question comes from the line of Alfonso Salazar with Scotiabank. Your line is open.

Speaker 5

Yes. Thank you for the call and for taking the question. Maximo, I have another question for you. And this is regarding the steel industry in North America, not only Mexico. What is the outlook here?

Speaker 5

Because what we know is that North America is a big net importer of steel. There is more capacity needed for all these efforts for re shoring and re shoring. But at the same time, we have this overcapacity problem globally, and it's only getting worse as China weakens demand in China is weakening. And there are tariffs that could be implemented, but that is going to impact competitiveness in the region. And even there is a risk that there are tariffs within the North American region.

Speaker 5

We cannot rule out that possibility. So how do you see the global steel market going to balance? Are we going to have 2 separate steel markets globally, one by China and another one by North America and Europe? Or how this is going to unfold over the next 3 to 5 years? I would like to.

Speaker 2

Alfonso, that's a great question. I don't know if I have a great answer for you. But clearly, there is an overcapacity in China. There is an overcapacity in China that was made not because of market forces, but because of a Chinese government policy or you can call it industrial policy, whatever you want. But it was a government incentives that create an overcapacity, not only steel on many industries.

Speaker 2

So that's a problem in itself. And as I always said, it's impossible to compete with China with all the subsidies and all the schemes that the Chinese state owned enterprises has in steel or in many, many other products. What will happen or what is happening is that most of the regions are reacting to this. North America is reacting to this, the U. S, Canada and Mexico has implemented a series of actions.

Speaker 2

Brazil is starting to react. Europe has already reacted. So I think we are going to have many regional markets. And that's how it's going to operate in the future. In the case of North America, in particularly, I think the North America region is a very competitive region to produce steel, especially low carbon intensity steel.

Speaker 2

I mean, as you know, Mexico probably of the big markets, of the big producer is the lowest of CO2 emission per ton followed by the U. S. So, and in a competitive way. So I think that North America itself is very competitive. And again, most or some of the companies in North America, including Ternium, is invested in more capacity, is investing in be able to supply all the needs of the region in a competitive way.

Speaker 2

Again, no one can compete with a state like China. And I think that it's because of that, that reaction is that the governments are taking place. I hope I gave a short answer of a very long topic, Alfonso.

Speaker 5

Yes. Thank you. That helps. Just one question on this. The risk of tariffs for steel going to entering the U.

Speaker 5

S, there is a risk in your view. What can Ternium does do to if that happens? Or what could be the strategy?

Speaker 2

Look, I cannot speculate today about tariffs in the U. S. I think as I said in the beginning, I think that this is more of an opportunity to strengthen all the North American supply chain. And I think that the administration in Mexico and the new administration or the future administration in the U. S.

Speaker 2

Has a common objective in this. I'm very confident that, of course, there will be discussions and negotiations, but at the end, they are looking the same. So I guess, things are going to be resolved.

Speaker 5

Okay. So basically, what North America needs is to be reduce imports from other regions. That would be the goal.

Speaker 2

Well, that's a clear objective of the President of Mexico. And she was very public about this in several things and she even put the number of $200,000,000,000 in the public. I think it's also the objective of the new or the future administration of the U. S. I think President Trump was very clear about this and the U.

Speaker 2

S. In general is very clear that the dependence of China is not the way to go. And the strength of a North America supply change, I think is beneficiary for everyone. I mean, there's a lot of positive things to discuss, integration of the energy sector in the North America. That's also a very important subject that can benefit a lot the U.

Speaker 2

S. And Mexico. So I think there are very positive things to discuss, which I think will be the way. So I'm very positive about this.

Speaker 5

Okay. Last one, I promise. This question is, in the near term, the region will need to continue importing still from elsewhere, from other countries. There is no way around it, right? So it may

Speaker 2

not be China. I'm not sure about that. I mean, I think the region, if you count Canada, U. S. And Mexico, I think we can supply most of the steel that is consumed in the region.

Speaker 5

Yes. But net import was €400,000,000 last year. So it's a big amount.

Speaker 2

But there you have the imports of between both countries.

Speaker 5

Right, right.

Speaker 2

So you have to discount that? Correct. So the net imports you are talking about net imports of steel of less than €15,000,000 or €20,000,000 And I think if we increase capacity, most of that comes on and some of the imports come from Europe and Japan and that's things that you can manage.

Speaker 5

Correct. Okay. Yes, that's just what I wanted to understand. Thank you so much, Maximo.

Speaker 2

Thank you, Chiyo.

Operator

And your next question comes from the line of Henrique Brago with Morgan Stanley. Your line is open. Good

Speaker 6

morning. Thanks for taking my question. I have two questions on my side. First one is regarding the steel imports in Brazil. I know you mentioned that in your initial thoughts, Maximo, about how the government is now studying and making revisiting the quota system.

Speaker 6

I just wanted to know from you what are the what is the company doing now if you're working closely with the government? And what's the outcome that you expect from that? If the quota system is going to reduce somehow, if it can extend for a longer period of time or if the tariffs are going to increase in some way? And the other one is about future investments. I know you have an ongoing CapEx plan, but if you have some thoughts about what's the next step for Ternium after the investments in Mexico, we will plan to continue in the Americas or an expansion in any other regions is a possibility?

Speaker 6

Thank you.

Speaker 2

Thank you, Enrique. Steel imports in Brazil, I mean, this I mean, the government implement this quota system. It implemented in June, so it's very early. But I don't know if you I mean, maybe you know it, but it's a system that you have a quota, a 4 month quarter. So you cannot surplus supposedly that quarter.

Speaker 2

And let me give you an example. This is a real numbers. The quota for the flat product was around 400,000 tons. That's the quarter for the 4th 1st month. The imports mainly from China, because 80% of that is China, of that quarter, instead of $400,000 was $900,000 So it's more than double and most of those didn't pay tax, this tariff of 25%.

Speaker 2

So what we are saying to the government, not Ternium in particular, the association is saying to the government is, as it is implemented, it's a good I mean, I don't know, it's a good first step, but it's not working because there are some loopholes in the system. So for one side, we are saying, okay, we should continue working to close those loopholes. The second thing that Ternium and other companies are doing is filing dumping cases. I think that's the long term view as

Speaker 3

most of

Speaker 2

the countries are doing, but that takes long time. But we are doing that as a second. I hope this is clear from the first question, Enrique.

Speaker 6

Yes, that's very clear. Okay.

Speaker 2

Yes. Future investments, I mean, as we always said, we are going to be focused in America. We are not going to go to other regions. I think we have a place or opportunities in the Americas, in the countries, especially in Latin America where we are to continue growing, to continue investment. Today, as you know, we are focused in mainly in the increase of the Pesqueria project.

Speaker 2

As you know, it's the biggest project we have ever had in our history. So we are not focusing the next 2 years in completing this project on time. And with the quality, as you know, it's going to be really the 1st steel shop of their kind. So we are very focused on completely in this and we are successful in this.

Operator

Thank you very much. Our next question comes from the line of Camilla Barter with Bradesco BBI. Your line is open.

Speaker 7

Hi, good morning. Thank you for the opportunity for taking my questions. Just two quick questions. First on CapEx. Not sure it's too early to say, but is there any estimate for CapEx in 2025?

Speaker 7

And on cost, for Q4, you mentioned you could expect a drop as lower raw material inventories flow through results. But looking at 2025, what can you expect in terms of cost? And also if you could provide your expectation for free cash flow in the coming quarter, it will be great as well. Thank you.

Speaker 2

Thank you, Camilla, very much for your questions. CapEx in 2025, I think that was your first question.

Speaker 7

Yes.

Speaker 2

Total CapEx will be around $2,300,000,000 This is including Usiminas. A big part of that is going to the Pesqueria project, of course. 2025 will be probably the year of more CapEx in our history because of the Pesqueria project. Well, then

Speaker 3

yes, sorry, but we didn't hear that well your questions, but I think the second one was with respect to our expectation for free flow generation in the coming quarters. Let me take that one. Yes, please. Okay. Yes.

Speaker 3

Both are yes, you're right. That was your question. So in respect to free cash flow, what we are expecting is, 1st of all, to continue increasing our CapEx investment as you have already asked and Maximo gave you the amount. So without taking that into consideration, it's clear is a risk in this amount. We shouldn't have that significant changes in working capital.

Speaker 3

It was quite special, the increase in working capital this quarter. It was basically account payables and increasing account payables and nothing else, no increase in inventories or in our account receivables. So shouldn't be that the we should have that case in the coming quarters. So should have a positive operating cash flow and then continue increasing in the CapEx. So all in all, should be in a better position and the one that we have this quarter.

Speaker 3

Secondly, and we are as we have already mentioned, both Maximo and myself, our expectation is to continue reducing cost, different ways to do that. One of them is something that we discuss almost every quarter, which is that we are still utilizing raw material and specialty slab bought in prior quarters, but they had a higher price than the current one that and that's why we should see a reduction in cost coming in the next and the following quarter. So that was that is one of the reasons why we said that we have just or we can have a slightly better EBITDA generation in the coming quarter. And also, as was mentioned, we are always and we especially in this situation working very hard in continuing our cost reduction program in all the facilities where we operate. So we tend to be positive in that respect with the numbers that we already mentioned for the Q4 and especially for 2025.

Speaker 7

Very clear. Thank you.

Speaker 2

Thank you, Camilla.

Operator

And there are no further questions at this time. I would like to turn the call back over to the CEO, Maximo Devoya.

Speaker 2

Okay. Thank you very much all for joining us in this call. We welcome your feedback and have a great day. See you in 3 months.

Speaker 7

This

Operator

concludes today's conference call. You may now disconnect.

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