FORM 6 - K



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934

As of 10/31/2023

Ternium S.A.
(Translation of Registrant's name into English)

Ternium S.A.
26 Boulevard Royal – 4th floor
L-2449 Luxembourg
(352) 2668-3152
(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.

Form 20-F a Form 40-F __

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.

Yes __ No a


If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
Not applicable


The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended.
This report contains Ternium S.A.’s consolidated financial statements as of September 30, 2023.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



TERNIUM S.A.

By: /s/ Guillermo Etchepareborda
By: /s/ Sebastián Martí
Name: Guillermo EtcheparebordaName: Sebastián Martí
Title: Attorney in FactTitle: Attorney in Fact
            

Dated: October 31, 2023






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TERNIUM S.A.
Consolidated Condensed Interim Financial Statements
as of September 30, 2023
and for the nine-month periods
ended on September 30, 2023 and 2022

26 Boulevard Royal, 4th floor
L – 2449 Luxembourg
R.C.S. Luxembourg: B 98 668



INDEX
Page
Consolidated Condensed Interim Statements of Financial Position
Consolidated Condensed Interim Statements of Changes in Equity
Consolidated Condensed Interim Statements of Cash Flows
Notes to the Consolidated Condensed Interim Financial Statements
1
General information and basis of presentation
2
Accounting policies
3Acquisition of business – Increase of the participation in Usiminas Control Group and new governance structure of Usiminas
4
Segment information
 15
5
Cost of sales
6
Selling, general and administrative expenses
7
Finance expense, Finance income and Other financial income (expenses), net
8
Property, plant and equipment, net
9
Intangible assets, net
10
Investments in non-consolidated companies
11Distribution of dividends
12
Contingencies, commitments and restrictions on the distribution of profits
13
Related party transactions
14
Financial instruments by category and fair value measurement
15Foreign exchange restrictions in Argentina
16The Russia-Ukraine armed conflict
17Ternium to integrate operations in the USMCA
Page 1 of
    
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022
(All amounts in $ thousands)







Consolidated Condensed Interim Income Statements
Three-month period ended
September 30, 		Nine-month period ended
September 30,
Notes2023202220232022
(Unaudited)(Unaudited)
Net sales45,184,710 4,125,478 12,679,353 12,867,983 
Cost of sales5(4,192,014)(3,325,164)(10,012,184)(9,368,257)
Gross profit 992,696 800,314 2,667,169 3,499,726 
Selling, general and administrative expenses6(442,949)(277,355)(1,040,144)(869,102)
Other operating (expense) income, net (22,431)3,280 (10,578)25,782 
Operating income 4527,316 526,239 1,616,447 2,656,406 
Finance expense7(47,328)(14,634)(81,070)(28,569)
Finance income777,740 7,080 161,219 47,033 
Other financial (expense) income, net 7(199)(47,393)(60,099)(97,104)
Equity in earnings of non-consolidated companies1018,643 (89,688)80,819 18,334 
Effect related to the increase of the participation in Usiminas3(171,045)— (171,045)— 
Recycling of other comprehensive income related to Usiminas3(934,946)— (934,946)— 
(Loss) Profit before income tax credit (expense)(529,819)381,604 611,325 2,596,100 
Income tax expense(253,020)(161,701)(178,761)(562,494)
(Loss) Profit for the period(782,839)219,903 432,564 2,033,606 
Attributable to:
Owners of the parent(739,134)152,793 262,170 1,727,684 
Non-controlling interest(43,705)67,110 170,394 305,922 
(Loss) Profit for the period(782,839)219,903 432,564 2,033,606 
Weighted average number of shares outstanding1,963,076,776 1,963,076,776 1,963,076,776 1,963,076,776 
Basic and diluted earnings per share for profit attributable to the equity holders of the company (expressed in $ per share)(0.38)0.08 0.13 0.88 
The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the year ended December 31, 2022.
Page 2 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022
(All amounts in $ thousands)







Consolidated Condensed Interim Statements of Comprehensive Income
Three-month period ended
September 30, 		Nine-month period ended
September 30,
2023202220232022
(Unaudited)(Unaudited)
(Loss) Profit for the period(782,839)219,903 432,564 2,033,606 
Items that may be reclassified subsequently to profit or loss:
Currency translation adjustment(56,838)(314)(53,598)248 
Currency translation adjustment from participation in non-consolidated companies842,098 (26,351)904,708 15,960 
Changes in the fair value of financial instruments at fair value through other comprehensive income(57,858)(7,683)(181,590)(47,271)
Income tax related to financial instruments at fair value34,035 2,415 12,277 15,911 
Changes in the fair value of derivatives classified as cash flow hedges— 4 — 59 
Income tax related to cash flow hedges— (1)— (18)
Other comprehensive income items from participation in non-consolidated companies(387)14 28 219 
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of post employment benefit obligations(27,505)— (28,384)(3,042)
Income tax relating to remeasurement of post employment benefit obligations4,151 — 4,479 1,025 
Remeasurement of post employment benefit obligations from participation in non-consolidated companies26,016 (518)18,455 (2,448)
Other comprehensive income (loss) for the period, net of tax763,712 (32,434)676,375 (19,357)
Total comprehensive (loss) income for the period (19,127)187,469 1,108,939 2,014,249 
Attributable to:
Owners of the parent50,023 123,962 944,052 1,718,806 
Non-controlling interest(69,150)63,507 164,887 295,443 
Total comprehensive (loss) income for the period (19,127)187,469 1,108,939 2,014,249 
The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the year ended December 31, 2022.
Page 3 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022
(All amounts in $ thousands)







Consolidated Condensed Interim Statements of Financial Position
Balances as of
NotesSeptember 30, 2023December 31, 2022
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment, net87,384,023 6,261,887 
Intangible assets, net91,028,981 944,409 
Investments in non-consolidated companies10512,998 821,571 
Other investments262,471 100,716 
Deferred tax assets31,526,677 200,237 
Receivables, net808,720 318,690 
Trade receivables, net38 11,523,908 — 8,647,510 
Current assets
Receivables, net1,161,519 662,762 
Derivative financial instruments— 227 
Inventories, net5,135,940 3,470,215 
Trade receivables, net2,172,611 1,180,689 
Other investments2,468,753 1,875,026 
Cash and cash equivalents1,815,731 12,754,554 1,653,355 8,842,274 
Non-current assets classified as held for sale6,577 1,764 
12,761,131 8,844,038 
Total Assets  24,285,039   17,491,548 
    
EQUITY     
Capital and reserves attributable to the owners of the parent  12,436,657   11,845,959 
Non-controlling interest  4,429,678   1,922,434 
Total Equity 16,866,335 13,768,393 
LIABILITIES
Non-current liabilities    
Provisions909,198   81,422 
Deferred tax liabilities25,517   162,742 
Other liabilities1,152,885   538,214 
Trade payables 11,303 1,112 
Lease liabilities198,576 190,134 
Borrowings1,193,564 3,491,043 532,701 1,506,325 
Current liabilities
Current income tax liabilities173,004 135,703 
Other liabilities 511,925 344,843 
Trade payables 2,199,379 1,187,600 
Derivative financial instruments20,360 505 
Lease liabilities51,833 49,015 
Borrowings 971,160 3,927,661 499,164 2,216,830 
Total Liabilities 7,418,704   3,723,155 
  
Total Equity and Liabilities24,285,039   17,491,548 
The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the year ended December 31, 2022.

Page 4 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022
(All amounts in $ thousands)
Consolidated Condensed Interim Statements of Changes in Equity
Attributable to the owners of the parent (1)
Capital stock
(2)		Treasury shares
(2)		Initial public offering expensesReserves
(3) 		Capital stock issue discount
(4)		Currency translation adjustmentRetained earningsTotalNon-controlling interestTotal Equity
Balance as of January 1, 20232,004,743 (150,000)(23,295)1,394,567 (2,324,866)(2,859,068)13,803,878 11,845,959 1,922,434 13,768,393 
Profit for the period262,170 262,170 170,394 432,564 
Other comprehensive income (loss) for the period
Currency translation adjustment (7)871,641 871,641 (20,531)851,110 
Remeasurement of post employment benefit obligations2,354 2,354 (7,804)(5,450)
Others (5)(192,113)(192,113)22,828 (169,285)
Total comprehensive income (loss) for the period— — — (189,759)— 871,641 262,170 944,052 164,887 1,108,939 
Dividends paid in cash (6)(353,354)(353,354)— (353,354)
Dividends paid in kind to non-controlling interest— (233,538)(233,538)
Effects related to the gain of control over Usiminas (7)— — 2,575,895 2,575,895 
Balance as of September 30, 2023 (unaudited)2,004,743 (150,000)(23,295)1,204,808 (2,324,866)(1,987,427)13,712,694 12,436,657 4,429,678 16,866,335 

(1) Shareholders’ equity is determined in accordance with accounting principles generally accepted in Luxembourg.
(2) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $ 1.00 per share. As of September 30, 2023, there were 2,004,743,442 shares issued. All issued shares are fully paid. Also, as of September 30, 2023, the Company held 41,666,666 shares as treasury shares.
(3) Includes legal reserve under Luxembourg law for $ 200.5 million, undistributable reserves under Luxembourg law for $ 1.4 billion and reserves related to the acquisition of non-controlling interest in subsidiaries for $ (72.4) million.
(4) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.
(5) Includes mainly the changes of the fair value of financial instruments at fair value through other comprehensive income, net of tax.
(6) See note 11.
(7) See note 3. For the effect in non-controlling interest of $ 2,575.9, represents the items included in note 3 (e) and (f).

Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg law and regulations exist. Therefore, retained earnings included in these consolidated condensed interim financial statements may not be wholly distributable.
The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the year ended December 31, 2022.
Page 5 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for six-month periods ended September 30, 2023 and 2022
(All amounts in $ thousands)
Consolidated Condensed Interim Statements of Changes in Equity
Attributable to the owners of the parent (1)
Capital stock
(2)		Treasury shares
(2)		Initial public offering expensesReserves
(3) 		Capital stock issue discount
(4)		Currency translation adjustmentRetained earningsTotalNon-controlling interestTotal Equity
Balance as of January 1, 20222,004,743 (150,000)(23,295)1,360,637 (2,324,866)(2,898,593)12,566,393 10,535,019 1,700,019 12,235,038 
Profit for the period1,727,684 1,727,684 305,922 2,033,606 
Other comprehensive income (loss) for the period
Currency translation adjustment15,035 15,035 1,173 16,208 
Remeasurement of post employment benefit obligations(3,854)(3,854)(611)(4,465)
Cash flow hedges, net of tax21 21 20 41 
Others (5)(20,080)(20,080)(11,061)(31,141)
Total comprehensive income (loss) for the period— — — (23,913)— 15,035 1,727,684 1,718,806 295,443 2,014,249 
Dividends paid in cash(353,354)(353,354)— (353,354)
Dividends paid in cash to non-controlling interest— (112,293)(112,293)
Acquisition of non-controlling interest (6)(223)(223)(3,993)(4,216)
Balance as of September 30, 2022 (unaudited)2,004,743 (150,000)(23,295)1,336,501 (2,324,866)(2,883,558)13,940,723 11,900,248 1,879,176 13,779,424 
(1) Shareholders’ equity is determined in accordance with accounting principles generally accepted in Luxembourg.
(2) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $ 1.00 per share. As of September 30, 2022, there were 2,004,743,442 shares issued. All issued shares are fully paid. Also, as of September 30, 2022, the Company held 41,666,666 shares as treasury shares.
(3) Include legal reserve under Luxembourg law for $ 200.5 million, undistributable reserves under Luxembourg law for $ 1.4 billion and reserves related to the acquisition of non-controlling interest in subsidiaries for $ (72.4) million.
(4) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.
(5) Includes mainly the changes of the fair value of financial instruments at fair value through other comprehensive income, net of tax.
(6) Corresponds to the acquisition of non-controlling interest participation of Ternium Argentina S.A..

Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg law and regulations exist. Therefore, retained earnings included in these consolidated condensed interim financial statements may not be wholly distributable.
The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the year ended December 31, 2022.
Page 6 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022
(All amounts in $ thousands)

Consolidated Condensed Interim Statements of Cash Flows
Nine-month period ended
September 30,
Notes20232022
(Unaudited)
Cash flows from operating activities
Profit for the period432,564 2,033,606 
Adjustments for:
Depreciation and amortization 8 & 9466,693 456,068 
Income tax accruals less payments (115,779)(1,105,929)
Equity in earnings of non-consolidated companies10(80,819)(18,334)
Interest accruals less payments/receipts, net(102,056)8,767 
Changes in provisions(3,828)(1,561)
Changes in working capital (1)1,125 197,747 
Net foreign exchange results and others (98,277)150,387 
Non-cash effects related to the increase of the participation in Usiminas31,105,991 — 
Net cash provided by operating activities1,605,614 1,720,751 
Cash flows from investing activities
Capital expenditures 8 & 9(777,537)(421,847)
Increase in other investments(755,304)(326,598)
Proceeds from the sale of property, plant and equipment 1,683 1,246 
Dividends received from non-consolidated companies15,162 28,884 
Acquisition of business3
Purchase consideration(118,686)— 
Cash acquired781,072 — 
Acquisition of non-controlling interest— (4,216)
Net cash used in investing activities(853,610)(722,531)
Cash flows from financing activities
Dividends paid in cash to company’s shareholders(353,354)(353,354)
Finance lease payments(43,068)(37,187)
Proceeds from borrowings235,896 225,071 
Repayments of borrowings(371,810)(614,374)
Net cash used in financing activities(532,336)(779,844)
Increase in cash and cash equivalents219,668 218,376 
Movement in cash and cash equivalents
At January 1, 1,653,355 1,276,605 
Effect of exchange rate changes(57,292)(20,823)
Increase in cash and cash equivalents219,668 218,376 
Cash and cash equivalents as of September 30, (2)1,815,731 1,474,158 
Non-cash transactions:
Dividends paid in kind to non-controlling interest(233,538)(112,293)
Acquisition of PP&E under lease contract agreements(15,833)12,174 
Effects related to the increase of the participation in Usiminas1,105,991 — 

(1) The working capital is impacted by non-cash movements of $ (33.4) million as of September 30, 2023 ($ 22.3 million as of September 30, 2022) due to the variations in the exchange rates used by subsidiaries.
(2) It includes restricted cash of $ 2,965 and $ 50 as of September 30, 2023 and 2022, respectively. In addition, the Company had other investments with a maturity of more than three months for $ 2,738,546 and $ 1,361,374 as of September 30, 2023 and 2022, respectively.

The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the year ended December 31, 2022.
Page 7 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


Notes to the Consolidated Condensed Interim Financial Statements

1.GENERAL INFORMATION AND BASIS OF PRESENTATION

Ternium S.A. (the “Company” or “Ternium”), was incorporated on December 22, 2003 to hold investments in flat and long steel manufacturing and distributing companies.  The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $ 1.00 per share. As of September 30, 2023, there were 2,004,743,442 shares issued. All issued shares are fully paid.

Ternium’s American Depositary Shares (“ADS”) trade on the New York Stock Exchange under the symbol “TX”. 

The name and percentage of ownership of subsidiaries that have been included in consolidation in these Consolidated Condensed Interim Financial Statements are disclosed in Note 2 to the audited Consolidated Financial Statements for the year ended December 31, 2022.

The preparation of Consolidated Condensed Interim Financial Statements requires management to make estimates and assumptions that might affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the statement of financial position, and also the reported amounts of revenues and expenses for the reported periods. Actual results may differ from these estimates. The main assumptions and estimates were disclosed in the Consolidated Financial Statements for the year ended December 31, 2022, without significant changes since its publication, except for the assumptions and estimates related to the acquisition of business (see note 3).

2.    ACCOUNTING POLICIES

These Consolidated Condensed Interim Financial Statements have been prepared in accordance with IAS 34, “Interim Financial Reporting” and are unaudited. These Consolidated Condensed Interim Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2022, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and in conformity with International Financial Reporting Standards as adopted by the European Union (“EU”). Recently issued accounting pronouncements were applied by the Company as from their respective dates.

These Consolidated Condensed Interim Financial Statements have been prepared following the same accounting policies used in the preparation of the audited Consolidated Financial Statements for the year ended December 31, 2022.

Business combinations

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Company makes judgments and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive, it is recognized as goodwill, and if negative, it is recognized in the income statement. See further information in note 3.



Page 8 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

2.    ACCOUNTING POLICIES (continued)

Recognition of non-controlling interest

The recognition of business combinations requires the acquirer to measure at the acquisition date components of non‑controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation at either (a) fair value; or (b) the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. The Company opted for the proportional share in the recognized amounts of the identifiable net assets. See further information in note 3.

Put option valuation method

IFRS presents the following options to recognize the value of a put option:

- Under IFRS 10, the terms of the forward and option contracts should be analyzed to assess whether they provide the parent or the non-controlling interest with access to the risks and rewards associated with the actual ownership of the shares. The non-controlling interest should be recognized if risks and rewards associated with ownership have been retained by the non-controlling interest. A financial liability (recognized at the present value of the redemption amount) is recorded to reflect the forward or put option.
- Under IAS 32, a liability is recognized for written puts over non-controlling interests. The liability reflects the entity’s obligation to deliver cash or a financial asset. The financial liability is recognized at present value of the redemption amount and accreted through finance charges in the income statement over the contract period up to the final redemption amount.

The Company opted for the recognition of the financial liability under IAS 32. See further information in note 3.

None of the accounting pronouncements issued after December 31, 2022, and as of the date of these Consolidated Condensed Interim Financial Statements have a material effect on the Company’s financial condition or result or operations.



Page 9 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


3.    ACQUISITION OF BUSINESS – INCREASE OF THE PARTICIPATION IN USIMINAS CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS

(a) The participation in Usiminas as of June 30, 2023

On January 16, 2012, the Company’s subsidiaries, Ternium Investments and Ternium Argentina (together with its wholly-owned subsidiary Prosid Investments S.A., or "Prosid", and the Company’s affiliate, Confab Industrial S.A., a subsidiary of Tenaris, or TenarisConfab), joined the existing control group of Usiminas, a leading steel company in the Brazilian flat steel market, through the acquisition of 84.7, 30.0, and 25.0 million ordinary shares, respectively, and formed the so-called Ternium/Tenaris (T/T) Group.

On October 30, 2014, Ternium Investments acquired 51.4 million additional ordinary shares of Usiminas. On April 20, 2016, Ternium Investments subscribed to 7.0 million preferred shares of Usiminas and Ternium Argentina, together with Prosid, subscribed to an aggregate 1.5 million preferred shares of Usiminas. On July 19, 2016, Usiminas’ extraordinary general shareholders’ meeting homologated a capital increase, and Ternium Investments acquired 62.6 million additional ordinary shares, and Ternium Argentina and Prosid acquired an aggregate 13.8 million additional ordinary shares. As a result of these transactions, Ternium, through its subsidiaries Ternium Investments, Ternium Argentina and Prosid, owned as of June 30, 2023, 242.6 million ordinary shares of Usiminas (representing 34.4% of Usiminas’ ordinary shares) and 8.5 million of Usiminas’ preferred shares (representing 1.6% of Usiminas’ preferred shares), representing, in the aggregate, 20.4% of Usiminas’ share capital.

As of June 30, 2023, the Usiminas control group held, in the aggregate, 483.6 million ordinary shares bound to the Usiminas shareholders’ agreement, representing approximately 68.6% of Usiminas’ voting capital. The Usiminas control group, which was bound by a long-term shareholders’ agreement that governs the rights and obligations of Usiminas’ control group members, was composed as of such date of three sub-groups: the T/T Group; the NSC Group, comprising Nippon Steel Corporation (“NSC”), Metal One Corporation and Mitsubishi Corporation; and Usiminas’ pension fund Previdência Usiminas. The T/T Group held approximately 47.1% of the total shares held by the control group (39.5% corresponding to the Ternium entities and the other 7.6% corresponding to TenarisConfab); the NSC Group held approximately 45.9% of the total shares held by the control group; and Previdência Usiminas held the remaining 7%. The corporate governance rules reflected in the Usiminas shareholders agreement provided, among other things, that Usiminas’ executive board was composed of six members, including the chief executive officer and five vice-presidents, with Ternium and NSC nominating three members each. The right to nominate Usiminas’ chief executive officer alternated between Ternium and NSC at every 4-year interval, with the party that did not nominate the chief executive officer having the right to nominate the chairman of Usiminas’ board of directors for the same 4-year period. The Usiminas shareholders agreement also provided for an exit mechanism consisting of a buy-and-sell procedure—exercisable at any time after November 16, 2022, and applicable with respect to shares held by NSC and the T/T Group—, which would allow either Ternium or NSC to purchase all or a majority of the Usiminas shares held by the other shareholder.

(b) The acquisition of the additional participation

On March 30, 2023, Ternium S.A. announced that its subsidiaries Ternium Investments and Ternium Argentina, together with Confab, a subsidiary of its affiliate Tenaris S.A., all of which compose the T/T group within Usiminas control group, entered into a share purchase agreement to acquire from Nippon Steel Corporation, Mitsubishi and MetalOne (the “NSC group”), pro rata to their current participations in the T/T group, 68.7 million ordinary shares of Usinas Siderúrgicas de Minas Gerais S.A. – USIMINAS (“Usiminas”) at a price of BRL10 per ordinary share.


Page 10 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022



3.    ACQUISITION OF BUSINESS – INCREASE OF THE PARTICIPATION IN USIMINAS CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)

On July 3, 2023, the Company announced the completion of the acquisition of this additional participation. Pursuant to the transaction, Ternium paid $118.7 million in cash for 57.7 million ordinary shares, increasing its participation in the Usiminas control group to 51.5%.

The Usiminas control group holds the majority of Usiminas’ voting rights. Following the completion of the transaction, the T/T group holds an aggregate participation of 61.3% in the control group, with the NSC group and Previdência Usiminas (Usiminas employees’ pension fund) holding 31.7% and 7.0%, respectively. The Usiminas control group members also agreed a new governance structure, as a result of which the T/T group nominated a majority of the Usiminas board of directors, the CEO and four other members of Usiminas board of officers, and ordinary decisions are approved with a 55% majority of the control group shares.

Pursuant to the Usiminas shareholders agreement, as supplemented by the T/T Group shareholders’ agreement, Ternium started fully consolidating Usiminas balance sheet and results of operations in its consolidated financial statements beginning in July 2023.

( c) Remeasurement of the previously held interest

As of July 3, 2023, Ternium remeasured its former participation (20.4%) at its fair value as of such date.

Consequently, Ternium valued its previously held interest by means of the market quotation of Usiminas share in the Brazilian stock market. Such value as of July 3, 2023, was of 7.36 BRL per share, amounting to a total of $385.9 million. This valuation results in the recognition of a loss of $441.3 million, which is included along with the gain related to the bargain purchase amounting to $270.4 million (see note 3 (d)) in the “Effect related to the increase of the participation in Usiminas” in the income statement for a total of $171.0 million.

In addition, IFRS 3, paragraph 42, establishes that the previous interest must be remeasured, and necessary adjustments made as if it were a disposal of the investment. In this case, items previously recognized in other comprehensive income, mainly the CTA (currency translation adjustment) should be recycled to results of the period. The accumulated loss in “Other comprehensive income” as of the acquisition date was $ 934.9 million.














Page 11 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

3.    ACQUISITION OF BUSINESS – INCREASE OF THE PARTICIPATION IN USIMINAS CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)

(d) Fair value of net assets acquired

The fair values provisionally determined for the assets acquired and liabilities assumed arising from the acquisition are as follows:

Fair value of acquired assets and assumed liabilities (provisional):in $ thousands
Property, plant and equipment904,780
Investments in non-consolidated companies400,037
Inventories1,707,311
Cash and cash equivalents781,072
Other investments247,005
Trade receivables, net719,631
Other receivables854,917
Deferred tax assets1,327,232
Borrowings(1,224,399)
Provisions(856,153)
Trade payables(758,687)
Other assets and liabilities, net(509,486)
Net assets acquired3,593,260
Non-controlling interest(2,818,358)
Remeasurent of previously held interest in Usiminas(385,851)
Total Purchase consideration(118,686)
Bargain purchase gain270,365
Loss on the remeasurent of previously held interest in Usiminas(441,410)
Net loss effect related to the increase of the participation in Usiminas(171,045)

The provisional purchase price allocation disclosed above is currently under analysis with the assistance of a third party expert. According to the provisional allocation, the transaction led to the recognition of a bargain purchase of $270.4 million. Following IFRS 3 and during the year after the acquisition date, the Company will continue reviewing the allocation and make any adjustments (mainly over Property, plant and equipment, Inventories and Provisions), if necessary.

Since the acquisition date, revenues and net income from Usiminas amounted to $1,359 and $15 million, respectively.

(e) Put and call option

In addition to the share purchase and the new governance structure, a “put” and “call” mechanism was established according to the following scheme:
–NSC group will have the right, at any time after the closing of the transaction, to withdraw its remaining shares from the control group and sell them in the open market after giving the T/T group the opportunity to buy them at the 40-trading day average price per share immediately prior to the NSC group’s notice of withdrawal, as well as the right, at any time after the second anniversary of the closing, to sell such shares to the T/T group at BRL10 per share.
Page 12 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


3. ACQUISITION OF BUSINESS – INCREASE OF THE PARTICIPATION IN USIMINAS CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)

–At any time after the second anniversary of the closing of the transaction, the T/T group will have the right to buy the NSC group’s remaining interest in the Usiminas control group (153.1 million ordinary shares) at the higher of BRL10 per share and the 40-trading day average price per share immediately prior to the date of exercising the option.
–In the case of the T/T Group, Ternium will decide at its own discretion the execution of the call option, having Confab and Ternium Argentina the option to acquire the shares owned by NSC pro rata to their participation.

IAS 32 requires a liability to be recognized for written puts over non-controlling interests. The liability reflects the entity’s obligation to deliver cash or a financial asset. The financial liability is recognized at present value of the redemption amount and accreted through finance charges in the income statement over the contract period up to the final redemption amount. Ternium has recognized a liability associated with the put option of $242.5 million, accounted for in the statement of financial position under Other liabilities, with the corresponding debit in the statement of changes in equity under Non-controlling interest.

(f) Recognition of non-controlling interest

Ternium recognizes non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. For the non-controlling interests in Usiminas, the Company elected to recognize the non-controlling interests at its proportionate share of the acquired net identifiable assets, which led to a non-controlling interest of $2,575.9 million.

(g) Main contingencies associated with the acquired business

Contrary to the recognition principles in IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IFRS 3 Business Combinations requires an acquirer of a business to recognize contingent liabilities assumed in a business acquisition at the acquisition date even if it is not probable that an outflow of resources will be required to settle the obligation.

in $ thousands
Provisions for contingencies recognized by Usiminas before business combination(199,677)
Provisions for contingencies recognized as part of the business combination:
Tax related contingencies(432,488)
Labour related contingencies(49,655)
Civil and other related contingencies(174,333)
Total Provision for contingencies(856,153)

Contingencies estimated by Management were related to possible losses arising from administrative proceedings and litigation related to tax, civil and labour matters and based on the advice and assessment of internal and external legal advisors.
Page 13 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

3.    ACQUISITION OF BUSINESS – INCREASE OF THE PARTICIPATION IN USIMINAS CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)

The main contingencies recognized in the consolidated condensed interim financial statements pursuant to IFRS 3 Business Combinations in connection with the acquisition of the additional participation in Usiminas and the full consolidation of Usiminas include the following:

DescriptionStatusin $ thousands
Labor lawsuits filed by employees, former employees and outsourced personnel of the Cubatão Plant, claiming severance pay and social security rights.Pending judgment by the Labor Court and administrative bodies, at different levels.57,343
Tax proceeding in which the tax authorities seek the reversal of ICMS/SP credits on materials considered as consumables (refractory items and others).Awaiting final outcome of the Appeal to the Superior Court of Justice (STJ).29,772
Labor lawsuits filed by employees, former employees and outsourced personnel of the Ipatinga Plant, claiming severance pay and social security rights.Pending judgment by the Labor Court and administrative bodies, at different levels.15,112
Labor lawsuits filed by former employees challenging the amount of compensation paid on dismissals.Pending judgment.10,837
Other contingencies86,613
Provisions for contingencies recognized by Usiminas before business combination199,677
DescriptionStatusin $ thousands
Objection filed against the decision that recognized only partially the credit rights established in a final and unappealable court decision that determined the exclusion of ICMS amounts from the calculation basis of PIS/COFINS-Imports.Pending judgment at administrative level.94,792
Public Civil Action seeking the reimbursement of the amounts increased by means of a term of amendment to the Contractor's Agreement, due to alleged overbilling in the construction of a bridge in Brasília/DF.Claim deemed groundless. Pending judgment of Appeal.64,315
Tax collection proceedings related to the collection of ICMS/SP on goods shipped to other countries without effective proof of export.Pending judgment by the trial court.51,546
Tax proceedings seeking the reversal of ICMS/SP credits on materials considered as consumables (refractory items and others).Several case records, declaratory actions and tax collection proceedings, suspended or pending decision by higher courts.38,640
Labor lawsuits filed by employees, former employees and outsourced personnel of the Cubatão Plant, claiming severance pay and social security rights.Pending judgment by the Labor Court and administrative bodies, at different levels.27,123
Public Civil Action seeking compensation for alleged damages caused to the State of Santa Catarina's Treasury related to improper expenditures incurred in the construction of a bridge.Pending conclusion of the expert evidence21,113
ICMS – Action for annulment of the tax debt claimed by the State of Rio Grande do Sul due to failure to make the advance payment of the tax at the entry of goods coming from other States (rate differential ).Pending judgment by the trial court.28,789
Tax assessment notice issued by the State of Minas Gerais concerning alleged reversal of ICMS credits on sale of electrical energy.Pending judgment at administrative level.12,386
Other tax contingencies206,334
Other civil and other contingencies88,905
Other labour contingencies22,533
Provisions for contingencies recognized as part of the business combination656,476

Page 14 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

4.    SEGMENT INFORMATION

OPERATING SEGMENTS


After the increase of the participation in Usiminas, the Company is organized preliminary in three operating segments: Steel, Mining and Usiminas. As of September 30, 2023, the CODM is still reviewing the new business structure to allocate resources and to assess the performance in order to define the segments.

The Steel segment includes the sales of steel products, which comprises mainly slabs, hot and cold rolled products, coated products, roll-formed and tubular products, billets, bars and other products.

The Mining segment includes the sales of mining products, mainly iron ore and pellets, and comprises the mining activities of Las Encinas, an iron ore mining company in which Ternium holds a 100% equity interest and the 50% of the operations and results performed by Peña Colorada, another iron ore mining company in which Ternium maintains that same percentage over its equity interest.

The Usiminas segment includes the sales of steel and mining products.

Ternium’s Chief Executive Officer (“CEO”) functions as the Company’s Chief Operating Decision Maker (“CODM”). The various geographic regions operate as an integrated steel producer. The CEO allocates resources and assesses performance of the Steel Segment as an integrated business and of the Mining Segment. The CEO uses “Operating income – Management view” as per the below table as the performance measure which differs from operating income determined in accordance with IFRS principally as follows:
• The use of direct cost methodology to calculate the inventories, while under IFRS is at full cost, including absorption of production overheads and depreciation.
• The use of costs based on previously internally defined cost estimates, while, under IFRS, costs are calculated at historical cost (with the FIFO method).
• Other non-significant differences.
































Page 15 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

4.    SEGMENT INFORMATION (continued)

Nine-month period ended September 30, 2023 (Unaudited)
SteelMiningUsiminasInter-segment eliminationsTotal
Operating income - Management view1,869,298 (44,857)(65,533)(6,634)1,752,274 
Reconciliation:
Differences in Cost of sales(135,827)
Operating income - Under IFRS1,616,447 
Financial income (expense), net20,050 
Equity in earnings (losses) of non-consolidated companies80,819 
Income before income tax expense - IFRS1,717,316 
Net sales from external customers11,320,454 — 1,358,898 — 12,679,353 
Net sales from transactions with other operating segments of the same entity155,852 308,492 11,177 (475,521)— 
Depreciation and amortization(379,119)(73,523)(14,051)— (466,693)
Nine-month period ended September 30, 2022 (Unaudited)
SteelMiningUsiminasInter-segment eliminationsTotal
Operating income - Management view2,163,008 16,194 — 6,559 2,185,761 
Reconciliation:
Differences in Cost of sales470,645 
Operating income - Under IFRS2,656,406 
Financial income (expense), net(78,640)
Equity in earnings (losses) of non-consolidated companies18,334 
Income before income tax expense - IFRS2,596,100 
Net sales from external customers12,867,920 63 — — 12,867,983 
Net sales from transactions with other operating segments of the same entity— 314,325 — (314,325)— 
Depreciation and amortization(390,846)(65,222)— — (456,068)
Information on segment assets is not disclosed as it is not reviewed by the CEO.


GEOGRAPHICAL INFORMATION

The Company had no revenues attributable to the Company’s country of incorporation (Luxembourg) in 2023.
For purposes of reporting geographical information, net sales are allocated based on the customer’s location. Allocation of depreciation and amortization is based on the geographical location of the underlying assets.

Nine-month period ended September 30, 2023 (Unaudited)
MexicoSouthern regionBrazilOther marketsTotal
Net sales 7,131,747 2,680,560 1,365,023 1,502,023 12,679,353 
Non-current assets (1)4,914,815 875,716 2,311,712 310,761 8,413,004 
Nine-month period ended September 30, 2022 (Unaudited)
MexicoSouthern regionBrazilOther marketsTotal
Net sales 6,975,691 2,894,941 591,246 2,406,105 12,867,983 
Non-current assets (1)4,754,124 871,007 1,372,064 311,350 7,308,545 
(1) Includes Property, plant and equipment and Intangible assets.
Page 16 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

    
5.    COST OF SALES
Nine-month period ended
September 30,
20232022
(Unaudited)
Inventories at the beginning of the year3,470,214 3,908,305 
Acquisition of business (Note 3)1,707,311 — 
Translation differences(61,353)— 
Plus: Charges for the period
Raw materials and consumables used and
other movements		8,149,208 7,683,998 
Services and fees173,285 134,544 
Labor cost681,477 672,257 
Depreciation of property, plant and equipment403,134 396,286 
Amortization of intangible assets28,750 29,779 
Maintenance expenses580,863 460,895 
Office expenses9,884 7,202 
Valuation allowance(15,333)18,078 
Insurance16,512 11,644 
Change of obsolescence allowance9,027 26,841 
Recovery from sales of scrap and by-products(29,945)(30,953)
Others25,090 15,639 
Less: Inventories at the end of the period(5,135,940)(3,966,258)
Cost of Sales10,012,184 9,368,257 



6.    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Nine-month period ended
September 30,
20232022
(Unaudited)
Services and fees64,70455,517
Labor cost255,590229,709
Depreciation of property, plant and equipment11,71610,269
Amortization of intangible assets23,09319,734
Maintenance and expenses7,5066,313
Taxes134,909128,891
Office expenses47,24231,798
Freight and transportation449,857380,268
Increase of allowance for doubtful accounts12,453 590 
Others33,0746,013
Selling, general and administrative expenses  1,040,144 869,102 

Page 17 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


7.     FINANCE EXPENSE, FINANCE INCOME AND OTHER FINANCIAL INCOME (EXPENSES), NET
Nine-month period ended
September 30,
20232022
(Unaudited)
Interest expense(81,070)(28,569)
Finance expense(81,070)(28,569)
Interest income161,219 47,033 
Finance income161,219 47,033 
Net foreign exchange loss(72,966)(137,143)
Change in fair value of financial assets79,830 57,608 
Derivative contract results(53,525)(1,610)
Others(13,438)(15,959)
Other financial (expenses) income, net (60,099)(97,104)


8.    PROPERTY, PLANT AND EQUIPMENT, NET
Nine-month period ended
September 30,
20232022
(Unaudited)
At the beginning of the year6,261,887 6,431,578 
Acquisition of business (Note 3)904,780 — 
Currency translation differences(37,862)129 
Additions697,139 360,289 
Value adjustments of lease contracts4,393 16,031 
Disposals(29,690)(18,077)
Depreciation charge(414,850)(406,555)
Capitalized borrowing costs— 403 
Transfers and reclassifications(1,774)(2,320)
At the end of the period7,384,023 6,381,478 


9.    INTANGIBLE ASSETS, NET
 Nine-month period ended
September 30,
20232022
(Unaudited)
At the beginning of the year944,409 902,256 
Acquisition of business (Note 3)34,451 — 
Currency translation differences(1,441)— 
Additions99,731 72,003 
Amortization charge(51,843)(49,513)
Transfers/Disposals3,674 2,321 
At the end of the period1,028,981 927,067 

Page 18 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


10.    INVESTMENTS IN NON-CONSOLIDATED COMPANIES

CompanyCountry of incorporationMain activityVoting rights as ofValue as of
September 30, 2023December 31, 2022September 30, 2023December 31, 2022
Usinas Siderurgicas de Minas Gerais S.A. - USIMINASBrazilManufacturing and selling of steel products-34.39%—725,705
Techgen S.A. de C.V.MexicoProvision of electric power48.00%48.00%108,34490,559
Unigal Usiminas Ltda.BrazilManufacturing and selling of steel products70.00%-137,866—
MRS Logística S.ABrazilLogistical services11.41%-226,439—
Other non-consolidated companies (1)40,3495,307
512,998821,571
(1) It includes the investments held in Finma S.A.I.F., Recrotek S.R.L. de C.V., Gas Industrial de Monterrey S.A. de C.V., Modal Terminal de Graneis Ltda., Usiroll – Usiminas Court Tecnologia em Acabamento Superficial Ltda, Codeme Engenharia S.A, Terminal de Cargas Paraopeba Ltda., Terminal de Cargas Sarzedo Ltda., and Metalcentro Ltda.


Techgen S.A. de C.V.

Techgen stated as of and for the nine-month period ended September 30, 2023, that revenues amounted to $329 million ($446 million for the nine-month period ended September 30, 2022), net profit from continuing operations to $37 million ($36 million for the nine-month period ended September 30, 2022), non-current assets to $762 million ($766 million as of December 31, 2022), current assets to $154 million ($131 million as of December 31, 2022), non-current liabilities to $481 million ($527 million as of December 31, 2022), current liabilities to $209 million ($181 million as of December 31, 2022) and shareholders’ equity to $226 million ($189 million as of December 31, 2022).

Page 19 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


11. DISTRIBUTION OF DIVIDENDS

During the annual shareholders’ meeting held on May 2, 2023, the shareholders approved a distribution of dividends of USD 0.27 per share (USD 2.70 per ADS). The annual dividend included the interim dividend of $0.09 per share ($0.90 per ADS) paid in November 2022. A net dividend of $0.18 per share ($1.80 per ADS) was paid on May 10, 2023, of approximately USD 360.9 million in the aggregate.

12.    CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF PROFITS

Contingencies, commitments and restrictions on the distributions of profits should be read in Note 24 to the Company’s audited Consolidated Financial Statements for the year ended December 31, 2022.

(i) Tax claims and other contingencies

Companhia Siderúrgica Nacional (CSN) - Tender offer litigation
In 2013, the Company was notified of a lawsuit filed in Brazil by Companhia Siderúrgica Nacional, or CSN, and various entities affiliated with CSN against Ternium Investments, its subsidiary Ternium Argentina, and Tenaris’s subsidiary Confab, all of which compose the T/T Group under the Usiminas shareholders agreement. The entities named in the CSN lawsuit had acquired a participation in Usiminas in January 2012. The CSN lawsuit alleges that, under applicable Brazilian laws and rules, the acquirers were required to launch a tag-along tender offer to all non-controlling holders of Usiminas ordinary shares for a price per share equal to 80% of the price per share paid in such acquisition, or BRL 28.8, and seeks an order to compel the acquirers to launch an offer at that price plus interest. If so ordered, the offer would need to be made to 182,609,851 ordinary shares of Usiminas not belonging to Usiminas’ control group. Ternium Investments and Ternium Argentina’s respective shares in the offer would be 60.6% and 21.5%.

On September 23, 2013, the first instance court dismissed the CSN lawsuit, and on February 8, 2017, the court of appeals maintained the understanding of the first instance court. On August 18, 2017, CSN filed an appeal to the Superior Court of Justice (SCJ) seeking the review and reversal of the decision issued by the Court of Appeals. On September 10, 2019, the SCJ declared CSN’s appeal admissible. On March 7, 2023, the SCJ, by majority vote, rejected CSN’s appeal. CSN made several submissions in connection with the SCJ decision, including a motion for clarification that challenged the merits of the SCJ decision. Decisions at the SCJ are adopted by majority vote and, at the date of these consolidated condensed interim financial statements, voting at the SCJ with respect to the motion for clarification is ongoing. At an October 17, 2023 session, two justices voted in favor of remanding the case to the first instance for it to be retried following production and assessment of the new evidence, and two justices voted, without requiring any further evidence, in favor of granting CSN’s motion for clarification and reversing the March 7, 2023 decision that rejected CSN’s appeal; because the fifth member of SCJ excused himself from voting, a justice from another panel at the SCJ will be summoned to produce the tie-breaking vote. There are no specified deadlines for voting to be resumed or the SCJ decision to be issued. In any event, either party may appeal against a SCJ decision.


Page 20 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

12.    CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF PROFITS (continued)

According to the views of the two justices that voted in favor of CSN’s motion, Ternium Investments and the other members of the T/T Group should be ordered to pay to CSN an indemnification amount equal to the difference between the price paid by the T/T Group in its acquisition and the market value of the Usiminas shares at signing, plus monetary adjustment and interest (at a rate of 1% per month) through the date of payment, plus legal costs equal to 10% of the compensation payable to CSN, with CSN retaining ownership of the Usiminas ordinary shares it currently owns. If that unprecedented view were to prevail, and depending on how the indemnification is calculated by other courts, as of the date of these consolidated condensed interm financial statements the potential aggregate indemnification payable by Ternium Investments and Ternium Argentina could reach up to BRL 3.0 billion (approximately $0.6 billion at the current BRL/$ rate) and BRL 1.1 billion (approximately $0.2 billion), respectively.

The Company continues to believe that all of CSN’s claims and allegations are groundless and without merit, as confirmed by several opinions of Brazilian legal counsel, two decisions issued by the Brazilian securities regulator in February 2012 and December 2016, the first and second instance court decisions and the March 7, 2023 SCJ decision referred to above. Notwithstanding the foregoing, in light of the votes already issued by two members of the SCJ on CSN’s motion for clarification, the Company cannot predict the ultimate resolution on the matter.

Potential Mexican income tax adjustment

In March 2015, as part of a tax audit with respect to fiscal year 2008, the Mexican tax authority (“SAT”) challenged the deduction by Ternium Mexico of a tax loss arising from an intercompany sale of shares in December 2008. In addition, in September 2018, as part of a tax audit for fiscal year 2011, the SAT objected to the deduction by Ternium Mexico of the remainder of the 2008 tax loss. Ternium Mexico requested an injunction from the Mexican courts against the SAT claims and filed its defense and supporting documents with the SAT. After Ternium Mexico obtained an injunction in August 2020, in November 2020 the SAT issued a new preliminary audit report in which it reiterated its objections to the deduction of the 2008 tax loss. In June 2021, the SAT determined income tax adjustments with respect to 2008 and 2011 for amounts currently estimated at approximately $ 72.8 million and $ 35.6 million, respectively. Ternium Mexico appealed the SAT determinations.

More recently, however, Ternium Mexico withdrew its appeals and agreed to provide further information and documentation to the SAT. With all of the above-mentioned information and documentation, the SAT reduced the 2008 and 2011 tax adjustments downwards to approximately $ 17.5 million and $ 35.8 million, respectively. The Company had a tax provision of $53.3 million already included in its consolidated condensed interim financial statements as of September 30, 2023. The payment to the SAT was done on October 9, 2023, and the Company expects to receive a formal document issued by the SAT with the closure of both audits.

(ii) Commitments

(a) Ternium Argentina also signed various contracts for the provision and transportation of natural gas, including Tecpetrol and Energy Consulting Services S.A., both related companies of Ternium, assuming firm commitments for a total of $ 56.8 million payable until April 2025. Additionally, Ternium Argentina signed contracts for gas transportation with Transportadora de Gas del Norte S.A., a related company of Ternium, assuming firm commitments for a total of $ 12.8 million payable until April 2028.
Page 21 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


12.    CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF PROFITS (continued)

(b) Ternium Argentina signed an agreement with Air Liquide Argentina S.A. for the supply of oxygen, nitrogen and argon, for an aggregate amount of $ 113.8 million, which is due to terminate in 2037.

(c ) Ternium Argentina signed various contracts within its investment plan for the future acquisition of Property, plant and equipment for a total of $ 99.4 million. Also, Vientos de Olavarría, a subsidiary controlled by Ternium Argentina, subscribed various contracts for the maintenance and the operation of the wind farm for a total of $ 44.0 million payable until the year 2054.

(d) Ternium México issued a guarantee letter covering up to approximately $28.8 million of the obligations of Gas Industrial de Monterrey, S.A. de C.V. (“GIMSA”), under the natural gas trading agreement between GIMSA and NEG Natural S.A. de C.V. (“NEG”) The credit line granted by NEG in connection with this natural gas trading agreement amounted to approximately $ 19.8 million. As of September 30, 2023, the outstanding amount under the natural gas trading agreement was $6.2 million, which is below the amount included in the guarantee letter issued by Ternium México. The contract with NEG was renewed in June 28, 2022, and the guarantee letter covering up to the above-mentioned amount was issued in January 2023.
Page 22 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


13.    RELATED PARTY TRANSACTIONS

As of September 30, 2023, Techint Holdings S.à r.l. (“Techint”) indirectly owned 65.03% of the Company’s share capital and Tenaris Investments S.à r.l. (“Tenaris”) held 11.46% of the Company’s share capital. Each of Techint and Tenaris were controlled by San Faustin S.A., a Luxembourg company (“San Faustin”). Rocca & Partners Stichting Administratiekantoor Aandelen San Faustin (“RP STAK”), a private foundation (Stichting) located in the Netherlands, held voting shares in San Faustin sufficient in number to control San Faustin. No person or group of persons controls RP STAK.
The following transactions were carried out with related parties:
Nine-month period ended
September 30,
20232022
(Unaudited)
(i) Transactions
(a) Sales of goods and services
Sales of goods to non-consolidated parties147,510 587,305 
Sales of goods to other related parties102,580 157,936 
Sales of services and others to non-consolidated parties126 133 
Sales of services and others to other related parties2,995 3,258 
253,211 748,632 
(b) Purchases of goods and services
Purchases of goods from non-consolidated parties360,210 500,705 
Purchases of goods from other related parties60,803 55,421 
Purchases of services and others from non-consolidated parties18,566 10,712 
Purchases of services and others from other related parties69,459 62,055 
509,038 628,893 
(c) Financial results
Income with non-consolidated parties9,602 5,590 
Expenses in connection with lease contracts from other related parties (592)(722)
9,010 4,868 
(d) Dividends
Dividends from non-consolidated parties214 1,007 
214 1,007 
(e) Other income and expenses
Income (expenses), net with non-consolidated parties1,747 2,451 
Income (expenses), net with other related parties966 529 
2,713 2,980 
September 30, 2023December 31, 2022
(Unaudited)
(ii) Period-end balances
(a) Arising from sales/purchases of goods/services
Receivables from non-consolidated parties138,544 180,476 
Receivables from other related parties38,417 43,765 
Advances to non-consolidated parties3,159 4,851 
Advances to suppliers with other related parties25,763 3,683 
Payables to non-consolidated parties(125,872)(91,172)
Payables to other related parties(76,178)(20,163)
Lease Liabilities with other related parties(1,720)(2,287)
2,113 119,153 
Page 23 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

14.    FINANCIAL INSTRUMENTS BY CATEGORY AND FAIR VALUE MEASUREMENT


1)Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below. According to the scope and definitions set out in IFRS 7 and IAS 32, employers’ rights and obligations under employee benefit plans, and non-financial assets and liabilities such as advanced payments and income tax payables, are not included.
As of September 30, 2023 (in $ thousands)Amortized
cost		Assets at fair value through profit or lossAssets at fair value through OCITotal
(i) Assets as per statement of financial position
Receivables468,369 — — 468,369 
Trade receivables2,172,649 — — 2,172,649 
Other investments1,247,819 225,882 1,257,366 2,731,067 
Cash and cash equivalents803,012 818,977 193,742 1,815,731 
Total4,691,849 1,044,859 1,451,108 7,187,816 
As of September 30, 2023 (in $ thousands)Amortized
cost		Liabilities at fair value through profit or lossTotal
(ii) Liabilities as per statement of financial position
Other liabilities375,863 — 375,863 
Trade payables2,128,998 — 2,128,998 
Derivative financial instruments— 20,360 20,360 
Lease liabilities250,409 — 250,409 
Borrowings2,164,724 — 2,164,724 
Total4,919,994 20,360 4,940,354 

2)Fair Value by Hierarchy
IFRS 13 requires for financial instruments that are measured at fair value, a disclosure of fair value measurements by level. See note 28 of the Consolidated Financial Statements as of December 31, 2022 for definitions of levels of fair values and figures at that date.
The following table presents the assets and liabilities that are measured at fair value:
Fair value measurement as of September 30, 2023
(in $ thousands):
DescriptionTotalLevel 1Level 2Level 3
Financial assets at fair value through profit or loss / OCI
Cash and cash equivalents1,012,719 1,012,719 — — 
Other investments1,483,248 1,338,628 108,653 35,967 
Total assets2,495,967 2,351,347 108,653 35,967 
Financial liabilities at fair value through profit or loss / OCI
Derivative financial instruments20,360 — 20,360 — 
Total liabilities20,360 — 20,360 — 


Page 24 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

14.    FINANCIAL INSTRUMENTS BY CATEGORY AND FAIR VALUE MEASUREMENT (continued)

Fair value measurement as of December 31, 2022
(in $ thousands):
DescriptionTotalLevel 1Level 2Level 3 (*)
Financial assets at fair value through profit or loss / OCI
Cash and cash equivalents772,953 772,953 — — 
Other investments1,492,281 1,283,284 164,980 44,017 
Derivative financial instruments227 — 227 — 
Total assets2,265,461 2,056,237 165,207 44,017 
Financial liabilities at fair value through profit or loss / OCI
Derivative financial instruments505 — 505 — 
Total liabilities505 — 505 — 
(*) The fair value of financial instruments classified as level 3 is not obtained from observable market information, but from measurements of the asset portfolio at market value provided by the fund manager. The evolution of such instruments during the nine-month period ended September 30, 2023, and the year ended December 31 2022, corresponds to the initial investment and to the changes in its fair value.


15.    FOREIGN EXCHANGE RESTRICTIONS IN ARGENTINA

Ternium’s Argentine subsidiary, Ternium Argentina S.A., is currently operating in a complex and volatile economic environment. Beginning in September 2019, the Argentine government has imposed and continues to impose significant restrictions on foreign exchange transactions. Restrictions have tightened significantly over time.

In October 2022, the Argentine government put in place a regulation on imports of services rendered by non-related parties, pursuant to which the Argentine government may clear or not the payment of import of services and, if cleared, may determine a payment term equal or different to that being requested. There are no rules on the conditions upon which the Argentine government may clear or determine alternative payment terms.

Also in October 2022, the Argentine government implemented a system, known as the SIRA system, pursuant to which the Argentine government may clear or not the payment of imports and, if cleared, may determine a payment term equal or different to that being requested. There are no objective conditions upon which the Argentine government may clear the payment of imports or determine alternative payment terms under the SIRA system. More recently, the Argentine government has been delaying release of foreign currency for payments, adding complexity to the existing regime.

Although as of the date of these consolidated condensed interim financial statements these measures did not have a significant effect on Ternium Argentina’s ability to purchase U.S. dollars at the prevailing official exchange rate for most of its imports of goods and for the acquisition of services from unrelated parties, if such restrictions continue to be maintained, or are further tightened, Ternium Argentina could be restricted from making payment of imports for key steelmaking inputs (which would adversely affect its operations), or would need to resort to alternative, more expensive arrangements (which would adversely affect its results of operations). In addition, access to the Argentine foreign exchange market to distribute dividends or to pay royalties to related parties at the prevailing official exchange rate generally requires prior Argentine Central Bank approval, which is rarely, if ever, granted, thus limiting Ternium’s ability to collect dividends from Ternium Argentina at the prevailing official exchange rate. Access to foreign currency and transfers out of Argentina can be achieved, however, through securities transactions involving bonds or shares with multiple listings. Such transactions are subject to certain restrictions and limits, which change from time to time, and often result in a financial loss being generated at the time of making any such transaction. For example, the Argentine Securities Commission has recently imposed several additional restrictions on such securities transactions, including a requirement to give prior notice to the Argentine government of any proposed transfer of securities outside of Argentina and a limitation on the amount of any such transfers.
Page 25 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022

15.    FOREIGN EXCHANGE RESTRICTIONS IN ARGENTINA (continued)

Ternium Argentina stated in its interim accounts as of September 30, 2023, and for the nine-month period then ended, that revenues amounted to $2,619 million (nine-month period ended September 30, 2022: $2,878 million), net profit from continuing operations to $588 million (nine-month period ended September 30, 2022: $807 million), total assets to $5,365 million (December 31, 2022: $5,258 million), total liabilities to $589 million (December 31, 2022: $511 million) and shareholders’ equity to $4,776 million (December 31, 2022: $4,747 million). Ternium Argentina’s cash and cash equivalents and other investments amounted to $1,252 million as of September 30, 2023, broken down as follows:
–$865 million in U.S. dollars-denominated instruments, in sovereign bonds issued by the Argentine Government and payable in U.S. dollars, and Argentine Treasury bonds related to the official exchange rate. The U.S. dollar value of these instruments recorded in Ternium’s consolidated financial statements is based on their Argentine peso local market price, converted to the U.S. dollar at the ARS/$ official exchange rate. Therefore, the valuation of such investments is subject to the volatility of the Argentine financial market and currency exchange rates, leading to a potential significant reduction of such value in the consolidated financial statements.
–$233 million in negotiable obligations and promissory notes issued by Argentine export driven companies in U.S. dollars and mainly payable in Argentine pesos.
–$85 million in Argentine pesos-denominated instruments with underlying assets linked to the U.S. dollar.
–$69 million in Argentine pesos-denominated instruments, mainly mutual funds.

Ternium Argentina’s financial position in ARS as of September 30, 2023, amounted to $191 million in monetary assets and $252 million in monetary liabilities. All of Ternium Argentina’s ARS-denominated assets and liabilities are valued at the prevailing official exchange rate.

The value of the financial instruments held by Ternium Argentina could be adversely affected in the event of a sharp devaluation of the Argentine peso against the U.S. dollar. Another material consequence of a sharp devaluation of the Argentine peso against the U.S. dollar would be a loss on deferred tax charge as a the result of a deterioration on the tax value of the fixed assets of Ternium Argentina. At this time, Ternium is unable to estimate all impacts of a sharp devaluation the Argentine peso against the U.S. dollar

On April 24, 2023, Ternium Argentina’s board of directors approved the payment of a dividend in kind in US dollar-denominated Argentine bonds for a total amount of up to $624 million. On May 4, 2023, Ternium received its share of the dividend in kind. Considering the impact of foreign exchange restrictions in Argentina and based on the value of the bonds in the international market, Ternium recorded in its equity a negative reserve of approximately $183 million as of the collection date. If and when Ternium disposes of these instruments, the reserve will be reclassified to financial results upon disposal of the bonds. Under Argentine regulations in effect at the time of the dividend distribution, transfer of these bonds outside of Argentina was restricted until November 4, 2023. However, as a result of the latest regulations issued by the Argentine Securities Commission referred to above, Ternium’s ability to have these bonds transferred outside of Argentina is further restricted to approximately USD100 thousand per day. All the foregoing creates a restriction on the availability of these assets.

This context of volatility and uncertainty remains in place as of the issue date of these Consolidated Condensed Interim Financial Statements. Management continues to monitor closely the evolution of the main variables affecting its business, identifying the potential impact thereof on its financial and economic situation and determining the appropriate course of action in each case. The Company’s Consolidated Condensed Interim Financial Statements should be read taking into account these circumstances.


Page 26 of
TERNIUM S.A.
Consolidated Condensed Interim Financial Statements as of September 30, 2023
and for the nine-month periods ended September 30, 2023 and 2022


16. THE RUSSIA-UKRAINE ARMED CONFLICT

On February 24, 2022, Russia launched a military attack on Ukraine. In response, the United States, the United Kingdom, and the European Union, among other countries, have imposed a wave of sanctions against certain Russian institutions, companies and citizens. As a result of the armed conflict and related sanctions, foreign trade transactions involving Russian and Ukrainian counterparties have been severely affected.

Russia has a significant participation in the international trade of steel slabs, iron ore pellets, metallurgical coal, pulverized coal for injection, which are relevant inputs for Ternium’s operations. In addition, Ukraine traditionally had a relevant participation in the international trade of steel slabs and iron ore pellets. As a result of the armed conflict and the economic sanctions imposed on Russia, Ternium or its contractors (including shipping companies) may not be able to continue purchasing or transporting products from, or making payments to, Ukrainian or Russian suppliers or counterparties; and the Company may be required to purchase raw materials from other sources at increased prices, resulting in limitations to Ternium’s production levels and higher costs, affecting the Company’s profitability and results of operations.


17. TERNIUM TO INTEGRATE OPERATIONS IN THE USMCA

On February 14, 2023, Ternium's Board of Directors approved the construction of a new upstream production capacity project to integrate its operations in the USMCA region. The increased slab production capacity will complement and support the company’s new state-of-the-art hot rolling mill, which began operations in mid-2021, as well as the previously announced downstream project in Mexico. Ternium expects to invest approximately $2.2 billion toward the construction of an electric arc furnace (EAF)-based steel shop with annual capacity of 2.6 million tons, as well as a direct reduced iron (DRI) module with annual capacity of 2.1 million tons. The slab production capacity program will also include the construction of a port facility for raw material handling.

On June 20, 2023, the Company announced that this new steel slab mill will be built at and integrated into the company’s existing downstream facility in Pesquería, Nuevo León, Mexico following an extensive review of location candidates. Construction is expected to begin in December 2023, with the start of operations anticipated to occur during the first half of 2026.



Pablo Brizzio
Chief Financial Officer
Page 27 of
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