terniumfs2012_6k.htm - Generated by SEC Publisher for SEC Filing

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 3/22/2013

Ternium S.A.

(Translation of Registrant's name into English)

Ternium S.A.
29 Avenue de la Porte-Neuve

L-2227 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 Ö 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 Ö

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 Terniums’ notice of Annual General Meeting of Shareholders, the Shareholder Meeting Brochure and Proxy Statement and Ternium's 2012 Annual Report.

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/ Raúl Darderes

Name: Raúl Darderes

Title: Secretary to the Board of Directors

Dated: March 22, 2013

Ternium S.A.
29, Avenue de la Porte Neuve
L-2227 Luxembourg
Grand Duché de Luxembourg

00 352 26 68 31 52 500 tel
00 352 26 68 31 52 549 fax
www.ternium.com

RCS Luxembourg B 98 668

March 22, 2013

Dear Ternium Shareholders and ADR holders,

I am pleased to invite you to attend the Annual General Meeting of Shareholders of TERNIUM S.A. (the “Company”), to be held on Thursday, May 2, 2013, at 29, avenue de la Porte-Neuve, L-2227, Luxembourg, at 2:30 p.m. (Luxembourg time) (the “Meeting”).

At the Meeting, you will hear a report on the Company’s business, financial condition and results of operations and will be able to vote on various matters, including the approval of the Company’s financial statements, the election of the members of the board of directors and the appointment of the independent auditors.

The Notice and Agenda for the Meeting, the Shareholder Meeting Brochure and Proxy Statement and the Company’s 2012 annual report (which includes the Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010, together with the board of directors’ and independent auditors’ reports thereon, and the Company’s annual accounts as at December 31, 2012, together with the independent auditor’s report thereon), will be available on our website at http://www.ternium.com/en/investor/ beginning on March 22, 2013. Copies of such documents will also be available to ADR holders and shareholders registered in the Company’s share register free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 22, 2013. In addition, beginning on March 22, 2013, shareholders registered in the Company’s share register may obtain electronic copies of such documents free of charge by sending an e-mail request to the following electronic address: ir@ternium.com.

Even if you only own a few shares or ADRs, I hope that you will exercise your right to vote at the Meeting. You can vote your shares personally or by proxy. If you are a shareholder and choose to vote by proxy, you may obtain a proxy form free of charge at the Company’s registered office in Luxembourg or, if you are a shareholder registered in the Company’s share register, obtain an electronic copy of such proxy form by sending an e-mail request to the following electronic address: ir@ternium.com, in each case, beginning on March 22, 2013. If you are a holder of ADRs, please see the letter from The Bank of New York Mellon, the depositary bank, or contact your broker/custodian, for instructions on how to give voting instructions in respect of the shares underlying your ADRs.

Yours sincerely,

Paolo Rocca

Chairman

THE BANK OF NEW YORK MELLON

101 Barclay Street

New York, NY 10286

Re: TERNIUM S.A.

To: Registered Holders of American Depositary Receipts (“ADRs”)

for ordinary shares, USD 1.00 par value each (the “Shares”), of

Ternium S.A. (the “Company”):

The Company has announced that its Annual General Meeting of Shareholders will be held on May 2, 2013 at 29, avenue de la Porte-Neuve, L-2227, Luxembourg, at 2:30 p.m. (Luxembourg time). A copy of the Company’s Notice of Annual General Meeting of Shareholders, which includes the agenda for such meeting, is available on the Company’s website at http://www.ternium.com/en/investor/.

The enclosed dedicated proxy form is provided to allow you to give voting instructions in respect of the Shares represented by your ADRs. The Notice of the Annual General Meeting of Shareholders, the Shareholder Meeting Brochure and Proxy Statement and the Company’s 2012 annual report (which includes the Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010, together with the board of directors’ and the independent auditors’ reports thereon; and the Company’s annual accounts as at December 31, 2012, together with the independent auditors’ report thereon), are available on the Company’s website at http://www.ternium.com/en/investor/. ADR holders may also obtain copies of such materials upon request at +1-800-555-2470 (toll free if you call from the United States). Copies of the Notice of the Annual General Meeting of Shareholders, the Shareholder Meeting Brochure and Proxy Statement and the Company’s 2012 annual report are also available to ADR holders free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time.

Each holder of ADRs as of April 1, 2013 is entitled to instruct The Bank of New York Mellon, as Depositary (the “Depositary”), as to the exercise of the voting rights pertaining to the Shares represented by such holder’s ADRs. Any eligible holder of ADRs who desires to give voting instructions in respect of the Shares represented by such holder’s ADRs must complete, date and sign a proxy form and return it to The Bank of New York Mellon Shareowner Services, P.O. Box 3549, S. Hackensack New Jersey 07606-9249, U.S.A. Attention: Proxy Processing, by 12:00 p.m., New York City time, on April 26, 2013. If the Depositary receives properly completed instructions by 12:00 p.m., New York City time, on April 26, 2013, then it shall endeavor, insofar as practicable, to vote or cause to be voted the Shares underlying such ADRs in the manner prescribed by the instructions. However, if by 12:00 p.m., New York City time, on April 26, 2013, the Depositary receives no instructions from the holder of ADRs, or the instructions received by the Depositary are not in proper form, then the Depositary shall deem such holder to have instructed the Depositary to give, and the Depositary shall give, a discretionary proxy to a person designated by the Company with respect to that amount of Shares underlying such ADRs to vote such Shares in favor of any proposals or recommendations of the Company (including any recommendation by the Company to vote such Shares on any issue in accordance with the majority shareholders’ vote on that issue) as determined by the appointed proxy. No instruction shall be deemed given and no discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary that (x) it does not wish such proxy given, (y) substantial opposition exists, or (z) the matter materially and adversely affects the rights of the holders of ADRs.

Any holder of ADRs is entitled to revoke or revise any instructions previously given to the Depositary by filing with the Depositary a written revocation or duly executed instructions bearing a later date at any time prior to 12:00 p.m., New York City time, on April 26, 2013. No instructions, revocations or revisions thereof will be accepted by the Depositary after that time.

In order to avoid the possibility of double vote, the Company’s ADR books will be closed for cancellations from April 1, 2013, until April 26, 2013. However, holders of ADRs need not have their ADRs blocked for trading on the New York stock exchange.

IF YOU WANT YOUR VOTE TO BE COUNTED, THE DEPOSITARY MUST RECEIVE YOUR VOTING
INSTRUCTIONS PRIOR TO 12:00 P.M. (NEW YORK CITY TIME) ON April 26, 2013.

THE BANK OF NEW YORK MELLON

Depositary

March 22, 2013

New York, New York

Ternium S.A.
29, Avenue de la Porte Neuve
L-2227 Luxembourg
Grand Duché de Luxembourg

00 352 26 68 31 52 500 tel
00 352 26 68 31 52 549 fax
www.ternium.com

RCS Luxembourg B 98 668

Notice of the Annual General Meeting of Shareholders to be held in Luxembourg on May 2, 2013 at 2:30 p.m. (Luxembourg time).

Notice is hereby given to shareholders of TERNIUM S.A. (the “Company”) that the Annual General Meeting of Shareholders of the Company will be held on May 2, 2013, at 29, avenue de la Porte-Neuve, L-2227, Luxembourg, at 2:30 p.m. (Luxembourg time) (the “Meeting”). At the Meeting, shareholders will vote on the items listed below.

Agenda

1. Consideration of the Board of Directors’ and independent auditor’s reports on the Company’s consolidated financial statements. Approval of the Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010.

2. Consideration of the independent auditor’s report on the Company’s annual accounts. Approval of the Company’s annual accounts as at December 31, 2012.

3. Allocation of results and approval of dividend payment.

4. Discharge to the members of the Board of Directors for the exercise of their mandate throughout the year ended December 31, 2012.

5. Election of the members of the Board of Directors.

6. Compensation of the members of the Board of Directors.

7. Appointment of the independent auditors for the fiscal year ending December 31, 2013 and approval of their fees.

8. Authorization to the Board of Directors to delegate the day-to-day management of the Company’s business to one or more of its members.

9. Authorization to the Board of Directors to appoint one or more of its members as the Company’s attorney-in-fact.

Pursuant to the Company’s Articles of Association, resolutions at the Meeting will be passed by a simple majority of the votes cast, irrespective of the number of shares present or represented.

Procedures for attending the Meeting

Any shareholder registered in the Company’s share register on April 26, 2013 (the “Record Date”), shall be admitted to the Meeting. Such shareholders may attend the Meeting in person or vote by proxy. To vote by proxy, such shareholders must file a completed proxy form with the Company not later than 5:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg, located at 29, avenue de la Porte-Neuve, L-2227, Luxembourg.

Any shareholder holding shares through fungible securities accounts wishing to attend the Meeting in person must present a certificate issued by the financial institution or professional depositary holding such shares, evidencing deposit of the shares and certifying the number of shares recorded in the relevant account as of the Record Date. Certificates certifying the number of shares recorded in the relevant account as of a date other than the Record Date will not be accepted and such shareholders will not be admitted to the Meeting. Certificates must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg.

Shareholders holding their shares through fungible securities accounts may also vote by proxy. To do so, they must present the above referred certificate, together with a completed proxy form. Such certificate and proxy form must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg.

Shareholders who wish to be represented and vote by proxy may obtain a proxy form free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 22, 2013. In addition, beginning on March 22, 2013, shareholders can obtain an electronic copy of such proxy form free of charge by sending an e-mail request to the following electronic address: ir@ternium.com. All proxy forms must be received by the Company, properly completed and signed, at the Company’s registered office in Luxembourg by not later than 5:00 p.m. (Luxembourg time) on the Record Date.

In the event of shares owned by a corporation or any other legal entity, individuals representing such entity who wish to attend the Meeting in person and vote at the Meeting on behalf of such entity, must present evidence of their authority to attend, and vote at, the Meeting by means of a proper document (such as a general or special power-of-attorney) issued by the relevant entity. A copy of such power of attorney or other proper document must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg. The original documentation evidencing the authority to attend, and vote at, the Meeting, or a notarized and legalized copy thereof, must be presented at the Meeting.

Shareholders and proxy holders attending the meeting in person will be required to identify themselves at the meeting with a valid official identification document (e.g., identity card, passport).

Those shareholders who have sold their shares between the Record Date and the date of the Meeting must not attend or be represented at any of the Meetings. In case of breach of such prohibition, criminal sanctions may apply.

Holders of American Depositary Receipts (the “ADRs”) as of April 1, 2013, are entitled to instruct The Bank of New York Mellon, as Depositary, as to the exercise of the voting rights pertaining to the Company’s shares represented by such holder’s ADRs. Eligible holders of ADRs who desire to give voting instructions in respect of the shares represented by their ADRs must complete, date and sign a proxy form and return it to The Bank of New York Mellon Shareowner Services, P.O. Box 3549, S. Hackensack New Jersey 07606-9249, U.S.A. Attention: Proxy Processing, by 12:00 p.m., New York City time, on April 26, 2013. Holders of ADRs maintaining non-certificated positions must follow voting instructions given by their broker or custodian bank, which may provide for earlier deadlines for submitting voting instructions.

Copies of the Shareholder Meeting Brochure and Proxy Statement and the Company’s 2012 annual report (which includes the Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010, together with the board of directors’ and independent auditors’ reports thereon, and the Company’s annual accounts as at December 31, 2012, together with the independent auditor’s report thereon), will be available on our website at http://www.ternium.com/en/investor/ beginning on March 22, 2013. Copies of such documents will also be available free of charge to ADR holders and shareholders registered in the Company’s share register at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 22, 2013. In addition, beginning on March 22, 2013, shareholders registered in the Company’s share register may obtain electronic copies of such documents free of charge by sending an e-mail request to the following electronic address: ir@ternium.com.

Raúl H. Darderes

Secretary to the Board of Directors

March 22, 2013

Luxembourg

Shareholder Meeting Brochure

and Proxy Statement

Ternium S.A.

29, Avenue de la Porte Neuve

L-2227 Luxembourg

Grand Duché de Luxembourg

RCS Luxembourg B 98 668

Shareholder meeting brochure and proxy statement

Annual General Meeting of Shareholders to be held in Luxembourg on May 2, 2013 at 2:30 p.m. (Luxembourg time)

This Shareholder Meeting Brochure and Proxy Statement is furnished by TERNIUM S.A.(the “Company”) in connection with the Annual General Meeting of Shareholders of the Company to be held on May 2, 2013, at 29, avenue de la Porte-Neuve, L-2227 Luxembourg, at 2:30 p.m. (Luxembourg time) (the “Meeting”), for the purposes set forth in the accompanying Notice of the Annual General Meeting of Shareholders (the “Notice”).

As of the date hereof, there are issued and outstanding 2,004,743,442 ordinary shares, USD 1.00 par value each, of the Company (the “Shares”), including Shares (the “Deposited Shares”) deposited with The Bank of New York Mellon (the “Depositary”) under the Deposit Agreement, dated as of January 31, 2006 (the “Deposit Agreement”), among the Company, the Depositary and owners and beneficial owners from time to time of American Depositary Receipts (the “ADRs”) issued thereunder. The Deposited Shares are represented by American Depositary Shares, which are evidenced by the ADRs (one ADR equals ten Deposited Shares). A subsidiary of the Company currently holds 41,666,666 Shares.

Each Share entitles the holder thereof to one vote at General Meeting of Shareholders of the Company. However, voting rights on the 41,666,666 Shares held by the Company’s subsidiary shall be suspended for so long as such Shares are so held.

In the event of shares owned by a corporation or any other legal entity, individuals representing such entity who wish to attend the Meeting in person and vote at the Meeting on behalf of such entity, must present evidence of their authority to attend, and vote at, the Meeting by means of a proper document (such as a general or special power-of-attorney) issued by the relevant entity. A copy of such power of attorney or other proper document must be filed with the Company not later than 5:00 p.m. (Luxembourg time) on the Record Date, at the Company’s registered office in Luxembourg. The original documentation evidencing the authority to attend, and vote, at the Meeting, or a notarized and legalized copy thereof, must be presented at the Meeting.

Shareholders and their proxies attending the meeting in person will be required to identify themselves at the meeting with a valid official identification document (e.g., identity card, passport).

Those shareholders who have sold their shares between the Record Date and the date of the Meeting must not attend or be represented at any of the Meeting. In case of breach of such prohibition, criminal sanctions may apply.

Each holder of ADRs as of April 1, 2013, is entitled to instruct the Depositary as to the exercise of the voting rights pertaining to the Shares represented by such holder’s ADRs. Any eligible holder of ADRs who desires to give voting instructions in respect of the Shares represented by such holder’s ADRs must complete, date and sign a proxy form and return it to The Bank of New York Mellon Shareowner Services, P.O. Box 3549, S. Hackensack New Jersey 07606-9249, U.S.A. Attention: Proxy Processing, by 12:00 p.m., New York City time, on April 26, 2013. If the Depositary receives properly completed instructions by 12:00 p.m., New York City time, on April 26, 2013, then it shall endeavor, insofar as practicable, to vote or cause to be voted the shares underlying such ADRs in the manner prescribed by the instructions. However, if by 12:00 p.m., New York City time, on April 26, 2013, the Depositary receives no instructions from the holder of ADRs, or the instructions received are not in proper form, then the Depositary shall deem such holder to have instructed the Depositary to give, and the Depositary shall give, a discretionary proxy to a person designated by the Company with respect to that amount of Shares underlying such ADRs to vote such Shares in favor of any proposals or recommendations of the Company (including any recommendation by the Company to vote such Shares on any issue in accordance with the majority shareholders’ vote on that issue) as determined by the appointed proxy. No instruction shall be deemed given and no discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary that (x) it does not wish such proxy given, (y) substantial opposition exists, or (z) the matter materially and adversely affects the rights of the holders of ADRs.

In order to avoid the possibility of double vote, the Company’s ADR books will be closed for cancellations from April 1, 2013 until April 26, 2013. However, holders of ADRs need not have their ADRs blocked for trading on the New York stock exchange.

Holders of ADRs maintaining non-certificated positions must follow voting instructions outlined by their broker or custodian bank, which may provide for earlier deadlines for submitting voting instructions than that indicated above.

The Meeting will appoint a chairperson pro tempore to preside over the Meeting. The chairperson pro tempore will have broad authority to conduct the Meeting in an orderly and timely manner and to establish rules for shareholders who wish to address the Meeting; the chairperson may exercise broad discretion in recognizing shareholders who wish to speak and in determining the extent of discussion on each item of the agenda.

Pursuant to the Company’s Articles of Association and Luxembourg law, resolutions at the Meeting will be passed by a simple majority of the votes cast, irrespective of the number of Shares present or represented.

The Meeting is called to address and vote on the following agenda:

The Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 (comprising the consolidated balance sheets of the Company and its subsidiaries and the related consolidated income statements, consolidated statements of changes in shareholders’ equity, consolidated cash flow statements and the notes to such consolidated financial statements) and the reports from each of the Board and the independent auditor on such consolidated financial statements are included in the Company’s 2012 annual report, a copy of which will be available on Company’s website at http://www.ternium.com/en/investor/ beginning on March 22, 2013. Copies of the Company’s 2012 annual report are also available to ADR holders and shareholders registered in the Company’s share register free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 22, 2013. In addition, beginning on March 22, 2013, shareholders registered in the Company’s share register may obtain an electronic copy of the Company’s 2012 annual report free of charge by sending an e-mail request to the following electronic address: ir@ternium.com.

Draft resolution proposed to be adopted: “to approve the Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010.”

2. Consideration of the independent auditor’s report on the Company’s annual accounts. Approval of the Company’s annual accounts as at December 31, 2012

The Company’s annual accounts as at December 31, 2012 (comprising the balance sheet, the profit and loss account and the notes to such annual accounts) and the report from the independent auditor on such annual accounts are included in the Company’s 2012 annual report, a copy of which will be available on our website at http://www.ternium.com/en/investor/ beginning on March 22, 2013. Copies of the Company’s 2012 annual report are also available to ADR holders and shareholders registered in the Company’s share register free of charge at the Company’s registered office in Luxembourg, between 10:00 a.m. and 5:00 p.m., Luxembourg time, beginning on March 22, 2013. In addition, beginning on March 22, 2013, shareholders registered in the Company’s share register may obtain an electronic copy of the Company’s 2012 annual report free of charge by sending an e-mail request to the following electronic address: ir@ternium.com.

Draft resolution proposed to be adopted: “to approve the Company’s annual accounts as at December 31, 2012.”

3. Allocation of results and approval of dividend payment

The Board proposes that a dividend payable in U.S. dollars on May 10, 2013, in the amount of USD 0.065 per share issued and outstanding, be approved. Accordingly, if this dividend proposal is approved, the Company will make, or cause to be made, a dividend payment on May 10, 2013, in the amount of USD 0.065 per share issued and outstanding, or USD 0.65 per ADR issued and outstanding.

The Company’s annual accounts as at December 31, 2012 show a loss for the year 2012 of USD7,328,634. The Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 show a net income for the year 2012 of USD 187,154,000. Considering the Company’s retained earnings and other distributable reserves, the Company has distributable amounts which exceed the proposed dividend

The aggregate amount of USD 130,308,323.70 to be distributed as dividend on May 10, 2013, is to be paid from the Company’s retained earnings reserve. The loss of the year ended December 31, 2012, would be absorbed by the Company’s retained earnings account.

Upon approval of this resolution, it is proposed that the Board be authorized to determine or amend, in its discretion, any of the terms and conditions (including payment date) of the dividend payment.

Draft resolution proposed to be adopted: “(i) to approve a dividend, payable in U.S. dollars, on May 10, 2013, in the amount of USD 0.065 per share issued and outstanding, (ii) to authorize the Board of Directors to determine or amend, in its discretion, any of the terms and conditions (including payment date) of such dividend payment, (iii) that the aggregate amount of USD 130,308,323.70 to be distributed as dividend on May 10, 2013, be paid from the Company’s retained earnings reserve, and (iv) that the loss of the year ended December 31, 2012, be absorbed by the Company’s retained earnings account.”

4. Discharge to the members of the Board of Directors for the exercise of their mandate throughout the year ended December 31, 2012

In accordance with applicable Luxembourg law and regulations, it is proposed that, upon approval of the Company’s annual accounts as at December 31, 2012, all who were members of the Board during the year 2012, be discharged from any liability in connection with the management of the Company’s affairs during such year.

Draft resolution proposed to be adopted: “to discharge all those who were members of the Board of Directors during the year ended December 31, 2012, from any liability in connection with the management of the Company’s affairs during such year.”

5. Election of the members of the Board of Directors

The Company’s Articles of Association provide for the annual election by the shareholders of a board of directors of not less than five and not more than fifteen members. Members of the Board have a term of office of one year, but may be reappointed.

Under the Company’s Articles of Association and applicable U.S. laws and regulations, the Company is required to have an Audit Committee comprised solely of directors who are independent.

The current Board consists of nine Directors. Three members of the Board (Messrs. Ubaldo Aguirre, Adrian Lajous and Pedro Pablo Kuczynski) qualify as independent members under the Company’s Articles of Association and applicable law and are members of the Audit Committee.

It is proposed that (i) the number of members of the Board be maintained at nine, and (ii) Messrs. Ubaldo Aguirre, Roberto Bonatti, Carlos Alberto Condorelli, Pedro Pablo Kuczynski, Adrian Lajous, Bruno Marchettini, Gianfelice Mario Rocca, Paolo Rocca and Daniel Agustin Novegil be re-elected as members of the Board.

Set forth below is summary biographical information of each of the candidates:

1) Mr. Ubaldo Aguirre. Mr. Aguirre has served on the Board since 2006. He is a managing director of AGM/R S.A. and Aguirre y Gonzalez S.A., both Argentine financial services firms, and also serves as a member of the board of directors and member of the audit committee of Holcim Argentina S.A., a subsidiary of Holcim, the Swiss cement producer. Since 2005, he also serves as chairman of the board of directors of Permasur S.A., an Argentine winery, and of Editorial Sur S.A. Since 2000, he is as member of the board of directors of URS Argentina S.A., the Argentine subsidiary of the U.S. corporation. He is a member of the Administrative Board of Universidad Catolica Argentina. Mr. Aguirre formerly served as director and chairman of the audit committee of Siderar S.A.I.C. (“Siderar”). Mr. Aguirre began his career at the World Bank in Washington, D.C. In addition, Mr. Aguirre has been a member of the boards of each of Argentina’s Central Bank —where he was responsible for that country’s external borrowing program and financial negotiations— Banco de la Nación Argentina and Banco Nacional de Desarrollo. He also served as the Republic of Argentina’s financial representative for Europe in Geneva and negotiator on behalf of the Republic of Argentina with the Paris Club. Mr. Aguirre, aged 64, is an Argentine citizen.

2) Mr. Roberto Bonatti. Mr. Bonatti has served as a director of the Company since 2005. He is a grandson of Agostino Rocca, founder of the Techint group, a group of companies controlled by San Faustin S.A. (“San Faustin”). Throughout his career in the Techint group he has been involved specifically in the engineering and construction and corporate sectors. He was first employed by the Techint group in 1976, as deputy resident engineer in Venezuela. In 1984, he became a director of San Faustín, and since 2001 he has served as its president. In addition, Mr. Bonatti currently serves as president of Sadma Uruguay S.A. He is also a member of the board of directors of Tenaris S.A. (“Tenaris”). Mr. Bonatti, aged 63, is an Italian citizen.

3) Mr. Carlos Alberto Condorelli. Mr. Condorelli has served as a director of the Company since 2005. He is currently a member of the board of directors of Tenaris. He began his career within the Techint group in 1975 as an analyst in the accounting and administration department of Siderar. He has held several positions within Tenaris and other Techint group companies, including chief financial officer of Tenaris, finance and administration director of Tubos de Acero de México, S.A. (“Tamsa”), and president of the board of directors of Empresa Distribuidora La Plata S.A., an Argentine utilities company. Mr. Condorelli, aged 62, is an Argentine citizen.

4) Mr. Pedro Pablo Kuczynski. Mr. Kuczynski has served as a member of the Board since 2007. He was Prime Minister of Peru in 2005-2006 and prior to that he was the Minister of Economy and Finance from 2001. He was the Republic of Peru’s Minister of Energy and Mines in 1980-82. He was president until 2001 of a private equity firm he founded in 1992 after spending ten years as Chairman of First Boston International (today Credit Suisse) in New York. Since 2007, he is Senior Advisor to the Rohatyn Group, a firm specializing in emerging markets. He ran a bauxite mining company affiliated with Alcoa between 1977 and 1980. He began his career at the World Bank in 1961 and was in the 1970s head of its Policy Planning Division, Chief Economist for Latin America and Chief Economist of IFC. He was a member of the Board of Directors of Siderar from 1992 to 2001. He was born in Peru in 1938 and educated in Peru and at Oxford and Princeton. Mr. Kuczynski, aged 74, is an U.S. and Peruvian national.

5) Mr. Adrian Lajous. Mr. Lajous has served as a director of the Company since 2006. Mr. Lajous currently serves as chairman of the Oxford Institute for Energy Studies, president of Petrométrica, S.C. and non-executive director of Schlumberger, Ltd. and Trinity Industries Inc. Mr. Lajous began his career teaching economics at El Colegio de México and in 1977 was appointed director general for energy at Mexico’s Ministry of Energy. Mr. Lajous joined Pemex in 1983, where he held a succession of key executive positions including executive coordinator for international trade, corporate director of planning, corporate director of operations and director of refining and marketing. From 1994 until 1999, he served as chief executive officer of Pemex and chairman of the boards of the Pemex Group of operating companies. Mr. Lajous, aged 69, is a Mexican citizen.

6) Mr. Bruno Marchettini. Mr. Marchettini has served on the Board since 2006. Mr. Marchettini is senior advisor in technological matters for the Techint group. Mr. Marchettini has retired from executive positions and is presently engaged as a consultant by Siderar. Mr. Marchettini is a director of San Faustin. Mr. Marchettini, aged 71, is an Italian citizen.

7) Mr. Gianfelice Mario Rocca. Mr. Rocca has served as a director of the Company since 2006. He is a grandson of Agostino Rocca. He is chairman of the board of directors of San Faustín, a member of the board of directors of Tenaris, president of the Humanitas Group, honorary president of the board of directors of Techint Compagnia Tecnica Internazionale S.p.A. and president of the board of directors of Tenova S.p.A. In addition, he sits on the board of directors or executive committees of several companies, including Allianz S.p.A, Brembo and Buzzi Unicem. He is chairman of the Board of the Italian Institute of Technology. He is a member of the Advisory Board of Allianz Group, of the Trilateral Commission and of the European Advisory Board of the Harvard Business School. Mr. Rocca, aged 65, is an Italian citizen.

8) Mr. Paolo Rocca. Mr. Rocca has served as chairman of the Board since 2005. He is a grandson of Agostino Rocca. He is also chairman and chief executive officer of Tenaris and chairman of the board of directors of Tamsa. In addition, he is a member of the board of directors and vice president of San Faustín and a director of Techint Financial Corporation N.V. Mr. Rocca is member of the International Advisory Committee of the New York Stock Exchange. Mr. Rocca, aged 60, is an Italian citizen.

9) Mr. Daniel Agustin Novegil. Mr. Novegil has served as a director and chief executive officer of the Company since 2005. He has more than 35 years of experience in the steelmaking industry. Mr. Novegil is managing director of Siderar since 1993 and a member of Usiminas’ Board of Directors since 2012. He is also member of the Board of Directors of the World Steel Association and former President of the Latin American Steel Association. He obtained a M.S. in Management from Stanford University in 1984 and, since 1999, he is a member of the Advisory Board of the Sloan Master’s Program of the Stanford Graduate School of Business. Mr. Novegil, aged 60, is an Argentine citizen.

Each elected director will hold office until the next Annual General Meeting of Shareholders, to be held on May 7, 2014.

The Board met six times during 2012. On January 12, 2006, the Board created an Audit Committee pursuant to Article 11 of the Articles of Association of the Company. As permitted under applicable laws and regulations, the Board does not have any executive, nominating or compensation committee, or any committees exercising similar functions.

Draft resolution proposed to be adopted: “to maintain the number of members of the Board of Directors at nine and to re-appoint Messrs. Ubaldo Aguirre, Roberto Bonatti, Carlos Alberto Condorelli, Pedro Pablo Kuczynski, Adrian Lajous, Bruno Marchettini, Gianfelice Mario Rocca, Paolo Rocca and Daniel Agustin Novegil to the Board of Directors, each to hold office until the next annual general meeting of shareholders that will be convened to decide on the 2013 accounts.”

6. Compensation of the members of the Board of Directors

It is proposed that each member of the Board receive an amount of USD 80,000.00 as compensation for his services during the fiscal year 2013, and that the Chairman of the Board receive, further, an additional fee of USD 280,000.00. It is further proposed that each of the members of the Board who are members of the Audit Committee receive an additional fee of USD 50,000.00, and that the Chairman of such committee receive, further, an additional fee of USD 10,000.00. In all cases, the proposed compensation would be net of any applicable Luxembourg social security charges.

Draft resolution proposed to be adopted: “that each of the members of the Board of Directors receive an amount of USD 80,000.00 as compensation for his services during the fiscal year 2013, and that the Chairman of the Board of Directors receive, further, an additional fee of USD 280,000.00; and that each of the members of the Board of Directors who are members of the Audit Committee receive an additional fee of USD 50,000.00, and that the Chairman of such Audit Committee receive, further, an additional fee of USD 10,000.00. In all cases, the approved compensation will be net of any applicable Luxembourg social security charges.”

7. Appointment of the independent auditors for the fiscal year ending December 31, 2013 and approval of their fees

The Audit Committee has recommended the appointment of PricewaterhouseCoopers, Société coopérative, Réviseur d'entreprises agréé (PricewaterhouseCoopers’ Luxembourg member firm) as the Company’s independent auditors for the fiscal year ending December 31, 2013, to be engaged until the next Annual General Meeting of Shareholders that will be convened to decide on the 2013 accounts.

In addition, the Audit Committee has recommended the approval of the independent auditors’ fees for audit, audit-related and other services to be rendered during the fiscal year ending December 31, 2013, broken-down into eight currencies (Argentine Pesos, Brazilian Reais, Colombian Pesos, Euro, Mexican Pesos, Swiss Francs, Uruguayan Pesos, and U.S. Dollars), up to a maximum amount for each currency equal to ARS 9,527,623.00; BRL 20,400.00; COP 190,827,000.00; EUR 577,901.00; MXN 14,115,542.00; CHF 27,500.00; UYU 1,722,355.00 and USD 100,000.00. Such fees would cover the audit of the Company’s consolidated financial statements and annual accounts, the audit of the Company’s internal controls over financial reporting as mandated by the Sarbanes-Oxley Act of 2002, other audit-related services, and other services rendered by the independent auditors. It is proposed that the Audit Committee be authorized to approve any increase or reallocation of the independent auditors’ fees as may be necessary, appropriate or desirable under the circumstances.

Draft resolution proposed to be adopted: “to (i) appoint PricewaterhouseCoopers, Société coopérative, Réviseur d'entreprises agréé, as the Company’s independent auditors for the fiscal year ending December 31, 2013, to be engaged until the next annual general meeting of shareholders that will be convened to decide on the 2013 accounts; and (ii) approve the independent auditors’ fees for audit, audit-related and other services to be rendered during the fiscal year ending December 31, 2013, broken-down into eight currencies (Argentine Pesos, Brazilian Reais, Colombian Pesos, Euro, Mexican Pesos, Swiss Francs, Uruguayan Pesos, and U.S. Dollars), up to a maximum amount for each currency equal to ARS 9,527,623.00; BRL 20,400.00; COP 190,827,000.00; EUR 577,901.00; MXN 14,115,542.00; CHF 27,500.00; UYU 1,722,355.00 and USD 100,000.00, and to authorize the Audit Committee to approve any increase or reallocation of the independent auditors’ fees as may be necessary, appropriate or desirable under the circumstances.”

8. Authorization to the Board of Directors to delegate the day-to-day management of the Company’s business to one or more of its members

It is proposed that the Board be authorized to delegate the management of the Company’s day-to-day business and the authority to represent and bind the Company with his sole signature in such day-to-day management to Mr. Daniel Agustin Novegil, and to appoint Mr. Novegil as chief executive officer (administrateur délégué) of the Company.

Draft resolution proposed to be adopted: “to authorize the Board of Directors to delegate the management of the Company’s day-to-day business and the authority to represent and bind the Company with his sole signature in such day-to-day management to Mr. Daniel Agustin Novegil, and to appoint Mr. Novegil as Chief Executive Officer (Administrateur Délégué) of the Company.”

9. Authorization to the Board of Directors to appoint one or more of its members as the Company’s attorney-in-fact

In order to provide for the necessary flexibility in the management of the Company’s affairs, it is proposed to authorize the Board to appoint any or all members of the Board from time to time as the Company’s attorney-in-fact, delegating to such directors any management powers (including, without limitation, any day-to-day management powers) to the extent the Board may deem appropriate in connection therewith, this authorization to be valid until expressly revoked by the Company’s General Shareholders Meeting, it being understood, for the avoidance of doubt, that this authorization does not impair nor limit in any way the powers of the Board to appoint any non-members of the Board as attorneys-in-fact of the Company pursuant to the provisions of article 10.1(iii) of the Articles of Association of the Company.

Draft resolution proposed to be adopted: “to authorize the Board of Directors to appoint any or all members of the Board of Directors from time to time as the Company’s attorney-in-fact, delegating to such directors any management powers (including, without limitation, any day-to-day management powers) to the extent the Board of Directors may deem appropriate in connection therewith, this authorization to be valid until expressly revoked by the Company’s General Shareholders Meeting; it being understood, for the avoidance of doubt, that this authorization does not impair nor limit in any way the powers of the Board of Directors to appoint any non-members of the Board of Directors as attorneys-in-fact of the Company pursuant to the provisions of article 10.1(iii) of the Articles.”

___________________________________

The Company anticipates that the next Annual General Meeting of Shareholders will be held on May 7, 2014. Any shareholder who intends to present a proposal to be considered at the next Annual General Meeting of Shareholders must submit the proposal in writing to the Company at the registered office of the Company, located at 29, avenue de la Porte-Neuve, L-2227 Luxembourg, Grand Duchy of Luxembourg, not later than 4:00 P.M. (Luxembourg time) on February 3, 2014, in order for such proposal to be considered for inclusion on the agenda for the 2014 Annual General Meeting of Shareholders. PricewaterhouseCoopers are the Company’s independent auditors. A representative of the independent auditors will be present at the Annual General Meeting of Shareholders.

Raúl H. Darderes

Secretary to the Board of Directors

March 22, 2013

Luxembourg

Ternium

2012 Annual Report

Ternium 2012 Annual Report Contents

Company Profile and Strategy

Operating and Financial Highlights

Chairman’s Letter

Management Report

Business Review

Corporate Governance

Board of Directors and Senior Management

Investor Information

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Statements

Company Profile and Strategy

Ternium is a leading steel producer in Latin America. We manufacture and process a broad range of value-added steel products, including galvanized and electro-galvanized sheets, pre-painted sheets, tinplate, welded pipes, hot-rolled flat products, cold-rolled products, bars and wire rods as well as slit and cut-to-length offerings through our service centers.

Our customers range from large global companies to small businesses operating in the construction, automotive, home appliances, capital goods, container, food and energy industries. We aim to build close relationships with our customers and recognize that our success is closely linked with theirs.

Ternium has a deeply ingrained industrial culture. With an annual production capacity of approximately 10.8 million tons of finished steel products and 4.4 million tons of iron ore, and 16,600 employees, Ternium has production facilities located in Mexico, Argentina, Colombia, the southern United States and Guatemala, as well as a network of service and distribution centers throughout Latin America that provide it with a strong position from which to serve its core markets. In addition, Ternium participates in the control group of Usiminas, a leading steel company in the Brazilian steel market.

Our proximity to local steel consuming markets and our commercial agreements with Usiminas enable us to differentiate from our competitors by offering valuable services to our customer base across Latin America. Our favorable access to iron ore sources and proprietary iron ore mines in Mexico provide reduced logistics costs, and our diversified steel production technology enables us to adapt to fluctuating input-cost conditions.

We operate with a broad and long-term perspective, and we regularly work towards improving the quality of life of our employees, their families and the local communities where we operate.

Note: Ternium S.A. (the “Company”) is a Luxembourg company and its American Depositary Securities, or ADSs, are listed on the New York Stock Exchange (NYSE: TX). We refer to Ternium S.A. and its consolidated subsidiaries as “we,” “our” or “Ternium.”

Operating and Financial Highlights

The financial and operational information contained in this annual report is based on the operational data and consolidated financial statements of the Company, which were prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as issued by the International Accounting Standards Board, or IASB and adopted by the European Union (EU), or IFRS, and presented in U.S. dollars (USD) and metric tons.

	2012 ⁽¹⁾	2011 ⁽²⁾	2010 ⁽²⁾	2009 ⁽²⁾	2008 ⁽²⁾
STEEL SALES VOLUME (thousand tons)

Mexico	4,952.4	4,683.2	4,466.9	3,707.0	4,195.1
Southern Region	2,444.5	2,635.3	2,396.4	1,606.9	2,407.0
Other Markets	1,371.2	1,505.0	1,191.3	1,046.9	940.6
Total	8,768.2	8,823.6	8,054.6	6,360.8	7,542.7

FINANCIAL INDICATORS (USD million)

Net sales	8,608.1	9,122.8	7,339.9	4,923.0	8,422.8
Operating income	915.9	1,251.8	1,043.6	288.6	1,668.9
EBITDA ⁽³⁾	1,286.8	1,647.8	1,417.8	663.5	2,073.7
Income before income tax expense	451.7	961.6	1,185.7	428.5	878.2
Discontinued operations ⁽⁴⁾	-	-	-	428.0	157.1
Profit for the year attributable to:
Equity holders of the Company	139.2	513.5	622.1	717.4	715.4
Non-controlling interest	47.9	136.4	157.4	49.7	159.7
Profit for the year	187.2	649.9	779.5	767.1	875.2

Capital expenditures	1,022.6	577.0	339.4	204.3	582.3
Free cash flow ⁽⁵⁾	32.5	45.4	457.9	950.7	(70.4)

BALANCE SHEET (USD million)

Total assets	10,867.0	10,743.1	11,099.9	10,301.9	10,662.6
Total financial debt	2,424.4	1,996.1	1,939.7	2,326.0	3,265.9
Net (cash) debt financial position	1,703.3	(443.6)	(688.0)	185.4	2,110.6
Total liabilities	4,371.4	3,901.9	4,083.8	4,040.6	5,101.1
Capital and reserves attributable to the Company's equity holders	5,420.9	5,756.4	5,880.7	5,296.3	4,597.4
Non-controlling interest	1,074.8	1,084.8	1,135.4	964.9	964.1

STOCK DATA (USD per share / ADS ⁽⁶⁾)

Basic earnings per share	0.07	0.26	0.31	0.36	0.36
Basic earnings per ADS	0.71	2.61	3.10	3.58	3.57
Proposed dividend per ADS	0.65	0.75	0.75	0.50	-

Weighted average number of shares outstanding ⁽⁷⁾	1,963,076.8	1,968,327.9	2,004,743.4	2,004,743.4	2,004,743.4
(thousand shares)

⁽¹⁾Ternium changed prospectively the functional currency of its Mexican subsidiaries to the U.S. dollar, effective as of January 1, 2012. For all periods prior to December 31, 2011, the functional currency for the Company's Mexican subsidiaries was the Mexican peso.

⁽²⁾Certain comparative amounts for the years 2011, 2010, 2009 and 2008 have been reclassified to conform to the retrospective deconsolidation of Peña Colorada, effective as from January 1, 2012. Peña Colorada was previously proportionally consolidated until December 31, 2011.

⁽³⁾EBITDA equals operating income adjusted to exclude depreciation and amortization, and impairment charges.

⁽⁴⁾Discontinued Operations include the results of Sidor (a Venezuelan subsidiary nationalized in April 2009) through the second quarter of 2009 and of non-core U.S. assets in the first quarter of 2008.

⁽⁵⁾Free cash flow equals net cash provided by operating activities less capital expenditure.

⁽⁶⁾Each ADS represents 10 shares.

⁽⁷⁾Shares outstanding were 1,963,076,776 as of December 31 of each of 2012 and 2011, and 2,004,743,442 as of December 31 of each of 2010, 2009 and 2008.

Chairman’s Letter

Ternium performed well in 2012, with stable shipments of 8.8 million tons, and EBITDA of USD1.3 billion on sales of USD8.6 billion. These results reflect the solid positioning we have established in our Latin American markets and maintain our industry-leading margins, in a year when global steel prices declined and economic growth slowed in some of our markets. Our operating results were also affected by an unplanned stoppage at a blast furnace in Argentina from October to February 2013.

The steel market in Mexico evolved favorably during 2012 with further demand growth from the automotive and construction sectors. With our Mexican facilities operating at a high rate of capacity utilization, we increased shipments of high value-added products and further strengthened our participation in the retail steel market. During the second half of 2013, we expect to bring into operation our new greenfield cold-rolling and hot-dip galvanizing facilities in Pesquería, Nuevo León. These facilities will produce high specification products which today are mostly imported into Mexico and will help us to increase our participation in the growing automotive sector.

In Argentina, we expanded a galvanizing line and are investing in a new continuous caster and vacuum degassing equipment, which are expected to come into operation at the beginning of 2014 and will expand our range of specialized products. In Colombia, we are modernizing our industrial facilities in Manizales, increasing production capacity and installing equipment to reduce dust and emissions.

In Brazil, Usiminas’s new management made steady progress in leading a thorough industrial reconfiguration aimed at transforming Usiminas’ productivity and competitiveness and modernizing its product range. This process will be gradual and is aimed at realizing the full potential of Usiminas’ operations and leading market position in Brazil. However, following a deterioration in the outlook for industrial production and steel demand in Brazil and increased uncertainty about future iron ore prices, we recorded an impairment charge to our investment in Usiminas that affected our net income for 2012. Looking ahead, we are fully confident of the strategic relevance of Usiminas for the positioning of Ternium in Brazil and in the supply of materials for the industrial and automotive sector in Latin America.

Latin American countries are facing the challenge of promoting industrial development in an economic context that favors growth and investment in the primary sector, driven by demand for agricultural goods, energy and raw materials. The studies we have been conducting with Alacero, the Latin America steel producers association, show that the deficit in manufactured goods in Latin America continued to worsen in 2011, reaching USD125 billion, and that 3.6 million jobs have been lost as a result. The threat to our industry from growing imports of steel-intensive manufactured goods, particularly from China, is clear. We aim to play our part in reverting this tendency by investing in steel resources and technologies that can sustain the development of competitive downstream industries throughout the region. Our program of support for small- and medium-sized enterprises aimed at enhancing their competitiveness and stimulating their investment in the steel industry’s value chain is an important part of this endeavour. More than 800 companies participate in this program, that facilitates knowledge sharing, promotes industrial best practices and enhances competitiveness.

Throughout our operations, we continue to expand our range and production of high value-added products and develop distribution and customization services that position us closer to our customers, understanding their requirements and enabling us to provide them a highly competitive value proposition. To support this strategy of product and service differentiation, we are investing in IT systems which allow us to integrate our operations more closely with those of our customers and increase operational productivity. This year in Mexico we implemented successfully a platform that effectively integrates operational, transactional and business management systems enhancing operational efficiency and customer service.

Our safety performance indicators continue to improve and compare favorably with the average for the steel industry worldwide and in the Americas. We focus on safety in all our work processes and require the active participation and awareness of all employees as we work to minimize risk and the potential for accidents in the workplace. Our commitment to reducing our environment footprint is also driving an important part of our investment program in all our facilities. In Mexico, our mining activities attained a “clean industry certificate” to match that already awarded to our steelmaking operations and our new facilities in Monterrey are being designed to qualify for the LEED (Leadership in Energy and Environmental Design) certification from the US Green Building Council.

We continue to invest in our human resources and in the sustainable development of the communities where we operate, through training, financial support and contributions to several joint industry and university programs. In addition to our ongoing training courses focused on leadership, performance management and technical knowledge for management, staff and operational employees, in Argentina, a program was launched to strengthen an industrial culture of commitment and teamwork among our factory employees, while in Mexico, around 850 students, of which more than 100 ended up joining Ternium, completed a new module implemented with our sponsorship in technical schools in Nuevo León, Mexico, to help schools teach the skills required in the steel industry.

In 2012, our earnings per ADS amounted to USD0.71 after recording a USD1.21 impairment loss per ADS on our investment in Usiminas. Our cash flow from operations supported the increase in our capital investment program and our financial situation remains solid, with a net debt to EBITDA ratio of 1.3 times. We are proposing to pay a dividend of USD0.65 per ADS for the year, which, if approved by shareholders, will be distributed in May.

During 2012, Ternium strengthened its ties with Usiminas and made solid progress in its projects in Mexico and Argentina, setting the ground for a new chapter in its development. I would like to thank our employees for their performance during the year and the results achieved. I would also like to thank our customers, suppliers and shareholders for their continuous support and confidence in our company.

Paolo Rocca

Chairman

Business Review

In 2012, steel consumption in the Americas continued its overall expansion at good rates, despite the difficult context worldwide. Of note was the 9.7% expansion of Mexican steel consumption, a market that accounted for 56% of our total shipments in 2012. Latin American economies continued to grow during the year at solid but lower rates compared to 2011. Construction activity consolidated its expansion and sales of capital goods and consumer durables grew in Mexico but weakened in South America. The overall solid market conditions in 2012 allowed Ternium to keep shipments at near record levels.

Work for the construction of a new facility in the proximity of Monterrey City, Mexico, evolved as planned during 2012. The new facility, which is expected to start production this year, includes a cold-rolling mill with an annual processing capacity of 1.5 million tons and a hot-dip galvanizing plant with an annual processing capacity of 400,000 tons, the latter under a joint venture with Nippon Steel. This new facility, which will strengthen Ternium’s leading presence in Mexico and further increase the significance of the Mexican market for Ternium, is expected to serve the demanding requirements of the automotive industry and to achieve further integration with Ternium’s steel processing facilities in the southern United States and Guatemala. In addition, during 2012 Ternium continued work in Argentina for the expansion of its steelmaking facilities and the manufacturing of specialty steels to serve the automotive industry requirements in that country and in Mexico.

Ternium’s support program for small- and medium-sized enterprises in Mexico and Argentina (ProPymes) continued growing in 2012 and now includes approximately 850 companies. Throughout its more than 10 years of existence, ProPymes has helped create an industrial network that facilitates knowledge sharing, reciprocal learning and the exchange of experiences toward the achievement of industrial best practices. Our safety indicators continued to improve in 2012 with the consolidation of our new practices and techniques. Our environmental projects in the year focused on the improvement of air emissions and wastewater treatment and disposal, and on the reduction or elimination of hazardous products from our manufacturing processes. Of note was the progress made last year in the construction of a new de-dusting facility for our steel shop in Colombia.

Steel Segment

Ternium’s shipments of steel products reached 8.8 million tons in 2012, relatively stable compared to the shipment levels achieved in the previous year. GDP in Latin America grew 3.0% in the year, decelerating from the 4.5% expansion rate in 2011, while the U.S. economy grew an estimated 2.2% in 2012, slightly higher than the 1.8% expansion rate in 2011.

Apparent demand for finished steel grew 4.7% year-over-year in Latin America in 2012. Overall, construction activity consolidated its growth pace in the region and the automotive sector showed an uneven performance, with expansion in Mexico and contraction in Brazil and Argentina. Apparent demand for finished steel grew a solid 8.4% in the U.S.

Mexico

During 2012, Ternium was the leading supplier of flat steel products in Mexico. Shipments to this market increased 5.7% year-over-year to 5.0 million tons, representing 56% of Ternium’s total steel shipments. Mexican GDP increased 3.9% year-over-year in 2012, reflecting a broad-based increase in activity. Apparent steel use increased 9.7% year-over-year to approximately 20.1 million tons, featuring an expansion in key steel consuming sectors such as construction and automotive.

Construction activity in Mexico increased 4.8% year-over-year in 2012, while activity in the automotive sector increased 17.6% year-over-year, following the significant expansion experienced during 2011. Mexico’s growth in motor vehicle production in 2012 reflected the strength of automotive exports to the U.S.

¹Source: United Nations’ Economic Commission for Latin America and the Caribbean

²Source: World Steel Association

Steel prices in the U.S., which usually drive steel prices in Mexico, increased moderately during the first quarter of 2012, reflecting the increase in steel consumption together with an inventory rebuilding, but subsequently showed a gradual decline during the year as higher imports and higher utilization rates increased steel supply. Close to year-end, however, prices rebounded fueled by a rise of order volumes and supported by increases in raw material prices.

During 2012 Ternium continued running its integrated steelmaking facilities in Mexico at close to full capacity and, as steel demand continued growing in our main markets, our re-rolling facilities saw increased utilization rates. We continued maximizing the use of direct reduced iron (DRI) over steel scrap in the metallic mix of our steel shops, benefiting from relatively low natural gas prices.

Ternium’s capital expenditures in the country amounted to USD697 million in 2012. During the year our Mexican subsidiaries, Ternium México and Tenigal, made progress in their projects, including the construction of a greenfield facility in the vicinity of Monterrey City for the manufacturing of cold-rolled and galvanized steel products, the revamping of a pickling processing unit in the Churubusco plant, and further development of the mining operations. We expect that our new cold-rolling and hot-dip galvanizing facility, located in Pesquería, state of Nuevo León, will start operations in the second half of 2013.

Ternium expects GDP growth rates in Mexico to remain healthy in the year. Apparent steel use is expected to grow in 2013, with higher industrial activity, mainly metal products and automotive, and construction driving local demand for steel products. The Mexican government has announced multiple infrastructure projects to increase distribution capacity of natural gas and water, aimed at releasing the industrial potential of some regions in the country, and these projects are expected to increase demand for flat steel products, particularly for the manufacturing of large diameter pipelines.

Southern Region

The Southern Region encompasses the steel markets of Argentina, Bolivia, Chile, Paraguay and Uruguay. During 2012, Ternium was the leading supplier of flat steel products in Argentina and a leading supplier of steel products in Paraguay and Uruguay. In addition, Ternium continued serving customers in Bolivia and Chile. Shipments in the Southern Region decreased 7.2% year-over-year in 2012 to 2.4 million tons, representing 28% of Ternium’s total steel shipments.

Argentina’s GDP increased 1.9% year-over-year in 2012, reflecting a deceleration of activity. Apparent steel demand decreased 8.3% year-over-year to approximately 4.9 million tons, with a contraction in the automotive and construction sectors, which resulted in a decrease of Ternium’s shipments to the country. Activity in the automotive sector in Argentina contracted 7.8% year-over-year as a result of the weakness in export levels, mainly to the Brazilian market.

Ternium’s shipments to the Paraguayan market decreased in 2012, as that country’s economy contracted 1.8% in 2012, affected mainly by adverse climate effects on its agricultural activities. Shipments to the Bolivian, Chilean and Uruguayan markets increased or remained at similar levels in 2012 compared to shipment levels in the previous year. The economies of these countries expanded in 2012, with GDP growth rate of between 3.5% and 5.5% year-over-year.

In 2012, Ternium’s Argentine subsidiary Siderar kept its finishing facilities working at utilization rates similar or slightly lower compared to those of 2011, while it reduced utilization rates in its upstream facilities, particularly for the production of pig iron, steel and hot-rolled coils, due to the execution of maintenance, improvement and repair works in certain facilities. Siderar’s blast furnace #2 was stopped for maintenance and repairs during most of the second half of 2012, and resumed production in February 2013.

Ternium’s capital expenditures in the region amounted to USD286 million in 2012. During the year, Siderar made progress in several projects, including the expansion of a galvanizing line (completed during the period), the expansion of specialty steel production capacity, repairs and enhancements at the coking and blast furnace areas, and the expansion and enhancements of the hot strip mill.

This year, Argentina’s economic activity is expected to accelerate as a result of higher activity levels in Latin America, particularly in Brazil, and a better performance of the Argentine agricultural sector. The economies of Bolivia, Chile and Uruguay are expected to expand in 2013 at rates similar to those of 2012, and the economy of Paraguay is expected to recover strongly from its weak performance in 2012. Apparent steel use is expected to increase moderately as a result. Our capital expenditures in Argentina are expected to remain strong in 2013, largely related to Siderar’s project to increase slab production capacity by approximately half a million tons and to build a new facility in the steel shop to enable the production of specialty steels, targeting the automotive industry in Mexico and Argentina.

Other Markets

Ternium’s sales to the rest of the world are shown under “Other Markets”, including major shipment destinations such as Colombia, the United States and Central America. During 2012, Ternium was a leading supplier of steel products in Colombia and Central America. In addition, Ternium continued serving customers in the southern United States and in other countries throughout Latin America. Shipments to these markets decreased 8.9% year-over-year in 2012 to 1.4 million tons, representing 16% of Ternium’s total steel shipments.

Colombia’s GDP grew 4.7% year-over-year in 2012, reflecting a broad-based increase in activity. Apparent steel use increased 6.6% year-over-year to approximately 3.4 million tons, featuring an expansion of the construction and industrial sectors. Ternium’s shipments to the country remained relatively stable year-over-year in 2012.

The U.S. economy continued recovering during 2012, with GDP growth of 2.2% and apparent steel use increasing a solid 8.4% year-over-year to approximately 96.7 million tons, yet still below pre-2008 crisis levels. Ternium’s shipments to the country increased year-over-year in 2012.

Ternium’s shipments to Central America decreased in 2012, despite healthy activity expansion in the region, as Ternium prioritized supplies to the growing Mexican market. Shipments to the Peruvian and Ecuadorian markets increased year-over-year in 2012, as these country’s economies expanded during 2012, with GDP growth rate estimates of 4.0% and 6.0% year-over-year, respectively.

Overall, in 2012 Ternium’s subsidiaries in Colombia, Guatemala and United States maintained their finishing facilities working at utilization rates similar to those of 2011. Capital expenditures in the region amounted to USD39 million in 2012. During the year Ternium’s subsidiary in Guatemala carried out the revamping and expansion of its galvanizing mill. In addition, Ternium’s Colombian subsidiary Ferrasa made progress in the installation of a new de-dusting system at its steel shop, which is expected to enable the facility to increase its steel production levels by approximately 25% while ensuring that its emission levels comply with Colombia’s environmental regulations.

Mining Segment

Ternium’s reported shipments of iron ore encompass shipments made by our Mexican subsidiary Las Encinas and by other Ternium consolidated subsidiaries. Shipments made by Las Encinas are destined mainly for internal consumption within Ternium’s Steel Segment, while shipments made by other consolidated subsidiaries are mainly destined for the export market. Ternium reported shipments of 1.9 million tons of iron ore in 2012, a decrease of 9% compared to shipment levels in 2011.

Ternium’s mining operations are located in Mexico. Mining concessions were granted for a 50-year period. Following the expiration of the initial concession term, the concessions are renewable for an additional 50-year term in accordance with, and subject to the procedures set forth in, applicable Mexican mining law.

Las Encinas

The Las Encinas mining facilities, which also include a pelletizing plant located in the community of Alzada, in the state of Colima, have an annual production capacity of 1.9 million tons of pellets and 0.2 million tons of concentrate surplus. As of year-end 2012, Las Encinas was operating the Aquila iron ore mine, located in Michoacán, Mexico, as well as small bodies at El Encino, an iron ore mine located in Jalisco, Mexico, whose main body is exhausted. During 2012, Las Encinas completed works for the revamping of its grinding and concentration facilities in Alzada, a project that enables higher processing capacity and the production of higher quality pellets, thereby reducing steelmaking costs.

In addition, Ternium completed its exploration activities in its concessions in Jalisco, in an area close to Las Encinas’ current processing facilities, and identified sufficient iron ore resources to enable the potential development of a new mining operation on those concessions. Ternium, however, has not made any decision in that respect. Any such decision will be subject to Ternium’s decision to expand its steel production capacity in Mexico and consequently its iron ore requirements.

In 2013, we intend to continue running the Las Encinas processing facilities at the highest possible utilization rates. We also intend to further develop micro-mining operations to complement the mining activity in our larger-scale operations. The expected average mining life of active mining sites is 17 years.

Peña Colorada

The Peña Colorada mining facilities, which are located in Colima, Mexico, and include a two-line pelletizing plant in the Manzanillo port, have an annual production capacity of 4.1 million tons of pellets and 0.4 million tons of concentrate surplus. Of these totals, ArcelorMittal and Ternium are each entitled to receive 50% of the production, in accordance with their equity participations in the company. As of year-end 2012, Peña Colorada was operating the Peña Colorada iron ore mine, also located in Colima. During 2012, Ternium purchased 2.5 million tons of iron ore from Peña Colorada, destined mainly for internal consumption at Ternium’s Steel Segment and to a lesser extent to be sold by Ternium in the export markets.

Peña Colorada’s financial statements are not consolidated into Ternium’s and its results are accounted for under the equity method. Consequently, volumes shipped by Peña Colorada are not included in Ternium’s Mining Segment reported shipments.

Peña Colorada continued its exploration activities in 2012 at areas nearby to the existing mine and succeeded in increasing its iron ore resources. In 2013, we intend to continue running Peña Colorada’s processing facilities at the highest possible utilization rates. The expected average mining life of the active mining sites is 25 years.

Support Program for Small- and Medium-Sized Enterprises

Ternium sponsors, as it has done for ten years now, a small- and medium-sized enterprise (SME) support program, ProPymes. Created by the Techint group in 2002, the program is focused on helping SMEs in the steel industry’s value chain to grow. The program’s ultimate goal is to enhance SMEs’ competitiveness and to stimulate investments in the steel industry’s value chain. To achieve this, ProPymes provides a variety of services including training, business advisory, institutional assistance, commercial support and financial aid. Through the years, ProPymes has helped create an industrial network that facilitates knowledge sharing, reciprocal learning and exchange of experiences toward the achievement of industrial best practices. ProPymes currently assists approximately 850 SMEs in Mexico and Argentina.

Ternium supervises the execution of the ProPymes programs through two departments operating under local management supervision in Mexico and Argentina.

Mexico

Approximately 190 Mexican SMEs, including customers and suppliers, participate in ProPymes. While suppliers are selected according to their ability to increase their products’ competitiveness, customers are selected according to their ability to add value to the steel products and to their potential to increase exports or substitute imports.

During 2012, ProPymes institutionalized its collaboration programs, including the Mexican government’s Leading Companies Program, the educational bodies’ Innovation and Training Programs, the industrial chambers’ Suppliers and New Entrepreneur Class Development Programs, and the local economic development secretariats’ Business Conventions Programs for the development of local companies. Accordingly, in 2012 initiatives continued focusing on management training and industrial assistance, including the technological upgrade of some facilities under cooperation with and support from Mexican government’s SMEs programs and ProPymes. Furthermore, ProPymes promoted business conventions in selected cities in Mexico in coordination with local industrial chambers in order to identify and promote new companies that could be developed as steel industry suppliers.

In 2013, ProPymes intends to launch an integral training program for SMEs, comprising employees in every category, aimed at helping them improve their productivity and efficiency in their relevant fields. In addition, the program intends to continue strengthening the industrial network through the continuous collaboration with the Mexican government and educational bodies, and the organization of an annual SMEs convention in the country.

Argentina

Approximately 660 Argentine SMEs, including customers and suppliers, participate in ProPymes. The program’s activities continued growing during 2012, with a notable 20% year-on-year increase in training program attendees, resulting in a new record of participants in 2012. The expansion of ProPymes’ training programs, which comprise SME employees in every category, focused on management requirements related to human resources, production and processes, and on family enterprise related challenges.

The program’s consulting area, one of ProPymes’ pillars, reached a new record of diagnosis reports and assistance performed. The assistance, which included plant layout, production planning, quality assurance and certification, supplier audit, and health and safety, was reinforced in relation to human resources and information technology. In addition, during 2012, the program launched a new initiative to assist SMEs in environmental certification processes (ISO 14000).

In 2013, ProPymes intends to assist SMEs in the development and launch of training models for young professionals, aimed at the development of a long-term source of company leadership. In addition, the program will reinforce its initiatives related to the professionalization of family companies, one of the most valued initiates during 2012, through the development of workshops and the offering of assistance for ongoing professionalization processes.

Product Research and Development

Product research and development activities at Ternium are conducted through a central Product Development Department in coordination with local teams that operate in several of our facilities. Applied research efforts are carried out in-house and in conjunction with universities and research centers, as well as through the participation in international consortia. Ternium also develops new products and processes in cooperation with its industrial customers, prioritizing an early involvement scheme.

In 2012, Ternium’s product research and development activities focused on initiatives aimed at increasing market share, adding value to our products and reducing costs. During the year, Ternium completed the implementation of an IT system at two of its main facilities in Mexico that fully integrates product and processing route specifications among its plants. This effort will enable significant optimization in our processes and products, including increased opportunities for enhancing productivity, reducing cost and optimizing inventory volumes.

Construction Products

During 2012, Ternium’s metal building systems division developed and introduced, among other products, a new steel floor deck in compliance with international standards and specifications for composite steel deck-slabs, aimed at increasing its market share in Mexico.

Industrial Products

For the automotive industry, Ternium continued certifying products in Mexico and Argentina during 2012, related to newly-defined standards for recently launched car platforms. The company qualified hot rolled, cold rolled and coated products for different applications, supporting an increase in its share in that market segment in Mexico and facilitating the certification process with prospective customers to be carried out during 2013. In addition, in 2012 Ternium initiated the certification process of its new Pesquería facilities, which are expected to start operations in the third quarter of 2013.

During 2012, Ternium successfully promoted new truck bodywork manufacturing technologies among its customers in Argentina, which resulted in an increased competitiveness of their products following the utilization of high-resistance steel grades for the manufacturing of truck bodies, entailing lighter structures with higher payload and lower incidence of fuel consumption.

For the U.S. and Mexican home appliances markets, Ternium continued developing new processes to manufacture coated steel products with improved and sophisticated aesthetics, aimed at increasing the attractiveness of its products and gaining share in the high-end market segment. Following the development of a new process to manufacture products with textured surfaces in 2011, during 2012 Ternium developed a new process to manufacture products with super high gloss and metallic colors. Similarly, Siderar launched several projects aimed at the development of innovative and exclusive products with improved characteristics for Southern Region customers seeking differentiation.

For tube and pipe manufacturers, Ternium developed over the past year new steel grades characterized by their high toughness at arctic temperatures, for applications in the oil and gas industry. In addition, it developed new steel grades for the manufacturing of high-resistance welded pipes, allowing Ternium to offer hot-rolled coils for use in natural gas and water pipelines required for infrastructure projects in Mexico.

Applied Research

Ternium’s medium-term product research and development plans are based on a continuing assessment of steel product performance and the emerging requirements of the industry, carried out in close collaboration with leading steel customers and institutions. Based on customer needs, we improve, adapt and create new applications and define future technology requirements at our facilities.

During 2012, Ternium continued participating in leading research and development projects through international consortia and together with universities and research centers to further expand the required know-how for the development of new products. Consortia projects included the development of high-strength steel for applications in the pipe manufacturing and automotive industries, with the University of Pittsburgh, and the development of new coating technologies for applications in the automotive industry and of improvements in the galvanizing bath to optimize processes, with the International Zinc Association.

Projects developed with universities and research centers included the improvement of batch annealing processes, the improvement of interstitial-free steel grades with dent resistance or controlled aging properties and the improvement of welding techniques for galvanized steel.

Prospective Developments

In 2013, Ternium plans to develop new products for the automotive industry to expand its product range and increase its market share in Mexico. Of note among the products to be developed are quenchable hot and cold-rolled ultra-high-strength steel grades for hot-stamping processes.

For tube and pipe manufacturers, Ternium intends to expand its range of steel grades to capture an expected increase in the demand for hot rolled coils for the manufacturing of oil and gas products, combining sour service with higher mechanical properties. In addition, the company will continue to develop new high-performance steel grades for round bars for oil and gas industry applications.

For Argentine manufacturers of mobile power substations and other heavy equipment, Siderar intends to foster and assist its customers to introduce new technologies during 2013, expected to help them increase their product competitiveness through the utilization of high-resistance steel grades, entailing lighter and lower cost structures.

During the year, Siderar will initiate the development of interstitial-free steel grades, based on automotive industry certification requirements, which will be able to be produced in its San Nicolás unit following the completion of the ongoing construction of a new vacuum degassing station.

Human Resources and Communities

Ternium had approximately 16,600 employees at year-end 2012, similar to year-end 2011. During 2012, the company continued its medium-term personnel recruitment plans in the different regions. Training and recruiting activities continue to be carried out through our ongoing program for recent graduates. The Young Professionals program has already contributed a majority of our current management and technologist positions. Ternium’s training programs are intended to create a unique managerial profile that combines the ability to integrate into a regional culture with a global approach to business.

Furthermore, Ternium continued carrying out several customized courses focused on leadership, performance and technical knowledge, targeted at management, staff and operating employees. These courses have been designed to train employees in the latest concepts and tools in their relevant fields, and to encourage them to achieve the highest possible levels of productivity and operating efficiency. In addition, the company continued organizing courses focused on health and safety to support the use of safety management tools. At the Colombian facilities these courses were supplemented by several initiatives intended to raise employee awareness and stress the importance of a safe working environment and behavior.

Ternium continued strengthening its financial support and contribution to different joint industry and university programs. Current initiatives include the funding of scholarship and fellowship grants and the endowed Chair sponsoring at Mexican university Tecnológico de Monterrey. Throughout the year the company hosted various courses for graduate and undergraduate students and fostered conferences on technical subjects related to the steel industry.

During 2012, Siderar launched a program designed to strengthen an industrial culture, commitment and teamwork among its workers, aimed at increasing the engagement of its employees of its industrial facilities. The program was developed under management role formats, through debates including all parties in a participative and consultative environment, and through previously defined working methodologies.

Ternium also continued with its programs aimed at ensuring the quality of life of its employees, in and out of the workplace. These efforts included sports and fitness fostering programs, clinical examination and disease prevention campaigns, scholarship and leisure programs for employees’ children, loan programs for home improvement and special situations, and special programs designed for employees willing to complete basic education. During 2012, Ternium distributed its biannual organizational climate questionnaire among employees, supervisors and chiefs. This initiative, which highlights organizational strengths and opportunities, is expected to contribute to the design of Ternium’s new programs.

Community Relations

With an eye toward prioritizing our long-term relationships in the communities where we operate, Ternium focuses its support on a select number of high-impact programs designed to address the social and economic issues of each region, in the areas of education, health and sports, social integration and culture.

On education-related initiatives, more than 850 students, over 100 of whom ended up joining Ternium’s workforce, completed by mid-2012 a new technical module implemented in technical schools of the state of Nuevo León, Mexico, during the previous year. Ternium continued working with Mexico’s national board of technical education for their consideration and implementation of such a module, which is similar to the one included in the company’s young technician training program, in the technical schools of the state of Puebla and elsewhere in Mexico. This module has helped these schools teach the skills required by the steel industry. In order to support an efficient implementation of this module, Ternium contributed some equipment to one technical school.

In the Ramallo and Ensenada industrial areas of Argentina, Siderar continued supporting a program aimed at strengthening technical schools. This endeavor, which includes five technical schools near Siderar’s facilities, focuses on the enhancement of these institutions’ technical education to match the increasingly demanding requirements of the industrial labor market. Under this program, Siderar continued improving the schools’ infrastructure during 2012, providing scholarships at its workshops and providing training in its associated centers and schools. In addition, Siderar invited other companies belonging to the steel industry value chain to participate in the program last year. These companies are expected to begin contributing to the program in 2013.

In 2012, Ternium continued financing programs aimed at the improvement of basic education. In Mexico, Ternium supported basic schools in Monterrey and academies and agricultural programs in Pihuamo, Aquila and Alzada. Likewise, in Argentina the company supported basic schools located in Ensenada and San Nicolás, through a Unesco program targeting some public institutions. In addition, the company granted scholarships for high achievement students from the broader communities in different countries.

On health-care related initiatives, in Mexico the company organized a new health fair in Monterrey during 2012 aimed at increasing the community’s awareness and basic understanding of how to prevent and take care of various health issues. In addition, it continued supporting a basic health care unit in Aquila and, in Argentina, following the remodeling and enhancement in recent years of the main regional hospital and a medical care unit in the Ramallo industrial area, Siderar supported the remodeling and expansion of a second medical care unit.

In sports and cultural-related activities, Ternium continued organizing, among other activities, its annual local marathons and cinema festivals in Monterrey, Mexico, and San Nicolás, Argentina, achieving a new record of participants.

Environment, Health and Safety

Ternium reaffirms environmental protection and the individual’s health and safety as a paramount value, holding its personnel responsible for the observance of this value and encouraging the promotion and sharing of related policies with the company’s value chain and with the communities where it operates. Ternium’s environment, health and safety policies abide by the World Steel Association’s policy statement and its principles for excellence in safety and occupational health, and by the ISO 14000 environmental management international standard directives.

In 2012, we continued participating in the World Steel Association (worldsteel) forums. These forums, which are focused on sustainable development, environment, safety and occupational health, are in the process of developing consistent measurements, statistics and databases of selected variables aiming to enable steelmaking companies to benchmark performance, share state-of-the-art best practices and ultimately set improvement plans for its processes. These forums include the Climate Change Policy, Life Cycle Assessment, CO2 Data Collection Program, Water Management, Sustainability Reporting, and Safety and Occupational Health Committee groups and their working subgroups. During 2012, Ternium was one of the hosts for the worldsteel’s Environmental Policy committee and Life Cycle Assessment working group meetings in Buenos Aires.

Ternium’s commitment toward environmental programs has once again been recognized by worldsteel and by GEI Mexico, a public-private nonprofit organization, for our participation in their respective greenhouse gas emission reporting programs. As of year-end 2012, all of our in-use mining facilities were registered with the Mexican Government’s National Environmental Voluntary Program, obtaining clean industry certificates, while Ternium’s steel operations in the country revalidated their clean industry certificates under the same program. In Argentina, Siderar revalidated the ISO 14001 certificates, where applicable, for its local facilities.

Health and safety programs resulted in new decreases in injury rates during 2012. Our average injuries frequency rate³ (IFR) and lost-time injuries frequency rate⁴ (LTIFR) were 2.9 and 0.9, respectively, in 2012. These measurements cover all of Ternium’s facilities other than Ferrasa, where Ternium’s health and safety policies began to be implemented soon after its acquisition in August 2010, and include both our personnel and the personnel of third-party contractors operating in our facilities.

*Does not include Colombia

In 2012, Ternium continued consolidating its medium-term safety program. Under the program, the company standardized safety practices across the production units, trained managers in the best-in-industry management safety tools, and reassessed contractor obligations towards pre-defined safety programs. Inspired by the steel industry’s best safety practices, the program includes leadership involvement, a safety information system, training programs, information campaigns, progressive enhancement teams and “safety hour” events, requiring managers to tour the facilities according to a predefined schedule, in order to detect unsafe conditions or practices and listen to personnel’s comments and suggestions.

Likewise, the company took steps to consolidate its medium-term environmental program, also inspired by the steel industry’s best practices, which includes environmental accountability of managers, personnel training and information campaigns.

Emissions Control

During 2012, we opened a new wastewater treatment plant for one unit in Argentina, replacing two conventional treatments plants, and continued investing in the expansion of our plants’ by-product processing capacity. In addition, we launched a project to reduce emissions at the Ferrasa steel shop in Colombia, through the installation of a new de-dusting system expected to be completed during 2013. These activities are part of an ongoing program that monitors and reviews our facilities, aimed at maximizing the efficient use of energy resources, the re-use of by-products and the appropriate treatment and disposal of wastes, air emissions and wastewater.

Greenhouse Gas Emissions

³Injuries frequency rate refers to total quantity of injuries per million of hours worked.

⁴Lost time injuries frequency rate refers to quantity of day-loss injuries per million of hours worked.

The accompanying chart shows Ternium’s estimated emission of carbon dioxide (CO₂) per ton of liquid steel produced, as reported to worldsteel. We support the steel industry’s ongoing efforts to develop innovative solutions to reduce greenhouse gas (GHG) emissions over the lifecycle of steel products. According to the Intergovernmental Panel on Climate Change (IPCC), the steel industry accounts for approximately 6-7% of total world GHG emissions.

Our steel production facilities in Mexico have achieved GHG-specific emission levels that are close to the theoretical minimum. In Argentina, Siderar’s GHG-specific emission levels are close to the industry average for blast furnace technology.

During 2012, Ternium applied for the Leadership in Energy and Environmental Design (LEED) certification from the United States Green Building Council, related to its facilities in Pesquería, Mexico. A LEED certification contemplates aspects related to energy efficiency, alternative energies, internal environment, water consumption efficiency, sustainable development of free spaces and material selection.

Corporate Governance

The Company

The Company is a public limited liability company (société anonyme) organized under the laws of the Grand-Duchy of Luxembourg. Its object and purpose, as set forth in Article 2 of its articles of association, is the taking of interests, in any form, in corporations or other business entities, and the administration, management, control and development thereof. The Company is registered under the number B98 668 in Luxembourg’s Registre du Commerce et des Sociétés.

Shares; Shareholders’ Meetings

The Company’s authorized share capital is fixed by the Company’s articles of association, as amended from time to time, with the approval of shareholders at an extraordinary general shareholders’ meeting. The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of USD1.00 per share. The general extraordinary meeting of shareholders held on June 2, 2010, renewed the validity of the Company’s authorized share capital until July 15, 2015. As of December 31, 2012, there were 2,004,743,442 shares issued.

The Company’s articles of association authorize the board of directors or any delegate(s) duly appointed by the board of directors, to issue shares within the limits of its authorized share capital against contributions in cash, contributions in kind or by way of incorporation of available reserves, at such times and on such terms and conditions as the board of directors or its delegates may determine. The extraordinary general meeting of shareholders held on June 2, 2010 renewed this authorization until July 15, 2015.

Under Luxembourg law, the Company’s existing shareholders have a pre-emptive right to subscribe for any new shares issued for cash. The Company’s shareholders have authorized the board of directors to waive, suppress or limit such pre-emptive subscription rights and related procedures to the extent it deems such waiver, suppression or limitation advisable for any issue or issues of shares within the authorized share capital. However, our articles of association provide that, if and from the date the Company’s shares are listed on a regulated market (and only for as long as they are so listed), any issuance of shares for cash within the limits of the authorized share capital shall be subject to the pre-emptive subscription rights of the then-existing shareholders, except in the following cases (in which cases no pre-emptive rights shall apply):

	§		any issuance of shares for, within, in conjunction with or related to, an initial public offering of the Company’s shares on one or more regulated markets (in one or more instances);
	§		any issuance of shares against a contribution other than in cash;
	§		any issuance of shares upon conversion of convertible bonds or other instruments convertible into shares; provided, however, that the pre-emptive subscription rights of the then existing shareholders shall apply by provision of the Company’s articles of association in connection with any issuance of convertible bonds or other instruments convertible into shares for cash; and
	§		any issuance of shares (including by way of free shares or at a discount), up to an amount of 1.5% of the issued share capital of the Company, to directors, officers, agents or employees of the Company, its direct or indirect subsidiaries, or its Affiliates (as such term is defined in the Company’s articles of association), including without limitation the direct issue of shares upon the exercise of options, rights convertible into shares, or similar instruments convertible or exchangeable into shares issued for the purpose of, or in relation to, compensation or incentive of any such persons.

Our articles of association provide that our annual ordinary general shareholders’ meetings must take place in Luxembourg on the first Wednesday of every May at 2:30 p.m., Luxembourg time. At these meetings, our annual financial statements are approved and the members of our board of directors are elected. No attendance quorum is required at annual ordinary general shareholders’ meetings and resolutions are adopted by a simple majority vote of the shares represented at the meeting. There are no limitations currently imposed by Luxembourg law on the rights of non-resident shareholders to hold or vote the Company’s shares.

On May 2, 2012, the Annual General Meeting of Shareholders of Ternium S.A. authorized the Board of Directors to delegate the management of the Company’s day-to-day business and the authority to represent and bind the Company with his sole signature in such day-to-day management to Mr. Daniel Agustin Novegil, and to appoint Mr. Novegil as chief executive officer (administrateur délégué) of the Company. Following the adjournment of such Annual General Meeting, the Board of Directors resolved to delegate such management and representation authority to Mr. Novegil and to reappoint Mr. Novegil as chief executive officer (administrateur délégué) of the Company.

American Depositary Shares (ADSs)

Holders of ADSs only have those rights that are expressly granted to them in the deposit agreement dated as of January 31, 2006, among the Company, The Bank of New York Mellon (formerly The Bank of New York), as depositary, and all owners and beneficial owners from time to time of ADRs of the Company. ADS holders may not attend or directly exercise voting rights in shareholders’ meetings, but may instruct the depositary how to exercise the voting rights for the shares which underlie their ADSs. Holders of ADSs maintaining non-certificated positions must follow instructions given by their broker or custodian bank.

Share and ADS Repurchases

The Company may repurchase its own shares in the cases and subject to the conditions set by the Luxembourg law of August 10, 1915, as amended. The ordinary general shareholders’ meeting held on June 2, 2010 authorized the Company and the Company’s subsidiaries to acquire shares of the Company, including shares represented by American Depositary Shares, or ADSs, at such times and on such other terms and conditions as may be determined by the board of directors of the Company or the board of directors or other governing body of the relevant Company subsidiary, provided that, among other conditions, the maximum number of shares, including shares represented by ADSs, acquired pursuant to the authorization may not exceed 10% of the Company’s issued and outstanding shares or, in the case of acquisitions made through a stock exchange in which the shares or ADSs are traded, such lower amount as may not be exceeded pursuant to any applicable laws or regulations of such market, and that the purchase price per ADS to be paid in cash may not exceed 125% (excluding transaction costs and expenses), nor may it be lower than 75% (excluding transaction costs and expenses), in each case of the average of the closing prices of the ADSs in the New York Stock Exchange during the five trading days in which transactions in the ADSs were recorded in the New York Stock Exchange preceding (but excluding) the day on which the ADSs are purchased. In the case of purchases of Shares other than in the form of ADSs, the maximum and minimum per Share purchase prices shall be equal to the prices that would have applied in case of an ADS purchase pursuant to the formula above divided by the number of underlying shares represented by an ADS at the time of the relevant purchase.

As of the date of this report, Ternium held 41,666,666 of its own shares. Those shares were purchased from Usiminas on February 15, 2011, concurrently with the closing of an underwritten public offering by Usiminas of Ternium ADSs.

Board of Directors

The Company’s articles of association provide for a board of directors consisting of a minimum of five members (when the shares of the Company are listed on a regulated market, as they currently are) and a maximum of fifteen. The board of directors is vested with the broadest powers to act on behalf of the Company and accomplish or authorize all acts and transactions of management and disposition that are within its corporate purpose and are not specifically reserved in the articles of association or by applicable law to the general shareholders’ meeting.

The board of directors is required to meet as often as required by the interests of the Company and at least four times per year. In 2012, the Company’s board of directors met six times. A majority of the members of the board of directors in office present or represented at each board of directors’ meeting constitutes a quorum, and resolutions may be adopted by the vote of a majority of the directors present or represented. In case of a tie, the chairman is entitled to cast the deciding vote.

Directors are elected at the annual ordinary general shareholders’ meeting to serve one-year renewable terms, as determined by the general shareholders’ meeting. The general shareholders’ meeting may dismiss all or any one member of the board of directors at any time, with or without cause, by resolution passed by a simple majority vote. The Company’s current board of directors is composed of nine directors, three of whom are independent directors.

Audit Committee

The board of directors has an audit committee consisting of three independent directors. The members of the audit committee are not eligible to participate in any incentive compensation plan for employees of the Company or any of its subsidiaries. Under the Company’s articles of association and the audit committee charter, the audit committee:

assists the board of directors in fulfilling its oversight responsibilities relating to the integrity of the financial statements of the Company, including periodically reporting to the board of directors on its activity and the adequacy of the Company’s systems of internal control over financial reporting;

is responsible for making recommendations for the appointment, compensation, retention and oversight of, and assessment of the independence of the Company’s independent auditors;

reviews material transactions between the Company or its subsidiaries with related parties (other than transactions that were reviewed and approved by the independent members of the board of directors or other governing body of any subsidiary of the Company) to determine whether their terms are consistent with market conditions or are otherwise fair to the Company and its subsidiaries; and

performs such other duties imposed to it by applicable laws and regulations of the regulated market or markets on which the shares of the Company are listed, as well as any other duty entrusted to it by the board of directors.

The audit committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and has direct access to the Company’s internal and external auditors as well as the Company’s management and employees and, subject to applicable laws, its subsidiaries.

Auditors

The Company’s articles of association require the appointment of at least one independent auditor chosen from among the members of the Luxembourg Institute of Independent Auditors. Auditors are appointed by the general shareholders’ meeting, on the audit committee’s recommendation, through a resolution passed by a simple majority vote. Shareholders may determine the number and the term of the office of the auditors at the ordinary general shareholders’ meeting, provided however that an auditor’s term shall not exceed one year and that any auditor may be reappointed or dismissed by the general shareholders’ meeting at any time, with or without cause. As part of their duties, the auditors report directly to the audit committee.

PricewaterhouseCoopers, Société coopérative (formerly PricewaterhouseCoopers S.à r.l.), Réviseur d’entreprises agréé, was appointed as the Company’s independent auditor for the fiscal year ended December 31, 2012, at the ordinary general shareholders’ meeting held on May 2, 2012.

Board of Directors and Senior Management

Board of Directors

Chairman

Paolo Rocca

Ubaldo Aguirre (*)

Roberto Bonatti

Carlos Condorelli

Pedro Pablo Kuczynski (*)

Adrián Lajous (*)

Bruno Marchettini

Daniel Novegil

Gianfelice Rocca

Secretary

Raúl Darderes

(*) Audit Committee Members

Senior Management

Chief Executive Officer

Daniel Novegil

Chief Financial Officer

Pablo Brizzio

Mexico Area Manager

Máximo Vedoya

Siderar Executive Vice President

Martín Berardi

International Area Manager

Héctor Obeso Zunzunegui

Planning and Operations General Director

Oscar Montero

Engineering and Environment Director

Luis Andreozzi

Human Resources Director

Rodrigo Piña

Chief Information Officer

Roberto Demidchuck

Quality and Product Director

Rubén Herrera

Investor Information

Investor Relations Director		IR Inquiries
Sebastián Martí		TERNIUM Investor Relations
smarti@ternium.com		ir@ternium.com
Toll free number for US calls: +1 866 890 0443
International calls: +54 11 4018 2389


Luxembourg Office
29 Avenue de la Porte-Neuve
L2227 - Luxembourg
Luxembourg
Phone: +352 2668 3153
Fax: +352 2659 8349


Stock Information		ADS Depositary Bank
New York Stock Exchange (TX)		BNY Mellon
CUSIP Number: 880890108		PO Box 358516
		Pittsburgh, PA 15252-8516

		Toll free number for US calls: +1 888 BNY ADRS
		International calls: +1 201 680 6825
		shrrelations@bnymellon.com
		www.bnymellon.com/shareowner



Internet
www.ternium.com

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The review of Ternium’s financial condition and results of operations is based on, and should be read in conjunction with, the Company’s consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 (including the notes thereto), which are included elsewhere in this annual report.

The financial and operational information contained in this annual report is based on the operational data and consolidated financial statements of the Company, which were prepared in accordance with IFRS and IFRIC interpretations as issued by IASB and adopted by the EU, and presented in USD and metric tons.

Overview

Apparent steel use in Mexico increased 9.7% year-over-year in 2012 to approximately 20.1 million tons, featuring an expansion in key steel consuming sectors such as construction and automotive. Mexico’s GDP increased 3.9% year-over-year, reflecting a broad-based increase in activity. In Argentina, apparent steel use decreased 8.3% year-over-year in 2012 to approximately 4.9 million tons, in a period characterized by lower activity levels, particularly in the automotive and agricultural sectors, as the country’s growth pace was reduced to a 1.3% year-over-year GDP expansion. In Colombia apparent steel use increased 6.6% year-over-year in 2012 to approximately 3.4 million tons, exhibiting a good performance of the construction and industrial sectors and a broad-based increase in activity, as GDP grew 4.7% year-over-year.

Ternium’s operating income in 2012 was USD915.9 million, USD335.9 million lower than in 2011, mainly as a result of a USD43 reduction in steel revenue per ton, partially offset by a slight decrease in steel operating cost per ton⁵.

In accordance with IFRS guidance, Ternium performed an impairment test of its investment in Usiminas and subsequently wrote down such investment by USD275.3 million. The impairment was mainly due to expectations of a weaker industrial environment in Brazil, where industrial production and consequently steel demand have been suffering downward adjustments. In addition, a higher degree of uncertainty regarding future prices of iron ore led to a reduction in Ternium’s forecast of long term iron ore prices that affected cash flow expectations.

Ternium’s net income in 2012 was USD187.2 million, a decrease of USD462.8 million year-over-year, mainly due to a USD363.9 million loss related to our investment in Usiminas, including the above mentioned USD275.3 million impairment, and a USD335.9 million decrease in operating income, as previously discussed, partially offset by a USD183.1 million lower net financial expense and a consequently lower income tax expense. The change in net financial results was principally attributable to lower net foreign exchange non-cash losses following the change in the functional currency of Ternium’s Mexican subsidiaries, effective as of January 1, 2012, as there was no impact of the Mexican Peso fluctuation on Ternium’s Mexican subsidiaries’ US dollar-denominated debt in 2012, partially offset by higher net interest expenses due to a higher net indebtedness.

⁵Operating cost per ton is equal to cost of sales plus selling, general and administrative expenses, divided by shipments.

Net Sales

Net sales were USD8.6 billion in 2012, 6% lower than net sales in 2011, reflecting a decrease in net sales in all regions. The following table shows Ternium’s total consolidated net sales for 2012 and 2011:

USD million	2012	2011	Dif.

Mexico	4,475.1	4,544.8	-2%
Southern Region	2,746.6	2,980.3	-8%
Other Markets	1,386.3	1,597.8	-13%

Total steel and mining segments	8,608.1	9,122.8	-6%

Cost of sales

Cost of sales was USD6.9 billion in 2012, a decrease of USD149.0 million, or 2%, compared to 2011. The decrease was due to a USD195.7 million, or 3%, decrease in raw material and consumables used, mainly reflecting a reduction in raw material costs and lower sales volumes, partially offset by a USD46.6 million increase in other costs, including a USD55.3 million increase in maintenance expenses, a USD21.2 million increase in labor costs, a USD13.0 million decrease in depreciation of property, plant and equipment and amortization of intangible assets, and a USD9.6 million decrease in services and fees expenses.

Selling, general and administrative expenses (SG&A)

SG&A expenses in 2012 were USD809.2 million, or 9.4% of net sales, a decrease of USD30.2 million compared to 2011, mainly including a USD12.1 million decrease in depreciation of property, plant and equipment and amortization of intangible assets, a USD10.7 million decrease in maintenance expenses, a USD6.5 million decrease in freight and transportation expenses and a USD6.1 million decrease in fiscal expenses, partially offset by a USD6.9 million increase in labor expenses.

Operating income

Operating income in 2012 was USD915.9 million, or 11% of net sales, compared to operating income of USD1.3 billion, or 14% of net sales, in 2011. The following table shows Ternium’s operating income by segment for 2012 and 2011.

	Steel segment		Mining segment		Intersegment eliminations		Total
USD million	2012	2011	2012	2011	2012	2011	2012	2011

Net Sales	8,601.1	9,058.9	190.7	213.2	(183.8)	(149.3)	8,608.1	9,122.8
Cost of sales	(6,914.7)	(7,000.7)	(132.4)	(164.3)	175.9	144.9	(6,871.1)	(7,020.1)
SG&A expenses	(804.7)	(833.4)	(4.5)	(5.9)	-	-	(809.2)	(839.4)
Other operating (expenses) income, net	(12.3)	(10.8)	0.4	(0.7)	-	-	(11.9)	(11.5)

Operating income	869.5	1,214.1	54.2	42.3	(7.9)	(4.5)	915.9	1,251.8

EBITDA	1,224.8	1,593.4	69.8	58.9	(7.9)	(4.5)	1,286.8	1,647.8

EBITDA per ton	140	181	37	29

Steel reporting segment

Net sales of steel products in 2012 decreased 5% compared to 2011, reflecting a USD43 decrease in revenue per ton, mainly due to lower steel prices in Mexico and a 55,000 tons decrease in shipments mainly as a result of lower sales volume in the Southern Region and Other Markets, partially offset by higher shipments in Mexico.

	Net Sales (million USD)			Shipments (thousand tons)			Revenue / ton (USD/ton)

	2012	2011	Dif.	2012	2011	Dif.	2012	2011	Dif.

Mexico	4,457.3	4,501.8	-1%	4,952.4	4,683.2	6%	900	961	-6%
Southern Region	2,737.4	2,962.3	-8%	2,444.5	2,635.3	-7%	1,120	1,124	0%
Other Markets	1,377.2	1,545.8	-11%	1,371.2	1,505.0	-9%	1,004	1,027	-2%

Total Steel products	8,572.0	9,009.9	-5%	8,768.2	8,823.6	-1%	978	1,021	-4%
Other products (1)	29.1	49.0	-41%

Total Steel segment	8,601.1	9,058.9	-5%
(1)Primarily includes pig iron and pre-engineered metal buildings.

Operating income was USD869.5 million in 2012, a decrease of USD344.6 million compared to 2011, mainly reflecting lower shipments and revenue per ton, partially offset by a slightly lower operating cost per ton.

Mining reporting segment

Sales of mining products in 2012 were 11% lower than in 2011 mainly due to lower shipments, as revenue per ton was relatively stable. Shipments were 1,863,000 tons, 9% lower than in 2011. Operating income was USD54.2 million in 2012, USD12.0 million higher when compared to operating income in 2011, mainly reflecting lower operating cost per ton partially offset by lower shipments.

Net financial results

Net financial results were a USD117.3 million loss in 2012, compared to a USD300.4 million loss in 2011.

In 2012, Ternium’s net interest results totaled a USD125.2 million loss, a USD64.5 million higher loss than in 2011, mainly reflecting higher net indebtedness and weighted average cost of debt.

Net foreign exchange result was a gain of USD11.4 million in 2012 compared to a USD236.1 million loss in 2011. The 2011 loss was primarily due to the impact of the Mexican Peso’s 13.1% devaluation on Ternium’s Mexican subsidiaries’ US dollar denominated debt. This non-cash result was offset by changes in Ternium’s net equity position in the currency translation adjustments line, as the value of Ternium México’s US dollar denominated debt was not altered by the Mexican Peso’s fluctuation when stated in US dollars in Ternium’s consolidated financial statements. Prior to January 1, 2012, Ternium’s Mexican subsidiaries used the Mexican Peso as functional currency, their financial statements were prepared in Mexican Pesos and foreign exchange results were registered on their net non-Mexican Peso positions whenever the Mexican Peso revaluated or devaluated in relation to those other currencies.

Change in fair value of financial instruments included in net financial results in 2012 was an USD11.0 million gain, compared with an USD8.0 million gain in 2011. These results were mainly related to certain derivative instruments entered into by Ternium to cover currency and interest rate exposure in its subsidiaries and to results from the fair value of financial investments.

Equity in results of non-consolidated companies

Equity in results of non-consolidated companies was a loss of USD346.8 million in 2012, compared to a gain of USD10.1 million in 2011. Equity in results of non-consolidated companies in 2012 included a USD14.1 million gain related to the company’s participation in Peña Colorada and a USD363.9 million loss related to Ternium’s investment in Usiminas. Such loss included the previously mentioned USD275.3 million impairment, a USD51.5 million depreciation of the difference between the fair value and book value of net assets and a USD37.1 million loss from Usiminas’ net losses in the year.

Income tax expense

Income tax expense in 2012 was USD264.6 million, or 59% of income before income tax expense, compared with an income tax expense of USD311.7 million in 2011, or 32% of income before income tax expense. The effective tax rate in 2012 increased mainly as a result of losses related to the Company’s investment in Usiminas, as such results did not generate tax credits.

Net income attributable to non-controlling interest

Net income attributable to non-controlling interest in 2012 was USD47.9 million, compared to USD136.4 million in 2011, mainly due to a lower result attributable to non-controlling interest in Siderar, partially offset by a higher result attributable to non-controlling interest in Ternium México.

Liquidity and capital resources

We obtain funds from our operations, as well as from short-term and long-term borrowings from financial institutions. These funds are primarily used to finance our working capital and capital expenditures requirements, as well as our acquisitions. We hold money market investments, time deposits and variable-rate or fixed-rate securities from investment grade issuers. During 2012 we increased our financial indebtedness, from USD2.0 billion at the end of 2011 to USD2.4 billion at the end of 2012, using a syndicated loan and short-term borrowings.

Management believes that funds from operations will be sufficient to satisfy our current working capital needs and service our debt in the foreseeable future. Although Ternium has access to the credit markets, it has not negotiated additional committed credit facilities for these purposes. Management also believes that our liquidity and capital resources give us adequate flexibility to manage our planned capital spending programs and to address short-term changes in business conditions.

The following table shows the changes in our cash and cash equivalents, excluding funds placed in trust, for each of the periods indicated below:

In USD thousands	For the year ended December 31,

	2012	2011

Net cash provided by operating activities	1,055,092	622,370
Net cash (used in) provided by investing activities	(2,994,747)	145,991
Net cash provided by (used in) financing activities	348,200	(364,570)

(Decrease) increase in cash and cash equivalents	(1,591,455)	403,791
Effect of exchange rate changes	(6,282)	(25,042)
Cash and cash equivalents at the beginning of the year	2,158,044	1,779,295

Cash and cash equivalents at the end of the year	560,307	2,158,044

During 2012, Ternium’s primary source of funding was cash provided by operating activities and proceeds from borrowings.

Cash and cash equivalents as of December 31, 2012 were USD560.3 million, a USD1.6 billion decrease from USD2.2 billion at the end of the previous year. The decrease is mainly attributable to net cash used in investing activities of USD3.0 billion, partially offset by net cash provided by operating activities of USD1.1 billion and net cash provided by financing activities of USD348.2 million.

In addition to cash and cash equivalents, as of December 31, 2012, we held other investments with maturity of more than three months for a total amount of USD160.8 million, decreasing USD120.9 million compared to December 31, 2011.

Operating activities

Net cash provided by operating activities was USD1.1 billion in 2012 compared to USD622.4 million in 2011, a year-over-year increase of USD432.7 million, mainly related a decrease in working capital of USD23.5 million in 2012, compared to an increase in working capital of USD399.3 million in 2011.

The decrease in working capital during 2012 was the result of an aggregate USD51.4 million net increase in accounts payable and other liabilities, and a USD20.2 million decrease in inventories, partially offset by an aggregate USD48.1 million net increase in trade and other receivables. Inventories decreased in 2012 mainly reflecting lower costs, partially offset by higher volumes, of purchased steel and raw materials (as shown in the table below).

	Change in inventory Dec’12 / Dec’11 (in millions of USD)

	Price	Volume	Total

Finished goods	(4.3)	(2.4)	(6.7)
Goods in process	(36.8)	(2.1)	(38.8)
Raw materials, supplies and allowances	(114.1)	139.5	25.3

Total	(155.2)	135.0	(20.2)

Investing activities

Net cash used in investing activities in 2012 was USD3.0 billion, compared to net cash provided by investing activities of USD146.0 million in 2011. This change was primarily attributable to the following:

• an increase in net cash used in acquisition of businesses of USD2.2 billion, mostly associated with the acquisition of an equity participation in Usiminas in 2012 (for further information on the purchase of shares of Usiminas, please see note 3 to our consolidated financial statements included in this annual report);

• a lower decrease in other investments of USD460.3 million, consisting mainly of financial investments with maturity of more than three months (from USD588.2 million in 2011 to USD127.9 million in 2012); and

• an increase of USD445.6 million in capital expenditures (from USD577.0 million in 2011 to USD1.0 billion in 2012).

Financing activities

Net cash provided by financing activities was USD348.2 million in 2012, compared to net cash used in financing activities of USD364.6 million in 2011. This change was primarily attributable to the following:

• a net increase of USD435.6 million in proceeds from borrowings (from USD34.0 million in 2011 to USD469.7 million in 2012);

• a repurchase of treasury shares for USD150.0 million in 2011; and

• a decrease of USD124.7 million in dividends paid in cash by subsidiary companies (from USD140.6 million in 2011 to USD15.9 million in 2012).

Principal sources of funding

Funding policy

Management’s policy is to maintain a high degree of flexibility in operating and investment activities by maintaining adequate liquidity levels and ensuring access to readily available sources of financing. While Ternium currently does not have committed credit facilities available for borrowing, management believes that it could have access to external borrowing in case of any shortfalls or for specific needs. We obtain financing primarily in U.S. dollars, Argentine pesos, Mexican pesos and Colombian pesos. Whenever feasible, management bases its financing decisions, including the election of currency, term and type of the facility, on the intended use of proceeds for the proposed financing and on costs. For further information on our financial risk management please see note 33 to our consolidated financial statements included in this annual report.

Financial liabilities

Our financial liabilities consist of loans with financial institutions and some pre-accorded overdraft transactions. As of December 31, 2012, these facilities were mainly denominated in U.S. dollars (70.3% of total financial liabilities), Argentine pesos (22.4% of total financial liabilities, subsequently hedged to the U.S. dollar) and Colombian pesos (5.6% of total financial liabilities). Total financial debt (inclusive of principal and interest accrued thereon) increased by USD428.2 million in the year, from USD2.0 billion as of December 31, 2011, to USD2.4 billion as of December 31, 2012, mainly due to a new USD700 million syndicated term loan used for the purchase of shares of Usiminas and the increase in short term borrowings, partially offset by the repayment of principal and interest on borrowings related to prior acquisitions. For further information on the purchase of shares of Usiminas please see note 3 to our consolidated financial statements included in this annual report. As of December 2012, current borrowings were 46.3% of total borrowings, none of which corresponded to borrowings with related parties.

The weighted average interest rate at December 31, 2012 was 5.99%, calculated using the rates set for each instrument in its corresponding currency and weighted using the U.S. dollar-equivalent outstanding principal amount of those instruments at December 31, 2012, after giving effect to derivative financial instruments used to mitigate interest rate risk.

Most significant borrowings

Our most significant borrowings as of December 31, 2012, were those incurred under Ternium México’s syndicated loan facility in relation to the Grupo Imsa transaction in July 2007 and under Ternium’s syndicated term loan facility in relation to the purchase of shares of Usiminas in January 2012.

In Millions of USD

Date	Borrower	Type	Original principal amount	Outstanding principal amount as of	Maturity
				December 31, 2012
July 2007	Ternium México	Syndicated loan	3,485.0	803.3⁶	July 2014
January 2012	Ternium	Syndicated loan	700.0	700.0	January 2017

The main covenants in our syndicated loan agreements are limitations on liens and encumbrances, limitations on the sale or other dispositions of certain material assets, minimum cash requirements and compliance with financial ratios (e.g., leverage ratio and interest coverage ratio).

As of December 31, 2012, we were in compliance with all covenants under our loan agreements. For further information on our derivative financial instruments and borrowings please see notes 23 and 24 to our consolidated financial statements included in this annual report.

⁶On February 1, 2008, we completed the sale of our interests in Steelscape, Inc., ASC Profiles Inc., Varco Pruden Buildings Inc. and Metl-Span LLC to BlueScope Steel North America Corporation, a subsidiary of BlueScope Steel Limited, for a total consideration of USD727 million. On February 28, 2008, we applied USD700.0 million of the proceeds of such sale to partially prepay loans under the syndicated loan agreement. Beginning in January 26, 2009 and until July 26, 2012 we paid eight semi-annual installments of USD249 million each. On April 6, 2011, Ternium México partially refinanced the final installment, extending its maturity from July 2012 to July 2014.

TERNIUM S.A.

Consolidated Financial Statements

as of December 31, 2012 and 2011 and

for the years ended on December 31, 2012, 2011 and 2010

29 Avenue de la Porte-Neuve, 3^rd floor

L – 2227

R.C.S. Luxembourg: B 98 668

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	1
Consolidated Income Statements for the years ended December 31, 2012, 2011 and 2010	2
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010	3
Consolidated Statements of Financial Position as of December 31, 2012 and 2011	4
Consolidated Statements of Changes in Equity for the years ended December 31, 2012, 2011 and 2010	5
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010	8
Index to the Notes to the Consolidated Financial Statements	9

PricewaterhouseCoopers
Société Coopérative
Réviseur d’Entreprises
400, route d’Esch
B.P. 1443
L-1014 Luxembourg
Telephone +352 494848-1
Facsimile +352 494848-2900
www.pwc.com/lu
info@lu.pwc.com

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Ternium S.A.

We have audited the accompanying consolidated statements of financial position of Ternium S.A. and its subsidiaries as of 31 December 2012 and 31 December 2011, and the related consolidated income statement, comprehensive income, changes in equity and cash flows for each of the two years in the period ended 31 December 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Company as of 31 December 2010 and for the year then ended were audited by Price Waterhouse & Co. S.R.L. (Argentina) whose report dated 30 June 2011 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ternium S.A. and its subsidiaries at 31 December 2012 and 31 December 2011, and the results of their operations and their cash flows for each of the two years in the period ended 31 December 2012 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union.

PricewaterhouseCoopers Société coopérative Luxembourg, 20 February 2013

Represented by

Mervyn R. Martins

Page 1 of 73

TERNIUM S.A.

Consolidated Financial Statements as of December 31, 2012
and 2011

and for the years ended December 31, 2012, 2011 and 2010

Consolidated Income Statements

		Year ended December 31,
	Notes	2012	2011	2010

Net sales	5	8,608,054	9,122,832	7,339,901
Cost of sales	6	(6,871,090)	(7,020,127)	(5,560,201)

Gross profit		1,736,964	2,102,705	1,779,700

Selling, general and administrative expenses	7	(809,181)	(839,362)	(738,304)
Other operating (expenses) income, net	9	(11,881)	(11,495)	2,162

Operating income		915,902	1,251,848	1,043,558

Interest expense		(144,439)	(100,712)	(72,953)
Interest income		19,226	39,981	87,323
Other financial (expenses) income, net	10	7,865	(239,691)	114,867

Equity in (losses) earnings of non-consolidated companies	3 & 14	(346,833)	10,137	12,867

Income before income tax expense		451,721	961,563	1,185,662

Income tax expense	11	(264,567)	(311,656)	(406,193)

Profit for the year		187,154	649,907	779,470

Attributable to:
Equity holders of the Company		139,235	513,540	622,076
Non-controlling interest		47,919	136,367	157,394

Profit for the year		187,154	649,907	779,470

Weighted average number of shares outstanding		1,963,076,776	1,968,327,917	2,004,743,442

Basic and diluted earnings per share for profit attributable to the equity holders of the company (expressed in USD per share)		0.07	0.26	0.31

The accompanying notes are an integral part of these consolidated financial statements.

Page 2 of 73

TERNIUM S.A.

Consolidated Financial Statements as of December 31, 2012 and 2011

and for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Comprehensive Income

	Year ended December 31,
	2012	2011	2010

Profit for the period	187,154	649,907	779,470

Other comprehensive income:
Currency translation adjustment	(149,551)	(422,230)	30,494
Changes in the fair value of derivatives classified as cash flow hedges	17,556	14,134	14,729
Income tax relating to cash flow hedges	(2,808)	(6,701)	(4,419)

Other comprehensive income from participation in non-consolidated companies:
Currency translation adjustment	(275,897)	(11,403)	5,421
Changes in the fair value of derivatives classified as cash flow hedges	1,438	-	-
Others	(1,961)	-	-

Other comprehensive (loss) income for the period, net of tax	(411,223)	(426,200)	46,225

Total comprehensive income for the period	(224,069)	223,707	825,695

Attributable to:
Equity holders of the Company	(188,258)	172,862	684,635
Non-controlling interest	(35,811)	50,845	141,060

Total comprehensive income for the period	(224,069)	223,707	825,695

The accompanying notes are an integral part of these consolidated financial statements.

Page 3 of 73

TERNIUM S.A.

Consolidated Financial Statements as of December 31, 2012 and 2011

and for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Financial Position

Balances as of	Notes	December 31, 2012		December 31, 2011
ASSETS
Non-current assets
Property, plant and equipment, net	12	4,438,117		3,969,187
Intangible assets, net	13	965,206		977,711
Investments in non-consolidated companies	14	1,710,514		94,875
Other investments	15	7,137		14,087
Deferred tax assets	21	12,541		8,101
Receivables, net	16	72,827		124,201
Trade receivables, net	17	5,029	7,211,371	7,526	5,195,688

Current assets
Receivables	16	187,212		91,516
Derivative financial instruments	23	64		50
Inventories, net	18	2,000,137		2,123,516
Trade receivables, net	17	735,140		745,904
Sidor financial asset	27	-		136,294
Other investments	19	160,750		281,676
Cash and cash equivalents	19	560,307	3,643,610	2,158,044	5,537,000

Non-current assets classified as held for sale			12,018		10,374

			3,655,628		5,547,374

Total assets			10,866,999		10,743,062

EQUITY
Capital and reserves attributable to the company’s equity holders			5,420,883		5,756,371

Non-controlling interest			1,074,763		1,084,827

Total equity			6,495,646		6,841,198

LIABILITIES
Non-current liabilities
Provisions	20	17,499		15,340
Deferred income tax	21	682,091		740,576
Other liabilities	22	224,956		196,974
Trade payables		18,337		21,096
Derivative financial instruments	23	271		-
Borrowings	24	1,302,753	2,245,907	948,495	1,922,481

Current liabilities
Current tax liabilities		153,071		106,625
Other liabilities	22	88,540		112,923
Trade payables		762,225		682,292
Derivative financial instruments	23	-		29,902
Borrowings	24	1,121,610	2,125,446	1,047,641	1,979,383

Total liabilities			4,371,353		3,901,864

Total equity and liabilities			10,866,999		10,743,062

The accompanying notes are an integral part of these consolidated financial statements.

Page 4 of 73

TERNIUM S.A.

Consolidated Financial Statements as of December 31, 2012 and 2011

and for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Changes in Equity

	Attributable to the Company’s equity holders (1)
	Capital stock (2)	Treasury shares	Initial public offering expenses	Reserves (3)	Capital stock issue discount (4)	Currency translation adjustment	Retained earnings	Total	Non-controlling interest	Total Equity
	Capital stock (2)	Treasury shares	Initial public offering expenses	Reserves (3)	Capital stock issue discount (4)	Currency translation adjustment	Retained earnings	Total	Non-controlling interest	Total Equity

Balance at January 1, 2012	2,004,743	(150,000)	(23,295)	1,542,040	(2,324,866)	(864,353)	5,572,102	5,756,371	1,084,827	6,841,198

Profit for the period							139,235	139,235	47,919	187,154
Other comprehensive income (loss) for the period
Currency translation adjustment						(340,531)		(340,531)	(84,916)	(425,447)
Cash flow hedges, net of tax				14,800				14,800	1,385	16,185
Others				(1,761)				(1,761)	(200)	(1,961)
Total comprehensive income for the period	-	-	-	13,039	-	(340,531)	139,235	(188,257)	(35,812)	(224,069)

Dividends paid in cash (5)							(147,231)	(147,231)	-	(147,231)
Dividends paid in cash by subsidiary companies								-	(15,902)	(15,902)
Contributions from non-controlling shareholders in consolidated subsidiaries (6)								-	41,650	41,650

Balance at December 31, 2012	2,004,743	(150,000)	(23,295)	1,555,079	(2,324,866)	(1,204,884)	5,564,106	5,420,883	1,074,763	6,495,646

(1) Shareholders’ equity determined in accordance with accounting principles generally accepted in Luxembourg is disclosed in Note 25 (iii).

(2) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of USD 1.00 per share. As of December 31, 2012, there were 2,004,743,442 shares issued. All issued shares are fully paid.

(3) Include legal reserve under Luxembourg law for USD 200.5 million, undistributable reserves under Luxembourg law for USD 1.4 billion, hedge accounting reserve, net of tax effect, for USD 1.2 million and reserves related to the acquisition of non-controlling interest in subsidiaries according to IAS 27 for USD (58.5) million.

(4) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.

(5) Represents USD 0.075 per share (USD 0.75 per ADS).

(6) Corresponds to the contribution made by Nippon Steel Corporation in Tenigal, S.R.L. de C.V.

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 financial statements may not be wholly distributable. See Note 25 (iii). The accompanying notes are an integral part of these consolidated financial statements.

Page 5 of 73

TERNIUM S.A.

Consolidated Financial Statements as of December 31, 2012 and 2011

and for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Changes in Equity

	Attributable to the Company’s equity holders (1)
	Capital stock (2)	Treasury shares (3)	Initial public offering expenses	Reserves (4)	Capital stock issue discount (5)	Currency translation adjustment	Retained earnings	Total	Non-controlling interest	Total Equity
	Capital stock (2)	Treasury shares (3)	Initial public offering expenses	Reserves (4)	Capital stock issue discount (5)	Currency translation adjustment	Retained earnings	Total	Non-controlling interest	Total Equity

Balance at January 1, 2011	2,004,743	-	(23,295)	1,635,126	(2,324,866)	(517,432)	5,106,464	5,880,740	1,135,361	7,016,101

Profit for the period							513,540	513,540	136,367	649,907
Other comprehensive income (loss) for the period
Currency translation adjustment						(346,921)		(346,921)	(86,712)	(433,633)
Cash flow hedges, net of tax				6,243				6,243	1,190	7,433
Total comprehensive income for the period	-	-	-	6,243	-	(346,921)	513,540	172,862	50,845	223,707

Dividends paid in cash (6)				(99,329)			(47,902)	(147,231)	-	(147,231)
Dividends paid in cash by subsidiary companies								-	(140,579)	(140,579)
Repurchase of own shares to Usiminas (3)		(150,000)						(150,000)	-	(150,000)
Contributions from non-controlling shareholders in consolidated subsidiaries (7)								-	39,200	39,200

Balance at December 31, 2011	2,004,743	(150,000)	(23,295)	1,542,040	(2,324,866)	(864,353)	5,572,102	5,756,371	1,084,827	6,841,198

(1) Shareholders’ equity determined in accordance with accounting principles generally accepted in Luxembourg is disclosed in Note 25 (iii).

(2) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of USD 1.00 per share. As of December 31, 2011, there were 2,004,743,442 shares issued. All issued shares are fully paid.

(3) See note 30.

(4) Include legal reserve under Luxembourg law for USD 200.5 million, distributable reserves under Luxembourg law for USD 101.4 million, undistributable reserves under Luxembourg law for USD 1.4 billion, hedge accounting reserve, net of tax effect, for USD (14.9) million and reserves related to the acquisition of non-controlling interest in subsidiaries according to IAS 27 for USD (58.5) million.

(5) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.

(6) Represents USD 0.075 USD per share (USD 0.75 per ADS).

(7) Corresponds to the contribution made by Nippon Steel Corporation in Tenigal, S.R.L. de C.V.

Page 6 of 73

TERNIUM S.A.

Consolidated Financial Statements as of December 31, 2012 and 2011

and for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Changes in Equity

	Attributable to the Company’s equity holders (1)
	Capital stock (2)	Initial public offering expenses	Reserves (3)	Capital stock issue discount (4)	Currency translation adjustment	Retained earnings	Total	Non-controlling interest	Total Equity
	Capital stock (2)	Initial public offering expenses	Reserves (3)	Capital stock issue discount (4)	Currency translation adjustment	Retained earnings	Total	Non-controlling interest	Total Equity

Balance at January 1, 2010	2,004,743	(23,295)	1,726,216	(2,324,866)	(570,844)	4,484,388	5,296,342	964,897	6,261,239

Profit for the period						622,076	622,076	157,394	779,470
Other comprehensive income (loss) for the period
Currency translation adjustment					53,412		53,412	(17,497)	35,915
Cash flow hedges, net of tax			9,147				9,147	1,163	10,310
Total comprehensive income for the period	-	-	9,147	-	53,412	622,076	684,635	141,060	825,695

Dividends paid in cash (5)			(100,237)				(100,237)		(100,237)
Dividends paid in cash by subsidiary companies							-	(38,304)	(38,304)
Contributions from non-controlling shareholders in consolidated subsidiaries							-	4,900	4,900
Acquisition of business							-	62,808	62,808

Balance at December 31, 2010	2,004,743	(23,295)	1,635,126	(2,324,866)	(517,432)	5,106,464	5,880,740	1,135,361	7,016,101

(1) Shareholders’ equity determined in accordance with accounting principles generally accepted in Luxembourg is disclosed in Note 25 (iii).

(2) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of USD 1.00 per share. As of December 31, 2010, there were 2,004,743,442 shares issued. All issued shares are fully paid.

(3) Include legal reserve under Luxembourg law for USD 200.5 million, distributable reserves under Luxembourg law for USD 101.4 million, undistributable reserves under Luxembourg law for USD 1.4 billion, hedge accounting reserve, net of tax effect, for USD (22.4) million and reserves related to the acquisition of non-controlling interest in subsidiaries according to IAS 27 for USD (58.5) million.

(4) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.

(5) Represents USD 0.05 USD per share (USD 0.50 per ADS).

Page 7 of 73

TERNIUM S.A.

Consolidated Financial Statements as of December 31, 2012 and 2011

and for the years ended December 31, 2012, 2011 and 2010

Consolidated Statements of Cash Flows

		Year ended December 31,
	Notes	2012	2011	2010

Cash flows from operating activities
Profit for the period		187,154	649,907	779,470
Adjustments for:
Depreciation and amortization	12 & 13	370,855	395,989	374,201
Income tax accruals less payments	31 (b)	44,370	(260,264)	226,355
Equity in losses (earnings) of non-consolidated companies	3 & 14	346,833	(10,137)	(12,867)
Interest accruals less payments	31 (b)	816	43,047	(59)
Changes in provisions	20	5,754	29,932	5,543
Changes in working capital	31 (b)	23,533	(399,292)	(437,079)
Net foreign exchange results and others		75,777	173,188	(138,308)
Net cash provided by operating activities		1,055,092	622,370	797,256

Cash flows from investing activities