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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the fiscal year ended December 31, 2010
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 or
 o
    
    Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission file number: 001-32734
 TERNIUM S.A.
  N/A
 Grand Duchy of Luxembourg
 29, Avenue de la Porte-Neuve  3rd floor
L-2227 Luxembourg
 Alicia Alvarez
29, Avenue de la Porte-Neuve  3rd floor
L-2227 Luxembourg
Tel. +352 26 68 31 52, Fax. +352 26 68 31 53, e-mail: luxembourg@ternium.com
 
  Title of Each Class
    
    Name of Each Exchange On Which RegisteredAmerican Depositary Shares
    
    New York Stock ExchangeOrdinary Shares, par value USD1.00 per share
    
    New York Stock Exchange*
 
 *
    
    Ordinary shares of Ternium S.A. are not listed for trading
but only in connection with the registration of American
Depositary Shares which are evidenced by American Depositary
Receipts.
 
  None
  None
  2,004,743,442 ordinary shares, par value USD1.00 per share
  þ o
  o þ
   þ o
  o þ
  Large accelerated filer þ
    
    Accelerated Filer o
    
    Non-accelerated filer o
  U.S. GAAP o
    
    International Financial Reporting Standards as issued
by the International Accounting Standards Board þ
    
    Other o
  o o
  o þ
 Please send copies of notices and communications from the Securities and Exchange Commission to:
 Cristian J.P. Mitrani 
Mitrani, Caballero, Rosso Alba, Francia, 
Ojam & Ruiz Moreno Abogados 
Alicia Moreau de Justo 400, 3rd Floor 
C1007AAH  Buenos Aires, Argentina
(54-11) 4590-8600
    
    Robert S. Risoleo, Esq.
Sullivan & Cromwell LLP
1701 Pennsylvania Avenue N.W.
Washington, D.C. 20006
(202) 956-7500




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##### 



TABLE OF CONTENTS
 PART I
    
    
    6Item 1. Identity of Directors, Senior Management and Advisers
    
    
    6Item 2. Offer Statistics and Expected Timetable
    
    
    6Item 3. Key Information
    
    
    6Item 4. Information on the Company
    
    
    22Item 4A. Unresolved Staff Comments
    
    
    52Item 5. Operating and Financial Review and Prospects
    
    
    52Item 6. Directors, Senior Management and Employees
    
    
    74Item 7. Major Shareholders and Related Party Transactions
    
    
    84Item 8. Financial Information
    
    
    88Item 9. The Offer and Listing
    
    
    90Item 10. Additional Information
    
    
    91Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    103Item 12. Description of Securities Other Than Equity Securities
    
    
    106PART II
    
    
    107Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    107Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    107Item 15. Controls and Procedures
    
    
    108Item 16A. Audit Committee Financial Expert
    
    
    108Item 16B. Code of Ethics
    
    
    109Item 16C. Principal Accountant Fees and Services
    
    
    109Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    110Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    110Item 16F. Change in Registrants Certifying Accountant
    
    
    111Item 16G. Corporate Governance
    
    
    112PART III
    
    
    113Item 17. Financial Statements
    
    
    113Item 18. Financial Statements
    
    
    113Item 19. Exhibits
    
    
    114Exhibit 1.1Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 15.2
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CERTAIN DEFINED TERMS
 In this annual report, unless otherwise specified or if the context so
requires:
 
    
    References to the Company refer exclusively to Ternium S.A., a Luxembourg public
limited liability company (société anonyme);
 
    
    References in this annual report to Ternium, we, us or our refer to
Ternium S.A. and its consolidated subsidiaries;
 
    
    References to the Ternium companies are to the Companys manufacturing
subsidiaries, namely Ternium México, S.A. de C.V., a Mexican corporation (Ternium
Mexico), Siderar S.A.I.C., an Argentine corporation (Siderar), and Ferrasa S.A.S., a
Colombian corporation (Ferrasa), and their respective subsidiaries;
 
    
    References to Tenaris are to Tenaris S.A., a Luxembourg public limited liability
company (société anonyme) and a significant shareholder of the Company;
 
    
    References to San Faustin are to San Faustin S.A., a Luxembourg corporation and
the Companys indirect controlling shareholder;
 
    
    References to the Ternium network or Ternium Internacional are to an
international group of companies wholly owned by Ternium that market and provide
worldwide distribution services for products offered primarily by Ternium;
 
    
    References to ADSs are to the American Depositary Shares, which are evidenced by
American Depositary Receipts;
 
    
    References to tons are to metric tons; one metric ton is equal to 1,000
kilograms, 2,204.62 pounds or 1.102 U.S. (short) tons; and
 
    
    References to billions are to thousands of millions, or 1,000,000,000.
  2




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PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION
 Accounting Principles
   3




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Currencies
  
    
    dollars, U.S. dollars, USD or US$ each refers to the United States of America
dollar;
 
    
    Mexican pesos or MXN each refers to the Mexican peso; and
 
    
    Argentine pesos or ARP each refers to the Argentine peso.
 Banco de México Banco Central de la República
Argentina
 Rounding; Comparability of Data
  Our Internet Site is Not Part of this Annual Report
   4




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
    
    uncertainties about the behavior of steel consumers in the markets in which Ternium operates
and sells its products;
 
    
    changes in the pricing environments in the countries in which Ternium operates;
 
    
    the impact in the markets in which Ternium operates of existing and new competitors,
including competitors that offer less expensive products and services, desirable or
innovative products, or have extensive resources or better financing, and whose presence may
affect Terniums customer mix, revenues and profitability;
 
    
    increases in the prices of raw materials, other inputs or energy or difficulties in
acquiring raw materials or other inputs or energy supply cut-offs;
 
    
    the policies of, and the economic, political and social developments and conditions in, the
countries in which Ternium owns facilities or other countries which have an impact on
Terniums business activities or investments;
 
    
    inflation or deflation and foreign exchange rates in the countries in which Ternium
operates;
 
    
    volatility in interest rates;
 
    
    the performance of the financial markets globally and in the countries in which Ternium
operates;
 
    
    changes in domestic and foreign laws, regulations and taxes;
 
    
    regional or general changes in asset valuations;
 
    
    our ability to successfully implement our business strategy or to grow through acquisitions,
greenfield projects, joint ventures and other investments; and
 
    
    other factors or trends affecting the flat and long steel industry generally and our
financial condition in particular.
   5




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PART I
 
 Item 1.
    
    Identity of Directors, Senior Management and Advisers
 Not applicable.
 
 Item 2.
    
    Offer Statistics and Expected Timetable
 Not applicable.
 
 Item 3.
    
    Key Information
 A.
    
    Selected Financial Data
 The selected consolidated financial data (or selected combined consolidated financial data, as
applicable) set forth below have been derived from our audited consolidated financial
statements (or combined consolidated financial statements, as applicable) for each of the
years and at the dates indicated. Our consolidated financial statements were prepared in
accordance with IFRS, and were audited by Price Waterhouse & Co. S.R.L., Argentina, an
independent registered public accounting firm that is a member firm of PricewaterhouseCoopers.
    6




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In thousands of U.S. dollars
    
    For the year ended December 31,(except number of shares and per share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Selected consolidated income statement dataContinuing operationsNet sales
    
    
    7,382,004
    
    
    
    4,958,983
    
    
    
    8,464,885
    
    
    
    5,633,366
    
    
    
    4,484,918Cost of sales
    
    
    (5,665,254
    )
    
    
    (4,110,370
    )
    
    
    (6,128,027
    )
    
    
    (4,287,671
    )
    
    
    (3,107,629
    )Gross profit
    
    
    1,716,750
    
    
    
    848,613
    
    
    
    2,336,858
    
    
    
    1,345,695
    
    
    
    1,377,289Selling, general and administrative expenses
    
    
    (665,306
    )
    
    
    (531,530
    )
    
    
    (669,473
    )
    
    
    (517,433
    )
    
    
    (370,727
    )Other operating income (expenses), net
    
    
    2,493
    
    
    
    (20,700
    )
    
    
    8,662
    
    
    
    8,514
    
    
    
    (4,739
    )Operating income
    
    
    1,053,937
    
    
    
    296,383
    
    
    
    1,676,047
    
    
    
    836,776
    
    
    
    1,001,823Interest expense
    
    
    (72,969
    )
    
    
    (105,810
    )
    
    
    (136,111
    )
    
    
    (133,109
    )
    
    
    (96,814
    )Interest income
    
    
    27,347
    
    
    
    21,141
    
    
    
    32,178
    
    
    
    41,613
    
    
    
    33,903Interest income  Sidor financial asset
    
    
    61,012
    
    
    
    135,952
    
    
    
    
    
    
    
    
    
    
    
    Other financial income (expenses), net
    
    
    115,112
    
    
    
    81,639
    
    
    
    (693,192
    )
    
    
    (38,498
    )
    
    
    (40,432
    )Equity in earnings of associated companies
    
    
    1,688
    
    
    
    1,110
    
    
    
    1,851
    
    
    
    434
    
    
    
    671Income before income tax expense
    
    
    1,186,127
    
    
    
    430,415
    
    
    
    880,773
    
    
    
    707,216
    
    
    
    899,151Income tax (expense) benefitCurrent and deferred income tax expense
    
    
    (406,657
    )
    
    
    (91,314
    )
    
    
    (258,969
    )
    
    
    (291,345
    )
    
    
    (353,044
    )Reversal of deferred statutory profit sharing
    
    
    
    
    
    
    
    
    
    
    96,265
    
    
    
    
    
    
    
    Income from continuing operations
    
    
    779,470
    
    
    
    339,101
    
    
    
    718,069
    
    
    
    415,871
    
    
    
    546,107Discontinued operationsIncome from discontinued operations
    
    
    
    
    
    
    428,023
    
    
    
    157,095
    
    
    
    579,925
    
    
    
    444,468Profit for the year (1)
    
    
    779,470
    
    
    
    767,124
    
    
    
    875,164
    
    
    
    995,796
    
    
    
    990,575Attributable to:Equity holders of the Company
    
    
    622,076
    
    
    
    717,400
    
    
    
    715,418
    
    
    
    784,490
    
    
    
    795,424Non-controlling interest
    
    
    157,394
    
    
    
    49,724
    
    
    
    159,746
    
    
    
    211,306
    
    
    
    195,151779,470
    
    
    
    767,124
    
    
    
    875,164
    
    
    
    995,796
    
    
    
    990,575Depreciation and amortization
    
    
    383,300
    
    
    
    385,105
    
    
    
    413,541
    
    
    
    355,271
    
    
    
    251,371Weighted average number of shares outstanding
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    1,936,833,060Basic earnings per share (expressed in USD per
share) for profit: (1) (2)From continuing operations attributable to
the equity holders of the Company
    
    
    0.31
    
    
    
    0.15
    
    
    
    0.27
    
    
    
    0.15
    
    
    
    0.20From discontinued operations attributable to the
equity holders of the Company
    
    
    
    
    
    
    0.21
    
    
    
    0.09
    
    
    
    0.24
    
    
    
    0.21For the year attributable to the equity holders
of the Company
    
    
    0.31
    
    
    
    0.36
    
    
    
    0.36
    
    
    
    0.39
    
    
    
    0.41Dividends per share declared
    
    
    0.075
    
    
    
    0.05
    
    
    
    
    
    
    
    0.05
    
    
    
    0.05
 (1)
    
    International Accounting Standard N° 1 (IAS 1) (Revised) requires that income for the
year as shown in the income statement includes the portion attributable to non-controlling
interest. Basic earnings per share, however, continue to be calculated on the basis of
income attributable solely to the equity holders of the Company.(2)
    
    Diluted earnings per share (expressed in USD per share), equals basic earnings per
share. Diluted earnings per share have been calculated giving effect to the conversion of
certain subordinated convertible loans.  7




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In thousands U.S. dollars(except number of shares and per
    
    At December 31,share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Selected consolidated balance
sheet dataNon-current assets
    
    
    5,579,438
    
    
    
    5,250,135
    
    
    
    5,491,408
    
    
    
    8,553,123
    
    
    
    6,029,383Property, plant and equipment, net
    
    
    4,262,896
    
    
    
    4,040,415
    
    
    
    4,212,313
    
    
    
    6,776,630
    
    
    
    5,335,030Other non-current assets (1)
    
    
    1,316,542
    
    
    
    1,209,720
    
    
    
    1,279,095
    
    
    
    1,776,493
    
    
    
    694,353Current assets
    
    
    5,532,893
    
    
    
    5,042,538
    
    
    
    5,179,839
    
    
    
    5,095,959
    
    
    
    2,628,870Cash and cash equivalents
    
    
    1,779,416
    
    
    
    2,095,798
    
    
    
    1,065,552
    
    
    
    1,125,830
    
    
    
    643,291Other current assets (2)
    
    
    3,743,516
    
    
    
    2,937,494
    
    
    
    4,108,954
    
    
    
    3,200,987
    
    
    
    1,978,537Non-current assets classified as
held for sale
    
    
    9,961
    
    
    
    9,246
    
    
    
    5,333
    
    
    
    769,142
    
    
    
    7,042Total assets
    
    
    11,112,331
    
    
    
    10,292,673
    
    
    
    10,671,247
    
    
    
    13,649,082
    
    
    
    8,658,253Capital and reserves attributable
to the Companys equity holders
(3)
    
    
    5,880,740
    
    
    
    5,296,342
    
    
    
    4,597,370
    
    
    
    4,452,680
    
    
    
    3,757,558Non-controlling interest
    
    
    1,135,361
    
    
    
    964,897
    
    
    
    964,094
    
    
    
    1,805,243
    
    
    
    1,626,119Non-current liabilities
    
    
    2,540,594
    
    
    
    2,872,667
    
    
    
    3,374,964
    
    
    
    5,401,549
    
    
    
    1,867,892Borrowings
    
    
    1,426,574
    
    
    
    1,787,204
    
    
    
    2,325,867
    
    
    
    3,676,072
    
    
    
    546,601Deferred income tax
    
    
    877,742
    
    
    
    857,297
    
    
    
    810,160
    
    
    
    1,327,768
    
    
    
    982,091Other non-current liabilities
    
    
    236,278
    
    
    
    228,166
    
    
    
    238,937
    
    
    
    397,709
    
    
    
    339,200Current liabilities
    
    
    1,555,636
    
    
    
    1,158,767
    
    
    
    1,734,819
    
    
    
    1,989,610
    
    
    
    1,406,684Borrowings
    
    
    513,083
    
    
    
    539,525
    
    
    
    941,460
    
    
    
    406,239
    
    
    
    507,241Other current liabilities
    
    
    1,042,553
    
    
    
    619,242
    
    
    
    793,359
    
    
    
    1,369,608
    
    
    
    899,443Liabilities directly associated
with non-current assets
classified as held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213,763
    
    
    
    Total liabilities
    
    
    4,096,230
    
    
    
    4,031,434
    
    
    
    5,109,783
    
    
    
    7,391,159
    
    
    
    3,274,576Total equity and liabilities
    
    
    11,112,331
    
    
    
    10,292,673
    
    
    
    10,671,247
    
    
    
    13,649,082
    
    
    
    8,658,253Number of shares outstanding
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
 (1)
    
    As of December 31, 2010, 2009, 2008, 2007 and 2006, includes goodwill mainly related
to the acquisition of our Mexican subsidiaries for a total amount of USD750.1, USD708.6,
USD683.7, USD850.7 and USD397.9 million, respectively.(2)
    
    As of December 31, 2010, 2009, 2008 and 2007, includes deposits with maturity of more
than three months for a total amount of USD848.4, USD46.8, USD90.0 and USD65.3 million,
respectively.(3)
    
    The Companys share capital as of December 31, 2010, 2009, 2008, 2007 and 2006 was
represented by 2,004,743,442 shares, par value USD1.00 per share, for a total amount of
USD2,004.7 million. B.
    
    Capitalization and IndebtednessNot applicable.C.
    
    Reasons for the Offer and Use of ProceedsNot applicable.D.
    
    Risk FactorsYou should carefully consider the risks and uncertainties described below, together with all
other information contained in this annual report, before making any investment decision. Any
of these risks and uncertainties could have a material adverse effect on our business,
financial condition and results of operations, which could in turn affect the price of the
Companys shares and ADSs.
  8




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Risks Relating to the Steel Industry
 A downturn in the global economy would cause a reduction in worldwide demand for steel and
would have a material adverse effect on the steel industry and Ternium.
   A protracted fall in steel prices would have a material adverse effect on the results of
Ternium, as could price volatility.
   A sudden increase in exports from China could have a significant impact on international steel
prices affecting Terniums profitability.
   9




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Excess capacity, resulting in part from the recent financial crisis that reduced steel demand
and from a strong increase in steel production capacity in recent years, may hamper the steel
industrys ability to sustain adequate profitability.
  Sales may fall as a result of fluctuations in industry inventory levels.
  Price fluctuations or shortages in the supply of raw materials, slabs and energy could
adversely affect Terniums profitability.
  The Ternium companies depend on a limited number of key suppliers.
   10




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Intense competition could cause Ternium to lose its share in certain markets and adversely
affect its sales and revenues.
     Risks Relating to our Business
 If Ternium does not successfully implement its business strategy, its opportunities for growth
and its competitive position could be adversely affected.
  Recent and future acquisitions, green-field projects, significant investments and strategic
alliances could disrupt Terniums operations and adversely affect its profits. Ternium may not
realize the benefits it expects from these business decisions.
    11




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Ternium may be required to record a significant charge to earnings if it must reassess its
goodwill or other amortizable intangible assets.
  Labor disputes at Terniums operating subsidiaries could result in work stoppages and
disruptions to Terniums operations.
     Terniums related party transactions with companies controlled by San Faustin may not always
be on terms as favorable as those that could be obtained from unaffiliated third parties.
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Following the completion of the Sidor nationalization process, Ternium is exposed to credit
concentration risk with Venezuela.
   Changes in exchange rates or any limitation in the Ternium companies ability to hedge against
exchange rate fluctuations could adversely affect Terniums business and results.
   Risks Relating to our Mining Activities
  Our mining activities depend on governmental concessions and on our ability to reach and
maintain lease agreements (or other agreements for the use of land) with the owner of the real
estate where the mines are located.
   13




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Our exploration activities are subject to uncertainties as to the result of such exploration;
even if the exploration activities lead to the discovery of ore deposits, the effective
exploitation of such deposits remains subject to several risks.
  Our expected costs for exploration or exploitation activities may vary significantly and
affect our expected results.
  Difficulties in the relationships with local communities may adversely affect our mining
activities.
  Risks Relating to the Structure of the Company
 As a holding company, the Companys ability to pay cash dividends depends on the results of
operations and financial condition of its subsidiaries and could be restricted by legal,
contractual or other limitations.
    14




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The Companys controlling shareholder may be able to take actions that do not reflect the will
or best interests of other shareholders.
  Remaining minority interests in our subsidiaries could delay or impede our ability to complete
our strategy.
  Administración Nacional de la Seguridad Social
   Risks Relating to the Countries in Which We Operate
 Negative economic, political and regulatory developments in certain markets where Ternium has
a significant portion of its operations and assets could hurt Terniums financial condition,
shipments and prices and disrupt its manufacturing operations, thereby adversely affecting its
results of operations and financial condition.
  Mexico
   15




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Economic and social conditions and government policies in Mexico could negatively impact
Terniums business and results of operations.
 ,
 Mexican peso volatility could have a negative impact on Terniums financial condition.
  Changes in the Mexican tax system could have an adverse effect on Terniums Mexican
operations.
 impuesto empresarial a tasa única impuesto al activo
   Argentina
   16




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Economic and political instability, which resulted in a severe recession in 2002, may occur in
the future, thereby adversely affecting our business, financial condition and results.
     Inflation may undermine economic growth in Argentina and impact our costs, thereby adversely
affecting our results of operations and financial position.
 Instituto Nacional de
Estadística y Censos
  The Argentine government has increased taxes on Argentine companies and could further increase
the fiscal burden in the future.
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The Argentine Central Bank has imposed restrictions on the transfer of funds outside of
Argentina and other exchange controls in the past and may do so in the future, which could
prevent Ternium from paying dividends or other amounts from cash generated by Siderars
operations.
  Restrictions on the supply of energy to Siderars operations in Argentina could curtail
Siderars production and negatively impact Terniums results of operations.
  Colombia
  Colombia has experienced internal security issues that have had or could have in the future a
negative effect on the Colombian economy.
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Colombian peso volatility could have a negative impact on Terniums financial condition.
  Certain Regulatory Risks and Litigation Risks
 International trade actions or regulations and trade-related legal proceedings could adversely
affect Terniums sales, revenues and overall business.
    The cost of complying with environmental regulations and potential environmental and product
liabilities may increase our operating costs and negatively impact our business, financial
condition, results of operations and prospects.
    19




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Risks Relating to our ADSs
 The market price for our ADSs could be highly volatile.
   In deciding whether to purchase, hold or sell our ADSs, you may not be able to access as much
information about us as you would in the case of a U.S. company.
   20




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Holders of our ADSs may not be able to exercise, or may encounter difficulties in the exercise
of, certain rights afforded to shareholders.
  Holders of our shares and ADSs in the United States may not be able to exercise preemptive
rights in certain cases.
  
    
    for, within, in conjunction with or related to, an initial
public offering of the shares of the Company on one or more regulated markets (in one or more instances);
 
    
    for consideration other than cash;
 
    
    upon conversion of convertible bonds or other instruments convertible into shares
of the Company; provided, however, that the preemptive subscription rights of the then
existing shareholders shall apply in connection with any issuance of convertible bonds or
other instruments convertible into shares of the Company for cash; or
 
    
    subject to a certain maximum percentage, as compensation to directors, officers,
agents or employees of the Company, its direct or indirect subsidiaries or its
affiliates, including without limitation the direct issuance of
shares or the issuance of shares upon exercise of options, rights convertible into shares or similar instruments
convertible or exchangeable into shares issued or created to provide compensation or
incentives to directors, officers, agents or employees of the Company, its direct or
indirect subsidiaries or its affiliates.
    21




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##### Table of Contents



It may be difficult to obtain or enforce judgments against the Company in U.S. courts or
courts outside of the United States.
 société anonyme
 
 Item 4.
    
    Information on the Company
 Overview
     A.
    
    History and Development of the Company
 The Company
 societé anonyme rd
 Ternium
   22




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##### Table of Contents



empresas del Estado
  23




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##### Table of Contents



B.
    
    Business Overview
 Our Business Strategy
    Enhance Terniums position as a low cost steel producer.We are focused on improving
utilization levels of our plants, increasing efficiency and further reducing production costs
from levels that we already consider to be among the most competitive in the steel industry
through, among other measures, capital investments and further integration of our facilities;
  Pursue strategic growth opportunities.We have a history of strategically growing our
businesses through acquisitions and joint ventures. In addition to strongly pursuing organic
growth, we intend to identify and actively pursue growth-enhancing strategic opportunities to
consolidate Terniums presence in its main markets and expand it to the rest of Latin America,
gain further access to iron ore and other inputs, expand its offerings of value-added
products, increase its steel production, and increase its distribution capabilities. In this
regard, our Ferrasa acquisition in Colombia in 2010 allowed Ternium to expand its business and
commercial presence in a country that is experiencing significant growth; Maximize the benefits arising from Terniums broad distribution network.We intend to
maximize the benefits arising from Terniums broad network of distribution, sales and
marketing services to reach customers in major steel markets with a comprehensive range of
value-added products and services and to continue to expand its customer base and improve its
product mix; Focus on higher margin value-added products.We intend to continue to shift Terniums sales
mix towards higher margin value-added products, such as cold-rolled sheets and coated and
tailor-made products, and services, such as just-in-time delivery and inventory management. In
this regard, the pickling, cold-rolling, annealing and tempering lines planned in the vicinity
of Monterrey City, will allow Ternium to increase its offering of cold-rolled and galvanized
products to meet the demanding requirements of our industrial customers in Mexico; and Implementing Terniums best practices.We believe that the implementation of Terniums
managerial, commercial and production best practices in acquired new businesses should
generate additional benefits and savings. For example, the implementation of Terniums cost
control procedures and performance analysis in Ternium Mexico improved control over its
production variables and led to cost savings.
  24




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##### Table of Contents



Our Competitive Strengths
   State-of-the-art and flexible production system, low cost producer.The combination of a
portfolio of state-of-the-art, low cost steel production mills, access to diversified sources
of raw materials, including proprietary iron ore mines in Mexico, diversified technology base,
including blast furnace based, mini-mill based and non-integrated based steel processing
facilities, and cost-competitive labor sources makes Ternium a low-cost producer of steel and
a cost-competitive producer of value-added products;
  Strong market position and extensive market reach.Ternium has a leading participation in
the market for flat steel products in Mexico and Argentina and is a significant supplier of
steel products in Colombia and in various other countries in South and Central America. The
location of its production facilities gives Ternium favorable access to the most important
regional markets in the Americas, including the North American Free Trade Agreement, or NAFTA,
and Mercado Común del Sur, or Mercosur; and
  Experienced and committed management team.Our management team has extensive experience in,
and knowledge of, the steel industry, which enhances Terniums reputation in the global steel
markets. A large percentage of our senior managers have spent their entire careers working
within the steel businesses of San Faustin and its affiliates. Our management team has
substantial experience in increasing productivity and reducing costs, as well as in
identifying, evaluating and pursuing growth opportunities and integrating acquisitions.
 Our Products
  Flat steel products
 Slabs:
 Hot-rolled flat products:
 Cold-rolled products:
 Tin plate and tin free:
  25




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##### Table of Contents



Hot dipped galvanized and pre-painted sheets:
 Electrogalvanized and pre-painted sheets:
 Steel pipes and tubular products:
 Beams:
 Roll formed products:
 Long steel products
 Steel billets:
 Steel round bars:
 Wire rod:
 Bars:
 Stirrups:
 Other products
 Pre-engineered metal building systems:
  26




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##### Table of Contents



Pig iron:
 Iron ore pellets:
  Production Facilities and Processes
   Steel production facilities, service centers and distribution centers
  Capacity (thousand tons per year)1Production asset
    
    Quantity
    
    
    Mexico
    
    
    Argentina
    
    
    Other
    
    
    TotalCoke Plant
    
    
    4
    
    
    
    
    
    
    
    1,030
    
    
    
    
    
    
    
    1,030Sinter Plant
    
    
    1
    
    
    
    
    
    
    
    1,490
    
    
    
    
    
    
    
    1,490Direct Reduced Iron Plant
    
    
    3
    
    
    
    2,690
    
    
    
    
    
    
    
    
    
    
    
    2,690Blast Furnace
    
    
    2
    
    
    
    
    
    
    
    3,890
    
    
    
    
    
    
    
    3,890Electric Arc Furnace
    
    
    5
    
    
    
    3,770
    
    
    
    
    
    
    
    160
    
    
    
    3,930Basic Oxygen Furnace
    
    
    3
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000Thin Slab Continuous Caster
    
    
    1
    
    
    
    2,050
    
    
    
    
    
    
    
    
    
    
    
    2,050Slab Continuous Caster
    
    
    1
    
    
    
    
    
    
    
    2,880
    
    
    
    
    
    
    
    2,880Billet Continuous Caster
    
    
    3
    
    
    
    1,660
    
    
    
    
    
    
    
    150
    
    
    
    1,810Slab  Rolling Mill
    
    
    4
    
    
    
    5,700
    
    
    
    2,790
    
    
    
    
    
    
    
    8,490Skin  Pass Mill
    
    
    4
    
    
    
    2,130
    
    
    
    940
    
    
    
    
    
    
    
    3,070Billet  Rolling Mill
    
    
    4
    
    
    
    1,080
    
    
    
    
    
    
    
    160
    
    
    
    1,240Pickling Line
    
    
    8
    
    
    
    3,500
    
    
    
    1,790
    
    
    
    
    
    
    
    5,290Cold-Rolling Mill (Tandem or Reversing)
    
    
    9
    
    
    
    2,540
    
    
    
    1,770
    
    
    
    
    
    
    
    4,310Electrolytic Cleaning
    
    
    4
    
    
    
    1,220
    
    
    
    200
    
    
    
    
    
    
    
    1,420Annealing Line
    
    
    4
    
    
    
    1,240
    
    
    
    1,240
    
    
    
    
    
    
    
    2,480Temper Mill
    
    
    6
    
    
    
    1,320
    
    
    
    1,770
    
    
    
    
    
    
    
    3,090Tension-Leveling / Inspection Line
    
    
    7
    
    
    
    800
    
    
    
    980
    
    
    
    
    
    
    
    1,780Electro-tin plating line
    
    
    1
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    160Hot Dip Galvanizing Line
    
    
    12
    
    
    
    1,430
    
    
    
    550
    
    
    
    390
    
    
    
    2,370Electro-galvanizing Line
    
    
    1
    
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    120Color  Coating Line
    
    
    8
    
    
    
    660
    
    
    
    110
    
    
    
    180
    
    
    
    950Slitter
    
    
    37
    
    
    
    1,960
    
    
    
    450
    
    
    
    280
    
    
    
    2,690Cut to length
    
    
    37
    
    
    
    550
    
    
    
    860
    
    
    
    130
    
    
    
    1,540Roll forming Line
    
    
    35
    
    
    
    490
    
    
    
    410
    
    
    
    280
    
    
    
    1,180Panel Line
    
    
    4
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    80Profile Line
    
    
    16
    
    
    
    190
    
    
    
    
    
    
    
    80
    
    
    
    270Tube Line
    
    
    23
    
    
    
    500
    
    
    
    200
    
    
    
    50
    
    
    
    750Structural beams Lines
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50Wire drawing Lines
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    110Wire Mesh Lines
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    30Rebar Processing Lines2
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100
 1
    
    In this annual report annual production capacity is calculated based on
management estimates of standard productivity, product mix allocations, the maximum
number of possible working shifts and a continued flow of supplies to the production
process.2
    
    Include shears, straighteners, stirrup benders and shaping centers.  27




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##### Table of Contents



North America Region.
  Type of PlantService
    
    DistributionUnit
    
    Country
    
    Integrated
    
    Downstream
    
    Center
    
    Center
    
    Location
    
    
    ProductsGuerrero1
    
    Mexico
    
    X
    
    
    
    X
    
    
    
    San Nicolás d.l.G., Nuevo León
    
    FlatNorte2
    
    Mexico
    
    X
    
    
    
    
    
    
    
    Apodaca, Nuevo León
    
    LongPuebla3
    
    Mexico
    
    X
    
    
    
    
    
    
    
    Puebla, Puebla
    
    LongJuventud4
    
    Mexico
    
    
    
    X
    
    X
    
    
    
    San Nicolás d.l.G., Nuevo León
    
    FlatChurubusco5
    
    Mexico
    
    
    
    X
    
    X
    
    
    
    Monterrey, Nuevo León
    
    FlatMonclova6
    
    Mexico
    
    
    
    X
    
    
    
    
    
    Monclova, Coahuila
    
    FlatUniversidad7
    
    Mexico
    
    
    
    X
    
    
    
    
    
    San Nicolás d.l.G., Nuevo León
    
    FlatApodaca Industrial8
    
    Mexico
    
    
    
    
    
    X
    
    
    
    Apodaca, Nuevo León
    
    FlatApodaca Comercial9
    
    Mexico
    
    
    
    
    
    X
    
    
    
    Apodaca, Nuevo León
    
    FlatVarco-Pruden10
    
    Mexico
    
    
    
    
    
    X
    
    
    
    Ciénaga de Flores, Nuevo León
    
    Metal buildingsSan Luis11
    
    Mexico
    
    
    
    
    
    X
    
    
    
    San Luis, San Luis Potosí
    
    FlatDC Chihuahua
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Chihuahua, Chihuahua
    
    FlatDC BC
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Tijuana, Baja California
    
    FlatDC MTY
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Monterrey, Nuevo León
    
    FlatDC Puebla
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Puebla, Puebla
    
    FlatDC Guadalajara
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Guadalajara, Jalisco
    
    FlatDC Mexico
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Naucalpan, Estado De México
    
    FlatDC Culiacán
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Culiacán, Sinaloa
    
    FlatDC Veracruz
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Veracruz, Veracruz
    
    FlatDC Mérida
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Mérida, Yucatán
    
    FlatDC Tuxtla
    
    Mexico
    
    
    
    
    
    
    
    X
    
    Tuxtla Gtz, Chiapas
    
    FlatShreveport12
    
    USA
    
    
    
    X
    
    
    
    
    
    Shreveport, Louisiana
    
    Flat
  28




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##### Table of Contents



1
    
    The Guerrero unit, located in the metropolitan area of Monterrey, Nuevo León,
Mexico, produces hot-rolled and cold-rolled coils for the industrial, construction and
home appliance sectors and for further processing in other Ternium Mexicos units. It
also produces slitted and cut-to-length products for the industrial sector, and profiles
and tubes for the industrial and construction sectors. This unit includes two steel
service centers, a slab-rolling mill, and an integrated facility based on direct reduced
iron, mini-mill steelmaking and thin-slab casting/rolling mill technologies that uses
iron ore pellets and steel scrap as main raw materials. The facility sources all of the
iron ore from Ternium Mexicos mining operations and the electricity and natural gas from
the Mexican grid. In addition, the facility sources its net requirements of slabs from
Mexican and international producers. Terniums procurement policy for these products is
described in greater depth in Item 4. Information on the CompanyB. Business Overview.
Raw Materials, Energy and Other Inputs.2
    
    The Norte unit in Nuevo León, Mexico, produces billets and rebar for the
construction industry. It is an integrated facility based on mini-mill steelmaking
technology that uses steel scrap as its main raw material. The facility sources
electricity from the Mexican grid. Terniums procurement policy for these products is
described in greater depth in Item 4. Information on the CompanyB. Business Overview.
Raw Materials, Energy and Other Inputs.3
    
    The Puebla unit in Puebla, Mexico, produces rebar and wire rod mainly for the
construction and industrial sectors, including high-carbon, low-carbon and micro-alloyed
wire rod. It is an integrated facility based on direct reduced iron and mini-mill
steelmaking technologies that uses iron ore pellets and steel scrap as main raw
materials. The facility sources all of the iron ore from Ternium Mexicos mining
operations and the electricity and natural gas from the Mexican grid. Terniums
procurement policy for these products is described in greater depth in Item 4.
Information on the CompanyB. Business Overview. Raw Materials, Energy and Other
Inputs.4
    
    The Juventud unit in Nuevo León, Mexico, produces galvanized and color coated
coils for the construction, home appliance and other industries and has a steel service
center that produces slitted and roll-formed products, panels and tubes for the
construction and industrial sectors. This plant processes hot-rolled and cold-rolled
coils received from Ternium Mexicos units in Nuevo León.5
    
    The Churubusco unit in Nuevo León, Mexico, produces hot-rolled and cold-rolled
coils for industrial, construction and home appliance sectors and for further processing
in other Ternium Mexicos units. It also produces slitted and cut-to-length products for
the industrial sector. The facility sources its requirements of slabs from other Mexican
producers and from the international markets. Terniums procurement policy for slabs is
described in greater depth in Item 4. Information on the CompanyB. Business Overview.
Raw Materials, Energy and Other Inputs.6
    
    The Monclova unit in Coahuila, Mexico, produces galvanized and color coated
sheets for the home appliance industry. This plant procceses cold-rolled coils mainly
received from Ternium Mexicos units in Nuevo León.7
    
    The Universidad unit in Nuevo León, Mexico, located across the street from the
Guerrero unit, produces galvanized and color coated coils for the construction, home
appliance and industrial sectors. This plant, which also has a cold-rolling mill,
processes hot-rolled coils received from Ternium Mexicos units in Nuevo León.8
    
    The Apodaca Industrial unit in Nuevo León, Mexico, is a steel service center
that produces slitted and cut-to-length products for industrial customers. This plant
processes coated coils mainly received from Ternium Mexicos units in Nuevo León.9
    
    The Apodaca Comercial unit in Nuevo León, Mexico, is a steel service center that
produces slitted and roll-formed products, profiles and tubes for the construction
industry. This plant processes coated coils mainly received from Ternium Mexicos units
in Nuevo León.10
    
    The Varco-Pruden unit in Nuevo León, Mexico, produces metal buildings systems
for commercial construction. This plant processes heavy plates procured from the local
and international markets and coils received from Ternium Mexicos units in Nuevo León.11
    
    The San Luis unit in San Luis Potosí, Mexico, is a steel service center that
produces slitted and cut-to-length products for the home appliance and other industries.
This plant processes coated coils received from Ternium Mexicos units in Nuevo León.12
    
    The Shreveport unit in Lousiana, US, produces galvanized and color coated
sheets. It processes cold-rolled coils procured in the international markets.  29




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##### Table of Contents



South and Central America Region.
  Type of PlantService
    
    DistributionUnit
    
    Country
    
    Integrated
    
    Downstream
    
    Center
    
    Center
    
    Location
    
    ProductsSan Nicolás13
    
    Argentina
    
    X
    
    
    
    
    
    
    
    Ramallo, Buenos Aires
    
    FlatCanning14
    
    Argentina
    
    
    
    X
    
    X
    
    
    
    Canning, Buenos Aires
    
    FlatHaedo14
    
    Argentina
    
    
    
    X
    
    X
    
    
    
    Haedo, Buenos Aires
    
    FlatFlorencio Varela15
    
    Argentina
    
    
    
    X
    
    X
    
    
    
    Florencio Varela, Buenos Aires
    
    FlatEnsenada16
    
    Argentina
    
    
    
    X
    
    
    
    
    
    Ensenada, Buenos Aires
    
    FlatRosario17
    
    Argentina
    
    
    
    
    
    X
    
    
    
    Rosario, Santa Fe
    
    FlatSan Luis17
    
    Argentina
    
    
    
    
    
    X
    
    
    
    San Luis, San Luis
    
    FlatServiacero III18
    
    Argentina
    
    
    
    
    
    X
    
    
    
    Ramallo, Buenos Aires
    
    FlatSidercrom19
    
    Argentina
    
    
    
    
    
    X
    
    
    
    Ramallo, Buenos Aires
    
    FlatManizales Acasa20
    
    Colombia
    
    X
    
    
    
    
    
    
    
    Manizales, Caldas
    
    LongBarranquilla21
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Malambo, Atlántico
    
    FlatItaguí22
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Itaguí, Antioquía
    
    LongCalí Perfilamos23
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Puerto Tejada, Cauca
    
    FlatMedellín24
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Medellín, Antioquía
    
    Flat and longBogotá24
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Bogotá, Cundinamarca
    
    Flat and longCalí Ferrasa24
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Calí, Valle del Cauca
    
    Flat and longMontería24
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Montería, Córdoba
    
    Flat and longManizales Ferrasa24
    
    Colombia
    
    
    
    
    
    X
    
    
    
    Manizales, Caldas
    
    Flat and longVilla Nueva25
    
    Guatemala
    
    
    
    X
    
    X
    
    
    
    Villa Nueva, Guatemala
    
    FlatDC Norte
    
    Guatemala
    
    
    
    
    
    
    
    X
    
    Guatemala, Guatemala
    
    FlatDC Occidente
    
    Guatemala
    
    
    
    
    
    
    
    X
    
    Mazatenango, Suchitepéquez
    
    FlatTegucigalpa26
    
    Honduras
    
    
    
    
    
    X
    
    
    
    San Pedro Sula, Cortés
    
    FlatDC Tegucigalpa
    
    Honduras
    
    
    
    
    
    
    
    X
    
    Tegucigalpa, Distrito Central
    
    FlatSan Salvador26
    
    El Salvador
    
    
    
    
    
    X
    
    
    
    San Salvador, San Salvador
    
    FlatDC San Miguel
    
    El Salvador
    
    
    
    
    
    
    
    X
    
    San Miguel, San Miguel
    
    FlatManagua26
    
    Nicaragua
    
    
    
    
    
    X
    
    
    
    Managua, Managua
    
    FlatHeredia27
    
    Costa Rica
    
    
    
    
    
    X
    
    
    
    Heredia, Heredia
    
    FlatPanamá24
    
    Panama
    
    
    
    
    
    X
    
    
    
    Panama, Panama
    
    Long
  30




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##### Table of Contents



13
    
    The San Nicolás unit in the Province of Buenos Aires, Argentina, produces
hot-rolled, cold-rolled and tinplate coils for the construction, industrial and packaging
sectors and for further processing in other Siderars units. San Nicolás includes an
integrated facility based on blast furnace and basic oxygen furnace technologies,
supplemented with a sinter plant, coking batteries, a by-product plant and a power plant.
It uses metallurgical coal and iron ore lumps, pellets and fines as main raw materials.
The facility sources all of its coal and iron ore needs from the international markets,
shipped to its own port on the banks of the Paraná river. It sources the natural gas from
the Argentine grid, produces most of its electricity needs in its own power plant and
sources its net requirements of electricity from the Argentine grid. Terniums
procurement policy for these products is described in greater depth in Item 4.
Information on the CompanyB. Business Overview. Raw Materials, Energy and Other
Inputs.14
    
    The Canning and Haedo units in the Province of Buenos Aires, Argentina, produce
galvanized sheets, slitted and roll-formed products and profiles for the construction and
home appliance sectors. In addition, the Canning facility produces color coated sheets
for such markets. Both plants process cold-rolled coils received from Siderars San
Nicolás and Ensenada units.15
    
    The Florencio Varela unit in the Province of Buenos Aires, Argentina, produces
electro-galvanized sheets, blanks and slitted products for the automotive, construction
and other industries. This plant processes cold-rolled coils received from Siderars San
Nicolás and Ensenada units.16
    
    The Ensenada unit in the Province of Buenos Aires, Argentina, produces
cold-rolled coils for the construction and industrial sectors and for further processing
in Siderars own facilities. This plant processes hot-rolled coils received from
Siderars San Nicolás unit.17
    
    The Rosario unit in the Province of Santa Fe, Argentina, and the San Luis unit
in the Province of San Luis, Argentina, are steel service centers that produce tubes for
the construction industry. These plants process hot-rolled coils received from Siderars
San Nicolás unit.18
    
    The Serviacero III unit in the Province of Buenos Aires, Argentina, is a steel
service center that produces cut-to-length products for the construction and industrial
sectors. This plant processes hot-rolled coils received from Siderars San Nicolás unit.19
    
    The Sidercrom unit in the Province of Buenos Aires, Argentina, is a steel
service center that produces cut-to-length and slitted products for the packaging sector.
This plant processes tinplate coils received from Siderars San Nicolás unit.20
    
    The Manizales Acasa unit in Caldas, Colombia, produces billets and rebar for the
construction industry. It is an integrated facility based on mini-mill steelmaking
technology that uses steel scrap as its main raw material. The facility sources all of its scrap and electricity needs from local suppliers. Terniums
procurement policy for these products is described in greater depth in Item 4. Information
on the CompanyB. Business OverviewRaw Materials, Energy and Other Inputs.21
    
    The Barranquilla unit in Atlántico, Colombia, is a steel service center that
produces slitted, cut-to-length, drawn wire, wire mesh and customized rebar-based
products for the construction industry. This plant processes wire rod purchased in the
international market and rebar received from Ferrasas Manizales unit and rebar purchased
in the international markets. Hot-rolled and cold-rolled coils are received mainly from
Ternium Mexicos units in Nuevo León.  31




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##### Table of Contents



22
    
    The Itaguaí unit in Antioquía, Colombia, is a steel service center that produces
drawn wire, wire mesh and customized rebar-based products for the construction industry.
This plant processes wire rod purchased in the international markets and rebar received
from Ferrasas Manizales unit and rebar purchased in the international markets.23
    
    The Calí Perfilamos unit in Cauca, Colombia, is a steel service center that
produces profiles, tubes and structural beams for the construction industry. This plant
processes hot-rolled and cold-rolled coils received mainly from Ternium Mexicos units in
Nuevo León and purchased in the international markets.24
    
    The Medellín unit in Antioquía, Colombia, the Bogotá unit in Cundinamarca,
Colombia, the Calí Ferrasa unit in Valle del Cauca, Colombia, the Montería unit in
Córdoba, Colombia, the Manizales Ferrasa unit in Caldas, Colombia and the Panamá unit in
Panama, Panama, are steel services centers that produce customized rebar-based products
for the construction industry. These plants process rebar received
from Ferrasas
Manizales unit and rebar purchased in the international markets.25
    
    The Villa Nueva unit in Guatemala, Guatemala, produces galvanized sheets for the
construction industry and for further processing in other Ternium Mexicos units in
Central America. It also has a steel service center that produces slitted, roll-formed
and cut-to-length products, and profiles for the construction industry. This plant
processes hot-rolled, cold-rolled and coated coils received from Ternium Mexicos units
in the Nuevo León area and from the international markets.26
    
    The Tegucigalpa unit in Cortés, Honduras, the San Salvador unit in San Salvador,
El Salvador, and the Managua unit in Managua, Nicaragua, are steel service centers that
produce roll-formed products for the construction industry. These plants process coated
coils received mainly from Ternium Mexicos Villa Nueva unit.27
    
    The Heredia unit in Heredia, Costa Rica, is a steel service center that produces
roll-formed products and profiles for the construction industry. This plant processes
hot-rolled, cold-rolled and coated coils received from Ternium Mexicos units in Nuevo
León and from the Villa Nueva unit. Iron ore mining facilities
  Capacity (thousands of tons per year)Production asset
    
    Quantity
    
    
    Las Encinas
    
    
    Peña Colorada
    
    
    TotalCrushing Plant
    
    
    3
    
    
    
    5,300
    
    
    
    9,000
    
    
    
    14,300Beneficiation Plant
    
    
    2
    
    
    
    2,000
    
    
    
    4,400
    
    
    
    6,400Pelletizing Line
    
    
    3
    
    
    
    1,900
    
    
    
    4,000
    
    
    
    5,900
    32




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##### Table of Contents



Production process
  Iron ore extraction and processing
  Steel production ® ®
  Steel processing
    33




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##### Table of Contents



Sales and Marketing
 Net Sales
    For the year ended December 31,In millions of U.S. dollars
    
    2010
    
    
    2009
    
    
    2008Flat Steel Product SalesNorth America
    
    
    3,464.9
    
    
    
    2,371.9
    
    
    
    4,294.7South and Central America
    
    
    2,886.2
    
    
    
    1,717.1
    
    
    
    2,782.5Europe and Other
    
    
    25.3
    
    
    
    161.0
    
    
    
    47.5Total Flat Steel Products Sales
    
    
    6,376.4
    
    
    
    4,250.0
    
    
    
    7,124.7Long Steel Product SalesNorth America
    
    
    640.7
    
    
    
    512.0
    
    
    
    791.8South and Central America
    
    
    163.9
    
    
    
    57.3
    
    
    
    274.2Europe and Other
    
    
    28.6
    
    
    
    3.5
    
    
    
    8.9Total Long Steel Product Sales
    
    
    833.1
    
    
    
    572.9
    
    
    
    1,075.1Total Other Sales (1)
    
    
    172.5
    
    
    
    136.1
    
    
    
    265.1Total Sales
    
    
    7,382.0
    
    
    
    4,959.0
    
    
    
    8,464.9
 (1)
    
    The item Other Sales primarily includes iron ore, pig iron and pre-engineered metal
buildings. In thousands of tons
    
    For the year ended December 31,(unaudited)
    
    2010
    
    
    2009
    
    
    2008Flat Steel Product Sales VolumeNorth America
    
    
    3,852.1
    
    
    
    3,114.5
    
    
    
    3,666.1South and Central America
    
    
    2,877.0
    
    
    
    1,903.6
    
    
    
    2,604.2Europe and Other
    
    
    42.6
    
    
    
    287.0
    
    
    
    55.2Total Flat Steel Product Sales Volume
    
    
    6,771.7
    
    
    
    5,305.2
    
    
    
    6,325.5Long Steel Product Sales VolumeNorth America
    
    
    974.2
    
    
    
    931.2
    
    
    
    901.3South and Central America
    
    
    258.7
    
    
    
    118.4
    
    
    
    302.5Europe and Other
    
    
    50.0
    
    
    
    6.1
    
    
    
    13.3Total Long Steel Product Sales Volume
    
    
    1,282.9
    
    
    
    1,055.6
    
    
    
    1,217.2Total Sales Volume (1)
    
    
    8,054.6
    
    
    
    6,360.8
    
    
    
    7,542.7
 (1)
    
    The Total Sales Volume does not include the tons of Other sales.  34




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##### Table of Contents



North America Region
     South and Central America Region
      35




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Europe and Other
   Pricing
  Marketing
    North America Region
       36




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##### Table of Contents



South and Central America Region
     Europe and Other
  Competition
 Global Market
 e.g
   
    
    June 2006: Mittal Steel and Arcelor merge to create ArcelorMittal, the worlds largest
steel company.
  37




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##### Table of Contents




    
    March 2007: Votorantim acquires Colombias Aceria Paz del Rio.
 
    
    April 2007: Tata Steel completes the acquisition of Corus.
 
    
    July 2007: Gerdau acquires Chaparral Steel.
 
    
    August 2007: US Steel acquires Stelco.
 
    
    March 2008 to May 2008: Severstal acquires Sparrows Point, WCI Steel and Esmark
(subsequently during 2011 it divested Sparrows Point, Warren and Wheeling).
 
    
    February 2011: Nippon Steel and Sumitomo announce a merger plan.
 Despite this trend, the global steel market remains highly fragmented. In 2010, the five
largest steel producers, ArcelorMittal, Hebei, Baosteel, Angang and Wuhan, accounted for 19%
of total worldwide steel production, compared to 15% for the five largest steel producers in
2000.
  North America Region
 Mexico.
    United States.
  38




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##### Table of Contents



South and Central America Region
  Argentina.
  Colombia.
  Other South and Central American markets. vis a vis
 Capital Expenditure Program
   
    
    maintain and replace equipment;
 
    
    increase processing capacity;
 
    
    reduce production costs;
 
    
    improve product quality, equipment reliability and productivity;
 
    
    comply with applicable environmental standards; and
 
    
    provide enhanced customer services.
   39




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##### Table of Contents



North America Region
  
    
    Revamping of a cold-rolling mill in Mexico. This mill is part of the Churubusco
unit of Ternium Mexicos operations. This improvement involves an investment of
approximately USD60 million and is expected to provide an additional annual rolling
capacity of 380 thousand tons.
 
    
    Revamping of a grinding plant. This plant is part of the Las Encinas mining
operations in Mexico. The project is aimed at expanding the facilitys iron ore
processing capacity and is expected to be completed during 2011.
  South and Central America Region
  
    
    Relining of blast furnace No. 1. This mill is part of the San Nicolás unit of
Siderars operations. The preparatory works for this project began in 2007, and the
relining work commenced in October 2008. The project was completed in the first half of
2010.
 
    
    Progress in the expansion of hot rolling mill capacity.This mill is part of the
San Nicolás unit of Siderars operations. The expansion entails the installation of an
additional coiler and exit, enabling an increase in the mills annual processing capacity
of approximately 100,000 tons of slabs. The project is expected to be completed during
2012.
 
    
    Revamping and expansion of the by-products plant at Siderars coking facilites.
These facilities are part of the San Nicolás unit of Siderars operations. The project is
expected to be completed during 2012.
 
    
    Progress in repairs and enhancements at Siderars coking facilities.Works included
repairs in one chimney (expected to be completed during 2011), in coke oven battery #2
(completed during 2010) and in coke oven battery #4 (expected to be completed during
2012).
 
    
    Construction of a river port for barges.This facility, which is part of the San
Nicolás unit of Siderars operations, is designed for unloading barged iron ore, which
represents approximately half of the total iron ore volume received in Siderars ports.
Construction of this port was completed in the first half of 2011.
 
    
    Expansion of service center processing capacity.These projects involved the
installation of new slitters at the Florencio Varela and Rosario units and a new roll
forming line at the Canning unit of Siderars operations.
  40




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##### Table of Contents




    
    Revamping of Siderars continuous caster in the steel shop.The revamping is
expected to increase the operating reliability of the equipment.
 
    
    Construction of a vacuum degassing in the steel shop.This equipment will enable
the production of interstitial-free steel for certain applications in the automobile
industry.
 
    
    Replacement of staves in blast furnace No. 2 in Argentina.This is expected to
increase the operating reliability of the equipment and is expected to be completed
during 2012.
 
    
    Expansion of processing capacity in Argentina.Works include the revamping and
expansion of a hot-dip galvanizing mill, a new slitter and the expansion of warehouse
capacity.
  Information technology investments
  Raw Materials, Energy and Other Inputs
  Mexico
  Slabs.
  41




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##### Table of Contents



Iron ore.
 Scrap.
 Electricity. Comisión Federal de Electricidad
 Natural gas.
 Argentina
  Iron ore.
 Coking coal and related materials.
 Electricity.
  42




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##### Table of Contents



Natural gas.
  Other inputs.
 Colombia
  Steel products.
 Scrap.
 Electricity.
  43




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Product Quality Standards
   General
Requirements for the Competence of Testing and Calibration Laboratories
 Research and Development; Product Development
       44




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Regulations
 Environmental Regulation
      45




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##### Table of Contents



Mining regulations in Mexico
 Ley Minera
   
    
    the right to dispose freely of mineral products obtained as a result of the
exploitation of the concession;
 
    
    the right to obtain the expropriation of, or an easement with respect to, the
land where the exploration or exploitation will be conducted; and
 
    
    the use of water in the mine to facilitate extraction.
 Secretaría de Economía
  Trade regulations
    46




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##### Table of Contents



Mexico.
  Hot-rolled products:
   Cold-rolled products:
 Plate in coil:
 Long products:
  
    
    Ternium Mexicos wire rod exports are subject to an antidumping duty of 17.94%
pursuant to an antidumping duty order on carbon and certain alloy steel wire rod from
Mexico. Following the most recent sunset review, such duty was extended for five more
years beginning in June 2008.
 
    
    During 2007, the Department of Commerce (DoC) initiated an antidumping
investigation of light-walled rectangular pipe and tube (LWRPT) from, among other
countries, Mexico. On June 13, 2008, the DoC made a final determination of sales at less
than fair value in the investigation of LWRPT from Mexico and, consequently LWRPT from
Mexico is subject to antidumping duties. On February 18, 2011, the DoC published the
final results of the first administrative review by which Ternium Mexicos LWRPT exports
are now subject to an antidumping duty of 6.13%.
  47




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##### Table of Contents




    
    Since 1992, pursuant to an antidumping duty order on circular welded non-alloy steel
pipe -or standard pipe- from various countries, including Mexico, standard
pipes manufactured by Hylsamex and Grupo Imsa were subject to antidumping duties. In
2007, such measures were extended for five more years. In August 2009, the DoC published
the final results of a changed circumstances review, concluding that Ternium Mexico is
the successor-in-interest to Hylsamex for purposes of determining antidumping duty
liability. As of June 2011, in accordance with the latest administrative review, the
applicable duty for Ternium Mexico is 48.33%.
       Argentina.
  Hot-rolled products:
  48




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##### Table of Contents



Cold-rolled products:
 Galvanized products:
   Mercado Común del Sur
 Comunidad Andina de Naciones
  Colombia.
   49




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##### Table of Contents



Triángulo
Norte
  Insurance
  C.
    
    Organizational StructureBelow is a simplified diagram of Terniums corporate structure.
 
  50




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##### Table of Contents



Subsidiaries
  Ternium Mexico.
 Siderar .
 Siderar Shareholders
    
    Number
    
    
    PercentTernium
    
    
    211,754,474
    
    
    
    60.94
    %ANSeS
    
    
    90,225,841
    
    
    
    25.97
    %Inversora Siderurgia Argentina S.A. (employees)
    
    
    8,912,146
    
    
    
    2.56
    %Public
    
    
    36,576,310
    
    
    
    10.53
    %Total
    
    
    347,468,771
    
    
    
    100.00
    %
 Bolsa de Comercio de
Buenos Aires Mercado de
Valores de Buenos Aires
 Ferrasa.
 Tenigal.
 Ternium Brasil.
 Ternium Internacional.
 Other Investments
 Exiros.
  51




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##### Table of Contents



D.
    
    Property, Plants and EquipmentSee B. Business OverviewProduction Facilities and Processes.
 
 Item 4A.
    
    Unresolved Staff Comments
  
 Item 5.
    
    Operating and Financial Review and Prospects
   Overview
    Terniums primary source of revenue is the sale of flat and long steel products.
  52




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##### Table of Contents



Terniums results are sensitive to economic activity and steel consumption.
 Terniums results are also sensitive to prices in the international steel markets.
 Trends in the steel industry may also have an impact on Terniums results.
 Terniums production costs are generally sensitive to the international prices of raw
materials, slabs and energy, which reflect supply and demand factors in the global steel
industry
  53




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##### Table of Contents



Terniums export revenues could be affected by trade restrictions and its domestic revenues
could be affected by unfair competition from imports.
 Prevailing exchange rates have had an impact on Terniums results in the past and could impact
results again in the future.
 Terniums cash flows for 2009 and 2010 were strongly affected by the non-recurring payments
received in connection with the transfer of our interest in Sidor to Venezuela.
 Critical Accounting Estimates
     54




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##### Table of Contents



Useful Lives and Impairment of Property, Plant and Equipment and Other Long-lived Assets
   
    
    whether significant changes with an adverse effect on the entity have taken place
during the period, or will take place in the near future, in the technological, market,
economic or legal environment in which the entity operates or in the market to which an
asset is dedicated;
 
    
    whether market interest rates or other market rates of return on investments have
increased during the period, and those increases are likely to affect the discount rate
used in calculating an assets value in use and decrease the assets recoverable amount
materially;
 
    
    whether the carrying amount of the net assets of the entity is more than its market
capitalization;
 
    
    whether evidence is available of obsolescence or physical damage of an asset.
 
    
    whether significant changes with an adverse effect on the entity have taken place
during the period, or are expected to take place in the near future, in the extent to
which, or manner in which, an asset is used or is expected to be used.
These changes include the asset becoming idle, plans to discontinue or restructure the
operation to which an asset belongs, plans to dispose of an asset before the previously
expected date, and reassessing the useful life of an asset as finite rather than indefinite;
and
 
    
    whether evidence is available from internal reporting that indicates that the
economic performance of an asset is, or will be, worse than expected.
     55




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##### Table of Contents



Impairment and recoverability of goodwill and
other assets, including identifiable intangible assets
     Allowances for Doubtful Accounts
     56




---



##### Table of Contents



e.g.
 Allowance for Obsolescence of Supplies and Spare Parts, Inventorys Net Realizable Value and
Slow-Moving Inventory
    e.g.
   Loss Contingencies
   57




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##### Table of Contents



Valuation Allowance of Deferred Tax Assets
   Sidor Financial Asset
   58




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##### Table of Contents



A.
    
    Results of OperationsThe following discussion and analysis of our financial condition and results of operations are
based on our audited consolidated financial statements included elsewhere in this annual
report. Accordingly, this discussion and analysis present our financial condition and results
of operations on a consolidated basis. See Presentation of Certain Financial and Other
InformationAccounting Principles and notes 2 and 4 to our audited consolidated financial
statements included elsewhere in this annual report. The following discussion should be read
in conjunction with our audited consolidated financial statements and the related notes
included elsewhere in this annual report.
 In thousands of U.S. dollars
    
    For the year ended December 31,(except number of shares and per share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Selected consolidated income statement dataContinuing operationsNet sales
    
    
    7,382,004
    
    
    
    4,958,983
    
    
    
    8,464,885
    
    
    
    5,633,366
    
    
    
    4,484,918Cost of sales
    
    
    (5,665,254
    )
    
    
    (4,110,370
    )
    
    
    (6,128,027
    )
    
    
    (4,287,671
    )
    
    
    (3,107,629
    )Gross profit
    
    
    1,716,750
    
    
    
    848,613
    
    
    
    2,336,858
    
    
    
    1,345,695
    
    
    
    1,377,289Selling, general and administrative expenses
    
    
    (665,306
    )
    
    
    (531,530
    )
    
    
    (669,473
    )
    
    
    (517,433
    )
    
    
    (370,727
    )Other operating income (expenses), net
    
    
    2,493
    
    
    
    (20,700
    )
    
    
    8,662
    
    
    
    8,514
    
    
    
    (4,739
    )Operating income
    
    
    1,053,937
    
    
    
    296,383
    
    
    
    1,676,047
    
    
    
    836,776
    
    
    
    1,001,823Interest expense
    
    
    (72,969
    )
    
    
    (105,810
    )
    
    
    (136,111
    )
    
    
    (133,109
    )
    
    
    (96,814
    )Interest income
    
    
    27,347
    
    
    
    21,141
    
    
    
    32,178
    
    
    
    41,613
    
    
    
    33,903Interest income  Sidor financial asset
    
    
    61,012
    
    
    
    135,952
    
    
    
    
    
    
    
    
    
    
    
    Other financial income (expenses), net
    
    
    115,112
    
    
    
    81,639
    
    
    
    (693,192
    )
    
    
    (38,498
    )
    
    
    (40,432
    )Equity in earnings of associated companies
    
    
    1,688
    
    
    
    1,110
    
    
    
    1,851
    
    
    
    434
    
    
    
    671Income before income tax expense
    
    
    1,186,127
    
    
    
    430,415
    
    
    
    880,773
    
    
    
    707,216
    
    
    
    899,151Income tax (expense) benefitCurrent and deferred income tax expense
    
    
    (406,657
    )
    
    
    (91,314
    )
    
    
    (258,969
    )
    
    
    (291,345
    )
    
    
    (353,044
    )Reversal of deferred statutory profit sharing
    
    
    
    
    
    
    
    
    
    
    96,265
    
    
    
    
    
    
    
    Income from continuing operations
    
    
    779,470
    
    
    
    339,101
    
    
    
    718,069
    
    
    
    415,871
    
    
    
    546,107Discontinued operationsIncome from discontinued operations
    
    
    
    
    
    
    428,023
    
    
    
    157,095
    
    
    
    579,925
    
    
    
    444,468Profit for the year (1)
    
    
    779,470
    
    
    
    767,124
    
    
    
    875,164
    
    
    
    995,796
    
    
    
    990,575Attributable to:Equity holders of the Company
    
    
    622,076
    
    
    
    717,400
    
    
    
    715,418
    
    
    
    784,490
    
    
    
    795,424Non-controlling interest
    
    
    157,394
    
    
    
    49,724
    
    
    
    159,746
    
    
    
    211,306
    
    
    
    195,151779,470
    
    
    
    767,124
    
    
    
    875,164
    
    
    
    995,796
    
    
    
    990,575Depreciation and amortization
    
    
    383,300
    
    
    
    385,105
    
    
    
    413,541
    
    
    
    355,271
    
    
    
    251,371Weighted average number of shares outstanding
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    1,936,833,060Basic earnings per share (expressed in USD per
share) for profit: (1) (2)From continuing operations attributable to
the equity holders of the Company
    
    
    0.31
    
    
    
    0.15
    
    
    
    0.27
    
    
    
    0.15
    
    
    
    0.20From discontinued operations attributable to the
equity holders of the Company
    
    
    
    
    
    
    0.21
    
    
    
    0.09
    
    
    
    0.24
    
    
    
    0.21For the year attributable to the equity holders
of the Company
    
    
    0.31
    
    
    
    0.36
    
    
    
    0.36
    
    
    
    0.39
    
    
    
    0.41Dividends per share declared
    
    
    0.075
    
    
    
    0.05
    
    
    
    
    
    
    
    0.05
    
    
    
    0.05
 (1)
    
    International Accounting Standard N° 1 (IAS 1) (Revised) requires that income for the
year as shown in the income statement includes the portion attributable to non-controlling
interest. Basic earnings per share, however, continue to be calculated on the basis of
income attributable solely to the equity holders of the Company.(2)
    
    Diluted earnings per share (expressed in USD per share), equals basic earnings per
share. Diluted earnings per share have been calculated giving effect to the conversion of
certain subordinated convertible loans.  59




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In thousands U.S. dollars(except number of shares and per
    
    At December 31,share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Selected consolidated balance
sheet dataNon-current assets
    
    
    5,579,438
    
    
    
    5,250,135
    
    
    
    5,491,408
    
    
    
    8,553,123
    
    
    
    6,029,383Property, plant and equipment, net
    
    
    4,262,896
    
    
    
    4,040,415
    
    
    
    4,212,313
    
    
    
    6,776,630
    
    
    
    5,335,030Other non-current assets (1)
    
    
    1,316,542
    
    
    
    1,209,720
    
    
    
    1,279,095
    
    
    
    1,776,493
    
    
    
    694,353Current assets
    
    
    5,532,893
    
    
    
    5,042,538
    
    
    
    5,179,839
    
    
    
    5,095,959
    
    
    
    2,628,870Cash and cash equivalents
    
    
    1,779,416
    
    
    
    2,095,798
    
    
    
    1,065,552
    
    
    
    1,125,830
    
    
    
    643,291Other current assets (2)
    
    
    3,743,516
    
    
    
    2,937,494
    
    
    
    4,108,954
    
    
    
    3,200,987
    
    
    
    1,978,537Non-current assets classified as
held for sale
    
    
    9,961
    
    
    
    9,246
    
    
    
    5,333
    
    
    
    769,142
    
    
    
    7,042Total assets
    
    
    11,112,331
    
    
    
    10,292,673
    
    
    
    10,671,247
    
    
    
    13,649,082
    
    
    
    8,658,253Capital and reserves attributable
to the Companys equity holders
(3)
    
    
    5,880,740
    
    
    
    5,296,342
    
    
    
    4,597,370
    
    
    
    4,452,680
    
    
    
    3,757,558Non-controlling interest
    
    
    1,135,361
    
    
    
    964,897
    
    
    
    964,094
    
    
    
    1,805,243
    
    
    
    1,626,119Non-current liabilities
    
    
    2,540,594
    
    
    
    2,872,667
    
    
    
    3,374,964
    
    
    
    5,401,549
    
    
    
    1,867,892Borrowings
    
    
    1,426,574
    
    
    
    1,787,204
    
    
    
    2,325,867
    
    
    
    3,676,072
    
    
    
    546,601Deferred income tax
    
    
    877,742
    
    
    
    857,297
    
    
    
    810,160
    
    
    
    1,327,768
    
    
    
    982,091Other non-current liabilities
    
    
    236,278
    
    
    
    228,166
    
    
    
    238,937
    
    
    
    397,709
    
    
    
    339,200Current liabilities
    
    
    1,555,636
    
    
    
    1,158,767
    
    
    
    1,734,819
    
    
    
    1,989,610
    
    
    
    1,406,684Borrowings
    
    
    513,083
    
    
    
    539,525
    
    
    
    941,460
    
    
    
    406,239
    
    
    
    507,241Other current liabilities
    
    
    1,042,553
    
    
    
    619,242
    
    
    
    793,359
    
    
    
    1,369,608
    
    
    
    899,443Liabilities directly associated
with non-current assets
classified as held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213,763
    
    
    
    Total liabilities
    
    
    4,096,230
    
    
    
    4,031,434
    
    
    
    5,109,783
    
    
    
    7,391,159
    
    
    
    3,274,576Total equity and liabilities
    
    
    11,112,331
    
    
    
    10,292,673
    
    
    
    10,671,247
    
    
    
    13,649,082
    
    
    
    8,658,253Number of shares outstanding
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
 (1)
    
    As of December 31, 2010, 2009, 2008, 2007 and 2006, includes goodwill mainly related
to the acquisition of our Mexican subsidiaries for a total amount of USD750.1, USD708.6,
USD683.7, USD850.7 and USD397.9 million, respectively.(2)
    
    As of December 31, 2010, 2009, 2008 and 2007, includes deposits with maturity of more
than three months for a total amount of USD848.4, USD46.8, USD90.0 and USD65.3 million,
respectively.(3)
    
    The Companys share capital as of December 31, 2010, 2009, 2008, 2007 and 2006 was
represented by 2,004,743,442 shares, par value USD1.00 per share, for a total amount of
USD2,004.7 million.  For the year ended December 31,Percentage of net sales
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Continuing operationsNet sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    (76.7
    )%
    
    
    (82.9
    )%
    
    
    (72.4
    )%
    
    
    (76.1
    )%
    
    
    (69.3
    )%Gross profit
    
    
    23.3
    %
    
    
    17.1
    %
    
    
    27.6
    %
    
    
    23.9
    %
    
    
    30.7
    %Selling, general and administrative expenses
    
    
    (9.0
    )%
    
    
    (10.7
    )%
    
    
    (7.9
    )%
    
    
    (9.2
    )%
    
    
    (8.3
    )%Other operating income (expenses), net
    
    
    0.0
    %
    
    
    (0.4
    )%
    
    
    0.1
    %
    
    
    0.2
    %
    
    
    (0.1
    )%Operating income
    
    
    14.3
    %
    
    
    6.0
    %
    
    
    19.8
    %
    
    
    14.9
    %
    
    
    22.3
    %Interest expense
    
    
    (1.0
    )%
    
    
    (2.1
    )%
    
    
    (1.6
    )%
    
    
    (2.4
    )%
    
    
    (2.2
    )%Interest income
    
    
    0.4
    %
    
    
    0.4
    %
    
    
    0.4
    %
    
    
    0.7
    %
    
    
    0.8
    %Interest income  Sidor financial asset
    
    
    0.8
    %
    
    
    2.7
    %
    
    
    
    
    
    
    
    
    
    
    Other financial income (expense), net
    
    
    1.6
    %
    
    
    1.6
    %
    
    
    (8.2
    )%
    
    
    (0.7
    )%
    
    
    (0.9)
    %Equity in earnings of associated companies
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Income before income tax expense
    
    
    16.1
    %
    
    
    8.7
    %
    
    
    10.4
    %
    
    
    12.6
    %
    
    
    20.0
    %Income tax expense
    
    
    (5.5
    )%
    
    
    (1.8
    )%
    
    
    (1.9
    )%
    
    
    (5.3
    )%
    
    
    (7.8
    )%Income from continuing operations
    
    
    10.6
    %
    
    
    6.8
    %
    
    
    8.5
    %
    
    
    7.4
    %
    
    
    12.2
    %Discontinued OperationsIncome from discontinued operations
    
    
    
    
    
    
    8.6
    %
    
    
    1.9
    %
    
    
    10.3
    %
    
    
    9.9
    %Profit for the year
    
    
    10.6
    %
    
    
    15.5
    %
    
    
    10.3
    %
    
    
    17.7
    %
    
    
    22.1
    %Attributable to:Equity holders of the Company
    
    
    8.4
    %
    
    
    14.5
    %
    
    
    8.5
    %
    
    
    13.9
    %
    
    
    17.7
    %Non-controlling interest
    
    
    2.1
    %
    
    
    1.0
    %
    
    
    1.9
    %
    
    
    3.8
    %
    
    
    4.4
    %
  60




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##### Table of Contents



Fiscal Year Ended December 31, 2010 compared to Fiscal Year Ended December 31, 2009
 Overview
 1
   Net Sales
   Net Sales (million USD)
    
    
    Shipments (thousand tons)
    
    
    Revenue / ton (USD/ton)2010
    
    
    2009
    
    
    Dif.
    
    
    2010
    
    
    2009
    
    
    Dif.
    
    
    2010
    
    
    2009
    
    
    Dif.North America
    
    
    3,464.9
    
    
    
    2,371.9
    
    
    
    46
    %
    
    
    3,852.1
    
    
    
    3,114.5
    
    
    
    24
    %
    
    
    899
    
    
    
    762
    
    
    
    18
    %South & Central America
    
    
    2,886.2
    
    
    
    1,717.1
    
    
    
    68
    %
    
    
    2,877.0
    
    
    
    1,903.6
    
    
    
    51
    %
    
    
    1,003
    
    
    
    902
    
    
    
    11
    %Europe & other
    
    
    25.3
    
    
    
    161.0
    
    
    
    
    
    
    
    42.6
    
    
    
    287.0
    
    
    
    
    
    
    
    594
    
    
    
    561Total flat products
    
    
    6,376.4
    
    
    
    4,250.0
    
    
    
    50
    %
    
    
    6,771.7
    
    
    
    5,305.2
    
    
    
    28
    %
    
    
    942
    
    
    
    801
    
    
    
    18
    %North America
    
    
    640.7
    
    
    
    512.0
    
    
    
    25
    %
    
    
    974.2
    
    
    
    931.2
    
    
    
    5
    %
    
    
    658
    
    
    
    550
    
    
    
    20
    %South & Central America
    
    
    163.9
    
    
    
    57.3
    
    
    
    186
    %
    
    
    258.7
    
    
    
    118.4
    
    
    
    118
    %
    
    
    634
    
    
    
    484
    
    
    
    31
    %Europe & other
    
    
    28.6
    
    
    
    3.5
    
    
    
    
    
    
    
    50.0
    
    
    
    6.1
    
    
    
    
    
    
    
    571
    
    
    
    583Total long products
    
    
    833.1
    
    
    
    572.9
    
    
    
    45
    %
    
    
    1,282.9
    
    
    
    1,055.6
    
    
    
    22
    %
    
    
    649
    
    
    
    543
    
    
    
    20
    %Total flat and long products
    
    
    7,209.5
    
    
    
    4,822.9
    
    
    
    49
    %
    
    
    8,054.6
    
    
    
    6,360.8
    
    
    
    27
    %
    
    
    895
    
    
    
    758
    
    
    
    18
    %Other products (1)
    
    
    172.5
    
    
    
    136.1
    
    
    
    27
    %Total Net Sales
    
    
    7,382.0
    
    
    
    4,959.0
    
    
    
    49
    %
 (1)
    
    Primarily includes iron ore, pig iron and pre-engineered metal buildings.  1
    
    Operating cost per ton is equal to cost of sales plus selling, general and administrative expenses, divided by shipments.  61




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##### Table of Contents



Cost of sales
  Selling, general and administrative expenses
  Other operating income (expenses), net
  Operating income
  Net financial results
    62




---



##### Table of Contents



Equity in earnings (losses) of associated companies
  Income tax expense
  Net result of discontinued operations
  Net income attributable to non-controlling interest
  Fiscal Year Ended December 31, 2009 compared to Fiscal Year Ended December 31, 2008
 Overview
    63




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##### Table of Contents



Net Sales
   Net Sales (million US$)
    
    
    Shipments (thousand tons)
    
    
    Revenue / ton (US$/ton)Year 2009
    
    
    Year 2008
    
    
    Dif.
    
    
    Year 2009
    
    
    Year 2008
    
    
    Dif.
    
    
    Year 2009
    
    
    Year 2008
    
    
    Dif.North America
    
    
    2,371.9
    
    
    
    4,294.7
    
    
    
    -45
    %
    
    
    3,114.5
    
    
    
    3,666.1
    
    
    
    -15
    %
    
    
    762
    
    
    
    1,171
    
    
    
    -35
    %South & Central America
    
    
    1,717.1
    
    
    
    2,782.5
    
    
    
    -38
    %
    
    
    1,903.6
    
    
    
    2,604.2
    
    
    
    -27
    %
    
    
    902
    
    
    
    1,068
    
    
    
    -16
    %Europe & other
    
    
    161.0
    
    
    
    47.5
    
    
    
    
    
    
    
    287.0
    
    
    
    55.2
    
    
    
    
    
    
    
    561
    
    
    
    860Total flat products
    
    
    4,250.0
    
    
    
    7,124.7
    
    
    
    -40
    %
    
    
    5,305.2
    
    
    
    6,325.5
    
    
    
    -16
    %
    
    
    801
    
    
    
    1,126
    
    
    
    -29
    %North America
    
    
    512.0
    
    
    
    791.8
    
    
    
    -35
    %
    
    
    931.2
    
    
    
    901.3
    
    
    
    3
    %
    
    
    550
    
    
    
    878
    
    
    
    -37
    %South & Central America
    
    
    57.3
    
    
    
    274.4
    
    
    
    -79
    %
    
    
    118.4
    
    
    
    302.5
    
    
    
    -61
    %
    
    
    484
    
    
    
    907
    
    
    
    -47
    %Europe & other
    
    
    3.5
    
    
    
    8.9
    
    
    
    
    
    
    
    6.1
    
    
    
    13.3
    
    
    
    
    
    
    
    583
    
    
    
    669Total long products
    
    
    572.9
    
    
    
    1,075.1
    
    
    
    -47
    %
    
    
    1,055.6
    
    
    
    1,217.2
    
    
    
    -13
    %
    
    
    543
    
    
    
    883
    
    
    
    -39
    %Total flat and long products
    
    
    4,822.9
    
    
    
    8,199.8
    
    
    
    -41
    %
    
    
    6,360.8
    
    
    
    7,542.7
    
    
    
    -16
    %
    
    
    758
    
    
    
    1,087
    
    
    
    -30
    %Other products (1)
    
    
    136.1
    
    
    
    265.1
    
    
    
    -49
    %Total Net Sales
    
    
    4,959.0
    
    
    
    8,464.9
    
    
    
    -41
    %
 (1)
    
    Primarily includes iron ore, pig iron and pre-engineered metal
buildings.      64




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##### Table of Contents



Cost of sales
  Selling, general and administrative expenses
  Other operating (expenses) income, net
  Operating income
  Net financial results
      65




---



##### Table of Contents



Equity in earnings (losses) of associated companies
  Income tax expense
  Net result of discontinued operations
  Net income attributable to non-controlling interest
  Foreign Currency Fluctuations
  Governmental Economic, Fiscal, Monetary or Political Policies or Factors
  B.
    
    Liquidity and Capital Resources
    66




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##### Table of Contents



For the year ended December 31,In thousands of U.S. dollars
    
    2010
    
    
    2009
    
    
    2008Net cash provided by operating activities
    
    
    806,825
    
    
    
    1,161,758
    
    
    
    517,513Net cash (used in) provided by investing activities
    
    
    (470,128
    )
    
    
    791,233
    
    
    
    350,530Net cash used in financing activities
    
    
    (654,118
    )
    
    
    (922,588
    )
    
    
    (752,909
    )(Decrease) increase in cash and cash equivalents
    
    
    (317,421
    )
    
    
    1,030,403
    
    
    
    115,134Effect of exchange rate changes
    
    
    1,039
    
    
    
    (157
    )
    
    
    (17,518
    )Cash and cash equivalents at the beginning of the year
    
    
    2,095,798
    
    
    
    1,065,552
    
    
    
    1,125,830Cash and cash equivalents of discontinued operations at
March 31, 2008
    
    
    
    
    
    
    
    
    
    
    (157,894
    )Cash and cash equivalents at the end of the year (1)
    
    
    1,779,416
    
    
    
    2,095,798
    
    
    
    1,065,552
 (1)
    
    In addition, at December 31,
2010, Ternium had USD848.4 million of other investments   with maturities of more than three months
and USD12.3 million in restricted cash. Fiscal Year Ended December 31, 2010 compared to Fiscal Year Ended December 31, 2009
 Overview
    Operating activities
  
    
    an increase in working capital of USD448.0 million in 2010 following the recovery
from the 2008  2009 global economic downturn, compared to a decrease in working capital
of USD635.2 million in 2009;
  
    
    an increase in net income from continuing operations of USD440.4 million; and
    
    a positive income tax accruals less payments adjustment of USD226.8 million in
2010, compared to a negative income tax accruals less payments adjustment of USD49.3
million in 2009.
  
    
    an increase of USD497.4 million in inventory, reflecting higher costs as a result
of higher input prices, as well as higher inventory volume of finished goods, goods in
process and raw materials as a result of increased operating activity (as shown in the
table below).
 Change in inventory Dec10 / Dec09(in millions of USD)Price
    
    
    Volume
    
    
    TotalFinished goods
    
    
    56.8
    
    
    
    104.1
    
    
    
    160.9Goods in process
    
    
    116.3
    
    
    
    64.3
    
    
    
    180.6Raw materials, supplies and allowances
    
    
    97.5
    
    
    
    58.4
    
    
    
    155.9Total
    
    
    270.6
    
    
    
    226.8
    
    
    
    497.4
  67




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##### Table of Contents




    
    an increase in trade and other receivables of USD149.3 million in 2010, mainly due
to higher shipments and steel prices during the fourth quarter of 2010 compared to the
fourth quarter of 2009; and
  
    
    an aggregate increase in accounts payable and other liabilities of USD198.7
million, mainly as a result of the higher activity levels in 2010.
 Investing activities
  
    
    an increase in net cash used in other investing activities, net, of USD933.6
million, consisting mainly of financial investments with maturity of more than three
months, which increased USD801.6 million in 2010 (compared to a decrease of USD43.2
million in 2009);
    
    a decrease of USD186.2 million in the proceeds from the Sidor financial asset (from
USD953.6 million in 2009 to USD767.4 million in 2010); and
    
    an increase of USD141.5 million in capital expenditures (from USD208.6 million in
2009 to USD350.1 million in 2010).
 Financing activities
  Fiscal Year Ended December 31, 2009 compared to Fiscal Year Ended December 31, 2008
 Overview
    Operating activities
  
    
    a decrease in working capital of USD635.2 million in 2009 as a result of the global
economic downturn, compared to an increase in working capital of USD1.1 billion in 2008
(see below);
  68




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##### Table of Contents




    
    a decrease in net income from continuing operations of USD379.0 million;
    
    adjustments for net foreign exchange results and others gain of USD53.6 million in
2009, compared to net foreign exchange results and others loss of USD629.5 million in
2008; and
    
    adjustments for net interest income related to the Sidor financial asset of USD136
million in 2009.
  
    
    a decrease in trade and other receivables of USD308.9 million in 2009, mainly due
to lower export volumes and steel prices during the fourth quarter of 2009 compared to
the fourth quarter of 2008; and
    
    a decrease of USD429.1 million in inventory, mainly as a result of lower costs as
well as a lower volume of finished goods, goods in process and raw materials (as shown in
the table below).
 Change in inventory (Dec09/Dec08)(in millions of USD)Price(1)
    
    
    Volume
    
    
    TotalFinished goods
    
    
    (65.0
    )
    
    
    (43.6
    )
    
    
    (108.6
    )Goods in process
    
    
    (156.9
    )
    
    
    74.4
    
    
    
    (82.5
    )Raw materials, supplies and allowances
    
    
    (213.9
    )
    
    
    (24.0
    )
    
    
    (238.0
    )Total
    
    
    (435.9
    )
    
    
    6.8
    
    
    
    (429.1
    )(1)
 
 (1)
    
    This amount was partially offset by a USD158.0 million write-down for net realizable
value of inventory   Investing activities
  
    
    the proceeds from the Sidor financial asset of USD953.6 million in 2009;
    
    a decrease of USD379.3 million in capital expenditures (from USD587.9 million in
2008 to USD208.6 million in 2009);
    
    the proceeds from the sale of certain non-core U.S. assets in 2008, amounting to
USD718.6 million; and
    
    the cash generated by discontinued operations, mainly Sidor, of USD242.4 million in
2008.
 Financing activities
   69




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##### Table of Contents



Principal Sources of Funding
 Funding Policies
  Financial Liabilities
   In thousands of U.S. dollars
    
    2010
    
    
    2009
    
    
    2008Borrowings with related parties
    
    
    
    
    
    
    
    
    
    
    Bank borrowings (1)
    
    
    1,939,657
    
    
    
    2,326,729
    
    
    
    3,267,327Total borrowings
    
    
    1,939,657
    
    
    
    2,326,729
    
    
    
    3,267,327
 
 (1)
    
    Net of debt issuance costs  2010
    
    
    2009
    
    
    2008Bank borrowings
    
    
    3.29
    %
    
    
    3.04
    %
    
    
    2.79
    %
  In thousands of U.S.dollars
    
    1 year
    
    
    1 - 2
    
    
    2 - 3
    
    
    3 - 4
    
    
    4 - 5
    
    
    Over 5At December 31, 2010
    
    Or less
    
    
    years
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalBorrowings (1)(2)
    
    
    513,083
    
    
    
    1,289,445
    
    
    
    12,726
    
    
    
    24,873
    
    
    
    24,874
    
    
    
    74,656
    
    
    
    1,939,657Total borrowings
    
    
    513,083
    
    
    
    1,289,445
    
    
    
    12,726
    
    
    
    24,873
    
    
    
    24,874
    
    
    
    74,656
    
    
    
    1,939,657
 
 (1)
    
    Borrowings are bank borrowings with third parties. See B. Liquidity and Capital
ResourcesPrincipal Sources of FundingFinancial Liabilities.(2)
    
    Net of debt issuance costs.   70




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##### Table of Contents



Most Significant Borrowings
  Original
    
    
    Outstanding principalIn Millions of U.S. dollars
    
    
    
    
    
    principal
    
    
    amount as ofDate
    
    Borrower
    
    Type
    
    amount
    
    
    December 31, 2010
    
    
    MaturityJuly 2007
    
    Ternium Mexico
    
    Syndicated loan
    
    
    3,485.0
    
    
    
    1,789.7
    (1)
    
    July 2012
(2)
 
 (1)
    
    On 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 December 31, 2010 we paid four semi-annual installments of
USD249 million each.(2)
    
    In April 2011, Ternium Mexico extended the maturities under its 2007 syndicated
loan facility. See Item 5. Operating and Financial Review and ProspectsG. Recent
DevelopmentsDebt Refinancing in Ternium Mexico. e.g
  C.
    
    Research and Development, Patents and Licenses, Etc.
  D.
    
    Trend Information
  E.
    
    Off-Balance Sheet Arrangements
  F.
    
    Contractual Obligations
  Payments Due by Periodas of December 31, 2010In millions of U.S. dollars
    
    
    
    
    
    Less than 1
    
    
    1-3
    
    
    4-5
    
    
    After 5Contractual Obligations
    
    Total
    
    
    Year
    
    
    years
    
    
    years
    
    
    YearsBorrowings (1)
    
    
    1,939.7
    
    
    
    513.1
    
    
    
    1,302.2
    
    
    
    49.7
    
    
    
    74.7Estimated interest payments (2)
    
    
    70.7
    
    
    
    26.6
    
    
    
    27.1
    
    
    
    13.5
    
    
    
    3.5Purchase Obligations (3)
    
    
    2,444.3
    
    
    
    424.2
    
    
    
    458.6
    
    
    
    361.2
    
    
    
    1,200.3Total Contractual Obligations
    
    
    4,454.7
    
    
    
    963.9
    
    
    
    1787.9
    
    
    
    424.4
    
    
    
    1,278.5
 
 (1)
    
    Borrowings are bank borrowings with third parties. See B. Liquidity and Capital
ResourcesPrincipal Sources of FundingFinancial Liabilities.  71




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##### Table of Contents



(2)
    
    Variable rates used in the projection are the ones settled in the current interest
period and are considered to be fixed over the years. In April 2011, we successfully
negotiated an extension of maturities under Ternium Mexicos 2007 syndicated loan
facility. Pursuant to this agreement, USD803 million originally maturing in July 2012
will be payed by Ternium Mexico in four equal semiannual installments commencing on
January 2013 and ending on July 2014, and estimated interest payments have increased
approximately USD21.8 million.(3)
    
    Purchase obligations include mainly electric power, raw materials, oxygen,
equipment and steam. Some of these purchase obligations are currently under
re-negotiation. G.
    
    Recent DevelopmentsRepurchase of shares from Usiminas concurrently with secondary public offering
    Debt refinancing in Ternium Mexico
  Recent developments involving Siderar
   72




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Comisión Nacional de Valores
      Settlement of arbitration proceedings
    73




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##### Table of Contents



Annual General Meeting and Extraordinary General Meeting of Shareholders
  Réviseur dentreprises agréé
   
 Item 6.
    
    Directors, Senior Management and Employees
 A.
    
    Directors and Senior ManagementBoard of Directors
   74




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##### Table of Contents



Years as
    
    
    Age at May 5,Name
    
    Position
    
    Principal Occupation
    
    director
    
    
    2011Paolo Rocca (1)
    
    Chairman
    
    Chairman and CEO of Tenaris, director and vice president of San Faustin
    
    
    6
    
    
    
    58Ubaldo Jose Aguirre
    
    Director
    
    Managing director of AGM/R S.A. and Aguirre y Gonzalez S.A.
    
    
    5
    
    
    
    62Roberto Bonatti (1)
    
    Director
    
    Director and president of San Faustin and director of Tenaris
    
    
    6
    
    
    
    61Carlos Condorelli
    
    Director
    
    Director of Tenaris
    
    
    6
    
    
    
    60Adrián Lajous Vargas
    
    Director
    
    Senior energy advisor at McKinsey & Company and president of Petrométrica, S.C.
    
    
    5
    
    
    
    67Bruno Marchettini
    
    Director
    
    Director of San Faustin and senior advisor in technological matters for the Techint group
    
    
    5
    
    
    
    69Daniel Agustín Novegil
    
    Director
    
    CEO of the Company
    
    
    6
    
    
    
    58Gianfelice Mario Rocca (1)
    
    Director
    
    Chairman of the board of directors of San Faustin, director of Tenaris and president of Humanitas Group
    
    
    5
    
    
    
    63Pedro Pablo Kuczynski
    
    Director
    
    Senior advisor of The Rohatyn Group
    
    
    4
    
    
    
    72
 
 (1)
    
    Paolo Rocca and Gianfelice Rocca are brothers, and Roberto Bonatti is Paolo and
Gianfelice Roccas first cousin. Paolo Rocca.
  75




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##### Table of Contents



Ubaldo Aguirre.
 Roberto Bonatti.
 Carlos Condorelli.
 Adrián Lajous Vargas.
 Bruno Marchettini.
 Daniel Agustín Novegil.
 Gianfelice Mario Rocca.
  76




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##### Table of Contents



Pedro Pablo Kuczynski
 Director Liability
       Auditors
   77




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##### Table of Contents



Réviseur d entreprises agréé Réviseur dentreprises agréé
 Senior Management
  Age atDecember 31,Name
    
    2010
    
    PositionDaniel Novegil
    
    58
    
    Chief Executive Officer; DirectorPablo Brizzio
    
    40
    
    Chief Financial OfficerJulián Eguren
    
    47
    
    North Region Area ManagerMartín Berardi
    
    53
    
    Siderar Executive Vice PresidentOscar Montero Martínez
    
    50
    
    Planning and Operations General DirectorPaolo Bassetti
    
    46
    
    Brazil General DirectorLuis Andreozzi
    
    60
    
    Engineering and Environment DirectorMiguel Punte
    
    63
    
    Human Resources DirectorRoberto Demidchuk
    
    49
    
    Chief Information OfficerRubén Herrera
    
    53
    
    Quality and Product Director
 Daniel A. Novegil.
 Pablo Brizzio.
 Martín Berardi.
 Julián Eguren.
 Oscar Montero Martínez.
  78




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##### Table of Contents



Paolo Bassetti.
 Luis Andreozzi.
 Miguel Punte.
 Roberto Demidchuk.
 Rubén Herrera
 B.
    
    Compensation
   .
 C.
    
    Board Practices
  Audit Committee
   79




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##### Table of Contents



(i)
    
    is not employed, and has not been employed in an executive capacity by the Company
or any of its subsidiaries within the five years preceding the ordinary general
shareholders meeting at which the candidate for the board of directors was voted upon;
 (ii)
    
    does not receive consulting, advisory or other compensatory fees from the Company
or any of its subsidiaries (other than fees received as a member of the board of
directors of any committee thereof and fees received as a member of the board of
directors or other governing body, or any committee thereof, of any of the Companys
subsidiaries);
 (iii)
    
    is not a person who directly or indirectly controls the Company;
 (iv)
    
    does not have, and does not control a business entity that has, a material business
relationship with the Company, any of its subsidiaries or a person who directly or
indirectly controls the Company, if such material business relationship would reasonably
be expected to adversely affect the directors ability to properly discharge his or her
duties;
 (v)
    
    does not control, and is not and has not been, within the five years preceding the
ordinary general shareholders meeting at which the candidate for the board of directors
was voted upon, employed by a present or former internal or external auditor of the
Company, any of its subsidiaries or a person who directly or indirectly controls the
Company; and
 (vi)
    
    is not a spouse, parent, sibling or relative up to the third degree of, and does
not share a home with, any of the persons above described.
    
    
    a Material Transaction is (i) any transaction with or involving a Related Party (x)
with an individual value equal to or greater than ten million U.S. dollars or (y) with an
individual value lower than ten million U.S. dollars, when the aggregate sum of any
series of transactions reflected in the financial statements of the four fiscal quarters
of the Company preceding the date of determination (excluding any transactions that were
reviewed and approved by any of the audit committee of the Company, or any of its
subsidiaries, the board of directors of the Company, the
independent members of the board of directors or other governing body of any subsidiary of
the Company, or a majority of the members of the board of directors or similar governing
body of any subsidiary of the Company that were not nominated by or at the request of the
Company or any entity that directly or indirectly controls or is under common control with
the Company) exceeds 1.5% of the Companys consolidated net sales made in the fiscal year
preceding the year on which the determination is made; or (ii) any corporate reorganization
transaction (including a merger, spin-off or bulk transfer of a business) involving the
Company or any of its direct or indirect subsidiaries for the benefit of or involving a
Related Party; and
  80




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##### Table of Contents




    
    a Related Party is, in relation to the Company or its direct or indirect
subsidiaries, any of the following persons: (i) a member of the board of directors of the
Company or of the board of directors or other governing body of any of the Companys
subsidiaries; (ii) any member of the board of directors or other governing body of an
entity that directly or indirectly controls the Company; (iii) any entity that directly
or indirectly controls or is under common control with the Company (other than the
Companys subsidiaries); (iv) any entity controlled directly or indirectly by any member
of the board of directors of the Company, or of the board of directors or other governing
body of any subsidiary of the Company; and (v) any spouses, parents, siblings or
relatives up to the third degree of, and any person that shares a home with, any person
referred to in (i) or (ii).
   D.
    
    Employees
  At December 31,2010
    
    
    2009
    
    
    2008Mexico
    
    
    8,575
    
    
    
    8,051
    
    
    
    8,597Argentina
    
    
    5,416
    
    
    
    5,281
    
    
    
    5,609Colombia
    
    
    1,375
    
    
    
    
    
    
    
    Other
    
    
    562
    
    
    
    547
    
    
    
    586Total employees (1)
    
    
    15,928
    
    
    
    13,879
    
    
    
    14,792
 
 (1)
    
    It does not include 2,137 employees of contractors who performed services at
Terniums facilities at year-end 2010, 2,092 employees at year-end 2009 and 1,241
employees at year-end 2008. Personnel of contractors who performed services at Terniums
facilities at year-end 2010 and 2009 increased compared to such personnel at year-end
2008 as a result of the normalization of production at Terniums facilities, following
the downturn that began in the fourth quarter 2008.   81




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##### Table of Contents



Mexico
 Federación Nacional de Asociaciones
Sindicales Autónomas Federación Nacional de Sindicatos Independientes Sindicato de Trabajadores Mineros, Metalúrgicos y Similares de la República Mexicana
   prima de antigüedad prima
de antigüedad
  Argentina
 Unión Obrera
Metalúrgica de la República Argentina
  Asociación de Supervisores de Industria
Metalmecánica de la República Argentina
  82




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##### Table of Contents



Colombia
      83




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##### Table of Contents



E.
    
    Share Ownership
  Director or Officer
    
    Number of Shares 
HeldAdrián Lajous
    
    
    740,560Daniel Novegil
    
    
    243,000Paolo Bassetti
    
    
    67,000Martín Berardi
    
    
    47,000Total
    
    
    1,097,560
 
 Item 7.
    
    Major Shareholders and Related Party Transactions
 A.
    
    Major Shareholders
  Identity of Person or Group
    
    Number
    
    
    PercentTechint Holdings S.à r.l. (1)
    
    
    1,243,433,012
    
    
    
    62.02
    %Tenaris (2)
    
    
    229,713,194
    
    
    
    11.46
    %Ternium (3)
    
    
    41,666,666
    
    
    
    2.08
    %Directors and Senior Management as a group
    
    
    1,097,560
    
    
    
    0.05
    %Public
    
    
    488,833,010
    
    
    
    24.38
    %
 (1)
    
    Techint Holdings S.à r.l. (Techint), formerly known as I.I.I. Industrial Investments Inc.,
is controlled by San Faustin S.A. (San Faustin), formerly known as San Faustin NV. Rocca &
Partners Stichting Administratiekantoor Aandelen San Faustin (RP STAK) holds shares in San
Faustin sufficient in number to control San Faustin and has the ability to influence
matters affecting, or submitted to a vote of, the shareholders of San
Faustin. Techint
transferred its domicile from the Cayman Islands to Luxembourg and San Faustin also
transferred its domicile from Curacao to Luxembourg. In connection with San Faustins 2011
redomiciliation, San Faustins controlling entity Rocca & Partners S.A. organized a Dutch
private foundation (Stichting) under the name of Rocca & Partners Stichting
Administratiekantoor Aandelen San Faustin (RP STAK). RP STAK holds shares in San Faustin
sufficient in number to control San Faustin. No person or group of persons controls RP
STAK.(2)
    
    Tenaris is controlled by Techint, which is controlled by San Faustin. RP STAK
controls a significant portion of the voting power of San Faustin and has the ability to
influence matters affecting, or submitted to a vote of, the shareholders of San Faustin.(3)
    
    Ternium holds its shares through its wholly-owned subsidiary Ternium International Inc
Panamá.    84




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##### Table of Contents



B.
    
    Related Party Transactions
   Purchases of Raw Materials
  
    
    purchase of ferrous scrap and other raw material, which amounted to USD29.5 million
in 2010, USD14.3 million in 2009 and USD28.8 million in 2008; and
 
    
    purchase of steam and operational services from the Argentine electric power
generating facility of Siderca for Siderar in San Nicolás. These purchases amounted to
USD14.1 million in 2010, USD13.6 million in 2009 and USD22.3 million in 2008.
 Sales of Steel Products and Raw Materials
  
    
    sales of flat steel products to be used in the production of welded pipes and
accessories, which amounted to USD126.5 million in 2010, USD24.7 million in 2009 and
USD91.6 million in 2008;
 
    
    sales of metal building components for a new rolling mill, which amounted to
USD18.7 million in 2010 and USD4.4 million in 2009; and
 
    
    sales of pig iron, DRI, scrap, pellets and other raw materials to be used in the
production of seamless pipes, which amounted to USD20.1 million in 2010, USD8.9 million
in 2009 and USD16.8 million in 2008.
    85




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##### Table of Contents



Purchase Agency Services
  Supply of Natural Gas
      Provision of Engineering and Labor Services
  Sales and Purchases of Other Products and Services
  Administrative Services
  Other Transactions
   86




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##### Table of Contents



Transactions between Sidor and related parties prior to April 1, 2008
  Purchases of Raw Materials.
 Sales of Steel Products and Raw Materials
 
    
    sales of flat steel products to be used in the production of welded pipes and
accessories, which amounted to USD10.0 million in the first quarter of 2008; and
 
    
    sales of steel bars to be used in the production of seamless pipes, which amounted
to USD4.6 million in the first quarter of 2008.
 Transactions with Matesi.
 
    
    purchases of HBI pursuant to an off-take agreement, which amounted to USD7.9
million in the first quarter of 2008. The agreement established that Matesi was required
to sell to Sidor, on a take-or-pay basis, 29.9% of Matesis HBI production, or up to
49.8% at the election of Sidor;
 
    
    during 2004, Sidor entered into a management assistance agreement with Matesi. As
part of this agreement, Sidor received fees from Matesi totaling USD0.1 million in the
first quarter of 2008, related to the provision of managerial services;
 
    
    as part of the investment agreement to finance the acquisition of Matesis assets
and its start-up, in July 2004 Sidor granted a loan to Matesi for an outstanding amount
at March 31, 2008, of USD26.8 million. This loan bore interest at a rate of LIBOR plus
2%. Interest earned on this loan amounted to USD0.5 million during the first quarter of
2008;
 
    
    during 2007, Sidor entered into a Service Agreement with Matesi under which Matesi
recycled pellets from Sidor into HBI. Sidor paid USD4.5 million in the first quarter of
2008 pursuant to this agreement.
 Provision of Engineering and Labor Services.
 Sales and Purchases of Other Products and Services
 C.
    
    Interest of Experts and Counsel
   87




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##### Table of Contents



Item 8.
    
    Financial Information
 A.
    
    Consolidated Statements and Other Financial Information
  Legal Proceedings
 Outstanding Legal Proceedings
  Tax matters relating to Siderar
 Administración Federal de Ingresos Públicos
 Previously Reported Legal Proceedings
  Corus arbitration proceedings
      88




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##### Table of Contents




 Dividend Policy
 pari passu
  Approved dividendAmount
    
    
    Per share
    
    
    Per ADSShareholders meeting date
    
    (USD million)
    
    
    (USD)
    
    
    (USD)
    
    
    Dividend payment dateJune 6, 2007
    
    
    100.2
    
    
    
    0.05
    
    
    
    0.50
    
    
    June 12, 2007June 4, 2008
    
    
    100.2
    
    
    
    0.05
    
    
    
    0.50
    
    
    June 12, 2008June 3, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/aJune 2, 2010
    
    
    100.2
    
    
    
    0.05
    
    
    
    0.50
    
    
    June 10, 2010June 1, 2011
    
    
    150.4
    
    
    
    0.075
    
    
    
    0.75
    
    
    June 9, 2011
    89




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##### Table of Contents



B.
    
    Significant Changes
  
 Item 9.
    
    The Offer and Listing
 A.
    
    Offer and Listing Details
   New York Stock Exchange
  Price per ADSFull Financial Years Since Listing
    
    High
    
    
    Low2006
    
    
    30.00
    
    
    
    20.152007
    
    
    41.23
    
    
    
    24.012008
    
    
    45.18
    
    
    
    4.652009
    
    
    35.61
    
    
    
    5.762010
    
    
    43.07
    
    
    
    29.16
 Price per ADSFull Financial Quarters in 2009
    
    High
    
    
    LowFirst quarter
    
    
    11.14
    
    
    
    5.76Second quarter
    
    
    18.64
    
    
    
    7.05Third quarter
    
    
    27.71
    
    
    
    17.24Fourth quarter
    
    
    35.61
    
    
    
    23.63
 Price per ADSFull Financial Quarters in 2010
    
    High
    
    
    LowFirst quarter
    
    
    41.34
    
    
    
    29.16Second quarter
    
    
    43.05
    
    
    
    29.78Third quarter
    
    
    37.94
    
    
    
    30.87Fourth quarter
    
    
    43.07
    
    
    
    32.55
  90




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##### Table of Contents



Price per ADSLast Six Months
    
    High
    
    
    LowJanuary 2011
    
    
    43.26
    
    
    
    38.30February 2011
    
    
    40.01
    
    
    
    35.21March 2011
    
    
    36.93
    
    
    
    33.78April 2011
    
    
    36.61
    
    
    
    32.55May 2011
    
    
    33.56
    
    
    
    30.53June 1 to June 16, 2011
    
    
    30.55
    
    
    
    28.46
 B.
    
    Plan of Distribution
 Not applicable.C.
    
    MarketsSee A. Offer and Listing Details.
 D.
    
    Selling ShareholdersNot applicable.E.
    
    DilutionNot applicable.
 F.
    
    Expenses of the IssueNot applicable.
 
 Item 10. Additional Information
 A.
    
    Share CapitalNot applicable.B.
    
    Memorandum and Articles of AssociationGeneral
  société anonyme Registre du Commerce et des Sociétés
   91




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##### Table of Contents



(a)
    
    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);
 (b)
    
    any issuance of shares against a contribution other than in cash;
 (c)
    
    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
 (d)
    
    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.
 Dividends
     92




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Voting Rights; Shareholders Meetings; Election of Directors
       Access to Corporate Records
   93




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##### Table of Contents



Appraisal Rights
  
    
    the delisting of the Companys shares from all regulated markets where the
Companys shares are listed at that time, excluding a delisting made pursuant to an offer
to all of the Companys shareholders made by a business entity subject to common control
with the Company, whereby such business entity offers to issue, in exchange for the
Companys shares, shares to be listed on the same regulated market(s) on which the
Companys shares are listed;
 
    
    a merger in which the Company is not the surviving entity (unless the shares or
other equity securities of such entity are listed on the New York or London stock
exchanges);
 
    
    a sale, lease, exchange or other disposition of all or substantially all of the
Companys assets;
 
    
    an amendment to the Companys articles of association that has the effect of
materially changing its corporate purpose;
 
    
    the relocation of the Companys domicile outside the Grand Duchy of Luxembourg; or
 
    
    amendments to the Companys articles of association that restrict the rights of its
shareholders (excluding any amendments in relation with, or to, the authorized share
capital and/or the waiver or suppression of any preferential subscription rights relating
thereto);
   
    
    they held the shares as of the date of the announcement by the Company of its
intention to delist or as of the date of publication of the first convening notice for
the general shareholders meeting that approved the delisting;
 
    
    they present their claim within one month following the date of the general
shareholders meeting and supply evidence of their shareholding as of the date of the
Companys announcement or the publication of the first convening notice to the meeting;
and
 
    
    the delisting is not being made pursuant to an offer to all of the Companys
shareholders made by a business entity subject to common control with the Company,
whereby such business entity offers to issue, in exchange for the Companys shares,
 shares to be listed on the same regulated market(s) on which such dissenting or absent
shareholders hold their shares through participants in the local clearing system for that
market or markets.
   94




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##### Table of Contents



Distribution of Assets on Winding-up
  Transferability and Form
     Repurchase of Company Shares
  Limitation on Securities Ownership
  Change in Control
   C.
    
    Material Contracts
   95




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##### Table of Contents



D.
    
    Exchange Controls
  Mexico
    Argentina
  
    
    the proceeds of certain foreign financial debt incurred by Argentine residents
(including private Argentine entities) as well as certain inflows for the purpose of
investments in the capital markets must remain in Argentina for at least 365 calendar
days and, with certain exceptions, 30% of the amount of off-shore
proceeds must be
deposited in a non-transferable, non-interest bearing account with an Argentine bank.
This deposit must be held for a period of 365 calendar days and may not be used as
collateral in any credit transaction;
 
    
    outflows from proceeds of investments in capital markets are restricted and subject
to certain requirements, such as, in certain cases, the mantainance of the investment for
a specific period of time;
 
    
    inflows and outflows of foreign currency through the local exchange market, and
indebtedness transactions by local residents that may result in a foreign currency
payment to non-residents, must be registered with the Argentine Central Bank; and
 
    
    funds from export revenues or financial loans received that are credited in foreign
currency overseas must be converted into local currency and credited to a local banking
account within a specific period of time.
  96




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E.
    
    Taxation
  Grand Duchy of Luxembourg
  You should consult your own tax advisor regarding the Luxembourg tax consequences of owning
and disposing of ADSs in your particular circumstances.
 As used herein, a Luxembourg individual means an individual resident in Luxembourg who is
subject to personal income tax (impôt sur le revenu) on his or her worldwide income from
Luxembourg or foreign sources, and a Luxembourg corporate holder means a company (that is, a
fully taxable collectivité within the meaning of Article 159 of the Luxembourg Income Tax Law)
resident in Luxembourg subject to corporate income tax (impôt sur le revenu des collectivités)
on its worldwide income from Luxembourg or foreign sources. For purposes of this summary,
Luxembourg individuals and Luxembourg corporate holders are collectively referred to as
Luxembourg Holders. A non-Luxembourg Holder means any investor in ADSs of the Company
other than a Luxembourg Holder.
 Corporate reorganization
 société anonyme holding
 (société anonyme)
  97




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##### Table of Contents



Tax regime applicable to realized capital gains
 Luxembourg Holders
 Luxembourg resident individual holders
    Luxembourg resident corporate holders
  Non-Luxembourg Holders
  collectivité
  98




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##### Table of Contents



Tax regime applicable to distributions
 Withholding tax
   Luxembourg Holders
  Net wealth tax
 Luxembourg Holders
   Non-Luxembourg Holders
  Stamp and registration taxes
   99




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##### Table of Contents



Estate and gift taxes
   United States federal income taxation
  
    
    a dealer in securities,
 
    
    a bank,
 
    
    a trader in securities that elects to use a mark-to-market method of accounting for
securities holdings,
 
    
    a tax-exempt organization,
 
    
    a person who invests through a pass-through entity, including a partnership,
 
    
    a life insurance company,
 
    
    a person liable for alternative minimum tax,
 
    
    a former citizen of long-term resident of the United States,
 
    
    a person that actually or constructively owns 10% or more of our voting stock (including
ADSs),
 
    
    a person that holds ADSs as part of a straddle or a hedging or conversion transaction, or
 
    
    a U.S. holder (as defined below) whose functional currency is not the U.S. dollar.
    
    
    an individual citizen or resident of the United States,
 
    
    a domestic corporation,
 
    
    an estate whose income is subject to U.S. federal income tax regardless of its source, or
 
    
    a trust if (i) a U.S. court can exercise primary supervision over the trusts administration
and one or more U.S. persons are authorized to control all substantial decisions of the trust
or (ii) the trust has a valid electionin effect under applicable U.S. Treasury regulations to
be treated as a U.S. person.
  100




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##### Table of Contents



You should consult your own tax advisor regarding the U.S. federal, state and local and other
tax consequences of owning and disposing of ADSs in your particular circumstances.
   Taxation of dividends
 U.S. Holders.
     Taxation of capital gains
 U.S. Holders
  101




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##### Table of Contents



Additional U.S. Federal Income Tax Considerations
 PFIC rules.
 F.
    
    Dividends and Paying AgentsNot applicable.G.
    
    Statement by ExpertsNot applicable.H.
    
    Documents on Display
     
    
    our annual reports; and
 
    
    summaries of all notices of general meetings of shareholders and other reports and
communications that are made generally available to our shareholders.
  102




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##### Table of Contents



I.
    
    Subsidiary Information
  
 Item 11.
    
    Quantitative and Qualitative Disclosures About Market Risk
   At December 31, 2010In thousands of
    
    Expected maturity in the year ending December 31,U.S. Dollars
    
    2011
    
    
    2012(3)
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    TotalNon-current DebtFixed RateFloating Rate
    
    
    
    
    
    
    1,289,445
    
    
    
    12,726
    
    
    
    24,873
    
    
    
    24,874
    
    
    
    74,656
    
    
    
    1,426,574Current DebtFixed Rate
    
    
    14,206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,206Floating Rate
    
    
    498,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    498,877Total (1) (2)
    
    
    513,083
    
    
    
    1,289,445
    
    
    
    12,726
    
    
    
    24,873
    
    
    
    24,874
    
    
    
    74,656
    
    
    
    1,939,657
 (1)
    
    Borrowings are primarily bank borrowings with third parties. See Item 5.
Operating and Financial Review and ProspectsB. Liquidity and Capital
ResourcesPrincipal Sources of FundingFinancial Liabilities.(2)
    
    As most borrowings are subject to floating rates that approximate market rates,
with contractual repricing that occurs every one, three or six months, the fair value of
each borrowing approximates its carrying amount and is not disclosed separately.(3)
    
    In April 2011, we successfully negotiated an extension of maturities under Ternium
Mexicos 2007 syndicated loan facility. Pursuant to this agreement, USD803 million
originally maturing in July 2012 will be payed by Ternium Mexico in four equal semiannual
installments commencing on January 2013 and ending on July 2014.   103




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##### Table of Contents



Total Debt by Currency as of December 31, 2010
 In thousands of U.S. DollarsUSD
    
    
    1,786,928COP
    
    
    129,544Other
    
    
    23,185Total
    
    
    1,939,657
 Interest Rate Exposure Risk
  Interest Rate Derivative Contracts
       At December 31, 2010
    
    Total
    
    Fair ValueInterest rate collars Ternium MexicoContract amount (in USD million)
    
    250
    
    
    (9.9
    )Average fixed pay range
    
    6.00%4.16%Knock-in swap agreementsContract amount (in USD million)
    
    645
    
    
    (44.8
    )Average swap level and knock-in level
    
    5.22%2.50%Interest rate swap agreementContract amount (in USD million)
    
    10
    
    
    (0.0
    )Average variable pay
    
    Fed Funds + 38 basis points
  104




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##### Table of Contents



Foreign Exchange Exposure Risk
   USD million
    
    Functional CurrencyExposure to
    
    USD
    
    
    MXN
    
    
    ARP
    
    
    COPU.S. dollar (USD)
    
    
    (n/a
    )
    
    
    (1,922.2
    )
    
    
    200.1
    
    
    
    (48.1
    )EU euro (EUR)
    
    
    (13.9
    )
    
    
    (3.8
    )
    
    
    8.8
    
    
    
    Other currencies
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
   Foreign Exchange Derivative Contracts
     2
 
 2
    
    Guatemalan quetzales  105




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##### Table of Contents



USD ThousandsCurrencies
    
    Contract
    
    Notional amount
    
    
    Fair ValueUSD/EUR
    
    Forward
    
    EUR
    3,300
    
    
    
    212USD/EUR
    
    Cross currency swap
    
    EUR
    5,000
    
    
    
    (52
    )CRC/USD
    
    ND forward
    
    CRC
    4,113,280
    
    
    
    8GTQ/USD
    
    ND forward
    
    GTQ
    48,711
    
    
    
    (57
    )111
 Commodities Exposure Risk
  Natural Gas
  Commodities Derivative Contracts
  Other Commodities and raw materials
  
 Item 12.
    
    Description of Securities Other Than Equity Securities
 A.
    
    Debt SecuritiesNot applicable.B.
    
    Warrants and RightsNot applicable.C.
    
    Other SecuritiesNot applicable.
  106




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##### Table of Contents



D.
    
    American Depositary Shares
  
    
    A fee of USD5.00 (or less) per 100 ADSs (or portion of 100 ADSs) for: issuance of
ADSs, including issuances resulting from a distribution of shares or rights or other
property; and cancellation of ADSs for the purpose of withdrawal, including if the
deposit agreement terminates.
 
    
    A fee of USD0.02 (or less) per ADSs for any cash distribution to ADS registered
holders.
 
    
    As necessary, charges for: taxes and other governmental charges the Depositary or
the custodian have to pay on any ADS or share underlying an ADS (e.g., share transfer
taxes, stamp duty or withholding taxes); and any charges incurred by the depositary or
its agents for servicing the deposited securities.
 
    
    Registration or transfer fees for transfer and registration of shares on our share
register to or from the name of the Depositary or its agent when you deposit or withdraw
 shares.
 
    
    Expenses of the Depositary for: cable, telex and facsimile transmissions; and
conversion of foreign currency.
 
    
    A fee equivalent to the fee that would be payable if securities distributed to ADS
holders had been shares and the shares had been deposited for issuance of ADSs for
distribution of securities distributed to holders of deposited securities which are
distributed by the Depositary to ADS registered holders.
 
    
    As necessary, charges for any costs incurred by the Depositary or its agents for
servicing the deposited securities.
  Fees payable by the Depositary to the Company
 Fees incurred in 2010.
 Fees to be paid in the future.
 
 PART II
 
 Item 13.
    
    Defaults, Dividend Arrearages and Delinquencies
  
 Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
   107




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##### Table of Contents



Item 15.
    
    Controls and Procedures
  Managements report on internal control over financial reporting
   Internal ControlIntegrated Framework
    Attestation Report of Registered Public Accounting Firm
  Change in Internal Control over Financial Reporting
  
 Item 16A.
    
    Audit Committee Financial Expert
   108




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##### Table of Contents



Item 16B.
    
    Code of Ethics
   
 Item 16C.
    
    Principal Accountant Fees and Services
 Fees Paid to the Companys Principal Accountant
  For the year ended December 31,In thousands of U.S. dollars
    
    2010
    
    
    2009Audit Fees
    
    
    2,457
    
    
    
    2,422Audit-Related Fees
    
    
    449
    
    
    
    213Tax Fees
    
    
    232
    
    
    
    All Other Fees
    
    
    6
    
    
    
    166Total
    
    
    3,144
    
    
    
    2,801
 Audit Fees
  Audit-Related Fees
  Tax Fees
  All Other Fees
  Audit Committees Pre-approval Policies and Procedures
   109




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##### Table of Contents



de minimis
 
 Item 16D.
    
    Exemptions from the Listing Standards for Audit Committees
  
 Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
   
    
    The acquisitions of shares may be made in one or more transactions as the Board of Directors
of the Company or the board of directors or other governing body of the relevant entity, as
applicable, considers advisable. The number of shares acquired as a block may amount to the
maximum permitted amount of purchases;
 
    
    The maximum number of shares, including shares represented by ADRs, acquired
pursuant to this 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 ADRs are traded, such lower amount as may not be exceeded pursuant to any applicable
laws or regulations of such market;
 
    
    The purchase price per ADR 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 ADRs in the
New York Stock Exchange during the five trading days in which transactions in the ADRs
were recorded in the New York Stock Exchange preceding (but excluding) the day on which
the ADRs are purchased. In the case of purchases of shares other than in the form of
ADRs, the maximum and minimum per share purchase prices shall be equal to the prices that
would have applied in case of an ADR purchase pursuant to the formula above divided by
the number of underlying shares represented by an ADR at the time of the relevant
purchase. Such maximum and minimum purchase prices shall also apply to over-the-counter
or off-market transactions. Compliance with maximum and minimum purchase price
requirements in any and all acquisitions made pursuant to this authorization (including,
without limitation, acquisitions carried out through the use of derivative financial
instruments or option strategies) shall be determined on and as of the date on which the
relevant transaction is entered into, irrespective of the date on which the transaction
is to be settled;
 
    
    The above maximum and minimum purchase prices shall, in the event of a change in
the par value of the shares, a capital increase by means of a capitalization of reserves,
a distribution of shares under compensation or similar programs, a stock split or reverse
stock split, a distribution of reserves or any other assets, the redemption of capital,
or any other transaction impacting on the Companys equity be adapted automatically, so that
the impact of any such transaction on the value of the shares shall be reflected;
 
    
    The acquisitions of shares may not have the effect of reducing the Companys net
assets below the sum of the Companys share capital plus its undistributable reserves;
  110




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##### Table of Contents




    
    Only fully paid-up shares may be acquired pursuant to this authorization;
 
    
    The acquisitions of shares may be carried out for any purpose, as may be permitted
under applicable laws and regulations, including, without limitation, to reduce the share
capital of the Company, to offer such shares to third parties in the context of corporate
mergers or acquisitions of other entities or participating interests therein, for
distribution to the Companys or the Companys subsidiaries directors, officers or
employees or to meet obligations arising from convertible debt instruments;
 
    
    The acquisitions of shares may be carried out by any and all means, as may be
permitted under applicable laws and regulations, including through any stock exchange in
which the shares or other securities representing shares are traded, through public
offers to all shareholders of the Company to buy shares, through the use of derivative
financial instruments or option strategies, or in over the counter or off-market
transactions or in any other manner;
 
    
    The acquisitions of shares may be carried out at any time and from time to time
during the duration of the authorization, including during a tender offer period, as may
be permitted under applicable laws and regulations;
 
    
    The authorization granted to acquire shares shall be valid for such maximum period
as may be provided for under applicable Luxembourg law as in effect from time to time
(such maximum period being, as of to date, five years);
 
    
    The acquisitions of shares shall be made 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 any
such purchase shall comply with Article 49-2 et.seq. of the Luxembourg law of August 10,
1915 on commercial companies, as amended (or any successor law) and, in the case of
acquisitions of shares made through a stock exchange in which the shares or other
securities representing shares are traded, with any applicable laws and regulations of
such market.
    
 Item 16F.
    
    Change in Registrants Certifying Accountant
 Réviseur d entreprises agréé Réviseur dentreprises agréé
  111




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##### Table of Contents



Item 16G.
    
    Corporate Governance
  Non-management Directors Meetings
   Audit Committee
   Standards for Evaluating Director Independence
   112




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##### Table of Contents



Audit Committee Responsibilities
   Shareholder Voting on Equity Compensation Plans
  Disclosure of Corporate Governance Guidelines
  Code of Business Conduct and Ethics
  Chief Executive Officer Certification
  
 PART III
 
 Item 17.
    
    Financial Statements
  
 Item 18.
    
    Financial Statements
   113




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##### Table of Contents



Item 19.
    
    Exhibits
 ExhibitNumber
    
    Description1.1
    
    
    Updated and Consolidated Articles of Association of Ternium S.A., dated as of June 1, 20112.1
    
    
    Deposit Agreement entered into between Ternium S.A. and The Bank of New York*4.1
    
    
    Shareholders Agreement, dated January 9, 2006, between Tenaris S.A. and Inversora Siderurgica Limited**4.2
    
    
    Promissory Notes (pagarés) numbered 1 to 7 issued by CVG on May 7, 2009***8.1
    
    
    List of subsidiaries of Ternium S.A.12.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200215.1
    
    
    Consent of Independent Registered Public Accounting Firm15.2
    
    

Item
16-F letter issued by Price Waterhouse & Co. S.R.L.
 *
    
    Incorporated by reference to the Registration Statement on Form F-6, filed by Ternium S.A. on
January 11, 2006 (File No. 333-130952).**
    
    Incorporated by reference to the F-1 Registration Statement filed by Ternium S.A. on January
27, 2006 (File No. 333-130950).***
    
    Incorporated by reference to the Annual Report on Form 20-F, filed by Ternium S.A. on June
30, 2009 (File No.001-32734 09919440).  114




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##### Table of Contents



SIGNATURES
  June 30, 2011
    TERNIUM S.A.By:
    
    /s/ Pablo BrizzioName: Pablo BrizzioTitle:   Chief Financial Officer  115




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##### Table of Contents



ExhibitNumber
    
    Description1.1
    
    
    Updated and Consolidated Articles of Association of Ternium S.A., dated as of June 1, 20112.1
    
    
    Deposit Agreement entered into between Ternium S.A. and The Bank of New York*4.1
    
    
    Shareholders Agreement, dated January 9, 2006, between Tenaris S.A. and Inversora Siderurgica Limited**4.2
    
    
    Promissory Notes (pagarés) numbered 1 to 7 issued by CVG on May 7, 2009***8.1
    
    
    List of subsidiaries of Ternium S.A.12.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200215.1
    
    
    Consent of Independent Registered Public Accounting Firm15.2
    
    

Item
16-F letter issued by Price Waterhouse & Co. S.R.L.
 *
    
    Incorporated by reference to the Registration Statement on Form F-6, filed by Ternium S.A. on
January 11, 2006 (File No. 333-130952).**
    
    Incorporated by reference to the F-1 Registration Statement filed by Ternium S.A. on January
27, 2006 (File No. 333-130950).***
    
    Incorporated by reference to the Annual Report on Form 20-F, filed by Ternium S.A. on June
30, 2009 (File No.001-32734 09919440).




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##### Table of Contents



TERNIUM S.A.
 CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 nd




---



##### 



TERNIUM S.A.
 Index to financial statements
 Consolidated Financial Statements
  
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated income statement for the years ended December 31, 2010, 2009 and 2008
    
    
    F-3Consolidated statement of comprehensive income for the years ended December 31, 2010, 2009 and
2008
    
    
    F-4Consolidated statement of financial position as of December 31, 2010 and 2009
    
    
    F-5Consolidated statement of changes in equity for the years ended December 31, 2010, 2009 and 2008
    
    
    F-6Consolidated statement of cash flows for the years ended December 31, 2010, 2009 and 2008
    
    
    F-9Notes to the consolidated financial statements
    
    
    F-10




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     F-1




---



##### Table of Contents



PRICE WATERHOUSE & CO. S.R.L.by
    
    /s/ Daniel A. López Lado (Partner)

Daniel A. López Lado
                          Price Waterhouse & Co. S.R.L., Bouchard 557, piso 8°, C1106ABG  Ciudad de Buenos Aires  T: +(54.11) 4850.0000, F: +(54.11) 4850.1800, www.pwc.com/ar
   F-2




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 
 CONSOLIDATED INCOME STATEMENT
 Year ended December 31,Notes
    
    
    2010
    
    
    2009
    
    
    2008Continuing operationsNet sales
    
    
    
    
    
    
    7,382,004
    
    
    
    4,958,983
    
    
    
    8,464,885Cost of sales
    
    
    6
    
    
    
    (5,665,254
    )
    
    
    (4,110,370
    )
    
    
    (6,128,027
    )Gross profit
    
    
    
    
    
    
    1,716,750
    
    
    
    848,613
    
    
    
    2,336,858Selling, general and administrative expenses
    
    
    7
    
    
    
    (665,306
    )
    
    
    (531,530
    )
    
    
    (669,473
    )Other operating income (expenses), net
    
    
    9
    
    
    
    2,493
    
    
    
    (20,700
    )
    
    
    8,662Operating income
    
    
    
    
    
    
    1,053,937
    
    
    
    296,383
    
    
    
    1,676,047Interest expense
    
    
    
    
    
    
    (72,969
    )
    
    
    (105,810
    )
    
    
    (136,111
    )Interest income
    
    
    
    
    
    
    27,347
    
    
    
    21,141
    
    
    
    32,178Interest income  Sidor financial asset
    
    
    29
    
    
    
    61,012
    
    
    
    135,952
    
    
    
    Other financial income (expenses), net
    
    
    10
    
    
    
    115,112
    
    
    
    81,639
    
    
    
    (693,192
    )Equity in earnings of associated companies
    
    
    14
    
    
    
    1,688
    
    
    
    1,110
    
    
    
    1,851Income before income tax expense
    
    
    
    
    
    
    1,186,127
    
    
    
    430,415
    
    
    
    880,773Income tax (expense) benefitCurrent and deferred income tax expense
    
    
    11
    
    
    
    (406,657
    )
    
    
    (91,314
    )
    
    
    (258,969
    )Reversal of deferred statutory profit sharing
    
    
    4 (m)
    
    
    
    
    
    
    
    
    
    
    
    96,265Income from continuing operations
    
    
    
    
    
    
    779,470
    
    
    
    339,101
    
    
    
    718,069Discontinued operationsIncome from discontinued operations
    
    
    29
    
    
    
    
    
    
    
    428,023
    
    
    
    157,095Profit for the year
    
    
    
    
    
    
    779,470
    
    
    
    767,124
    
    
    
    875,164Attributable to:Equity holders of the Company
    
    
    28
    
    
    
    622,076
    
    
    
    717,400
    
    
    
    715,418Non-controlling interest
    
    
    
    
    
    
    157,394
    
    
    
    49,724
    
    
    
    159,746779,470
    
    
    
    767,124
    
    
    
    875,164Weighted average number of shares outstanding
    
    
    28
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442Basic and diluted earnings per share
(expressed in USD per share) for profit:- From continuing operations attributable to
the equity holders of the Company
    
    
    
    
    
    
    0.31
    
    
    
    0.15
    
    
    
    0.27- From discontinued operations attributable to
the equity holders of the Company
    
    
    
    
    
    
    
    
    
    
    0.21
    
    
    
    0.09- For the year attributable to the equity
holders of the Company
    
    
    
    
    
    
    0.31
    
    
    
    0.36
    
    
    
    0.36
   F-3




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 
 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 Year ended December 31,2010
    
    
    2009
    
    
    2008Profit for the year
    
    
    779,470
    
    
    
    767,124
    
    
    
    875,164Other comprehensive income:Currency translation adjustment
    
    
    35,915
    
    
    
    (93,922
    )
    
    
    (502,996
    )(1)Changes in the fair value of
derivatives classified
as cash flow hedges
    
    
    14,729
    
    
    
    35,881
    
    
    
    (82,574
    )Income tax relating to cash flow hedges
    
    
    (4,419
    )
    
    
    (9,112
    )
    
    
    23,121Other comprehensive income (loss) for the year,
net of tax
    
    
    46,225
    
    
    
    (67,153
    )
    
    
    (562,449
    )Total comprehensive income for the year
    
    
    825,695
    
    
    
    699,971
    
    
    
    312,715Attributable to:Equity holders of the Company
    
    
    684,635
    
    
    
    698,789
    
    
    
    244,927Non-controlling interest
    
    
    141,060
    
    
    
    1,182
    
    
    
    67,788825,695
    
    
    
    699,971
    
    
    
    312,715
 (1)
    
    Includes an increase of USD 151.5 million corresponding to the currency translation
adjustment from discontinued operations. See note 29 (ii).
 The accompanying notes are an integral part of these consolidated financial statements.
  F-4




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 Notes
    
    
    December 31, 2010
    
    
    December 31, 2009ASSETSNon-current assetsProperty, plant and equipment, net
    
    
    12
    
    
    
    4,262,896
    
    
    
    
    
    
    
    4,040,415Intangible assets, net
    
    
    13
    
    
    
    1,129,348
    
    
    
    
    
    
    
    1,085,412Investments in associated companies
    
    
    14
    
    
    
    8,212
    
    
    
    
    
    
    
    6,577Sidor financial asset
    
    
    29 (ii)
    
    
    
    74,549
    
    
    
    
    
    
    
    Other investments
    
    
    15
    
    
    
    35,575
    
    
    
    
    
    
    
    16,414Deferred tax assets
    
    
    23
    
    
    
    12,387
    
    
    
    
    
    
    
    Receivables, net
    
    
    16
    
    
    
    56,471
    
    
    
    5,579,438
    
    
    
    101,317
    
    
    
    5,250,135Current assetsReceivables
    
    
    17
    
    
    
    94,573
    
    
    
    
    
    
    
    136,300Derivative financial instruments
    
    
    25
    
    
    
    212
    
    
    
    
    
    
    
    1,588Inventories, net
    
    
    18
    
    
    
    1,953,390
    
    
    
    
    
    
    
    1,350,568Trade receivables, net
    
    
    19
    
    
    
    663,502
    
    
    
    
    
    
    
    437,835Sidor financial asset
    
    
    29 (ii)
    
    
    
    183,439
    
    
    
    
    
    
    
    964,359Other investments
    
    
    20
    
    
    
    848,400
    
    
    
    
    
    
    
    46,844Cash and cash equivalents
    
    
    20
    
    
    
    1,779,416
    
    
    
    5,522,932
    
    
    
    2,095,798
    
    
    
    5,033,292Non-current assets classified as held for sale
    
    
    
    
    
    
    
    
    
    
    9,961
    
    
    
    
    
    
    
    9,2465,532,893
    
    
    
    
    
    
    
    5,042,538Total assets
    
    
    
    
    
    
    
    
    
    
    11,112,331
    
    
    
    
    
    
    
    10,292,673EQUITYCapital and reserves attributable to the
companys equity holders
    
    
    
    
    
    
    
    
    
    
    5,880,740
    
    
    
    
    
    
    
    5,296,342Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    1,135,361
    
    
    
    
    
    
    
    964,897Total equity
    
    
    
    
    
    
    
    
    
    
    7,016,101
    
    
    
    
    
    
    
    6,261,239LIABILITIESNon-current liabilitiesProvisions
    
    
    21
    
    
    
    16,144
    
    
    
    
    
    
    
    18,913Deferred income tax
    
    
    23
    
    
    
    877,742
    
    
    
    
    
    
    
    857,297Other liabilities
    
    
    24
    
    
    
    201,312
    
    
    
    
    
    
    
    176,626Derivative financial instruments
    
    
    25
    
    
    
    18,822
    
    
    
    
    
    
    
    32,627Borrowings
    
    
    26
    
    
    
    1,426,574
    
    
    
    2,540,594
    
    
    
    1,787,204
    
    
    
    2,872,667Current liabilitiesCurrent tax liabilities
    
    
    
    
    
    
    294,902
    
    
    
    
    
    
    
    103,171Other liabilities
    
    
    24
    
    
    
    123,610
    
    
    
    
    
    
    
    57,021Trade payables
    
    
    
    
    
    
    588,086
    
    
    
    
    
    
    
    412,967Derivative financial instruments
    
    
    25
    
    
    
    35,955
    
    
    
    
    
    
    
    46,083Borrowings
    
    
    26
    
    
    
    513,083
    
    
    
    1,555,636
    
    
    
    539,525
    
    
    
    1,158,767Total liabilities
    
    
    
    
    
    
    
    
    
    
    4,096,230
    
    
    
    
    
    
    
    4,031,434Total equity and liabilities
    
    
    
    
    
    
    
    
    
    
    11,112,331
    
    
    
    
    
    
    
    10,292,673
   F-5




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 Attributable to the Companys equity holders (1)Initialpublic
    
    
    
    
    
    
    Capital
    
    
    Currency
    
    
    
    
    
    
    
    
    
    
    Non-Capital
    
    
    offering
    
    
    
    
    
    
    stock issue
    
    
    translation
    
    
    Retained
    
    
    
    
    
    
    controlling
    
    
    Totalstock (2)
    
    
    expenses
    
    
    Reserves (3)
    
    
    discount (4)
    
    
    adjustment
    
    
    earnings
    
    
    Total
    
    
    interest
    
    
    EquityBalance 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
    
    
    
    6,261,239Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    622,076
    
    
    
    622,076
    
    
    
    157,394
    
    
    
    779,470Other comprehensive income (loss)
for the year:Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,412
    
    
    
    
    
    
    
    53,412
    
    
    
    (17,497
    )
    
    
    35,915Cash flow hedges, net of tax
    
    
    
    
    
    
    
    
    
    
    9,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,147
    
    
    
    1,163
    
    
    
    10,310Total comprehensive income for the year
    
    
    
    
    
    
    
    
    
    
    9,147
    
    
    
    
    
    
    
    53,412
    
    
    
    622,076
    
    
    
    684,635
    
    
    
    141,060
    
    
    
    825,695Dividends 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 (See Note 31)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,900
    
    
    
    4,900Acquisition of business (See Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,808
    
    
    
    62,808Balance 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 27 (iii).(2)
    
    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. 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 per share (USD 0.50 per ADS)
   F-6




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 Attributable to the Companys equity holders (1)Initialpublic
    
    
    
    
    
    
    Capital
    
    
    Currency
    
    
    
    
    
    
    
    
    
    
    Non-Capital
    
    
    offering
    
    
    
    
    
    
    stock issue
    
    
    translation
    
    
    Retained
    
    
    
    
    
    
    controlling
    
    
    Totalstock (2)
    
    
    expenses
    
    
    Reserves
    
    
    discount (3)
    
    
    adjustment
    
    
    earnings
    
    
    Total
    
    
    interest
    
    
    EquityBalance at January 1, 2009
    
    
    2,004,743
    
    
    
    (23,295
    )
    
    
    1,702,285
    
    
    
    (2,324,866
    )
    
    
    (528,485
    )
    
    
    3,766,988
    
    
    
    4,597,370
    
    
    
    964,094
    
    
    
    5,561,464Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    717,400
    
    
    
    717,400
    
    
    
    49,724
    
    
    
    767,124Other comprehensive income (loss)
for the yearCurrency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,359
    )
    
    
    
    
    
    
    (42,359
    )
    
    
    (51,563
    )
    
    
    (93,922
    )Cash flow hedges, net of tax
    
    
    
    
    
    
    
    
    
    
    23,748
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,748
    
    
    
    3,021
    
    
    
    26,769Total comprehensive income (loss) for
the year
    
    
    
    
    
    
    
    
    
    
    23,748
    
    
    
    
    
    
    
    (42,359
    )
    
    
    717,400
    
    
    
    698,789
    
    
    
    1,182
    
    
    
    699,971Acquisition of non-controlling
interest (4)
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    (379
    )
    
    
    (196
    )Balance at December 31, 2009
    
    
    2,004,743
    
    
    
    (23,295
    )
    
    
    1,726,216
    
    
    
    (2,324,866
    )
    
    
    (570,844
    )
    
    
    4,484,388
    
    
    
    5,296,342
    
    
    
    964,897
    
    
    
    6,261,239
 (1)
    
    Shareholders equity determined in accordance with accounting principles generally
accepted in Luxembourg is disclosed in Note 27 (iii).(2)
    
    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. As of December 31, 2009, there were
2,004,743,442 shares issued. All issued shares are fully paid.(3)
    
    Represents the difference between book value of non-monetary contributions received from
shareholders under Luxembourg GAAP and IFRS.(4)
    
    On February 5, 2009, Ternium Internacional España S.L.U. acquired from its related
company Siderca S.A.I.C., 53,452 shares of Siderar S.A.I.C., representing 0.015% of that
companys share capital, for an aggregate purchase price of USD 196 thousand. After this
acquisition, Ternium increased its ownership in Siderar to 60.94%.As permitted by IFRS 3, the Company accounted for this acquisition under the economic entity
model, which requires that the acquisition of an additional equity interest in a controlled
subsidiary be accounted for at its carrying amount, with the difference arising on purchase
price allocation being recorded directly in equity.
   F-7




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 Attributable to the Companys equity holders (1)Initialpublic
    
    
    
    
    
    
    Capital
    
    
    Currency
    
    
    
    
    
    
    
    
    
    
    Non-Capital
    
    
    offering
    
    
    
    
    
    
    stock issue
    
    
    translation
    
    
    Retained
    
    
    
    
    
    
    controlling
    
    
    Totalstock (2)
    
    
    expenses
    
    
    Reserves
    
    
    discount (3)
    
    
    adjustment
    
    
    earnings
    
    
    Total
    
    
    interest
    
    
    EquityBalance at January 1, 2008
    
    
    2,004,743
    
    
    
    (23,295
    )
    
    
    1,946,963
    
    
    
    (2,324,866
    )
    
    
    (110,739
    )
    
    
    2,959,874
    
    
    
    4,452,680
    
    
    
    1,805,243
    
    
    
    6,257,923Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    715,418
    
    
    
    715,418
    
    
    
    159,746
    
    
    
    875,164Other comprehensive loss for the
yearCurrency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (417,746
    )
    
    
    
    
    
    
    (417,746
    )
    
    
    (85,250
    )
    
    
    (502,996
    )Cash flow hedges, net of tax
    
    
    
    
    
    
    
    
    
    
    (52,745
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52,745
    )
    
    
    (6,708
    )
    
    
    (59,453
    )Total comprehensive (loss) income for
the year
    
    
    
    
    
    
    
    
    
    
    (52,745
    )
    
    
    
    
    
    
    (417,746
    )
    
    
    715,418
    
    
    
    244,927
    
    
    
    67,788
    
    
    
    312,715Reversal of revaluation reserves
related to discontinued operations (4)
    
    
    
    
    
    
    
    
    
    
    (91,696
    )
    
    
    
    
    
    
    
    
    
    
    91,696
    
    
    
    
    
    
    
    
    
    
    
    Dividends paid in cash (5)
    
    
    
    
    
    
    
    
    
    
    (100,237
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100,237
    )
    
    
    
    
    
    
    (100,237
    )Dividends paid in cash by subsidiary
companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,595
    )
    
    
    (19,595
    )Non-controlling interest in
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (889,342
    )
    
    
    (889,342
    )Balance at December 31, 2008
    
    
    2,004,743
    
    
    
    (23,295
    )
    
    
    1,702,285
    
    
    
    (2,324,866
    )
    
    
    (528,485
    )
    
    
    3,766,988
    
    
    
    4,597,370
    
    
    
    964,094
    
    
    
    5,561,464
 (1)
    
    Shareholders equity determined in accordance with accounting principles generally
accepted in Luxembourg is disclosed in Note 27 (iii).(2)
    
    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. As of December 31, 2008, there were
2,004,743,442 shares issued. All issued shares are fully paid.(3)
    
    Represents the difference between book value of non-monetary contributions received from
shareholders under Luxembourg GAAP and IFRS.(4)
    
    Corresponds to the reversal of the revaluation reserve recorded in fiscal year 2005,
representing the excess of fair value over the book value of Terniums pre-acquisition
interest in the net assets of Sidor.(5)
    
    Represents USD 0.05 per share (USD 0.50 per ADS)
   F-8




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 Year ended December 31,Notes
    
    
    2010
    
    
    2009
    
    
    2008Cash flows from operating activitiesIncome from continuing operations
    
    
    
    
    
    
    779,470
    
    
    
    339,101
    
    
    
    718,069Adjustments for:Depreciation and amortization
    
    
    12&13
    
    
    
    383,300
    
    
    
    385,105
    
    
    
    413,541Income tax accruals less payments
    
    
    32 (b)
    
    
    
    226,820
    
    
    
    (49,342
    )
    
    
    (88,511
    )Equity in earnings of associated companies
    
    
    14
    
    
    
    (1,688
    )
    
    
    (1,110
    )
    
    
    (1,851
    )Interest accruals less payments
    
    
    32 (b)
    
    
    
    (59
    )
    
    
    10,706
    
    
    
    (84,151
    )Impairment charge
    
    
    27 (ii)
    
    
    
    
    
    
    
    27,022
    
    
    
    Changes in provisions
    
    
    21
    
    
    
    5,543
    
    
    
    4,614
    
    
    
    2,358Changes in working capital
    
    
    32 (b)
    
    
    
    (447,973
    )
    
    
    635,179
    
    
    
    (1,071,472
    )Interest income  Sidor financial asset
    
    
    29 (ii)
    
    
    
    (61,012
    )
    
    
    (135,952
    )
    
    
    Net foreign exchange results and others
    
    
    
    
    
    
    (77,576
    )
    
    
    (53,565
    )
    
    
    629,530Net cash provided by operating activities
    
    
    
    
    
    
    806,825
    
    
    
    1,161,758
    
    
    
    517,513Cash flows from investing activitiesCapital expenditures
    
    
    12&13
    
    
    
    (350,124
    )
    
    
    (208,590
    )
    
    
    (587,904
    )Acquisition of business:Purchase consideration
    
    
    3
    
    
    
    (75,000
    )
    
    
    (196
    )
    
    
    Cash acquired
    
    
    3
    
    
    
    6,593
    
    
    
    
    
    
    
    (Increase) Decrease in other investments
    
    
    15&20
    
    
    
    (820,672
    )
    
    
    43,163
    
    
    
    (24,674
    )Proceeds from the sale of property, plant and equipment
    
    
    
    
    
    
    1,693
    
    
    
    3,245
    
    
    
    2,103Proceeds from Sidor financial asset
    
    
    29 (ii)
    
    
    
    767,382
    
    
    
    953,611
    
    
    
    Dividends received from associated companies
    
    
    14
    
    
    
    302
    
    
    
    
    
    
    
    Contributions in associated companies
    
    
    14
    
    
    
    (302
    )
    
    
    
    
    
    
    Proceeds from the sale of discontinued operations
    
    
    29  (i)
    
    
    
    
    
    
    
    
    
    
    
    718,635Discontinued operations
    
    
    29 (iv)
    
    
    
    
    
    
    
    
    
    
    
    242,370Net cash (used in) provided by investing activities
    
    
    
    
    
    
    (470,128
    )
    
    
    791,233
    
    
    
    350,530Cash flows from financing activitiesDividends paid in cash to companys shareholders
    
    
    
    
    
    
    (100,237
    )
    
    
    
    
    
    
    (100,237
    )Dividends paid in cash by subsidiary companies
    
    
    
    
    
    
    (38,304
    )
    
    
    
    
    
    
    (19,595
    )Contributions from non-controlling shareholders in
consolidated subsidiaries
    
    
    
    
    
    
    4,900
    
    
    
    
    
    
    
    Proceeds from borrowings
    
    
    
    
    
    
    35,441
    
    
    
    219,037
    
    
    
    519,809Repayments of borrowings
    
    
    
    
    
    
    (555,918
    )
    
    
    (1,141,625
    )
    
    
    (1,152,886
    )Net cash used in financing activities
    
    
    
    
    
    
    (654,118
    )
    
    
    (922,588
    )
    
    
    (752,909
    )(Decrease) Increase in cash and cash equivalents
    
    
    
    
    
    
    (317,421
    )
    
    
    1,030,403
    
    
    
    115,134Movement in cash and cash equivalentsAt January 1,
    
    
    
    
    
    
    2,095,798
    
    
    
    1,065,552
    
    
    
    1,125,830Effect of exchange rate changes
    
    
    
    
    
    
    1,039
    
    
    
    (157
    )
    
    
    (17,518
    )(Decrease) Increase in cash and cash equivalents
    
    
    
    
    
    
    (317,421
    )
    
    
    1,030,403
    
    
    
    115,134Cash & cash equivalents of discontinued operations at
March 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157,894
    )Cash and cash equivalents at December 31, (1)
    
    
    20
    
    
    
    1,779,416
    
    
    
    2,095,798
    
    
    
    1,065,552
 (1)
    
    In addition, the Company had restricted cash for USD 12,343. As of December 31, 2009 and
2008, there were no restricted cash. Additionally, the Company had other investments with a
maturity of more than three months for USD 848,400 at
December 31, 2010.
   F-9




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 
 INDEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1
    
    General information2
    
    Basis of presentation3
    
    Acquisition of business4
    
    Accounting policies5
    
    Segment information6
    
    Cost of sales7
    
    Selling, general and administrative expenses8
    
    Labor costs (included in cost of sales, selling, general and administrative expenses)9
    
    Other operating income (expenses), net10
    
    Other financial income (expenses), net11
    
    Income tax expense12
    
    Property, plant and equipment, net13
    
    Intangible assets, net14
    
    Investments in associated companies15
    
    Other investments, net  non current16
    
    Receivables, net  non current17
    
    Receivables  current18
    
    Inventories, net19
    
    Trade receivables, net20
    
    Cash, cash equivalents and other investments21
    
    Allowances and Provisions  non current22
    
    Allowances  current23
    
    Deferred income tax24
    
    Other liabilities25
    
    Derivative financial instruments26
    
    Borrowings27
    
    Contingencies, commitments and restrictions on the distribution of profits28
    
    Earnings per share29
    
    Discontinued operations30
    
    Related party transactions31
    
    Joint Venture in Mexico32
    
    Other required disclosures33
    
    Recently issued accounting pronouncements34
    
    Financial risk management35
    
    Auditors fees36
    
    Subsequent events  Repurchase of Shares from Usiminas concurrently with secondary public offering37
    
    Update as of June 30, 2011
  F-10




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##### Table of Contents



TERNIUM S.A.
Consolidated financial statements
as of December 31, 2010 and 2009 and
for the years ended December 31, 2010, 2009 and 2008
 1 General information
       2 Basis of presentation
       F-11




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 2 Basis of presentation (continued)
  Percentage of ownership atCountry of
    
    
    
    December 31,Company
    
    Organization
    
    Main activity
    
    2010
    
    
    2009
    
    
    2008Ternium S.A.
    
    Luxembourg
    
    Holding
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium Investments S.à.r.l. (1)
    
    Luxembourg
    
    Holding
    
    
    100.00
    %
    
    
    
    
    
    
    Ternium Brasil S.A. (2)
    
    Brazil
    
    Holding
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Siderúrgica do Norte Fluminense S.A. (3)
    
    Brazil
    
    Manufacturing and selling of steel products
    
    
    100.00
    %
    
    
    
    
    
    
    Ylopa  Servicos de Consultadoria Lda. (4)
    
    Portugal
    
    Holding
    
    
    94.38
    %
    
    
    94.38
    %
    
    
    94.38
    %Consorcio Siderurgia Amazonia S.L.U. (5)
    
    Spain
    
    Holding
    
    
    94.38
    %
    
    
    94.38
    %
    
    
    94.38
    %Secor- Servicios Corporativos S.A. (5)
    
    Venezuela
    
    Holding
    
    
    94.38
    %
    
    
    94.38
    %
    
    
    93.44
    %Ternium Internacional España S.L.U. (2)
    
    Spain
    
    Marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Siderar S.A.I.C. (6)
    
    Argentina
    
    Manufacturing and selling of flat steel products
    
    
    60.94
    %
    
    
    60.94
    %
    
    
    60.93
    %Impeco S.A. (7)
    
    Argentina
    
    Manufacturing of pipe products
    
    
    60.97
    %
    
    
    60.97
    %
    
    
    60.96
    %Prosid Investments S.C.A. (7)
    
    Uruguay
    
    Holding
    
    
    60.94
    %
    
    
    60.94
    %
    
    
    60.93
    %Inversiones Basilea S.A. (8)
    
    Chile
    
    Purchase and sale of real estate and other
    
    
    60.94
    %
    
    
    60.94
    %
    
    
    60.93
    %Ternium Mexico S.A. de C.V. (9)
    
    Mexico
    
    Holding
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Hylsa S.A. de C.V. (10)
    
    Mexico
    
    Manufacturing and selling of steel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Las Encinas S.A. de C.V. (10)
    
    Mexico
    
    Exploration, exploitation and pelletizing of iron ore
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Ferropak Comercial S.A. de C.V. (10)
    
    Mexico
    
    Scrap services company
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Ferropak Servicios S.A. de C.V. (10)
    
    Mexico
    
    Services
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Galvacer America Inc (10)
    
    USA
    
    Distributing company
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Galvamet America Corp (10)
    
    USA
    
    Manufacturing and selling of insulated panel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Transamerica E. & I. Trading Corp (10)
    
    USA
    
    Scrap company
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Técnica Industrial S.A. de C.V. (10)
    
    Mexico
    
    Services
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Sefimsa S.A. de C.V. (10)
    
    Mexico
    
    Financial Services
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Ecore Holding S. de R.L. de C.V. (10)
    
    Mexico
    
    Holding
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Neotec L.L.C. (10)
    
    USA
    
    Holding
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Treasury Services S.A. de C.V. (10)
    
    Mexico
    
    Financial Services
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %APM, S.A. de C.V. (10)
    
    Mexico
    
    Manufacturing and selling of steel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Acedor, S.A. de C.V. (10)
    
    Mexico
    
    Holding
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Empresas Stabilit S.A. de C.V. (10)
    
    Mexico
    
    Holding
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %
  F-12




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 2 Basis of presentation (continued)
 Percentage of ownership atCountry of
    
    
    
    December 31,Company
    
    Organization
    
    Main activity
    
    2010
    
    
    2009
    
    
    2008Acerus S.A. de C.V. (10)
    
    Mexico
    
    Manufacturing and selling of steel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Imsa Monclova S.A. de C.V. (10)
    
    Mexico
    
    Services
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Ternium Internacional Guatemala S.A. (10)
    
    Guatemala
    
    Selling of steel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Corporativo Grupo Imsa S.A. de C.V. (10)
    
    Mexico
    
    Services
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Ternium USA Inc. (10)
    
    USA
    
    Manufacturing and selling of steel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Consorcio Minero Benito Juarez Peña Colorada S.A.de C.V. (11)
    
    Mexico
    
    Exploration, exploitation and pelletizing of iron ore
    
    
    44.36
    %
    
    
    44.36
    %
    
    
    44.36
    %Peña Colorada Servicios S.A. de C.V. (11)
    
    Mexico
    
    Services
    
    
    44.36
    %
    
    
    44.36
    %
    
    
    44.36
    %Servicios Integrales Nova de Monterrey S.A. de C.V. (12)
    
    Mexico
    
    Medical and Social Services
    
    
    66.09
    %
    
    
    66.09
    %
    
    
    66.09
    %Ternium Guatemala S.A.
    
    Guatemala
    
    Manufacturing and selling of steel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Ternium Internacional Nicaragua S.A.
    
    Nicaragua
    
    Manufacturing and selling of steel products
    
    
    88.18
    %
    
    
    88.18
    %
    
    
    88.09
    %Ternium Internacional Honduras S.A. de C.V.
    
    Honduras
    
    Manufacturing and selling of steel products
    
    
    88.01
    %
    
    
    88.00
    %
    
    
    88.00
    %Ternium Internacional El Salvador, S.A. de C.V.
    
    El Salvador
    
    Manufacturing and selling of steel products
    
    
    88.66
    %
    
    
    88.65
    %
    
    
    88.65
    %Ternium Internacional Costa Rica S.A.
    
    Costa Rica
    
    Manufacturing and selling of steel products
    
    
    88.72
    %
    
    
    88.71
    %
    
    
    88.71
    %Ferrasa S.A.S. (13)
    
    Colombia
    
    Manufacturing and selling of steel products
    
    
    54.00
    %
    
    
    
    
    
    
    Perfilamos del Cauca S.A.S. (13)
    
    Colombia
    
    Manufacturing and selling of steel products
    
    
    54.00
    %
    
    
    
    
    
    
    Figuraciones S.A.S. (13)
    
    Colombia
    
    Manufacturing and selling of steel products
    
    
    54.00
    %
    
    
    
    
    
    
    Siderúrgica de Caldas S.A.S. (13)
    
    Colombia
    
    Manufacturing and selling of steel products
    
    
    54.00
    %
    
    
    
    
    
    
    Recolectora Industrial de Colombia S.A. (1)
    
    Colombia
    
    Scrap services company
    
    
    28.70
    %
    
    
    
    
    
    
    Procesadora de Materiales Industriales S.A. (1)
    
    Colombia
    
    Scrap services company
    
    
    32.40
    %
    
    
    
    
    
    
    Desechos Industriales de Colombia S.A. (1)
    
    Colombia
    
    Scrap services company
    
    
    29.70
    %
    
    
    
    
    
    
    Tenigal S. de R.L. de C.V. (14)
    
    Mexico
    
    Manufacturing and selling of steel products
    
    
    51.00
    %
    
    
    
    
    
    
    Ternium Investments Switzerland AG (2)
    
    Switzerland
    
    Holding
    
    
    100.00
    %
    
    
    
    
    
    
    Ternium Internacional S.A. (15)
    
    Uruguay
    
    Holding and marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium International Ecuador S.A. (16)
    
    Ecuador
    
    Marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium International USA Corporation (16)
    
    USA
    
    Marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
  F-13




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 2 Basis of presentation (continued)
 Percentage of ownership atCountry of
    
    
    
    December 31,Company
    
    Organization
    
    Main activity
    
    2010
    
    
    2009
    
    
    2008Ternium Internationaal B.V. (16)
    
    Netherlands
    
    Marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium Internacional Perú S.A. (16)
    
    Peru
    
    Marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium Internacional de Colombia S.A. (16)
    
    Colombia
    
    Marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium Procurement S.A. (15)
    
    Uruguay
    
    Procurement services
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium International Inc. (15)
    
    Panama
    
    Marketing of steel products
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium Engineering & Services S.A. (17)
    
    Uruguay
    
    Engineering and other services
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    Ternium Ingeniería y Servicios de Argentina S.A.
    
    Argentina
    
    Engineering  and other services
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    Ternium Ingeniería y Servicios de Mexico S.A. de C.V.
    
    Mexico
    
    Engineering  and other services
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    Ternium Treasury Services S.A. (15)
    
    Uruguay
    
    Financial Services
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ternium Treasury Services B.V. (15)
    
    Netherlands
    
    Financial Services
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Ferrasa Panamá, S.A. (18)
    
    Panama
    
    Manufacturing and selling of steel products
    
    
    54.00
    %
    
    
    
    
    
    
    Aceros Transformados de Panamá, S.A. (18)
    
    Panama
    
    Manufacturing and selling of steel products
    
    
    54.00
    %
    
    
    
    
    
    
    Ternium Investments S.A. (formerly Dirken Company S.A.) (19)
    
    Uruguay
    
    Holding
    
    
    
    
    
    
    100.00
    %
    
    
    100.00
    %
 (1)
    
    Incorporated in the fourth quarter of 2010.(2)
    
    Indirectly through Ternium Investments S.à.r.l. Total voting rights held 100.00%(3)
    
    Indirectly through Ternium Brasil S.A. Total voting rights held: 100.00%. Incorporated during
2010.(4)
    
    Indirectly through Ternium Investments S.á.r.l. (85.62%) and Prosid Investments S.C.A.
(8.76%). Total voting rights held: 100.00%(5)
    
    Indirectly through Ylopa  Servicos de Consultadoría Lda.. Total voting rights held:
100.00%. As of April 25, 2008, Consorcio Siderurgia Amazonia S.L.U. was relocated into Spain
(formerly Cayman Islands)(6)
    
    Indirectly through Ternium Internacional España S.L.U. Total voting rights held: 60.94%(7)
    
    Indirectly through Siderar S.A.I.C and Ternium Internacional S.A. Total voting rights held
100.00%(8)
    
    Indirectly through Siderar S.A.I.C. Total voting rights held 100.00%(9)
    
    Indirectly through Siderar S.A.I.C., Inversiones Basilea S.A. and Ternium Internacional
España S.L.U. Total voting rights held 99.93%(10)
    
    Indirectly through Ternium Mexico S.A. de C.V. Total voting rights held: 100.00%(11)
    
    Indirectly through Ternium Mexico S.A. de C.V. Total voting rights held: 50.00%. Consolidated
under the proportionate consolidation method.(12)
    
    Indirectly through Ternium Mexico S.A. de C.V. Total voting rights held: 74.50%(13)
    
    Indirectly through Ternium Internacional España S.L.U.. Total voting rights held: 54.00%.
Incorporated during 2010. (See note 3)(14)
    
    Indirectly through Ternium Internacional España S.L.U.. Total voting rights held: 51.00%.
Incorporated during 2010. (See note 31)(15)
    
    Indirectly through Ternium Investments Switzerland AG. Total voting rights held: 100.00%(16)
    
    Indirectly through Ternium Internacional S.A. Total voting rights held 100.00%(17)
    
    Indirectly through Ternium Internacional Inc.. Total voting rights held 100.00%(18)
    
    Indirectly through Ternium Treasury Services S.A. Total voting rights held: 54.00%.
Incorporated during 2010. (See note 3)(19)
    
    This company was dissolved as of December 6, 2010.
  F-14




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 3 Acquisition of business
 Ferrasa S.A.S and Ferrasa Panamá S.A.
     Fair value
    
    
    Book valueProperty, plant and equipment
    
    
    140,118
    
    
    
    140,413Previously recognized goodwill
    
    
    
    
    
    
    37,377Customer relationships
    
    
    15,403
    
    
    
    Trademarks
    
    
    4,407
    
    
    
    Other contractual rights
    
    
    4,064
    
    
    
    Other intangible assets
    
    
    42
    
    
    
    42Inventories
    
    
    76,771
    
    
    
    76,241Cash and cash equivalents
    
    
    6,593
    
    
    
    6,593Deferred tax assets
    
    
    7,832
    
    
    
    1,180Borrowings
    
    
    (134,120
    )
    
    
    (134,120
    )Other assets and liabilities, net
    
    
    15,141
    
    
    
    15,141Non-controlling interest in subsidiaries
    
    
    (236
    )
    
    
    (236
    )Net
    
    
    136,015
    
    
    
    142,631Non-controlling interest
    
    
    (62,572
    )Goodwill
    
    
    1,557Total Purchase Consideration
    
    
    75,000
    F-15




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 3 Acquisition of business (continued)
  For valuation of customer relationship the excess earnings method was used, which is based on
calculating the present value of the future cash flows of the future economic benefits during the
remaining useful life attributable to the customer base. Customer relationships are being
amortized over an estimated useful life of 10 years.
 For the valuation of brands, the relief-from-royalty method was applied, both with the value that
a third party would have paid for these trademarks. The expected amortization of these assets is
determined on the basis of the expected benefit the asset provides the entity (e.g. expected
decline in value). For valuation of the other contractual rights, the postulated loss of income
method was used. Both intangible assets are being amortized over an estimated useful life of 10
years.
 The valuation of acquired intangible assets is to a great extent based on anticipated cash flows.
Nevertheless it is possible that actual outcomes could vary significantly from such estimated
future cash flows.
 For property, plant and equipment, fair values were derived from expert appraisals.
 The valuation of inventories at the date of acquisition was based on the corresponding selling
price less estimated costs of completion or estimated costs to make the sale.
    Pro forma data for the acquisitions
  4 Accounting policies
  IFRS 3 (revised January 2008), Business Combinations
  
    
    Partial acquisitions: Non-controlling interests are measured either as their proportionate
interest in the net identifiable assets (which is the original IFRS 3 requirement) or at fair value
(which is the new requirement).
 
    
    Step acquisitions: The requirement to measure at fair value every asset and liability at each
step for the purposes of calculating a portion of goodwill has been removed. Instead, goodwill is
measured as the difference at acquisition date between the fair value of any investment in the
business held before the acquisition, the consideration transferred and the net assets acquired.
 
    
    Acquisition-related costs: Acquisition-related costs are generally recognized as expenses (rather
than included in goodwill).
  F-16




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
  (a) Group accounting
 (1) Subsidiary companies and transactions with non-controlling interests
         (2) Joint ventures
    F-17




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
 (3) Associated companies
   (b) Foreign currency translation
 (1) Functional and presentation currency
  (2) Subsidiary companies
      (3) Transactions in currencies other than the functional currency
     F-18




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
 (c) Financial instruments
 Non derivative financial instruments
  
    
    Financial instruments at fair value through profit or loss: comprises mainly cash
and cash equivalents and investments in debt securities held for trading;
 
    
    Held-to-maturity instruments: measured at amortized cost using the effective
interest method less impairment losses. As of December 31, 2010, there are no
instruments classified under this category;
 
    
    Loans and receivables: measured at amortized cost using the effective interest
method less impairment losses;
 
    
    Available-for-sale (AFS) financial assets: gains and losses arising from changes
in fair value are recognized within other comprehensive income (OCI) with the
exception of impairment losses, interest calculated using the effective interest method
and foreign exchange gains and losses on monetary assets, which are recognized directly
in profit or loss. Where the investment is disposed of or is determined to be impaired,
the cumulative gain or loss previously recognized in OCI is included in the income
statement for the period. As of December 31, 2010, there are no instruments classified
under this category;
 
    
    Other financial liabilities: measured at amortized cost using the effective interest
method.
     Impairment of financial assets
    Derivative financial instruments
  (d) Property, plant and equipment
    F-19




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
     Land
    
    No DepreciationBuildings and improvements
    
    15-40 yearsProduction equipment
    
    5-25 yearsVehicles, furniture and fixtures and other equipment
    
    5-15 years
    (e) Intangible assets
 (1) Information system projects
   (2) Mining concessions
  (3) Exploration costs
  (4) Goodwill
    F-20




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
  (5) Research and development
  (6) Customer relationships acquired in a business combination
   (7) Trademarks acquired in a business combination
   (f) Impairment
        (g) Other investments
   F-21




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
   (h) Inventories
  (4)
 (i) Trade receivables and other receivables
   (j) Cash and cash equivalents
    (k) Non current assets (disposal groups) classified as held for sale
   (l) Borrowings
   (m) Income taxes  current and deferred
    F-22




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
     (n) Employee liabilities
 (1) Pension obligations
     Mexico
    Argentina
   F-23




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
 2) Termination benefits
  (3) Other compensation obligations
    (4) Social security contributions
  (o) Provisions and other liabilities
  (p) Trade payables
  (q) Revenue recognition
   (r) Borrowing Costs
   F-24




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
 (s) Cost of sales, selling, general and administrative expenses
  (t) Earnings per share
  (u) Derivative financial instruments and hedging activities
    (v) Segment information
     (w) Critical Accounting Estimates
   (1) Goodwill impairment test
    F-25




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
 (2) Income taxes
   (3) Loss contingencies
  (4) Allowance for obsolescence of supplies and spare parts and slow-moving inventory
        F-26




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
 (5) Valuation of the Sidor financial asset
    (6) Useful Lives and Impairment of Property, Plant and Equipment and Other Long-lived Assets
   
    
    whether significant changes with an adverse effect on the entity have taken place during the
period, or will take place in the near future, in the technological, market, economic or legal
environment in which the entity operates or in the market to which an asset is dedicated;
    
    whether market interest rates or other market rates of return on investments have increased
during the period, and those increases are likely to affect the discount rate used in calculating
an assets value in use and decrease the assets recoverable amount materially;
    
    whether the carrying amount of the net assets of the entity is more than its market
capitalization;
    
    whether evidence is available of obsolescence or physical damage of an asset.
    
    whether significant changes with an adverse effect on the entity have taken place during the
period, or are expected to take place in the near future, in the extent to which, or manner in
which, an asset is used or is expected to be used. These changes include the asset becoming
idle, plans to discontinue or restructure the operation to which an asset belongs, plans to dispose
of an asset before the previously expected date, and reassessing the useful life of an asset as
finite rather than indefinite; and
    
    whether evidence is available from internal reporting that indicates that the economic
performance of an asset is, or will be, worse than expected.
     F-27




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 4 Accounting policies (continued)
  (7) Allowances for doubtful accounts
   5 Segment information
 Reportable operating segments
 Year ended December 31, 2010Flat steel
    
    
    Long steelproducts
    
    
    products
    
    
    Other
    
    
    Unallocated
    
    
    TotalNet sales
    
    
    6,376,380
    
    
    
    833,137
    
    
    
    172,487
    
    
    
    
    
    
    
    7,382,004Cost of sales
    
    
    (4,932,551
    )
    
    
    (633,958
    )
    
    
    (98,745
    )
    
    
    
    
    
    
    (5,665,254
    )Gross profit
    
    
    1,443,829
    
    
    
    199,179
    
    
    
    73,742
    
    
    
    
    
    
    
    1,716,750Selling, general and administrative expenses
    
    
    (585,746
    )
    
    
    (62,419
    )
    
    
    (17,141
    )
    
    
    
    
    
    
    (665,306
    )Other operating income (expenses), net
    
    
    2,887
    
    
    
    (506
    )
    
    
    112
    
    
    
    
    
    
    
    2,493Operating income
    
    
    860,970
    
    
    
    136,254
    
    
    
    56,713
    
    
    
    
    
    
    
    1,053,937Capital expenditures  PP&E
    
    
    272,623
    
    
    
    38,123
    
    
    
    6,172
    
    
    
    
    
    
    
    316,918Depreciation  PP&E
    
    
    285,755
    
    
    
    20,851
    
    
    
    6,214
    
    
    
    
    
    
    
    312,820Segment assetsInventories, net
    
    
    1,804,896
    
    
    
    117,721
    
    
    
    30,773
    
    
    
    
    
    
    
    1,953,390Trade receivables, net
    
    
    514,521
    
    
    
    121,872
    
    
    
    27,109
    
    
    
    
    
    
    
    663,502Property, plant and equipment, net
    
    
    3,831,181
    
    
    
    378,212
    
    
    
    53,503
    
    
    
    
    
    
    
    4,262,896Intangible assets, net
    
    
    1,004,680
    
    
    
    75,504
    
    
    
    49,164
    
    
    
    
    
    
    
    1,129,348Assets  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257,988
    
    
    
    257,988Other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,845,207
    
    
    
    2,845,207
  F-28




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 5 Segment information (continued)
 Year ended December 31, 2009Flat steel
    
    
    Long steelproducts
    
    
    products
    
    
    Other
    
    
    Unallocated
    
    
    TotalNet sales
    
    
    4,249,979
    
    
    
    572,900
    
    
    
    136,104
    
    
    
    
    
    
    
    4,958,983Cost of sales
    
    
    (3,634,854
    )
    
    
    (392,983
    )
    
    
    (82,533
    )
    
    
    
    
    
    
    (4,110,370
    )Gross profit
    
    
    615,125
    
    
    
    179,917
    
    
    
    53,571
    
    
    
    
    
    
    
    848,613Selling, general and administrative expenses
    
    
    (477,067
    )
    
    
    (40,739
    )
    
    
    (13,724
    )
    
    
    
    
    
    
    (531,530
    )Other operating income (expenses), net
    
    
    (21,303
    )
    
    
    414
    
    
    
    189
    
    
    
    
    
    
    
    (20,700
    )Operating income
    
    
    116,755
    
    
    
    139,592
    
    
    
    40,036
    
    
    
    
    
    
    
    296,383Capital expenditures  PP&E
    
    
    178,425
    
    
    
    10,270
    
    
    
    1,983
    
    
    
    
    
    
    
    190,678Depreciation  PP&E
    
    
    287,177
    
    
    
    19,017
    
    
    
    6,786
    
    
    
    
    
    
    
    312,980Segment assetsInventories, net
    
    
    1,219,347
    
    
    
    102,423
    
    
    
    28,798
    
    
    
    
    
    
    
    1,350,568Trade receivables, net
    
    
    349,230
    
    
    
    60,825
    
    
    
    27,780
    
    
    
    
    
    
    
    437,835Property, plant and equipment, net
    
    
    3,724,825
    
    
    
    263,461
    
    
    
    52,129
    
    
    
    
    
    
    
    4,040,415Intangible assets, net
    
    
    977,552
    
    
    
    60,795
    
    
    
    47,065
    
    
    
    
    
    
    
    1,085,412Assets  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    964,359
    
    
    
    964,359Other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,414,084
    
    
    
    2,414,084
 Year ended December 31, 2008Flat steel
    
    
    Long steelproducts
    
    
    products
    
    
    Other
    
    
    Unallocated
    
    
    TotalNet sales
    
    
    7,124,687
    
    
    
    1,075,090
    
    
    
    265,108
    
    
    
    
    
    
    
    8,464,885Cost of sales
    
    
    (5,256,340
    )
    
    
    (732,332
    )
    
    
    (139,355
    )
    
    
    
    
    
    
    (6,128,027
    )Gross profit
    
    
    1,868,347
    
    
    
    342,758
    
    
    
    125,753
    
    
    
    
    
    
    
    2,336,858Selling, general and administrative expenses
    
    
    (560,189
    )
    
    
    (80,303
    )
    
    
    (28,981
    )
    
    
    
    
    
    
    (669,473
    )Other operating income (expenses), net
    
    
    2,789
    
    
    
    2,419
    
    
    
    3,454
    
    
    
    
    
    
    
    8,662Operating income
    
    
    1,310,947
    
    
    
    264,874
    
    
    
    100,226
    
    
    
    
    
    
    
    1,676,047Capital expenditures  PP&E
    
    
    511,658
    
    
    
    29,684
    
    
    
    2,915
    
    
    
    
    
    
    
    544,257Depreciation  PP&E
    
    
    311,624
    
    
    
    18,422
    
    
    
    3,715
    
    
    
    
    
    
    
    333,761Segment assetsInventories, net
    
    
    1,708,324
    
    
    
    100,494
    
    
    
    17,729
    
    
    
    
    
    
    
    1,826,547Trade receivables, net
    
    
    449,168
    
    
    
    133,673
    
    
    
    40,151
    
    
    
    
    
    
    
    622,992Property, plant and equipment, net
    
    
    3,911,919
    
    
    
    260,925
    
    
    
    39,469
    
    
    
    
    
    
    
    4,212,313Intangible assets, net
    
    
    1,039,337
    
    
    
    51,769
    
    
    
    45,261
    
    
    
    
    
    
    
    1,136,367Assets  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,318,900
    
    
    
    1,318,900Other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,554,128
    
    
    
    1,554,128
  F-29




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 5 Segment information (continued)
 Geographical information
  Year ended December 31, 2010South andCentral
    
    
    North
    
    
    Europe andAmerica
    
    
    America
    
    
    other
    
    
    TotalNet sales
    
    
    3,057,676
    
    
    
    4,208,617
    
    
    
    115,711
    
    
    
    7,382,004Segment assetsTrade receivables, net
    
    
    192,723
    
    
    
    456,433
    
    
    
    14,346
    
    
    
    633,502Property, plant and equipment, net
    
    
    1,437,417
    
    
    
    2,825,370
    
    
    
    109
    
    
    
    4,262,896Intangible assets, net
    
    
    54,443
    
    
    
    1,074,905
    
    
    
    
    
    
    
    1,129,348Capital expenditures  PP&E
    
    
    182,845
    
    
    
    134,027
    
    
    
    46
    
    
    
    316,918Depreciation  PP&E
    
    
    118,774
    
    
    
    194,029
    
    
    
    17
    
    
    
    312,820
 Year ended December 31, 2009South andCentral
    
    
    North
    
    
    Europe andAmerica
    
    
    America
    
    
    other
    
    
    TotalNet sales
    
    
    1,782,446
    
    
    
    2,976,938
    
    
    
    199,599
    
    
    
    4,958,983Segment assetsTrade receivables, net
    
    
    116,231
    
    
    
    318,466
    
    
    
    3,138
    
    
    
    437,835Property, plant and equipment, net
    
    
    1,297,289
    
    
    
    2,743,045
    
    
    
    81
    
    
    
    4,040,415Intangible assets, net
    
    
    36,188
    
    
    
    1,049,224
    
    
    
    
    
    
    
    1,085,412Capital expenditures  PP&E
    
    
    117,583
    
    
    
    73,044
    
    
    
    51
    
    
    
    190,678Depreciation  PP&E
    
    
    111,895
    
    
    
    201,071
    
    
    
    14
    
    
    
    312,980
 Year ended December 31, 2008South andCentral
    
    
    North
    
    
    Europe andAmerica
    
    
    America
    
    
    other
    
    
    TotalNet sales
    
    
    3,107,510
    
    
    
    5,230,126
    
    
    
    127,249
    
    
    
    8,464,885Segment assetsTrade receivables, net
    
    
    176,348
    
    
    
    425,163
    
    
    
    21,481
    
    
    
    622,992Property, plant and equipment, net
    
    
    1,424,382
    
    
    
    2,787,903
    
    
    
    28
    
    
    
    4,212,313Intangible assets, net
    
    
    50,864
    
    
    
    1,085,503
    
    
    
    
    
    
    
    1,136,367Capital expenditures  PP&E
    
    
    325,496
    
    
    
    218,753
    
    
    
    8
    
    
    
    544,257Depreciation  PP&E
    
    
    132,891
    
    
    
    200,843
    
    
    
    27
    
    
    
    333,761
  F-30




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 6 Cost of sales
 Year      ended December 31,2010
    
    
    2009
    
    
    2008Inventories at the beginning of the year
    
    
    1,350,568
    
    
    
    1,826,547
    
    
    
    1,449,476Acquisition of business (Note 3)
    
    
    76,771
    
    
    
    
    
    
    
    Translation differences
    
    
    28,621
    
    
    
    (46,857
    )
    
    
    (440,685
    )Plus: Charges for the yearRaw materials and consumables used and other
movements
    
    
    4,763,000
    
    
    
    2,473,327
    
    
    
    5,374,363Services and fees
    
    
    197,873
    
    
    
    126,325
    
    
    
    154,176Labor cost
    
    
    496,961
    
    
    
    378,558
    
    
    
    481,057Depreciation of property, plant and equipment
    
    
    295,504
    
    
    
    308,156
    
    
    
    328,260Amortization of intangible assets
    
    
    19,453
    
    
    
    14,462
    
    
    
    19,023Maintenance expenses
    
    
    342,529
    
    
    
    221,175
    
    
    
    277,753Office expenses
    
    
    6,662
    
    
    
    4,997
    
    
    
    8,347Freight and transportation
    
    
    36,892
    
    
    
    32,846
    
    
    
    37,735Insurance
    
    
    7,530
    
    
    
    9,256
    
    
    
    8,695Charge (recovery) of obsolescence allowance
    
    
    11,710
    
    
    
    (7,556
    )
    
    
    82,125Valuation allowance
    
    
    
    
    
    
    127,553
    
    
    
    199,972Recovery from sales of scrap and by-products
    
    
    (40,654
    )
    
    
    (27,326
    )
    
    
    (60,379
    )Others
    
    
    25,224
    
    
    
    19,475
    
    
    
    34,656Less: Inventories at the end of the year
    
    
    (1,953,390
    )
    
    
    (1,350,568
    )
    
    
    (1,826,547
    )Cost of Sales
    
    
    5,665,254
    
    
    
    4,110,370
    
    
    
    6,128,027
 7 Selling, general and administrative expenses
 Year ended December 31,2010
    
    
    2009
    
    
    2008Services and fees
    
    
    60,874
    
    
    
    46,923
    
    
    
    65,221Labor cost
    
    
    153,807
    
    
    
    150,914
    
    
    
    199,304Depreciation of property plant and equipment
    
    
    17,316
    
    
    
    4,824
    
    
    
    5,501Amortization of intangible assets
    
    
    51,027
    
    
    
    57,663
    
    
    
    60,757Maintenance and expenses
    
    
    11,113
    
    
    
    6,858
    
    
    
    7,737Taxes
    
    
    89,412
    
    
    
    65,889
    
    
    
    79,286Office expenses
    
    
    29,567
    
    
    
    26,134
    
    
    
    32,682Freight and transportation
    
    
    232,184
    
    
    
    156,520
    
    
    
    189,848(Decrease) Increase of allowance for doubtful accounts
    
    
    (393
    )
    
    
    (1,635
    )
    
    
    2,861Others
    
    
    20,399
    
    
    
    17,440
    
    
    
    26,276Selling, general and administrative expenses
    
    
    665,306
    
    
    
    531,530
    
    
    
    669,473
 8 Labor costs (included in cost of sales, selling, general and administrative expenses)
 Year ended December 31,2010
    
    
    2009
    
    
    2008Wages, salaries and social security costs
    
    
    594,909
    
    
    
    450,828
    
    
    
    636,018Termination benefits
    
    
    27,872
    
    
    
    55,358
    
    
    
    22,604Pension benefits (Note 24 (i))
    
    
    27,987
    
    
    
    23,286
    
    
    
    21,739Labor costs
    
    
    650,768
    
    
    
    529,472
    
    
    
    680,361
  F-31




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 9 Other operating income (expenses), net
 Year ended December 31,2010
    
    
    2009
    
    
    2008Results from the sale of sundry assets
    
    
    (4,681
    )
    
    
    (2,121
    )
    
    
    5,535Provision for legal claims and other matters (Note 21)
    
    
    (5,543
    )
    
    
    (4,614
    )
    
    
    (2,358
    )Impairment charge (Note 27 (ii))
    
    
    
    
    
    
    (27,022
    )
    
    
    Others
    
    
    12,718
    
    
    
    13,057
    
    
    
    5,485Other operating income (expenses), net
    
    
    2,494
    
    
    
    (20,700
    )
    
    
    8,662
 10 Other financial income (expenses), net
 Year ended December 312010
    
    
    2009
    
    
    2008Debt issue costs
    
    
    (4,562
    )
    
    
    (5,149
    )
    
    
    (11,314
    )Net foreign exchange gain (loss)
    
    
    123,690
    
    
    
    83,057
    
    
    
    (632,735
    )Change in fair value of derivative instruments
    
    
    1,545
    
    
    
    10,607
    
    
    
    (32,480
    )Others
    
    
    (5,561
    )
    
    
    (6,876
    )
    
    
    (16,663
    )Other financial income (expenses), net
    
    
    115,112
    
    
    
    81,639
    
    
    
    (693,192
    )
 11 Income tax expense
 Income tax
  Year ended December 31,2010
    
    
    2009
    
    
    2008(1)Current tax
    
    
    (410,041
    )
    
    
    (124,647
    )
    
    
    (502,425
    )Deferred tax (Note 23)
    
    
    (1,035
    )
    
    
    (24,812
    )
    
    
    300,614Deferred tax  effect of changes in tax rates (Note 23)
    
    
    
    
    
    
    (11,216
    )
    
    
    Effect of change in fair value of cash flow hedge
    
    
    4,419
    
    
    
    9,112
    
    
    
    (23,121
    )Recovery of
income tax (2)
    
    
    
    
    
    
    60,249
    
    
    
    62,228Income tax expense
    
    
    (406,657
    )
    
    
    (91,314
    )
    
    
    (162,704
    )
 
 (1)
    
    Includes the reversal of deferred statutory profit sharing.(2)
    
    Represents gains recorded in 2008 and 2009 for several income tax claims
filed against the tax authorities for which definitive favorable rulings were obtained in each such
year.  Year ended December 31,2010
    
    
    2009
    
    
    2008Income before income tax
    
    
    1,186,127
    
    
    
    430,415
    
    
    
    880,773Income tax expense at statutory tax rate
    
    
    (366,992
    )
    
    
    (92,662
    )
    
    
    (238,822
    )Non taxable income
    
    
    2,797
    
    
    
    1,940
    
    
    
    40,785Non deductible expenses
    
    
    (38,132
    )
    
    
    (41,085
    )
    
    
    (18,883
    )Recovery of income tax
    
    
    
    
    
    
    60,249
    
    
    
    62,228Unrecognized tax losses
    
    
    (4,330
    )
    
    
    (8,540
    )
    
    
    (8,012
    )Effect of changes in tax rate
    
    
    
    
    
    
    (11,216
    )
    
    
    Income tax expense
    
    
    (406,657
    )
    
    
    (91,314
    )
    
    
    (162,704
    )
   F-32




---



##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 12 Property, plant and equipment, net
 Year ended December 31, 2010Vehicles,Buildings and
    
    
    Production
    
    
    furniture
    
    
    Work  in
    
    
    SpareLand
    
    
    improvements
    
    
    equipment
    
    
    and fixtures
    
    
    progress
    
    
    parts
    
    
    TotalCostValues at the beginning of the year
    
    
    424,722
    
    
    
    1,511,825
    
    
    
    4,024,494
    
    
    
    149,214
    
    
    
    387,721
    
    
    
    32,590
    
    
    
    6,530,566Translation differences
    
    
    20,717
    
    
    
    (18,926
    )
    
    
    43,439
    
    
    
    (4,097
    )
    
    
    (7,566
    )
    
    
    (1,522
    )
    
    
    32,045Acquisition of business
    
    
    26,041
    
    
    
    41,217
    
    
    
    67,280
    
    
    
    4,070
    
    
    
    1,510
    
    
    
    
    
    
    
    140,118Additions
    
    
    18,270
    
    
    
    5,575
    
    
    
    2,730
    
    
    
    1,955
    
    
    
    282,139
    
    
    
    6,249
    
    
    
    316,918Disposals / Consumptions
    
    
    
    
    
    
    (3,616
    )
    
    
    (34,111
    )
    
    
    (2,381
    )
    
    
    (762
    )
    
    
    (169
    )
    
    
    (41,039
    )Transfers
    
    
    
    
    
    
    263,329
    
    
    
    77,864
    
    
    
    3,519
    
    
    
    (344,712
    )
    
    
    
    
    
    
    Values at the end of the year
    
    
    489,750
    
    
    
    1,799,404
    
    
    
    4,181,696
    
    
    
    152,280
    
    
    
    318,330
    
    
    
    37,148
    
    
    
    6,978,608DepreciationAccumulated at the beginning of the year
    
    
    
    
    
    
    (554,581
    )
    
    
    (1,809,902
    )
    
    
    (124,455
    )
    
    
    
    
    
    
    (1,213
    )
    
    
    (2,490,151
    )Translation differences
    
    
    
    
    
    
    20,341
    
    
    
    29,192
    
    
    
    4,128
    
    
    
    
    
    
    
    54
    
    
    
    53,715Depreciation charge
    
    
    
    
    
    
    (78,000
    )
    
    
    (225,866
    )
    
    
    (8,464
    )
    
    
    
    
    
    
    (490
    )
    
    
    (312,820
    )Disposals / Consumptions
    
    
    
    
    
    
    1,151
    
    
    
    30,926
    
    
    
    1,428
    
    
    
    
    
    
    
    39
    
    
    
    33,544Accumulated at the end of the year
    
    
    
    
    
    
    (611,089
    )
    
    
    (1,975,650
    )
    
    
    (127,363
    )
    
    
    
    
    
    
    (1,610
    )
    
    
    (2,715,712
    )At December 31, 2010
    
    
    489,750
    
    
    
    1,188,315
    
    
    
    2,206,046
    
    
    
    24,917
    
    
    
    318,330
    
    
    
    35,538
    
    
    
    4,262,896
 Year ended December 31, 2009Vehicles,Buildings and
    
    
    Production
    
    
    furniture
    
    
    Work  in
    
    
    SpareLand
    
    
    improvements
    
    
    equipment
    
    
    and fixtures
    
    
    progress
    
    
    parts
    
    
    TotalCostValues at the beginning of the year
    
    
    412,087
    
    
    
    1,536,847
    
    
    
    4,030,337
    
    
    
    162,173
    
    
    
    380,050
    
    
    
    40,192
    
    
    
    6,561,686Translation differences
    
    
    11,665
    
    
    
    (81,486
    )
    
    
    (101,317
    )
    
    
    (11,286
    )
    
    
    (16,901
    )
    
    
    (4,314
    )
    
    
    (203,639
    )Additions
    
    
    6,892
    
    
    
    1,276
    
    
    
    1,692
    
    
    
    1,170
    
    
    
    179,648
    
    
    
    
    
    
    
    190,678Disposals / Consumptions
    
    
    
    
    
    
    
    
    
    
    (760
    )
    
    
    (4,613
    )
    
    
    (2,483
    )
    
    
    (3,288
    )
    
    
    (11,144
    )Transfers
    
    
    (5,922
    )
    
    
    55,188
    
    
    
    94,542
    
    
    
    1,770
    
    
    
    (152,593
    )
    
    
    
    
    
    
    (7,015
    )Values at the end of the year
    
    
    424,722
    
    
    
    1,511,825
    
    
    
    4,024,494
    
    
    
    149,214
    
    
    
    387,721
    
    
    
    32,590
    
    
    
    6,530,566DepreciationAccumulated at the beginning of the year
    
    
    
    
    
    
    (532,056
    )
    
    
    (1,688,314
    )
    
    
    (126,937
    )
    
    
    
    
    
    
    (2,066
    )
    
    
    (2,349,373
    )Translation differences
    
    
    
    
    
    
    45,341
    
    
    
    112,784
    
    
    
    9,743
    
    
    
    
    
    
    
    1,269
    
    
    
    169,137Depreciation charge
    
    
    
    
    
    
    (67,866
    )
    
    
    (234,688
    )
    
    
    (9,985
    )
    
    
    
    
    
    
    (441
    )
    
    
    (312,980
    )Disposals / Consumptions
    
    
    
    
    
    
    
    
    
    
    316
    
    
    
    2,724
    
    
    
    
    
    
    
    25
    
    
    
    3,065Accumulated at the end of the year
    
    
    
    
    
    
    (554,581
    )
    
    
    (1,809,902
    )
    
    
    (124,455
    )
    
    
    
    
    
    
    (1,213
    )
    
    
    (2,490,151
    )At December 31, 2009
    
    
    424,722
    
    
    
    957,244
    
    
    
    2,214,592
    
    
    
    24,759
    
    
    
    387,721
    
    
    
    31,377
    
    
    
    4,040,415
  F-33




---



##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 13 Intangible assets, net
 Year ended December 31, 2010CustomerrelationshipsInformation
    
    
    
    
    
    
    
    
    
    
    and othersystem
    
    
    Mining
    
    
    Exploration
    
    
    contractualprojects
    
    
    concessions
    
    
    costs
    
    
    rights
    
    
    Trademarks
    
    
    Goodwill
    
    
    TotalCostValues at the beginning of the year
    
    
    98,736
    
    
    
    103,909
    
    
    
    20,812
    
    
    
    288,414
    
    
    
    73,358
    
    
    
    708,643
    
    
    
    1,293,872Translation differences
    
    
    (363
    )
    
    
    5,900
    
    
    
    1,412
    
    
    
    14,795
    
    
    
    3,258
    
    
    
    39,927
    
    
    
    64,929Acquisition of business
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    19,467
    
    
    
    4,407
    
    
    
    1,557
    
    
    
    25,473Additions
    
    
    20,369
    
    
    
    
    
    
    
    10,843
    
    
    
    1,994
    
    
    
    
    
    
    
    
    
    
    
    33,206Disposals / Consumptions
    
    
    
    
    
    
    
    
    
    
    (1,379
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,379
    )Values at the end of the year
    
    
    118,784
    
    
    
    109,809
    
    
    
    31,688
    
    
    
    324,670
    
    
    
    81,023
    
    
    
    750,127
    
    
    
    1,416,101AmortizationAccumulated at the beginning of the year
    
    
    (66,363
    )
    
    
    (35,568
    )
    
    
    
    
    
    
    (74,474
    )
    
    
    (32,055
    )
    
    
    
    
    
    
    (208,460
    )Translation differences
    
    
    690
    
    
    
    (2,215
    )
    
    
    
    
    
    
    (4,390
    )
    
    
    (1,898
    )
    
    
    
    
    
    
    (7,813
    )Amortization charge
    
    
    (17,068
    )
    
    
    (9,817
    )
    
    
    
    
    
    
    (29,847
    )
    
    
    (13,748
    )
    
    
    
    
    
    
    (70,480
    )Accumulated at the end of the year
    
    
    (82,741
    )
    
    
    (47,600
    )
    
    
    
    
    
    
    (108,711
    )
    
    
    (47,701
    )
    
    
    
    
    
    
    (286,753
    )At December 31, 2010
    
    
    36,043
    
    
    
    62,209
    
    
    
    31,688
    
    
    
    215,959
    
    
    
    33,322
    
    
    
    750,127
    
    
    
    1,129,348
 Year ended December 31, 2009CustomerrelationshipsInformation
    
    
    
    
    
    
    
    
    
    
    and othersystem
    
    
    Mining
    
    
    Exploration
    
    
    contractualprojects
    
    
    concessions
    
    
    costs
    
    
    rights
    
    
    Trademarks
    
    
    Goodwill
    
    
    TotalCostValues at the beginning of the year
    
    
    97,358
    
    
    
    96,856
    
    
    
    15,984
    
    
    
    304,931
    
    
    
    71,358
    
    
    
    683,702
    
    
    
    1,270,189Translation differences
    
    
    (4,417
    )
    
    
    3,893
    
    
    
    885
    
    
    
    10,505
    
    
    
    2,000
    
    
    
    24,941
    
    
    
    37,807Additions
    
    
    6,128
    
    
    
    
    
    
    
    11,784
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,912Disposals / Consumptions
    
    
    (333
    )
    
    
    
    
    
    
    (4,926
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,259
    )Impairment charge (see note 27 (ii))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,022
    )
    
    
    
    
    
    
    
    
    
    
    (27,022
    )Transfers
    
    
    
    
    
    
    3,160
    
    
    
    (2,915
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245Values at the end of the year
    
    
    98,736
    
    
    
    103,909
    
    
    
    20,812
    
    
    
    288,414
    
    
    
    73,358
    
    
    
    708,643
    
    
    
    1,293,872AmortizationAccumulated at the beginning of the year
    
    
    (50,145
    )
    
    
    (24,429
    )
    
    
    
    
    
    
    (43,015
    )
    
    
    (16,233
    )
    
    
    
    
    
    
    (133,822
    )Translation differences
    
    
    2,841
    
    
    
    (1,358
    )
    
    
    
    
    
    
    (3,007
    )
    
    
    (989
    )
    
    
    
    
    
    
    (2,513
    )Amortization charge
    
    
    (19,059
    )
    
    
    (9,781
    )
    
    
    
    
    
    
    (28,452
    )
    
    
    (14,833
    )
    
    
    
    
    
    
    (72,125
    )Accumulated at the end of the year
    
    
    (66,363
    )
    
    
    (35,568
    )
    
    
    
    
    
    
    (74,474
    )
    
    
    (32,055
    )
    
    
    
    
    
    
    (208,460
    )At December 31, 2009
    
    
    32,373
    
    
    
    68,341
    
    
    
    20,812
    
    
    
    213,940
    
    
    
    41,303
    
    
    
    708,643
    
    
    
    1,085,412
  F-34




---



##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 14 Investments in associated companies
 As of December 31,2010
    
    
    2009At the beginning of the year
    
    
    6,577
    
    
    
    5,585Translation adjustment
    
    
    (53
    )
    
    
    (118
    )Acquisitions
    
    
    302
    
    
    
    Dividends received from associated companies
    
    
    (302
    )
    
    
    Equity in earnings of associated companies
    
    
    1,688
    
    
    
    1,110At the end of the year
    
    
    8,212
    
    
    
    6,577
  Voting rightsCountry of
    
    at December 31,
    
    
    Value at December 31,Company
    
    incorporation
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Lomond Holdings BV. (1)
    
    Netherlands
    
    
    50.00
    %
    
    
    50.00
    %
    
    
    6,635
    
    
    
    5,440Finma S.A.I.F. (2)
    
    Argentina
    
    
    33.33
    %
    
    
    33.33
    %
    
    
    1,200
    
    
    
    1,058Techinst S.A. (2)
    
    Argentina
    
    
    33.33
    %
    
    
    
    
    
    
    126
    
    
    
    Arhsa S.A. (2)
    
    Argentina
    
    
    33.33
    %
    
    
    
    
    
    
    176
    
    
    
    Compañía Afianzadora
de Empresas
Siderúrgicas S.G.R.
(3)
    
    Argentina
    
    
    38.89
    %
    
    
    38.89
    %
    
    
    75
    
    
    
    798,212
    
    
    
    6,577
 
 (1)
    
    Holding Company. Indirectly through the participation in Ternium Treasury Services S.A.
since August 9, 2010. Prior to this date, the participation was held by Ternium Procurement
S.A.(2)
    
    Consulting and financial services. Indirectly through the participation in Siderar.(3)
    
    Granting of guarantees to participating partners to facilitate or permit access to
credits for purchase of national raw material. Indirectly through the participation in
Siderar. In process of liquidation. 15 Other investments, net  non-current
 As of  December 31,2010
    
    
    2009Time deposits with related parties (i) (Note 30)
    
    
    18,086
    
    
    
    16,161Investments in debt instruments
    
    
    17,227
    
    
    
    Others
    
    
    262
    
    
    
    253Other investments, net  non-current
    
    
    35,575
    
    
    
    16,414
 (i) Time deposits with related parties
   F-35




---



##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 16 Receivables, net  non-current
 As of December 31,2010
    
    
    2009Receivables with related parties (Note 30)
    
    
    285
    
    
    
    372Employee advances and loans
    
    
    8,821
    
    
    
    10,103Advances to suppliers for the purchase of property, plant and equipment
    
    
    21,125
    
    
    
    36,446Advances to suppliers for the purchase of property, plant and
equipment with related parties (Note 30)
    
    
    1,548
    
    
    
    15,168Tax credits
    
    
    18,369
    
    
    
    29,676Others
    
    
    6,677
    
    
    
    9,968Allowance for doubtful accounts (Note 21 )
    
    
    (354
    )
    
    
    (416
    )Receivables, net  non-current
    
    
    56,471
    
    
    
    101,317
 17 Receivables  current
 As of December 31,2010
    
    
    2009Value added tax
    
    
    26,169
    
    
    
    30,777Tax credits
    
    
    26,806
    
    
    
    66,271Employee advances and loans
    
    
    10,465
    
    
    
    8,822Advances to suppliers
    
    
    4,815
    
    
    
    4,059Advances to suppliers with related parties (Note 30)
    
    
    552
    
    
    
    519Expenses paid in advance
    
    
    3,695
    
    
    
    4,676Government tax refunds on exports
    
    
    9,263
    
    
    
    10,603Receivables with related parties (Note 30)
    
    
    548
    
    
    
    892Others
    
    
    12,260
    
    
    
    9,681Receivables  current
    
    
    94,573
    
    
    
    136,300
 18 Inventories, net
 As of December 31,2010
    
    
    2009Raw materials, materials and spare parts
    
    
    523,832
    
    
    
    438,231Goods in process
    
    
    998,552
    
    
    
    678,977Finished goods
    
    
    415,985
    
    
    
    213,025Goods in transit
    
    
    83,214
    
    
    
    78,488Obsolescence allowance (Note 22)
    
    
    (68,193
    )
    
    
    (58,153
    )Inventories, net
    
    
    1,953,390
    
    
    
    1,350,568
 19 Trade receivables, net
 As of December 31,2010
    
    
    2009Current accounts
    
    
    669,403
    
    
    
    441,952Trade receivables with related parties (Note 30)
    
    
    10,959
    
    
    
    12,193Allowance for doubtful accounts (Note 22)
    
    
    (16,860
    )
    
    
    (16,310
    )Trade receivables, net
    
    
    663,502
    
    
    
    437,835
 20 Cash, cash equivalents and other investments
 As of December 31,2010
    
    
    2009(i) Other investmentsDeposits with maturity of more than three months
    
    
    848,400
    
    
    
    46,844(ii) Cash and cash equivalentsCash and banks
    
    
    98,811
    
    
    
    135,917Restricted cash
    
    
    12,343
    
    
    
    Deposits with maturity of less than three months
    
    
    1,668,262
    
    
    
    1,959,881Cash and cash equivalents
    
    
    1,779,416
    
    
    
    2,095,798
  F-36




---



##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 21 Allowances and Provisions  non current
 Deductedfrom assets
    
    
    LiabilitiesAllowance for
    
    
    Legal claimsdoubtful
    
    
    and otheraccounts
    
    
    mattersYear ended December 31, 2010Values at the beginning of the year
    
    
    416
    
    
    
    18,913Translation differences
    
    
    (18
    )
    
    
    (290
    )Additions
    
    
    
    
    
    
    6,721Reversals
    
    
    (44
    )
    
    
    (1,178
    )Uses
    
    
    
    
    
    
    (8,022
    )At December 31, 2010
    
    
    354
    
    
    
    16,144Year ended December 31, 2009Values at the beginning of the year
    
    
    170
    
    
    
    24,400Translation differences
    
    
    (18
    )
    
    
    (1,538
    )Additions
    
    
    264
    
    
    
    7,887Reversals
    
    
    
    
    
    
    (3,273
    )Uses
    
    
    
    
    
    
    (8,563
    )At December 31, 2009
    
    
    416
    
    
    
    18,913
 22 Allowances  current
 Deducted from assetsAllowance fordoubtful
    
    
    Obsolescence
    
    
    Valuationaccounts
    
    
    allowance
    
    
    allowanceYear ended December 31, 2010Values at the beginning of the year
    
    
    16,310
    
    
    
    58,153
    
    
    
    Translation differences
    
    
    (460
    )
    
    
    1,911
    
    
    
    Acquisition of business
    
    
    4,168
    
    
    
    1,290
    
    
    
    Reversals
    
    
    (3,885
    )
    
    
    (17,719
    )
    
    
    Additions
    
    
    3,536
    
    
    
    29,429
    
    
    
    Uses
    
    
    (2,809
    )
    
    
    (4,871
    )
    
    
    At December 31, 2010
    
    
    16,860
    
    
    
    68,193
    
    
    
    Year ended December 31, 2009Values at the beginning of the year
    
    
    23,350
    
    
    
    124,883
    
    
    
    160,935Translation differences
    
    
    (561
    )
    
    
    (216
    )
    
    
    (2,918
    )Reversals (1)
    
    
    (3,860
    )
    
    
    (65,465
    )
    
    
    Additions
    
    
    1,961
    
    
    
    57,909
    
    
    
    127,553Uses
    
    
    (4,580
    )
    
    
    (58,958
    )
    
    
    (285,570
    )At December 31, 2009
    
    
    16,310
    
    
    
    58,153
    
    
    
    
 
 (1)
    
    The world financial crisis that took place in part of 2009 and 2008 had a severe
negative impact on the volume of international steel trade, thus reducing the rotation of
the Companys stock. Accordingly, the Company recorded a provision for slow-moving
inventory taking the inventory to net realizable value. As market conditions improved
during fiscal year 2009, certain inventory items covered by the obsolescence allowance
were subsequently sold and their sales prices exceeded those initially estimated when the
obsolescence allowance was recorded, resulting in the reversal of such excess amount at
the time the related inventory was sold.  F-37




---



##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 23 Deferred income tax
   Year ended December 31,2010
    
    
    2009At beginning of the year
    
    
    (857,297
    )
    
    
    (810,160
    )Translation differences
    
    
    (14,855
    )
    
    
    11,574Deferred income tax expense included within discontinued operations
    
    
    
    
    
    
    (22,683
    )Effect of changes in tax rate
    
    
    
    
    
    
    (11,216
    )Acquisition of business
    
    
    7,832
    
    
    
    Deferred tax credit (charge)
    
    
    (1,035
    )
    
    
    (24,812
    )At end of the year
    
    
    (865,355
    )
    
    
    (857,297
    )
  Total atFixed
    
    
    
    
    
    
    Intangible
    
    
    
    
    
    
    December 31,Deferred tax liabilities
    
    assets
    
    
    Inventories
    
    
    assets
    
    
    Other
    
    
    2010At beginning of year
    
    
    (687,120
    )
    
    
    (55,225
    )
    
    
    (94,728
    )
    
    
    (130,022
    )
    
    
    (967,095
    )Translation differences
    
    
    (14,378
    )
    
    
    (3,880
    )
    
    
    (5,314
    )
    
    
    6,414
    
    
    
    (17,158
    )Acquisition of business
    
    
    (17,092
    )
    
    
    426
    
    
    
    5,188
    
    
    
    
    
    
    
    (11,478
    )Deferred tax credit (charge)
    
    
    36,563
    
    
    
    (11,819
    )
    
    
    13,693
    
    
    
    (45,765
    )
    
    
    (7,328
    )At end of year
    
    
    (682,027
    )
    
    
    (70,498
    )
    
    
    (81,161
    )
    
    
    (169,373
    )
    
    
    (1,003,059
    )
 Total atTrade
    
    
    Tax losses
    
    
    
    
    
    
    December 31,Deferred tax assets
    
    Provisions
    
    
    Receivables
    
    
    (1)
    
    
    Other
    
    
    2010At beginning of year
    
    
    63,193
    
    
    
    7,835
    
    
    
    
    
    
    
    38,770
    
    
    
    109,798Translation differences
    
    
    1,104
    
    
    
    383
    
    
    
    (1,012
    )
    
    
    1,828
    
    
    
    2,303Acquisition of business
    
    
    
    
    
    
    754
    
    
    
    18,556
    
    
    
    
    
    
    
    19,310Income statement credit (charge)
    
    
    2,329
    
    
    
    (1,001
    )
    
    
    4,666
    
    
    
    299
    
    
    
    6,293At end of year
    
    
    66,626
    
    
    
    7,971
    
    
    
    22,210
    
    
    
    40,897
    
    
    
    137,704
 
 (1)
    
    As of December 31, 2010, the recognized tax losses amount to USD 22,210 and the net
unrecognized deferred tax assets amount to USD 22,302. According to the tax law in force in the
jurisdictions in which the tax losses are generated, these amounts do not have a certain expiration
date.   As of December 31,2010
    
    
    2009Deferred tax assets to be recovered after more than 12 months
    
    
    82,980
    
    
    
    61,916Deferred tax liabilities to be settled after more than 12 months
    
    
    (922,136
    )
    
    
    (911,289
    )(839,156
    )
    
    
    (849,373
    )
  F-38




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 24 Other liabilities
 As of December 31,2010
    
    
    2009(i) Other liabilities   non-currentTermination benefits
    
    
    4,877
    
    
    
    4,114Pension benefits
    
    
    166,812
    
    
    
    151,562Related parties (Note 30)
    
    
    507
    
    
    
    1,058Other
    
    
    29,116
    
    
    
    19,892Other liabilities  non-current
    
    
    201,312
    
    
    
    176,626
 Pension benefits
  Year ended December 31,2010
    
    
    2009Present value of unfunded obligations
    
    
    262,366
    
    
    
    201,145Unrecognized prior service costs
    
    
    (3,694
    )
    
    
    (4,120
    )Unrecognized actuarial losses
    
    
    (72,946
    )
    
    
    (45,463
    )Fair value of plan assets
    
    
    (18,914
    )
    
    
    Liability in the statement of financial position
    
    
    166,812
    
    
    
    151,562
  Year ended December 31,2010
    
    
    2009Current service cost
    
    
    4,697
    
    
    
    4,594Interest cost
    
    
    20,000
    
    
    
    17,351Amortization of prior service costs
    
    
    634
    
    
    
    529Net actuarial losses recognized in the year
    
    
    2,656
    
    
    
    812Total included in labor costs
    
    
    27,987
    
    
    
    23,286
  Year ended December 31,2010
    
    
    2009At the beginning of the year
    
    
    151,562
    
    
    
    125,700Transfers, new participants and funding of the plan
    
    
    (20,412
    )
    
    
    (795
    )Total expense
    
    
    27,987
    
    
    
    23,286Translation differences
    
    
    8,473
    
    
    
    4,711Contributions paid
    
    
    (798
    )
    
    
    (1,340
    )At the end of the year
    
    
    166,812
    
    
    
    151,562
  Year ended December 31,Mexico
    
    2010
    
    
    2009Discount rate
    
    
    8.75
    %
    
    
    9.50
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
 Year ended December 31,Argentina
    
    2010
    
    
    2009Discount rate
    
    
    7.00
    %
    
    
    7.00
    %Rate of compensation increase
    
    
    2.00
    %
    
    
    2.00
    %
  F-39




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 24 Other liabilities (continued)
 As of December 31,2010
    
    
    2009(ii) Other liabilities  currentPayroll and social security payable
    
    
    88,727
    
    
    
    40,656Termination benefits
    
    
    6,693
    
    
    
    7,663Related Parties (Note 30)
    
    
    22,017
    
    
    
    4,792Others
    
    
    6,173
    
    
    
    3,910Other liabilities  current
    
    
    123,610
    
    
    
    57,021
 25 Derivative financial instruments
 Net fair values of derivative financial instruments
  Year ended December 31,2010
    
    
    2009Contracts with positive fair values:Foreign exchange contracts
    
    
    212
    
    
    
    1,588212
    
    
    
    1,588Contracts with negative fair values:Interest rate swap contracts
    
    
    (54,675
    )
    
    
    (78,710
    )Foreign exchange contracts
    
    
    (102
    )
    
    
    (54,777
    )
    
    
    (78,710
    )
  a) Interest rate contracts
     Cash flow hedgesGross amount
    
    
    Income Tax
    
    
    TotalAt December 31, 2008
    
    
    (82,574
    )
    
    
    23,121
    
    
    
    (59,453
    )(Decrease) / Increase
    
    
    (19,348
    )
    
    
    5,417
    
    
    
    (13,931
    )Reclassification to income statement
    
    
    55,229
    
    
    
    (14,529
    )
    
    
    40,700At December 31, 2009
    
    
    (46,693
    )
    
    
    14,009
    
    
    
    (32,684
    )(Decrease) / Increase
    
    
    (19,334
    )
    
    
    5,800
    
    
    
    (13,534
    )Reclassification to income statement
    
    
    34,063
    
    
    
    (10,219
    )
    
    
    23,844At December 31, 2010
    
    
    (31,964
    )
    
    
    9,590
    
    
    
    (22,374
    )
   F-40




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 25 Derivative financial instruments (continued)
  b) Foreign exchange contracts
      Fair Value at December 31,Currencies
    
    Contract
    
    Notional amount
    
    
    2010
    
    
    2009USD/EUR
    
    Forward
    
    3,300 EUR
    
    
    212
    
    
    
    177USD/EUR
    
    Cross Currency Swap
    
    5,000 EUR
    
    
    (52
    )
    
    
    CRC/USD
    
    ND Forward
    
    4,113,280 CRC
    
    
    8
    
    
    
    GTQ/USD
    
    ND Forward
    
    48,711 GTQ
    
    
    (57
    )MXN/USD
    
    Forward
    
    
    
    
    
    
    
    
    
    
    773ARS/USD
    
    ND Forward
    
    
    
    
    
    
    
    
    
    
    638111
    
    
    
    1,588
   26 Borrowings
 Year ended December 31,2010
    
    
    2009(i) Non-currentBank borrowings
    
    
    1,429,278
    
    
    
    1,794,149Less: debt issue costs
    
    
    (2,704
    )
    
    
    (6,945
    )1,426,574
    
    
    
    1,787,204(ii) CurrentBank borrowings
    
    
    517,718
    
    
    
    543,940Less: debt issue costs
    
    
    (4,635
    )
    
    
    (4,415
    )513,083
    
    
    
    539,525Total Borrowings
    
    
    1,939,657
    
    
    
    2,326,729
  F-41




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 26 Borrowings (continued)
  Expected Maturity Date2013 and
    
    
    At December 31, (1)2011
    
    
    2012
    
    
    thereafter
    
    
    2010
    
    
    2009Fixed Rate
    
    
    14,206
    
    
    
    
    
    
    
    
    
    
    
    14,206
    
    
    
    15,595Floating Rate
    
    
    498,877
    
    
    
    1,289,445
    
    
    
    137,129
    
    
    
    1,925,451
    
    
    
    2,311,134Total
    
    
    513,083
    
    
    
    1,289,445
    
    
    
    137,129
    
    
    
    1,939,657
    
    
    
    2,326,729
 (1)
    
    As most borrowings incorporate floating rates that approximate market rates and the
contractual repricing occurs every 3 to 6 months, the fair value of the borrowings
approximates their carrying amount and it is not disclosed separately.
  December 31,2010
    
    
    2009Bank borrowings
    
    
    3.29
    %
    
    
    3.04
    %
   December 31,Currency
    
    Interest rates
    
    2010
    
    
    2009USD
    
    Floating
    
    
    1,786,928
    
    
    
    2,311,134USD
    
    Fixed
    
    
    
    
    
    
    3,971ARS
    
    Fixed
    
    
    312
    
    
    
    11,624BRL
    
    Floating
    
    
    12,725
    
    
    
    GTQ
    
    Fixed
    
    
    10,148
    
    
    
    COP
    
    Floating
    
    
    125,798
    
    
    
    COP
    
    Fixed
    
    
    3,746
    
    
    
    Total Borrowings
    
    
    
    
    1,939,657
    
    
    
    2,326,729
   F-42




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 27 Contingencies, commitments and restrictions on the distribution of profits
  (i) Tax claims
 (a) Siderar. AFIP  Income tax claim for fiscal years 1995 to 1999
 Administración Federal de Ingresos Públicos
     (ii) Commitments
         F-43




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 27 Contingencies, commitments and restrictions on the distribution of profits (continued)
          F-44




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 27 Contingencies, commitments and restrictions on the distribution of profits (continued)
 (iii) Restrictions on the distribution of profits
    At December31, 2010Share capital
    
    
    2,004,743Legal reserve
    
    
    200,474Distributable reserves
    
    
    101,437Non distributable reserves
    
    
    1,414,122Accumulated profit at January 1, 2010 (1)
    
    
    1,535,379Profit for the year
    
    
    4,666,555Total shareholders equity under Luxembourg GAAP
    
    
    9,922,710
 
 (1)
    
    As a result of the repurchase of its own shares from Usiminas on February 15, 2011 (see note
36  Subsequent events), the Company is required under applicable Luxembourg law to create a
new non-distributable reserve in the amount of USD 150 million. 28 Earnings per share
    2010
    
    
    2009
    
    
    2008Profit from continuing operations attributable to
equity holders of the Company
    
    
    622,076
    
    
    
    305,830
    
    
    
    544,987Profit from discontinued operations attributable
to equity holders of the Company
    
    
    
    
    
    
    411,570
    
    
    
    170,431Weighted average number of ordinary shares in issue
    
    
    2,004,743,442
    
    
    
    2,004,743,442
    
    
    
    2,004,743,442Basic and diluted earnings per share from
continuing operations attributable to equity
holders of the Company (USD per share)
    
    
    0.31
    
    
    
    0.15
    
    
    
    0.27Basic and diluted earnings per share from
discontinued operations attributable to equity
holders of the Company (USD per share)
    
    
    
    
    
    
    0.21
    
    
    
    0.09
 29 Discontinued operations
 (i) Sale of non strategic U.S. assets
   F-45




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 29 Discontinued operations (continued)
 (ii) Nationalization of Sidor
           F-46




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 29 Discontinued operations (continued)
 (iii) Analysis of the result of discontinued operations:
 Year ended December 31,2010
    
    
    2009
    
    
    2008(1)Net sales
    
    
    
    
    
    
    
    
    
    
    467,618Cost of sales
    
    
    
    
    
    
    
    
    
    
    (306,744
    )Gross profit
    
    
    
    
    
    
    
    
    
    
    160,874Selling, general and administrative expenses
    
    
    
    
    
    
    
    
    
    
    (90,362
    )Other operating income (expenses), net
    
    
    
    
    
    
    
    
    
    
    1,080Operating income
    
    
    
    
    
    
    
    
    
    
    71,592Financial expenses, net
    
    
    
    
    
    
    
    
    
    
    (15,330
    )Loss from Participation Account  Sidor
    
    
    
    
    
    
    
    
    
    
    (96,525
    )Income from Participation Account
    
    
    
    
    
    
    
    
    
    
    210,205Equity in (losses) earnings of associated companies
    
    
    
    
    
    
    
    
    
    
    (150
    )Income before income tax
    
    
    
    
    
    
    
    
    
    
    169,792Income tax benefit
    
    
    
    
    
    
    
    
    
    
    41,326Subtotal
    
    
    
    
    
    
    
    
    
    
    211,118Gain form the sale of non strategic U.S. assets  see Note 29 (i)
    
    
    
    
    
    
    
    
    
    
    97,481Reversal of currency translation adjustment  Sidor
    
    
    
    
    
    
    
    
    
    
    (151,504
    )Gain from the disposal of Sidor (net of income tax)
    
    
    
    
    
    
    428,023
    
    
    
    Income from discontinued operations
    
    
    
    
    
    
    428,023
    
    
    
    157,095
 
 (1)
    
    Includes the results of Sidor for the period January 1, 2008 up to March 31, 2008. (iv) Analysis of cash flows from discontinued operations:
 Year ended December 31,2010
    
    
    2009
    
    
    2008(1)Cash flows from discontinued operating activitiesNet income of from discontinued operations
    
    
    
    
    
    
    428,023
    
    
    
    157,095Adjustments for:Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    50,820Income tax accruals less payments
    
    
    
    
    
    
    
    
    
    
    (41,613
    )Gain from the sale of non strategic U.S. assets
    
    
    
    
    
    
    
    
    
    
    (97,481
    )Reversal of currency translation adjustment  Sidor
    
    
    
    
    
    
    
    
    
    
    151,504Gain from the disposal of Sidor
    
    
    
    
    
    
    (428,023
    )Changes in working capital and others
    
    
    
    
    
    
    
    
    
    
    107,184Cash flows from discontinued operating activities
    
    
    
    
    
    
    
    
    
    
    327,509Net cash used in discontinued investing activities
    
    
    
    
    
    
    
    
    
    
    (54,923
    )Net cash used in discontinued financing activities
    
    
    
    
    
    
    
    
    
    
    (30,216
    )Net cash flows from discontinued operations
    
    
    
    
    
    
    
    
    
    
    242,370
 
 (1)
    
    Includes cash flow movements from Sidor for the period January 1, 2008 up to March
31, 2008.  F-47




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 30 Related party transactions
   
    
    Techint transferred its domicile from the Cayman Islands to Luxembourg;
 
    
    San Faustin also transferred its domicile from Curacao to Luxembourg and changed its name
to San Faustin S.A. and
 
    
    In connection with the redomiciliation of San Faustin into Luxembourg, R&P organized a
Dutch private foundation (Stichting) under the name of Rocca & Partners Stichting
Administratiekantoor Aandelen San Faustin (RP STAK). As of the date hereof, RP STAK holds
shares in San Faustin sufficient in number to control San Faustin. No person or group of
persons controls RP STAK.
   Year ended December 31,2010
    
    
    2009
    
    
    2008(i) Transactions(a) Sales of goods and servicesSales of goods to other related parties
    
    
    172,337
    
    
    
    40,915
    
    
    
    109,036Sales of services to associated parties
    
    
    65
    
    
    
    76
    
    
    
    43Sales of services to other related parties
    
    
    1,763
    
    
    
    562
    
    
    
    1,101174,615
    
    
    
    41,553
    
    
    
    110,180(b) Purchases of goods and servicesPurchases of goods from other related parties
    
    
    49,735
    
    
    
    34,834
    
    
    
    61,127Purchases of services from associated parties
    
    
    38,939
    
    
    
    31,403
    
    
    
    32,796Purchases of services from other related parties
    
    
    114,377
    
    
    
    91,404
    
    
    
    172,708203,051
    
    
    
    157,641
    
    
    
    266,631(c) Financial resultsIncome with associated parties
    
    
    78
    
    
    
    581
    
    
    
    906Income with other related parties
    
    
    
    
    
    
    118
    
    
    
    Expenses with other related parties
    
    
    
    
    
    
    (29
    )
    
    
    78
    
    
    
    670
    
    
    
    906(d) DividendsDividends received from associated parties
    
    
    302
    
    
    
    
    
    
    
    
 At December 31,2010
    
    
    2009(ii) Year-end balancesa) Arising from sales/purchases of goods/services
and other transactionsReceivables from associated parties
    
    
    368
    
    
    
    329Receivables from other related parties
    
    
    11,424
    
    
    
    13,128Advances to suppliers with other related parties
    
    
    2,101
    
    
    
    15,687Payables to associated parties
    
    
    (1,953
    )
    
    
    (1,775
    )Payables to other related parties
    
    
    (42,048
    )
    
    
    (16,541
    )(30,108
    )
    
    
    10,828(b) Other investmentsTime deposit
    
    
    18,086
    
    
    
    16,16118,086
    
    
    
    16,161
  F-48




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 30 Related party transactions (continued)
 (iii) Officers and Directors compensation
   31 Joint Venture in Mexico
    32 Other required disclosures
 (a) Statement of comprehensive income
 Cash flow hedges
    
    
    CurrencyGross
    
    
    
    
    
    
    
    
    
    
    translationamount
    
    
    Income Tax
    
    
    Total
    
    
    adjustmentAt December 31, 2008
    
    
    (82,574
    )
    
    
    23,121
    
    
    
    (59,453
    )
    
    
    (621,450
    )Increase / (Decrease)
    
    
    (19,348
    )
    
    
    5,417
    
    
    
    (13,931
    )
    
    
    (93,922
    )Reclassification to income statement
    
    
    55,229
    
    
    
    (14,529
    )
    
    
    40,700
    
    
    
    At December 31, 2009
    
    
    (46,693
    )
    
    
    14,009
    
    
    
    (32,684
    )
    
    
    (715,372
    )Increase / (Decrease)
    
    
    (19,334
    )
    
    
    5,800
    
    
    
    (13,534
    )
    
    
    35,915Reclassification to income statement
    
    
    34,063
    
    
    
    (10,219
    )
    
    
    23,844
    
    
    
    At December 31, 2010
    
    
    (31,964
    )
    
    
    9,590
    
    
    
    (22,374
    )
    
    
    (679,457
    )
 (b) Statement of cash flows
 At December 31,2010
    
    
    2009
    
    
    2008(i) Changes in working capital (1)Inventories
    
    
    (497,430
    )
    
    
    429,122
    
    
    
    (821,713
    )Receivables and others
    
    
    30,052
    
    
    
    115,252
    
    
    
    (35,031
    )Trade receivables
    
    
    (179,308
    )
    
    
    193,677
    
    
    
    (22,535
    )Other liabilities
    
    
    63,062
    
    
    
    (67,778
    )
    
    
    20,412Trade payables
    
    
    135,651
    
    
    
    (35,094
    )
    
    
    (212,605
    )(447,973
    )
    
    
    635,179
    
    
    
    (1,071,472
    )(ii) Income tax accrual less paymentsTax accrued (Note 11)
    
    
    406,657
    
    
    
    91,314
    
    
    
    162,704Taxes paid
    
    
    (179,837
    )
    
    
    (140,656
    )
    
    
    (251,215
    )226,820
    
    
    
    (49,342
    )
    
    
    (88,511
    )(iii) Interest accruals less paymentsInterest accrued
    
    
    70,771
    
    
    
    105,655
    
    
    
    138,979Interest paid
    
    
    (70,830
    )
    
    
    (94,949
    )
    
    
    (223,130
    )(59
    )
    
    
    10,706
    
    
    
    (84,151
    )
 
 (1)
    
    Changes in working capital are shown net of the effect of exchange rate changes.  F-49




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 33 Recently issued accounting pronouncements
 (i) Improvements to International Financial Reporting Standards
    (ii) Amendments to IFRS 7, Financial Instruments: Disclosures
    34 Financial risk management
 1) Financial risk factors
   1.1) Market Risk
 (i) Foreign exchange rate risk
     USD million
    
    Functional CurrencyExposure to
    
    USD
    
    
    MXN
    
    
    ARS
    
    
    COPUS dollar (USD)
    
    
    (n/a
    )
    
    
    (1,922.2
    )
    
    
    200.1
    
    
    
    (48.1
    )EU euro (EUR)
    
    
    (13.9
    )
    
    
    (3.8
    )
    
    
    8.8
    
    
    
    Other currencies
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
  F-50




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 34 Financial risk management (continued)
   (ii) Interest rate risk
     (iii) Commodity price risk
  1.2) Credit risk
        F-51




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 34 Financial risk management (continued)
   Currency
    
    USD millionUS dollar (USD)
    
    
    387.9EU euro (EUR)
    
    
    14.1Argentine peso (ARS)
    
    
    34.2Mexican peso (MXN)
    
    
    307.1Colombian peso (COP)
    
    
    71.0Other currencies
    
    
    0.2814.5
 1.3) Liquidity risk
     USD million
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterBorrowings
    
    
    513.0
    
    
    
    1,289.4
    
    
    
    12.7
    
    
    
    24.9
    
    
    
    99.5Interests to be accrued (1)
    
    
    26.6
    
    
    
    17.6
    
    
    
    9.5
    
    
    
    7.5
    
    
    
    9.5Trade payables and other liabilities
    
    
    569.9
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    Derivatives financial instruments
    
    
    35.9
    
    
    
    19.0
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,145.4
    
    
    
    1,326.5
    
    
    
    22.2
    
    
    
    32.4
    
    
    
    109.0
 
 (1)
    
    These amounts do not include the effect of derivative financial instruments.  1.4) Capital risk
  2) Financial instruments by category and fair value hierarchy level
  Assets at fairAt December 31, 2010
    
    Loans and
    
    
    value through(in USD thousands)
    
    receivables
    
    
    profit and loss
    
    
    Total(i) Assets as per statement of
financial positionReceivables
    
    
    38,693
    
    
    
    
    
    
    
    38,693Derivative financial instruments
    
    
    
    
    
    
    212
    
    
    
    212Trade receivables
    
    
    663,502
    
    
    
    
    
    
    
    663,502Other investments
    
    
    23,864
    
    
    
    859,849
    
    
    
    883,713Cash and cash equivalents
    
    
    113,342
    
    
    
    1,666,073
    
    
    
    1,779,416Total
    
    
    839,401
    
    
    
    2,526,134
    
    
    
    3,365,536
  F-52




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 34 Financial risk management (continued)
 OtherAt December 31, 2010
    
    
    
    
    
    financial(in USD thousands)
    
    Derivatives
    
    
    liabilities
    
    
    Total(ii) Liabilities as per
statement of financial positionOther liabilities
    
    
    
    
    
    
    28,682
    
    
    
    28,682Trade payables
    
    
    
    
    
    
    541,709
    
    
    
    541,709Derivative financial instruments
    
    
    54,777
    
    
    
    
    
    
    
    54,777Borrowings
    
    
    
    
    
    
    1,939,657
    
    
    
    1,939,657Total
    
    
    54,777
    
    
    
    2,510,048
    
    
    
    2,564,825
  Fair Value by Hierarchy
  Fair value measurement at December 31, 2010(in USD thousand):Description
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Financial assets at fair value
through profit or lossCash and cash equivalents
    
    
    1,666,073
    
    
    
    1,531,082
    
    
    
    134,991
    
    
    
    Other investments
    
    
    859,849
    
    
    
    811,824
    
    
    
    48,025
    
    
    
    Derivatives financial instruments
    
    
    212
    
    
    
    
    
    
    
    212
    
    
    
    Total assets
    
    
    2,526,134
    
    
    
    2,342,906
    
    
    
    183,228
    
    
    
    Financial liabilities at fair
value through profit or lossDerivatives financial instruments
    
    
    54,777
    
    
    
    
    
    
    
    54,777
    
    
    
    Total liabilities
    
    
    54,777
    
    
    
    
    
    
    
    54,777
    
    
    
    
  3) Accounting for derivative financial instruments and hedging activities
    F-53




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 34 Financial risk management (continued)
    4) Fair value estimation
     35 Auditors fees
  36 Subsequent events  Repurchase of Shares from Usiminas concurrently with secondary public
offering
    37 Update as of June 30, 2011 1
 (a) Debt refinancing in Ternium Mexico
  
 1
    
    This note was added subsequent to the
approval of these financial statements at the Annual General Meeting of
shareholders of the Company held on June 1, 2011.  F-54




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
 (b) Recent developments involving Siderar
 Administración Nacional de la
Seguridad Social
  Comisión Nacional de Valores
     (c) Settlement of arbitration proceedings
    F-55




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##### Table of Contents



TERNIUM S.A.
Notes to the Consolidated Financial Statements (Contd.)
  (d) Annual General Meeting and Extraordinary General Meeting of Shareholders
  Réviseur dentreprises agréé
   
   F-56