Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Improved productivity of man hours per tonne of steel by 18 minutes (from 4:37 hours in 2015 to 4:19 hours in 2017).
• Reduced emissions through investments in coke furnaces.
• Obtained 8 Clean Industry certificates for various plants in 2017.

Social Achievements

• Revisions of Contracts and Wage Scales of AHMSA, MINOSA, and NASA plants were accepted and approved at Workers Meetings in 2017.
• Continuous improvement to the quality of its products and customer service.

Governance Achievements

• The Audit Committee and Corporate Practices Committee were constituted in 2007 to support the Board of Directors.
• Adopted a policy on the treatment of situations generating conflicts of interest.

Climate Goals & Targets

Environmental Challenges

• Liquidity restrictions due to instability in international steel prices, causing delays in payments to suppliers.
• Strong competition in the steel industry, including excess supply and imports.
• Dependence on key suppliers for raw materials.
• Risks related to environmental regulations and potential remediation obligations.
• Uncertainty regarding the renegotiation of NAFTA and its potential impact on the steel industry.

Mitigation Strategies

• Management is analyzing financing options and return to capital markets to strengthen financial situation and working capital.
• Continuous assessment of domestic and export markets to maintain flexibility.
• Investments in new mines to secure raw material supply.
• Voluntary environmental protection agreements with PROFEPA and investments in emission control equipment.
• Active participation in NAFTA negotiations and advocacy for measures to protect the domestic steel industry.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Certifications: ISO 9001:2008, ISO 14001:2004, ISO TS-16949:2009, OHSAS-18001:2007, NRF-001PEMEX 2007, SA800:2008, ISO IEC 17025:2005, EN 10025-1:2004 "CE 120"

Third-party Assurance: Deloitte (qualified opinion)

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Improved productivity of man hours per ton of steel by 7 minutes (from 4:08 hours in 2016 to 4:01 hours in 2018)
• Reduced product rejection rate to 0.21% of total production in 2018 (0.52% in 2017)
• Increased production of higher value-added products

Social Achievements

• Maintained good relationships with unionized workers; contracts and salary tabulations were accepted and approved in workers' assemblies in 2018
• Improved productivity of man hours per ton of steel

Governance Achievements

• Established an Audit Committee and a Corporate Practices Committee
• Adopted a policy for handling conflicts of interest

Climate Goals & Targets

Environmental Challenges

• Suspension of Payments and debt restructuring
• Increased competition in the steel industry
• Fluctuations in energy costs
• Liquidity risks due to instability in international steel prices and tariff restrictions
• Availability of raw materials
• International commercial agreements
• Environmental regulations
• Mining concessions
• Strikes or other labor issues
• Economic situation in Mexico
• Government regulations
• Political events
• Exchange fluctuations and restrictions
• Inflation
• Interest rate risks

Mitigation Strategies

• General payment agreement with creditors (100% debt payment within 3 years)
• Investment and capital improvement plans for steel and mining segments
• Obtained a bank loan in September 2018 for working capital
• Analyzing financing options and return to capital markets
• Investment in new mining projects and equipment
• Continuous assessment of domestic and export markets
• ISO certifications and other quality standards
• Strategic location of facilities
• Voluntary environmental protection agreements with PROFEPA
• Environmental audit program
• Negotiations with workers and trade union sections
• Strict monitoring and control of commitments
• Active participation in policy dialogues and industry associations

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: IFRS

Certifications: ISO 9001:2008, ISO-14001:2004, ISO TS-16949:2009, OHSAS-18001:2007, NRF-001PEMEX 2007, SA800:2008, ISO IEC 17025:2005, EN 10025-1:2004 “CE 120”

Third-party Assurance: Deloitte

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Instability in international steel prices and US tariffs (Section 232) led to decreased demand and prices, affecting operating results and cash flow, causing delays in short-term obligations, mainly payments to suppliers.
• Cargill Financial Services International, Inc. notified early maturity of its credits.
• Comisión Federal de Electricidad (CFE) unilaterally cancelled thermal coal supply contracts.
• The company incurred in net losses during the nine months ended September 30, 2020 and the year ended December 31, 2019.
• Current liabilities exceeded current assets.
• Loss of more than two-thirds of its share capital, potentially leading to dissolution.
• Multiple breaches of credit contracts.
• Cancellation of thermal coal supply contracts with CFE leading to the closure of operations in the thermal coal segment.
• Layoff of 2,000 workers and employees in Mexico and 400 in Texas.
• Strike notice from the Sindicato Nacional de Trabajadores Mineros Metalúrgicos y Similares de la República Mexicana.

Mitigation Strategies

• Implemented a drastic savings and operational efficiency program.
• Cancelled non-priority investments.
• Eliminated some subsidiaries.
• Defined a production reorganization plan.
• Explored various capitalization options.
• Determined the sale of non-fundamental assets.
• Analyzing financing options, capitalization alternatives, and return to capital markets to improve cash flow in the short and medium term.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS