Ternium S.A. Q3 2024 Financial Summary
Business Context and Reporting Period
This Form 6-K filing summarizes Ternium S.A.'s unaudited results for the third quarter and first nine months ended September 30, 2024. Ternium is a leading steel producer in the Americas with operations in Mexico, Brazil, and the Southern Region (Argentina, Chile, Uruguay). The company reports under IFRS in US dollars.
Key Financial Metrics
| Metric | 3Q 2024 | 9M 2024 |
|---|---|---|
| Net Sales | $4,480 million | $13,773 million |
| Operating Income | $175 million | $1,221 million |
| Adjusted EBITDA | $368 million | $1,768 million |
| Adjusted EBITDA Margin | 8% | 13% |
| Net Income | $93 million | ($159 million) |
| Equity Holders' Net Income | $32 million | ($335 million) |
| Earnings per ADS | $0.16 | ($1.70) |
| Cash from Operating Activities | $303 million | $1,435 million |
| Capital Expenditures | $446 million | $1,304 million |
| Free Cash Flow | ($143 million) | $130 million |
| Net Cash Position | $1.7 billion | N/A |
Material Changes vs. Prior Periods
- Revenue: Net sales decreased 14% year-over-year (YoY) in 3Q24 to $4,480 million, driven by lower realized steel prices. Sequentially, sales were flat (-1%).
- Profitability: Operating income fell 67% YoY to $175 million. Adjusted EBITDA declined 47% YoY to $368 million, with margins compressing to 8% from 13% in 3Q23.
- Shipments: Steel product shipments remained stable YoY (4.1 million tons) but increased 7% sequentially. Mining product shipments dropped 18% YoY but rose 19% sequentially.
- Costs: Steel revenue per ton decreased due to lower market prices and contract resets in Mexico. Cost per ton saw a modest decrease as the company consumed previously purchased high-priced inventory.
- Liquidity: Net cash position decreased to $1.7 billion from $1.9 billion in Q2 2024, impacted by a $155 million increase in working capital and $446 million in capital expenditures.
Outlook, Risks, and Management Commentary
- Guidance: Management expects a slight sequential increase in Adjusted EBITDA for Q4 2024 due to improved margins, partially offset by reduced shipments. Apparent demand in Mexico and Brazil is anticipated to decline due to seasonality.
- Price Environment: Realized steel prices are projected to decline in Q4 compared to Q3, primarily due to quarterly price contract resets with industrial customers in Mexico at reduced levels.
- Cost Outlook: The company anticipates a continued decrease in cost per ton as it consumes lower-priced slabs and raw material inventories.
- Operational Milestones: New finishing lines in the Pesquería industrial center and a new wind farm in Argentina are ramping up or expected to begin operations by year-end, supporting decarbonization goals.
- Dividends: An interim dividend of $0.90 per ADS ($177 million total) was approved, payable November 21, 2024.
- Risks: Forward-looking statements are subject to risks including GDP uncertainty, global production capacity, tariffs, and cyclicality in steel-consuming industries.
Investor Verification Checklist
- Verify the impact of the Mexican Peso depreciation and Brazilian Real appreciation on the $57 million foreign exchange gain.
- Confirm the timeline and cost implications of the new wind farm in Argentina and the Pesquería expansion projects.
- Monitor the reset of industrial contract prices in Mexico for Q4 2024 and its effect on realized steel prices.
- Review the reconciliation of Adjusted EBITDA to Net Income, specifically regarding the exclusion of the Usiminas litigation provision recognized in Q2 2024.
- Assess the sustainability of the $1.7 billion net cash position given the negative free cash flow in Q3 and upcoming dividend payments.