Ternium S.A. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on February 24, 2010, reports Ternium S.A.'s fourth quarter and full-year 2009 results. Ternium is a leading steel manufacturer in Latin America with principal operations in Mexico and Argentina, serving markets across the Americas. The financial data is presented in U.S. dollars and metric tons in accordance with IFRS.
Key Financial Metrics
| Metric | 4Q 2009 | 4Q 2008 | Full Year 2009 | Full Year 2008 |
|---|---|---|---|---|
| Net Sales (US$ million) | 1,365.2 | 1,721.1 | 4,959.0 | 8,464.9 |
| Operating Income (US$ million) | 216.1 | 186.3 | 296.4 | 1,676.0 |
| EBITDA (US$ million) | 315.9 | 281.1 | 708.5 | 2,089.6 |
| EBITDA Margin | 23% | 16% | 14% | 25% |
| Net Income (US$ million) | 194.8 | (348.5) | 767.1 | 875.2 |
| EPS per ADS (US$) | 0.79 | (1.67) | 3.58 | 3.57 |
| Free Cash Flow (US$ million) | 9.7 | 403.6 | 953.2 | (70.4) |
| Net Financial Debt (US$ million) | 184.1 | 2,085.7* | 184.1 | 2,085.7* |
*Note: Full year 2008 net financial debt calculated as 2009 debt ($184.1M) plus the reported decrease of $1.9 billion.
Material Changes vs. Prior Period
- Revenue Decline: Full-year 2009 net sales dropped 41% to $4.96 billion, driven by a 16% decrease in shipments (6.36 million tons) and a 30% drop in revenue per ton ($758) due to the global economic downturn.
- Profitability Recovery in 4Q: Despite lower sales, 4Q 2009 operating income rose 36% sequentially and 16% year-over-year, aided by higher revenue per ton and lower operating costs.
- Debt Reduction: Net financial debt decreased by $1.9 billion year-over-year to $184.1 million, supported by strong cash generation and debt amortization.
- Foreign Exchange Impact: 4Q 2009 included a $72.2 million non-cash foreign exchange gain (vs. a $622.5 million loss in 4Q 2008) due to the Mexican Peso's revaluation against the U.S. dollar.
Outlook, Risks, and Unusual Items
- Sidor Transaction: The company collected $953.6 million in 2009 related to the transfer of Sidor shares to Venezuela. However, as of the filing date, Ternium had not received $298.9 million in compensation payments (principal and interest) due on February 8, 2010.
- Management Changes: Roberto Philipps retired as CFO effective February 28, 2010, succeeded by Pablo Brizzio.
- Dividend Proposal: The board proposed an annual dividend of $0.50 per ADS ($0.05 per share), totaling approximately $100.2 million, payable June 10, 2010 if approved.
- Outlook: Management expects operating income to increase in Q1 2010 compared to Q4 2009 due to higher shipments and stable margins. They anticipate a recovery in South American economies and moderate growth in the NAFTA region.
- Risks: Forward-looking statements are subject to risks including global GDP uncertainty, market demand fluctuations, tariffs, and cyclicality in steel-consuming industries.
Investor Verification Checklist
- Verify the status of the outstanding $298.9 million Sidor compensation payments due from CVG.
- Monitor the impact of the Mexican Peso's exchange rate fluctuations on future non-cash foreign exchange results.
- Assess the sustainability of the 23% EBITDA margin in 4Q 2009 against the backdrop of lower steel prices.
- Confirm the approval of the proposed $100.2 million annual dividend at the June 2, 2010 shareholders' meeting.
- Track the integration and performance of the new CFO, Pablo Brizzio.