Ternium S.A. Q1 2021 Financial Summary
Business Context and Reporting Period
This Form 6-K filing reports Ternium S.A.'s unaudited consolidated results for the first quarter ended March 31, 2021. Ternium is Latin America's leading flat steel producer with operations in Mexico, Brazil, Argentina, Colombia, and the southern United States. The results reflect a strong global pricing environment and sustained demand, particularly in the North American market.
Key Financial Metrics
| Metric | Q1 2021 | Q4 2020 | Q1 2020 |
|---|---|---|---|
| Net Sales ($ million) | 3,249.3 | 2,579.7 | 2,271.4 |
| Operating Income ($ million) | 905.8 | 677.2 | 135.7 |
| EBITDA ($ million) | 1,057.4 | 645.2 | 302.1 |
| EBITDA Margin | 33% | 25% | 13% |
| Net Result ($ million) | 706.7 | 670.6 | (19.4) |
| Equity Holders' Net Result ($ million) | 602.9 | 600.4 | (11.6) |
| Earnings per ADS ($) | 3.07 | 3.06 | (0.06) |
| Free Cash Flow ($ million) | 198.1 | N/A | N/A |
| Net Debt ($ million) | 228.9 | 371.5 | N/A |
| Net Debt / LTM EBITDA | 0.1x | N/A | N/A |
Steel shipments totaled 3.1 million tons, while iron ore shipments reached 1.035 million tons. EBITDA per ton was $341.1.
Material Changes vs. Prior Periods
- Revenue Growth: Net sales increased 26% sequentially and 43% year-over-year, driven primarily by significantly higher realized steel prices.
- Profitability Surge: Operating income rose 34% sequentially and 568% year-over-year. EBITDA increased 64% sequentially and 250% year-over-year.
- Volume Trends: Steel shipments grew 1% sequentially and 3% year-over-year. Mexico shipments increased 3% sequentially, while the Southern Region (Argentina) decreased 5% sequentially but recovered 64% year-over-year.
- Cost Pressures: Cost of sales increased due to higher raw material, purchased slab, and energy costs, though these were more than offset by price increases.
- Financial Results: Net financial results shifted from a gain of $106.2 million in Q1 2020 to a gain of $16.0 million in Q1 2021, largely due to the absence of significant foreign exchange gains from currency depreciation seen in the prior year.
Outlook, Guidance, and Risks
Management Commentary: Management expects sequentially higher EBITDA in Q2 2021 due to increased realized steel prices, partially offset by higher input costs (iron ore, scrap, slabs) flowing through inventories. Volumes are anticipated to remain stable in Q2, with increases in Mexico offset by lower slab sales to third parties.
Operational Updates: The new hot rolling mill in Mexico is expected to commission in June 2021 with a ramp-up in the second half of the year. The company anticipates market conditions to normalize in the second half of 2021 as steel capacity utilization increases.
Dividends: The Board proposed an annual dividend of $0.21 per share ($2.10 per ADS), totaling approximately $412.2 million, subject to shareholder approval.
Risks: Forward-looking statements are subject to risks including GDP uncertainties, market demand fluctuations, global production capacity, tariffs, and cyclicality in steel-consuming industries.
Investor Verification Checklist
- Verify the sustainability of the 33% EBITDA margin given the expectation of normalizing steel prices in H2 2021.
- Confirm the impact of rising raw material and energy costs on future cost per ton.
- Monitor the commissioning timeline and ramp-up progress of the new Mexico hot rolling mill.
- Review the proposed dividend payout of $412.2 million against the Q1 free cash flow of $198.1 million.
- Assess the exposure to foreign exchange fluctuations, particularly regarding the Mexican Peso and Brazilian Real.