Business Context and Reporting Period
Ternium S.A. is a leading steel producer in the Americas, operating primarily in Mexico, Brazil, Argentina, Colombia, and the United States. The company is organized into two operating segments: Steel and Mining. This Form 20-F covers the fiscal year ended December 31, 2024. A significant structural change occurred in July 2023 when Ternium increased its participation in Usiminas (Brazil) to 51.5% of the control group, resulting in the full consolidation of Usiminas' financial results starting in the third quarter of 2023.
Key Financial Metrics (2024 vs. 2023)
| Metric (in millions USD) | 2024 | 2023 | Change |
|---|---|---|---|
| Net Sales | 17,649 | 17,610 | 0.2% |
| Operating Income | 1,263 | 2,198 | -42.5% |
| Profit for the Year | 174 | 986 | -82.4% |
| Profit Attributable to Owners of Parent | (54) | 676 | Loss vs. Profit |
| Basic EPS (USD) | (0.03) | 0.34 | N/A |
| Capital Expenditures | 1,900 | 1,500 | +26.7% |
| Operating Cash Flow | 1,906 | 2,501 | -23.8% |
| Net Cash Position | 1,600 | 1,900 | -15.8% |
| Total Financial Debt | 2,230 | 2,146 | +3.9% |
Material Changes and Drivers
- Operating Income Decline: Operating income decreased by 43% year-over-year, primarily driven by a $116 per ton reduction in realized steel revenue. This was partially offset by the full-year consolidation of Usiminas and a decrease in cost per ton, though cost reductions lagged behind raw material price declines.
- Usiminas Litigation Provision: A non-recurring provision of $410 million was recorded in 2024 related to ongoing litigation with Companhia Siderúrgica Nacional (CSN) regarding the 2012 acquisition of a participation in Usiminas. The Brazilian Superior Court of Justice ordered indemnification, though Ternium has filed an extraordinary appeal.
- Financial Results: Net financial results showed a loss of $194 million, including a $121 million loss from the divestment of Argentine government bond holdings and a $104 million net foreign exchange loss, largely due to the depreciation of the Brazilian Real against the U.S. dollar impacting Usiminas' dollar-denominated debt.
- Regional Performance:
- Mexico: Shipments remained stable; weakness in the commercial market was offset by growth in industrial sectors (automotive production reached a record 4.0 million units).
- Brazil: Shipments increased significantly due to full-year Usiminas consolidation and a 10% growth in apparent steel demand.
- Southern Region (Argentina): Shipments decreased by 20% due to the Argentine government's economic stabilization measures, though a gradual recovery occurred throughout the year.
Guidance, Outlook, and Risks
- Capital Expenditure Outlook: Ternium expects 2025 capital expenditures to range between $2.4 billion and $2.6 billion. Major projects include new facilities at the Pesquería Industrial Center in Mexico (cold-rolling mill, galvanizing line, and new steel mill) and Usiminas' coking battery and PCI projects in Brazil.
- Dividend Proposal: The Board of Directors proposed an annual dividend of $0.27 per share ($2.70 per ADS), totaling approximately $530 million, subject to shareholder approval at the May 6, 2025 meeting.
- Trade Risks: Significant uncertainty exists regarding U.S. trade policy. In early 2025, the U.S. government announced new tariffs, including a 25% tariff on virtually all steel imports and a 25% tariff on automobiles and parts produced outside the U.S. Ternium states it cannot currently quantify the impact of these measures.
- Argentina Risks: Continued volatility in Argentina's economy, high inflation (118% in 2024), and foreign exchange restrictions limit the ability to repatriate cash and import raw materials. Ternium Argentina holds approximately $1.3 billion in cash and investments, largely in U.S. dollar-denominated sovereign bonds, which are subject to valuation volatility.
- Environmental and Climate: The company faces increasing regulatory pressure regarding carbon emissions (EU CBAM, local carbon taxes) and has set a target to reduce emission intensity by 15% by 2030 compared to a 2023 baseline.
- Usiminas Litigation Status: Verify the outcome of the extraordinary appeal filed by Ternium against the Brazilian Superior Court of Justice regarding the $410 million CSN indemnification provision.
- U.S. Tariff Impact: Monitor the final implementation details of the new U.S. tariffs on steel and automobiles announced in early 2025 and their specific impact on Ternium's Mexican exports and automotive customers.
- Argentina FX Restrictions: Track the evolution of foreign exchange regulations in Argentina and the company's ability to repatriate the $1.3 billion in cash and investments held by Ternium Argentina.
- Capital Project Execution: Verify the timeline and cost adherence for the Pesquería Industrial Center expansion, particularly the new steel mill and port facilities scheduled for completion in 2026.
- Debt Maturity Profile: Review the maturity schedule of the $2.2 billion total financial debt, noting that 30% is due within one year, and assess refinancing risks in a high-interest-rate environment.