Ternium S.A. Q2 2025 Financial Summary
Business Context and Reporting Period
This Form 6-K filing summarizes Ternium S.A.'s unaudited results for the second quarter and first half of 2025, ended June 30, 2025. Ternium is a leading steel producer in the Americas with operations in Mexico, Brazil, Argentina, and other markets. The company reports under IFRS and utilizes several non-IFRS alternative performance measures, including Adjusted EBITDA and Adjusted Net Income, to exclude the impact of ongoing litigation regarding the Usiminas acquisition.
Key Financial Metrics
| Metric | Q2 2025 | Q1 2025 | Q2 2024 | 1H 2025 | 1H 2024 |
|---|---|---|---|---|---|
| Net Sales ($ million) | 3,947 | 3,933 | 4,514 | 7,880 | 9,292 |
| Operating Income ($ million) | 199 | 132 | 371 | 331 | 1,045 |
| Adjusted EBITDA ($ million) | 403 | 322 | 545 | 725 | 1,400 |
| Adjusted EBITDA Margin | 10% | 8% | 12% | 9% | 15% |
| Net Income ($ million) | 259 | 142 | (743) | 402 | (252) |
| Adjusted Net Income ($ million) | 299 | 188 | 40 | 487 | 531 |
| Adjusted EPS per ADS ($) | 1.28 | 0.55 | (0.11) | 1.83 | 1.73 |
| Cash from Operations ($ million) | 1,044 | 207 | 656 | 1,251 | 1,132 |
| Capital Expenditures ($ million) | 810 | 518 | 409 | 1,327 | 858 |
| Free Cash Flow ($ million) | 234 | (311) | 247 | (77) | 274 |
| Net Cash Position ($ billion) | 1.0 | 1.3 | 1.9 | - | - |
Material Changes vs. Prior Periods
- Revenue: Consolidated net sales were flat sequentially (+0%) but declined 13% year-over-year (YoY) due to lower steel prices and reduced volumes in Mexico and the US. The Steel Segment saw a 13% YoY sales decline, while the Mining Segment grew 3% YoY driven by higher volumes.
- Profitability: Adjusted EBITDA improved sequentially by 25% to $403 million, driven by higher realized steel prices in Mexico. However, it remains down 26% YoY. Operating income rose 51% sequentially but fell 46% YoY.
- Volume Trends: Steel product shipments decreased 4% sequentially and 3% YoY. Mining product shipments increased 11% sequentially and 32% YoY.
- Working Capital: Cash from operations surged to $1.0 billion in Q2, primarily due to a $787 million decrease in working capital (inventory down $429 million, receivables down $198 million).
- Dividends: The company paid $353 million in dividends in Q2, representing the balance of the 2024 declared dividend.
Outlook, Risks, and Management Commentary
- Guidance: Management expects Adjusted EBITDA to improve in Q3 2025, supported by cost reduction initiatives and operational enhancements. Shipments in Mexico are expected to increase in Q3 compared to Q2.
- Regional Outlook:
- Mexico: Uncertainty persists regarding US trade discussions and Section 232 tariffs (raised to 50%). The Mexican government is implementing trade measures against unfair imports, which may benefit local producers.
- Brazil: The market struggles with high levels of unfairly traded steel imports, particularly from China. Usiminas aims to improve cost per ton in Q3.
- Argentina: Shipments are expected to remain stable in Q3 following a sequential increase in Q2 driven by seasonal factors and macroeconomic recovery.
- Risks and Contingencies:
- Usiminas Litigation: A $40 million provision charge was recorded in Q2 for ongoing litigation related to the 2012 acquisition of a participation in Usiminas. This charge includes interest accruals and currency impacts (Brazilian Real appreciation).
- Foreign Exchange: Net financial results included a $35 million loss due to FX fluctuations, specifically the Mexican Peso appreciation and Argentine Peso depreciation against the USD.
- Market Conditions: Risks include global production capacity, cyclicality in steel-consuming industries, and tariff uncertainties.
Key Facts for Investor Verification
- Adjusted vs. GAAP: Verify the reconciliation of Adjusted Net Income ($299M) to GAAP Net Income ($259M), noting the $40M litigation provision exclusion.
- Working Capital Impact: Confirm the sustainability of the $787M working capital release, which was a primary driver of the $1.0B operating cash flow.
- Capital Allocation: Review the $810M CapEx spend, primarily for the Pesquería, Mexico expansion, against the $234M Free Cash Flow generated.
- Net Cash Position: Note the decline in Net Cash from $1.3B (Q1) to $1.0B (Q2) despite strong operating cash flow, driven by CapEx and dividend payments.
- Usiminas Contingency: Monitor the status of the Usiminas acquisition litigation, which has resulted in significant provisions in prior periods ($783M in Q2 2024) and continues to impact current results.