Ternium S.A. 2024 Sustainability Report Summary
Business Context and Reporting Period
This filing is a Form 6-K submitting Ternium S.A.'s Sustainability Report 2024, covering the fiscal year ended December 31, 2024. Ternium is a leading integrated steelmaker in Latin America, with operations primarily in Mexico, Brazil, and Argentina. The report details the company's economic, environmental, social, and governance (ESG) performance, highlighting its strategy to consolidate its market position amidst global market uncertainty, trade tensions, and a focus on decarbonization.
Key Financial Metrics
- Net Sales: $17.6 billion (stable compared to 2023).
- Adjusted EBITDA: $2.0 billion (margin of 12%), down from $2.74 billion in 2023.
- Net Income: $174 million, significantly impacted by a litigation provision in Brazil.
- Operating Cash Flow: $1.9 billion.
- Capital Expenditures (Capex): $1.9 billion, driven by the Pesquería complex expansion in Mexico.
- Free Cash Flow: $41 million.
- Liquidity: Net cash position of $1.6 billion at year-end.
- Dividend: Approved annual dividend of $2.70 per ADS (9% yield).
- Production Volume: Total steel shipments reached 15.6 million tons (up 10% YoY), driven by the full-year consolidation of Usiminas in Brazil.
Material Changes vs. Prior Period
- Profitability Decline: EBITDA and Net Income decreased due to falling steel prices in key markets and a specific provision for an adverse court ruling in Brazil (Usiminas), which the company disputes.
- Volume Growth: Shipments increased by 10% year-over-year, primarily due to the full consolidation of Usiminas, offsetting a 2% decline in Mexico and a 20% decline in the Southern Region (Argentina) due to economic contraction.
- Investment Acceleration: Capital expenditures rose to $1.9 billion (from $1.46 billion in 2023) to advance the DRI-EAF steelmaking facility in Pesquería, Mexico, and downstream processing lines.
- Safety Performance: The Injury Frequency Rate (IFR) increased to 2.70 (from 2.45 in 2023), and the company recorded two fatalities in 2024, a setback to its safety goals.
Guidance, Outlook, and Management Commentary
- Decarbonization Strategy: Ternium reaffirmed its target to reduce CO2e emission intensity by 15% by 2030 (vs. 2023 baseline). Key milestones include the inauguration of a 99 MW wind farm in Argentina (supplying 90% of local energy needs) and continued construction of the low-emission DRI-EAF facility in Mexico.
- Market Outlook: Management notes uncertainty regarding tariffs and trade tensions in North America but remains confident in Mexico's role as a manufacturing ally under USMCA. In Argentina, the company anticipates economic recovery following government reforms, though construction demand remains subdued.
- Investment Program: The company is executing a multi-year investment plan focused on the Pesquería complex to produce ultra-high-strength steel for the automotive industry and to meet USMCA "melted and poured" requirements.
- Risks: Key risks include fluctuating raw material prices, geopolitical tensions affecting supply chains, water stress in Mexican operations, and the potential for further litigation or regulatory changes regarding environmental compliance.
Investor Verification Checklist
- Litigation Impact: Verify the magnitude and ongoing status of the Brazilian court ruling that reduced net income to $174 million.
- Usiminas Consolidation: Confirm the full-year financial impact of Usiminas consolidation on 2024 metrics versus 2023 partial-year data.
- Capex Execution: Monitor the timeline and cost adherence of the Pesquería DRI-EAF project, scheduled for completion in 2026.
- Safety Metrics: Review the root cause analysis of the two 2024 fatalities and the effectiveness of new safety protocols.
- Argentina Recovery: Assess the pace of demand recovery in Argentina's industrial and construction sectors following economic reforms.
- Decarbonization Progress: Track the operational performance of the new Argentina wind farm and the integration of renewable energy into the production mix.