TX

Ternium S.A. Form 6-K Summary

Business Context and Reporting Period

This filing presents the unaudited consolidated condensed interim financial statements for Ternium S.A. for the nine-month period ended September 30, 2015. Ternium is a global steel manufacturer organized into two reportable segments: Steel (flat and long products) and Mining (iron ore and pellets). The company is incorporated in Luxembourg and its American Depositary Shares (ADS) trade on the NYSE under the symbol "TX".

Key Financial Metrics (Nine Months Ended Sept 30, 2015)

Note: 2014 figures are restated. Total borrowings include current and non-current portions.

Material Changes vs. Prior Period

• Profitability Turnaround: The company reported a net profit of $186.3 million for the nine months ended Sept 30, 2015, compared to a net loss of $175.6 million in the same period of 2014. This reversal is primarily driven by a significant reduction in the "Equity in losses of non-consolidated companies" line item, which decreased from a loss of $746.5 million in 2014 to $59.4 million in 2015.
• Revenue Decline: Net sales decreased by approximately 7.7% to $6.07 billion, reflecting lower volumes and/or pricing in the steel market.
• Debt Reduction: Total borrowings decreased significantly by approximately $1.26 billion, from $2.96 billion in 2014 to $1.69 billion in 2015, due to net repayments of $427 million during the period.
• Restatement Impact: The 2014 comparative figures were restated to reflect a $739.8 million impairment charge on the investment in Usiminas (a non-consolidated company), which heavily impacted the prior year's loss.

Outlook, Risks, and Contingencies

Management Commentary & Outlook: The filing does not contain explicit forward-looking guidance or management commentary regarding future market conditions beyond the financial data. However, the company notes that its "Management view" of operating income differs from IFRS due to the use of direct cost methodology for inventory valuation.

Key Risks and Contingencies:

• Usiminas Investment: Ternium holds a 32.88% stake in Usiminas. The carrying value was reduced to $445.1 million (from $742.3 million at year-end 2014) due to share of results and other comprehensive income losses. The market value of this stake was approximately $345.4 million as of Sept 30, 2015.
• Tax Litigation (Argentina): Siderar faces an income tax claim from the Argentine tax authority (AFIP) for fiscal years 1995-1999. The aggregate exposure is approximately $10.7 million, with a provision of $0.6 million recorded.
• Usiminas Tender Offer Litigation: Ternium is involved in legal proceedings regarding a potential tender offer requirement for Usiminas shares following a 2014 acquisition. The Brazilian securities regulator (CVM) staff determined a tender offer might be required, but Ternium has appealed. No provision has been recorded as management believes the claims are groundless.
• Tax Audit (Mexico): Mexican tax authorities have challenged a tax loss deduction, estimating a potential adjustment of $34 million plus interest. Ternium believes an unfavorable outcome is not probable and has recorded no provision.
• Commitments: Significant commitments include a $285 million transportation capacity agreement for the Techgen power plant project and a $375 million corporate guarantee on Techgen's syndicated loan.

Investor Verification Checklist

• Usiminas Valuation: Verify the recoverability of the $445 million investment in Usiminas, given the market value ($345 million) is below the carrying value and the subsidiary reported a net loss of $573 million for the period.
• Restatement Details: Review the specific assumptions used in the 2014 restatement regarding the Usiminas impairment to understand the baseline for current performance comparisons.
• Legal Exposure: Monitor the outcome of the CVM appeal regarding the Usiminas tender offer, as a negative ruling could trigger a significant cash outflow.
• Cash Flow Sustainability: Assess the sustainability of the $1.01 billion operating cash flow given the decline in net sales and the heavy reliance on working capital changes ($460 million positive impact).
• Debt Covenants: Confirm compliance with financial covenants, particularly regarding the Techgen loan guarantee and overall leverage ratios.