Ternium S.A. 2021 Sustainability Report Summary
Business Context and Reporting Period
This Form 6-K filing furnishes Ternium S.A.'s 2021 Sustainability Report to the SEC. Ternium is a leading integrated flat steel producer in Latin America with operations in Mexico, Brazil, Argentina, Colombia, the southern United States, and Central America. The reporting period covers the fiscal year ended December 31, 2021. The company operates under IFRS standards and reports in U.S. dollars.
Key Financial Metrics
- Net Sales: $16.1 billion (Steel products: $15.8 billion; Iron ore: $0.5 billion).
- Operating Income: $5.3 billion (Record high).
- EBITDA: $5.9 billion ($485.9 per ton).
- Net Income: $4.4 billion (Attributable to owners: $3.8 billion).
- Earnings Per ADS: $19.49.
- Free Cash Flow: $2.2 billion.
- Capital Expenditures (CAPEX): $523.6 million.
- Liquidity: Ended the year with a net cash position of $1.2 billion.
- Dividend: Proposed dividend of $2.60 per ADS for 2021.
- Steel Shipments: 12.1 million tons.
Material Changes vs. Prior Period
2021 was a record year driven by a global recovery in steel prices and strong demand for durable goods following pandemic lockdowns.
- Revenue Growth: Net sales increased significantly from $8.7 billion in 2020 to $16.1 billion in 2021.
- Profitability Surge: Operating income rose from $1.1 billion in 2020 to $5.3 billion in 2021. EBITDA per ton increased by $351.7 year-over-year.
- Volume Increase: Steel shipments in Mexico grew 10% to 6.5 million tons. Total consolidated shipments reached 12.1 million tons.
- Operational Milestone: Successful start-up of the new hot rolling mill in Pesquería, Mexico, in mid-2021, enhancing high-value product capabilities.
- Balance Sheet: Transitioned from net financial debt of $371.5 million in 2020 to a net cash position of $1.2 billion in 2021.
Outlook, Strategy, and Risks
Strategy and Guidance: Ternium is focusing on sophisticated value-added products, strategic growth in the USMCA region, and operational excellence. The company aims to reduce CO2 emission intensity by 20% by 2030 (vs. 2018 baseline) through energy efficiency, increased scrap usage, and renewable energy adoption. Future investments include downstream processing facilities in Mexico and the U.S. scheduled for 2024 start-up.
Risks and Contingencies:
- Geopolitical: The Russian invasion of Ukraine has created market uncertainty and supply chain disruptions.
- Climate Change: Physical risks include extreme weather events (e.g., droughts affecting iron ore transport in Argentina). Transition risks include potential future carbon taxes or regulatory changes.
- Operational: Risks related to machinery operation, cybersecurity, and environmental compliance.
Unusual Items: The company maintained a special fund of $8.1 million in 2021 to support communities during the COVID-19 pandemic, including vaccination campaigns and field hospital operations.
Investor Verification Checklist
- Verify the sustainability of record steel prices and the potential for margin compression in 2022.
- Confirm the timeline and capital requirements for the 2024 downstream investments in Mexico and the U.S.
- Assess the progress of the 2030 decarbonization roadmap, specifically the 20% CO2 intensity reduction target.
- Monitor the impact of geopolitical instability on raw material supply chains and logistics costs.
- Review the company's exposure to water stress in Mexican facilities and the efficacy of third-party water usage strategies.