Ternium S.A. 2025 Annual Report Summary (Form 6-K)
Business Context and Reporting Period
This filing covers Ternium S.A.'s Annual Report for the fiscal year ended December 31, 2025. Ternium is a leading steel producer in the Americas, operating primarily in Mexico, Brazil, and Argentina. The company reported results in a challenging environment characterized by sharp increases in U.S. trade measures (Section 232 tariffs raised to 50%), uncertainty in U.S.-Mexico trade negotiations, and pressure from low-priced Chinese steel imports in Brazil. Despite these headwinds, Ternium executed a cost-reduction program and advanced major expansion projects at its Pesquería industrial center in Mexico.
Key Financial Metrics (Year Ended Dec 31, 2025)
| Metric ($ millions) | 2025 | 2024 | Variance |
|---|---|---|---|
| Net Sales | 15,609 | 17,649 | -12% |
| Operating Income | 705 | 1,263 | -44% |
| Adjusted EBITDA | 1,541 | 2,038 | -24% |
| Adjusted EBITDA Margin | 10.0% | 11.5% | -150 bps |
| Net Income | 303 | 174 | +74% |
| Net Income Attributable to Owners | 425 | (54) | Turnaround |
| Free Cash Flow | (187) | 41 | Negative |
| Capital Expenditures | 2,501 | 1,865 | +34% |
| Net Cash Position | 712 | 1,644 | -57% |
| Total Borrowings | 2,419 | 2,230 | +8% |
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 12% year-over-year, driven by a 13% drop in Steel Segment sales. Steel revenue per ton fell 10% due to lower realized prices, and shipments declined 4% (Mexico and Other Markets down; Southern Region up 21%).
- Profitability Pressure: Operating income fell 44% to $705 million. Adjusted EBITDA declined 24% to $1.54 billion, reflecting lower prices and volumes, partially offset by cost-saving initiatives and lower raw material costs.
- Net Income Volatility: While consolidated Net Income rose to $303 million (from $174 million), this was significantly impacted by non-recurring items: a $405 million write-down of deferred tax assets at Usiminas and a $117 million charge for ongoing litigation regarding the Usiminas acquisition. Excluding these, underlying profitability was pressured.
- Investment Peak: Capital expenditures reached $2.5 billion, the peak of the current investment cycle, primarily funding the Pesquería expansion (new cold-rolling, galvanizing, and DRI-EAF facilities).
- Liquidity Shift: Net Cash decreased by $932 million to $712 million due to high capital outflows and dividend payments, though the company maintains a net cash position.
Guidance, Outlook, and Risks
- 2026 Outlook: Management expects trade challenges to persist, including geopolitical tensions (Iran-U.S.-Israel) and U.S. tariff policies. However, recent government measures in Mexico and Brazil to counter unfair trade practices are viewed positively. Demand in Mexico is recovering after 2025 destocking.
- Expansion Progress: New downstream facilities at Pesquería (cold rolling and galvanizing) are in the ramp-up phase. The new DRI-EAF steelmaking plant is expected to start up by the end of 2026, enhancing decarbonization and USMCA-region production.
- Dividend Proposal: The Board proposed an annual dividend of $2.70 per ADS ($530 million total), including the interim dividend paid in November 2025. If approved, a net dividend of $1.80 per ADS will be paid in May 2026.
- Key Risks:
- Trade Policy: Escalating U.S. tariffs (Section 232, IEEPA) and potential USMCA review uncertainties.
- Geopolitics: Violence and security issues in Mexican mining regions; inflation and exchange controls in Argentina.
- Litigation: Ongoing lawsuit by CSN regarding the Usiminas acquisition, with a provision of $527.6 million as of year-end.
- Climate/Regulatory: Increasing carbon taxes and environmental regulations in Mexico, Brazil, and Argentina.
Investor Verification Checklist
- Usiminas Litigation Status: Verify the latest developments in the CSN lawsuit regarding the 2012 Usiminas acquisition, which carries a significant provision and potential for further charges.
- Pesquería Project Timeline: Confirm the on-schedule commissioning of the DRI-EAF plant and new downstream facilities by end-2026, as this is critical for future margin expansion.
- Argentina FX Restrictions: Monitor the evolution of foreign exchange controls in Argentina, which impact the repatriation of cash and dividend payments from Ternium Argentina.
- U.S. Tariff Impact: Assess the long-term impact of the 50% Section 232 tariff and other U.S. trade measures on Mexican steel demand and Ternium's export competitiveness.
- Deferred Tax Assets: Review the recoverability assessment of Usiminas' deferred tax assets, given the $405 million write-down recorded in 2025.