• Adjusted EBITDA: $368 million for the third quarter.
• Net Income: $93 million for the third quarter.
• Shipments: Increased across all primary markets.
• Steel Market in Mexico: Record high shipments in the third quarter; expected decline in the fourth quarter due to seasonality.
• Steel Consumption in Brazil: Increased 9% year over year in the first nine months.
• Flat Steel Imports in Brazil: Increased 20% year over year in the first nine months.
• Argentina Steel Volumes: Recovery observed; stable shipments expected in the fourth quarter.
• Wind Farm in Argentina: Expected to begin operation by year-end.
• Net Cash Position: Declined to $1.7 billion as of the end of September.
• Capital Expenditure: Expected total of $1.7 to $1.8 billion in 2024.
• Interim Dividend: 90 per share, totaling $177 million.
• Dividend Yield: Approximately 8% based on current share price.

• Warning! GuruFocus has detected 5 Warning Signs with BUE:TXAR.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ternium Argentina SA reported an adjusted EBITDA of $368 million and a net income of $93 million for the third quarter, indicating strong financial performance.
• The company experienced increased shipments across all primary markets, with record high shipments in Mexico during the third quarter.
• Ternium Argentina SA is optimistic about the Mexican market, expecting sequential shipment growth in the first quarter of next year due to new production lines.
• The company is making significant progress on its expansion projects, including a new pickling line and finishing center in Pesqueria, which will enhance its product offering.
• Ternium Argentina SA is committed to sustainability, with its wind farm in Argentina set to begin operations by year-end, boosting renewable energy use and reducing reliance on external sources.

Negative Points

• The company experienced a decline in margins due to a decrease in realized prices in its main market.
• There is an expected decline in shipments for the fourth quarter due to seasonal weakness, particularly in Mexico and Brazil.
• Flat steel imports in Brazil jumped 20% year over year, mainly from China, posing a challenge to local steel producers.
• The Brazilian government's quota system to curb steel imports has not yielded the expected results, leading to ongoing anti-dumping investigations.
• Ternium Argentina SA's net cash position declined to $1.7 billion due to decreased cash flow from operations and increased capital expenditure.

Q & A Highlights

Q: Can you explain the rationale behind the dividend cut despite a constructive outlook for Mexico and Argentina? A: Maximo Vedoya, CEO, explained that the board's decision was for a nominal reduction in dividend payment, but the dividend yield and payout ratio remain high. The company is maintaining a strong financial position to support significant CapEx plans, particularly in Pesqueria, while still providing a substantial dividend yield.

Q: What are the implications of the US election outcome for Ternium's operations in Mexico? A: Maximo Vedoya, CEO, sees the election outcome as an opportunity to strengthen North American supply chains. The new administrations in Mexico and the US share concerns about unfair trade practices, particularly from China, and are committed to enhancing regional industrialization and reducing trade deficits with Asia.

Q: How is Ternium addressing the issue of steel imports in Brazil, particularly from China? A: Maximo Vedoya, CEO, stated that the Brazilian government implemented a quota system to curb imports, but it has not been effective due to loopholes. Ternium is working with industry associations to address these issues and is filing anti-dumping cases as a long-term solution.

Q: What is Ternium's strategy for future investments after the completion of the Pesqueria project? A: Maximo Vedoya, CEO, emphasized that Ternium will continue to focus on growth within the Americas, particularly in Latin America. The company is currently focused on completing the Pesqueria project, which is the largest in its history, and plans to enhance its capacity and product offerings in the region.

Q: What are the expectations for CapEx and cost reductions in 2025? A: Pablo Brizzio, CFO, indicated that CapEx for 2025 is expected to be around $2.3 billion, with a significant portion allocated to the Pesqueria project. The company anticipates cost reductions as lower-priced raw materials flow through operations, and it continues to implement cost-cutting initiatives across its facilities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.