Sebastián Martí

Ternium - Investor Relations

+1 (866) 890 0443

+54 (11) 4018 8389 www.ternium.com

Ternium Announces Third Quarter and First Nine Months of 2020 Results

Luxembourg, November 3, 2020 - Ternium S.A. (NYSE: TX) today announced its results for the third quarter and first nine months ended September 30, 2020.

The financial and operational information contained in this press release is based on Ternium S.A.'s operational data and consolidated condensed interim financial statements prepared in accordance with IAS 34 "Interim financial reporting" (IFRS) and presented in U.S. dollars ($) and metric tons.

Summary of Third Quarter of 2020 Results

3Q2020

2Q2020

3Q2019

Steel Shipments (tons)

2,845,000

2,449,000

16%

3,057,000

-7%

Iron Ore Shipments (tons)

869,000

991,000

-12%

904,000

-4%

Net Sales ($ million)

2,138.6

1,745.8

23%

2,449.7

-13%

Operating Income ($ million)

201.0

65.6

207%

228.6

-12%

EBITDA1 ($ million)

353.4

223.9

58%

388.0

-9%

EBITDA Margin (% of net sales)

17%

13%

16%

EBITDA per Ton2 ($)

124.2

91.4

126.9

Financial Result, Net ($ million)

(13.7)

(14.6)

(34.9)

Income Tax Result ($ million)

(27.5)

12.3

(83.6)

Net Result ($ million)

173.0

43.6

111.9

Equity Holders' Net Result ($ million)

145.6

44.0

95.3

Earnings per ADS3 ($)

0.74

0.22

0.49

  • EBITDA of $353.4 million on steel shipments of 2.8 million tons, with EBITDA margin of 17% and EBITDA per ton of $124.2.
  • Equity holders' net income of $145.6 million, equivalent to earnings per ADS of $0.74.
  • Net cash provided by operating activities of $460.0 million, including a working capital decrease of $140.6 million.
  • Capital expenditures of $71.1 million, a 36% sequential decrease reflecting the company's decision to slow or postpone several projects across its facilities.
  • Free cash flow4 of $388.8 million.
  • Net debt position5 of $562.4 million at the end of September 2020, down from $917.4 million at the end of June 2020, with net debt to last twelve months EBITDA ratio of 0.5 times.

Ternium's main markets rebounded in the third quarter of 2020 from their trough during the second quarter. Total steel shipments in the third quarter reached 2.8 million tons, up 16% on a sequential

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basis, with higher finished steel shipments in the company's key markets partially offset by lower slab shipments to third parties. Shipments in the third quarter were down 7% over the same period in 2019. In Mexico, the company's main steel market, shipments recovered 23% sequentially to 1.4 million tons. The country's manufacturing industries continued ramping up their facilities during the third quarter, and activity in the construction sector slightly improved. Compared to the same period in 2019, shipments in Mexico were down 11% in the third quarter of 2020.

In the Southern Region, Ternium's shipments reached 547,000 tons in the third quarter of 2020, increasing 59% on a sequential basis from a very weak second quarter. On an year-over-year basis, shipments increased 9%.

In the Other Markets region, Ternium's finished steel shipments in the third quarter of 2020 increased sequentially and on an year-over-year basis, with a return to pre-pandemic levels in Colombia and continued strong demand in the US market. During the third quarter of 2020 the company's slab facility in Brazil returned to full capacity from minimum utilization rates in April, significantly increasing its integration with other Ternium's mills.

The company's EBITDA per ton in the third quarter of 2020 was $124, increasing $33 on a sequential basis, mainly reflecting an increase in revenue per ton mostly due to a higher value added product mix, partially offset by a slight increase in operating cost per ton. On an year-over-year basis, EBITDA per ton levels were similar.

Summary of First Nine Months of 2020 Results

9M2020

9M2019

Steel Shipments (tons)

8,292,000

9,594,000

-14%

Iron Ore Shipments (tons)

2,854,000

2,659,000

7%

Net Sales ($ million)

6,155.8

7,942.8

-22%

Operating Income ($ million)

402.3

772.3

-48%

EBITDA6 ($ million)

879.3

1,262.6

-30%

EBITDA Margin (% of net sales)

14%

16%

EBITDA per Ton ($)

106.0

131.6

Financial Result, Net ($ million)

77.8

(68.9)

Income Tax Result ($ million)

(282.5)

(200.4)

Net Result ($ million)

197.2

540.1

Equity Holders' Net Result ($ million)

178.1

493.8

Earnings per ADS ($)

0.91

2.52

  • EBITDA of $879.3 million on steel shipments of 8.3 million tons, with EBITDA margin of 14% and EBITDA per ton of $106.0.
  • Equity holders' net income of $178.1 million, equivalent to earnings per ADS of $0.91, negatively affected by a non-cash deferred tax loss of $0.72 per ADS as a result of a 16% depreciation of the Mexican peso in the period.
  • Net cash provided by operating activities of $1.4 billion including a working capital decrease of $628.1 million.
  • Free cash flow7 of $1.0 billion after capital expenditures of $439.6 million.

Ternium's steel shipments in the first nine months of 2020 were 8.3 million tons, down 1.3 million tons compared to the same period in 2019 reflecting lower activity in the context of the COVID-19 outbreak.

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Shipments in the first nine months of 2020 decreased 10% in Mexico, 13% in the Southern Region and 19% in the Other Markets region.

EBITDA per ton decreased $26 year-over-year to $106, mainly reflecting lower steel prices, partially offset by lower cost per ton, which decreased due to lower purchased slab, raw material and energy costs and the positive impact on costs of weak local currencies vis-a-vis the U.S. dollar, partially offset by the negative impact on costs of lower mill utilization rates.

The company's net earnings in the first nine months of 2020 were $197.2 million, including a $77.8 million net financial result gain, mainly reflecting the Mexican peso and Brazilian real depreciation of 16% and 29%, respectively, against the U.S. dollar in the first nine months of 2020, and a $141.2 million non-cash deferred tax loss in connection with the depreciation of the Mexican peso in the period.

COVID-19 Update

During the third quarter of 2020, the pandemic's impact on steel demand in the Americas lessened significantly, allowing all of Ternium's industrial facilities to return to normal production rates. In addition, Ternium restarted several of its capital expenditure projects, including the continued construction of a new hot-rolling mill at the company's industrial center in Pesquería, Mexico and the final commissioning of a greenfield rebar facility in Colombia.

Though shipment levels in all of Ternium's markets are currently strong, uncertainty persists about the future course of the COVID-19 pandemic and related countermeasures in markets around the world.

Outlook

Ternium expects EBITDA in the fourth quarter of 2020 to increase compared to EBITDA in the third quarter of 2020, due to higher shipments and realized steel prices in its key markets.

In Mexico, the company anticipates steel volumes returning to pre-pandemic levels in the fourth quarter of 2020, as well as a continued recovery of shipments to the automotive, household appliances and HVAC industries driven by solid end-user demand in the U.S. market. Shipments to the construction market are also expected to sequentially improve, with steady demand from small construction and various governmental infrastructure projects.

In the Southern Region, following record-low shipments in the second quarter of 2020, volumes increased by 59% in the third quarter of 2020. Specifically in Argentina, this recovery was supported by advances in durable goods purchases and a buildup in building materials in the private construction sector. If this market dynamic persists throughout the rest of the year, it could support an additional sequential shipment increase in the Argentine market.

Ternium expects slab shipments from its facility in Brazil to remain stable in the fourth quarter of 2020 compared to levels in the third quarter, with a continued increase in domestic sales substituting exports to third parties, reflecting a faster than expected recovery in Brazilian domestic steel consumption.

Analysis of Third Quarter of 2020 Results

Net sales in the third quarter of 2020 were $2.1 billion, 13% lower than net sales in the third quarter of 2019. The following table outlines Ternium's consolidated net sales for the third quarter of 2020 and the third quarter of 2019:

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Net Sales

Shipments

Revenue/ton

(million $)

(thousand tons)

($/ton)

3Q2020

3Q2019

Dif.

3Q2020

3Q2019

Dif.

3Q2020

3Q2019

Dif.

Mexico

1,065.7

1,334.9

-20%

1,445

1,629

-11%

737

820

-10%

Southern Region

495.6

435.9

14%

547

504

9%

906

865

5%

Other Markets

508.0

595.1

-15%

853

924

-8%

596

644

-7%

Total steel products

2,069.4

2,365.8

-13%

2,845

3,057

-7%

727

774

-6%

Other products*

45.6

83.9

-46%

Steel segment

2,114.9

2,449.7

-14%

Mining segment

91.3

111.7

-18%

869

904

-4%

105

124

-15%

Intersegment

(67.6)

(111.7)

eliminations

Net sales

2,138.6

2,449.7

-13%

  • The item "Other products" primarily includes Ternium Brasil's and Ternium México's electricity sales.

Cost of sales was $1.8 billion in the third quarter of 2020, a decrease of $259.8 million compared to the third quarter of 2019. This was principally due to a $215.8 million, or 14%, decrease in raw material and consumables used, reflecting a 7% decrease in steel shipment volumes and lower purchased slabs, raw material and energy costs; and to a $44.0 million decrease in other costs, mainly including a $21.1 million decrease in labor costs, a $13.6 million decrease in services and fees and a $10.9 decrease in maintenance expenses.

Selling, General & Administrative (SG&A) expenses in the third quarter of 2020 were $183.1 million, or 9% of net sales, a decrease of $28.8 million compared to SG&A expenses in the third quarter of 2019 mainly due to a $9.6 million decrease in amortization of intangible assets, an $8.3 million decrease in labor costs, a $7.9 million decrease in services and fees and a $2.9 million decrease in offices expenses.

Operating income in the third quarter of 2020 was $201.0 million compared to operating income of $228.6 million in the third quarter of 2019 representing a steady rate of 9% of the net sales. The following table outlines Ternium's operating income by segment for the third quarter of 2020 and third quarter of 2019:

Intersegment

Steel segment

Mining segment

eliminations

Total

$ million

3Q2020

3Q2019

3Q2020

3Q2019

3Q2020

3Q2019

3Q2020

3Q2019

Net Sales

2,114.9

2,449.7

91.3

111.7

(67.6)

(111.7)

2,138.6

2,449.7

Cost of sales

(1,762.2)

(2,065.1)

(60.2)

(61.6)

65.9

110.3

(1,756.6)

(2,016.4)

SG&A expenses

(175.4)

(208.2)

(7.7)

(3.7)

-

-

(183.1)

(211.9)

Other operating

1.8

6.9

0.2

0.3

-

-

2.0

7.2

income, net

Operating income

179.2

183.3

23.5

46.7

(1.7)

(1.4)

201.0

228.6

EBITDA

318.7

330.7

36.4

58.7

(1.7)

(1.4)

353.4

388.0

Net financial results were a $13.7 million loss in the third quarter of 2020, compared to a $34.9 million loss in the third quarter of 2019.

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Ternium SA published this content on 03 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 November 2020 21:19:00 UTC