Ternium S.A. (NYSE:TX) today announced its results for the second
quarter and first half ended June 30, 2017.
The financial and operational information
contained in this press release is based on Ternium S.A.’s
operational data and consolidated financial statements prepared in
accordance with International Financial Reporting Standards (IFRS)
and presented in U.S. dollars (USD) and metric tons.
Summary of Second Quarter 2017 Results
|
2Q 2017
|
|
1Q 2017 |
|
2Q 2016 |
|
|
|
|
|
|
|
|
Steel Shipments
(tons) |
2,641,000 |
|
|
2,475,000 |
|
7 |
% |
|
2,608,000 |
|
1 |
% |
Iron Ore Shipments
(tons) |
875,000 |
|
|
863,000 |
|
1 |
% |
|
811,000 |
|
8 |
% |
Net Sales (USD
million) |
2,262.6 |
|
|
2,040.1 |
|
11 |
% |
|
1,862.8 |
|
21 |
% |
Operating Income (USD
million) |
392.8 |
|
|
364.2 |
|
8 |
% |
|
293.5 |
|
34 |
% |
EBITDA1 (USD
million) |
497.9 |
|
|
464.8 |
|
7 |
% |
|
392.8 |
|
27 |
% |
EBITDA Margin (% of net
sales) |
22.0 |
% |
|
22.8 |
% |
|
|
21.1 |
% |
|
EBITDA per Ton2
(USD) |
188.5 |
|
|
187.8 |
|
|
|
150.6 |
|
|
Net Income (USD
million) |
281.8 |
|
|
310.4 |
|
|
|
174.3 |
|
|
Equity Holders' Net
Income (USD million) |
249.7 |
|
|
261.3 |
|
|
|
154.0 |
|
|
Earnings per ADS
(USD) |
1.27 |
|
|
1.33 |
|
|
|
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- EBITDA of USD497.9 million in the second quarter 2017, 7%
higher sequentially, with higher shipments and slightly lower
EBITDA margin.
- Earnings per American Depositary Share (ADS)3 of USD1.27 in the
second quarter 2017, a sequential decrease of USD0.06 per ADS.
- Capital expenditures of USD98.6 million in the second quarter
2017, up from USD83.9 million in the first quarter 2017.
- Net debt position of USD1.2 billion at the end of June 2017, up
from USD0.9 billion at the end of March 2017 and equivalent to 0.7
times net debt to last twelve months EBITDA. Of note in the second
quarter 2017 were dividend payments of USD226.9 million.
Ternium’s operating income in the second quarter
2017 was USD392.8 million, a USD28.7 million increase compared to
operating income in the first quarter 2017 due mainly to higher
shipments. The company’s shipments were 166,000 tons higher
compared to the first quarter 2017, as a result of a 57,000-ton
increase in Mexico, a 54,000-ton increase in the Southern Region
and a 54,000-ton increase in Other Markets. Operating margin4 was
relatively stable, with a USD33 increase in steel revenue per ton,
mainly due to higher realized prices in Mexico, mostly offset by an
increase in operating cost per ton5 mainly related to higher raw
material and purchased slab costs.
Compared to the second quarter 2016, the
company’s operating income in the second quarter 2017 increased
USD99.3 million, with higher operating margin and slightly higher
shipments. Operating margin in the second quarter 2017 increased
year-over-year principally due to USD142 higher steel revenue per
ton partially offset by USD100 higher steel operating cost per ton.
Steel revenue per ton increased as a result of higher realized
prices in all of Ternium’s markets. The increase in operating cost
per ton was mainly related to higher raw material and purchased
slab costs. Shipments were 33,000 tons higher compared to the
second quarter 2016, mainly as a result of a 50,000-ton increase in
the Southern Region and a 16,000-ton increase in Other Markets,
partially offset by a 34,000-ton decrease in Mexico.
The company’s net income in the second quarter
2017 was USD281.8 million, compared to USD310.4 million in the
first quarter 2017. The USD28.6 million decrease in net income was
mainly due to higher net financial expenses and an increase in the
effective tax rate, partially offset by the above mentioned higher
operating income. The effective tax rate in the first and second
quarters of 2017 was significantly reduced by the non-cash effect
on deferred taxes of the appreciation of the Mexican peso against
the US dollar, of 10% and 5%, respectively.
Relative to the prior-year-period, net income in
the second quarter 2017 increased USD107.5 million mainly due to
higher operating income and a decrease in effective tax rate,
partially offset by higher net financial expenses. Net income in
the second quarter 2017 included a net foreign exchange loss of
USD37.5 million, compared to a gain of USD19.8 in the same quarter
in 2016. The net foreign exchange loss in the second quarter
2017 was mainly due to the non-cash negative impact of the
Argentine peso’s 7% depreciation against the U.S. dollar on
Siderar’s U.S. dollar financial position, which is offset by
changes in Ternium’s net equity position in the currency
translation adjustments line, and to the negative impact of the
Mexican peso’s 5% appreciation against the U.S. dollar on a net
short local currency position in Ternium’s Mexican
subsidiaries.
Summary of First Half 2017
Results
|
1H 2017 |
|
1H 2016 |
|
|
|
|
|
Steel Shipments
(tons) |
5,116,000 |
|
5,038,000 |
2% |
Iron Ore Shipments
(tons) |
1,738,000 |
|
1,646,000 |
6% |
Net Sales (USD
million) |
4,302.7 |
|
3,518.3 |
22% |
Operating Income (USD
million) |
757.0 |
|
495.9 |
53% |
EBITDA (USD
million) |
962.6 |
|
695.8 |
38% |
EBITDA Margin (% of net
sales) |
22.4% |
|
19.8% |
|
|
EBITDA per Ton
(USD) |
188.2 |
|
138.1 |
|
|
Net Income (USD
million) |
592.2 |
|
297.8 |
|
Equity Holders' Net
Income (USD million) |
511.0 |
|
248.4 |
|
Earnings per ADS
(USD) |
2.60 |
|
1.27 |
|
|
|
|
|
|
- EBITDA6 of USD962.6 million in the first half 2017, a 38%
year-over-year increase mainly as a result of higher EBITDA per ton
and slightly higher shipments.
- Earnings per ADS7 of USD2.60 in the first half 2017, a
year-over-year increase of USD1.34 per ADS
- Capital expenditures of USD182.5 million in the first half
2017, down from USD230.2 million in the first half 2016.
Operating income in the first half 2017 was
USD757.0 million, a USD261.1 million increase compared to operating
income in the first half 2016 due to higher operating margin and
slightly higher shipments. Operating margin increased, mainly
reflecting USD143 higher steel revenue per ton partially offset by
USD94 higher steel operating cost per ton. Steel revenue per ton
increased as a result of higher prices in all of Ternium’s steel
markets. The increase in operating cost per ton was mainly due to
higher raw material and purchased slab costs. Shipments were 77,000
tons higher compared to the first half 2016, mainly as a result of
a 36,000-ton increase in the Southern Region, a 33,000-ton increase
in Mexico and an 8,000-ton increase in Other Markets.
Net income in the first half 2017 was USD592.2
million, compared to net income of USD297.8 million in the first
half 2016. The USD294.3 million increase in the year-over-year
comparison was mainly due to higher operating income and a lower
effective tax rate, partially offset by higher net financial
expenses, which included a USD79.9 million negative year-over-year
difference in net foreign exchange results mainly related to the
effect of the fluctuations of the Mexican peso against the U.S.
dollar on a net short local currency position in Ternium’s Mexican
subsidiaries.
Outlook
Steel market fundamentals in the North American
region remain healthy, with steady end-user demand, adequate steel
inventory levels and a higher than 75% capacity utilization rate.
Ternium expects these factors to be supportive for steel prices in
the region. At the same time, China’s steel domestic demand and
production levels continue growing. In addition, finished steel
imports in the U.S. are reaching 30% of the steel market. Many of
these imports are being made under unfair terms, and the company is
confident the governments in the region will continue working
toward achieving a level playing field for the steel industry.
In Argentina, signals of recovery in many
sectors of the economy point to a strong second half of the year,
and as a result GDP in the country could grow more than 2.5% in
2017. Good operating conditions in the agribusiness industry, a
pick-up in public infrastructure investment and the gradual
deployment of resources for the development of shale oil and gas
fields by local and international oil companies are fostering an
increase in steel demand. The company believes these developments
could support a 10% growth in flat steel consumption in Argentina
in 2017.
Ternium expects a sequential decrease of
operating income in the third quarter 2017 compared to the second
quarter 2017, as a result of lower shipments and operating margin.
Following record steel shipments in the second quarter 2017, the
company anticipates lower volumes in the third quarter 2017 as a
result of a seasonal decrease in Mexico, especially in the
automotive and HVAC industries, partially offset by an increase in
Argentina. Ternium expects slightly lower revenue per ton in the
third quarter 2017 compared to the second quarter 2017 mainly as a
result of lower realized prices in Mexico in connection with the
usual lag effect of regular price resets contained in industrial
customer sales contracts, and higher operating cost per ton due to
higher purchased slab and raw material costs.
Analysis of Second Quarter 2017
Results
Net gain attributable
to Ternium’s equity owners in the second quarter 2017 was
USD249.7 million, compared to net gain attributable to Ternium’s
equity owners of USD154.0 million in the second quarter 2016.
Including non-controlling interest, net gain for the second quarter
2017 was USD281.8 million, compared to net gain of USD174.3 million
in the second quarter 2016. Earnings per ADS in the second quarter
2017 were USD1.27, compared to earnings per ADS of USD0.78 in the
second quarter 2016.
Net sales in the second quarter
2017 were USD2.3 billion, or 21% higher than net sales in the
second quarter 2016. The following table outlines Ternium’s
consolidated net sales for the second quarter 2017 and the second
quarter 2016:
|
|
Net Sales (million USD) |
|
|
|
2Q 2017 |
2Q 2016 |
Dif. |
|
Mexico |
|
1,424.2 |
1,185.9 |
20% |
|
Southern
Region |
|
563.5 |
451.0 |
25% |
|
Other
Markets |
|
270.9 |
222.8 |
22% |
|
Total steel
products net sales |
|
2,258.6 |
1,859.7 |
21% |
|
Other
products1 |
|
4.1 |
2.5 |
62% |
|
Steel segment net sales |
|
2,262.6 |
1,862.2 |
22% |
|
|
|
|
|
|
|
Mining segment net sales |
|
55.6 |
48.4 |
15% |
|
Intersegment
eliminations |
|
(55.6) |
(47.7) |
|
|
Net sales |
|
2,262.6 |
1,862.8 |
21% |
|
|
|
|
|
|
|
|
1 The
item "Other products" primarily includes pig iron. |
Cost of sales was USD1.7
billion in the second quarter 2017, an increase of USD278.4 million
compared to the second quarter 2016. This was principally due to a
USD263.5 million, or 26%, increase in raw material and consumables
used, mainly reflecting higher iron ore, coking coal, scrap, and
purchased slabs costs, and a 1% increase in steel shipments volume;
and to a USD14.9 million increase in other costs, mainly including
a USD21.7 million increase in labor cost, a USD6.3 million increase
in depreciation of property, plant and equipment and a USD3.1
million increase in services and fees, partially offset by a
USD16.1 million decrease in maintenance expenses.
Selling, General & Administrative
(SG&A) expenses in the second quarter 2017 were
USD189.0 million, or 8.4% of net sales, an increase of USD9.0
million compared to SG&A expenses in the second quarter 2016,
mainly due to higher labor costs and services and fees expenses,
partially offset by lower taxes and contributions (other than
income tax).
Other net operating expense in
the second quarter 2017 was a USD12.6 million loss, compared to a
USD0.4 million gain in the second quarter 2016. Other net operating
expense in the second quarter 2017 included a USD15.9 million
donation related to the Roberto Rocca technical school in
Pesquería, Nuevo León, Mexico.
Operating income in the second
quarter 2017 was USD392.8 million, or 17.4% of net sales, compared
to operating income of USD293.5 million, or 15.8% of net sales, in
the second quarter 2016. The following table outlines Ternium’s
operating income by segment for the second quarter 2017 and second
quarter 2016:
|
|
Steel segment |
|
Mining segment |
|
Intersegmenteliminations |
|
Total |
USD million |
|
2Q 2017 |
2Q 2016 |
|
2Q 2017 |
2Q 2016 |
|
2Q 2017 |
2Q 2016 |
|
2Q 2017 |
2Q 2016 |
Net Sales |
|
2,262.6 |
|
1,862.2 |
|
|
55.6 |
|
48.4 |
|
|
(55.6 |
) |
(47.7 |
) |
|
2,262.6 |
|
1,862.8 |
|
Cost of sales |
|
(1,665.3 |
) |
(1,389.4 |
) |
|
(53.7 |
) |
(47.8 |
) |
|
50.8 |
|
47.4 |
|
|
(1,668.2 |
) |
(1,389.7 |
) |
SG&A expenses |
|
(186.1 |
) |
(177.0 |
) |
|
(2.9 |
) |
(3.0 |
) |
|
- |
|
- |
|
|
(189.0 |
) |
(180.0 |
) |
Other operating
(expense) income, net |
|
(12.7 |
) |
0.1 |
|
|
0.1 |
|
0.3 |
|
|
- |
|
- |
|
|
(12.6 |
) |
0.4 |
|
Operating income (expense) |
|
398.5 |
|
295.9 |
|
|
(0.9 |
) |
(2.1 |
) |
|
(4.7 |
) |
(0.3 |
) |
|
392.8 |
|
293.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
491.7 |
|
384.7 |
|
|
10.9 |
|
8.4 |
|
|
(4.7 |
) |
(0.3 |
) |
|
497.9 |
|
392.8 |
|
Steel reporting segment
The steel segment’s operating income was
USD398.5 million in the second quarter 2017, an increase of
USD102.6 million compared to the second quarter 2016, reflecting
higher net sales, partially offset by higher operating cost.
Net sales of steel products in the second
quarter 2017 increased 22% compared to the second quarter 2016,
reflecting a 20% higher revenue per ton and a 33,000-ton increase
in shipments. The USD142 increase in revenue per ton reflected
higher steel prices in all of Ternium’s steel markets. Total
shipments remained relatively stable in the second quarter 2017
year-over-year mainly due to higher volumes in the Southern Region
and in Other Markets, partially offset by lower shipments in
Mexico.
|
|
Net Sales (million
USD) |
|
Shipments (thousand
tons) |
|
Revenue/ton (USD/ton) |
|
|
2Q 2017 |
2Q 2016 |
Dif. |
|
2Q 2017 |
2Q 2016 |
Dif. |
|
2Q 2017 |
2Q 2016 |
Dif. |
Mexico |
|
1,424.2 |
1,185.9 |
20 |
% |
|
1,720.4 |
1,754.2 |
-2 |
% |
|
828 |
676 |
22 |
% |
Southern
Region |
|
563.5 |
451.0 |
25 |
% |
|
599.4 |
549.0 |
9 |
% |
|
940 |
821 |
14 |
% |
Other
Markets |
|
270.9 |
222.8 |
22 |
% |
|
321.0 |
304.5 |
5 |
% |
|
844 |
732 |
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total steel
products |
|
2,258.6 |
1,859.7 |
21 |
% |
|
2,640.8 |
2,607.7 |
1 |
% |
|
855 |
713 |
20 |
% |
Other
products1 |
|
4.1 |
2.5 |
62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment |
|
2,262.6 |
1,862.2 |
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The item "Other products" primarily includes pig iron. |
Operating cost increased 18% in the second
quarter 2017, due to a 17% increase in cost per ton and the above
mentioned 1% increase in shipments. The increase in cost per ton
year-over-year was mainly the result of higher purchased slab and
raw material costs.
Mining reporting segment
The mining segment’s operating income was a loss
of USD0.9 million in the second quarter 2017, compared to a loss of
USD2.1 million in the second quarter 2016, mainly reflecting higher
iron ore sales partially offset by higher operating cost.
Mining products net sales in the second quarter
2017 increased USD7.1 million, mainly as a result of higher
shipments and higher revenue per ton. Shipments were 875,000 tons,
8% higher than in the second quarter 2016.
|
|
Mining segment |
|
|
|
2Q 2017 |
2Q 2016 |
Dif. |
|
Net Sales (million
USD) |
|
55.6 |
48.4 |
15 |
% |
|
Shipments (thousand
tons) |
|
874.5 |
811.4 |
8 |
% |
|
Revenue per ton
(USD/ton) |
|
64 |
60 |
6 |
% |
|
Operating cost increased 12% year-over-year,
mainly due to the above mentioned 8% increase in shipment volumes
and a 3% increase in operating cost per ton.
EBITDA in the second quarter
2017 was USD497.9 million, or 22.0% of net sales, compared to
USD392.8 million, or 21.1% of net sales, in the second quarter
2016.
Net financial results were a
USD67.1 million loss in the second quarter 2017, compared to a
USD0.2 million loss in the second quarter 2016. During the second
quarter 2017, Ternium’s net financial interest results totaled a
loss of USD19.6 million, compared to a loss of USD19.8 million in
the second quarter 2016.
Net foreign exchange results were a loss of
USD37.5 million in the second quarter 2017 compared to a gain of
USD19.8 million in the second quarter 2016. The second quarter 2017
loss was mainly due to the negative impact of the Mexican peso’s 5%
appreciation against the U.S. dollar on a net short local currency
position in Ternium’s Mexican subsidiaries, and the Argentine
peso’s 7% depreciation against the U.S. dollar on Ternium’s
Argentine subsidiary Siderar’s U.S. dollar financial position
(which uses the Argentine peso as its functional currency). The
second quarter 2016 gain was mainly due to the positive impact of
the Mexican peso’s 8% depreciation against the U.S. dollar.
Change in fair value of financial instruments
included in net financial results was a USD9.8 million loss in the
second quarter 2017 compared to a USD0.4 million gain in the second
quarter 2016. The loss in the second quarter 2017 was mainly
related to certain derivative instruments entered into to
compensate for the interest rate charges derived from Ternium’s
Argentine subsidiary Siderar’s Argentine peso denominated financial
debt.
Equity in results of non-consolidated
companies was a gain of USD15.2 million in the second
quarter 2017, compared to a gain of USD4.9 million in the second
quarter 2016, mainly due to better results from Ternium’s
investment in Usiminas.
Income tax expense in the
second quarter 2017 was USD59.1 million, or 17% of income before
income tax expense, compared to an income tax expense of USD124.0
million in the second quarter 2016, or 42% of income before income
tax expense. Effective tax rate in the second quarter 2017 included
a non-cash gain on deferred taxes due to the 5% appreciation of the
Mexican peso against the U.S. dollar during the period, which
increases, in U.S. dollar terms, the tax base used to calculate
deferred tax at our Mexican subsidiaries (which have the U.S dollar
as their functional currency). Effective tax rate in the second
quarter 2016 included a non-cash charge on deferred taxes due to
the 8% depreciation of the Mexican peso against the U.S. dollar
during that period.
Net gain attributable to non-controlling
interest in the second quarter 2017 was USD32.1 million,
compared to net gain of USD20.3 million in the same period in
2016.
Analysis of First Half 2017
Results
Net income attributable
to Ternium’s equity owners in the first half 2017 was
USD511.0 million, compared to a net income attributable to
Ternium’s equity owners of USD248.4 million in the first half 2016.
Including non-controlling interest, net income for the first half
2017 was USD592.2 million, compared to net income of USD297.8
million in the first half 2016. Earnings per ADS in the first half
2017 were USD2.60, compared to earnings of USD1.27 in the first
half 2016.
Net sales in the first half
2017 were USD4.3 billion, 22% higher than net sales in the first
half 2016. The following table outlines Ternium’s consolidated net
sales for the first half 2017 and the first half 2016:
|
|
Net Sales (million USD) |
|
|
1H 2017 |
1H 2016 |
Dif. |
Mexico |
|
2,724.0 |
|
2,176.4 |
|
25 |
% |
Southern
Region |
|
1,074.9 |
|
915.1 |
|
17 |
% |
Other
Markets |
|
494.7 |
|
418.8 |
|
18 |
% |
Total steel products
net sales |
|
4,293.6 |
|
3,510.3 |
|
22 |
% |
Other
products1 |
|
9.1 |
|
6.9 |
|
31 |
% |
Steel segment net sales |
|
4,302.7 |
|
3,517.2 |
|
22 |
% |
|
|
|
|
|
Mining segment net sales |
|
118.2 |
|
92.2 |
|
28 |
% |
Intersegment
eliminations |
|
(118.2 |
) |
(91.1 |
) |
|
Net sales |
|
4,302.7 |
|
3,518.3 |
|
22 |
% |
|
|
|
|
|
|
|
|
1 The
item “Other products” primarily includes pig iron. |
Cost of sales was USD3.2
billion in the first half 2017, an increase of USD488.1 million
compared to the first half 2016. This was principally due to a
USD453.2 million, or 23%, increase in raw material and consumables
used, mainly reflecting higher iron ore, coking coal, scrap, energy
and purchased slab costs and a 2% increase in steel shipments
volume; and to a USD34.9 million increase in other costs, mainly
including a USD39.3 million increase in labor cost, a USD5.5
million increase in depreciation of property, plant and equipment
and a USD4.3 million increase in services and fees, partially
offset by a USD15.4 million decrease in maintenance expenses.
Selling, General & Administrative
(SG&A) expenses in the first half 2017 were USD361.3
million, or 8.4% of net sales, an increase of USD17.3 million
compared to SG&A expenses in the first half 2016 mainly due to
higher labor costs, services and fees expenses, partially offset by
lower taxes and contributions (other than income tax).
Other net operating expense in
the first half 2017 was a USD19.8 million loss, compared to a
USD1.9 million loss in the first half 2016 mainly as a result of a
donation related to the Roberto Rocca technical school in
Pesquería, Nuevo León, Mexico in the second quarter 2017.
Operating income in the first
half 2017 was USD757.0 million, or 17.6% of net sales, compared to
operating income of USD495.9 million, or 14.1% of net sales, in the
first half 2016. The following table outlines Ternium’s
operating income by segment for the first half 2017 and the first
half 2016.
|
|
Steel segment |
|
Mining segment |
Intersegmenteliminations |
|
Total |
USD million |
|
1H 2017 |
1H 2016 |
|
1H 2017 |
1H 2016 |
|
1H 2017 |
1H 2016 |
|
1H 2017 |
1H 2016 |
Net Sales |
|
4,302.7 |
|
3,517.2 |
|
|
118.2 |
|
92.2 |
|
|
(118.2 |
) |
(91.1 |
) |
|
4,302.7 |
|
3,518.3 |
|
Cost of sales |
|
(3,179.5 |
) |
(2,672.4 |
) |
|
(102.3 |
) |
(95.8 |
) |
|
117.2 |
|
91.6 |
|
|
(3,164.6 |
) |
(2,676.5 |
) |
SG&A expenses |
|
(356.1 |
) |
(338.3 |
) |
|
(5.2 |
) |
(5.7 |
) |
|
- |
|
- |
|
|
(361.3 |
) |
(344.0 |
) |
Other operating
(expense) income, net |
|
(20.1 |
) |
(0.8 |
) |
|
(0.3 |
) |
(1.1 |
) |
|
- |
|
- |
|
|
(19.8 |
) |
(1.9 |
) |
Operating income (expense) |
|
747.0 |
|
505.7 |
|
|
10.9 |
|
(10.3 |
) |
|
(0.9 |
) |
0.5 |
|
|
757.0 |
|
495.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
929.4 |
|
683.6 |
|
|
34.2 |
|
11.8 |
|
|
(0.9 |
) |
0.5 |
|
|
962.6 |
|
695.8 |
|
Steel reporting segment
The steel segment’s operating income was
USD747.0 million in the first half 2017, an increase of USD241.2
million compared to the operating income in the first half 2016,
reflecting higher net sales, partially offset by higher operating
cost.
Net sales of steel products in the first half
2017 increased 22% compared to net sales in the first half 2016,
reflecting a USD143 increase in steel revenue per ton and a 77,000
tons increase in shipments. Revenue per ton increased 20%
reflecting higher steel prices in Ternium’s main markets. Shipments
increased 2% year-over-year in the first half 2017 due to higher
shipments in all the markets.
|
|
Net Sales (million
USD) |
|
Shipments (thousand
tons) |
|
Revenue/ton (USD/ton) |
|
|
1H 2017 |
1H 2016 |
Dif. |
|
1H 2017 |
1H 2016 |
Dif. |
|
1H 2017 |
1H 2016 |
Dif. |
Mexico |
|
2,724.0 |
2,176.4 |
25 |
% |
|
3,383.4 |
3,350.9 |
1 |
% |
|
805 |
650 |
24 |
% |
Southern
Region |
|
1,074.9 |
915.1 |
17 |
% |
|
1,144.5 |
1,108.0 |
3 |
% |
|
939 |
826 |
14 |
% |
Other
Markets |
|
494.7 |
418.8 |
18 |
% |
|
587.7 |
579.4 |
1 |
% |
|
842 |
723 |
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total steel
products |
|
4,293.6 |
3,510.3 |
22 |
% |
|
5,115.6 |
5,038.2 |
2 |
% |
|
839 |
697 |
20 |
% |
Other
products1 |
|
9.1 |
6.9 |
31 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment |
|
4,302.7 |
3,517.2 |
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The item "Other products" primarily includes pig iron. |
Operating cost increased 17% due to a 16%
increase in operating cost per ton and the above-mentioned 2%
increase in shipment volumes. The increase in operating cost per
ton was mainly due to higher raw material, purchased slab, energy
and labor costs.
Mining reporting segment
The mining segment’s operating income was a gain
of USD10.9 million in the first half 2017, compared to a loss of
USD10.3 million in the first half 2016, reflecting higher iron ore
sales and slightly higher operating cost.
Net sales of mining products in the first half
2017 were 28% higher than those in the first half 2016, reflecting
21% higher revenue per ton and 6% higher shipments.
|
|
Mining segment |
|
|
|
1H 2017 |
1H 2016 |
Dif. |
|
Net Sales (million
USD) |
|
118.2 |
92.2 |
28 |
% |
|
Shipments (thousand
tons) |
|
1,737.9 |
1,645.8 |
6 |
% |
|
Revenue per ton
(USD/ton) |
|
68 |
56 |
21 |
% |
|
Operating cost increased 6% year-over-year
mainly due to the above mentioned 6% increase in shipment volumes
and a stable operating cost per ton.
EBITDA in the first half 2017
was USD962.6 million, or 22.4% of net sales, compared with USD695.8
million, or 19.8% of net sales, in the first half 2016.
Net financial results were
USD107.0 million loss in the first half 2017, compared to USD22.0
million loss in the first half 2016. During the first half 2017,
Ternium’s net financial interest results totaled a loss of USD36.4
million, compared with a loss of USD29.4 million in the first half
2016, reflecting higher weighted average interest rates, partially
offset by lower average indebtedness.
Net foreign exchange results included a USD79.9
million negative year-over-year difference in net foreign exchange
results mainly related to the effect of the fluctuations of the
Mexican peso against the U.S. dollar on a net short local currency
position in Ternium’s Mexican subsidiaries. In the first half 2017,
the Mexican peso appreciated 15% against the U.S. dollar.
Change in fair value of financial instruments
included in net financial results was a USD9.5 million gain in the
first half 2017 compared to a USD8.0 million gain in the first half
2016.
Equity in results of non-consolidated
companies was a gain of USD36.6 million in the first half
2017, compared to a gain of USD7.3 million in the first half 2016,
mainly due to better results from Ternium’s investment in
Usiminas.
Income tax expense in the first
half 2017 was USD94.4 million, or 14% of income before income tax,
compared to an income tax expense of USD183.3 million, or 38% of
income before income tax, in the first half 2016. Effective tax
rate in the first half 2017 included a non-cash gain on deferred
taxes due to the 15% appreciation of the Mexican peso against the
U.S. dollar during the period.
Net gain attributable to non-controlling
interest in the first half 2017 was USD81.1 million,
compared to a net gain of USD49.5 million in the first half
2016.
Cash Flow and Liquidity
Net cash provided by operating activities in the
first half 2017 was USD106.5 million. Working capital increased by
USD458.5 million in the first half 2017 as a result of a USD318.0
million increase in inventories and an aggregate USD284.4 million
increase in trade and other receivables, partially offset by an
aggregate USD143.9 million increase in accounts payable and other
liabilities. The increase in the value of inventories in the first
half 2017 was mainly due to USD189.4 million higher costs of slabs,
goods in process and finished goods principally as a result of the
pass-through of higher purchased slab, scrap, coal and iron ore
prices, USD85.1 million higher steel volume and USD43.5 million
higher prices and volume of raw materials and other. In addition,
during the first half 2017, Ternium made tax payments of an
aggregate USD403.9 million.
Capital expenditures in the first half 2017 were
USD182.5 million, USD47.7 million lower than in the first half
2016. The main investments carried out during the period included
those made for the improvement of environmental and safety
conditions at certain facilities, the upgrade and expansion of two
hot strip mills, the expansion of connectivity and equipment
automation, and in Peña Colorada’s iron ore operations.
In the first half 2017, Ternium had negative
free cash flow of USD76.0 million8. The company’s net proceeds from
borrowings in the first half 2017 were USD331.1 million. Net
dividends paid to shareholders were USD196.3 million and net
dividends paid by subsidiaries to non-controlling interest were
USD30.6 million. As of June 30, 2017, Ternium’s net debt position
was USD1.2 billion9.
Net cash provided by operating activities in the
second quarter 2017 was USD20.7 million. Working capital increased
by USD140.7 million in the second quarter 2017 as a result of an
USD85.2 million increase in inventories and an aggregate USD86.0
million net increase in trade and other receivables, partially
offset by an aggregate USD30.5 million net increase in accounts
payable and other liabilities. The increase in the value of
inventories in the second quarter 2017 was mainly due to higher
costs of slabs, goods in process and finished goods principally as
a result of the pass-through of higher purchased slab, scrap, coal
and iron ore prices, partially offset by lower steel volume and
lower volume and prices of raw materials and other. Capital
expenditures in the second quarter 2017 were USD98.6 million,
USD33.7 million lower than in the second quarter 2016. In addition,
during the second quarter 2017, Ternium made tax payments of an
aggregate USD337.1 million. Consequently, Ternium had negative free
cash flow of USD77.9 million10 in the period.
Forward Looking Statements
Some of the statements contained in this press
release are “forward-looking statements”. Forward-looking
statements are based on management’s current views and assumptions
and involve known and unknown risks that could cause actual
results, performance or events to differ materially from those
expressed or implied by those statements. These risks include
but are not limited to risks arising from uncertainties as to gross
domestic product, related market demand, global production
capacity, tariffs, cyclicality in the industries that purchase
steel products and other factors beyond Ternium’s control.
About Ternium
Ternium is a leading steel producer in Latin
America, with an annual production capacity of approximately 11.0
million tons of finished steel products. The company manufactures
and processes a broad range of value-added steel products for
customers active in the construction, automotive, home appliances,
capital goods, container, food and energy industries. With
production facilities located in Mexico, Argentina, Colombia, the
southern United States and Guatemala, Ternium serves markets in the
Americas through its integrated manufacturing system and extensive
distribution network. In addition, Ternium participates in
the control group of Usiminas, a Brazilian steel company.
More information about Ternium is available at www.ternium.com.
______________________________________1 EBITDA
in the second quarter 2017 equals operating income of USD392.8
million adjusted to exclude depreciation and amortization of
USD105.0 million.2 Consolidated EBITDA divided by steel shipments.3
Each American Depositary Share (ADS) represents 10 shares of
Ternium’s common stock. Results are based on a weighted
average number of shares of common stock outstanding (net of
treasury shares) of 1,963,076,776.4 Operating margin is equal to
revenue per ton minus operating cost per ton.5 Operating cost per
ton is equal to cost of sales plus SG&A, divided by shipments.6
EBITDA in the first half 2017 equals operating income of USD757.0
million adjusted to exclude depreciation and amortization of
USD205.6 million.7 Each American Depositary Share (ADS) represents
10 shares of Ternium’s common stock. Results are based on a
weighted average number of shares of common stock outstanding (net
of treasury shares) of 1,963,076,776.8 Negative free cash
flow in the first half 2017 equals net cash provided by operating
activities of USD106.5 million less capital expenditures of
USD182.5 million.9 Net debt position at June 30, 2017 equals
borrowings of USD1.5 billion less cash and equivalents plus other
investments of USD0.3 billion.10 Negative free cash flow in the
second quarter 2017 equals net cash provided by operating
activities of USD20.7 million less capital expenditures of USD98.6
million.
Consolidated Income
Statement
USD million |
|
2Q 2017 |
2Q 2016 |
|
1H 2017 |
1H 2016 |
|
|
(Unaudited) |
|
(Unaudited) |
Net
sales |
|
2,262.6 |
|
|
1,862.8 |
|
|
4,302.7 |
|
|
3,518.3 |
|
Cost of
sales |
|
(1,668.2 |
) |
|
(1,389.7 |
) |
|
(3,164.6 |
) |
|
(2,676.5 |
) |
Gross profit |
|
594.5 |
|
|
473.1 |
|
|
1,138.1 |
|
|
841.8 |
|
Selling,
general and administrative expenses |
|
(189.0 |
) |
|
(180.0 |
) |
|
(361.3 |
) |
|
(344.0 |
) |
Other
operating (expenses) income, net |
|
(12.6 |
) |
|
0.4 |
|
|
(19.8 |
) |
|
(1.9 |
) |
Operating income |
|
392.8 |
|
|
293.5 |
|
|
757.0 |
|
|
495.9 |
|
|
|
|
|
|
|
|
|
|
Finance
expense |
|
(24.1 |
) |
|
(23.9 |
) |
|
(45.5 |
) |
|
(36.5 |
) |
Finance
income |
|
4.5 |
|
|
4.1 |
|
|
9.1 |
|
|
7.1 |
|
Other
financial (expenses) income, net |
|
(47.5 |
) |
|
19.6 |
|
|
(70.6 |
) |
|
7.4 |
|
Equity in
earnings of non-consolidated companies |
|
15.2 |
|
|
4.9 |
|
|
36.6 |
|
|
7.3 |
|
Profit before income
tax expense |
|
340.9 |
|
|
298.2 |
|
|
686.5 |
|
|
481.2 |
|
Income tax expense |
|
(59.1 |
) |
|
(124.0 |
) |
|
(94.4 |
) |
|
(183.3 |
) |
Profit for the period |
|
281.8 |
|
|
174.3 |
|
|
592.2 |
|
|
297.8 |
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
Owners of the parent |
|
249.7 |
|
|
154.0 |
|
|
511.0 |
|
|
248.4 |
|
Non-controlling interest |
|
32.1 |
|
|
20.3 |
|
|
81.1 |
|
|
49.5 |
|
Profit for the period |
|
281.8 |
|
|
174.3 |
|
|
592.2 |
|
|
297.8 |
|
Consolidated Statement of Financial
Position
USD million |
|
June 30,
2017 |
|
December 31, 2016 |
Property,
plant and equipment, net |
|
|
4,160.2 |
|
|
|
4,136.0 |
|
Intangible assets, net |
|
|
831.9 |
|
|
|
842.6 |
|
Investments in non-consolidated companies |
|
|
453.8 |
|
|
|
418.4 |
|
Deferred
tax assets |
|
|
111.5 |
|
|
|
85.8 |
|
Receivables, net |
|
|
142.9 |
|
|
|
132.6 |
|
Trade
receivables, net |
|
|
0.9 |
|
|
|
1.3 |
|
Other
investments |
|
|
5.9 |
|
|
|
6.0 |
|
Total non-current
assets |
|
|
5,707.0 |
|
|
|
5,622.6 |
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
112.0 |
|
|
|
79.8 |
|
Derivative financial instruments |
|
|
39.5 |
|
|
|
0.3 |
|
Inventories, net |
|
|
1,936.6 |
|
|
|
1,647.9 |
|
Trade
receivables, net |
|
|
932.2 |
|
|
|
633.7 |
|
Other
investments |
|
|
153.2 |
|
|
|
144.9 |
|
Cash and
cash equivalents |
|
|
178.3 |
|
|
|
183.5 |
|
Total current
assets |
|
|
3,378.9 |
|
|
|
2,690.1 |
|
|
|
|
|
|
|
|
|
|
Non-current assets
classified as held for sale |
|
|
9.7 |
|
|
|
10.2 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
9,095.6 |
|
|
|
8,322.9 |
|
|
|
|
|
|
|
|
|
|
Capital and reserves
attributable to the owners of the parent |
|
|
4,728.8 |
|
|
|
4,391.3 |
|
Non-controlling
interest |
|
|
816.6 |
|
|
|
775.3 |
|
|
|
|
|
|
|
|
|
|
Total Equity |
|
|
5,545.4 |
|
|
|
5,166.6 |
|
|
|
|
|
|
|
|
|
|
Provisions |
|
|
7.3 |
|
|
|
7.0 |
|
Deferred
tax liabilities |
|
|
481.5 |
|
|
|
609.0 |
|
Other
liabilities |
|
|
353.3 |
|
|
|
302.8 |
|
Trade
payables |
|
|
5.5 |
|
|
|
9.3 |
|
Financial
Lease liabilities |
|
|
66.5 |
|
|
|
- |
|
Borrowings |
|
|
291.4 |
|
|
|
396.7 |
|
Total non-current
liabilities |
|
|
1,205.5 |
|
|
|
1,324.8 |
|
|
|
|
|
|
|
|
|
|
Current
income tax liabilities |
|
|
48.5 |
|
|
|
178.1 |
|
Other
liabilities |
|
|
265.4 |
|
|
|
228.1 |
|
Trade
payables |
|
|
768.1 |
|
|
|
603.1 |
|
Derivative financial instruments |
|
|
6.4 |
|
|
|
0.3 |
|
Financial
Lease liabilities |
|
|
9.7 |
|
|
|
- |
|
Borrowings |
|
|
1,246.6 |
|
|
|
821.9 |
|
Total current
liabilities |
|
|
2,344.7 |
|
|
|
1,831.5 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,550.2 |
|
|
|
3,156.3 |
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities |
|
|
9,095.6 |
|
|
|
8,322.9 |
|
Consolidated Statement of Cash Flows
USD million |
|
2Q 2017 |
|
2Q 2016 |
|
1H 2017 |
|
1H 2016 |
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
Profit for the
period |
|
281.8 |
|
|
174.3 |
|
|
592.2 |
|
|
297.8 |
|
|
|
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
105.0 |
|
|
99.3 |
|
|
205.6 |
|
|
199.9 |
|
Equity in
earnings of non-consolidated companies |
|
(15.2 |
) |
|
(4.9 |
) |
|
(36.6 |
) |
|
(7.3 |
) |
Changes
in provisions |
|
0.7 |
|
|
1.6 |
|
|
1.3 |
|
|
1.7 |
|
Net
foreign exchange results and others |
|
64.0 |
|
|
(17.2 |
) |
|
110.0 |
|
|
0.5 |
|
Interest
accruals less payments |
|
3.0 |
|
|
4.2 |
|
|
2.0 |
|
|
6.9 |
|
Income
tax accruals less payments |
|
(278.0 |
) |
|
57.6 |
|
|
(309.6 |
) |
|
54.6 |
|
Changes
in working capital |
|
(140.7 |
) |
|
49.0 |
|
|
(458.5 |
) |
|
47.1 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities |
|
20.7 |
|
|
363.7 |
|
|
106.5 |
|
|
601.2 |
|
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
(98.6 |
) |
|
(132.4 |
) |
|
(182.5 |
) |
|
(230.2 |
) |
Proceeds
from the sale of property, plant & equipment |
|
0.3 |
|
|
0.3 |
|
|
0.4 |
|
|
0.5 |
|
Investment in non-consolidated companies |
|
- |
|
|
(114.4 |
) |
|
- |
|
|
(114.4 |
) |
Dividends
received from non-consolidated companies |
|
0.1 |
|
|
0.1 |
|
|
0.1 |
|
|
0.1 |
|
Loans to
non-consolidated companies |
|
- |
|
|
(29.4 |
) |
|
(23.9 |
) |
|
(52.0 |
) |
(Increase) decrease in Other Investments |
|
(2.7 |
) |
|
31.6 |
|
|
(8.2 |
) |
|
34.1 |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(101.0 |
) |
|
(244.2 |
) |
|
(214.2 |
) |
|
(362.0 |
) |
|
|
|
|
|
|
|
|
|
Dividends
paid in cash to company's shareholders |
|
(196.3 |
) |
|
(176.7 |
) |
|
(196.3 |
) |
|
(176.7 |
) |
Dividends
paid in cash to non-controlling interest |
|
(30.6 |
) |
|
(50.8 |
) |
|
(30.6 |
) |
|
(50.8 |
) |
Financial
Lease Payments |
|
- |
|
|
- |
|
|
(1.1 |
) |
|
- |
|
Proceeds
from borrowings |
|
519.4 |
|
|
403.2 |
|
|
858.4 |
|
|
610.5 |
|
Repayments of borrowings |
|
(318.9 |
) |
|
(299.7 |
) |
|
(527.3 |
) |
|
(592.5 |
) |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing
activities |
|
(26.4 |
) |
|
(124.0 |
) |
|
103.2 |
|
|
(209.5 |
) |
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash
equivalents |
|
(106.6 |
) |
|
(4.5 |
) |
|
(4.5 |
) |
|
29.7 |
|
Shipments |
|
Thousand tons |
|
2Q 2017 |
2Q 2016 |
1Q 2017 |
|
1H 2017 |
1H 2016 |
|
|
|
|
|
|
|
|
|
|
Mexico |
|
1,720.4 |
|
1,754.2 |
|
1,663.0 |
|
|
3,383.4 |
|
3,350.9 |
|
|
Southern
Region |
|
599.4 |
|
549.0 |
|
545.1 |
|
|
1,144.5 |
|
1,108.0 |
|
|
Other
Markets |
|
321.0 |
|
304.5 |
|
266.7 |
|
|
587.7 |
|
579.4 |
|
|
Total steel
segment |
|
2,640.8 |
|
2,607.7 |
|
2,474.8 |
|
|
5,115.6 |
|
5,038.2 |
|
|
|
|
|
|
|
|
|
|
|
Total mining
segment |
|
874.5 |
|
811.4 |
|
863.4 |
|
|
1,737.9 |
|
1,645.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue / ton |
|
USD/ton |
|
2Q 2017 |
2Q 2016 |
1Q 2017 |
|
1H 2017 |
1H 2016 |
|
|
|
|
|
|
|
|
|
|
Mexico |
|
828 |
|
676 |
|
782 |
|
|
805 |
|
650 |
|
|
Southern
Region |
|
940 |
|
821 |
|
938 |
|
|
939 |
|
826 |
|
|
Other
Markets |
|
844 |
|
732 |
|
839 |
|
|
842 |
|
723 |
|
|
Total steel
segment |
|
855 |
|
713 |
|
822 |
|
|
839 |
|
697 |
|
|
|
|
|
|
|
|
|
|
|
Total mining
segment |
|
64 |
|
60 |
|
73 |
|
|
68 |
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
USD million |
|
2Q 2017 |
2Q 2016 |
1Q 2017 |
|
1H 2017 |
1H 2016 |
|
|
|
|
|
|
|
|
|
|
Mexico |
|
1,424.2 |
|
1,185.9 |
|
1,299.8 |
|
|
2,724.0 |
|
2,176.4 |
|
|
Southern
Region |
|
563.5 |
|
451.0 |
|
511.4 |
|
|
1,074.9 |
|
915.1 |
|
|
Other
Markets |
|
270.9 |
|
222.8 |
|
223.9 |
|
|
494.7 |
|
418.8 |
|
|
Total steel
products |
|
2,258.6 |
|
1,859.7 |
|
2,035.0 |
|
|
4,293.6 |
|
3,510.3 |
|
|
Other
products1 |
|
4.1 |
|
2.5 |
|
5.0 |
|
|
9.1 |
|
6.9 |
|
|
Total steel
segment |
|
2,262.6 |
|
1,862.2 |
|
2,040.1 |
|
|
4,302.7 |
|
3,517.2 |
|
|
|
|
|
|
|
|
|
|
|
Total mining
segment |
|
55.6 |
|
48.4 |
|
62.6 |
|
|
118.2 |
|
92.2 |
|
|
|
|
|
|
|
|
|
|
|
Total steel and mining
segments |
|
2,318.2 |
|
1,910.6 |
|
2,102.7 |
|
|
4,420.9 |
|
3,609.5 |
|
|
|
|
|
|
|
|
|
|
|
Intersegment
eliminations |
|
(55.6 |
) |
(47.7 |
) |
(62.6 |
) |
|
(118.2 |
) |
(91.1 |
) |
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
2,262.6 |
|
1,862.8 |
|
2,040.1 |
|
|
4,302.7 |
|
3,518.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The item “Other products” primarily includes pig iron. |
Sebastián Martí
Ternium - Investor Relations
+1 (866) 890 0443
+54 (11) 4018 2389
www.ternium.com
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