Analysis of
Full Year
2018
Results
Net income
attributable to Ternium’s equity owners
in
2018
was USD
1.5
billion, compared to USD
886.2
million in
2017
. Including non-controlling interest, net income for
2018
was USD
1.7
billion, compared to net income of USD1.0 billion in
2017
. Earnings per ADS in
2018
were USD
7.67
, compared to earnings of USD
4.51
in
2017
.
Net sales
in
2018
were USD
11.5
billion,
18%
higher than net sales in the
2017
. The following table outlines Ternium’s consolidated net sales for
2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales (million USD)
|
|
|
|
|
|
|
|
FY 2018
|
FY 2017
|
Dif.
|
|
|
|
|
|
Mexico
|
|
6,134.0
|
|
5,378.6
|
|
14
|
%
|
|
|
|
|
|
Southern Region
|
|
1,933.4
|
|
2,313.6
|
|
-16
|
%
|
|
|
|
|
|
Other Markets
|
|
3,023.6
|
|
1,699.0
|
|
78
|
%
|
|
|
|
|
|
Total steel products net sales
|
|
11,091.0
|
|
9,391.2
|
|
18
|
%
|
|
|
|
|
|
Other products
1
|
|
362.4
|
|
309.1
|
|
17
|
%
|
|
|
|
|
|
Steel segment net sales
|
|
11,453.4
|
|
9,700.3
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining segment net sales
|
|
282.0
|
|
271.5
|
|
4
|
%
|
|
|
|
|
|
Intersegment eliminations
|
|
(280.6
|
)
|
(271.4
|
)
|
|
|
|
|
|
|
Net sales
|
|
11,454.8
|
|
9,700.3
|
|
18
|
%
|
|
|
|
|
|
1
The item “Other products” primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Cost of sales
was USD
8.5
billion in
2018
, an increase of USD
1.1
billion compared to
2017
. This was principally due to a USD883.5 million, or 15%, increase in raw material and consumables used, mainly reflecting a 12% increase in steel shipments and higher raw material and purchased slab costs, partially offset by lower energy costs; and to a USD196.8 million increase in other costs, mainly including a USD108.1 million increase in depreciation of property, plant and equipment due to the full consolidation of Ternium Brasil and the effect of inflation adjustment in Argentina, a USD47.6 million increase in services and fees, and a USD39.1 million increase in maintenance expenses.
Selling, General & Administrative (SG&A) expenses
in
2018
were USD
876.8
million, or
7.7%
of net sales, an increase of USD
52.5
million compared to SG&A expenses in
2017
mainly due to higher freight and transportation expenses and labor costs, partially offset by lower services and fees expenses.
Other net operating income
in
2018
was a USD
13.7
million gain, compared to a USD
16.2
million loss in the
2017
. Other net operating income in 2018 included a recovery of tax credit in Ternium Brasil.
Operating income
in
2018
was USD
2.1
billion, or
18.4%
of net sales, compared to operating income of USD
1.5
billion, or
15.0%
of net sales, in
2017
. The following table outlines Ternium’s operating income by segment for
2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
Mining segment
|
|
Intersegment
eliminations
|
|
Total
|
USD million
|
|
FY 2018
|
FY 2017
|
|
FY 2018
|
FY 2017
|
|
FY 2018
|
FY 2017
|
|
FY 2018
|
FY 2017
|
Net Sales
|
|
11,453.4
|
|
9,700.3
|
|
|
282.0
|
|
271.5
|
|
|
(280.6)
|
|
(271.4)
|
|
|
11,454.8
|
|
9,700.3
|
|
Cost of sales
|
|
(8,524.9)
|
|
(7,465.8)
|
|
|
(239.9)
|
|
(212.9)
|
|
|
281.5
|
|
275.6
|
|
|
(8,483.3)
|
|
(7,403.0)
|
|
SG&A expenses
|
|
(860.9)
|
|
(811.5)
|
|
|
(15.9)
|
|
(12.8)
|
|
|
—
|
|
—
|
|
|
(876.8)
|
|
(824.2)
|
|
Other operating income (expense), net
|
|
12.9
|
|
(17.0)
|
|
|
0.7
|
|
0.8
|
|
|
—
|
|
—
|
|
|
13.7
|
|
(16.2)
|
|
Operating income
|
|
2,080.6
|
|
1,406.0
|
|
|
26.9
|
|
46.6
|
|
|
0.8
|
|
4.1
|
|
|
2,108.4
|
|
1,456.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
2,618.5
|
|
1,830.5
|
|
|
78.3
|
|
96.4
|
|
|
0.8
|
|
4.1
|
|
|
2,697.7
|
|
1,931.1
|
|
Steel reporting segment
The steel segment’s operating income was USD
2.1
billion in
2018
, an increase of USD
674.6
million compared to the operating income in
2017
, reflecting higher net sales, partially offset by higher operating cost.
Net sales of steel products in
2018
increased
18%
compared to
2017
, reflecting a
1.4
million-ton increase in shipments and a USD
47
increase in steel revenue per ton. Shipments increased
12%
year-over-year mainly due to higher shipments in Other Markets, due to the consolidation of Ternium Brasil since September 2017, partially offset by lower shipments in Southern Region, reflecting lower demand for steel products, and slightly lower shipments in Mexico. Revenue per ton in
2018
was higher than in the previous year as a result of higher steel prices in Ternium Mexico and in Other Markets. Although steel prices in Southern Region were relatively stable year-over-year, revenue per ton decreased due to the effect of inflation adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
(million USD)
|
|
Shipments
(thousand tons)
|
|
Revenue/ton
(USD/ton)
|
|
|
FY 2018
|
FY 2017
|
Dif.
|
|
FY 2018
|
FY 2017
|
Dif.
|
|
FY 2018
|
FY 2017
|
Dif.
|
Mexico
|
|
6,134.0
|
|
5,378.6
|
|
14
|
%
|
|
6,544.8
|
|
6,622.8
|
|
-1
|
%
|
|
937
|
|
812
|
|
15
|
%
|
Southern Region
|
|
1,933.4
|
|
2,313.6
|
|
-16
|
%
|
|
2,301.1
|
|
2,456.0
|
|
-6
|
%
|
|
840
|
|
942
|
|
-11
|
%
|
Other Markets
|
|
3,023.6
|
|
1,699.0
|
|
78
|
%
|
|
4,105.2
|
|
2,517.7
|
|
63
|
%
|
|
737
|
|
675
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total steel products
|
|
11,091.0
|
|
9,391.2
|
|
18
|
%
|
|
12,951.1
|
|
11,596.6
|
|
12
|
%
|
|
856
|
|
810
|
|
6
|
%
|
Other products
1
|
|
362.4
|
|
309.1
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
11,453.4
|
|
9,700.3
|
|
18
|
%
|
|
|
|
|
|
|
|
|
1
The item “Other products” primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Operating cost increased 13% due to the above-mentioned
12%
increase in shipment volumes and a 2% increase in operating cost per ton.
Mining reporting segment
The mining segment’s operating income was a gain of USD
26.9
million in
2018
, lower than a gain of USD
46.6
million in
2017
, reflecting higher operating cost, partially offset by higher iron ore sales.
Net sales of mining products in
2018
were
4%
higher than those in
2017
, reflecting a
2%
increase in shipments and a
2%
increase in revenue per ton.
|
|
|
|
|
|
|
|
|
|
|
|
Mining segment
|
|
|
|
FY 2018
|
FY 2017
|
Dif.
|
|
Net Sales (million USD)
|
|
282.0
|
|
271.5
|
|
4
|
%
|
|
Shipments (thousand tons)
|
|
3,616.3
|
|
3,551.1
|
|
2
|
%
|
|
Revenue per ton (USD/ton)
|
|
78
|
|
76
|
|
2
|
%
|
|
Operating cost increased 13% year-over-year mainly due to 11% increase in operating cost per ton
and the above -mentioned
2%
increase in shipment volumes.
EBITDA
in
2018
was USD
2.7
billion, or
23.6%
of net sales, compared to USD
1.9
billion, or
19.9%
of net sales, in
2017
.
Net financial results
were USD
179.6
million loss in
2018
, compared to USD
165.1
million loss in
2017
. During
2018
, Ternium’s net financial interest results totaled a loss of USD
109.9
million, compared with a loss of USD
95.2
million in
2017
, reflecting higher average indebteness and a lower average cost of debt.
Net foreign exchange results included a USD112.2 million negative year-over-year difference mainly related to the effect of the fluctuations of the Argentine and Mexican peso against the US dollar. In
2018
, the Argentine peso depreciated 51% against the US dollar compared to 15% in
2017
, resulting in a non-cash negative impact in Ternium Argentina’s US dollar financial position (which applies the Argentine peso as functional currency).
Change in fair value of financial instruments included in net financial results was a USD99.3 million loss in
2018
compared to a USD3.1 million gain in
2017
. The loss in
2018
was mainly related to certain derivative instruments entered into to compensate for the interest rate charges derived from Ternium’s Argentine subsidiary's local currency denominated financial debt and currency derivatives in Mexico.
The effect of inflation on Ternium’s Argentine subsidiaries and associates’ short net monetary position was a gain of USD191.4 million as a result of the application of IAS 29 from 2018.
Equity in results of non-consolidated companies
was a gain of USD
102.8
million in
2018
, compared to a gain of USD
68.1
million in
2017
mainly due to better results from Ternium's investment in Usiminas.
Income tax expense
in
2018
was USD
369.4
million, or
18%
of income before income tax, compared to an income tax expense of USD
336.9
million, or
25%
of income before income tax in
2017
. The unusually low effective tax rate in 2018 was mainly the result of a USD104.1 million tax gain related to the effect of an asset revaluation for tax purposes at Ternium's Argentine subsidiary. In 2017, the effective tax rate included a non-cash gain on deferred taxes due to the 5% appreciation of the Mexican peso against the US dollar during the year which reduces, 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).
Net gain attributable to non-controlling interest
in
2018
was USD
155.5
million, compared to a net gain of USD
136.7
million in
2017
.
Analysis of
Fourth
Quarter
2018
Results
Net gain
attributable to Ternium’s equity owners
in the
fourth
quarter
2018
was USD
350.6
million, compared to net gain attributable to Ternium’s equity owners of USD
180.2
million in the
fourth
quarter
2017
. Including non-controlling interest, net gain for the
fourth
quarter
2018
was USD
435.4
million, compared to net gain of USD
198.0
million in the
fourth
quarter
2017
. Earnings per ADS in the
fourth
quarter
2018
were USD
1.79
, compared to earnings per ADS of USD
0.92
in the
fourth
quarter
2017
.
Net sales
in the
fourth
quarter
2018
were USD
2.6
billion, or
5%
lower than net sales in the
fourth
quarter
2017
. The following table outlines Ternium’s consolidated net sales for the
fourth
quarter
2018
and the
fourth
quarter
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales (million USD)
|
|
|
|
|
4Q 2018
|
4Q 2017
|
Dif.
|
|
Mexico
|
|
1,439.9
|
1,306.0
|
10
|
%
|
|
Southern Region
|
|
474.3
|
619.9
|
-23
|
%
|
|
Other Markets
|
|
653.3
|
708.8
|
-8
|
%
|
|
Total steel products net sales
|
|
2,567.5
|
2,634.8
|
-3
|
%
|
|
Other products
1
|
|
68.2
|
132.7
|
-49
|
%
|
|
Steel segment net sales
|
|
2,635.7
|
2,767.5
|
-5
|
%
|
|
|
|
|
|
|
|
Mining segment net sales
|
|
71.9
|
69.0
|
4
|
%
|
|
Intersegment eliminations
|
|
(71.5)
|
(69.0)
|
|
|
Net sales
|
|
2,636.1
|
2,767.5
|
-5
|
%
|
|
1
The item "Other products" primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Cost of sales
was USD
2.1
billion in the
fourth
quarter
2018
, a decrease of USD
111.1
million compared to the
fourth
quarter
2017
. This was principally due to a USD75.4 million, or 5%, decrease in raw material and consumables used, mainly reflecting a
13%
decrease in steel shipment volumes partially offset by higher raw material and purchased slabs costs; and to a USD35.6 million decrease in other costs, mainly including a USD31.0 million decrease in labor costs and a USD11.5 decrease in maintenance expense partially offset by a USD15.2 increase in depreciation of property, plant and equipment.
Selling, General & Administrative (SG&A) expenses
in the
fourth
quarter
2018
were USD
202.0
million, or
7.7%
of net sales, a decrease of USD
49.7
million compared to SG&A expenses in the
fourth
quarter
2017
, mainly due to lower amortization of intangible assets.
Operating income
in the
fourth
quarter
2018
was USD
382.7
million, or
14.5%
of net sales, compared to operating income of USD
350.0
million, or
12.6%
of net sales in the
fourth
quarter
2017
. The following table outlines Ternium’s operating income by segment for the
fourth
quarter
2018
and
fourth
quarter
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
Mining segment
|
|
Intersegment
eliminations
|
|
Total
|
USD million
|
|
4Q 2018
|
4Q 2017
|
|
4Q 2018
|
4Q 2017
|
|
4Q 2018
|
4Q 2017
|
|
4Q 2018
|
4Q 2017
|
Net Sales
|
|
2,635.7
|
|
2,767.5
|
|
71.9
|
|
69.0
|
|
(71.5)
|
|
(69.0)
|
|
|
2,636.1
|
2,767.5
|
Cost of sales
|
|
(2,058.1)
|
|
(2,183.8)
|
|
(69.9)
|
|
(55.9)
|
|
68.1
|
|
68.8
|
|
|
(2,059.9)
|
(2,170.9)
|
SG&A expenses
|
|
(198.1)
|
|
(248.0)
|
|
(3.9)
|
|
(3.7)
|
|
—
|
|
—
|
|
|
(202.0)
|
(251.7)
|
Other operating income, net
|
|
8.5
|
|
5.1
|
|
—
|
|
0.0
|
|
—
|
|
—
|
|
|
8.5
|
5.1
|
Operating income (expense)
|
|
388.0
|
|
340.7
|
|
(2.0)
|
|
9.4
|
|
(3.4)
|
|
(0.2)
|
|
|
382.7
|
350.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
506.7
|
|
479.7
|
|
9.5
|
|
22.8
|
|
(3.4)
|
|
(0.2)
|
|
|
512.8
|
502.3
|
Steel reporting segment
The steel segment’s operating income was USD
388.0
million in the
fourth
quarter
2018
, an increase of USD
47.3
million compared to the
fourth
quarter
2017
mainly as a result of higher revenue per ton, partially offset by lower shipments, higher operating cost per ton and USD42.7 million non-recurring gain related to sales of electricity in Mexico in the prior-year period.
Net sales of steel products in the
fourth
quarter
2018
decreased
3%
compared to the
fourth
quarter
2017
, reflecting a 447,000-ton decrease in shipments partially offset by higher revenue per ton. Revenue per ton increased 12% mainly reflecting higher realized steel prices in Mexico and Other Markets. Shipments decreased
13%
year-over-year due to lower volumes in Other Markets, mainly as a result of lower slab shipments to third parties, lower shipments in the Southern Region, reflecting decreased demand for steel products, and slightly lower shipments in Mexico.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
(million USD)
|
|
Shipments
(thousand tons)
|
|
Revenue/ton
(USD/ton)
|
|
|
4Q 2018
|
4Q 2017
|
Dif.
|
|
4Q 2018
|
4Q 2017
|
Dif.
|
|
4Q 2018
|
4Q 2017
|
Dif.
|
Mexico
|
|
1,439.9
|
|
1,306.0
|
|
10
|
%
|
|
1,523.4
|
|
1,614.4
|
|
(6
|
)%
|
|
945
|
|
809
|
|
17
|
%
|
Southern Region
|
|
474.3
|
|
619.9
|
|
(23
|
)%
|
|
505.1
|
|
645.2
|
|
(22
|
)%
|
|
939
|
|
961
|
|
(2
|
)%
|
Other Markets
|
|
653.3
|
|
708.8
|
|
(8
|
)%
|
|
935.2
|
|
1,151.2
|
|
(19
|
)%
|
|
699
|
|
616
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total steel products
|
|
2,567.5
|
|
2,634.8
|
|
(3
|
)%
|
|
2,963.6
|
|
3,410.8
|
|
(13
|
)%
|
|
866
|
|
772
|
|
12
|
%
|
Other products
1
|
|
68.2
|
|
132.7
|
|
(49
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
2,635.7
|
|
2,767.5
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The item "Other products" primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Operating cost decreased 7% due to the above-mentioned
13%
decrease in shipments offset by a 7% increase in cost per ton.
Mining reporting segment
The mining segment’s operating income was a loss of USD
2.0
million in the
fourth
quarter
2018
, compared to a gain of USD
9.4
million in the
fourth
quarter
2017
, mainly reflecting higher operating costs.
Net sales of mining products in the
fourth
quarter
2018
were 4% higher than those in the fourth quarter 2017 as a result of a
6%
increase in revenue per ton, partially offset by a
2%
decrease in shipments.
|
|
|
|
|
|
|
|
|
|
Mining segment
|
|
|
|
4Q 2018
|
4Q 2017
|
Dif.
|
|
Net Sales (million USD)
|
|
71.9
|
69.0
|
4
|
%
|
|
Shipments (thousand tons)
|
|
856.9
|
874.8
|
(2
|
)%
|
|
Revenue per ton (USD/ton)
|
|
84
|
79
|
6
|
%
|
|
Operating cost increased 24% year-over-year, mainly due to an increase of 26% in operating cost per ton, partially offset by the above-mentioned
2%
decrease in shipments.
EBITDA
in the
fourth
quarter
2018
was USD
512.8
million, or
19.5%
of net sales, compared to USD
502.3
million, or
18.2%
of net sales, in the
fourth
quarter
2017
.
Net financial results
were a gain of USD
60.7
million in the
fourth
quarter
2018
, compared to a USD
29.3
million loss in the
fourth
quarter
2017
. During the
fourth
quarter
2018
, Ternium’s net financial interest results totaled a loss of USD23.8 million, compared to a loss of USD34.8 million in the
fourth
quarter
2017
, reflecting lower average indebtedness.
Net foreign exchange results were a gain of USD29.7 million in the
fourth
quarter
2018
compared to a gain of USD19.5 million in the
fourth
quarter
2017
. The gain in the fourth quarter 2018 was mainly due to the positive non-cash impact of the Argentine peso’s 9% appreciation against the U.S. dollar on Ternium Argentina’s US dollar financial position (which applies the Argentine peso as functional currency) and the positive impact of the Mexican peso's 4% depreciation against the US dollar on a net short local currency position in Ternium's Mexican subsidiaries. Change in fair value of financial instruments included in net financial results was a USD3.8 million gain in the
fourth
quarter
2018
compared to a USD9.2 million loss in the
fourth
quarter
2017
.
The effect of inflation on Ternium’s Argentine subsidiaries and associates’ short net monetary position was a gain of USD45.1 million as a result of the application of IAS 29 from 2018.
Equity in results of non-consolidated companies
was a gain of USD
47.8
million in the
fourth
quarter
2018
, compared to a gain of USD
16.0
million in the
fourth
quarter
2017
mainly due to higher results from Ternium's investment in Usiminas partially compensated by lower results in Techgen.
Income tax expense
in the
fourth
quarter
2018
was USD
55.8
million, or
11%
of income before income tax expense, compared to an income tax expense of USD
138.7
million in the
fourth
quarter
2017
, or
41%
of income before income tax expense. The unusually low effective tax rate in the
fourth
quarter
2018
was mainly the result of a USD104.1 million tax gain related to the effect of an asset revaluation for tax purposes at Ternium's Argentine subsidiary. In addition, effective tax rates in these periods included a non-cash charge on deferred taxes due to the 4% and 8% devaluation of the Mexican peso against the U.S. dollar during the fourth quarter 2018 and fourth quarter 2017, respectively, which reduces, 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).
Net gain attributable to non-controlling interest
in the
fourth
quarter
2018
was USD
84.9
million, compared to net gain of USD
17.8
million in the same period in
2017
.
Cash Flow and Liquidity
Net cash provided by operating activities in the
full year
2018
was USD
1.7
billion. Working capital increased by USD
228.6
million in the
full year
2018
as a result of a USD186.4 million increase in inventories and an aggregate USD114.7 million net increase in trade and other receivables, partially offset by an aggregate USD72.6 million increase in accounts payable and other liabilities. The inventory value increase in the
full year
2018
was mainly due to USD159.5 million higher volume and price of raw materials, supplies and other; and net USD90.5 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; partially offset by USD63.6 million net lower steel volume.
Capital expenditures in the
full year
2018
were USD
520.3
million, USD
110.8
million higher than in the
full year
2017
including the effect of the consolidation of Ternium Brasil since September 2017. The main investments carried out during the
full year
2018
included those made for new hot-rolling, hot-dipped galvanizing and pre-painting production capacity in the company’s Pesquería industrial center, 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 those made in Peña Colorada’s iron ore operations.
In the
full year
2018
, Ternium's free cash flow
7
was USD
1.2
billion. During the year, the company lent USD24.5 million to its non-consolidated company Techgen. Net repayment of borrowings in the
full year
2018
reached USD
1.1
billion. Net dividends paid to shareholders were USD
215.9
million and net dividends paid by subsidiaries to non-controlling interest were USD
20.9
million. As of
December 31, 2018
, Ternium’s net debt position
8
was USD
1.7
billion.
Net cash provided by operating activities in the
fourth
quarter
2018
was USD
525.0
million. Working capital decreased by USD
190.4
million in the
fourth
quarter
2018
as a result of an aggregate USD138.5 million net decrease in trade and other receivables and USD126.1 million decrease in inventories, partially offset by an aggregate USD74.1 million decrease in accounts payable and other liabilities. The decrease in inventory value in the
fourth
quarter
2018
was mainly due to net USD100.2 million lower steel volume; USD17.8 million lower volume and price of raw materials and supplies; and net USD8.1 million lower costs of slabs, goods in process and finished goods. In the
fourth
quarter
2018
, Ternium's free cash flow
9
was USD
360.4
million.
Conference Call and Webcast
Ternium will host a conference call on February 20, 2019, at 8:30 a.m. ET in which management will discuss
fourth
quarter and full year
2018
results. A webcast link will be available in the Investor Center section of the company’s website at
www.ternium.com
.
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 Latin America’s leading flat steel producer, with operating facilities in Mexico, Brazil, Argentina, Colombia, the southern United States and Central America. The company offers a broad range of high value-added steel products for customers active in the automotive, home appliances, construction, capital goods, container, food and energy industries through its manufacturing and service center network and advanced customer integration systems. More information about Ternium is available at
www.ternium.com
.
Notes
|
|
1
|
EBITDA in 2018 equals operating income of USD
2.1
billion adjusted to exclude depreciation and amortization of USD
589.3
million.
|
|
|
2
|
Consolidated EBITDA divided by steel shipments.
|
|
|
3
|
American Depositary Share (ADS). Each 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
|
Free cash flow in 2018 equals net cash provided by operating activities of USD
1.7
billion less capital expenditures of USD
520.3
million.
|
|
|
5
|
Net debt position at
December 31, 2018
equals borrowings of USD2.0 billion less cash and equivalents plus other investments of USD0.3 billion.
|
|
|
6
|
Steel operating cost per ton is equal to steel cost of sales plus steel SG&A, divided by shipments.
|
7
Figures for the third quarter 2018 have been adjusted to reflect the application of IAS 29 to the financial reporting of Ternium’s Argentine subsidiaries.
|
|
8
|
EBITDA in the fourth quarter 2018 equals operating income of USD382.7 million adjusted to exclude depreciation and amortization of USD
130.1
million.
|
|
|
9
|
Free cash flow in the
fourth
quarter
2018
equals net cash provided by operating activities of USD
525.0
million less capital expenditures of USD
164.6
million.
|
Consolidated Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD million
|
|
4Q 2018
|
|
4Q 2017
|
|
FY 2018
|
|
FY 2017
|
|
|
(Unaudited)
|
|
|
Net sales
|
|
2,636.1
|
|
|
2,767.5
|
|
|
11,454.8
|
|
|
9,700.3
|
|
Cost of sales
|
|
(2,059.9
|
)
|
|
(2,170.9
|
)
|
|
(8,483.3
|
)
|
|
(7,403.0
|
)
|
Gross profit
|
|
576.3
|
|
|
596.6
|
|
|
2,971.5
|
|
|
2,297.3
|
|
Selling, general and administrative expenses
|
|
(202.0
|
)
|
|
(251.7
|
)
|
|
(876.8
|
)
|
|
(824.2
|
)
|
Other operating income (expenses), net
|
|
8.5
|
|
|
5.1
|
|
|
13.7
|
|
|
(16.2
|
)
|
Operating income
|
|
382.7
|
|
|
350.0
|
|
|
2,108.4
|
|
|
1,456.8
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
(29.6
|
)
|
|
(39.9
|
)
|
|
(131.2
|
)
|
|
(114.6
|
)
|
Finance income
|
|
5.8
|
|
|
5.1
|
|
|
21.2
|
|
|
19.4
|
|
Other financial income (expenses), net
|
|
84.5
|
|
|
5.5
|
|
|
(69.6
|
)
|
|
(69.9
|
)
|
Equity in earnings of non-consolidated companies
|
|
47.8
|
|
|
16.0
|
|
|
102.8
|
|
|
68.1
|
|
Profit before income tax expense
|
|
491.3
|
|
|
336.7
|
|
|
2,031.6
|
|
|
1,359.8
|
|
Income tax expense
|
|
(55.8
|
)
|
|
(138.7
|
)
|
|
(369.4
|
)
|
|
(336.9
|
)
|
Profit for the period
|
|
435.4
|
|
|
198.0
|
|
|
1,662.1
|
|
|
1,022.9
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
350.6
|
|
|
180.2
|
|
|
1,506.6
|
|
|
886.2
|
|
Non-controlling interest
|
|
84.9
|
|
|
17.8
|
|
|
155.5
|
|
|
136.7
|
|
Profit for the period
|
|
435.4
|
|
|
198.0
|
|
|
1,662.1
|
|
|
1,022.9
|
|
Consolidated Statement of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
USD million
|
|
|
December 31,
2018
|
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
5,817.6
|
|
|
|
|
5,349.8
|
|
|
Intangible assets, net
|
|
|
1,012.5
|
|
|
|
|
1,092.6
|
|
|
Investments in non-consolidated companies
|
|
|
495.2
|
|
|
|
|
478.3
|
|
|
Deferred tax assets
|
|
|
134.2
|
|
|
|
|
121.1
|
|
|
Receivables, net
|
|
|
649.4
|
|
|
|
|
677.3
|
|
|
Trade receivables, net
|
|
|
4.8
|
|
|
|
|
4.8
|
|
|
Derivative financial instruments
|
|
|
0.8
|
|
|
|
|
—
|
|
|
Other investments
|
|
|
7.2
|
|
|
|
|
3.4
|
|
|
Total non-current assets
|
|
|
8,121.8
|
|
|
|
|
7,727.3
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
309.8
|
|
|
|
|
362.2
|
|
|
Derivative financial instruments
|
|
|
0.8
|
|
|
|
|
2.3
|
|
|
Inventories, net
|
|
|
2,689.8
|
|
|
|
|
2,550.9
|
|
|
Trade receivables, net
|
|
|
1,128.5
|
|
|
|
|
1,006.6
|
|
|
Other investments
|
|
|
44.5
|
|
|
|
|
132.7
|
|
|
Cash and cash equivalents
|
|
|
250.5
|
|
|
|
|
337.8
|
|
|
Total current assets
|
|
|
4,423.9
|
|
|
|
|
4,392.5
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets classified as held for sale
|
|
|
2.1
|
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
12,547.9
|
|
|
|
|
12,122.6
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves attributable to the owners of the parent
|
|
|
6,393.3
|
|
|
|
|
5,010.4
|
|
|
Non-controlling interest
|
|
|
1,091.3
|
|
|
|
|
842.3
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
7,484.6
|
|
|
|
|
5,852.8
|
|
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
644.0
|
|
|
|
|
768.5
|
|
|
Deferred tax liabilities
|
|
|
474.4
|
|
|
|
|
513.4
|
|
|
Other liabilities
|
|
|
414.5
|
|
|
|
|
373.0
|
|
|
Trade payables
|
|
|
0.9
|
|
|
|
|
2.3
|
|
|
Financial Lease liabilities
|
|
|
65.8
|
|
|
|
|
69.0
|
|
|
Borrowings
|
|
|
1,637.1
|
|
|
|
|
1,716.3
|
|
|
Total non-current liabilities
|
|
|
3,236.8
|
|
|
|
|
3,442.5
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax liabilities
|
|
|
150.3
|
|
|
|
|
52.9
|
|
|
Other liabilities
|
|
|
351.2
|
|
|
|
|
357.0
|
|
|
Trade payables
|
|
|
904.2
|
|
|
|
|
897.7
|
|
|
Derivative financial instruments
|
|
|
13.0
|
|
|
|
|
6.0
|
|
|
Financial Lease liabilities
|
|
|
8.0
|
|
|
|
|
8.0
|
|
|
Borrowings
|
|
|
399.9
|
|
|
|
|
1,505.6
|
|
|
Total current liabilities
|
|
|
1,826.5
|
|
|
|
|
2,827.3
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,063.3
|
|
|
|
|
6,269.8
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
12,547.9
|
|
|
|
|
12,122.6
|
|
|
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD million
|
|
4Q 2018
|
|
4Q 2017
|
|
FY 2018
|
|
FY 2017
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
435.4
|
|
|
198.0
|
|
|
1,662.1
|
|
|
1,022.9
|
|
|
|
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
130.1
|
|
|
152.4
|
|
|
589.3
|
|
|
474.3
|
|
Equity in earnings of non-consolidated companies
|
|
(47.8
|
)
|
|
(16.0
|
)
|
|
(102.8
|
)
|
|
(68.1
|
)
|
Changes in provisions
|
|
(9.0
|
)
|
|
0.9
|
|
|
(7.7
|
)
|
|
2.8
|
|
Net foreign exchange results and others
|
|
(96.4
|
)
|
|
(48.6
|
)
|
|
(5.8
|
)
|
|
70.9
|
|
Interest accruals less payments
|
|
(0.1
|
)
|
|
11.6
|
|
|
(13.0
|
)
|
|
19.5
|
|
Income tax accruals less payments
|
|
(77.7
|
)
|
|
43.6
|
|
|
(154.4
|
)
|
|
(273.4
|
)
|
Changes in working capital
|
|
190.4
|
|
|
(309.7
|
)
|
|
(228.6
|
)
|
|
(865.0
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
525.0
|
|
|
32.1
|
|
|
1,739.3
|
|
|
383.9
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(164.6
|
)
|
|
(126.5
|
)
|
|
(520.3
|
)
|
|
(409.4
|
)
|
Proceeds from the sale of property, plant & equipment
|
|
0.3
|
|
|
0.4
|
|
|
0.9
|
|
|
1.1
|
|
Acquisition of business
|
|
|
|
|
|
|
|
|
Purchase consideration
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,891.0
|
)
|
Cash acquired
|
|
—
|
|
|
—
|
|
|
—
|
|
|
278.2
|
|
Dividends received from non-consolidated companies
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
Loans to non-consolidated companies
|
|
—
|
|
|
—
|
|
|
(24.5
|
)
|
|
(23.9
|
)
|
Decrease in Other Investments
|
|
28.2
|
|
|
24.5
|
|
|
86.9
|
|
|
15.0
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(136.1
|
)
|
|
(101.7
|
)
|
|
(457.0
|
)
|
|
(2,030.0
|
)
|
|
|
|
|
|
|
|
|
|
Dividends paid in cash to company's shareholders
|
|
—
|
|
|
—
|
|
|
(215.9
|
)
|
|
(196.3
|
)
|
Dividends paid in cash to non-controlling interest
|
|
(3.8
|
)
|
|
—
|
|
|
(20.9
|
)
|
|
(30.6
|
)
|
Financial Lease Payments
|
|
(2.6
|
)
|
|
(3.1
|
)
|
|
(7.6
|
)
|
|
(4.2
|
)
|
Proceeds from borrowings
|
|
83.5
|
|
|
426.9
|
|
|
1,188.7
|
|
|
3,239.1
|
|
Repayments of borrowings
|
|
(614.5
|
)
|
|
(399.6
|
)
|
|
(2,266.6
|
)
|
|
(1,205.8
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
(537.3
|
)
|
|
24.3
|
|
|
(1,322.3
|
)
|
|
1,802.3
|
|
|
|
|
|
|
|
|
|
|
(Decrease) Increase in cash and cash equivalents
|
|
(148.5
|
)
|
|
(45.3
|
)
|
|
(40.0
|
)
|
|
156.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipments
|
|
Shipments
|
Thousand tons
|
|
4Q 2018
|
3Q 2018
|
2Q 2018
|
1Q 2018
|
|
FY 2018
|
FY 2017
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
1,523.4
|
|
1,525.2
|
|
1,721.7
|
|
1,774.5
|
|
|
6,544.8
|
|
6,622.8
|
|
Southern Region
|
|
505.1
|
|
546.5
|
|
604.2
|
|
645.3
|
|
|
2,301.1
|
|
2,456.0
|
|
Other Markets
|
|
935.2
|
|
1,071.3
|
|
995.8
|
|
1103.0
|
|
|
4,105.2
|
|
2517.7
|
|
Total steel segment
|
|
2,963.6
|
|
3,143.0
|
|
3,321.6
|
|
3,522.8
|
|
|
12,951.1
|
|
11,596.6
|
|
|
|
|
|
|
|
|
|
|
|
Total mining segment
|
|
856.9
|
|
914.5
|
|
915.6
|
|
929.3
|
|
|
3,616.3
|
|
3,551.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue / ton
|
|
Revenue /ton
|
USD/ton
|
|
4Q 2018
|
3Q 2018
|
2Q 2018
|
1Q 2018
|
|
FY 2018
|
FY 2017
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
945
|
|
997
|
|
963
|
|
854
|
|
|
937
|
|
812
|
|
Southern Region
|
|
939
|
|
928
|
|
792
|
|
734
|
|
|
840
|
|
942
|
|
Other Markets
|
|
699
|
|
810
|
|
781
|
|
657
|
|
|
737
|
|
675
|
|
Total steel segment
|
|
866
|
|
921
|
|
877
|
|
770
|
|
|
856
|
|
810
|
|
|
|
|
|
|
|
|
|
|
|
Total mining segment
|
|
84
|
|
73
|
|
81
|
|
75
|
|
|
78
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Net Sales
|
USD million
|
|
4Q 2018
|
3Q 2018
|
2Q 2018
|
1Q 2018
|
|
FY 2018
|
FY 2017
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
1,439.9
|
|
1,521.3
|
|
1,657.4
|
|
1,515.4
|
|
|
6,134.0
|
|
5,378.6
|
|
Southern Region
|
|
474.3
|
|
506.9
|
|
478.5
|
|
473.6
|
|
|
1,933.4
|
|
2,313.6
|
|
Other Markets
|
|
653.3
|
|
867.9
|
|
778.0
|
|
724.4
|
|
|
3,023.6
|
|
1,699.0
|
|
Total steel products
|
|
2,567.5
|
|
2,896.2
|
|
2,913.9
|
|
2,713.4
|
|
|
11,091.0
|
|
9,391.2
|
|
Other products
1
|
|
68.2
|
|
102.8
|
|
107.9
|
|
83.4
|
|
|
362.4
|
|
309.1
|
|
Total steel segment
|
|
2,635.7
|
|
2,999.0
|
|
3,021.8
|
|
2,796.9
|
|
|
11,453.4
|
|
9,700.3
|
|
|
|
|
|
|
|
|
|
|
Total mining segment
|
|
71.9
|
|
66.6
|
|
73.7
|
|
69.7
|
|
|
282.0
|
|
271.5
|
|
|
|
|
|
|
|
|
|
|
Total steel and mining segments
|
|
2,707.6
|
|
3,065.6
|
|
3,095.6
|
|
2,866.6
|
|
|
11,735.4
|
|
9,971.7
|
|
|
|
|
|
|
|
|
|
|
Intersegment eliminations
|
|
(71.5)
|
|
(66.4)
|
|
(73.1)
|
|
(69.6)
|
|
|
(280.6)
|
|
(271.4)
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
2,636.1
|
|
2,999.2
|
|
3,022.4
|
|
2,797.0
|
|
|
11,454.8
|
|
9,700.3
|
|
1
The item “Other products” primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
Consolidated Income Statements adjusted to reflect the application of IAS 29 to the financial reporting of Ternium’s Argentine subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
USD million
|
|
3Q 2018
|
|
2Q 2018
|
|
1Q 2018
|
|
|
|
(Unaudited)
|
|
Net sales
|
|
2,999.2
|
|
|
3,022.4
|
|
|
2,797.0
|
|
|
Cost of sales
|
|
(2,078.3
|
)
|
|
(2,212.4
|
)
|
|
(2,132.7
|
)
|
|
Gross profit
|
|
920.9
|
|
|
810.0
|
|
|
664.3
|
|
|
Selling, general and administrative expenses
|
|
(216.9
|
)
|
|
(234.0
|
)
|
|
(223.8
|
)
|
|
Other operating income (expenses), net
|
|
4.9
|
|
|
(5.5
|
)
|
|
5.8
|
|
|
Operating income
|
|
708.9
|
|
|
570.5
|
|
|
446.2
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
(40.1
|
)
|
|
(31.3
|
)
|
|
(30.1
|
)
|
|
Finance income
|
|
5.1
|
|
|
5.3
|
|
|
4.9
|
|
|
Other financial expenses, net
|
|
(63.0
|
)
|
|
(67.4
|
)
|
|
(23.8
|
)
|
|
Equity in earnings of non-consolidated companies
|
|
22.6
|
|
|
12.4
|
|
|
20.0
|
|
|
Profit before income tax expense
|
|
633.6
|
|
|
489.5
|
|
|
417.3
|
|
|
Income tax expense
|
|
(80.8
|
)
|
|
(192.2
|
)
|
|
(40.6
|
)
|
|
Profit for the period
|
|
552.7
|
|
|
297.3
|
|
|
376.7
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Owners of the parent
|
|
515.5
|
|
|
301.7
|
|
|
338.9
|
|
|
Non-controlling interest
|
|
37.2
|
|
|
(4.4
|
)
|
|
37.8
|
|
|
Profit for the period
|
|
552.7
|
|
|
297.3
|
|
|
376.7
|
|
|
|
|
|
|
|
|
|
|
EBITDA
1
|
|
856.5
|
|
|
724.9
|
|
|
603.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
EBITDA equals operating income of USD
709
million in the third quarter 2018, USD
571
million in the second quarter 2018 and USD
446
million in the first quarter 2018, adjusted to exclude depreciation and amortization of USD
148
million, USD
154
million and USD
157
million, respectively.
|
Ternium applied IAS 29 as from July 1, 2018 to the financial reporting of its subsidiaries and associates located in Argentina, and adjusted accordingly the previously reported figures for the previous quarters of 2018.