Summary of
Second
Quarter
2019
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q 2019
|
|
1Q 2019
|
|
2Q 2018
|
|
|
|
|
|
|
|
|
Steel Shipments (tons)
|
3,333,000
|
|
|
3,205,000
|
|
4
|
%
|
|
3,322,000
|
|
0
|
%
|
Iron Ore Shipments (tons)
|
835,000
|
|
|
920,000
|
|
-9
|
%
|
|
916,000
|
|
-9
|
%
|
Net Sales ($ million)
|
2,813.4
|
|
|
2,785.3
|
|
1
|
%
|
|
3,022.4
|
|
-7
|
%
|
Operating Income ($ million)
|
238.3
|
|
|
307.5
|
|
-23
|
%
|
|
570.5
|
|
-58
|
%
|
EBITDA
1
($ million)
|
410.0
|
|
|
473.6
|
|
-13
|
%
|
|
724.9
|
|
-43
|
%
|
EBITDA Margin (% of net sales)
|
14.6
|
%
|
|
17.0
|
%
|
-240 bps
|
|
|
24.0
|
%
|
-940 bps
|
|
EBITDA
2
per Ton ($)
|
123.0
|
|
|
147.8
|
|
-17
|
%
|
|
218.2
|
|
-44
|
%
|
Financial (Expense) Income, Net ($ million)
|
(5.5)
|
|
|
(25.7)
|
|
|
|
(101.5)
|
|
|
Income Tax Expense ($ million)
|
(47.3)
|
|
|
(72.5)
|
|
|
|
|
(192.2)
|
|
|
|
Net Income ($ million)
|
205.7
|
|
|
224.2
|
|
|
|
|
289.3
|
|
|
|
Equity Holders' Net Income ($ million)
|
181.1
|
|
|
217.8
|
|
|
|
|
293.7
|
|
|
|
Earnings per ADS
3
($)
|
0.92
|
|
|
1.11
|
|
|
|
|
1.50
|
|
|
|
|
|
•
|
EBITDA of $
410.0
million,
13%
lower sequentially, with lower EBITDA margin and higher shipments.
|
|
|
•
|
Earnings per ADS (EPADS) of $
0.92
, a sequential decrease of $
0.19
.
|
|
|
•
|
Capital expenditures of $
273.9
million, up from $211.3 million in the
first
quarter
2019
.
|
|
|
•
|
Dividends paid to shareholders and non-controlling interest of $265.2 million in the second quarter 2019.
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|
|
•
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Net debt position
4
of $
1.7
billion at the end of June 2019, a $0.3 billion increase in the second quarter 2019 and equivalent to
0.8
times net debt to last twelve months EBITDA.
|
Ternium’s operating income in the
second
quarter
2019
was $
238.3
million, reflecting a sequential decrease in operating margin, partially offset by a gradual recovery of shipments in the Argentine flat steel market and an increase of slab sales to third parties. Operating income in the
second
quarter
2019
decreased $
69.2
million sequentially, mainly due to a $27 decrease in steel revenue per ton, partially offset by a 128,000-ton increase in steel shipments. Revenue per ton decreased mainly reflecting lower steel prices in most of
Ternium's steel markets. The increase in steel volume was mostly the result of a 66,000-ton increase in the Southern Region and a 57,000-ton increase in Other Markets mainly reflecting higher slab shipments to third parties.
Compared to the
second
quarter
2018
, the company’s operating income in the
second
quarter
2019
decreased $
332.3
million, due mainly to an year-over-year $59 decrease in steel revenue per ton and $
33
increase in the steel segment’s operating cost per ton
5
. Revenue per ton decreased mainly as a result of lower steel prices in most markets. The increase in the steel segment's operating cost per ton mainly reflected higher raw material and transportation costs, higher taxes, and higher depreciation and amortization, partially offset by lower labor costs and maintenance expenses.
The company’s net income in the
second
quarter
2019
was $
205.7
million. Compared to net income of $
224.2
million in the
first
quarter
2019
, net income in the second quarter 2019 decreased $
18.4
million mainly due to lower operating income, partially offset by better financial results and lower effective tax rate.
Relative to the prior-year-period, net income in the
second
quarter
2019
decreased $
83.5
million mainly due to lower operating income, partially offset by better financial results and a lower effective tax rate.
Summary of
First Half
2019
Results
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|
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1H 2019
|
|
1H 2018
|
|
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|
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|
Steel Shipments (tons)
|
6,537,000
|
|
|
6,844,000
|
|
-4
|
%
|
Iron Ore Shipments (tons)
|
1,755,000
|
|
|
1,845,000
|
|
-5
|
%
|
Net Sales ($ million)
|
5,598.7
|
|
|
5,819.4
|
|
-4
|
%
|
Operating Income ($ million)
|
545.7
|
|
|
1,016.7
|
|
-46
|
%
|
EBITDA
6
($ million)
|
883.6
|
|
|
1,328.4
|
|
-33
|
%
|
EBITDA Margin (% of net sales)
|
15.8
|
%
|
|
22.8
|
%
|
|
|
EBITDA per Ton ($)
|
135.2
|
|
|
194.1
|
|
|
|
Financial (Expense) Income, Net ($ million)
|
(31.2)
|
|
|
(150.4)
|
|
|
|
Income Tax Expense ($ million)
|
(119.8)
|
|
|
(232.8)
|
|
|
|
Net Income ($ million)
|
429.9
|
|
|
665.9
|
|
|
|
Equity Holders' Net Income ($ million)
|
398.9
|
|
|
632.5
|
|
|
|
Earnings per ADS ($)
|
2.03
|
|
|
3.22
|
|
|
|
|
|
•
|
EBITDA of $
883.6
million, 33% lower year-over-year, with lower EBITDA margin and shipments.
|
|
|
•
|
Earnings per ADS of $
2.03
, a year-over-year decrease of
$1.19.
|
|
|
•
|
Capital expenditures of $
485.1
million, up from $229.6 million in the
first
half 2018 as Ternium's investment program progresses as planned.
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|
|
•
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Free cash flow
7
of $
264.4
million in the
first
half 2019.
|
Ternium’s operating income in the
first half
2019
was $
545.7
million, decreasing $
471.0
million year-over-year, mainly due to a $71 increase in steel cost per ton and lower shipments reflecting a 364,000-ton decrease in Mexico and a 299,000-ton decrease in the Southern Region, partially offset by a 356,000-ton increase in Other Markets. The volume decrease in Mexico was mainly due to a soft commercial market in 2019 and a high base of comparison, as shipments in the first half 2018 were strong as a result of a rising steel prices environment. In the Southern Region, shipments were affected in the first half 2019 by a combination of weaker steel demand and a destocking process in the value chain. Shipments of slabs to third parties increased
in the year-over-year comparison in the Other Markets region. The increase in the steel segment's operating cost per ton mainly reflected higher purchased slabs, raw material and energy costs, higher depreciation and amortization, higher maintenance and transportation expenses, and higher taxes.
The company’s net income in the
first half
2019
was $
429.9
million, compared to net income of $
665.9
million in the
first half
2018. The $
236.0
million decrease year-over-year was mainly due to lower operating income, partially offset by better financial results and a lower effective tax rate.
Outlook
Ternium expects EBITDA to decrease in the third quarter 2019 compared to the second quarter 2019 due to a steel margin that will be below historical long term trends and lower shipments. The main factor affecting the company’s EBITDA in the third quarter of the year will be sequentially lower shipments of slabs to third parties with low margins.
The company anticipates steel shipments in Mexico to gradually recover during the second half 2019, reaching higher levels than those reported for the second half 2018. In addition, Ternium expects realized steel prices in Mexico to decrease, as the lagged reset of contract prices for industrial customers during the third quarter 2019 will reflect the steel price downturn during the second quarter 2019. This should be partially offset by the recent rebound of prices on sales to the commercial markets.
In Argentina, Ternium anticipates an additional sequential increase in steel shipments in the third quarter 2019 due to an improvement in the domestic steel market.
Analysis of
Second
Quarter
2019
Results
Net gain
attributable to Ternium’s equity owners
in the
second
quarter
2019
was $
181.1
million, compared to net gain attributable to Ternium’s equity owners of $
293.7
million in the
second
quarter
2018
. Including non-controlling interest, net gain for the
second
quarter
2019
was $
205.7
million, compared to net gain of $
289.3
million in the
second
quarter
2018
. Earnings per ADS in the
second
quarter
2019
were $
0.92
, compared to earnings per ADS of $
1.50
in the
second
quarter
2018
.
Net sales
in the
second
quarter
2019
were $
2.8
billion, or
7%
lower than net sales in the
second
quarter
2018
. The following table outlines Ternium’s consolidated net sales for the
second
quarter
2019
and the
second
quarter
2018
:
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|
|
|
|
|
|
|
|
|
|
|
Net Sales (million $)
|
|
|
|
|
2Q 2019
|
2Q 2018
|
Dif.
|
|
Mexico
|
|
1,370.6
|
1,657.4
|
-17
|
%
|
|
Southern Region
|
|
484.9
|
478.5
|
1
|
%
|
|
Other Markets
|
|
872.2
|
778.0
|
12
|
%
|
|
Total steel products net sales
|
|
2,727.7
|
2,913.9
|
-6
|
%
|
|
Other products
1
|
|
85.7
|
107.9
|
-21
|
%
|
|
Steel segment net sales
|
|
2,813.4
|
3,021.8
|
-7
|
%
|
|
|
|
|
|
|
|
Mining segment net sales
|
|
76.8
|
73.7
|
4
|
%
|
|
Intersegment eliminations
|
|
(76.8)
|
(73.1)
|
|
|
Net sales
|
|
2,813.4
|
3,022.4
|
-7
|
%
|
|
1
The item "Other products" primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Cost of sales
was $
2.3
billion in the
second
quarter
2019
, an increase of $
112.6
million compared to the
second
quarter
2018
. This was principally due to a $114.8 million, or 7%, increase in raw material and consumables used mainly reflecting higher raw materials and energy costs per ton partially offset by a $2.2 million decrease in other costs, including a $9.8 million decrease in labor costs, a $3.2 decrease in services and fees and a $2.3 million decrease in maintenance, partially offset by higher charges of depreciation of property, plant and equipment.
Selling, General & Administrative (SG&A) expenses
in the
second
quarter
2019
were $
250.4
million, or
8.9%
of net sales, an increase of $
16.5
million compared to SG&A expenses in the
second
quarter
2018
, mainly due to a $10.9 million increase in freight and transportation expenses, a $9.7 million increase in taxes and a $5.9 million increase in amortization of intangible assets partially offset by a $9.4 million decrease in labor costs.
Operating income
in the
second
quarter
2019
was $
238.3
million, or
8.5%
of net sales, compared to operating income of $
570.5
million, or
18.9%
of net sales in the
second
quarter
2018
. The following table outlines Ternium’s operating income by segment for the
second
quarter
2019
and
second
quarter
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
Mining segment
|
|
Intersegment
eliminations
|
|
Total
|
$ million
|
|
2Q 2019
|
2Q 2018
|
|
2Q 2019
|
2Q 2018
|
|
2Q 2019
|
2Q 2018
|
|
2Q 2019
|
2Q 2018
|
Net Sales
|
|
2,813.4
|
|
3,021.8
|
|
76.8
|
73.7
|
|
(76.8)
|
|
(73.1)
|
|
|
2,813.4
|
3,022.4
|
Cost of sales
|
|
(2,336.4)
|
|
(2,234.0)
|
|
(63.0)
|
(55.3)
|
|
74.4
|
|
76.8
|
|
|
(2,325.0)
|
(2,212.4)
|
SG&A expenses
|
|
(246.4)
|
|
(230.5)
|
|
(4.0)
|
(3.5)
|
|
—
|
|
—
|
|
|
(250.4)
|
(234.0)
|
Other operating income, net
|
|
0.3
|
|
(5.9)
|
|
0.0
|
0.4
|
|
—
|
|
—
|
|
|
0.4
|
(5.5)
|
Operating income
|
|
230.9
|
|
551.5
|
|
9.8
|
15.3
|
|
(2.4)
|
|
3.7
|
|
|
238.3
|
570.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
395.5
|
|
692.1
|
|
17.0
|
29.1
|
|
(2.4)
|
|
3.7
|
|
|
410.0
|
724.9
|
Steel reporting segment
The steel segment’s operating income was $
230.9
million in the
second
quarter
2019
, a decrease of $
320.6
million compared to the
second
quarter
2018
as a result of lower revenue per ton and higher operating cost per ton.
Net sales of steel products in the
second
quarter
2019
decreased
6%
compared to the
second
quarter
2018
reflecting lower revenue per ton. Revenue per ton decreased
7%
year-over-year due to lower realized steel prices in Mexico and Other Markets and a higher participation of slabs in the sales mix (which is included in Other Markets). Shipments increased in 11,000 tons mainly due to higher slabs shipments to third parties in Other Markets partially offset by lower volumes in Mexico and the Southern Region.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
(million $)
|
|
Shipments
(thousand tons)
|
|
Revenue/ton
($/ton)
|
|
|
2Q 2019
|
2Q 2018
|
Dif.
|
|
2Q 2019
|
2Q 2018
|
Dif.
|
|
2Q 2019
|
2Q 2018
|
Dif.
|
Mexico
|
|
1,370.6
|
|
1,657.4
|
|
-17
|
%
|
|
1,569.3
|
|
1,721.7
|
|
-9
|
%
|
|
873
|
|
963
|
|
-9
|
%
|
Southern Region
|
|
484.9
|
|
478.5
|
|
1
|
%
|
|
507.8
|
|
604.2
|
|
-16
|
%
|
|
955
|
|
792
|
|
21
|
%
|
Other Markets
|
|
872.2
|
|
778.0
|
|
12
|
%
|
|
1,255.7
|
|
995.8
|
|
26
|
%
|
|
695
|
|
781
|
|
-11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total steel products
|
|
2,727.7
|
|
2,913.9
|
|
-6
|
%
|
|
3,332.7
|
|
3,321.6
|
|
0
|
%
|
|
818
|
|
877
|
|
-7
|
%
|
Other products
1
|
|
85.7
|
|
107.9
|
|
-21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
2,813.4
|
|
3,021.8
|
|
-7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The item "Other products" primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Operating cost increased 5% due to a 4% increase in operating cost per ton and the previously mentioned increase in shipments. The increase in the steel segment's operating cost per ton mainly reflected higher raw material and transportation costs, higher taxes and higher depreciation and amortization, partially offset by lower labor costs.
Mining reporting segment
The mining segment’s operating income was a gain of $
9.8
million in the
second
quarter
2019
, compared to a gain of $
15.3
million in the
second
quarter
2018
, mainly reflecting higher operating cost per ton.
Net sales of mining products in the
second
quarter
2019
were
4%
higher than those in the
second
quarter 2018 as a result of a
14%
increase in revenue per ton, partially offset by a
9%
decrease in shipments.
|
|
|
|
|
|
|
|
|
|
Mining segment
|
|
|
|
2Q 2019
|
2Q 2018
|
Dif.
|
|
Net Sales (million $)
|
|
76.8
|
73.7
|
4
|
%
|
|
Shipments (thousand tons)
|
|
835.1
|
915.6
|
-9
|
%
|
|
Revenue per ton ($/ton)
|
|
92
|
81
|
14
|
%
|
|
Operating cost increased 14% year-over-year, mainly due to an increase of 25% in operating cost per ton, partially offset by the above-mentioned
9%
decrease in shipments.
EBITDA
in the
second
quarter
2019
was $
410.0
million, or
14.6%
of net sales, compared to $
724.9
million, or
24.0%
of net sales, in the
second
quarter
2018
.
Net financial results
were a loss of $
5.5
million in the
second
quarter
2019
, compared to a $
101.5
million loss in the
second
quarter
2018
. During the
second
quarter
2019
, Ternium’s net financial interest results totaled a loss of $
15.0
million, compared to a loss of $
26.0
million in the
second
quarter
2018
, reflecting lower average indebtedness and lower interest rate.
Net foreign exchange results were a loss of $12.4 million in the
second
quarter
2019
compared to a loss of $51.5 million in the
second
quarter
2018
. The loss in the
second
quarter
2019
was mainly due to the negative impact of the Mexican peso's 1.1% appreciation against the US dollar on a net short local currency position in Ternium's Mexican subsidiaries and the Brazilian real's 1.7% appreciation against the US dollar on a net short local currency position in Ternium Brasil, partially offset by the non-cash impact of the Argentine peso’s 2.1% appreciation against the U.S. dollar on 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 $1.6 million gain in the
second
quarter
2019
compared to a $59.4 million loss in the second quarter 2018. The results in these periods were mainly related to currency hedge transactions in Argentina and Mexico.
The effect of inflation on Ternium’s Argentine subsidiaries and associates’ short net monetary position was a gain of $26.1 million in the
second
quarter 2019 compared to a gain of $28.9 million in the
second
quarter 2018.
Equity in results of non-consolidated companies
was a gain of $
20.3
million in the
second
quarter
2019
, compared to a gain of $
12.4
million in the
second
quarter
2018
mainly due to higher results from Ternium's investment in Usiminas.
Income tax expense
in the
second
quarter
2019
was $
47.3
million, or
19%
of income before income tax expense, compared to an income tax expense of $
192.2
million in the
second
quarter
2018
, or
40%
of income before income tax expense. Effective tax rates in the
second
quarter 2019 included a non-cash gain on deferred taxes due to the 1% appreciation of the Mexican peso against the U.S. dollar, 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) compared to an 8% depreciation of the Mexican peso against the U.S dollar in the
second
quarter 2018 which had the opposite effect on the tax base used to calculate deferred tax at that time. Finally, the effective tax rate in the second quarter 2019 decreased year-over-year due to the application of inflation adjustments for tax purposes in Argentina.
Net gain attributable to non-controlling interest
in the
second
quarter
2019
was $
24.6
million, compared to a net loss of $
4.4
million in the same period in
2018
.
Analysis of
First Half
2019
Results
Net gain
attributable to Ternium’s equity owners
in the
first half
2019
was $
398.9
million, compared to net gain attributable to Ternium’s equity owners of $
632.5
million in the
first half
2018
. Including non-controlling interest, net gain for the
first half
2019
was $
429.9
million, compared to net gain of $
665.9
million in the
first half
2018
. Earnings per ADS in the
first half
2019
were $
2.03
, compared to earnings per ADS of $
3.22
in the
first half
2018
.
Net sales
in the first half 2019 were $
5.6
billion, or
4%
lower than net sales in the first half 2018. The following table outlines Ternium’s consolidated net sales for the first half 2019 and the first half 2018:
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales (million $)
|
|
|
|
|
1H 2019
|
1H 2018
|
Dif.
|
|
Mexico
|
|
2,798.1
|
3,172.8
|
-12
|
%
|
|
Southern Region
|
|
916.6
|
952.1
|
-4
|
%
|
|
Other Markets
|
|
1,723.6
|
1,502.4
|
15
|
%
|
|
Total steel products net sales
|
|
5,438.3
|
5,627.3
|
-3
|
%
|
|
Other products
1
|
|
160.4
|
191.4
|
-16
|
%
|
|
Steel segment net sales
|
|
5,598.7
|
5,818.7
|
-4
|
%
|
|
|
|
|
|
|
|
Mining segment net sales
|
|
152.6
|
143.5
|
6
|
%
|
|
Intersegment eliminations
|
|
(152.6)
|
(142.7)
|
|
|
Net sales
|
|
5,598.7
|
5,819.4
|
-4
|
%
|
|
1
The item "Other products" primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Cost of sales
was $
4.6
billion in the
first half
2019
, an increase of $
238.1
million compared to the
first half
2018
. This was principally due to a $222.4 million, or 7%, increase in raw material and consumables used, mainly reflecting higher raw materials and energy costs per ton partially offset by a
4%
decrease in steel shipment volumes; and to a $15.7 million increase in other costs, mainly including a $29.3 million increase in depreciation of property, plant and equipment and a $13.4 million increase in maintenance expenses, partially offset by a $22.9 million decrease in labor costs.
Selling, General & Administrative (SG&A) expenses
in the
first half
2019
were $
475.6
million, or
8.5%
of net sales, an increase of $
17.8
million compared to SG&A expenses in the
first half
2018
, mainly due to higher freight and transportation expenses, services and fees, and taxes, partially offset by lower labor costs.
Operating income
in the
first half
2019
was $
545.7
million, or
9.7%
of net sales, compared to operating income of $
1.02
billion, or
17.5%
of net sales in the
first half
2018
. The following table outlines Ternium’s operating income by segment for the
first half
2019
and
first half
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
Mining segment
|
|
Intersegment
eliminations
|
|
Total
|
$ million
|
|
1H 2019
|
1H 2018
|
|
1H 2019
|
1H 2018
|
|
1H 2019
|
1H 2018
|
|
1H 2019
|
1H 2018
|
Net Sales
|
|
5,598.7
|
5,818.7
|
|
152.6
|
143.5
|
|
(152.6
|
)
|
(142.7
|
)
|
|
5,598.7
|
|
5,819.4
|
|
Cost of sales
|
|
(4,612.4)
|
(4,386.4)
|
|
(124.6)
|
(107.7)
|
|
153.8
|
|
149.0
|
|
|
(4,583.3
|
)
|
(4,345.2
|
)
|
SG&A expenses
|
|
(467.9)
|
(449.1)
|
|
(7.7)
|
(8.7)
|
|
—
|
|
—
|
|
|
(475.6
|
)
|
(457.8
|
)
|
Other operating income, net
|
|
6.6
|
(0.3)
|
|
(0.7)
|
0.6
|
|
—
|
|
—
|
|
|
5.9
|
|
0.3
|
|
Operating income
|
|
524.9
|
982.8
|
|
19.6
|
27.7
|
|
1.2
|
|
6.3
|
|
|
545.7
|
|
1,016.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
839.4
|
1267.1
|
|
43.0
|
55.0
|
|
1.2
|
|
6.3
|
|
|
883.6
|
|
1,328.4
|
|
Steel reporting segment
The steel segment’s operating income was $
524.9
million in the
first half
2019
, a decrease of $
457.9
million compared to the
first half
2018
mainly as a result of higher operating cost per ton and lower shipments partially offset by higher revenue per ton.
Net sales of steel products in the
first half
2019
decreased
3%
compared to the
first half
2018
, reflecting a
307,000
ton decrease in shipments partially offset by higher revenue per ton. Revenue per ton increased
1%
mainly reflecting higher realized steel prices Southern region partially offset by lower realized prices in Mexico and Other Markets and a higher participation of slabs in the sales mix. Shipments decreased
4%
year-over-year due to lower volumes in Mexico and in the Southern Region, partially offset by higher slabs shipments in Other Markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
(million $)
|
|
Shipments
(thousand tons)
|
|
Revenue/ton
($/ton)
|
|
|
1H 2019
|
1H 2018
|
Dif.
|
|
1H 2019
|
1H 2018
|
Dif.
|
|
1H 2019
|
1H 2018
|
Dif.
|
Mexico
|
|
2,798.1
|
|
3,172.8
|
|
-12
|
%
|
|
3,132.7
|
|
3,496.2
|
|
-10
|
%
|
|
893
|
|
907
|
|
-2
|
%
|
Southern Region
|
|
916.6
|
|
952.1
|
|
-4
|
%
|
|
950.0
|
|
1,249.5
|
|
-24
|
%
|
|
965
|
|
762
|
|
27
|
%
|
Other Markets
|
|
1,723.6
|
|
1,502.4
|
|
15
|
%
|
|
2,454.5
|
|
2,098.7
|
|
17
|
%
|
|
702
|
|
716
|
|
-2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total steel products
|
|
5,438.3
|
|
5,627.3
|
|
-3
|
%
|
|
6,537.2
|
|
6,844.5
|
|
-4
|
%
|
|
832
|
|
822
|
|
1
|
%
|
Other products
1
|
|
160.4
|
|
191.4
|
|
-16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel segment
|
|
5,598.7
|
|
5,818.7
|
|
-4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
The item "Other products" primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
|
Operating cost increased 5% due to a 10% increase in cost per ton partially offset by the above-mentioned
4%
decrease in shipments. Cost per ton increased mainly as a result of higher purchased slabs, raw material and energy costs, higher depreciation and amortization, higher maintenance and transportation expenses, and higher taxes partially offset by lower labor costs.
Mining reporting segment
The mining segment’s operating income was a gain of $
19.6
million in the
first half
2019
, compared to a gain of $
27.7
million in the
first half
2018
, mainly reflecting higher operating cost per ton and lower shipments partially offset by higher revenue per ton.
Net sales of mining products in the
first half
2019
were
6%
higher than those in the
first half
2018 as a result of a
12%
increase in revenue per ton, partially offset by a
5%
decrease in shipments.
|
|
|
|
|
|
|
|
|
|
|
|
Mining segment
|
|
|
|
1H 2019
|
1H 2018
|
Dif.
|
|
Net Sales (million $)
|
|
152.6
|
|
143.5
|
|
6
|
%
|
|
Shipments (thousand tons)
|
|
1,755.0
|
|
1,844.9
|
|
-5
|
%
|
|
Revenue per ton ($/ton)
|
|
87
|
|
78
|
|
12
|
%
|
|
Operating cost increased 14% year-over-year, mainly due to an increase of 19% in operating cost per ton, partially offset by the above-mentioned
5%
decrease in shipments.
EBITDA
in the
first half
2019
was $
883.6
million, or
15.8%
of net sales, compared to $
1.3
billion, or
22.8%
of net sales, in the
first half
2018
.
Net financial results
were a loss of $
31.2
million in the
first half
2019
, compared to a $
150.4
million loss in the
first half
2018
. During the
first half
2019
, Ternium’s net financial interest results totaled a loss of $29.1 million, compared to a loss of $51.2 million in the
first half
2018
, reflecting lower average indebtedness.
Net foreign exchange results were a loss of $46.0 million in the
first half
2019
compared to a loss of $90.6 million in the
first half
2018
. The loss in the
first half
2019
was mainly due to the negative non-cash impact of the Argentine peso’s 11.2% depreciation against the U.S. dollar on Ternium Argentina’s US dollar financial position (which applies the Argentine peso as functional currency) and the negative impact of the Mexican peso's 2.7% appreciation 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 $6.6 million loss in the
first half
2019
compared to a $73.6 million loss in the first half 2018. The results in these periods were mainly related to currency hedge transactions in Mexico and Argentina.
The effect of inflation on Ternium’s Argentine subsidiaries and associates’ short net monetary position was a gain of $63.8 million in the
first half
2019 compared to a gain of $53.0 million in the
first half
2018.
Equity in results of non-consolidated companies
was a gain of $
35.2
million in the
first half
2019
, compared to a gain of $
32.3
million in the
first half
2018
.
Income tax expense
in the
first half
2019
was $
119.8
million, or
22%
of income before income tax expense, compared to an income tax expense of $
232.8
million in the
first half
2018
, or
26%
of income before income tax expense. Effective tax rate in the
first half
2019 included a non-cash gain on deferred taxes due to the 2.7% appreciation of the Mexican peso against the U.S. dollar during the
first half
2019 which reduced, 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
first half
2019
was $
31.0
million, compared to net gain of $
33.4
million in the same period in
2018
.
Cash Flow and Liquidity
Net cash provided by operating activities in the
first half
2019
was $
749.6
million. Working capital decreased by $
202.6
million in the
first half
2019
as a result of a $287.7 million decrease in inventories and an aggregate $39.4 million net increase in accounts payable and other liabilities, partially offset by an aggregate $124.5 million net increase in trade and other receivables. The inventory value decrease in the
first half
2019
was mainly due to a $269.1 million lower steel volume; and $33.8 million inventory value decrease in raw materials, supplies and other; partially offset by $15.1 million net higher costs of steel.
Capital expenditures in the
first half
2019
were $
485.1
million, $
255.5
million higher than in the
first half
2018
. The main investments carried out during the
first half
2019
included those made for new hot-rolling, hot-dipped galvanizing and painting production capacity in the company’s Pesquería industrial center, a new steel bar and coil mill in Colombia, improvement of environmental and safety conditions at certain facilities, the expansion of connectivity and equipment automation, and those made in the iron ore mining operations.
In the
first half
2019
, Ternium's free cash flow was $
264.4
million. During the period, the company collected $24.5 million from its non-consolidated company Techgen in connection with loan settlements. In the
first half
2019
, net proceeds from borrowings were $515.6 million and lease payments reached $23.4 million. Net dividends paid to shareholders were USD235.6 million and net dividends paid by subsidiaries to non-controlling interest were USD29.6 million. As of
June 30, 2019
, Ternium’s net debt position was $
1.7
billion.
Net cash provided by operating activities in the
second
quarter
2019
was $269.6 million. Working capital decreased by $31.3 million in the
second
quarter
2019
as a result of a $184.5 million decrease in inventories, partially offset by an aggregate $128.9 million decrease in accounts payable and other liabilities, and an aggregate $24.3 million net increase in trade and other receivables. The inventory value decrease in the
second
quarter
2019
was mainly due to a $178.5 million lower steel volume; and $16.7 million inventory value decrease in raw materials, supplies and other; partially offset by $10.8 million net higher costs of steel. In the
second
quarter
2019
, Ternium's free cash flow
8
was a negative $
4.2
million.
Conference Call and Webcast
Ternium will host a conference call on July 31, 2019, at 8:00 a.m. ET in which management will discuss
second
quarter
2019
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,
HVAC, construction, capital goods, container, food and energy industries through its manufacturing facilities, service center and distribution networks, and advanced customer integration systems. More information about Ternium is available at
www.ternium.com
.
Notes
|
|
1
|
EBITDA in the
second
quarter
2019
equals operating income of $
238.3
million adjusted to exclude depreciation and amortization of $
171.7
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
|
Net debt position at
June 30, 2019
equals borrowings of $2.6 billion less cash and equivalents plus other investments of $0.8 billion.
|
|
|
5
|
Steel operating cost per ton is equal to steel cost of sales plus steel SG&A, divided by shipments.
|
|
|
6
|
EBITDA in the first half 2019 equals operating income of $
545.7
million adjusted to exclude depreciation and amortization of $
337.9
millio
n.
|
|
|
7
|
Free cash flow in the first half 2019 equals net cash provided by operating activities of $
749.6
million less capital expenditures of $
485.1
million.
|
|
|
8
|
Free cash flow in the
second
quarter
2019
equals net cash provided by operating activities of $
269.6
million less capital expenditures of $
273.9
million.
|
Consolidated Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ million
|
|
2Q 2019
|
|
2Q 2018
|
|
1H 2019
|
|
1H 2018
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Net sales
|
|
2,813.4
|
|
|
3,022.4
|
|
|
5,598.7
|
|
|
5,819.4
|
|
Cost of sales
|
|
(2,325.0
|
)
|
|
(2,212.4
|
)
|
|
(4,583.3
|
)
|
|
(4,345.2
|
)
|
Gross profit
|
|
488.3
|
|
|
810.0
|
|
|
1,015.4
|
|
|
1,474.3
|
|
Selling, general and administrative expenses
|
|
(250.4
|
)
|
|
(234.0
|
)
|
|
(475.6
|
)
|
|
(457.8
|
)
|
Other operating income (expenses), net
|
|
0.4
|
|
|
(5.5
|
)
|
|
5.9
|
|
|
0.3
|
|
Operating income
|
|
238.3
|
|
|
570.5
|
|
|
545.7
|
|
|
1,016.7
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
(21.7
|
)
|
|
(31.3
|
)
|
|
(41.7
|
)
|
|
(61.4
|
)
|
Finance income
|
|
6.6
|
|
|
5.3
|
|
|
12.6
|
|
|
10.3
|
|
Other financial income (expenses), net
|
|
9.5
|
|
|
(75.5
|
)
|
|
(2.1
|
)
|
|
(99.3
|
)
|
Equity in earnings of non-consolidated companies
|
|
20.3
|
|
|
12.4
|
|
|
35.2
|
|
|
32.3
|
|
Profit before income tax expense
|
|
253.1
|
|
|
481.4
|
|
|
549.7
|
|
|
898.7
|
|
Income tax expense
|
|
(47.3
|
)
|
|
(192.2
|
)
|
|
(119.8
|
)
|
|
(232.8
|
)
|
Profit for the period
|
|
205.7
|
|
|
289.3
|
|
|
429.9
|
|
|
665.9
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
181.1
|
|
|
293.7
|
|
|
398.9
|
|
|
632.5
|
|
Non-controlling interest
|
|
24.6
|
|
|
(4.4
|
)
|
|
31.0
|
|
|
33.4
|
|
Profit for the period
|
|
205.7
|
|
|
289.3
|
|
|
429.9
|
|
|
665.9
|
|
Consolidated Statement of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
$ million
|
|
|
June 30,
2019
|
|
|
|
December 31,
2018
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
6,375.1
|
|
|
|
|
5,817.6
|
|
|
Intangible assets, net
|
|
|
968.6
|
|
|
|
|
1,012.5
|
|
|
Investments in non-consolidated companies
|
|
|
534.0
|
|
|
|
|
495.2
|
|
|
Deferred tax assets
|
|
|
139.4
|
|
|
|
|
134.2
|
|
|
Receivables, net
|
|
|
621.7
|
|
|
|
|
649.4
|
|
|
Trade receivables, net
|
|
|
2.8
|
|
|
|
|
4.8
|
|
|
Derivative financial instruments
|
|
|
0.2
|
|
|
|
|
0.8
|
|
|
Other investments
|
|
|
5.1
|
|
|
|
|
7.2
|
|
|
Total non-current assets
|
|
|
8,646.9
|
|
|
|
|
8,121.8
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
390.8
|
|
|
|
|
309.8
|
|
|
Derivative financial instruments
|
|
|
0.1
|
|
|
|
|
0.8
|
|
|
Inventories, net
|
|
|
2,447.6
|
|
|
|
|
2,689.8
|
|
|
Trade receivables, net
|
|
|
1,289.5
|
|
|
|
|
1,128.5
|
|
|
Other investments
|
|
|
28.6
|
|
|
|
|
44.5
|
|
|
Cash and cash equivalents
|
|
|
777.5
|
|
|
|
|
250.5
|
|
|
Total current assets
|
|
|
4,934.2
|
|
|
|
|
4,423.9
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets classified as held for sale
|
|
|
2.1
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
13,583.3
|
|
|
|
|
12,547.9
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves attributable to the owners of the parent
|
|
|
6,630.3
|
|
|
|
|
6,393.3
|
|
|
Non-controlling interest
|
|
|
1,137.6
|
|
|
|
|
1,091.3
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
7,767.9
|
|
|
|
|
7,484.6
|
|
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
646.1
|
|
|
|
|
644.0
|
|
|
Deferred tax liabilities
|
|
|
470.2
|
|
|
|
|
474.4
|
|
|
Other liabilities
|
|
|
434.0
|
|
|
|
|
414.5
|
|
|
Trade payables
|
|
|
1.0
|
|
|
|
|
0.9
|
|
|
Lease liabilities
|
|
|
290.0
|
|
|
|
|
65.8
|
|
|
Borrowings
|
|
|
1,829.1
|
|
|
|
|
1,637.1
|
|
|
Total non-current liabilities
|
|
|
3,670.5
|
|
|
|
|
3,236.8
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax liabilities
|
|
|
26.8
|
|
|
|
|
150.3
|
|
|
Other liabilities
|
|
|
321.6
|
|
|
|
|
351.2
|
|
|
Trade payables
|
|
|
1,014.3
|
|
|
|
|
904.2
|
|
|
Derivative financial instruments
|
|
|
3.8
|
|
|
|
|
13.0
|
|
|
Lease liabilities
|
|
|
52.3
|
|
|
|
|
8.0
|
|
|
Borrowings
|
|
|
726.2
|
|
|
|
|
399.9
|
|
|
Total current liabilities
|
|
|
2,144.9
|
|
|
|
|
1,826.5
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,815.4
|
|
|
|
|
5,063.3
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
13,583.3
|
|
|
|
|
12,547.9
|
|
|
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ million
|
|
2Q 2019
|
|
2Q 2018
|
|
1H 2019
|
|
1H 2018
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
205.7
|
|
|
289.3
|
|
|
429.9
|
|
|
665.9
|
|
|
|
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
171.7
|
|
|
154.4
|
|
|
337.9
|
|
|
311.6
|
|
Equity in earnings of non-consolidated companies
|
|
(20.3
|
)
|
|
(12.4
|
)
|
|
(35.2
|
)
|
|
(32.3
|
)
|
Changes in provisions
|
|
1.7
|
|
|
(0.1
|
)
|
|
(2.7
|
)
|
|
1.0
|
|
Net foreign exchange results and others
|
|
4.9
|
|
|
69.8
|
|
|
1.0
|
|
|
67.4
|
|
Interest accruals less payments
|
|
8.7
|
|
|
5.5
|
|
|
8.3
|
|
|
(7.1
|
)
|
Income tax accruals less payments
|
|
(134.0
|
)
|
|
67.5
|
|
|
(192.4
|
)
|
|
(32.7
|
)
|
Changes in working capital
|
|
31.3
|
|
|
(35.5
|
)
|
|
202.6
|
|
|
(248.1
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
269.6
|
|
|
538.4
|
|
|
749.6
|
|
|
725.8
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(273.9
|
)
|
|
(131.9
|
)
|
|
(485.1
|
)
|
|
(229.6
|
)
|
Proceeds from the sale of property, plant & equipment
|
|
0.3
|
|
|
0.2
|
|
|
0.5
|
|
|
0.4
|
|
Recovery/ (Loans) to non-consolidated companies
|
|
—
|
|
|
4.8
|
|
|
24.5
|
|
|
—
|
|
Decrease in Other Investments
|
|
35.2
|
|
|
13.7
|
|
|
17.9
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(238.4
|
)
|
|
(113.2
|
)
|
|
(442.2
|
)
|
|
(222.9
|
)
|
|
|
|
|
|
|
|
|
|
Dividends paid in cash to company’s shareholders
|
|
(235.6
|
)
|
|
(215.9
|
)
|
|
(235.6
|
)
|
|
(215.9
|
)
|
Dividends paid in cash to non-controlling interest
|
|
(29.6
|
)
|
|
(20.9
|
)
|
|
(29.6
|
)
|
|
(20.9
|
)
|
Finance Lease Payments
|
|
(10.6
|
)
|
|
(2.5
|
)
|
|
(23.4
|
)
|
|
(3.8
|
)
|
Proceeds from borrowings
|
|
703.2
|
|
|
298.9
|
|
|
869.4
|
|
|
526.0
|
|
Repayments of borrowings
|
|
(143.7
|
)
|
|
(477.7
|
)
|
|
(353.8
|
)
|
|
(885.4
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
283.7
|
|
|
(418.2
|
)
|
|
227.0
|
|
|
(600.0
|
)
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in cash and cash equivalents
|
|
315.0
|
|
|
7.1
|
|
|
534.3
|
|
|
(97.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipments
|
|
|
|
Thousand tons
|
|
2Q 2019
|
2Q 2018
|
1Q 2019
|
|
1H 2019
|
1H 2018
|
|
|
|
|
|
|
|
|
Mexico
|
|
1,569.3
|
|
1,721.7
|
|
1,563.4
|
|
|
3,132.7
|
|
3,496.2
|
|
Southern Region
|
|
507.8
|
|
604.2
|
|
442.3
|
|
|
950.0
|
|
1,249.5
|
|
Other Markets
|
|
1,255.7
|
|
995.8
|
|
1,198.8
|
|
|
2,454.5
|
|
2,098.7
|
|
Total steel segment
|
|
3,332.7
|
|
3,321.6
|
|
3,204.5
|
|
|
6,537.2
|
|
6,844.5
|
|
|
|
|
|
|
|
|
Total mining segment
|
|
835.1
|
|
915.6
|
|
919.9
|
|
|
1,755.0
|
|
1,844.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue / ton
|
|
|
|
$/ton
|
|
2Q 2019
|
2Q 2018
|
1Q 2019
|
|
1H 2019
|
1H 2018
|
|
|
|
|
|
|
|
|
Mexico
|
|
873
|
|
963
|
|
913
|
|
|
893
|
|
907
|
|
Southern Region
|
|
955
|
|
792
|
|
976
|
|
|
965
|
|
762
|
|
Other Markets
|
|
695
|
|
781
|
|
710
|
|
|
702
|
|
716
|
|
Total steel segment
|
|
818
|
|
877
|
|
846
|
|
|
832
|
|
822
|
|
|
|
|
|
|
|
|
|
Total mining segment
|
|
92
|
|
81
|
|
82
|
|
|
87
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
$ million
|
|
2Q 2019
|
2Q 2018
|
1Q 2019
|
|
1H 2019
|
1H 2018
|
|
|
|
|
|
|
|
|
Mexico
|
|
1,370.6
|
|
1,657.4
|
|
1,427.5
|
|
|
2,798.1
|
|
3,172.8
|
|
Southern Region
|
|
484.9
|
|
478.5
|
|
431.7
|
|
|
916.6
|
|
952.1
|
|
Other Markets
|
|
872.2
|
|
778.0
|
|
851.4
|
|
|
1,723.6
|
|
1,502.4
|
|
Total steel products
|
|
2,727.7
|
|
2,913.9
|
|
2,710.6
|
|
|
5,438.3
|
|
5,627.3
|
|
Other products
1
|
|
85.7
|
|
107.9
|
|
74.7
|
|
|
160.4
|
|
191.4
|
|
Total steel segment
|
|
2,813.4
|
|
3,021.8
|
|
2,785.3
|
|
|
5,598.7
|
|
5,818.7
|
|
|
|
|
|
|
|
|
|
Total mining segment
|
|
76.8
|
|
73.7
|
|
75.8
|
|
|
152.6
|
|
143.5
|
|
|
|
|
|
|
|
|
|
Total steel and mining segments
|
|
2,890.2
|
|
3,095.6
|
|
2,861.1
|
|
|
5,751.3
|
|
5,962.2
|
|
|
|
|
|
|
|
|
|
Intersegment eliminations
|
|
(76.8)
|
|
(73.1)
|
|
(75.8)
|
|
|
(152.6)
|
|
(142.7)
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
2,813.4
|
|
3,022.4
|
|
2,785.3
|
|
|
5,598.7
|
|
5,819.4
|
|
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.
|
|
|
|
|
$ million
|
|
1Q 2019
|
|
|
(Unaudited)
|
Net sales
|
|
2,785.3
|
|
Cost of sales
|
|
(2,258.2
|
)
|
Gross profit
|
|
527.1
|
|
Selling, general and administrative expenses
|
|
(225.2
|
)
|
Other operating income, net
|
|
5.5
|
|
Operating income
|
|
307.5
|
|
|
|
|
Finance expense
|
|
(20.0
|
)
|
Finance income
|
|
6.0
|
|
Other financial expenses, net
|
|
(11.7
|
)
|
Equity in earnings of non-consolidated companies
|
|
14.9
|
|
Profit before income tax expense
|
|
296.6
|
|
Income tax expense
|
|
(72.5
|
)
|
Profit for the period
|
|
224.2
|
|
|
|
|
Attributable to:
|
|
|
Owners of the parent
|
|
217.8
|
|
Non-controlling interest
|
|
6.4
|
|
Profit for the period
|
|
224.2
|
|
|
|
|
EBITDA
1
|
|
473.6
|
|
|
|
1
|
EBITDA equals operating income of $
307.5
million in the first quarter 2019, adjusted to exclude depreciation and amortization of USD
166.2
million.
|
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 quarter of 2019.