TERNIUM S.A. +1 (866) 890 0443
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www.ternium.com
Luxembourg, November 3, 2015 - Ternium S.A. (NYSE: TX) today announced its results for the third quarter and first nine months ended September 30, 2015.
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.
3Q 20141
3Q 2015 2Q 2015
Steel Shipments (tons) | 2,463,000 | 2,397,000 | 3% | 2,335,000 | 5% |
Iron Ore Shipments (tons) | 892,000 | 873,000 | 2% | 1,006,000 | -11% |
Net Sales (USD million) | 1,945.4 | 1,996.1 | -3% | 2,218.3 | -12% |
Operating Income (USD million) | 140.5 | 103.1 | 36% | 314.5 | -55% |
EBITDA2 (USD million) | 250.4 | 212.2 | 18% | 423.0 | -41% |
EBITDA per Ton3 (USD) | 101.7 | 88.5 | 181.1 | ||
EBITDA Margin (% of net sales) | 12.9% | 10.6% | 19.1% | ||
Equity in Results of Non-Consolidated Companies | (48.8) | (1.1) | (748.8) | ||
Net Income (Loss) (USD million) | 40.0 | 50.5 | (544.1) | ||
Equity Holders' Net Income (Loss) (USD million) | 24.8 | 41.0 | (530.9) | ||
Earnings (Loss) per ADS (USD) | 0.13 | 0.21 | (2.70) |
1 On May 28, 2015, Ternium restated its interim consolidated financial statements as of September 30, 2014 to reduce the carrying amount of its Usiminas investment. As a result of that restatement, the consolidated financial statements as of December 31, 2014 and March 31, 2015 and for the periods then ended were also restated to reflect a lower carrying amount of the Usiminas investment.
2 EBITDA in the third quarter 2015 equals operating income of USD140.5 million adjusted to exclude depreciation and amortization of USD109.9 million.
3 Consolidated EBITDA divided by steel shipments.
1
EBITDA of USD250.4 million in the third quarter 2015, USD38.2 million higher than EBITDA in the second quarter 2015 mainly reflecting higher shipments and lower costs, partially offset by lower steel prices.
Earnings per American Depositary Share (ADS)4 of USD0.13 in the third quarter 2015, a sequential decrease of USD0.08 per ADS mainly due to lower results from Ternium's investment in Usiminas, partially offset by higher operating income.
Capital expenditures of USD115.3 million in the third quarter 2015, down from USD143.6 million in the second quarter 2015.
Net debt position of USD1.3 billion at the end of September 2015, down from USD1.5 billion at the end of June 2015 and equivalent to 1.2 times net debt to last twelve months EBITDA.
Ternium's operating income in the third quarter 2015 was USD140.5 million, up sequentially by USD37.4 million due to higher operating margin5 and shipments. Operating margin increased sequentially mainly as a result of USD56 lower operating cost per ton6 partially offset by USD37 lower steel revenue per ton. The decrease in operating cost per ton was mainly due to lower purchased slabs, raw material and labor costs. Steel revenue per ton decreased principally as a result of lower realized steel prices in Mexico.
Compared to the third quarter 2014, the company's operating income in the third quarter 2015 decreased by USD174.0 million as a result of lower operating margin, partially offset by higher shipments. Operating margin in the third quarter 2015 decreased year-over-year mainly due to a USD157 decrease in steel revenue per ton, partially offset by a USD107 decrease in operating cost per ton. Steel revenue per ton decreased principally as a result of lower steel prices in Ternium's main steel markets. The decrease in operating cost per ton was mainly due to lower purchased slabs, raw material and energy costs.
Net income in the third quarter 2015 was USD40.0 million, a decrease of USD10.5 million compared to net income in the second quarter 2015 mainly due to USD45.7 million lower results from Ternium's investment in Usiminas and a higher effective tax rate, partially offset by the above mentioned increase in operating income.
Net income in the third quarter 2015 compared with a net loss of USD544.1 million in the third quarter 2014. The USD584.1 million higher result in the year-over-year comparison was mainly due to a USD739.8 million impairment of Ternium's investment in Usiminas in the third quarter 2014 and a lower year-over-year income tax expense, partially offset by the above mentioned lower operating income.
4 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.
5 Operating margin is equal to revenue per ton less operating cost per ton.
6 Operating cost per ton is equal to cost of sales plus SG& A, divided by shipments.
Summary of First Nine Months of 2015 Results9M 20141
9M 2015
Steel Shipments (tons)
7,291,000
7,027,000
4%
Iron Ore Shipments (tons)
2,729,000
2,835,000
-4%
Net Sales (USD million)
6,067.5
6,571.5
-8%
Operating Income (USD million)
447.7
864.9
-48%
EBITDA (USD million)
776.0
1,170.1
-34%
EBITDA per Ton (USD)
106.4
166.5
EBITDA Margin (% of net sales)
12.8%
17.8%
Net Income (Loss) (USD million)
186.3
(175.6)
Equity Holders' Net Income (Loss) (USD million)
134.3
(251.8)
Earnings (Loss) per ADS (USD)
0.68
(1.28)
EBITDA7 of USD776.0 million in the first nine months of 2015, down from EBITDA of USD1.2 billion in the first nine months of 2014.
Earnings per ADS8 of USD0.68 in the first nine months of 2015, compared to a USD1.28 loss per ADS in the first nine months of 2014, which included an impairment of Ternium's investment in Usiminas.
Capital expenditures of USD342.8 million in the first nine months of 2015, compared to USD334.8 million in the first nine months of 2014.
Net debt decrease of USD461.1 million in the first nine months of 2015. Of note in the period were a decrease of USD459.8 million in working capital and USD209.4 million dividend payments.
Operating income in the first nine months of 2015 was USD447.7 million, USD417.2 million lower than operating income in the first nine months of 2014. Steel shipments increased by 263,000 tons year-over- year, mainly as a result of a 320,000 ton increase in Mexico and a 39,000 ton increase in the Southern Region, partially offset by a 95,000 ton decrease in Other Markets. Operating margin decreased, mainly reflecting USD102 lower steel revenue per ton, partially offset by USD50 lower operating cost per ton. Steel revenue per ton decreased as a result of lower steel prices in Ternium's main steel markets, partially offset by a higher value added product mix. The decrease in operating cost per ton was mainly due to lower purchased slabs, raw material and energy costs.
Net income in the first nine months of 2015 was USD186.3 million, compared to USD175.6 million net losses in the first nine months of 2014. The USD361.8 million higher result in the year-over-year comparison was mainly due to the above mentioned impairment of Ternium's investment in Usiminas in the third quarter 2014, and lower year-over-year income tax expense and net financial results, partially offset by lower operating income.
7 EBITDA in the first nine months 2015 equals operating income of USD447.7 million adjusted to exclude depreciation and amortization of USD328.3 million.
8 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.
Shipments in Mexico during the third quarter 2015 increased 5% sequentially and 11% year-over-year, returning to the record levels of this year's first quarter. Shipments to automotive, home-appliance and other industrial customers in the country continue to drive Ternium's growth in Mexico, while shipments to customers in the construction sector are growing, albeit not at the same pace. The fourth quarter of this year is expected to see a sequential decrease in shipments in Mexico, related in part to end-of-year seasonality, but also to a planned 30-day stoppage of Ternium's hot rolling mill in connection with an upgrade of the line that will enable a wider product range.
Shipments in Argentina remained sequentially stable in the third quarter 2015. While shipments in the fourth quarter of the year should follow the same trend, current conditions of the local steel market could change in 2016.
After a relatively stable second quarter 2015, steel prices in the NAFTA markets resumed a downward trend by the end of the third quarter of the year, pressured by high levels of low-priced steel imports into the region, largely under unfair trade conditions. Ternium, however, expects to realize sequentially stable steel prices in Mexico in the fourth quarter 2015, reflecting, with some lag related to the regular price resets contained in industrial customer sales contracts, the steel price stability seen through the end of the third quarter.
The company anticipates that operating income will increase in the fourth quarter 2015 compared to the third quarter of the year, mainly as a result of higher operating margin partially offset by lower shipments. Prices of iron ore, coking coal, scrap and energy continue to decline as a result of the impact of China's economic slowdown on the world's commodities and energy markets. Consequently, Ternium expects that cost per ton will continue to decrease in the upcoming quarters, with a gradual pass-through to costs of lower prices of raw materials and purchased slabs.
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