Ternium(TX) - 2024 Q4 - Annual Report

Financial Performance - Ternium S.A. reported its annual financial results for the year ended December 31, 2024, with a focus on operational data and consolidated financial statements prepared in accordance with IFRS[5][14]. - In 2024, Ternium's net sales reached $17,649 million, a slight increase of 0.2$17,610 million in 2023[53]. - Ternium's net income for 2024 was $174 million, significantly down from$986 million in 2023, impacted by a $410 million provision for ongoing litigation[45][48]. - Adjusted EBITDA decreased by 26$2,038 million, with an adjusted EBITDA margin of 12% compared to 16% in 2023[48]. - The operating income decreased to $1,263 million in 2024 from$2,198 million in 2023, reflecting a significant decline of 42.4%[53]. - The net financial results showed a loss of $194 million in 2024, compared to a gain of$123 million in 2023[56]. - Basic earnings per ADS were $(0.27) in 2024, down from$3.44 in 2023, while adjusted earnings per ADS were $1.61[48]. - Ternium maintained a robust net cash position of$1.6 billion as of December 31, 2024, despite significant cash disbursements[64]. - Cash from operations was $1.9 billion in 2024, with capital expenditures also amounting to$1.9 billion[63]. - Ternium's total financial debt was $2.2 billion as of December 31, 2024, with a weighted average cost of debt at 8.83$2.70 per ADS, totaling $530 million, to be approved at the upcoming shareholders' meeting[47]. - The annual dividend includes an interim dividend of$0.90 per ADS, totaling $177 million, paid in November 2024, and a proposed net dividend of$1.80 per ADS, totaling $353 million, to be paid on May 14, 2025[80]. Risks and Challenges - Ternium's operations are affected by fluctuations in industry inventory levels and supply chain disruptions, which can lead to irregular purchasing volumes[123]. - The steel industry faces risks from excess production capacity, particularly in China, which could lead to unfair trade practices and increased competition[120]. - Ternium's acquisitions and investments may not perform as expected, potentially impacting operations and profits[134]. - Uncertainty regarding global economic activity remains high, influenced by recent U.S. trade actions and geopolitical tensions[115]. - Ternium's operations in Argentina, Brazil, and Mexico are vulnerable to extreme weather events, which could materially damage production facilities and infrastructure, adversely affecting financial results[165]. - Ternium does not carry business interruption insurance, and existing property damage and general liability insurance may not adequately cover potential losses from extreme weather events[171]. - Labor disputes could lead to work stoppages, negatively impacting Ternium's operations and results[149]. - Ternium's operations are exposed to foreign currency exchange rate fluctuations, which could adversely affect financial results[153]. - Cybersecurity threats have increased in sophistication and frequency, with the manufacturing sector being particularly vulnerable to ransomware attacks in 2024[156]. - Ternium does not currently maintain cybersecurity insurance, which may leave it exposed to financial losses from cyber events[162]. Mining Operations and Regulatory Environment - Ternium has equity interests in two iron ore mining companies, with a 100% interest in Las Encinas and a 50% interest in Consorcio Peña Colorada, both of which are subject to operational and environmental risks[172]. - The company faces potential liabilities from environmental damages caused by mining operations, which could materially affect margins, cash flow, and profitability[176]. - Ternium's mining activities are subject to significant regulatory risks, including potential revocation of concessions if compliance with obligations is not met[181]. - Exploration activities are speculative and may not yield expected results, with substantial costs incurred that could adversely affect the company's business if sufficient ore resources are not found[186]. - Ternium's mining operations in Mexico may face increased costs and delays due to the need for continuous investment in equipment and compliance with environmental regulations[188]. - The company may need to substitute self-produced lower-cost iron ore with third-party iron ore, potentially increasing steel production costs if mining activities are not maintained[188]. - Ternium's financial condition could be adversely affected by difficulties in maintaining relationships with local communities, which may lead to disruptions in mining operations[191]. - Recent violence and crime in Mexico have worsened the security situation, potentially leading to temporary or permanent shutdowns of mining operations[194]. - The company is subject to increased scrutiny from tax authorities globally, which may impact financial results due to potential disputes over transfer pricing and double taxation[196]. - Ternium is preparing for the implementation of the OECD's Pillar 2 global minimum taxation framework, effective from 2024[198].