Ternium(US:TX)2020-08-05 23:58Financial Data and Key Metrics Changes - Ternium's EBITDA decreased sequentially in Q2 2020 to $224 million, attributed to lower shipments and slightly lower EBITDA per ton [25] - Net income for the period was $44 million, compared to a net loss of $19 million in Q1 2020, which included significant currency depreciation effects [26][34] - Free cash flow for Q2 2020 was $393 million, leading to a reduction in net debt to just over $900 million, resulting in a net debt to last 12-month EBITDA ratio of 0.8 times [17][18][36] Business Line Data and Key Metrics Changes - Steel shipments decreased by 18% sequentially to 2.44 million tons in Q2 2020, with a 25% year-over-year decline in Mexico and a 32% year-over-year decline in the Southern Region [27][31] - The average realized price decreased by 6% in Q2 2020, reflecting lower prices in the spot market, particularly in Mexico [32] Market Data and Key Metrics Changes - In Mexico, production is approaching normal rates, with a gradual return of activity in the auto industry and other manufacturing sectors [19] - Brazil's slab facility increased production from minimum technical levels due to improved local steel demand, while Argentina expects a sequential volume increase driven by construction and agribusiness [20][21] Company Strategy and Development Direction - The company focused on optimizing production and overhead costs to sustain margins during the pandemic, achieving a 13% EBITDA margin despite a challenging environment [15] - Ternium is committed to maintaining a conservative balance sheet management approach amid ongoing uncertainties related to the pandemic [18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding demand recovery in various sectors, particularly in industrial production, while noting that construction remains weak [42] - The company anticipates a sequential increase in shipments in Q3 2020, supported by improved market conditions, although uncertainty regarding COVID-19 persists [23] Other Important Information - Ternium established a $5.5 million fund to support health initiatives in response to COVID-19, including building field hospitals and supplying medical equipment [11] - The company issued its first Sustainability Report following GRI guidelines, enhancing transparency and data comparability [13] Q&A Session Summary Question: Demand outlook for different sectors in Mexico - Management noted strong demand in the industrial sector, particularly in automotive and appliances, while construction remains below expectations [41] Question: Outlook for slab exports to the U.S. - Management indicated no immediate changes in slab export quotas to the U.S. and noted current profitability favors exporting slabs elsewhere [43] Question: Cost performance despite volume declines - Management attributed cost reductions to operational flexibility and strict control of general expenses, aiming to maintain this performance in future quarters [49] Question: Pricing pressures in North America - Management explained that low prices in North America are driven by weak demand and competition among domestic steel mills, with expectations for a rebound [56][58] Question: Dividend policy and future payments - Management confirmed the suspension of dividends for 2020 but indicated a possibility of resuming payments in 2021 if conditions improve [72][74] Question: Free cash flow and balance sheet management - Management expects positive free cash flow in the second half of 2020, although working capital levels may increase with rising volumes [80][82] Question: Demand recovery in Argentina - Management highlighted challenges in Argentina but noted improvements in certain sectors like agribusiness and construction [102]