Ternium(US:TX)2020-04-29 23:36Financial Data and Key Metrics Changes - Ternium reported EBITDA of $302 million for Q1 2020, with an EBITDA margin of 13% of net sales and EBITDA per ton at $101 [27][36] - The company experienced a net loss of $19 million or $0.06 per ADS, which included a non-cash deferred tax loss of $189 million due to a 20% depreciation of the Mexican peso [29][38] - Cash from operations was strong at $443 million, with free cash flow after tax at $180 million for the first quarter [38] Business Line Data and Key Metrics Changes - Shipments in Mexico increased sequentially and year-over-year, with a notable increase in market share despite a soft construction environment [30] - In Argentina, shipments decreased significantly due to strict lockdowns, with expectations for gradual volume increases as restrictions ease [32][74] - Brazil's slab facility operated at technical minimums due to weak global demand, with plans to offset this by shipping to other markets [22][33] Market Data and Key Metrics Changes - The automotive industry in Mexico is expected to gradually reopen in May, impacting steel demand positively [20][50] - The construction sector in Mexico showed weaker demand in April, with expectations for gradual recovery [21][25] - In Argentina, the lockdown has severely impacted operations, but a gradual increase in shipments is anticipated as restrictions are lifted [24][32] Company Strategy and Development Direction - The company is focused on safeguarding employee health during the COVID-19 outbreak, implementing strict safety measures [9][12] - Ternium is optimizing production and overhead costs, reducing general expenses, and postponing capital expenditure projects to preserve cash [18][19] - The Board of Directors decided to withdraw the annual dividend proposal for fiscal year 2019 due to uncertainty in the market [19][60] Management Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding the impact of COVID-19 on the global economy and steel demand, emphasizing a cautious approach [8][19] - The company expects a sequential decrease in EBITDA and shipments in Q2 2020, with a projected overall market volume drop of around 30% [28][46] - Management anticipates a gradual recovery in demand, particularly in the automotive sector, with shipments expected to increase in the second half of the year [50][74] Other Important Information - Ternium is actively supporting local communities by donating medical equipment and establishing a field hospital in Monterrey, Mexico [14] - The company has a strong financial position, with net debt decreasing to $1.3 billion and a cash position of $1 billion as of March 31, 2020 [40] Q&A Session Summary Question: Conditions for Resuming Dividends - Management indicated that the decision to resume dividends will depend on visibility and clarity regarding steel demand, emphasizing a prudent approach given current uncertainties [42][44] Question: Volume Expectations Going Forward - Management expects a 30% decrease in overall shipments in Q2, with a gradual recovery anticipated thereafter, particularly in the automotive sector [46][50] Question: CapEx Outlook - CapEx for 2020 is expected to decrease significantly, with plans to postpone some projects to 2021 [58][60] Question: Costs Associated with COVID-19 Measures - Management noted that while there are costs associated with COVID-19 measures, they do not expect a significant increase in overall costs, and some savings are anticipated from renegotiated contracts [85][86] Question: Working Capital Expectations - Management is focused on reducing working capital and expects positive results in the second quarter despite challenges [103]