Ternium(US:TX)2020-02-19 22:41Financial Data and Key Metrics Changes - In 2019, the company reported an EBITDA of $1.5 billion on shipments of 12.5 million tons, with an EBITDA margin of 15% [7][25] - Free cash flow reached $595 million, and net debt was reduced to $1.5 billion, resulting in a net debt-to-EBITDA ratio of 1 [8][39] - The proposed annual dividend was $1.20 per ADS, equating to a dividend yield of 6% and a payout ratio of 42% [8][40] Business Line Data and Key Metrics Changes - The fourth quarter EBITDA was $263 million, with an EBITDA margin of 12%, reflecting a low pricing environment in North America [26] - Shipments in Mexico decreased by 4% due to lower demand, but market share increased [14][30] - In Argentina, shipments decreased by 16% compared to 2018, with expectations for stability in 2020 [17][18] Market Data and Key Metrics Changes - Steel apparent consumption in Mexico decreased by 6%, primarily due to weak construction activity [13] - The Brazilian steel market showed signs of improvement, with local companies expected to increase slab purchases [22] - The overall steel shipments decreased by 5% sequentially in the fourth quarter and 2% year-over-year [33] Company Strategy and Development Direction - The company plans to complete expansion projects in Mexico and Colombia, including a new rebar mill in Colombia and a hot rolling mill in Mexico [24] - The ratification of the USMCA agreement is expected to reduce trade uncertainties and foster investment in the North American steel industry [16] - The company is considering both organic growth and potential M&A opportunities in the Americas [44][56] Management Comments on Operating Environment and Future Outlook - The management expects a gradual improvement in margins throughout 2020, with the fourth quarter being the lowest point [9][23] - The impact of the coronavirus outbreak on the steel market is currently unclear, but no significant effects are anticipated at this time [12] - The management is cautiously optimistic about the construction activity rebound in Mexico, expecting improvements in 2020 and stronger growth in 2021 [46][48] Other Important Information - The company will change the functional currency of its Argentine subsidiary to the U.S. dollar starting January 1, 2020, to reduce earnings volatility [38] - Capital expenditures in 2019 reached $1.1 billion, with expectations to remain high in 2020 at approximately $800 million [39] Q&A Session Summary Question: Long-term strategy and capital allocation - The company is focused on completing current investments and is analyzing future organic growth projects in Mexico, Colombia, and Brazil [54][56] Question: Construction activity rebound in Mexico - Management expects a slight improvement in 2020, with a more significant rebound anticipated in 2021 [46][48] Question: Capacity concerns in Mexico - The company believes it can manage increased capacity without issues due to strong demand and competitive cost structure [50][51] Question: EBITDA per ton expectations for the new facility in Colombia - The new facility is expected to improve margins by substituting imports and increasing production of high-end products [66] Question: Working capital sustainability - The company anticipates stable working capital levels, with no significant fluctuations expected in 2020 [75] Question: Price expectations for the first and second quarters - Prices are expected to improve in the second quarter, with higher volumes anticipated in the first quarter [114] Question: SG&A increase explanation - The increase was due to a new asset tax in Argentina and higher amortization costs related to a long-term contract [116][118]