Ternium(TX) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Ternium reported an adjusted EBITDA of $368 million and a net income of$ 93 million for Q3 2024, with margins declining primarily due to decreased realized prices in the main market [6][28]. - The net cash position declined to $1.7 billion, attributed to decreased EBITDA and increased working capital alongside higher capital expenditures [33]. Business Line Data and Key Metrics Changes - The Steel segment saw increased shipments across key markets, but sales remained steady due to a decline in revenue per ton driven by lower realized steel prices [30][31]. - The Mining segment experienced a 13% sequential increase in shipments, although net sales were stable due to lower iron-ore market prices, leading to decreased margins [32]. Market Data and Key Metrics Changes - In Mexico, steel consumption remains healthy with record high shipments, although a decline is expected in Q4 due to seasonal weakness [7][10]. - Brazil's steel consumption grew by 9% year-over-year in the first nine months of 2024, but flat steel imports surged by 20% year-over-year, prompting government action against unfair trade [12][13]. - Argentina's steel volumes have shown recovery, with expectations for stable shipments in Q4 despite seasonal slowdowns [14]. Company Strategy and Development Direction - Ternium is optimistic about the Mexican market, anticipating growth in automotive production and infrastructure projects [10][11]. - The company is focused on expanding its production capacity through significant capital expenditures, including new facilities in Pesquería and a wind farm in Argentina [15][16][20]. - Ternium aims to enhance its product offerings and operational efficiency while reducing dependency on external suppliers [19][20]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in Ternium's performance in 2025, citing opportunities in key markets and expected margin improvements due to lower raw material costs [25]. - The new Mexican administration's commitment to industrialization and import substitution is seen as beneficial for the steel market [11][43]. Other Important Information - Ternium's Board announced an interim dividend of$ 0.90 per ADS, totaling $177 million, representing a dividend yield of about 8% based on the current share price [35][36]. - The company published its latest Sustainability Report, which includes updates on decarbonization targets and emissions reporting [21][22]. Q&A Session Summary Question: Dividend cut rationale and future expectations - Management explained that the nominal reduction in dividends was necessary due to decreased EBITDA and increased capital expenditures, but the payout ratio remains high at around 70% [44][46]. Question: Outlook for North American steel industry - Management highlighted the overcapacity issue in China and the competitive nature of North American steel production, emphasizing the region's focus on low-carbon intensity steel [51][53]. Question: Steel imports in Brazil and government actions - Management noted that the Brazilian government is addressing steel imports through a quota system, but loopholes exist that need to be closed [62]. Question: Future investments and CapEx plans - Management confirmed that total CapEx for 2025 is expected to be around$ 2.3 billion, primarily focused on the Pesquería project [67].