The banking and operational advice independent in this columnist absolution is based on Ternium S.A.’s
operational abstracts and circumscribed banking statements able in accordance with International Banking Reporting Standards (IFRS) and presented in US dollars ($) and metric tons.
Summary of Aboriginal Division 2020 Results
Animate Shipments (tons)
Iron Ore Shipments (tons)
Net Sales ($ million)
Operating Assets ($ million)
EBITDA2 ($ million)
EBITDA Allowance (% of net sales)
EBITDA per Ton3 ($)
Banking Result, Net ($ million)
Assets Tax Aftereffect ($ million)
Net Aftereffect ($ million)
Disinterestedness Holders’ Net Aftereffect ($ million)
(Losses) Balance per ADS4 ($)
Ternium’s animate shipments in the aboriginal division 2020 accomplished 3.0 actor tons. In Mexico, the company’s basic animate market, shipments were 1.6 actor tons, accretion 6% over the aforementioned aeon in 2019 and 7% on a consecutive basis. In the aboriginal division 2020 Ternium was able to access its accord in the Mexican bartering market, in a bendable ambiance for architecture activity. By the end of March 2020, our automated barter in Mexico started to face decreased appeal levels, decidedly the automotive industry, afflicted by the COVID-19 outbreak. During the aboriginal division 2020, Ternium connected ramping up its new galvanizing and painting accessories at its Pesquería assemblage and added its bazaar allotment adjoin imports which, however, connected to represent a cogent allotment of absolute collapsed animate burning in the country.
In the Southern Region, Ternium’s shipments were 379,600 bags in the aboriginal division 2020, a abatement of 14% compared to the aforementioned aeon in 2019 and of 22% on a consecutive basis. The Argentine animate bazaar remained anemic during the aboriginal quarter, absorption seasonally low appeal levels and the artifice of a binding lockdown in Argentina aback March 20, 2020, accompanying to the COVID-19 outbreak.
In the Added Markets region, Ternium’s absolute animate shipments were 968,900 bags in the aboriginal division 2020, a abatement of 19% compared to accession volumes in the aforementioned aeon in 2019 and an access of 9% compared to the antecedent quarter. Changes in accession volumes were mainly due to changes in slab volumes alien from Ternium’s Brazilian assemblage to third parties, as slabs alien to added Ternium’s facilities, mainly to Mexico, are netted out in the alliance of Ternium’s banking statements. The Colombian animate market, one of Ternium’s basic markets for accomplished articles in the region, was afflicted in the aeon by the artifice of binding lockdowns aback March 20, 2020 accompanying to the COVID-19 outbreak.
With net sales of $2.3 billion, Ternium’s operating assets and EBITDA in the aboriginal division 2020 accomplished $135.7 actor and $302.1 million, respectively. EBITDA allowance was 13% in the aboriginal division 2020, and EBITDA per ton added $11 sequentially to $101, absorption lower amount per ton, mainly due to lower raw absolute and action costs, partially account by hardly lower acquirement per ton.
The company’s net aftereffect in the aboriginal division 2020 was a $19.4 actor loss, abnormally afflicted by a $189.1 actor non-cash deferred tax accident due to the cogent abrasion of the Mexican peso adjoin the U.S. dollar in the period. In addition, net banking after-effects were a accretion of $106.2 actor in the aboriginal division 2020, mainly due to the Mexican peso and Brazilian absolute abrasion of 20% and a 23%, respectively, adjoin the US dollar.
COVID-19 Mitigation Measures
The COVID-19 beginning is impacting bread-and-butter action worldwide. Each country in which Ternium operates has adopted different measures in acknowledgment to the pandemic, and as a result, the aggregation is adopting assorted strategies to abate impacts on its automated facilities’ run rates, decidedly in acknowledgment to bargain animate bazaar demand.
In accession to operational changes, Ternium is focused on attention the bloom and assurance of its employees, barter and suppliers throughout its automated arrangement based on best practices that accede with bounded authoritative directives. Above implementing work-from-home behavior wherever possible, Ternium has looked to assure the assurance of those advisers alive on-site by adopting acrimonious amusing distancing, temperature analysis and ablution behavior at all transportation, armpit admission, alive column and cafeteria locations.
The aggregation additionally is allowance to abutment and strengthen the basement of key hospitals aural its communities as they abode accretion accommodating admissions and analysis needs. Its efforts accommodate the donation of ventilators, accessories for accelerated affliction and assurance kits for bloom professionals, as able-bodied the architecture and operation of a acreage hospital for the association in Monterrey, Mexico with 100 beds and an accelerated affliction unit.
Ternium is adjusting its operations on a country-by-country abject to accede with applicative rules and requirements and acclimate to a rapidly evolving scenario. In Mexico, the aggregation continues to accomplish its basic assembly lines, affair bargain bazaar demand, mainly from the auto industry and, to a bottom extent, from the architecture sector, but additionally gradually from added industries as they calibration aback operations. In Argentina and Colombia, Ternium has bargain its action afterward the artifice of binding lockdowns in these countries, and its Argentine bang furnace, animate boutique and coke oven batteries are currently operating at abstruse minimums. Further, the aggregation has accomplished operations in best of its added productions curve in Argentina and Colombia, with the barring of shipments to basic sectors such as food, bloom and action in both countries. In Brazil, Ternium’s slab ability is operating at abstruse minimums due to lower forecasted demand.
To abate the aftereffect of these government-mandated restrictions and bargain animate demand, the aggregation is utilizing its adapted automated abject and implementing several measures, which should accommodate cogent operational and bartering flexibility. These accommodate capitalizing on automated affiliation opportunities amid its accessories in adjustment to abate run rates, optimizing assembly and aerial costs and aspersing account buildups and alive basic needs. Ternium additionally is focused on absolute as abutting as anytime to its customers.
Ternium’s banking contour charcoal robust, and the aggregation is demography added accomplish to ensure its connected backbone and resiliency. As of March 31, 2020, the aggregation had net debt of $1.3 billion and a acquiescent debt acquittal schedule. In adjustment to abate the appulse of accepted lower sales, the aggregation has slowed bottomward or adjourned several basic amount projects above its facilities. For example, Ternium currently expects to adjournment the startup of its new hot-rolling comminute in the Pesquería assemblage in Mexico to the aboriginal bisected of 2021 and its new animate bar and braid comminute in the Palmar de Varela assemblage in Colombia to the added bisected of 2020.
In addition, accustomed the ambiguity about the furnishings of the recession originated by COVID-19 on the industry, and on their appulse on Ternium’s after-effects of operations, banknote flows or banking action in the boilerplate term, Ternium’s lath of admiral has absitively to abjure its previously-announced anniversary allotment angle for budgetary year 2019.
Ternium expects a abridgement of EBITDA in the added division 2020, with a cogent abatement of shipments in its basic markets and a moderately lower EBITDA allowance compared to the aboriginal division of the year. Although the aggregation anticipates lockdowns or operating restrictions in all of its markets will end or be airy during the added division of 2020, these could change if so absitively by the authorities.
In Mexico, with animate prices crumbling aback March 2020 and accretion advancement restrictions, animate shipments accept been weakening. Currently, the automotive industry is mostly bankrupt and it is accepted to re-open during May. Added automated customers, such as those in the white-goods and electric motors industries, are accepted to accomplish at beneath accustomed ante in the added division 2020. In addition, the aggregation anticipates lower shipments to the architecture area in the added division 2020, as the area is additionally accountable to austere operating restrictions due to the COVID-19 outbreak.
In Brazil, Ternium expects weaker appeal from bounded animate producers in the added division 2020 to be account by college shipments to third parties in added markets, and shipments to its accessories in Mexico to sequentially abatement due to lower ante of production.
In Argentina, afterwards a minimum akin of shipments ages to date in April 2020, Ternium expects a bit-by-bit accumulated access over the blow of the added quarter, as the lockdown of operations in the country is absolute boring subsiding.
Analysis of Aboriginal Division 2020 After-effects
Net sales in the aboriginal division 2020 were $2.3 billion, 17% lower than net sales in the aboriginal division 2019. The afterward table outlines Ternium’s circumscribed net sales for the aboriginal division 2020 and the aboriginal division 2019:
Absolute animate articles
1 The account “Other products” primarily includes Ternium Brasil’s and Ternium México’s electricity sales.
Cost of sales was $1.9 billion in the aboriginal division 2020, a abatement of $294.6 actor compared to the aboriginal division 2019. This was principally due to a $256.9 million, or 15%, abatement in raw absolute and consumables used, mainly absorption lower purchased slabs and raw absolute costs and a 6% abatement in animate accession volumes; and to a $37.7 actor abatement in added costs, mainly including a $26.8 actor abatement in aliment costs and a $12.9 abatement in activity costs.
Selling, Accepted & Authoritative (SG&A) costs in the aboriginal division 2020 were $211.6 million, or 9% of net sales, a abatement of $7.5 actor compared to SG&A costs in the aboriginal division 2019 mainly due to lower activity and casework and fee costs.
Operating assets in the aboriginal division 2020 was $135.7 million, or 6% of net sales, compared to operating assets of $307.3 million, or 11% of net sales in the aboriginal division 2019. The afterward table outlines Ternium’s operating assets by articulation for the aboriginal division 2020 and aboriginal division 2019:
Amount of sales
Added operating income, net
Net banking after-effects were a $106.2 actor accretion in the aboriginal division 2020, compared to a $26.9 actor accident in the aboriginal division 2019. During the aboriginal division 2020, Ternium’s net banking absorption after-effects totaled a accident of $8.3 million, compared to a accident of $13.9 actor in the aboriginal division 2019 mainly absorption lower boilerplate indebtedness.
Net adopted barter after-effects in the aboriginal division 2020 were a accretion of $109.2 million. In the period, the Mexican peso and the Brazilian absolute attenuated 19.8% and a 22.5%, respectively, adjoin the US dollar, consistent in a absolute appulse in Ternium’s Mexican and Brazilian subsidiaries’ net abbreviate bounded bill position.
Income tax amount in the aboriginal division 2020 was $267.3 actor compared to $70.3 actor in the aboriginal division 2019. Assets tax in the aboriginal division 2020 included a $189.1 actor non-cash accident on deferred taxes due to the cogent abasement of the Mexican peso adjoin the U.S. dollar, which changes, in U.S. dollar terms, the tax abject acclimated to account deferred taxes at our Mexican subsidiaries (which accept the U.S dollar as their anatomic currency).
Cash Breeze and Liquidity
Net banknote provided by operating activities in the aboriginal division 2020 was $442.8 million. Alive basic decreased by $181.8 actor in the aboriginal division 2020 as a aftereffect of an accumulated $173.8 actor net access in accounts payable and added liabilities and a $74.7 actor abatement in inventories, partially account by an accumulated $66.7 actor net access in barter and added receivables. The account amount abatement in the aboriginal division 2020 was due to a $71.3 actor lower amount of animate and a $25.7 actor account amount abatement in raw materials, aliment and other, partially account by $22.3 actor college animate volume.
Capital expenditures in the aboriginal division 2020 were $257.6 million, $47.7 actor college than in the aboriginal division 2019 as Ternium’s advance affairs progressed during the period. The basic investments agitated out during the aboriginal division 2020 included those fabricated for the new hot-rolling comminute in the company’s Pesquería automated center, the accommodation amplification of the burst atramentous bang arrangement in the company’s Rio de Janeiro assemblage in Brazil, and projects aimed at added convalescent ecology and assurance altitude throughout our basic facilities.
In the aboriginal division 2020, Ternium’s chargeless banknote breeze accomplished $185.2 actor and net gain from borrowings were $129.9 million. As of March 31, 2020, Ternium had a net debt position of $1.3 billion.
Conference Alarm and Webcast
Ternium will host a appointment alarm on April 29, 2020, at 10:00 a.m. ET in which administration will altercate aboriginal division 2020 results. A webcast articulation will be accessible in the Investor Centermost area of the company’s website at www.ternium.com.
Forward Looking Statements
Some of the statements independent in this columnist absolution are “forward-looking statements”. Forward-looking statements are based on management’s accepted angle and assumptions and absorb accepted and alien risks that could account absolute results, achievement or contest to alter materially from those bidding or adumbrated by those statements. These risks accommodate but are not bound to risks arising from uncertainties as to gross calm product, accompanying bazaar demand, all-around assembly capacity, tariffs, cyclicality in the industries that acquirement animate articles and added factors above Ternium’s control.
Ternium is Latin America’s arch collapsed animate producer, with operating accessories in Mexico, Brazil, Argentina, Colombia, the southern United States and Central America. The aggregation offers a ample ambit of aerial value-added animate articles for barter alive in the automotive, home appliances, HVAC, construction, basic goods, container, aliment and action industries through its accomplishment facilities, account centermost and administration networks, and avant-garde chump affiliation systems. More advice about Ternium is accessible at www.ternium.com.
1 The anatomic bill of Ternium’s accessory Ternium Argentina has afflicted from the Argentine Peso to the US dollar. This change is -to-be from January 1, 2020, and does not affect the balances at December 31, 2019, nor after-effects or banknote flows for the year again ended.
2 EBITDA in the aboriginal division 2020 equals operating assets of $135.7 actor adapted to exclude abrasion and acquittal of $166.4 million.
3 Circumscribed EBITDA disconnected by animate shipments.
4 American Depositary Allotment (ADS). Each represents 10 shares of Ternium’s accepted stock. After-effects are based on a abounding boilerplate cardinal of shares of accepted banal outstanding (net of treasury shares) of 1,963,076,776.
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