Ternium ((TX)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call for Ternium reveals a balanced sentiment, marked by strong financial performance and strategic advancements, juxtaposed with considerable challenges. The company is making strides with its downstream expansion and renewable energy initiatives, yet faces hurdles from trade uncertainties, market weaknesses, and increased Chinese steel exports.
Strong Financial Position
Ternium reported robust financial results, with shipments reaching 16 million tons for 2024 and an adjusted EBITDA of $2 billion, reflecting a 12% margin. The company’s net cash position is strong at $1.6 billion by the year’s end, despite substantial capital expenditures and dividend payouts.
Downstream Expansion Progress in Mexico
The company has made significant progress in its downstream expansion project in Mexico, with the pickling line and finishing center now operational. Plans are underway for two more lines, set to start by the end of 2025.
Wind Farm Initiative in Argentina
Ternium’s wind farm in Argentina has commenced energy generation, anticipated to produce around 480 gigawatt-hours annually, contributing both economically and environmentally by aiding decarbonization efforts.
Operational Improvement in Brazil
Brazil has seen a positive year, with a 10% growth in flat steel consumption and vehicle production. Usiminas improved its operations significantly, producing 3.2 million tons of crude steel.
Educational Initiatives
Ternium has demonstrated its commitment to community development by opening the Roberto Roca Technical School in Brazil, offering technical education and scholarships, thereby supporting local youth.
Trade Uncertainties and Challenges
The global market faces uncertainty due to increased US trade actions, impacting Mexico and Canada and posing potential challenges to the steel industry.
Market Weakness in Mexico
Mexico experienced a decline in shipments, attributed to lackluster commercial market activity and insufficient government infrastructure investment.
Significant Steel Imports from China
China’s surge in steel exports has disrupted markets, particularly in Brazil, where Chinese imports constitute approximately 80% of flat steel imports.
Decline in Argentina’s Shipments
A significant decrease in shipments from Argentina, about 20% year-over-year, was mainly due to macroeconomic policies aimed at economic stabilization.
Decreased EBITDA and Net Income
The company faced a decline in adjusted EBITDA, impacted by reduced prices and shipments, while net income was further affected by foreign exchange fluctuations and the depreciation of the Brazilian real.
Guidance
Despite a challenging year for the steel industry, Ternium maintained a robust financial position with a net cash balance of $1.6 billion by December 2024. The company is optimistic about its downstream expansion in Mexico, with significant progress at the Pesqueria site and construction expected to complete by December 2025. The wind farm in Argentina is projected to generate substantial energy output, and a proposed annual dividend of $2.70 per ADS underscores financial stability, offering approximately a 9% dividend yield.
In conclusion, Ternium’s earnings call reflects a balanced outlook. The company is well-positioned financially and strategically, with promising projects in Mexico and Argentina. However, it must navigate trade uncertainties and market weaknesses in key regions. Investors should note the company’s strong financial base and progressive initiatives as positive indicators for future growth.
