LUXEMBOURG — (Marketwire) — 08/03/11 — Ternium S.A. (NYSE: TX) today announced its results for the second quarter and six-month period ended June 30, 2011.
The financial and operational information contained in this press release is based on Ternium S.A.–s operational data and consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and presented in U.S. dollars (USD) and metric tons.
EBITDA(1) of USD454.8 million in the second quarter 2011, up 16% compared to the first quarter 2011 mainly as a result of a higher operating margin. EBITDA in the second quarter 2011 included a non-recurring charge of USD21.3 million related to the settlement of the previously disclosed arbitration proceedings with Tata Steel in connection with a slab off-take framework agreement and its related agreements.
Earnings per American Depositary Share (ADS)(2) of USD1.01(3) in the second quarter 2011.
Net cash position of USD0.3 billion as of June 30, 2011, down from USD0.8 billion at the end of March 2011. Of note in the second quarter 2011 were an increase in working capital, income tax payments and a dividend payment.
Ternium–s operating income in the second quarter 2011 was USD348.6 million, USD57.6 million higher than in the first quarter 2011, mainly as a result of a USD93.3 million(4) higher flat and long steel products operating income partially offset by a USD21.3 million non-recurring charge related to the settlement of the aforementioned arbitration proceedings with Tata Steel and a USD14.3 million lower other products operating income. Flat and long steel products operating margin was USD45 per ton higher in the second quarter 2011 compared to the first quarter 2011, as a USD98 increase in revenue per ton was partially offset by a USD53 increase in operating cost per ton(5) due to higher raw material, labor and energy costs. Shipments remained stable, as a 79,000-ton increase in the South & Central America Region was offset mainly by a 74,000-ton decrease in the North America Region.
Operating income in the second quarter 2011 was USD10.5 million lower when compared to the second quarter 2010, as a USD27.7 million(4) higher flat and long steel products operating income, which increased mainly due to a 141,000-ton increase in shipments, was offset by a USD16.9 million lower other products operating income and the aforementioned USD21.3 million non-recurring charge.
Ternium–s net income in the second quarter 2011 was USD246.9 million, relatively stable compared to the first quarter 2011, mainly as a result of the above mentioned USD57.6 million increase in operating income offset by a USD47.7 million decrease in non-cash foreign exchange gains mainly related to Ternium–s Mexican subsidiary–s US dollar denominated net debt (which was offset by changes in Ternium–s net equity position) and a USD4.8 million increase in income tax expense.
EBITDA(6) of USD848.5 million in the first half 2011, relatively stable compared to the first half 2010, mainly as a result of higher shipments offset by a lower operating margin.
Earnings per ADS(7) of USD2.04 in the first half 2011, up 4% year-over-year.
Ternium–s operating and net income in the first half 2011 were relatively stable compared to the first half 2010. Shipments increased 405,000 tons year-over-year, and operating margin was lower as a result of a USD145 increase in operating cost per ton partially offset by a USD134 increase in revenue per ton.
Ternium expects its level of shipments in the second half of 2011 to remain in line with that achieved in the first half of the year due to stable demand in all its markets and no indications of overstocking. However, the company anticipates lower quarterly operating income through year-end compared to its operating income in the second quarter 2011 as a result of price weakness in steel finished products in the North America Region and an increase in the cost of sales line derived from higher costs of purchased slabs and raw materials acquired during the first half of the year.
in the second quarter 2011 was USD197.7 million, compared to USD187.6 million in the second quarter 2010. Including minority interest, net income for the second quarter 2011 was USD246.9 million, compared to USD230.7 million in the second quarter 2010. Earnings per ADS in the second quarter 2011 were USD1.01, compared to USD0.94 in the second quarter 2010.
in the second quarter 2011 were USD2.3 billion, 22% higher than net sales in the second quarter 2010. Shipments of flat and long products were 2.2 million tons during the second quarter 2011, an increase of 7% compared to shipments in the second quarter 2010, mainly due to an increase in demand in Ternium–s main steel markets in South & Central America and Ternium–s increased participation in the Colombian steel market. Revenue per ton shipped was USD1,065 in the second quarter 2011, an increase of 15% compared to the same quarter 2010, mainly as a result of higher prices.
Sales of flat products during the second quarter 2011 were USD2.0 billion, an increase of 20% compared with the same quarter in 2010. Sales of flat products increased as a result of higher shipments and revenue per ton. Shipments of flat products were 1.8 million tons in the second quarter 2011, an increase of 4% compared with the same period in 2010. Revenue per ton of flat products shipped increased 16% to USD1,125 in the second quarter 2011 compared with the same period in 2010, mainly due to higher prices.
Sales of long products were USD325.6 million in the second quarter 2011, an increase of 52% compared to the same period in 2010 mainly due to higher shipments and revenue per ton. Shipments of long products totaled 403,000 tons in the second quarter 2011, a 25% increase versus the same quarter in 2010 mainly due to Ternium–s increased participation in the Colombian steel market. Revenue per ton of long products shipped was USD807 in the second quarter 2011, an increase of 21% compared to the second quarter 2010, mainly due to higher prices and a higher value-added sales mix.
Sales of other products totaled USD31.6 million during the second quarter 2011, compared to USD50.0 million during the second quarter 2010, mainly due to lower sales of iron ore, partially offset by higher sales of pig iron.
Sales of flat and long products in the North America Region were USD1.3 billion in the second quarter 2011, an increase of 16% versus the same period in 2010 mainly due to higher revenue per ton. Shipments in the region totaled 1.2 million tons during the second quarter 2011, or 1% lower than in the same period in 2010. Revenue per ton shipped in the region increased 17% to USD1,048 in the second quarter 2011 over the same quarter in 2010, mainly due to higher prices.
Flat and long product sales in the South & Central America Region were USD1.0 billion during the second quarter 2011, an increase of 35% versus the same period in 2010 as a result of higher shipments and revenue per ton. Shipments in the region totaled 948,000 tons during the second quarter 2011, or 20% higher than in the second quarter 2010, mainly due to higher demand for steel products and Ternium–s increased participation in the Colombian steel market. Revenue per ton shipped in the region was USD1,091 in the second quarter 2011, an increase of 12% compared to the same quarter in 2010, mainly due to higher prices.
was USD1.8 billion in the second quarter 2011 compared to USD1.4 billion in the second quarter 2010. Cost of sales increased mainly due to higher shipments and higher cost per ton. Cost per ton increased mainly as a result of higher raw material, purchased slab and energy costs.
in the second quarter 2011 were USD209.7 million, or 9% of net sales, compared with USD168.2 million, or 9% of net sales, in the second quarter 2010. The USD41.5 million year-over-year increase was mainly due to the impact of the consolidation of Ferrasa in the second quarter 2011 and higher freight expenses related to higher activity levels.
in the second quarter 2011 were a loss of USD17.2 million, compared with a loss of USD0.3 million in the second quarter 2010. The second quarter 2011 net loss included a non-recurring charge of USD21.3 million related to the settlement of arbitration proceedings with Tata Steel.
in the second quarter 2011 was USD348.6 million, or 14.9% of net sales, compared with operating income of USD359.2 million, or 18.6% of net sales, in the second quarter 2010.
in the second quarter 2011 was USD454.8 million, or 19.4% of net sales, compared with USD453.2 million, or 23.5% of net sales, in the second quarter 2010.
were a USD15.6 million gain in the second quarter 2011, compared with a USD31.0 million loss in the second quarter 2010.
During the second quarter 2011, Ternium–s net interest expenses totaled USD11.8 million, USD2.8 million lower than in the second quarter 2010, mainly due to a higher yield on financial investments.
Net foreign exchange result was a gain of USD22.8 million in the second quarter 2011 compared to a loss of USD32.8 million in the same period in 2010. The second quarter 2011 gain was primarily due to the impact of the Mexican Peso–s 1.08% revaluation on Ternium–s Mexican subsidiary–s US dollar denominated debt. This result is non-cash when measured in US dollars and is offset by changes in Ternium–s net equity position in the currency translation adjustments line, as the value of Ternium México–s US dollar denominated debt is not altered by the Mexican Peso–s fluctuation when stated in US dollars in Ternium–s consolidated financial statements. In accordance with IFRS, Ternium México prepares its financial statements in Mexican Pesos and registers foreign exchange results on its net non-Mexican Peso positions when the Mexican Peso revaluates or devaluates relative to other currencies.
Interest income on the Sidor financial asset was USD3.1 million in the second quarter 2011 compared to USD17.8 million in the second quarter 2010. These results are attributable to the Sidor financial asset in connection with the transfer of Sidor shares on May 7, 2009. The decrease reflects the reduction in the notional amount of the Sidor financial asset over time.
for the second quarter 2011 was USD117.6 million, or 32% of income before income tax and minority interest, compared with an income tax expense of USD96.9 million in the same period in 2010, or 30% of income before income tax and minority interest.
for the second quarter 2011 was USD49.2 million compared to USD43.0 million in the same period in 2010.
in the first half 2011 was USD402.4 million, compared to USD392.9 million in the first half 2010. Including minority interest, net income in the first half 2011 was USD490.1 million, compared to USD475.8 million in the first half 2010. Earnings per ADS were USD2.04 in the first half 2011, compared to USD1.96 in the first half 2010.
in the first half 2011 were USD4.5 billion, 26% higher than net sales in the first half 2010. Shipments of flat and long products were 4.3 million tons during the first half 2011, up 10% compared to shipment in the first half 2010. Revenue per ton shipped was USD1,017 in the first half 2011, a 15% increase compared to the same period in 2010, mainly as a result of higher prices.
Sales of flat products during the first half 2011 totaled USD3.8 billion, a 24% increase compared to the first half 2010. Net sales increased as a result of higher shipments and revenue per ton. Shipments of flat products totaled 3.6 million tons in the first half 2011, an increase of 8% compared to the same period in 2010 mainly due to an increase in demand in the South & Central America Region. Revenue per ton shipped of flat products increased 15% to USD1,061 in the first half 2011 compared with the same period in 2010, mainly due to higher steel prices.
Sales of long products were USD579.8 million in the first half 2011, an increase of 50% compared to the same period in 2010, mainly due to higher volumes and revenue per ton. Shipments of long products totaled 729,000 tons in the first half 2011, a 22% increase versus the first half 2010, due mainly to Ternium–s increased participation in the Colombian steel market. Revenue per ton shipped of long products was USD795 in the first half 2011, a 23%increase compared to the first half 2010, mainly due to higher steel prices and a higher value-added sales mix.
Sales of other products totaled USD76.0 million during the first half 2011, compared to USD100.9 million during the first half 2010. The decrease was mainly driven by lower iron ore shipments.
Sales of flat and long products in the North America Region were USD2.5 billion in the first half 2011, an increase of 19% versus the same period in 2010 due to higher shipments and revenue per ton. Shipments in the region totaled 2.5 million tons during the first half 2011, a 3% increase compared to the first half of 2010. Revenue per ton shipped in the region increased 16% to USD987 in the first half 2011 over the same period in 2010, mainly due to higher prices.
Flat and long product sales in the South & Central America Region were USD1.9 billion during the first half 2011, an increase of 39% versus the same period in 2010, due to higher shipments and revenue per ton. Shipments in the region totaled 1.8 million tons during the first half 2011, or 23% higher than in the first half 2010, mainly due to higher demand for steel products and Ternium–s increased participation in the Colombian steel market. Revenue per ton shipped was USD1,060 in the first half 2011, an increase of 13% compared to the same period in 2010, mainly due to higher prices.
was USD3.4 billion in the first half 2011 compared to USD2.6 billion in the first half 2010. Cost of sales increased mainly as a result of higher shipments and higher cost per ton. Cost per ton increased mainly as a result of higher raw material and purchased slab costs.
in the first half 2011 were USD398.8 million, or 9% of net sales, compared with USD312.5 million, or 9% of net sales, in the first half 2010. The USD86.2 million year-over-year increase was mainly due to the impact of the consolidation of Ferrasa in the first half 2011, higher freight expenses and taxes related to higher activity levels and higher services and labor costs.
in the first half 2011 was USD639.7 million, or 14.2% of net sales, compared to operating income of USD652.7 million in the first half 2010, or 18.2% of net sales.
in the first half 2011 was USD848.5 million, or 18.9% of net sales, compared to USD838.0 million, or 23.4% of net sales, in the first half 2010.
were a gain of USD80.3 million in the first half 2011, compared with a gain of USD77.7 million in the first half 2010.
During the first half 2011, Ternium–s net interest expenses totaled USD20.5 million, lower than the USD29.4 million expenses in the first half 2010 mainly as a result of a higher yield on financial investments.
Net foreign exchange result was a gain of USD93.2 million in the first half 2011 compared to a gain of USD68.2 million in the same period in 2010. The first half 2011 gain was primarily due to the impact of the Mexican Peso–s 4.19% revaluation on Ternium–s Mexican subsidiary–s US dollar denominated debt. This result is non-cash when measured in US dollars and is offset by changes in Ternium–s net equity position in the currency translation adjustments line, as the value of Ternium Mexico–s US dollar denominated debt is not altered by the Mexican Peso–s fluctuation when stated in US dollars in Ternium–s consolidated financial statements. In accordance with IFRS, Ternium Mexico prepares its financial statements in Mexican Pesos and registers foreign exchange results on its net non-Mexican Pesos positions when the Mexican Peso revaluates or devaluates relative to other currencies.
Interest income on the Sidor financial asset was USD6.9 million in the first half 2011, compared to USD45.1 million in the first half 2010. These results are attributable to the Sidor financial asset in connection with the transfer of Sidor shares on May 7, 2009. The decrease reflects the reduction in the notional amount of the Sidor financial asset over time.
for the first half 2011 was USD230.4 million, or 32% of income before income tax and minority interest, compared with an income tax expense of USD253.7 million in the first half 2010, or 35% of income before income tax and minority interest.
in the first half 2011 was USD87.6 million, compared to income attributable to minority interest of USD82.9 million in the first half 2010.
Net cash provided by operating activities in the first half 2011 was USD69.3 million. Working capital increased USD404.8 million in the first half 2011 as a result of a USD488.8 million increase in inventory and an aggregate USD195.4 million increase in trade and other receivables, partially offset by an aggregate USD251.9 million increase in accounts payable and other liabilities and a USD27.6 million increase in tax liabilities. Inventories increased in the first half 2011 reflecting higher inventory volume and costs of finished goods, goods in process and raw materials. In addition, there was a USD373.5 million tax payment in the first half 2011, mainly related to income tax in Mexico and Argentina.
Capital expenditures in the first half 2011 were USD277.2 million. Ternium–s ongoing projects included, among others, in Mexico the construction of a greenfield facility for the manufacture of cold rolled and galvanized steel products, the expansion and enhancement of the service and distribution center network, the enhancement of defuse emission control equipment at a steel shop and the development of mining activities, and, in Argentina, repairs and enhancements in the coking facilities, the expansion of the hot strip mill, the expansion of galvanizing and service center capacity and the enclosure of a basic oxygen furnace.
In the first half 2011, Ternium generated negative free cash flow of USD207.9 million(8). Ternium–s net proceeds from borrowings in the first half 2011 were USD42.5 million, related to net proceeds from short-term debt partially offset by the scheduled repayments of Ternium México–s outstanding debt. Repurchases of Ternium–s own shares totaled USD150.0 million, related to the repurchase from Usiminas of 41,666,666 shares at a price per share of USD3.60 (equivalent to USD36 per ADS). Additionally, net dividends paid were USD147.2 million. As of June 30, 2011, Ternium–s net cash position was USD0.3(9) billion.
Net cash used in operating activities in the second quarter 2011 was USD179.3 million. Working capital increased USD348.4 million in the second quarter 2011 as a result of a USD414.6 million increase in inventory, an aggregate USD36.5 million increase in trade and other receivables and a USD15.0 million decrease in other liabilities, partially offset by a USD93.7 million increase in accounts payable and a USD24.0 million increase in tax liabilities. Inventories increased in the second quarter 2011 reflecting higher inventory volume and costs. In addition, there was a USD316.3 million tax payment in the second quarter 2011, mainly related to income tax in Mexico and Argentina. Capital expenditures in the second quarter 2011 were USD167.6 million. Ternium generated negative free cash flow of USD346.9 million(10) in the period.
Some of the statements contained in this press release are “forward-looking statements”. Forward-looking statements are based on management–s current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by those statements. These risks include but are not limited to risks arising from uncertainties as to gross domestic product, related market demand, global production capacity, tariffs, cyclicality in the industries that purchase steel products and other factors beyond Ternium–s control.
Ternium is a leading steel company in Latin America, manufacturing and processing a wide range of flat and long steel products for customers active in the construction, home appliances, capital goods, container, food, energy and automotive industries. With its principal operations in México and Argentina, Ternium serves markets in the Americas through its integrated manufacturing system and extensive distribution network. The Company has an annual production capacity of approximately ten million tons of finished steel products. More information about Ternium is available at .
(1) EBITDA in the second quarter 2011 equals operating income of USD348.6 million plus depreciation and amortization of USD106.1 million.
(2) Each American Depositary Share (ADS) represents 10 shares of Ternium–s common stock. Results are based on a weighted average number of shares of common stock outstanding (net of treasury shares) of 1,963,076,776 in the second quarter 2011, 1,984,373,072 in the first quarter 2011 and 2,004,743,442 in the second quarter 2010.
(3) Includes a USD0.07 per ADS after-tax non-cash foreign exchange gain on Ternium–s Mexican subsidiary–s US dollar denominated net debt in the second quarter 2011 compared to USD0.19 per ADS in the first quarter 2011.
(4) Excludes non-recurring charge related to the settlement of the arbitration proceedings with Tata Steel.
(5) Flat and long steel products operating cost per ton is equal to flat and long steel products cost of sales plus flat and long steel products SG&A, divided by shipments.
(6) EBITDA in the first half 2011 equals operating income of USD639.7 million plus depreciation and amortization of USD208.8 million.
(7) Results are based on a weighted average number of shares of common stock outstanding of 1,973,666,094 in the first half 2011 and 2,004,743,442 in the first half 2010.
(8) Negative free cash flow in the first half 2011 equals net cash provided by operating activities of USD69.3 million less capital expenditures of USD277.2 million.
(9) Net cash position at June 30, 2011 equals cash and equivalents plus other investments of USD2.3 billion less borrowings of USD2.0 billion.
(10) Negative free cash flow in the second quarter 2011 equals net cash used in operating activities of USD179.3 million plus capital expenditures of USD167.6 million.