Ternium S.A. (TX) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presented mixed signals. Financial performance showed improvements in adjusted EBITDA and net income, but increased CapEx and operational delays pose financial risks. The Q&A revealed some optimism about margins and market share growth, but management provided vague responses on key issues. The lack of a share repurchase program and global trade uncertainties add to the cautious outlook. Overall, the sentiment balances between positive financials and negative external factors, suggesting a neutral stock price movement.
Key Financial Performance
Adjusted EBITDA Increased due to better margins and higher steel and iron ore shipments, with a decrease in steel cost per ton partially offset by a decline in realized steel prices.
Net Income $142 million, includes a $45 million provision adjustment related to ongoing litigation. Adjusted net income, excluding this charge, was $188 million, marking a significant improvement over the prior quarter.
Net Financial Results Improved by $130 million, mainly due to foreign exchange gains and realized gains from the partial divestment of bond holdings in Argentina.
Net Sales in Steel Segment Slightly higher in the first quarter, although revenue per pound declined due to a sequential drop in raw material costs and efficiency improvements.
Mining Segment Shipments Increased 14% year-over-year, driven by higher production levels in Mexico and Brazil, despite a sequential decrease in margins due to cost per ton.
Total CapEx for Expansion Project Revised to $4 billion, an increase of approximately 16% compared to previous estimates, primarily due to higher assembly and construction prices.
Net Cash Position $1.3 billion at the end of March 2025, supporting a strong balance sheet during a period of high CapEx.
Projected CapEx for 2025 Expected to be around $2.5 billion, with $1.4 billion already invested as of March 2025.
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Operating Highlights
New Product Development: Integration of advanced technology in our picking, finishing, cold rolling and galvanizing lines will not only increase operational efficiency, but also enhance product quality and expand our product range.
Electric Arc Furnace Production: This will be the first time that an electric arc furnace base mill will be able to produce exposed material automotive steel with significantly lower CO2 emissions than previously possible.
Market Expansion in Mexico: The current administration has shown support for reducing reliance on Asian suppliers within the North American regional market, enhancing industrialization and import substitution.
USMCA Renegotiation: The future renegotiation of USMCA presents a significant opportunity for Mexico to further align its trade strategy with that of the United States.
Brazilian Market Dynamics: Brazilian trade authorities released preliminary results of an anti-dumping investigation on imports from China, identifying substantial dumping margins.
Argentina Market Outlook: The microeconomic situation in Argentina is showing signs of improvement, providing optimism for future achievements in this market.
Operational Efficiency Initiatives: Our goal is to enhance earnings competitiveness by increasing operational efficiency and reducing costs.
CapEx for Expansion Project: The total CapEx for the expansion project has been revised to $4 billion, representing an increase of approximately 16%.
Strategic Shift in Trade Practices: Adjustments were necessary as China's progress with non-competitive trade practices has contributed to declining manufacturing.
Focus on North American Supply Chain: The implementation of Plan Mexico aims to strengthen North American supply chains and reduce reliance on imports from Asia.
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Risk or Challenges
Trade Tensions: Trade tension in recent months has created a climate of uncertainty, affecting business confidence and posing risks to global economic growth.
Unfair Trade Practices: Unfair trade practices have adversely impacted manufacturing globally, with many countries addressing this issue, which poses risks to Ternium's operations.
Investment and Consumption Uncertainty in Mexico: The operating environment in Mexico is challenging due to uncertainty affecting investment and consumption.
Brazilian Trade Practices: In Brazil, unfair trade practices persist with a significant year-over-year increase in imports, posing risks to local steel demand.
CapEx Increase: The total CapEx for the expansion project has increased to $4 billion, a 16% rise due to higher assembly and construction prices, which poses financial risks.
Operational Delays: The upstream project is now anticipated to be operational by the fourth quarter of 2026, representing a slight delay from the original schedule.
Tariff Situation in Mexico: Ongoing tariff situations are expected to keep Mexican steel volumes subdued, impacting sales.
Macroeconomic Environment in Argentina: While there are signs of improvement in Argentina's microeconomic situation, the overall economic environment remains a risk.
Global Trade Uncertainty: Global trade is undergoing major changes, resulting in considerable market uncertainty that affects consumption and investment.
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Guidance & Outlook
Expansion Project CapEx: The total CapEx for the expansion project in Mexico has been revised to $4 billion, an increase of approximately 16% from previous estimates due to higher assembly and construction prices.
Operational Efficiency Initiatives: Ternium is focusing on enhancing earnings competitiveness by increasing operational efficiency and reducing costs, with several initiatives already yielding positive results.
Plan Mexico: The Plan Mexico aims to enhance industrialization and import substitution to strengthen North American supply chains, attracting investment and increasing local content.
USMCA Renegotiation: The future renegotiation of USMCA presents a significant opportunity for Mexico to align its trade strategy with the U.S. and defend against unfair trade practices.
Q2 2025 EBITDA Margin: For the second quarter, Ternium anticipates achieving a double-digit EBITDA margin supported by increased real asset prices in Mexico and cost reduction initiatives.
Net Income Projection: Adjusted net income for Q1 2025 was $188 million, with expectations for continued improvement in the upcoming quarters.
CapEx Projections: Ternium projects a total CapEx of around $2.5 billion for 2025, with $1.4 billion already invested as of March 2025.
Steel Shipments Outlook: Steel shipments are expected to remain stable in Q2 2025, with anticipated increases in Argentina and stable demand in Brazil.
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Shareholder Return Plan
Share Repurchase Program: Ternium has not announced any share buyback program during this call.
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Key Q&A
Q:What is the situation in Mexico regarding GDP and industrial customers?
A:Maximo Vedoya mentioned that apparent consumption of steel decreased almost 5% in 2024, primarily due to issues in the commercial market and construction. He expects demand to start increasing in the following quarters, particularly in the commercial market, and that shipments will begin to improve in the second half of the year.
Q:What can you tell us about the level of margins and profitability?
A:Pablo Brizzio noted that margins decreased in the previous quarters but are expected to improve in the second quarter, with a trend towards better margins moving forward.
Q:Can you elaborate on cost reductions and if there are still areas to cut costs?
A:Maximo Vedoya stated that they are seeing a reduction in costs, particularly in raw materials, and expect this trend to continue into the second quarter and beyond.
Q:What is the outlook for volumes and market share opportunities?
A:Pablo Brizzio indicated that there is capacity to increase volumes in Mexico, with a significant decrease in imports, presenting opportunities to gain market share.
Q:How will trade tensions impact dividend payments?
A:Pablo Brizzio affirmed that despite uncertainties, they believe they can sustain dividend payments due to a solid financial position.
Q:What is the outlook for the steel sector in Argentina?
A:Maximo Vedoya mentioned that the outlook is improving for the steel sector in Argentina, with expectations for increased shipments in the coming quarters.
Q:What are the reasons for the increase in CapEx and the extended deadline?
A:Pablo Brizzio explained that the increase in CapEx is due to inflation and increased prices from vendors, not due to budgetary mistakes.
Q:How do you see the U.S.-Mexico relationship impacting steel pricing?
A:Maximo Vedoya acknowledged that the U.S.-Mexico relationship has been challenging for steel, but he believes a stronger USMCA agreement is in the best interest of both countries.
Q:How do recent changes in FX controls in Argentina impact dividend payments?
A:Pablo Brizzio stated that while there are still some restrictions, there is a path for companies to pay dividends in the near future.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specific timeline for improvements in operating margins and the exact impact of trade negotiations on their business. Additionally, there was vague language used when discussing the potential for market share growth and the specifics of the CapEx increase.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America Henrique
Argentina situation
Caio Ribeiro
Carlos De
China progress
China rolling
Commission page
Director Maximo
ET Ternium
Henrique Marquez
Integration technology
MSMEs addition
Maximo Chief
Maximo Ternium
Mexico United
Mexico alignment
Mexico completion
Mexico industrialization
Mexico uncertainty
Mr Ternium
Officer Carlos
Officer environment
Plan Mexico
Research Caio
Results speaker
USMCA region
administration
authority
content
decade
development
dumping
expansion project
line operation
practice country
review
steel demand
support
trade practice
TX Transcript
Ternium S.A. (TX) Q3 2025 Earnings Call Transcript
Unknown10-29
The earnings call presents a mixed picture. While there are positives like sequential improvement in EBITDA, cost efficiency measures, and the Pesqueria expansion, there are concerns such as declining mining segment sales, lower adjusted EBITDA, and challenges in the Brazilian market. The Q&A revealed cautious management responses and uncertainties in trade and market conditions. Despite some positive developments, the lack of strong guidance and potential market challenges suggest a neutral sentiment, with no significant short-term stock price movement expected.
Ternium S.A. (TX) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call summary reveals mixed elements: strong operational cash flow and positive cost reduction initiatives, but with increased CapEx and a decrease in net cash position. The Q&A highlights potential market share gains in Mexico and improved EBITDA margins, but also notes concerns about ongoing litigation and unclear future trade measures. Overall, the sentiment is balanced, with positive operational strategies countered by financial pressures and uncertainties, leading to a neutral stock price prediction.
Ternium S.A. (TX) Q1 2025 Earnings Call Transcript
Unknown4-30
The earnings call presented mixed signals. Financial performance showed improvements in adjusted EBITDA and net income, but increased CapEx and operational delays pose financial risks. The Q&A revealed some optimism about margins and market share growth, but management provided vague responses on key issues. The lack of a share repurchase program and global trade uncertainties add to the cautious outlook. Overall, the sentiment balances between positive financials and negative external factors, suggesting a neutral stock price movement.
Ternium S.A. (TX) Q3 2024 Earnings Call Transcript
Positive11-6
The earnings call indicates a stable financial position with a strong net cash position, optimistic future revenue expectations, and a consistent dividend policy. The Q&A section reveals management's positive outlook on North American market opportunities, despite global overcapacity concerns. The interim dividend yield of 8% and a record dividend distribution suggest confidence in future performance. The potential risks in Mexico and Brazil are acknowledged but seem mitigated by strategic positioning and government reforms. Overall, the sentiment is positive, with expectations of improved margins and recovery in steel consumption in 2025.
TX Report
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
