Ternium S.A. (TX) Q4 2025 Earnings Call Transcript
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Overview
The earnings call summary reflects mixed signals: strong cash generation and consistent dividends suggest stability, but the anticipated decline in EBITDA and shipment reductions point to challenges. The Q&A reveals uncertainties, particularly regarding USMCA and market dynamics in Mexico and Brazil. Despite some positive steps, like antidumping measures and strategic projects, the lack of clear guidance and potential risks result in a neutral sentiment. Without market cap data, the impact on stock price is uncertain but likely to remain within a neutral range.
Key Financial Performance
Cost Savings $250 million in savings in 2025 over 2024, achieved through cost reduction and efficiency programs such as enhancing blast furnace stability, negotiating service contracts, optimizing iron ore sourcing, and improving logistics.
EBITDA Margin 10% in 2025, reflecting resilient results despite challenging market conditions.
Net Income $171 million in Q4 2025, impacted by lower operating income due to one-time charges, including an impairment in Lesa, offset by better income tax results and stronger financial results.
Steel Segment Shipments Declined modestly in Q4 2025 due to weaker volumes in the U.S. and Brazil, offset by higher volumes in Mexico and the Southern region, driven by government measures against unfair trade practices.
Steel Cash Operating Income Decreased sequentially in Q4 2025 due to lower sales volume and a decline in realized steel prices, partially offset by reduced raw material purchase costs and efficiency gains.
Mining Cash Operating Income Increased sequentially in Q4 2025 due to stronger shipments and higher realized iron ore prices, partially offset by higher unit costs.
Cash Generated by Operations $2.3 billion in 2025, supported by a reduction in working capital and used to finance capital expenditures and projects.
Capital Expenditures (CapEx) $463 million in Q4 2025, primarily for new facilities at Ternium's Industrial Center in Pesqueria, Mexico. Full-year CapEx for 2025 was significant but is expected to decrease to $2 billion in 2026.
Annual Dividend $2.7 per ADS for fiscal year 2025, consistent with 2024, reflecting confidence in the company's prospects despite high capital expenditures.
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Operating Highlights
New cold rolling mill and galvanized line: Production has started at the Pesqueria facility, completing the downstream expansion. The project also includes a picking line and a finishing line center, all of which are now operational.
Slab plant construction: The construction is progressing as planned, with the facility expected to start operations by the end of the year. This plant will produce high-quality automotive steel with the lowest CO2 emissions per ton in the industry.
Trade measures in the U.S. and Mexico: The U.S. implemented significant trade measures against unfair practices from China and other Asian countries. Mexico raised import tariffs on steel from 25% to 35% for countries without a free trade agreement.
Brazil's antidumping measures: Brazil implemented antidumping measures and increased import taxes on 9 steel products, signaling stronger government support for local producers.
Argentina-U.S. trade agreement: The agreement aims to address unfair trade practices, particularly from China, while promoting cautious integration with the global economy.
Cost reduction and efficiency program: Generated $250 million in savings in 2025 through initiatives like enhancing blast furnace stability, optimizing iron ore sourcing, and improving logistics.
EBITDA margin: Achieved a 10% EBITDA margin despite challenging market conditions.
Regional integration efforts: Ternium is actively participating in discussions to promote fair trade and regional integration, particularly in the North American region.
Green financing for slab plant: Secured a $1.25 billion loan through a green financing facility, receiving multiple awards for sustainability.
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Risk or Challenges
Fatal Accidents: The company experienced fatal accidents at Ternium Mexico and Ternium Brasil in 2025, which are significant setbacks and highlight safety risks. These incidents have prompted the company to reinforce safety programs and preventive actions.
Global Trade Environment: The United States and other countries implemented significant trade measures in 2025 to counter unfair trade practices, particularly from China and other Asian countries. This has reshaped the global steel market and created uncertainties in trade dynamics.
Import Tariffs in Mexico: The Mexican government raised import tariffs on steel from 25% to 35% for countries without a free trade agreement. This could impact the cost structure and competitiveness of operations.
Antidumping Measures in Brazil: The implementation of antidumping measures and increased import taxes on steel products in Brazil has created a shift in the market environment, requiring close monitoring to prevent circumvention and ensure fair competition.
Economic Concerns in Argentina: Growing concerns about unfair trade practices from China and the need for cautious economic integration highlight risks in Argentina's trade environment.
Impairment in Mining Operations: A one-time impairment charge related to Lesa, a mining operation in Mexico, negatively impacted operating income in the fourth quarter of 2025.
Seasonal Shipment Decline: Shipments declined modestly in the fourth quarter due to weaker volumes in the U.S. and Brazil, reflecting seasonally slower activity.
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Guidance & Outlook
Profitability Outlook: Ternium expects profitability to improve in 2026, starting from the first quarter, driven by cost reduction, enhanced operational efficiency, and supportive trade policies.
Operational Expansion: The company has started production in its new cold rolling mill and galvanized line at the Pesqueria facility, with the slab plant expected to start operations by the end of 2026. This expansion aims to produce high-quality automotive steel with low CO2 emissions.
Market Environment: Promising changes in Brazil's steel market and advancing economic reforms in Argentina are expected to create a stronger foundation for growth in South America.
Capital Expenditures: CapEx is anticipated to decrease to around $2 billion in 2026, down from the peak levels in 2025.
Dividend Policy: The Board of Directors has proposed an annual dividend of $2.7 per ADS for fiscal year 2025, maintaining the same level as 2024, reflecting confidence in the company's future prospects.
Shipment Growth: Sequential increase in shipments is anticipated in the first quarter of 2026, driven by stronger demand in Mexico.
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Shareholder Return Plan
Annual Dividend Proposal: Ternium's Board of Directors has proposed an annual dividend of $2.7 per ADS for fiscal year 2025, maintaining the same level as for the year 2024. Of this total, $0.90 has already been paid as an interim dividend in November. This reflects confidence in the company's prospects despite significant capital expenditures. At the current market price of Ternium ADS, this implies a dividend yield of over 6%.
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Key Q&A
Q:What is the outlook for the Mexican market, particularly regarding demand recovery and the impact of recently announced tariffs?
A:Demand in Mexico is significantly below peak levels, with a 10% decrease in apparent steel consumption in 2025. Flat products, the main market, saw a 14% decrease. Ternium managed to gain market share in flat products despite the decline. CANACERO estimates a 4% market growth in 2026, with local steel mills expected to gain more market share against imports. However, the timing of the USMCA deal remains uncertain, with projections for its impact more likely in 2027.
Q:What is the impact of recently announced antidumping measures in Brazil on pricing dynamics?
A:The antidumping measures are a significant step for Brazil, aligning it with other economies like the U.S. and Europe in combating unfair trade. The impact on prices is expected to be gradual rather than immediate, with no significant price hikes anticipated.
Q:What is Ternium's Plan B if the USMCA is not renewed and Mexico cannot reach a standalone agreement with the U.S.?
A:Ternium operated in 2025 under the premise of no USMCA renewal. The main benefit of renewal would be the removal of Section 232 tariffs. Without renewal, Ternium plans to continue operating in the current environment, with no significant changes expected in 2026.
Q:What are Ternium's volume growth expectations for 2026 across its operations?
A:Ternium expects volume growth in Mexico, driven by a 4% increase in steel consumption and gains in market share. In South America, volumes are expected to recover in the second quarter of 2026, following a recession in Argentina. Brazil's volumes are anticipated to grow moderately, aligned with GDP growth.
Q:What are the expectations for Ternium's EBITDA margin recovery, and what factors influence this?
A:Ternium aims to recover its EBITDA margin to the 15%-20% range, with a focus on cost reduction programs and market conditions. The margin recovery depends on factors like antidumping measures, Section 232 tariffs, and market dynamics. A 15% margin is targeted by the end of 2026, excluding potential USMCA impacts.
Q:Are the trade actions in Mexico and Brazil sufficient to address unfair trade practices?
A:The trade actions in Mexico and Brazil are positive steps but not sufficient. Brazil's recent measures are a good start, and Mexico continues to pursue dumping cases. More actions are expected to align with global standards.
Q:What is the guidance for Ternium's CapEx in 2026 and beyond, and how does it impact free cash flow and capital allocation?
A:CapEx is projected at $2 billion for 2026, decreasing to $1.2 billion in 2027 and $800 million in 2028. Free cash flow is expected to improve post-2026 as major projects conclude. Capital allocation priorities include dividends and potential growth opportunities in Mexico and Brazil.
Q:What are the strategic benefits and cost savings of the upstream project in Pesqueria?
A:The Pesqueria project focuses on the automotive industry, aiming to meet USMCA requirements for 2027. It will replace imported slabs with local production, reducing costs and logistics expenses. The project also enables Ternium to produce new products and increase volumes for the automotive sector.
Q:What is Ternium's long-term strategy for growth and capital allocation?
A:Ternium prioritizes returning value to shareholders through dividends and exploring growth opportunities in Mexico and Brazil. Corporate simplification remains a goal, and the company is open to analyzing new opportunities in its main markets.
Q:Is Ternium considering any partnerships or acquisitions, such as with CSN in Brazil?
A:Ternium is not currently analyzing any partnerships or acquisitions with CSN in Brazil. However, the company remains open to exploring opportunities in Brazil, given its importance as a market.
Q:Review of Unclear Management Responses
A:Management avoided providing a clear answer on the potential impact of the USMCA renewal on Ternium's operations, stating uncertainty about the timing and outcome of negotiations. Additionally, they did not provide specific cost savings figures for the Pesqueria project, emphasizing strategic benefits instead.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America Caribbean
America context
Argentina United
Argentina concern
Argentina hope
Awards Loan
Brasil Usiminas
Brazil analyst
Brazil implementation
Brazil steel
Caribbean mention
Carnival season
China production
China situation
Deal Latin
Director result
Marti
United States
commitment
country trade
discussion
economy
import tariff
integration
loan
manufacturing industry
market environment
plant
practice China
profitability
program
restriction
safety
steel market
support
trade agreement
trade practice
world
TX Transcript
Ternium S.A. (TX) Q4 2025 Earnings Call Transcript
Unknown2-18
The earnings call summary reflects mixed signals: strong cash generation and consistent dividends suggest stability, but the anticipated decline in EBITDA and shipment reductions point to challenges. The Q&A reveals uncertainties, particularly regarding USMCA and market dynamics in Mexico and Brazil. Despite some positive steps, like antidumping measures and strategic projects, the lack of clear guidance and potential risks result in a neutral sentiment. Without market cap data, the impact on stock price is uncertain but likely to remain within a neutral range.
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.
TX Report
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