Ternium (TX) Q2 2024 earnings summary

Executive summary

• Adjusted EBITDA for Q2 2024 was $545 million with a 12% margin, reflecting stable shipments despite weak steel prices and higher costs.

• Net loss of $743 million in Q2 2024 was driven by a $783 million provision for ongoing litigation related to the Usiminas acquisition.

• Adjusted net income was $40 million, including a significant deferred tax loss from peso depreciation.

• Usiminas consolidation contributed $1.1 billion to steel segment net sales and 1.0 million tons to steel shipments year-over-year.

• Major downstream and R&D projects in Mexico and a wind farm in Argentina are progressing, with new lines and a steel slab mill expected to enhance value-added product offerings.

Financial highlights

• Cash flow from operations reached $656 million in Q2, with free cash flow at $248 million and capex at $409 million.

• Adjusted EBITDA for 2Q24 was $545 million, down from $855 million in 1Q24 and $883 million in 2Q23.

• Adjusted net income for 1H24 was $40 million, compared to $1.4 billion in 1H23.

• Net cash position at quarter-end was $1.9 billion, slightly down from $2.0 billion in Q1 2024.

• Dividend payments totaled $432 million in Q2 2024.

Outlook and guidance

• Q3 2024 adjusted EBITDA is expected to decline due to lower margins, with increased shipments partially offsetting the impact.

• Margins are anticipated to bottom in Q3, with recovery expected in Q4 as steel prices rise and costs decrease.

• Shipments are projected to grow in key markets, with healthy demand and margin improvement as contract prices reset.

• Management notes ongoing risks from steel price volatility, raw material costs, and currency fluctuations, especially in Mexico.