Ternium Reports Strong Q2 Results Despite Market Challenges

In the latest earnings call, Ternium (NYSE: TX) reported strong financial results for the second quarter of 2024, achieving an adjusted EBITDA of $545 million and solid operational cash flow of $656 million. Despite a negative court ruling in Brazil and the expectation of declining steel prices in Mexico, the company maintains a positive outlook for growth, bolstered by increasing steel prices and higher shipment volumes. Ternium’s net cash position remains robust at $1.9 billion, even amid ongoing litigation and market challenges.

### Key Takeaways
– Ternium recorded an adjusted EBITDA of $545 million for Q2.
– Strong cash flow from operations reached $656 million.
– The company holds a solid net cash position of $1.9 billion.
– Anticipated declines in steel prices in Mexico and a $783 million litigation provision impacted overall financial results.
– Steel shipments in Brazil rose by 6%, driven by activity in the automotive and manufacturing sectors.
– The company predicts growth in shipments and steel prices in the coming quarters.
– Ternium is proactive in addressing climate change, including the construction of a wind farm in Argentina.
– The company has no plans to increase its stake in Usiminas and continues litigation with CSN.

### Company Outlook
– Ternium remains optimistic, expecting improved performance as it anticipates increased shipments and rising steel prices.
– Although a decline in EBITDA is expected in the next quarter due to lower prices, the company views this as a temporary dip, with a potential for recovery in subsequent quarters.

### Bearish Highlights
– Weak market conditions and falling contract prices are likely to reduce steel prices in Mexico.
– A provision for $783 million related to litigation has negatively affected net income.
– Ternium Argentina faced low volumes and rising costs, resulting in minimal operating profit for Q2.

### Bullish Highlights
– Despite challenges, Ternium’s net cash position is strong.
– Growth in Brazil’s automotive and manufacturing sectors supports positive shipment trends.
– The company has received recognition for its commitment to sustainability through its technical school in Pesqueria.

### Misses
– Adjusted net income fell to $40 million, influenced by deferred tax changes due to the depreciation of the Mexican peso.
– Steel shipments in Mexico saw a slight decline due to lower prices and adverse weather conditions.

### Q&A Highlights
– Ternium addressed that it is a net buyer of slabs and is not facing production issues in Brazil.
– The company downplayed the significance of Chinese investments in Mexico, indicating they account for less than 1% of total foreign direct investment in the country.
– Ternium’s dividend policy remains stable, unaffected by current market conditions.
– The company anticipates cost reductions by year-end due to falling iron ore and coal prices.

In summary, Ternium’s earnings report for Q2 reflects a strong financial foundation while navigating market hurdles and litigation complexities. The company is optimistic about potential recoveries in steel prices and shipment volumes in the near future.