Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ternium Argentina SA (BUE:TXAR, Financial) posted a healthy adjusted EBITDA of $545 million for the second quarter, maintaining stable shipments with a 12% margin despite a weak steel price environment.
- The company generated strong cash from operations of $656 million, contributing to a solid net cash position of $1.9 billion even after distributing record dividends.
- Ternium Argentina SA (BUE:TXAR) is advancing its growth projects, including the startup of a new downstream project and finishing center in Pesqueria, with further expansions on track.
- The steel market in Mexico remains healthy, with strong demand in the automotive industry and stable industrial steel market conditions.
- Ternium Argentina SA (BUE:TXAR) is making progress on its climate change initiatives, including the construction of a wind farm in Buenos Aires Province, Argentina, expected to be operational by year-end.
Negative Points
- Net income was negatively affected by a $783 million provision due to an adverse Brazilian court decision related to the acquisition of a stake in Usiminas.
- The company anticipates a decline in adjusted EBITDA in the third quarter due to lower realized steel prices and decreased margins.
- Shipments in Mexico experienced a slight decline in the second quarter, impacted by a downturn in steel prices and a tropical storm.
- The Brazilian steel sector faces a serious threat from imports under predatory conditions, mostly from China, with current measures proving insufficient.
- Ternium Argentina SA (BUE:TXAR) faced operational challenges, including issues with a blast furnace in Brazil and low volumes in Argentina, impacting profitability.
Q & A Highlights
Q: Can you provide an update on HRC prices in the US and any potential rebound? Also, any updates on the MUSA expansion and iron ore production levels?
A: HRC prices in the US were around $700 per metric ton but are now showing signs of increase, indicating a potential bottom. The decision on the MUSA expansion is expected by the end of next year. Current iron ore prices are manageable for MUSA, and no significant production decline is anticipated.
Q: Is the 25% import tariff exemption for Brazilian steel official, and what is the status of the CSN lawsuit regarding Usiminas?
A: The exemption is official, announced by the Mexican President, but implementation is pending. Regarding the CSN lawsuit, it is ongoing, and we prefer not to comment further at this time.
Q: How does the US tariff on Mexican steel affect Ternium, and are there opportunities from AHMSA's potential bankruptcy?
A: The tariff impacts are minimal as Mexico exports less steel to the US compared to imports. Regarding AHMSA, the bankruptcy process is lengthy, and we are monitoring the situation.
Q: Are you seeing a recovery in demand as prices stabilize, and what are the risks with USMCA under a new US administration?
A: Yes, demand is picking up as prices stabilize. We believe the USMCA benefits all three countries, and we do not foresee significant changes regardless of the US administration.
Q: Siderar reported an operating loss; is this due to FX accounting or something more fundamental?
A: The loss was primarily due to low volumes and increased costs. We expect improvements in the coming quarters as volumes recover and costs decrease.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
