Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ternium SA (TX, Financial) reported an adjusted EBITDA of $368 million and a net income of $93 million for the third quarter.
- Record high shipments were achieved in the Mexican market during the third quarter of 2024.
- The company is optimistic about the Mexican market, with expectations of increased automotive production and infrastructure projects.
- Ternium SA (TX) is making significant progress on its expansion projects, including new production lines and a wind farm in Argentina.
- The company has published a comprehensive sustainability report, including a 15% reduction target in emissions intensity by 2030.
Negative Points
- Margins declined primarily due to a decrease in realized prices in the main market.
- A seasonal decline in shipments is expected in the fourth quarter.
- The Brazilian market faces challenges with increased flat steel imports, mainly from China, despite government measures.
- The Argentine market risks an increase in imports of unfair trade products, which could impact local steel demand.
- The dividend payment was reduced, which was unexpected given the company's previous commitment to stable or growing dividends.
Q & A Highlights
Q: Can you explain the rationale behind the dividend cut despite a positive outlook for Mexico and Argentina?
A: Maximo Vedoya, CEO, explained that the board's decision to reduce the nominal dividend payment was influenced by lower earnings generation and a slight decrease in net cash position. However, the dividend yield and payout ratio remain high, reflecting the company's strong financial position. The focus is on maintaining a robust dividend yield while managing increased capital expenditures for ongoing projects.
Q: What are the implications of the recent US election for Ternium, especially regarding trade relations with Mexico?
A: Maximo Vedoya, CEO, sees the election outcome as an opportunity to strengthen North American trade relations. The new Mexican administration shares concerns about unfair trade practices, particularly from China, and is committed to reducing the trade deficit with Asia. The USMCA agreement is viewed positively, and there is optimism about further strengthening the North American supply chain.
Q: How does Ternium view the global steel market, given the overcapacity in China and potential tariffs?
A: Maximo Vedoya, CEO, acknowledged the overcapacity in China driven by government policies. He anticipates regional markets will become more prevalent, with North America being competitive in producing low-carbon steel. Ternium is investing in capacity to meet regional demand, and the company expects governments to continue taking measures against unfair trade practices.
Q: What is Ternium's strategy regarding steel imports in Brazil, and what future investments are planned?
A: Maximo Vedoya, CEO, stated that Ternium is working with the Brazilian government to address loopholes in the quota system for steel imports, primarily from China. The company is also filing anti-dumping cases. Future investments will focus on the Americas, particularly completing the Pesqueria project, which is the largest in Ternium's history.
Q: What are the expectations for CapEx and cost management in 2025?
A: Pablo Brizzio, CFO, indicated that CapEx for 2025 is expected to be around $2.3 billion, with a significant portion allocated to the Pesqueria project. The company anticipates a reduction in costs as lower-priced raw materials flow through results, and it continues to implement cost-reduction programs across its facilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
