Ternium Announces First Quarter of 2024 Results

LUXEMBOURG / ACCESSWIRE / April 24, 2024 / Ternium S.A. (NYSE:TX) today announced its results for the first quarter ended March 31, 2024.

The financial and operational information contained in this press release is based on Ternium S.A.'s operational data and consolidated condensed interim financial statements prepared in accordance with IAS 34 "Interim financial reporting" (IFRS) and presented in US dollars ($) and metric tons. Interim financial figures are unaudited. This press release includes certain non-IFRS alternative performance measures such as Adjusted EBITDA, Cash Operating Income, Net Cash, Free Cash Flow, Adjusted Net Income, Adjusted Equity Holders' Net Income and Adjusted Earnings per ADS. The reconciliation of these figures to the most directly comparable IFRS measures is included in Exhibit I.

First Quarter of 2024 Highlights

Summary of First Quarter of 2024 Results

CONSOLIDATED		1Q24			4Q23		DIF			1Q23			DIF
Steel Products Shipments (thousand tons)		3,894			4,035		-3	%		3,065			27	%
Mining Products Shipments (thousand tons)		1,424			1,952		-27	%		-
Net Sales ($ million)		4,778			4,931		-3	%		3,623			32	%
Operating Income ($ million)		675			582		16	%		357			89	%
Adjusted EBITDA ($ million)		855			651		31	%		508			68	%
Adjusted EBITDA Margin (% of net sales)		18	%		13	%				14	%
Net Income ($ million)		491			554					480
Equity Holders' Net Income ($ million)		361			414					374
Earnings per ADS1 ($)		1.84			2.11					1.91

1 American Depositary Share. Each ADS represents 10 shares of Ternium's common stock. Results are based on a weighted average number of shares of common stock outstanding (net of treasury shares) of 1,963,076,776.

First quarter of 2024 highlights

Ternium achieved a strong operating performance in the first quarter, reflecting a rebound in its margins and sustained high steel sales volumes.

Analysis of First Quarter of 2024 Results

Consolidated Net Sales

$ MILLION		1Q24			4Q23			DIF			1Q23		DIF
Mexico		2,389			2,265			5	%		2,206		8	%
Brazil		1,045			1,064			-2	%		42
Southern Region		563			905			-38	%		854		-34	%
Other Markets		603			455			32	%		452		33	%
Total steel products		4,601			4,689			-2	%		3,554		29	%
Other products		89			62			45	%		69		28	%
Steel segment		4,690			4,750			-1	%		3,623		29	%
Mining segment		88			180			-51	%		0
Total net sales		4,778			4,931			-3	%		3,623		32	%

Adjusted EBITDA in the first quarter was benefited by a $56 million gain related to a readjustment of electricity transmission charges in Mexico.

Adjusted EBITDA in the first quarter of 2024 equals Net Income adjusted to exclude:

• Income Tax Results;
• Equity in Results of Non-consolidated Companies;
• Net Financial Results; and
• Depreciation and Amortization.

And adjusted to include the proportional EBITDA in Unigal (70% participation).

Adjusted EBITDA Margin equals Adjusted EBITDA divided by net sales. For more information see Exhibit I - Alternative performance measures - "Adjusted EBITDA".

The steel segment net sales remained strong in the first quarter of 2024, slightly below the levels achieved in the prior quarter. On a year-over-year basis, the consolidation of Usiminas added $1.1 billion to steel segment net sales and 1.0 million tons to steel product shipments.

Cash Operating Income equals Operating Income adjusted to exclude depreciation and amortization as well as certain other non-cash items. The steel segment's Cash Operating Income per Ton and Margin equal the steel segment's Cash Operating Income divided by Steel Segment's Shipments and Net Sales, respectively. For more information see Exhibit I - Alternative performance measures - "Cash Operating Income - Steel Segment".

Ternium recorded strong steel segment Cash Operating Income per Ton and Margin in the first quarter of 2024. Reported ratios were positively impacted by lower costs of purchased slabs and raw materials as well as better operating efficiencies in Usiminas' steel facility in Ipatinga. In addition, Ternium recorded a $56 million gain in its steel segment's cost of sales related to a readjustment of electricity transmission charges in Mexico.

Mining Segment

Ternium reports intercompany and third-party sales of mining products under the Mining segment.

The Mining segment net sales in the first quarter of 2024 decreased sequentially, mainly reflecting lower iron ore prices and a decrease in iron ore shipments to third parties. Mining product shipments decreased in the period mainly due to lower iron ore production levels.

On a year-over-year basis, the consolidation of Usiminas added 2.0 million tons to mining products shipments and $131 million to net sales of mining products.

Iron ore price volatility remained high in the first quarter, with reference prices reaching a 12-month peak early in January 2024 and then falling to a bottom near the lowest level recorded in the last 12-months. However, starting in April, iron ore reference prices have been on an upward trend.

Cash Operating Income equals Operating Income adjusted to exclude depreciation and amortization as well as certain other non-cash items. The mining segment Cash Operating Income per Ton and Cash Operating Income Margin equal the mining segment's Cash Operating Income divided by its Shipments and Net Sales, respectively. For more information see Exhibit I - Alternative performance measures - "Cash Operating Income - Mining Segment".

The mining segment's Cash Operating Income per Ton and Margin in the first quarter of 2024 were negatively affected by the decrease in mining products revenue per ton.

Net Financial Results

In the first quarter of 2024, Ternium's divestment of Argentine government bond holdings resulted in a loss of $106 million due to the recycling of changes in the fair value of financial instruments from Other Comprehensive Income to Financial Results.

As of March 31, 2024, the balance of Ternium's Other Comprehensive Income in connection with its Argentine government bond holdings amounted to a negative $238 million.

Ternium recorded a $41 million net foreign exchange loss in the period, mainly due to the impact on Usiminas' net short foreign currency position of the depreciation of the Brazilian Real vis-a-vis the US dollar (as Usiminas uses the Brazilian Real as its functional currency), and the impact of the appreciation of the Mexican Peso vis-a-vis the US dollar on Ternium Mexico's net short local currency position.

$ MILLION			1Q24				4Q23				1Q23
Net interest results			38				49				25
Net foreign exchange result			(41	)			171				(16	)
Change in fair value of financial assets			(137	)			(85	)			4
Other financial expense, net			(22	)			(32	)			(6	)
Net financial results			(163	)			103				8

Income Tax Results

Using the US dollar as their functional currency, Ternium Mexico, Ternium Argentina and Ternium Brasil are affected by deferred tax results. These results account for the impact of local currency fluctuations against the US dollar, as well as the effect of local inflation.

$ MILLION			1Q24				4Q23				1Q23
Current income tax expense			(126	)			(141	)			(139	)
Deferred tax gain (loss)			86				(15	)			218
Income tax expense			(40	)			(156	)			79
Result before income tax			532				709				400
Effective tax rate			8	%			22	%			-20	%

A robust operating performance coupled with a $56 million gain related to a readjustment of electricity transmission charges in Mexico contributed to Ternium's Net Income in the first quarter of 2024. In addition, Net Income in the period reflected higher financial expenses and an unusually low effective tax rate caused by deferred tax gains.

In the third quarter of 2023, Adjusted Net Income equaled the period's Net Loss adjusted to exclude a loss of $1.1 billion in connection with an increase in the participation in Usiminas. Adjusted Earnings per ADS equaled the period's Adjusted Equity Holders' Net Income divided by 1,963 million outstanding shares of Ternium's common stock, net of treasury shares, expressed in ADS equivalent (each ADS represents 10 shares).

$ MILLION			1Q24				4Q23				1Q23
Owners of the parent			361				414				374
Non-controlling interest			130				140				105
Net Income			491				554				480

Cash Flow and Liquidity

In the first quarter of 2024, cash from operations was $475 million, a relatively healthy level considering a $266 million increase in working capital, mainly related to higher inventories of $153 million and a net increase in trade and other receivables of $146 million.

Capital expenditures decreased sequentially in the first quarter mainly reflecting the completion of the relining of the main blast furnace in Ipatinga and a decrease in advanced payments to equipment manufacturers in connection with the construction of the new facilities at the industrial center in Pesquería.

Ternium's net cash position increased slightly in the first quarter, reaching $2.0 billion as of March 31, 2024.

The sequential change in net cash position was mainly related to an improved valuation of Ternium Argentina's holdings of Argentine sovereign bonds. Net cash as of the end of the period included Ternium Argentina's total position of cash and cash equivalents and other investments of $1.2 billion.

Conference Call and Webcast

Ternium will host a conference call on April 25, 2024, at 8:30 a.m. ET in which management will discuss first quarter of 2024 results. A webcast link will be available in the Investor Center section of the company's website at www.ternium.com.

Forward Looking Statements

Some of the statements contained in this press release are "forward-looking statements". Forward-looking statements are based on management's current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by those statements. These risks include but are not limited to risks arising from uncertainties as to gross domestic product, related market demand, global production capacity, tariffs, cyclicality in the industries that purchase steel products and other factors beyond Ternium's control.

About Ternium

Ternium is a leading steel producer in the Americas, providing advanced steel products to a wide range of manufacturing industries and the construction sector. We invest in low carbon emissions steelmaking technologies to support the energy transition and the mobility of the future. We also support the development of our communities, especially through educational programs in Latin America. More information about Ternium is available at www.ternium.com.

Income Statement

$ MILLION			1Q24				4Q23				1Q23
Net sales			4,778				4,931				3,623
Cost of sales			(3,675	)			(4,039	)			(2,981	)
Gross profit			1,104				892				643
Selling, general and administrative expenses			(431	)			(432	)			(293	)
Other operating income			2				121				8
Operating income			675				582				357
Financial expense			(45	)			(44	)			(16	)
Financial income			83				94				41
Other financial (expense) income, net			(200	)			54				(17	)
Equity in earnings of non-consolidated companies			20				24				35
Profit before income tax results			532				709				400
Income tax (expense) credit			(40	)			(156	)			79
Profit for the period			491				554				480
Attributable to:
Owners of the parent			361				414				374
Non-controlling interest			130				140				105
Net income			491				554				480

Statement of Financial Position

$ MILLION		MARCH 31, 2024				DECEMBER 31, 2023
Property, plant and equipment, net			7,856				7,638
Intangible assets, net			1,025				996
Investments in non-consolidated companies			524				517
Other investments			35				211
Deferred tax assets			1,694				1,713
Receivables, net			994				1,073
Total non-current assets			12,128				12,149
Receivables, net			1,221				1,173
Derivative financial instruments			7				15
Inventories, net			5,059				4,948
Trade receivables, net			2,181				2,065
Other investments			2,283				1,976
Cash and cash equivalents			1,780				1,846
Total current assets			12,532				12,024
Non-current assets classified as held for sale			9				7
Total assets			24,669				24,179

Statement of Financial Position (cont.)

$ MILLION		MARCH 31, 2024				DECEMBER 31, 2023
Capital and reserves attributable to the owners of the parent			13,029				12,419
Non-controlling interest			4,527				4,393
Total equity			17,556				16,812
Provisions			806				840
Deferred tax liabilities			23				171
Other liabilities			1,139				1,149
Trade payables			6				12
Lease liabilities			186				189
Borrowings			1,176				1,206
Total non-current liabilities			3,337				3,567
Current income tax liabilities			120				137
Other liabilities			490				430
Trade payables			2,195				2,233
Derivative financial instruments			2				8
Lease liabilities			50				52
Borrowings			919				940
Total current liabilities			3,776				3,801
Total liabilities			7,113				7,367
Total equity and liabilities			24,669				24,179

Statement of Cash Flows

$ MILLION			1Q24				4Q23				1Q23
Result for the period			491				554				480
Adjustments for:
Depreciation and amortization			171				191				151
Income tax accruals less payments			(13	)			(45	)			(157	)
Equity in earnings of non-consolidated companies			(20	)			(24	)			(35	)
Impairment charge			-				42				-
Interest accruals less payments/receipts, net			(2	)			(34	)			(18	)
Changes in provisions			(7	)			(61	)			(1	)
Changes in working capital			(266	)			320				218
Net foreign exchange results and others			120				(225	)			(1	)
Net cash provided by operating activities			475				718				636
Capital expenditures and advances to suppliers for PP&E			(449	)			(597	)			(204	)
Decrease (increase) in other investments			0				129				(686	)
Proceeds from the sale of property, plant & equipment			1				1				1
Dividends received from non-consolidated companies			1				28				-
Net cash used in investing activities			(447	)			(439	)			(889	)
Dividends paid in cash to company's shareholders			-				(216	)			-
Finance lease payments			(18	)			(16	)			(14	)
Proceeds from borrowings			131				119				46
Repayments of borrowings			(166	)			(121	)			(196	)
Net cash used in financing activities			(53	)			(234	)			(164	)
(Decrease) increase in cash and cash equivalents			(24	)			45				(417	)

Exhibit I - Alternative performance measures

These non-IFRS measures should not be considered in isolation of, or as a substitute for, measures of performance prepared in accordance with IFRS. These non-IFRS measures do not have a standardized meaning under IFRS and, therefore, may not correspond to similar non-IFRS financial measures reported by other companies.

Adjusted EBITDA

$ MILLION			1Q24				4Q23				3Q23				2Q23				1Q23
Net income (loss)			491				554				(783	)			736				480
Adjusted to exclude:
Income tax results			40				156				253				5				(79	)
Equity in earnings of non-consolidated companies			(20	)			(24	)			(19	)			(27	)			(35	)
Net financial results			163				(103	)			(30	)			18				(8	)
Reversal of Usiminas' post-retirement liabilities			-				(109	)			-				-				-
Contingency reversal - dismissal of public civil action against Usiminas			-				(63	)			-				-				-
Non-cash effects related to the increase in the participation in Usiminas			-				-				1,106				-				-
Impairment on Las Encinas' mining assets			-				42				-				-				-
Depreciation and amortization			171				191				165				151				151
Adjusted to include:
Proportional EBITDA in Unigal (70% participation)			9				8				6				-				-
Adjusted EBITDA			855				651				698				883				508
Divided by: net sales			4,778				4,931				5,185				3,871				3,623
Adjusted EBITDA Margin (%)			18	%			13	%			13	%			23	%			14	%

Exhibit I - Alternative performance measures (cont.)

Cash Operating Income - Steel Segment

$ MILLION			1Q24				4Q23				3Q23				2Q23				1Q23
Operating Income - Management View (Note "Segment Information" to Ternium's Financial Statements as of the corresponding dates)			593				543				667				597				521
Plus/Minus differences in Cost of Sales (IFRS)			59				(75	)			(162	)			144				(139	)
Excluding Reversal of Usiminas' post-retirement liabilities			-				(109	)			-				-				-
Excluding Contingency reversal - dismissal of public civil action against Usiminas			-				(63	)			-				-				-
Excluding Depreciation and Amortization			137				154				136				126				126
Including Proportional EBITDA in Unigal (70% participation)			9				8				6				-				-
Cash Operating Income			798				458				647				867				507
Divided by Steel Shipments (thousand tons)			3,894				4,035				4,131				2,982				3,065
Cash Operating Income per Ton - Steel			205				114				157				291				166
Divided by Steel Net Sales			4,690				4,750				5,036				3,871				3,623
Cash Operating Income Margin - Steel (%)			17	%			10	%			13	%			22	%			14	%

Cash Operating Income - Mining Segment

$ MILLION			1Q24				4Q23				3Q23				2Q23				1Q23
Operating Income - Management View (Note "Segment Information" to Ternium's Financial Statements as of the corresponding dates)			(22	)			97				(4	)			(25	)			(6	)
Plus/Minus differences in Cost of Sales (IFRS)			54				9				17				10				(16	)
Excluding Impairment on Las Encinas' mining assets			-				42				-				-				-
Excluding Depreciation and Amortization			34				37				29				25				24
Cash Operating Income			66				185				42				9				3
Divided by Mining Shipments (thousand tons)			2,695				3,277				3,232				867				799
Cash Operating Income per Ton - Mining			25				57				13				10				4
Divided by Mining Net Sales			274				404				276				110				85
Cash Operating Income Margin - Mining (%)			24	%			46	%			15	%			8	%			3	%

Exhibit I - Alternative performance measures (cont.)

Adjusted Net Income

$ MILLION			3Q23
Net loss			(783	)
Less: non-cash effects related to the increase in the participation in Usiminas			(1,106	)
Adjusted Net Income			323

Adjusted Equity Holders' Net Income and Adjusted Earnings per ADS

$ MILLION			3Q23
Equity holders' net loss			(739	)
Less: non-cash effects related to the increase in the participation in Usiminas			(1,010	)
Adjusted Equity Holders' Net Income			271
Divided by: outstanding shares of common stock, net of treasury shares (expressed in million of ADS equivalent)			196
Adjusted Earnings per ADS ($)			1.38

Free Cash Flow

$ MILLION			1Q24				4Q23				3Q23				2Q23				1Q23
Net cash provided by operating activities			475				718				1,020				127				636
Less: capital expenditures and advances to suppliers for PP&E			(449	)			(597	)			(430	)			(231	)			(204	)
Free cash flow			26				121				590				(104	)			433

Note: Free Cash Flow in the comparative quarters in 2023 has been modified due to a reclassification, moving the following amounts from Interest accruals less payments to Other investments: $27 million in the third quarter of 2023, $46 million in the second quarter of 2023 and $18 million in the first quarter of 2023.

Exhibit I - Alternative performance measures (cont.)

Net Cash Position

$ BILLION		MAR 31, 2024				DEC 31, 2023				SEP 30, 2023				JUN 30, 2023				MAR 31, 2023
Cash and cash equivalents2			1.8				1.8				1.8				0.9				1.2
Plus: other investments (current and non-current)2			2.3				2.2				2.7				2.1				2.6
Less: borrowings (current and non-current)			(2.1	)			(2.1	)			(2.2	)			(0.9	)			(0.9	)
Net cash position			2.0				1.9				2.4				2.2				3.0

2Ternium Argentina's consolidated position of cash and cash equivalents and other investments amounted to $1.2 billion as of March 31, 2024, and $1.1 billion, $1.2 billion, $1.0 billion and $1.5 billion as of December 31, September 30, June 30 and March 31, 2023, respectively.

Sebastián Martí
Ternium - Investor Relations
+1 (866) 890 0443
+54 (11) 4018 8389
www.ternium.com

SOURCE: Ternium S.A.

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