EBITDA: Sequential increase driven by improved margins and slightly higher shipments. Net Income: $142 million for Q1 2025, including a $45 million provisional adjustment charge. Adjusted Net Income: $188 million, excluding the provisional adjustment charge. Steel Shipments: Higher shipments in Brazil and other markets, offset by lower sales volumes in Mexico. Mining Segment Shipments: Increased slightly quarter over quarter and rose 14% year over year. CapEx: Total project cost revised to $4 billion, with $1.4 billion already invested as of March 2025. Net Cash Position: $1.3 billion at the end of March 2025.

Warning! GuruFocus has detected 7 Warning Signs with TX.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Ternium SA (NYSE:TX) reported a sequential increase in EBITDA driven by improved margins and slightly higher shipments. The company anticipates achieving a double-digit EBITDA margin in the second quarter, supported by increased realized prices in Mexico and cost-reduction initiatives. The expansion project in Mexico is progressing, with the pickling and finishing lines already operational and other facilities scheduled to begin by the end of December. Ternium SA (NYSE:TX) has a strong balance sheet with a net cash position of $1.3 billion at the end of March 2025. The company is focusing on enhancing competitiveness by increasing operational efficiency and reducing costs, which has already yielded positive results.

Negative Points

Trade tensions and uncertainty are affecting business confidence and posing risks to global economic growth. The operating environment in Mexico is challenging, with uncertainty impacting investment and consumption. The expansion project in Mexico has experienced a slight delay, with the total CapEx revised to $4 billion, representing a 16% increase from previous estimates. The Brazilian market faces issues with unfair trade practices, with significant increases in imports and no immediate imposition of anti-dumping tariffs. The macroeconomic situation in Argentina, while showing signs of improvement, still presents risks such as high inflation.

Q & A Highlights

Q: Can you provide more details on the situation in Mexico, especially regarding the GDP and the impact on industrial customers? A: Maximo Vedoya, CEO: The steel industry in Mexico is facing challenges with a decrease in apparent steel consumption by almost 5% in 2024. This is mainly due to the commercial market, infrastructure, and construction sectors. However, we expect demand to increase in the coming quarters, particularly in the commercial markets. Imports are decreasing, and we anticipate gaining market share with new lines in the Pesqueria project.

Story Continues

Q: What is the outlook for margins and profitability, given the current economic environment? A: Pablo Brizzio, CFO: We saw a decrease in margins last year, but we expect an improvement in the second quarter of 2025, supported by higher realized steel prices and cost reduction initiatives. We anticipate margins to reach double-digit territory, and if trends continue, we should see further improvements throughout the year.

Q: Can you elaborate on the cost reduction initiatives and their impact on Q2? A: Pablo Brizzio, CFO: We are seeing a reduction in costs, particularly in raw materials and slabs, which will continue into Q2. Our cost reduction program has had a significant impact, and we expect it to continue contributing to improved margins. The main driver will be higher realized prices, especially in the Mexican market.

Q: What are the opportunities for volume growth in Mexico, and how are imports affecting this? A: Maximo Vedoya, CEO: We have the capacity to increase volumes in Mexico. Imports have decreased from 600,000 tons to 400,000 tons monthly, providing opportunities to gain market share. We are working on certifying our products with industrial customers, and we see potential to capture a share of these imports.

Q: How do trade tensions and tariffs impact Ternium's dividend policy and cash returns? A: Pablo Brizzio, CFO: Despite trade tensions, we maintain a strong financial position and aim to sustain our dividend payments. We are in the middle of a significant CapEx plan but remain committed to providing consistent cash returns to shareholders, assuming no drastic changes in the trade environment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.