terniumpr3q15_6k.htm - Generated by SEC Publisher for SEC Filing

 

FORM 6 - K

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a - 16 or 15d - 16 of

the Securities Exchange Act of 1934

 

 

As of 11/3/2015

 

 

 

Ternium S.A.

(Translation of Registrant's name into English)

 

 

Ternium S.A.
29, Avenue de la Porte-Neuve

L-2227 Luxembourg

(352) 2668-3152

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.

 

Form 20-F  Ö    Form 40-F    

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.

 

Yes          No  Ö   

 

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

Not applicable

 


 

 

The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended.

 

This report contains Ternium S.A.’s press release announcing third quarter 2015 results.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

TERNIUM S.A.

 

By: /s/ Pablo Brizzio 

Name: Pablo Brizzio 

Title: Chief Financial Officer

By: /s/ Daniel Novegil

Name: Daniel Novegil

Title: Chief Executive Officer

 

 

Dated: November 3, 2015

 


 

 

 

Sebastián Martí

Ternium - Investor Relations

+1   (866) 890 0443

+54 (11) 4018 2389

www.ternium.com

 

 

Ternium Announces Third Quarter and First Nine Months of 2015 Results

 

Luxembourg, November 3, 2015 – Ternium S.A. (NYSE: TX) today announced its results for the third quarter and first nine months ended September 30, 2015.

 

The financial and operational information contained in this press release is based on Ternium S.A.’s operational data and consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and presented in U.S. dollars (USD) and metric tons.

 

 

Summary of Third Quarter 2015 Results

 

 

3Q 2015

 

2Q 2015

 

3Q 20141

               

Steel Shipments (tons)

2,463,000

 

2,397,000

3%

 

2,335,000

5%

Iron Ore Shipments (tons)

892,000

 

873,000

2%

 

1,006,000

-11%

Net Sales (USD million)

1,945.4

 

1,996.1

-3%

 

2,218.3

-12%

Operating Income (USD million)

140.5

 

103.1

36%

 

314.5

-55%

EBITDA2 (USD million)

250.4

 

212.2

18%

 

423.0

-41%

EBITDA per Ton3 (USD)

101.7

 

88.5

   

181.1

 

EBITDA Margin (% of net sales)

12.9%

 

10.6%

   

19.1%

 

Equity in Results of Non-Consolidated Companies

(48.8)

 

(1.1)

 

 

(748.8)

 

Net Income (Loss) (USD million)

40.0

 

50.5

   

(544.1)

 

Equity Holders' Net Income (Loss) (USD million)

24.8

 

41.0

   

(530.9)

 

Earnings (Loss) per ADS (USD)

0.13

 

0.21

   

(2.70)

 

 

 

·         EBITDA of USD250.4 million in the third quarter 2015, USD38.2 million higher than EBITDA in the second quarter 2015 mainly reflecting higher shipments and lower costs, partially offset by lower steel prices.

 

 


1 On May 28, 2015, Ternium restated its interim consolidated financial statements as of September 30, 2014 to reduce the carrying amount of its Usiminas investment. As a result of that restatement, the consolidated financial statements as of December 31, 2014 and March 31, 2015 and for the periods then ended were also restated to reflect a lower carrying amount of the Usiminas investment.

2 EBITDA in the third quarter 2015 equals operating income of USD140.5 million adjusted to exclude depreciation and amortization of USD109.9 million.

3 Consolidated EBITDA divided by steel shipments.

 

1


 

 


 

Ternium’s operating income in the third quarter 2015 was USD140.5 million, up sequentially by USD37.4 million due to higher operating margin5 and shipments. Operating margin increased sequentially mainly as a result of USD56 lower operating cost per ton6 partially offset by USD37 lower steel revenue per ton. The decrease in operating cost per ton was mainly due to lower purchased slabs, raw material and labor costs. Steel revenue per ton decreased principally as a result of lower realized steel prices in Mexico.

 

Compared to the third quarter 2014, the company’s operating income in the third quarter 2015 decreased by USD174.0 million as a result of lower operating margin, partially offset by higher shipments. Operating margin in the third quarter 2015 decreased year-over-year mainly due to a USD157 decrease in steel revenue per ton, partially offset by a USD107 decrease in operating cost per ton. Steel revenue per ton decreased principally as a result of lower steel prices in Ternium’s main steel markets. The decrease in operating cost per ton was mainly due to lower purchased slabs, raw material and energy costs.

 

Net income in the third quarter 2015 was USD40.0 million, a decrease of USD10.5 million compared to net income in the second quarter 2015 mainly due to USD45.7 million lower results from Ternium’s investment in Usiminas and a higher effective tax rate, partially offset by the above mentioned increase in operating income.

 

Net income in the third quarter 2015 compared with a net loss of USD544.1 million in the third quarter 2014. The USD584.1 million higher result in the year-over-year comparison was mainly due to a USD739.8 million impairment of Ternium’s investment in Usiminas in the third quarter 2014 and a lower year-over-year income tax expense, partially offset by the above mentioned lower operating income.

 


 

4 Each American Depositary Share (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.

5 Operating margin is equal to revenue per ton less operating cost per ton.

6 Operating cost per ton is equal to cost of sales plus SG&A, divided by shipments.

2

 


 

 

Summary of First Nine Months of 2015 Results

 

 

9M 2015

 

9M 20141

 
           

Steel Shipments (tons)

7,291,000

 

7,027,000

4%

 

Iron Ore Shipments (tons)

2,729,000

 

2,835,000

-4%

 

Net Sales (USD million)

6,067.5

 

6,571.5

-8%

 

Operating Income (USD million)

447.7

 

864.9

-48%

 

EBITDA (USD million)

776.0

 

1,170.1

-34%

 

EBITDA per Ton (USD)

106.4

 

166.5

   

EBITDA Margin (% of net sales)

12.8%

 

17.8%

   

Net Income (Loss) (USD million)

186.3

 

(175.6)

   

Equity Holders' Net Income (Loss) (USD million)

134.3

 

(251.8)

   

Earnings (Loss) per ADS (USD)

0.68

 

(1.28)

   
           

 

 

Operating income in the first nine months of 2015 was USD447.7 million, USD417.2 million lower than operating income in the first nine months of 2014. Steel shipments increased by 263,000 tons year-over-year, mainly as a result of a 320,000 ton increase in Mexico and a 39,000 ton increase in the Southern Region, partially offset by a 95,000 ton decrease in Other Markets. Operating margin decreased, mainly reflecting USD102 lower steel revenue per ton, partially offset by USD50 lower operating cost per ton. Steel revenue per ton decreased as a result of lower steel prices in Ternium’s main steel markets, partially offset by a higher value added product mix. The decrease in operating cost per ton was mainly due to lower purchased slabs, raw material and energy costs.

 

Net income in the first nine months of 2015 was USD186.3 million, compared to USD175.6 million net losses in the first nine months of 2014. The USD361.8 million higher result in the year-over-year comparison was mainly due to the above mentioned impairment of Ternium’s investment in Usiminas in the third quarter 2014, and lower year-over-year income tax expense and net financial results, partially offset by lower operating income.

 

 


7 EBITDA in the first nine months 2015 equals operating income of USD447.7 million adjusted to exclude depreciation and amortization of USD328.3 million.

8 Each American Depositary Share (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.

3

 


 

 

Outlook

 

Shipments in Mexico during the third quarter 2015 increased 5% sequentially and 11% year-over-year, returning to the record levels of this year’s first quarter.  Shipments to automotive, home-appliance and other industrial customers in the country continue to drive Ternium’s growth in Mexico, while shipments to customers in the construction sector are growing, albeit not at the same pace. The fourth quarter of this year is expected to see a sequential decrease in shipments in Mexico, related in part to end-of-year seasonality, but also to a planned 30-day stoppage of Ternium’s hot rolling mill in connection with an upgrade of the line that will enable a wider product range.

 

Shipments in Argentina remained sequentially stable in the third quarter 2015. While shipments in the fourth quarter of the year should follow the same trend, current conditions of the local steel market could change in 2016.

 

After a relatively stable second quarter 2015, steel prices in the NAFTA markets resumed a downward trend by the end of the third quarter of the year, pressured by high levels of low-priced steel imports into the region, largely under unfair trade conditions. Ternium, however, expects to realize sequentially stable steel prices in Mexico in the fourth quarter 2015, reflecting, with some lag related to the regular price resets contained in industrial customer sales contracts, the steel price stability seen through the end of the third quarter.

 

The company anticipates that operating income will increase in the fourth quarter 2015 compared to the third quarter of the year, mainly as a result of higher operating margin partially offset by lower shipments.  Prices of iron ore, coking coal, scrap and energy continue to decline as a result of the impact of China’s economic slowdown on the world’s commodities and energy markets. Consequently, Ternium expects that cost per ton will continue to decrease in the upcoming quarters, with a gradual pass-through to costs of lower prices of raw materials and purchased slabs.

 

 

Analysis of Third Quarter 2015 Results

 

Net gain attributable to Ternium’s equity owners in the third quarter 2015 was USD24.8 million, compared to net loss attributable to Ternium’s equity owners of USD530.9 million in the third quarter 2014. Including non-controlling interest, net gain for the third quarter 2015 was USD40.0 million, USD584.1 million higher compared to the third quarter 2014. The net loss in the third quarter 2014 included a USD739.8 million impairment of Ternium’s investment in Usiminas. Earnings per ADS in the third quarter 2015 were USD0.13 compared to losses per ADS of USD2.70 in the third quarter 2014.

Net sales in the third quarter 2015 were USD1.9 billion, or 12% lower than net sales in the third quarter 2014. The following table outlines Ternium’s consolidated net sales for the third quarter 2015 and third quarter 2014:

 

4

 


 

 

   

Net Sales (million USD)

 

 

 

3Q 2015

3Q 2014

Dif.

 

Mexico

 

1,065.3

1,219.2

-13%

 

Southern Region

 

648.0

671.2

-3%

 

Other Markets

 

224.1

313.4

-28%

 

Total steel products net sales

 

1,937.3

2,203.8

-12%

 

Other products1

 

7.7

7.2

6%

 

Steel segment net sales

 

1,945.0

2,211.0

-12%

 

 

 

 

 

 

 

Mining segment net sales

 

51.1

82.2

-38%

 

Intersegment eliminations

 

(50.7)

(74.9)

   

Net sales

 

1,945.4

2,218.3

-12%

 

1   The item "Other products" primarily includes pig iron.

 

Cost of sales was USD1.6 billion in the third quarter 2015, a decrease of USD138.9 million compared to the third quarter 2014. This was principally due to a USD136.8 million, or 10%, decrease in raw material and consumables used, mainly reflecting lower iron ore, coking coal, scrap, energy and purchased slabs costs, partially offset by a 5% increase in steel shipments.

 

Selling, General & Administrative (SG&A) expenses in the third quarter 2015 were USD188.0 million, or 9.7% of net sales, a decrease of USD18.1 million compared to SG&A expenses in the third quarter 2014 mainly due to lower freight and transportation expenses, labor costs, services and fees expenses and lower taxes and contributions (other than income tax).

 

Other net operating income in the third quarter 2015 was a USD4.0 million gain, lower than the USD62.1 million gain in the third quarter 2014. Other net operating income in the third quarter 2014 included a USD57.5 million income recognition on insurance recovery related to Ternium’s subsidiary Siderar.

 

Operating income in the third quarter 2015 was USD140.5 million, or 7.2% of net sales, compared to operating income of USD314.5 million, or 14.2% of net sales, in the third quarter 2014.  The following table outlines Ternium’s operating income by segment for the third quarter 2015 and third quarter 2014:

 

 

Steel segment

 

Mining segment

 

Intersegment

eliminations

 

Total

USD million

 

3Q 2015

3Q 2014

 

3Q 2015

3Q 2014

 

3Q 2015

3Q 2014

 

3Q 2015

3Q 2014

Net Sales

 

1,945.0

2,211.0

 

51.1

82.2

 

(50.7)

(74.9)

 

1,945.4

2,218.3

Cost of sales

 

(1,621.2)

(1,765.3)

 

(51.8)

(69.6)

 

52.1

75.1

 

(1,620.8)

(1,759.7)

SG&A expenses

 

(184.7)

(202.3)

 

(3.3)

(3.9)

 

-

-

 

(188.0)

(206.2)

Other operating income , net

 

4.0

61.8

 

(0.0)

0.3

 

-

-

 

4.0

62.1

Operating income (expense)

 

143.2

305.3

 

(4.1)

9.0

 

1.4

0.2

 

140.5

314.5

                         

EBITDA

 

240.5

401.2

 

8.5

21.6

 

1.4

0.2

 

250.4

423.0

                     
                         

Steel reporting segment

5

 


 

 

The steel segment’s operating income was USD143.2 million in the third quarter 2015, a decrease of USD162.1 million compared to the third quarter 2014, reflecting lower net sales and other net operating income, partially offset by lower operating cost in the third quarter 2015. Other net operating income in the third quarter 2014 included the above mentioned income recognition on insurance recoveries related to Siderar.

 

Net sales of steel products in the third quarter 2015 decreased 12% compared to the third quarter 2014, reflecting a USD157 decrease in steel revenue per ton shipped, partially offset by a 127,000 tons increase in shipments. Revenue per ton decreased reflecting lower steel prices in Ternium´s main steel markets. Shipments increased year-over-year in the third quarter 2015 mainly due to higher shipments in Mexico and the Southern Region, partially offset by lower shipments in Other Markets.

 

 

   

Net Sales (million USD)

 

Shipments (thousand tons)

 

Revenue / ton (USD/ton)

   

3Q 2015

3Q 2014

Dif.

 

3Q 2015

3Q 2014

Dif.

 

3Q 2015

3Q 2014

Dif.

Mexico

 

1,065.3

1,219.2

-13%

 

1,532.9

1,380.5

11%

 

695

883

-21%

Southern Region

 

648.0

671.2

-3%

 

641.4

624.9

3%

 

1,010

1,074

-6%

Other Markets

 

224.1

313.4

-28%

 

288.2

330.0

-13%

 

777

950

-18%

   

 

 

 

 

 

 

 

 

 

 

 

Total steel products

 

1,937.3

2,203.8

-12%

 

2,462.6

2,335.4

5%

 

787

944

-17%

Other products1

 

7.7

7.2

6%

               
                         

Steel segment

 

1,945.0

2,211.0

-12%

               

1 The item "Other products" primarily includes pig iron.

 

 

Operating cost decreased 8% year-over-year in the third quarter 2015, due to a 13% decrease in cost per ton, partially offset by the above mentioned 5% increase in shipments. The decrease in operating cost per ton was mainly the result of lower raw material, purchased slabs and energy costs.

 

Mining reporting segment

 

The mining segment’s operating income was a loss of USD4.1 million in the third quarter 2015, compared to a gain of USD9.0 million in the third quarter 2014, mainly reflecting lower net sales, partially offset by a lower operating cost.

 

Net sales of mining products in the third quarter 2015 were 38% lower than net sales in the third quarter 2014, mainly as a result of lower revenue per ton and lower shipments. Shipments were 115,000 tons, 11% lower than in the third quarter 2014.

 

   

Mining segment

 

 

 

3Q 2015

3Q 2014

Dif.

 

Net Sales (million USD)

 

51.1

82.2

-38%

 

Shipments (thousand tons)

 

891.5

1,006.6

-11%

 

Revenue per ton (USD/ton)

 

57

82

-30%

 

 

6

 


 

 

Operating cost decreased 25% year-over-year, mainly due to the above mentioned 11% decrease in shipment volumes and a 15% decrease in operating cost per ton. The decrease in operating cost per ton was mainly the result of energy costs and freight and transportation expenses.

 

EBITDA in the third quarter 2015 was USD250.4 million, or 12.9% of net sales, compared to USD423.0 million, or 19.1% of net sales, in the third quarter 2014.

 

Net financial results were a USD19.9 million loss in the third quarter 2015, compared to a USD22.6 million loss in the third quarter 2014. During the third quarter 2015, Ternium’s net financial interest results totaled a loss of USD21.5million, compared to a loss of USD32.9million in the third quarter 2014, reflecting lower indebtedness and weighted average interest rates.

 

Net foreign exchange results were a gain of USD11.2 million in the third quarter 2015 compared to a gain of USD6.6 million in the third quarter 2014. The third quarter 2015 gain was primarily associated with the effect of the Mexican peso depreciation against the US dollar on a net short local currency position in Ternium’s Mexican subsidiaries.

 

Change in fair value of financial instruments included in net financial results was an USD8.8 million loss in the third quarter 2015 compared with a USD4.7 million gain in the third quarter 2014. This loss in the third quarter 2015 was mainly related to certain derivative instruments entered into to compensate for the interest rate charges derived from Ternium’s Argentine subsidiary Siderar’s Argentine Peso denominated financial debt, and to results from changes in the fair value of financial assets.

 

Equity in results of non-consolidated companies was a loss of USD48.8 million in the third quarter 2015, compared to a loss of USD748.8 million in the third quarter 2014. Equity in results of non-consolidated companies in the third quarter 2015 included a lower result of Ternium’s investment in Usiminas. Equity in results of non-consolidated companies in the third quarter 2014 included the above mentioned loss related to a USD739.8 million impairment of Ternium’s investment in Usiminas.

 

Income tax expense in the third quarter 2015 was USD31.8 million, compared with an income tax expense of USD87.3 million in the third quarter 2014. Effective tax rate on both periods were affected by non-taxable losses stemming from the investment in Usiminas, in addition to other non-cash effects on deferred taxes.

 

Net gain attributable to non-controlling interest in the third quarter 2015 was USD15.2 million, compared to net loss of USD13.2 million in the same period in 2014, mainly due to a higher result attributable to non-controlling interest in Siderar, that in the third quarter 2014 was affected by the impairment of its investment in Usiminas.

 

 

Analysis of First Nine Months of 2015 Results

 

Net income attributable to Ternium’s equity owners in the first nine months of 2015 was USD134.3 million, compared to a net loss attributable to Ternium’s equity owners of USD251.8 million in the first nine months of 2014. Including non-controlling interest, net income for the first nine months of 2015 was USD186.3 million, compared to net loss of USD175.6 million in the first nine months of 2014. The net loss in the first nine months of 2014 included a USD739.8 million impairment of Ternium’s investment in Usiminas. Earnings per ADS in the first nine months of 2015 were USD0.68, compared to losses per ADS of USD1.28 in the first nine months of 2014.

Net sales in the first nine months of 2015 were USD6.1 billion, 8% lower than net sales in the first nine months of 2014. The following table shows Ternium’s consolidated net sales for the first nine months of 2015 and 2014:

7

 


 

 

   

Net Sales (million USD)

 

 

 

9M 2015

9M 2014

Dif.

 

Mexico

 

3,400.6

3,648.2

-7%

 

Southern Region

 

1,917.0

1,974.6

-3%

 

Other Markets

 

705.8

901.9

-22%

 

Total steel products net sales

 

6,023.4

6,524.7

-8%

 

Other products1

 

42.4

26.1

62%

 

Steel segment net sales

 

6,065.8

6,550.8

-7%

 

 

 

 

 

 

 

Mining segment net sales

 

157.7

241.8

-35%

 

Intersegment eliminations

 

(156.0)

(221.1)

 

 

Net sales

 

6,067.5

6,571.5

-8%

 

1   The item “Other products” primarily includes pig iron.

 

Cost of sales was USD5.0 billion in the first nine months of 2015, a decrease of USD121.2 million compared to the first nine months of 2014. This was principally due to a USD156.9 million, or 4%, decrease in raw material and consumables used, mainly reflecting lower iron ore, coking coal, scrap, energy and purchased slabs costs, partially offset by a 4% increase in shipments; and to a USD35.7 million increase in other costs, including a USD23.5 million increase in depreciation of property, plant and equipment and amortization of intangible assets, a USD9.1 million increase in labor costs and an USD8.6 million increase in maintenance expenses, partially offset by a USD2.9 million decrease in services and fees and a USD2.7 million decrease in insurance expenses.

 

Selling, General & Administrative (SG&A) expenses in the first nine months of 2015 were USD590.2 million, or 9.7% of net sales, a decrease of USD24.5 million compared to the first nine months of 2014, mainly as a result of lower labor cost, freight and transportation expenses, and services and other expenses.

 

Other net operating income in the first nine months of 2015 was a USD9.3 million gain, lower than the USD68.3 million gain in the first nine months of 2014. Other net operating income in the first nine months of 2014 included the above mentioned USD57.5 million income recognition on insurance recovery related to Ternium’s subsidiary Siderar.

 

Operating income in the first nine months of 2015 was USD447.7 million, or 7.4% of net sales, compared to operating income of USD864.9 million, or 13.2% of net sales, in the first nine months of 2014.  The following table shows Ternium’s operating income by segment for the first nine months of 2015 and the first nine months of 2014.

8

 


 

 

   

Steel segment

 

Mining segment

 

Intersegment eliminations

 

Total

USD million

 

9M 2015

 

9M 2014

 

9M 2015

 

9M 2014

 

9M 2015

 

9M 2014

 

9M 2015

 

9M 2014

Net Sales

 

6,065.8

 

6,550.8

 

157.7

 

241.8

 

(156.0)

 

(221.1)

 

6,067.5

 

6,571.5

Cost of sales

 

(5,022.6)

 

(5,193.4)

 

(168.6)

 

(187.4)

 

152.3

 

220.7

 

(5,038.9)

 

(5,160.1)

SG&A expenses

 

(580.0)

 

(603.0)

 

(10.2)

 

(11.7)

 

-

 

-

 

(590.2)

 

(614.8)

Other operating income (expenses), net

 

9.4

 

67.4

 

(0.1)

 

0.8

 

-

 

-

 

9.3

 

68.3

Operating income (expense)

 

472.6

 

821.9

 

(21.2)

 

43.4

 

(3.7)

 

(0.4)

 

447.7

 

864.9

                                 

EBITDA

 

762.7

 

1,095.4

 

17.0

 

75.1

 

(3.7)

 

(0.4)

 

776.0

 

1,170.1

 

 

Steel reporting segment

 

The steel segment’s operating income was USD472.6 million in the first nine months of 2015, a decrease of USD349.3 million compared to the first nine months of 2014, reflecting lower net sales and other net operating income, partially offset by lower operating cost.

 

Net sales of steel products in the first nine months of 2015 decreased 7% compared to the first nine months of 2014, reflecting a USD102 decrease in steel revenue per ton shipped, partially offset by a 263,000 ton increase in shipments. Revenue per ton decreased, reflecting lower steel prices in Ternium´s main steel markets, partially offset by a better product mix in Mexico. The increase in shipments in the first nine months of 2015 was mainly due to higher shipments in Mexico and the Southern Region, partially offset by lower shipments in Other Markets.

 

   

Net Sales (million USD)

 

Shipments (thousand tons)

 

Revenue / ton (USD/ton)

 

 

9M 2015

9M 2014

Dif.

 

9M 2015

9M 2014

Dif.

 

9M 2015

9M 2014

Dif.

Mexico

 

3,400.6

3,648.2

-7%

 

4,526.7

4,206.8

8%

 

751

867

-13%

Southern Region

 

1,917.0

1,974.6

-3%

 

1,908.7

1,870.0

2%

 

1,004

1,056

-5%

Other Markets

 

705.8

901.9

-22%

 

855.3

950.5

-10%

 

825

949

-13%

                         

Total steel products

 

6,023.4

6,524.7

-8%

 

7,290.7

7,027.4

4%

 

826

928

-11%

Other products1

 

42.4

26.1

62%

               
                         

Steel segment

 

6,065.8

6,550.8

-7%

               

1 The item “Other products” primarily includes pig iron.

 

 

Operating cost decreased 3% due to a 7% decrease in operating cost per ton, partially offset by the above-mentioned 4% increase in shipment volumes. The decrease in operating cost per ton was mainly due lower raw material, purchased slabs and energy costs.

 

9

 


 

 

Mining reporting segment

 

The mining segment’s operating result was a loss of USD21.2 million in the first nine months of 2015, a decrease of USD64.6 million compared to the first nine months of 2014 mainly reflecting lower iron ore sales, partially offset by a lower operating cost.

 

Net sales of mining products in the first nine months of 2015 were 35% lower than in the first nine months of 2014, reflecting 32% lower revenue per ton and 4% lower shipments.

 

   

Mining segment

 

 

 

9M 2015

9M 2014

Dif.

 

Net Sales (million USD)

 

157.7

241.8

-35%

 

Shipments (thousand tons)

 

2,729.5

2,835.3

-4%

 

Revenue per ton (USD/ton)

 

58

85

-32%

 

 

Operating cost decreased 10% year-over-year, mainly due to the above mentioned 4% decrease in shipment volumes and a 7% decrease in operating cost per ton. The decrease in operating cost per ton was mainly the result of lower energy costs and freight and transportation expenses.

 

 

EBITDA in the first nine months of 2015 was USD776.0 million, or 12.8% of net sales, compared with USD1.2 billion, or 17.8% of net sales, in the first nine months of 2014.

 

Net financial results were a USD45.9 million loss in the first nine months of 2015, compared with a USD78.1 million loss in the first nine months of 2014.

 

During the first nine months of 2015, Ternium’s net interest results totaled a loss of USD66.0 million, compared to a loss of USD83.9 million in the first nine months of 2014, reflecting lower average indebtedness and weighted average interest rates.

 

Net foreign exchange results were a gain of USD24.9 million in the first nine months of 2015 compared to a gain of USD0.4 million in the first nine months of 2014. The first nine months of 2015 gain was primarily associated with the effect of the Mexican peso depreciation against the US dollar on a net short local currency position in Ternium’s Mexican subsidiaries.

 

Change in fair value of financial instruments included in net financial results was a USD2.8 million loss in the first nine months of 2015 compared with a USD8.2 million gain in the first nine months of 2014. This loss in the first nine months of 2015 was mainly related to results from changes in the fair value of financial assets.

 

Equity in results of non-consolidated companies was a loss of USD59.4 million in the first nine months of 2015, compared to a loss of USD746.5 million in the first nine months of 2014. Equity in results of non-consolidated companies in the first nine months of 2015 included a USD55.0 million loss related to Ternium’s investment in Usiminas. Equity in results of non-consolidated companies in the first nine months of 2014 included the above mentioned loss related to a USD739.8 million impairment of Ternium’s investment in Usiminas.

 

Income tax expense in the first nine months of 2015 was USD156.1 million, compared to an income tax expense of USD215.8 million in the same period in 2014. Effective tax rate on both periods were affected by non-taxable losses stemming from the investment in Usiminas, in addition to other non-cash effects on deferred taxes.

10

 


 

 

Net gain attributable to non-controlling interest in the first nine months of 2015 was USD52.0 million, compared to a net gain of USD76.2 million in the same period in 2014, mainly due to a lower result attributable to non-controlling interest in Siderar.

 

Cash Flow and Liquidity

 

Net cash provided by operating activities in the first nine months of 2015 was USD1.0 billion.  Working capital decreased by USD459.8 million in the first nine months of 2015 as a result of a USD340.7 million decrease in inventories and an aggregate USD135.0 million net increase in accounts payable and other liabilities, partially offset by an aggregate USD15.9 million net increase in trade and other receivables. Inventories decreased in the first nine months of 2015, mainly reflecting lower costs and lower inventory volumes of goods in process, partially offset by higher inventory volumes of purchased steel.

 

Capital expenditures in the first nine months of 2015 were USD342.8 million, similar to capital expenditures in the first nine months of 2014. The main investments carried out during the period included, in Mexico, those made for the upgrade of hot-rolling and galvanizing mills, and the revamping of steel making and iron ore reduction facilities and, in Argentina, those made for the expansion and enhancement of the coking facilities, the upgrade of the hot-rolling mill and the enhancement of the steelmaking facilities.

 

In the first nine months of 2015, Ternium had free cash flow of USD667.2 million9. During the period the company acquired the remaining minority stake in Ferrasa for USD74.0 million. In addition, Ternium’s net repayment of borrowings in the first nine months of 2015 was USD427.1 million.  Net dividends paid to shareholders were USD176.7 million and net dividends paid by subsidiaries to non-controlling interest were USD32.7 million. As of September 30, 2015, Ternium’s net debt position was USD1.3 billion10.

 

Net cash provided by operating activities in the third quarter 2015 was USD251.5 million.  Working capital decreased by USD73.6 million in the third quarter 2015 as a result of an aggregate USD55.2 million net increase in accounts payable and other liabilities, and a USD30.4 million decrease in inventories, partially offset by a USD12.0 million net increase in trade and other receivables. Inventories decreased in the third quarter 2015 mainly reflecting lower costs, partially offset by higher inventory volumes of purchased steel and finished goods. Capital expenditures in the third quarter 2015 were USD115.3 million, compared to capital expenditures of USD94.8 million in the third quarter 2014. Ternium had free cash flow of USD136.1 million11 in the period.

 

 


9   Free cash flow in the first nine months of 2015 equals net cash provided by operating activities of USD1.0 billion less capital expenditures of USD342.8 million.

10 Net debt position at September 30, 2015 equals borrowings of USD1.7 billion less cash and equivalents plus other investments of USD0.4 billion.

11 Free cash flow in the third quarter 2015 equals net cash provided by operating activities of USD251.5 million less capital expenditures of USD115.3 million.

11

 


 

 

 

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 Latin America, with an annual production capacity of approximately 11.0 million tons of finished steel products. The company manufactures and processes a broad range of value-added steel products for customers active in the construction, automotive, home appliances, capital goods, container, food and energy industries.  With production facilities located in Mexico, Argentina, Colombia, the southern United States and Guatemala, Ternium serves markets in the Americas through its integrated manufacturing system and extensive distribution network.  In addition, Ternium participates in the control group of Usiminas, a Brazilian steel company.  More information about Ternium is available at www.ternium.com.

 

12

 


 

 

Consolidated Income Statement

 

USD million

 

3Q 2015

3Q 2014

(restated)

 

9M 2015

9M 2014

(restated)

   

(Unaudited)

 

(Unaudited)

 

Net sales

 

1,945.4

 

2,218.3

 

6,067.5

 

6,571.5

 

Cost of sales

 

(1,620.8)

 

(1,759.7)

 

(5,038.9)

 

(5,160.1)

 

Gross profit

 

324.5

 

458.6

 

1,028.6

 

1,411.4

 

Selling, general and administrative expenses

 

(188.0)

 

(206.2)

 

(590.2)

 

(614.8)

 

Other operating income, net

 

4.0

 

62.1

 

9.3

 

68.3

 

Operating income

 

140.5

 

314.5

 

447.7

 

864.9

 
                   

Finance expense

 

(23.4)

 

(35.0)

 

(71.9)

 

(89.8)

 

Finance income

 

1.9

 

2.1

 

5.9

 

6.0

 

Other financial income, net

 

1.6

 

10.3

 

20.1

 

5.8

 

Equity in losses of non-consolidated companies

 

(48.8)

 

(748.8)

 

(59.4)

 

(746.5)

 

Profit (loss) before income tax expense

 

71.8

 

(456.8)

 

342.4

 

40.3

 

Income tax expense

 

(31.8)

 

(87.3)

 

(156.1)

 

(215.8)

 

Profit (loss) for the period

 

40.0

 

(544.1)

 

186.3

 

(175.6)

 
                   

Attributable to:

                 

Owners of the parent

 

24.8

 

(530.9)

 

134.3

 

(251.8)

 

Non-controlling interest

 

15.2

 

(13.2)

 

52.0

 

76.2

 

Profit (loss) for the period

 

40.0

 

(544.1)

 

186.3

 

(175.6)

 

 

13

 


 

 

Consolidated Statement of Financial Position

 

USD million

 

September 30,
2015

 

December 31,
2014

     

(Unaudited)

     

(Restated)

 
                 

Property, plant and equipment, net

   

4,437.0

     

4,481.0

 

Intangible assets, net

   

903.2

     

948.9

 

Investments in non-consolidated companies

   

450.0

     

748.2

 

Deferred tax assets

   

104.2

     

115.6

 

Receivables, net

   

36.6

     

47.5

 

Trade receivables, net

           

0.1

 

Total non-current assets

   

5,930.9

     

6,341.3

 
                 

Receivables

   

116.5

     

112.2

 

Derivative financial instruments

   

-

     

4.3

 

Inventories, net

   

1,769.8

     

2,134.0

 

Trade receivables, net

   

651.8

     

720.2

 

Other investments

   

150.8

     

150.0

 

Cash and cash equivalents

   

200.4

     

213.3

 

Total current assets

   

2,889.3

     

3,334.1

 
                 

Non-current assets classified as held for sale

   

14.6

     

14.8

 
                 

Total assets

 

 

8,834.8

 

 

 

9,690.2

 

                 

Capital and reserves attributable to the owners of the parent

   

4,341.3

     

4,697.2

 

Non-controlling interest

   

888.3

     

937.5

 
                 

Total Equity

 

 

5,229.6

 

 

 

5,634.7

 

                 

Provisions

   

10.2

     

9.1

 

Deferred tax liabilities

   

633.6

     

670.5

 

Other liabilities

   

325.9

     

371.9

 

Trade payables

   

10.8

     

12.0

 

Borrowings

   

709.3

     

900.6

 

Total non-current liabilities

   

1,689.9

     

1,964.1

 
                 

Current income tax liabilities

   

18.5

     

51.1

 

Other liabilities

   

219.4

     

210.2

 

Trade payables

   

691.8

     

564.5

 

Derivative financial instruments

 

 

3.2

 

 

 

1.4

 

Borrowings

   

982.3

     

1,264.2

 

Total current liabilities

   

1,915.2

     

2,091.4

 
                 

Total liabilities

   

3,605.1

     

4,055.5

 
                 

Total equity and liabilities

 

 

8,834.8

 

 

 

9,690.2

 

 

14

 


 

 

Consolidated Statement of Cash Flows

 

USD million

 

3Q 2015

 

3Q 2014

(restated)

 

9M 2015

 

9M 2014

(restated)

   

(Unaudited)

 

(Unaudited)

                 

Profit (loss) for the period

 

40.0

 

(544.1)

 

186.3

 

(175.6)

Adjustments for:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

109.9

 

108.5

 

328.3

 

305.2

Equity in losses of non-consolidated companies

 

48.8

 

748.8

 

59.4

 

746.5

Changes in provisions

 

0.8

 

0.5

 

2.6

 

1.7

Net foreign exchange results and others

 

2.4

 

7.5

 

17.0

 

33.0

Interest accruals less payments

 

(3.2)

 

2.2

 

(0.7)

 

4.7

Income tax accruals less payments

 

(20.9)

 

13.1

 

(44.4)

 

(64.9)

Results on the sale of participation in subsidiary company

 

-

 

-

 

1.7

 

-

Changes in working capital

 

73.6

 

(48.7)

 

459.8

 

(553.2)

           

 

 

 

Net cash provided by operating activities

 

251.5

 

287.8

 

1,010.0

 

297.5

                 

Capital expenditures

 

(115.3)

 

(94.8)

 

(342.8)

 

(334.8)

Proceeds from the sale of property, plant & equipment

 

0.3

 

0.4

 

0.9

 

1.1

Sale of participation in subsidiary company, net of cash disposed

 

-

 

-

 

(0.7)

 

-

Investment in non-consolidated companies - Techgen

 

-

 

-

 

-

 

(3.0)

Recovery of loan to non-consolidated companies

 

-

 

62.5

 

-

 

-

Decrease in Other Investments

 

17.3

 

3.7

 

0.4

 

64.6

                 

Net cash used in investing activities

 

(97.7)

 

(28.2)

 

(342.1)

 

(272.1)

                 

Dividends paid in cash to company's shareholders

 

-

 

-

 

(176.7)

 

(147.2)

Dividends paid in cash to non-controlling interest

 

-

 

-

 

(32.7)

 

(33.6)

Acquisition of non-controlling interest

 

-

 

-

 

(74.0)

 

-

Contributions from non-controlling shareholders in consolidated subsidiaries

 

-

 

-

 

30.9

 

-

Proceeds from borrowings

 

279.7

 

187.4

 

681.7

 

781.7

Repayments of borrowings

 

(496.5)

 

(332.9)

 

(1,108.8)

 

(581.5)

                 

Net cash (used in) provided by financing activities

 

(216.8)

 

(145.5)

 

(679.7)

 

19.3

                 

(Decrease) Increase in cash and cash equivalents

 

(63.1)

 

114.1

 

(11.8)

 

44.7

 

 

 

 

15

 


 

 

Shipments

Thousand tons

 

3Q 2015

3Q 2014

2Q 2015

 

9M 2015

9M 2014

               

Mexico

 

1,532.9

1,380.5

1,457.7

 

4,526.7

4,206.8

Southern Region

 

641.4

624.9

644.6

 

1,908.7

1,870.0

Other Markets

 

288.2

330.0

294.9

 

855.3

950.5

Total steel segment

 

2,462.6

2,335.4

2,397.2

 

7,290.7

7,027.4

               

Total mining segment

 

891.5

1,006.6

873.4

 

2,729.5

2,835.3

               
               

Revenue / ton

USD/ton

 

3Q 2015

3Q 2014

2Q 2015

 

9M 2015

9M 2014

               

Mexico

 

695

883

752

 

751

867

Southern Region

 

1,010

1,074

989

 

1,004

1,056

Other Markets

 

777

950

814

 

825

949

Total steel segment

 

787

944

824

 

826

928

               

Total mining segment

 

57

82

57

 

58

85

               
               

Net Sales

USD million

 

3Q 2015

3Q 2014

2Q 2015

 

9M 2015

9M 2014

               

Mexico

 

1,065.3

1,219.2

1,096.9

 

3,400.6

3,648.2

Southern Region

 

648.0

671.2

637.4

 

1,917.0

1,974.6

Other Markets

 

224.1

313.4

240.1

 

705.8

901.9

Total steel products

 

1,937.3

2,203.8

1,974.4

 

6,023.4

6,524.7

Other products1

 

7.7

7.2

20.9

 

42.4

26.1

Total steel segment

 

1,945.0

2,211.0

1,995.3

 

6,065.8

6,550.8

               

Total mining segment

 

51.1

82.2

49.7

 

157.7

241.8

               

Total steel and mining segments

 

1,996.1

2,293.3

2,044.9

 

6,223.5

6,792.6

               

Intersegment eliminations

 

(50.7)

(74.9)

(48.9)

 

(156.0)

(221.1)

               

Total net sales

 

1,945.4

2,218.3

1,996.1

 

6,067.5

6,571.5

The item “Other products” primarily includes pig iron.


16