20-F: Ternium S.A. Announces Annual Results, Highlights Strategic Growth and Financial Performance

Ternium S.A.'s annual report details the company's financial performance, strategic initiatives, and risk factors for the fiscal year ended December 31, 2024.

Summary

• Ternium S.A.'s 20-F filing provides a comprehensive overview of the company's operations and financial standing.
• The report highlights the company's strategic focus on sophisticated value-added products, strategic growth opportunities, and competitive industrial operations.
• Ternium's consolidated net sales remained stable at $17.6 billion in 2024 compared to 2023.
• The company's operating income decreased to $1.3 billion in 2024 from $2.2 billion in 2023.
• Net income attributable to owners of the parent was a loss of $54 million in 2024, compared to a profit of $676 million in 2023.
• Capital expenditures for 2024 reached $1.9 billion, supporting expansion projects and facility upgrades.
• The company maintained a strong net cash position of $1.6 billion as of December 31, 2024.
• Ternium is targeting a 15% reduction in emissions intensity by 2030 compared to a 2023 baseline.
• The report also details various risk factors, including economic downturns, steel price volatility, and regulatory challenges.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company highlights its strategic growth and strong financial position, it also acknowledges challenges such as decreased operating income and ongoing litigation.

Positives

• Ternium is making progress in its expansion program at the Pesquera Industrial Center.
• The company is commissioning new facilities and upgrading existing ones to enhance its competitive position.
• Ternium is committed to reducing its environmental footprint and has set a target to reduce emissions intensity by 15% by 2030.
• The company maintains a strong net cash position, providing financial flexibility.

Negatives

• Operating income decreased year-over-year, mainly due to lower realized steel prices.
• Net income attributable to owners of the parent was a loss in 2024.
• The company recorded a $410 million provision for ongoing litigation related to the acquisition of a participation in Usiminas in 2012.
• The company faces risks related to economic and political instability in Argentina and Brazil.

Risks

• A downturn in global or regional economic activity could reduce demand for steel.
• Protracted falls in steel prices or price volatility could adversely affect Ternium's operating results.
• Regional or worldwide excess steel production capacity may lead to intense competition.
• Price fluctuations, shortages, or disruptions in the supply of raw materials, slabs, energy, and other inputs could adversely affect Ternium's profitability.
• Past or future acquisitions or other significant investments could have an adverse impact on Ternium's operations or profits.
• Cyberattacks could have a material adverse impact on Ternium's business and results of operations.
• The physical risks resulting from climate change may adversely impact Ternium's business, results of operations, and net worth.
• Changes in applicable tax regulations and resolutions of tax disputes could negatively affect our financial results.
• Dividend payments depend on the results of operations and financial condition of its subsidiaries and could be affected by legal, contractual or other limitations or tax changes.
• Negative economic, political, social and regulatory developments in certain markets where a significant portion of Ternium's operations and assets are located could disrupt its manufacturing activity, hurt Ternium's shipment volumes or prices, or increase its costs.

Future Outlook

Ternium expects to continue its strategic growth initiatives and focus on operational efficiencies to strengthen its position as a leading steel supplier in the Americas.

Industry Context

The steel industry is highly competitive and subject to economic cycles, regional or worldwide production overcapacity, and fluctuations in raw material costs.

Comparison to Industry Standards

• The report mentions key competitors such as ArcelorMittal, CSN, Gerdau, and Deacero, highlighting the competitive landscape in the steel industry.
• The report references the World Economic Forums 2024 Global Cybersecurity Outlook, indicating the importance of cybersecurity in the industry.
• The report mentions the EU Emissions Trading System (ETS) and the European Green Deal, reflecting the industry's focus on environmental sustainability.

Legal Proceedings

• The company is party to a long-standing lawsuit filed in Brazil by CSN against Ternium Investments, Ternium Argentina, and Tenaris' subsidiary Confab, related to the 2012 acquisition of a participation in Usiminas.
• The company recorded a $410 million provision for ongoing litigation related to the acquisition of a participation in Usiminas in 2012.
• In March 2015, as part of a tax audit with respect to fiscal year 2008, the Mexican tax authority (the SAT) challenged the deduction by Ternium Mexico of a tax loss arising from an intercompany sale of shares in December 2008.
• In August 2024, the Brazilian Federal Government filed two new tax claims for a total of approximately BRL503 million, or $92 million, related to tax assessments that partially approved offset statements through which Usiminas claimed PIS and COFINS credits arising from a final court decision.

Related Party Transactions

• Ternium buys raw materials and other production inputs from subsidiaries of Tenaris.
• Usiminas buys steel products from Unigal.
• Usiminas buys logistics services from MRS Logstica.
• Ternium sells steel products and raw materials to subsidiaries of Tenaris.
• Techgen sells electricity to Ternium Mexico and Tenigal.
• Ternium Mexico purchases natural gas from GIMSA.
• Ternium Argentina purchases natural gas from Tecpetrol and Energy Consulting Services.
• Ternium Argentina contracts with companies controlled by San Faustin for engineering services, construction services, labor and supervision services, civil and electromechanical works, cleaning, general maintenance and handling of by-products services.
• Exiros provides Tecpetrol and other companies controlled by San Faustin with purchase agency services and sales of raw materials and other products.
• Ternium enters into other transactions with companies controlled by San Faustin from time to time.

Stakeholder Impact

• The company's performance and strategic decisions impact shareholders, employees, customers, suppliers, and local communities.
• The company's commitment to environmental sustainability and social responsibility affects its relationships with stakeholders.
• The company's financial performance and dividend policy impact shareholder returns.

Next Steps

• The company will continue to progress with its expansion program at the Pesquera Industrial Center.
• Usiminas will continue to focus on streamlining its industrial system to increase productivity.
• The company will continue to monitor the evolution of the main variables affecting its business and determine the appropriate course of action.
• The company will continue to seek to improve cybersecurity controls, processes and procedures to monitor, detect, evaluate and respond to hacking, malware infection, cybersecurity compromise and other risks.

Key Dates

Keywords

Ternium, steel, mining, financial results, annual report, Usiminas, Mexico, Argentina, Brazil, trade, regulations, risk factors