Ternium Reports USD 414 per Tonne EBITDA in Apr-Jun’22 Quarter
Strategic Research Institute
Published on :
4 Aug, 2022, 6:18 am
Luxembourg headquartered leading Latin American producer of flat steel Ternium has reported adjusted EBITDA of USD 1.2 billion on steel shipments of 3.0 million tonnes in April-June 2022 quarter, with adjusted EBITDA margin of 28% and adjusted EBITDA per tonne of USD 414. Ternium’s steel shipments in the second quarter of 2022 were 3.0 million tonnes, stable sequentially. On a year-over-year basis, steel shipments decreased 110,000 tonnes in the second quarter, due to a 208,000 tonne decrease in the volume of slabs shipped to third parties, partially offset by a 98,000 tonne increase in finished steel shipments reflecting a further integration of Ternium's production system.
Steel volumes in Mexico increased 7% sequentially in the second quarter of 2022 on healthy industrial customer demand. Automobile manufacturers continued experiencing supply chain constraints in the period, which further curtailed their ability to improve vehicle production rates. In addition, steel volumes shipped to commercial customers increased sequentially mainly reflecting a restocking process, as infrastructure investment in the country remained subdued. On a year-over-year basis, shipments in Mexico decreased 3% in the second quarter of 2022 on weaker industrial customer demand, partially offset by the positive effect of commercial customer's restocking in the period.
Shipments in the Southern Region increased 2% sequentially in the second quarter of 2022, reflecting increased steel demand in Argentina following a seasonally low first quarter. On a year-over-year basis, shipments in the Southern Region decreased 5% in the second quarter of 2022 as in the prior-year period demand for Ternium's products in Argentina was prompted by softening pandemic-related restrictions. Argentina's construction and industrial activity continued growing in the second quarter of 2022 despite the persistence of a high level of uncertainty in connection with the country's economic and financial performance.
In the Other Markets region, shipments decreased 14% sequentially reflecting lower volumes of finished steel products and of slabs shipped to third parties. On a year-over-year basis, shipments in the second quarter of 2022 decreased 3% on lower volumes of slabs shipped to third parties that were mostly offset by higher finished steel shipments in Ternium's main markets in the region.
Outlook - The global steel market environment is rapidly normalizing after the disruption caused by Russia’s invasion of Ukraine in the first quarter of 2022, which led to higher costs across the industry and a surge in steel prices. This normalization, coupled with increasing inflation, the progression of a monetary tightening cycle in the largest western economies and the COVID-19 lockdown-related economic slowdown in China, are causing significant steel price decreases. Ternium expects these steel price decreases to negatively affect its margins during the third quarter of 2022, as the quarterly reset of contract prices gradually reflects lower average prices. The company also expects cost per ton to increase, primarily due to high raw material and slab costs flowing through the company’s inventories. As a result, Ternium anticipates adjusted EBITDA to decrease in the third quarter compared to the second quarter of 2022, mainly due to a lower steel margin and steady shipment levels. In Mexico, demand from the industrial market remains relatively healthy, although supply chain disruptions continue to prevent the automotive industry from a needed increase in production. In addition, the commercial market is currently seeing lackluster apparent demand due to a destocking process driven by the significant decrease in steel prices over the last few months, as well as inflation and higher interest rates which are impacting end customers. In Argentina, steel demand may reflect substantial macroeconomic volatility.
Ternium is Latin America’s leading flat steel producer, with operating facilities in Mexico, Brazil, Argentina, Colombia, the southern United States and Central America.