Ternium (TX) Q4 2023 earnings summary

Executive summary

• FY23 net sales rose 7% to $17.61B; steel shipments increased 19% to 14.21M tons, including 2.1M tons from Usiminas consolidation.

• FY23 adjusted EBITDA was $2.74B at a 16% margin, down from $3.42B; reported net income was $986M, including a non-cash loss tied to increased Usiminas participation.

• Q4 adjusted EBITDA was $651M at a 13% margin; net income of $554M benefited from reversals, ARS-related FX gains and better deferred-tax results.

Financial highlights

• Q4 net sales were $4.93B, operating income $582M, and earnings per ADS $2.11.

• FY23 operating income was $2.20B versus $2.70B in FY22; adjusted EBITDA margin was 16% versus 21%.

• FY23 net income was $986M versus $2.09B; adjusted net income was $2.09B, and adjusted earnings per ADS were $8.59 versus $9.00.

• Cash provided by operations was $718M in Q4 and $2.50B for FY23; free cash flow was $1.04B after $1.46B of capital expenditures.

Segment performance

• FY23 Mexico steel shipments reached a record 8.4M tons, up 22%; sales were $9.31B, up 5%, supported by nearshoring, manufacturing, infrastructure investment and the Pesquería mill ramp-up.

• Q4 steel shipments were 4.04M tons, down 2% QoQ; Mexico remained near record levels as Southern Region volumes weakened amid Argentina import restrictions.

• Q4 shipments were 2.122M tons in Mexico, 561k in the Southern Region, 952k in Brazil and 399k in Other Markets; shipments were slightly lower QoQ, mainly in the Southern Region and Other Markets.

• FY23 mining shipments were 4.13M tons; Q4 shipments were 1.95M tons, down 10% QoQ. Third-party iron ore shipments increased 4.1M tons YoY due to Usiminas consolidation.

• Usiminas was fully consolidated from July 2023; low profitability during Ipatinga blast furnace relining weighed on adjusted EBITDA, with productivity improvement a 2024 focus.