Ternium cites revenue growth but tight margins in 2017

Luxembourg-based steelmaker Ternium, which operates mills in Mexico, Argentina and Brazil, has reported income growth for 2017 compared to the prior year, but also has cited “a decrease in steel operating margin” as a factor in its 2017 results.

The company indicates its operating income in 2017 was $1.5 billion, a $315 million increase compared to operating income in 2016. Ternium’s financial statement notes mention “higher steel segment operating income, with an increase in steel shipments partially offset by a decrease in steel operating margin, and higher mining segment operating income” as factors in its results.

In terms of steel output, Ternium has reported 2017 steel shipments were 1.8 million tons higher compared to 2016. The company points to a “1.4 million-ton increase in other markets, mainly as a result of the consolidation of Ternium Brasil’s shipments; a 235,000-ton increase in [South America]; and a 218,000-ton increase in Mexico.”

Steel revenue per ton increased year-over-year in both Mexico and South America, but the operating cost per ton increased as a result of higher raw material and purchased slab costs, Ternium indicates.

The company’s net income in 2017 was $1.0 billion, compared to net income of $707 million in 2016. Higher net financial expenses included an $85.8 million negative year-over-year difference in net foreign exchange results mainly related to fluctuations of the Mexican peso and the Argentine peso against the U.S. dollar.

The company’s management writes that it “expects higher operating income in the first quarter 2018 compared to the fourth quarter 2017, mainly as a result of an increase in revenue per ton in Mexico and, to a lesser extent, in Argentina.”

The company indicates it anticipates shipments to remain relatively stable sequentially, as higher shipments in Mexico will be offset by lower shipments in other markets. “The outlook for the U.S. and Mexican steel industry’s fundamentals in 2018 is positive,” the firm’s notes state, adding, “In Argentina, Ternium expects economic activity to continue improving [and] a concurrent recovery of the Brazilian economy, which is the primary destination for Argentina’s manufacturing exports, should also help increase the company’s shipments in the Argentine market.”