Ternium hit hard by COVID-19

Luxembourg-based Ternium S.A., which has steelmaking operations in Argentina, Mexico and the United States, has announced first quarter 2020 results that include an 11 percent drop in sales and a 16 percent drop in revenue. The firm says it lost $267 million in the quarter ending March 31.

Notes accompanying the company’s results indicate steel shipments from its southern region (with operations in Argentina and Brazil) dropped by 14 percent compared with the same period in 2019. Shipments fell by 22 percent compared with the prior quarter.

“The Argentine steel market remained weak during the first quarter, reflecting seasonally low demand levels and the imposition of a mandatory lockdown in Argentina since March 20, 2020, related to the COVID-19 outbreak,” states Ternium.

The firm adds, “The Colombian steel market, one of Ternium’s main markets for finished products in the region, was affected in the period by the imposition of mandatory lockdowns since March 20, 2020, related to the COVID-19 outbreak.”

In Mexico, which the company calls its main steel market, the news was better for Ternium. Shipments were 1.6 million tons, increasing 6 percent over the same period in 2019 and rising by 7 percent compared with the previous quarter.

“Ternium was able to increase its participation in the Mexican commercial market in a soft environment for construction activity,” writes the firm. On a cautionary note, Ternium adds, “By the end of March 2020, our industrial customers in Mexico started to face decreased demand levels, particularly the automotive industry, affected by the COVID-19 outbreak.”

Negative bottom-line effects from Mexico may occur in the second quarter, Ternium warns. “In Mexico, with steel prices declining since March 2020 and increasing mobility restrictions, steel shipments have been weakening,” writes the firm. “Currently, the automotive industry is mostly closed, and it is expected to reopen during May. Other industrial customers, such as those in the white goods and electric motors industries, are expected to operate at below normal rates in the second quarter of 2020. In addition, the company anticipates lower shipments to the construction sector in the second quarter of 2020, as the sector is also subject to strict operating restrictions due to the COVID-19 outbreak.”

Summarizing current conditions in its predominantly Latin American market, Ternium writes, “The COVID-19 outbreak is impacting economic activity worldwide. Each country in which Ternium operates has adopted unique measures in response to the pandemic, and as a result, the company is adopting diverse strategies to mitigate impacts on its industrial facilities’ run rates, particularly in response to reduced steel market demand.”

In terms of its outlook, the steel producer says, “Ternium expects a reduction of EBITDA [earnings before interest, tax, depreciation and amortization] in the second quarter of 2020, with a significant decrease of shipments in its main markets and a moderately lower EBITDA margin compared to the first quarter of the year. Although the company anticipates lockdowns or operating restrictions in all of its markets will end or be relaxed during the second quarter of 2020, these could change if so decided by the authorities.”