LUXEMBOURG -- (Marketwire) -- 08/05/08 -- Ternium S.A. (NYSE: TX) today announced its
results for the second quarter and first half ended June 30, 2008.
The financial and operational information contained in this press release
is based on consolidated financial statements prepared in accordance with
International Financial Reporting Standards (IFRS) and presented in U.S.
dollars and metric tons.
Ternium has modified the accounting treatment for its investment in Sidor.
For more information, please see Note 12 to Ternium's Consolidated
Condensed Interim Financial Statements as of June 30, 2008 and "Sidor
Nationalization Process - Deconsolidation from Ternium Financial
Statements" in this press release.
Summary of Second Quarter 2008 Results(1)
2Q 2008 1Q 2008 2Q 2007
--------- -------------- ---------------
Shipments (tons) 2,063,000 2,088,000 -1% 1,604,000 29%
Net Sales (US$ million) 2,374.8 1,952.7 22% 1,255.9 89%
Operating Income (US$ million) 610.4 363.3 68% 203.0 201%
EBITDA (US$ million) 714.1 470.1 52% 281.9 153%
EBITDA Margin (% of net sales) 30% 24% 22%
EBITDA per Ton, Flat & Long
Steel (US$/ton) 337 213 58% 162 108%
Discontinued Operations(1)
(US$ million) - 159.9 199.0
Net Income (US$ million) 498.9 483.6 3% 315.0 58%
Equity Holders' Net Income
(US$ million) 415.6 422.1 -2% 236.9 75%
Earnings per ADS (US$) 2.07 2.11 -2% 1.18 75%
Operating income was US$610.4 million in the second quarter 2008, an
increase of 68% when compared to the first quarter 2008 mainly as a result
of a 24% increase in revenue per ton, partially offset by a 12% increase in
operating cost per ton due to higher raw material, energy and labor costs.
Higher purchased slab and raw material costs are gradually reflected in the
Company's cost of sales, as Ternium consumes slabs and raw materials from
its inventories over time. Average prices increased across all products
and regions during the second quarter 2008 compared to the first quarter
2008 and second quarter 2007. Operating income in the second quarter 2008
increased 201% when compared to the second quarter 2007. Excluding the
effect of the consolidation of Grupo Imsa, operating income increased
year-over-year mainly due to higher prices, partially offset by higher raw
material, energy and labor costs. Ternium's shipments were relatively
stable during the second quarter 2008 compared to the first quarter 2008
and increased 29% when compared to the second quarter 2007 mainly as a
result of the consolidation of Grupo Imsa.
No results from discontinued operations related to Sidor have been
accounted for in the second quarter 2008. In the first quarter 2008,
results from discontinued operations included an after-tax gain of US$101.4
million related to the sale of non-core US assets and an after-tax gain of
US$58.5 million related to Sidor, while in the second quarter 2007 results
from discontinued operations comprised an after-tax gain of US$199.0
million related to Sidor.
Net income during the second quarter 2008 was US$498.9 million, an increase
of 3% when compared to the first quarter 2008 mainly due to higher
operating income, a higher foreign exchange gain of US$60.2 million mainly
related to Ternium Mexico's financial debt and an improved result of
US$40.7 million related to changes in the fair value of derivative
instruments, partially offset by higher income tax expenses. In addition,
the first quarter 2008 net income included a discontinued operations gain
of US$159.9 million and an income tax gain of US$96.3 million related to
Hylsa's reversal of deferred statutory profit sharing.
Net income during the second quarter 2008 increased 58% when compared to
the second quarter 2007. This year-over-year increase was due to the
consolidation of Grupo Imsa and higher operating income, as well as more
favorable foreign exchange and changes in fair value of derivatives
results. In addition, the second quarter 2007 net income included results
of US$199.0 million from discontinued operations.
Summary of First Half 2008 Results(2)
1H 2008 1H 2007
--------- ---------------
Shipments (tons) 4,152,000 3,148,000 32%
Net Sales (US$ million) 4,327.5 2,430.7 78%
Operating Income (US$ million) 973.6 413.1 136%
EBITDA (US$ million) 1,184.3 557.8 112%
EBITDA Margin (% of net sales) 27% 23%
EBITDA per Ton, Flat & Long Steel (US$/ton) 275 165 67%
Discontinued Operations(2) (US$ million) 159.9 318.7 -50%
Net Income (US$ million) 982.4 566.6 73%
Equity Holders' Net Income (US$ million) 837.8 459.1 82%
Earnings per ADS (US$) 4.18 2.29 82%
Operating income was US$973.6 million in the first half 2008, an increase
of 136% when compared to the first half 2007 mainly as a result of higher
steel prices and the consolidation of Grupo Imsa, partially offset by
higher raw material, energy and labor costs. Higher purchased slab and raw
material costs are gradually reflected in the Company's cost of sales, as
Ternium consumes slabs and raw materials from its inventories over time.
Ternium's net sales were US$4.3 billion during the first half 2008, an
increase of 78% when compared to the first half 2007, reflecting higher
steel prices and the consolidation of Grupo Imsa.
During the first half 2008, results from discontinued operations were an
after-tax gain of US$101.4 million related to the sale of non-core US
assets and an after-tax gain of US$58.5 million related to Sidor. During
the first half 2007, results from discontinued operations were an after-tax
gain of US$318.7 million related to Sidor.
Net income during the first half 2008 was US$982.4 million, an increase of
73% when compared to the first half 2007. This increase in net income was
mainly due to the consolidation of Grupo Imsa, a higher operating income
and a US$139.6 million higher foreign exchange net gain mainly related to
Ternium Mexico's financial debt, partially offset by higher net interest
and income tax expenses, and lower gains from discontinued operations.
Sidor Nationalization Process - Deconsolidation from Ternium Financial
Statements
Based on the facts and circumstances described in Note 12 to Ternium's
Consolidated Condensed Interim Financial Statements as of June 30, 2008,
Ternium ceased consolidating Sidor's results of operations and cash flows
as from April 1, 2008. The carrying amount of the Company's investment in
Sidor at March 31, 2008 is its book value at that date. Thus, the carrying
amount of this available-for-sale asset at June 30, 2008 does not represent
its fair value at that date.
Outlook
Demand for steel products in the North America Region remains relatively
stable. Although there are no indications of overstocking, prices in the
North America Region may soften in the second half 2008 as a result of
continued weakness in the region's construction, home appliances and
automobile industries. Demand and prices in the South & Central America
Region are expected to remain at healthy levels.
Ternium expects a slightly lower operating margin in the third quarter 2008
compared to the operating margin it achieved in the second quarter 2008.
Higher purchased slab and raw material costs were not entirely reflected in
Ternium's cost of sales during the second quarter 2008 and are expected to
flow into the cost of sales in subsequent quarters as Ternium consumes
purchased slabs and raw materials from its inventories over time.
Analysis of Second Quarter 2008 Results
Net income attributable to the Company's equity holders in the second
quarter 2008 was US$415.6 million, compared with US$236.9 million in the
second quarter 2007. Including minority interest, net income for the
second quarter 2008 was US$498.9 million, compared with US$315.0 million in
the second quarter 2007. Earnings per ADS(3) for the second quarter 2008
were US$2.07, compared with US$1.18 in the second quarter 2007.
Net sales for the second quarter 2008 increased 89% to US$2.4 billion
compared with the same period in 2007. Net sales increased mainly due to
the effect of the consolidation of Grupo Imsa and higher steel prices.
Shipments of flat and long products were 2.1 million tons during the second
quarter 2008, an increase of 29% compared to shipment levels in the second
quarter 2007 mainly due to the consolidation of Grupo Imsa. Revenue per
ton shipped increased 48% to US$1,120 in the second quarter 2008 versus the
same quarter in 2007, mainly as a result of higher steel prices and the
consolidation of Grupo Imsa's higher value added product mix.
Net Sales Shipments Revenue / ton
(million US$) (thousand tons) (US$/ton)
2Q 2Q
2Q 2008 2Q 2007 Dif. 2Q 2008 2Q 2007 Dif. 2008 2007 Dif.
------- ------- --- ------- ------- --- ----- ---- ---
South & Central
America 719.9 466.6 54% 690.9 598.9 15% 1,042 779 34%
North America 1,264.6 483.6 162% 1,042.2 592.1 76% 1,213 817 49%
Europe & other 10.0 69.1 -86% 11.6 101.2 -89% 864 682 27%
------- ------- --- ------- ------- --- ----- ---- ---
Total flat
products 1,994.5 1,019.2 96% 1,744.7 1,292.1 35% 1,143 789 45%
South & Central
America 62.1 14.3 334% 67.9 25.3 168% 913 565 62%
North America 253.8 182.6 39% 249.6 286.4 -13% 1,017 638 59%
Europe & other 0.6 - 1.0 - 630 -
------- ------- --- ------- ------- --- ----- ---- ---
Total long
products 316.4 196.9 61% 318.5 311.7 2% 993 632 57%
Total flat and
long products 2,311.0 1,216.2 90% 2,063.2 1,603.9 29% 1,120 758 48%
Other products(1) 63.8 39.7 61%
------- ------- ---
Total Net Sales 2,374.8 1,255.9 89%
(1) Primarily includes iron ore, pig iron and pre-engineered metal
buildings.
Net sales of flat products during the second quarter 2008 totaled US$2.0
billion, an increase of 96% compared with the same quarter in 2007. Net
sales of flat products increased as a result of the effect of the
consolidation of Grupo Imsa and higher steel prices. Shipments of flat
products totaled 1.7 million tons in the second quarter 2008, an increase
of 35% compared with the same period in 2007, mainly due to the
consolidation of Grupo Imsa. Revenue per ton shipped increased 45% to
US$1,143 in the second quarter 2008 compared with the same period in 2007,
mainly due to higher steel prices and the consolidation of Grupo Imsa's
higher value added product mix.
Net sales of long products were US$316.4 million during the second quarter
2008, an increase of 61% compared with the same period in 2007 due to
higher steel prices and slightly higher shipment levels. Shipments of long
products totaled 319,000 tons in the second quarter 2008, representing a 2%
increase versus the same quarter in 2007. Revenue per ton shipped
increased 57% to US$993 in the second quarter 2008 over the second quarter
2007.
Net sales of other products totaled US$63.8 million during the second
quarter 2008, compared to US$39.7 million during the second quarter 2007.
This increase resulted mainly from higher iron ore shipments and prices and
the consolidation of Grupo Imsa's pre-engineered metal buildings business
in Mexico.
Net sales of flat and long products in the North America Region were US$1.5
billion in the second quarter 2008, an increase of 128% versus the same
period in 2007. Shipments in the region totaled 1.3 million tons during
the second quarter 2008, or 47% higher than in the same period in 2007,
mainly due to the consolidation of Grupo Imsa. Revenue per ton shipped in
the region increased 55% to US$1,175 in the second quarter 2008 over the
same quarter in 2007 mainly as a result of higher prices and the
consolidation of Grupo Imsa's higher value added product mix.
Net sales of flat and long products in the South & Central America Region
were US$782.0 million during the second quarter 2008, an increase of 63%
versus the same period in 2007. This increase was due to higher shipments
and revenue per ton. Shipments in the region totaled 759,000 tons during
the second quarter 2008, or 22% higher than in the second quarter 2007.
Revenue per ton shipped in the region increased 34% to US$1,030 in the
second quarter 2008 over the same quarter in 2007, mainly due to higher
prices.
Cost of sales totaled US$1.6 billion in the second quarter 2008 compared to
US$931.1 million in the second quarter 2007. Cost of sales increased as a
result, in part, of the consolidation of Grupo Imsa, which increased
Ternium's production volume and cost per ton due to Grupo Imsa's higher
production cost structure and higher value added product sales mix.
Excluding this effect, the higher year-over-year cost of sales was related
to higher costs for raw materials and other supplies, as well as for
freight, services and labor.
The consolidation of Grupo Imsa resulted in an increased volume of
purchased slabs with a cost per ton significantly higher than Ternium's
average cost of slab production. This higher cost per ton for purchased
slabs is gradually reflected in the cost of sales, as Ternium consumes
slabs and other raw materials from its inventories over time. In the
second quarter 2008, scrap and energy prices increased in Mexico, while the
price of zinc was lower when compared to the prior year period. Iron ore
costs were higher during the second quarter 2008 than they were in the same
period in 2007, mainly as a result of higher annual contract prices for
third party iron ore supplies and higher production costs at Ternium's iron
ore mines.
Selling, General and Administrative (SG&A) expenses in the second quarter
2008 were US$181.8 million, or 8% of net sales, compared with US$118.2
million, or 9% of net sales, in the second quarter 2007. The increase in
SG&A was due mainly to the consolidation of Grupo Imsa.
Operating income in the second quarter 2008 was US$610.4 million, or 26% of
net sales, compared with US$203.0 million, or 16% of net sales, in the
second quarter 2007.
EBITDA(4) in the second quarter 2008 was US$714.1 million, or 30% of net
sales, compared with US$281.9 million, or 22% of net sales, in the second
quarter 2007. Equity holders' EBITDA in the second quarter 2008 was 82% of
EBITDA.
Net financial result totaled a gain of US$97.4 million in the second
quarter 2008, compared with expenses of US$13.5 million in the same period
in 2007. A higher net gain of US$98.9 million related to foreign exchange
valuations and a US$24.2 million improved result related to changes in the
fair value of some derivative instruments entered into by Ternium mainly to
mitigate the effects of interest rate fluctuations were partially offset by
a US$19.7 million year-over-year increase in net interest expenses
primarily associated with an increase in net debt. The foreign exchange
results in the second quarter 2008 (an effect that is offset to a large
extent by changes in Ternium's net equity position) resulted primarily from
the impact of the Mexican Peso fluctuation on the Company's Mexican
subsidiaries' US dollar denominated debt (Ternium's subsidiaries prepare
their financial statements in currencies other than the US dollar in
accordance with IFRS).
Income tax expense for the second quarter 2008 was US$209.3 million, or 30%
of income before income tax, discontinued operations and minority interest,
compared with US$73.2 million in the second quarter 2007, or 39% of income
before income tax, discontinued operations and minority interest.
Income attributable to minority interest for the second quarter 2008 was
US$83.2 million, compared with US$78.0 million in the second quarter 2007.
The year-over-year increase was due mainly to higher income attributable to
minority interest in Siderar. In addition, there was no income
attributable to minority interest in Sidor in the second quarter 2008,
compared with US$39.0 million in the second quarter 2007.
Analysis of First Half 2008 Results
Net income attributable to the Company's equity holders for the first half
ended June 30, 2008 was US$837.8 million, compared with US$459.1 million
for the first half ended June 30, 2007. Including minority interest, net
income for the first half 2008 was US$982.4 million, compared with US$566.6
million for the first half 2007. Earnings per ADS(5) were US$4.18 in the
first half 2008, compared with US$2.29 in the first half 2007.
Net sales for the first half 2008 increased 78% to US$4.3 billion, compared
with the same period in 2007. Net sales increased due to the effect of the
consolidation of Grupo Imsa and higher steel prices. Shipments of flat and
long products reached 4.2 million tons during the first half 2008, an
increase of 32% compared to shipment levels in the first half 2007.
Revenue per ton shipped increased 35% to US$1,012 in the first half 2008
versus the same period in 2007, mainly as a result of higher prices and the
consolidation of Grupo Imsa's higher value added product mix.
Net Sales Shipments Revenue / ton
(million US$) (thousand tons) (US$/ton)
1H 1H
1H 2008 1H 2007 Dif. 1H 2008 1H 2007 Dif.
