LUXEMBOURG -- (Marketwire) -- 02/24/09 -- Ternium S.A. (NYSE: TX) today announced its
results for the full year and fourth quarter ended December 31, 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.
Summary of Full Year 2008 Results(1)
12M 2008 12M 2007
Shipments (tons) 7,543,000 6,980,000 8%
Net Sales (US$ million) 8,464.9 5,633.4 50%
Operating Income (US$ million) 1,676.0 836.8 100%
EBITDA (US$ million) 2,089.6 1,192.1 75%
EBITDA Margin (% of net sales) 25% 21%
EBITDA per Ton, Flat & Long Steel (US$/ton) 263 163 61%
Net Foreign Exchange Result (US$ million) (632.7) (18.4)
Discontinued Operations Result (US$ million) 157.1 579.9
Net Income (US$ million) 875.2 995.8 -12%
Equity Holders' Net Income (US$ million) 715.4 784.5 -9%
Earnings per ADS (US$) 3.57 3.91 -9%
Ternium's operating income was US$1.7 billion in 2008, an increase of 100%
when compared to operating income in 2007. This resulted mainly from the
consolidation of Grupo Imsa and an increase in margins during the first
nine months of 2008, partially offset by a US$200.0 million write-down of
Ternium's inventory during the second half of 2008.
Net income during 2008 was US$875.2 million, a decrease of 12% when
compared to the year 2007. This decrease was mainly due to the US$632.7
million net foreign exchange loss and a decline of US$422.8 million in
discontinued operations results, partially offset by an increase of
US$839.3 million in operating income and a reduction of US$128.6 million in
income tax expense. The net foreign exchange loss in 2008 was primarily
due to the Mexican Peso's 25% devaluation on Ternium's Mexican subsidiary's
US dollar denominated debt. This result is non-cash when measured in US
dollars and is offset by changes in Ternium's net equity position in the
currency translation adjustments line. Ternium does not have a significant
position in foreign exchange derivatives and only uses these instruments
for hedging purposes.
During 2008, Ternium's results from discontinued operations of US$157.1
million were comprised of after-tax gains of US$97.5 million related to the
sale of non-core US assets and US$59.6 million related to Sidor. During
2007, results from discontinued operations totaled an after-tax gain of
US$579.9 million and were mainly related to Sidor.
Summary of Fourth Quarter 2008 Results(2)
4Q 2008 3Q 2008 4Q 2007
Shipments (tons) 1,547,000 1,844,000 -16% 2,044,000 -24%
Net Sales (US$ million) 1,721.1 2,436.9 -29% 1,723.1 0%
Operating Income
(US$ million) 186.3 524.2 -64% 211.1 -12%
EBITDA (US$ million) 281.1 636.0 -56% 330.1 -15%
EBITDA Margin
(% of net sales) 16% 26% 19%
EBITDA per Ton, Flat &
Long Steel (US$/ton) 158 326 -52% 160 -1%
Net Foreign Exchange
Result (US$ million) (622.5) (150.1) 25.6
Discontinued Operations
Result (US$ million) - (2.8) 117.7
Net Income (Loss)
(US$ million) (348.5) 247.3 221.4
Equity Holders' Net Income
(Loss) (US$ million) (334.0) 211.7 165.6
Earnings (Loss) per
ADS (US$) (1.67) 1.06 0.83
-- Ebitda of US$281.1 million in the fourth quarter 2008, as shipments
and revenue per ton decreased 16% and 17%, respectively, compared to the
third quarter 2008.
-- Loss per ADS of US$1.67 in the fourth quarter 2008, mainly related to
the above mentioned non-cash foreign exchange loss on Ternium's Mexican
subsidiary's US dollar denominated debt.
-- Positive free cash flow(3) of US$403.6 million in the fourth quarter
2008.
-- Net financial debt(4) of US$2.1 billion at the close of the fourth
quarter 2008, a decrease of US$392.8 million compared to the close of the
third quarter 2008.
During the fourth quarter 2008, Ternium's shipments decreased 16% compared
to the third quarter 2008 as a result of a sharp decline in steel demand
from the main steel consuming sectors -- construction, home appliances and
automotive -- in its core markets. Operating income was US$186.3 million,
a decrease of 64% when compared to the third quarter 2008. Net sales
decreased 29% during the fourth quarter 2008, as shipments and revenue per
ton decreased 16% and 17%, respectively, while operating cost per ton
decreased 4%. Operating income in the fourth quarter 2008 included a
US$68.3 million loss related to the write-down of Ternium's inventory
referenced above, compared to a US$131.7 million inventory related
write-down in the third quarter 2008. Operating income in the fourth
quarter 2008 decreased 12% when compared to the fourth quarter 2007, mainly
as a result of a 24% decrease in shipments and a 33% increase in operating
cost per ton during the fourth quarter 2008, partially offset by a 28%
increase in revenue per ton. There was no write-down of inventories
recorded in the fourth quarter 2007.
Net loss during the fourth quarter 2008 was US$348.5 million, compared to
net income of US$247.3 million in the third quarter 2008. The fourth
quarter 2008 net result was lower than that of the precedent quarter,
mainly due to an increase of US$472.4 million in net foreign exchange loss
and a US$337.9 million reduction in operating income, partially offset by a
US$236.4 million reduction in income tax expense. The fourth quarter 2008
net result was US$569.8 million lower than that of the fourth quarter 2007,
mainly due to a decline of US$643.3 million in net foreign exchange result
and US$117.7 million less in discontinued operations results, partially
offset by a reduction of US$216.0 million in income tax expense.
Net foreign exchange result during the fourth quarter 2008 was a loss of
US$622.5 million, compared to a loss of US$150.1 million in the third
quarter 2008 and a gain of US$25.6 million in the fourth quarter 2007. The
net foreign exchange losses in the third and fourth quarters of 2008 were
primarily due to the Mexican Peso's 5% and 25% devaluation, respectively,
on Ternium's Mexican subsidiary's US dollar denominated debt. These
results are non-cash when measured in US dollars and are offset by changes
in Ternium's net equity position in the currency translation adjustments
line, as the value of Ternium Mexico's US dollar denominated debt is not
altered by the Mexican Peso fluctuation when stated in US dollars in
Ternium's consolidated financial statements.
Ternium's financial debt at the end of the fourth quarter 2008 was US$3.3
billion, of which US$941.5 million will mature during 2009, while the
company's cash, cash equivalents and other investments totaled US$1.2
billion as of December 31, 2008. The company's net financial debt(5) of
US$2.1 billion at the close of the fourth quarter 2008 decreased US$392.8
million compared to its net financial debt as of September 30, 2008.
Outlook
Steel product demand and prices in the North America Region are expected to
remain at their current levels throughout the first quarter 2009 following
the decline experienced during the second half of 2008 as a result of the
significant slowdown in the world economy. Demand and prices in the South
& Central America Region are expected to decrease in the first quarter 2009
due to a delayed effect on the region's economies of the global markets
disruption.
Ternium expects a lower EBITDA(6) in the first quarter 2009 compared to
EBITDA in the fourth quarter 2008, mainly as a result of lower overall
volume and lower average prices in its regions.
The company anticipates a lower net debt position at the close of the first
quarter 2009, mainly as a result of a decline in working capital and a
re-assessment and re-scheduling of its capital expenditure projects.
Inventory volumes are expected to continue declining due to a scaling down
of production and a reduction of the volume of Ternium's semi-finished
product and raw-material purchases.
Ternium expects that its average capacity utilization during the first half
of 2009 would be approximately 65%. Capital expenditures for 2009 are
expected to total approximately US$250 million, while capital expenditures
during 2008 were US$587.9 million.
Analysis of Full Year 2008 Results
Net income attributable to the Company's equity holders for 2008 was
US$715.4 million, compared with US$784.5 million for 2007. Including
minority interest, net income for 2008 was US$875.2 million, compared with
US$995.8 million for 2007. Earnings per ADS(7) were US$3.57 in 2008,
compared with US$3.91 in 2007.
Net sales for 2008 increased 50% to US$8.5 billion, compared with 2007.
Excluding the effect of the consolidation of Grupo Imsa, net sales
increased due to higher revenue per ton. Shipments of flat and long
products were 7.5 million tons during 2008, an increase of 8% compared to
shipment levels in 2007, mainly due to the consolidation of Grupo Imsa and
higher shipment levels in the South & Central America Region. Revenue per
ton shipped was US$1,087 in 2008, an increase of 38% when compared to 2007,
mainly as a result of higher prices and the consolidation of Grupo Imsa's
higher value added product mix.
Net Sales Shipments Revenue / ton
(million US$) (thousand tons) (US$/ton)
FY FY FY FY FY FY
2008 2007 Dif. 2008 2007 Dif. 2008 2007 Dif.
South &
Central
America 2,782.5 2,037.0 37% 2,604.2 2,499.1 4% 1,068 815 31%
North
America 4,294.7 2,571.8 67% 3,666.1 3,034.9 21% 1,171 847 38%
Europe &
other 47.5 123.0 -61% 55.2 184.9 -70% 860 665 29%
------- ------- --- ------- ------- --- ----- --- ---
Total flat
products 7,124.7 4,731.7 51% 6,325.5 5,718.9 11% 1,126 827 36%
South &
Central
America 274.4 70.0 292% 302.5 132.8 128% 907 527 72%
North
America 791.8 696.0 14% 901.3 1,113.4 -19% 878 625 41%
Europe &
other 8.9 6.9 30% 13.3 15.0 -11% 669 457 46%
------- ------- --- ------- ------- --- ----- --- ---
Total long
products 1,075.1 772.8 39% 1,217.2 1,261.2 -3% 883 613 44%
Total flat
and long
products 8,199.8 5,504.5 49% 7,542.7 6,980.1 8% 1,087 789 38%
Other
products
(1) 265.1 128.8 106%
------- ------- ---
Total Net
Sales 8,464.9 5,633.4 50%
(1) Primarily includes iron ore, pig iron and pre-engineered metal
buildings.
Sales of flat products during 2008 totaled US$7.1 billion, an increase of
51% compared to 2007. Excluding the effect of the consolidation of Grupo
Imsa, net sales increased mainly as a result of higher revenue per ton.
Shipments of flat products totaled 6.3 million tons in 2008, an increase of
11% compared with 2007, mainly due to the consolidation of Grupo Imsa and
higher shipments in the South & Central America Region, partially offset by
lower shipments in the "Europe and other" Region. Revenue per ton shipped
increased 36% to US$1,126 in 2008 compared to 2007, mainly as a result of
higher steel prices and the consolidation of Grupo Imsa's higher value
added product mix.
Sales of long products were US$1.1 billion during 2008, an increase of 39%
compared to 2007 mainly due to higher prices. Shipments of long products
totaled 1.2 million tons in 2008, representing a 3% decrease versus 2007 as
lower shipments in the North America Region were offset by higher shipments
in the South & Central America Region. Revenue per ton shipped was US$883
in 2008, an increase of 44% compared to 2007.
Sales of other products totaled US$265.1 million during 2008 compared to
US$128.8 million during 2007. The increase was driven by higher iron ore
shipments and prices, as well as by higher pre-engineered metal building
sales coming from the Grupo Imsa acquisition.
Sales of flat and long products in the North America Region totaled US$5.1
billion in 2008, an increase of 56% versus 2007, mainly due to the effect
of the consolidation of Grupo Imsa and higher prices. Shipments in the
region totaled 4.6 million tons during 2008, or 10% higher than during
2007. Revenue per ton shipped was US$1,114 in 2008, an increase of 41%
compared to 2007, as a result of higher steel prices and the consolidation
of Grupo Imsa's higher value added product mix.
Flat and long product sales in the South & Central America Region were
US$3.1 billion during 2008, an increase of 45% versus 2007. This increase
was due to higher volumes and revenue per ton. Shipments in the region
totaled 2.9 million tons during 2008, or 10% higher than in 2007. Revenue
per ton shipped in the South & Central America Region was US$1,052 in 2008,
an increase of 31% compared to 2007, mainly due to higher prices.
Cost of sales was US$6.1 billion in 2008 compared to US$4.3 billion in
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. The year-over-year cost of sales increase also was
related to higher costs for third party steel, raw materials, energy,
freight, labor and services and the US$200.0 million write-down of
Ternium's inventory that was primarily related to purchased slabs,
partially offset by a reduction in the US dollar value of inventories at
the beginning of the year and purchased during the period, mainly as a
result of the Mexican Peso's 25% devaluation to the US dollar.
The consolidation of Grupo Imsa, which began on July 26, 2007, resulted in
an increased volume of purchased slabs with a cost per ton significantly
higher than Ternium's average cost of slab production. Scrap and energy
prices increased in Mexico while the price of zinc was lower in 2008
compared to the prior year. Iron ore and coal costs were higher during
2008 than they were in 2007, mainly as a result of higher annual contract
prices of third party iron ore supplies and higher production costs at
Ternium's iron ore mines.
Selling, general and administrative (SG&A) expenses in 2008 were US$669.5
million, or 8% of net sales, compared with US$517.4 million, or 9% of net
sales, in 2007. The increase in SG&A was due mainly to the consolidation
of Grupo Imsa.
Operating income in 2008 was US$1.7 billion, or 20% of net sales, compared
with US$836.8 million, or 15% of net sales, in 2007.
EBITDA(8) in 2008 was US$2.1 billion, or 25% of net sales, compared to
US$1.2 billion, or 21% of net sales, in 2007. Equity holders' EBITDA in
2008 was 79% of EBITDA.
Net financial expenses were US$797.1 million in 2008, compared with
US$130.0 million in 2007. During 2008, Ternium's net interest expenses
were US$103.9 million, an increase of US$12.4 million compared to 2007 due
to higher indebtedness as a result of the Grupo Imsa acquisition in July
2007, partially compensated by lower interest rates.
Net foreign exchange result was a loss of US$632.7 million in 2008,
compared to a loss of US$18.4 million in 2007. The result in 2008 was
primarily due to the impact of the Mexican Peso's 25% devaluation on
Ternium's Mexican subsidiary's US dollar denominated debt. This result is
non-cash when measured in US dollars and is offset by changes in Ternium's
net equity position in the currency translation adjustments line, as the
value of Ternium Mexico's US dollar denominated debt is not altered by the
Mexican Peso fluctuation when stated in US dollars in Ternium's
consolidated financial statements. In accordance with IFRS, Ternium Mexico
prepares its financial statements in Mexican Pesos and registers foreign
exchange results on its net
non-Mexican Pesos positions when the Mexican Peso revaluates or devaluates
to other currencies.
Fair value of derivatives result was a loss of US$32.5 million in 2008,
compared to a gain of US$2.5 million in 2007, related to some derivative
instruments entered into by Ternium mainly to mitigate the effect of
interest rates and foreign exchange fluctuations.
Income tax expense in 2008 was US$259.0 million, or 29% of income before
income tax, discontinued operations and minority interest, compared with
US$291.3 million, or 41% of income before income tax, discontinued
operations and minority interest, in 2007. The income tax expense in 2008
included a non-recurring gain of US$96.3 million on account of Hylsa's
reversal of deferred statutory profit sharing that reduced the effective
tax rate for the year.
Net result of discontinued operations in 2008 was a gain of US$157.1
million, comprised an after-tax gain of US$59.6 million related to Sidor
and an after-tax gain of US$97.5 million from the sale of non-core US
assets during the first quarter 2008. In 2007, net result of discontinued
operations was a gain of US$579.9 million, mainly related to Sidor.
Income attributable to minority interest in 2008 was US$159.7 million,
compared to US$211.3 million in 2007, mainly as a result of a lower income
attributable to minority interest in Sidor.
Analysis of Fourth Quarter 2008 Results
Net loss attributable to the Company's equity holders in the fourth quarter
2008 was US$334.0 million, compared with net income attributable to the
Company's equity holders of US$165.6 million in the fourth quarter 2007.
Including minority interest, net loss for the fourth quarter 2008 was
US$348.5 million, compared with net income of US$221.4 million in the
fourth quarter 2007. Loss per ADS(9) for the fourth quarter 2008 was
US$1.67, compared with earnings per ADS of US$0.83 in the fourth quarter
2007.
Net sales in the fourth quarter 2008 were US$1.7 billion, a similar result
to the net sales total in the fourth quarter 2007. Lower shipments were
offset by higher revenue per ton during the fourth quarter 2008. Shipments
of flat and long products were 1.5 million tons during the fourth quarter
2008, a decrease of 24% compared to shipment levels in the fourth quarter
2007, mainly due to a decrease in demand in Ternium's main steel markets.
Revenue per ton shipped was US$1,062 in the fourth quarter 2008, an
increase of 28% compared to the same quarter in 2007, mainly as a result of
higher steel prices.
Net Sales Shipments Revenue / ton
(million US$) (thousand tons) (US$/ton)
4Q 4Q 4Q 4Q 4Q 4Q
2008 2007 Diff. 2008 2007 Diff. 2008 2007 Diff.
South &
Central
America 642.4 607.9 6% 559.9 699.0 -20% 1,147 870 32%
North
America 735.7 876.3 -16% 642.2 993.6 -35% 1,146 882 30%
Europe &
other 30.0 7.9 281% 36.0 12.3 193% 834 641 30%
------- ------- --- ------- ------- --- ----- --- ---
Total flat
products 1,408.1 1,492.0 -6% 1,238.1 1,704.9 -27% 1,137 875 30%
South &
Central
America 71.7 27.0 166% 91.9 55.2 67% 780 489 60%
North
America 159.7 164.4 -3% 213.2 268.9 -21% 749 611 22%
Europe &
other 3.1 6.9 -54% 3.6 15.0 -76% 884 457 94%
------- ------- --- ------- ------- --- ----- --- ---
Total long
products 234.5 198.2 18% 308.7 339.1 -9% 760 585 30%
Total flat
and long
products 1,642.6 1,690.3 -3% 1,546.8 2,044.0 -24% 1,062 827 28%
Other
products
(1) 78.5 32.8 139%
------- ------- ---
Total Net
Sales 1,721.1 1,723.1 0%
(1) Primarily includes iron ore, pig iron and pre-engineered metal
buildings.
Sales of flat products during the fourth quarter 2008 totaled US$1.4
billion, a decrease of 6% compared with the same quarter in 2007. Net
sales decreased as a result of lower shipments, partially offset by higher
revenue per ton. Shipments of flat products totaled 1.2 million tons in
the fourth quarter 2008, a decrease of 27% compared with the same period in
2007, mainly due to a decrease in demand in our main steel markets.
Revenue per ton shipped increased 30% to US$1,137 in the fourth quarter
2008 compared with the same period in 2007, mainly due to higher steel
prices.
Sales of long products were US$234.5 million in the fourth quarter 2008, an
increase of 18% compared to the same period in 2007 mainly due to higher
prices, partially offset by lower volumes. Shipments of long products
totaled 309,000 tons in the fourth quarter 2008, a 9% decrease versus the
same quarter in 2007, due to lower shipments in the North America Region
partially offset by higher shipments in the South & Central America Region.
Revenue per ton shipped was US$760 in the fourth quarter 2008, an increase
of 30% compared to the fourth quarter 2007, mainly due to higher prices.
Sales of other products totaled US$78.5 million during the fourth quarter
2008, compared to US$32.8 million during the fourth quarter 2007. The
increase was mainly driven by higher iron ore shipments and prices.
Sales of flat and long products in the North America Region were US$895.4
million in the fourth quarter 2008, a decrease of 14% versus the same
period in 2007, due to lower shipments partially offset by higher revenue
per ton. Shipments in the region totaled 855,000 tons during the fourth
quarter 2008, or 32% lower than in the same period in 2007 as a result of
lower demand from the region's main markets. Revenue per ton shipped in
the region increased 27% to US$1,047 in the fourth quarter 2008 over the
same quarter in 2007, mainly due to higher prices.
Flat and long product sales in the South & Central America Region were
US$714.1 million during the fourth quarter 2008, an increase of 12% versus
the same period in 2007. This increase was due to higher revenue per ton
partially offset by lower shipments.
