FORM
6 - K
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Report
of Foreign Private Issuer
Pursuant
to Rule 13a - 16 or 15d - 16 of
the
Securities Exchange Act of 1934
As
of 11/5/2008
Ternium
S.A.
(Translation
of Registrant's name into English)
Ternium
S.A.
46a,
Avenue John F. Kennedy – 2nd floor
L-1855
Luxembourg
(352)
4661-11-3815
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover Form 20-F or 40-F.
Form
20-F þ Form
40-F o
Indicate
by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12G3-2(b) under the Securities Exchange Act of 1934.
Yes o No þ
If “Yes”
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
Not
applicable
The
attached material is being furnished to the Securities and Exchange Commission
pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934,
as amended.
This
report contains Ternium S.A.’s press release announcing third quarter 2008
results.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TERNIUM
S.A.
|
By:
/s/ Roberto
Philipps
|
By:
/s/ Daniel
Novegil
|
|
Name:
Roberto Philipps
|
Name:
Daniel Novegil
|
|
Title:
Chief Financial Officer
|
Title:
Chief Executive Officer
|
Dated:
November 5, 2008
 |
 |
Sebastián
Martí
Ternium
- Investor Relations
+1 (866)
890 0443
+52 (81)
8865 2111
+54 (11)
4018 2389
www.ternium.com
Ternium
Announces Results for the Third Quarter and First Nine Months of
2008
Luxembourg,
November 5, 2008 – Ternium S.A. (NYSE: TX) today announced its results for the
third quarter and first nine months ended September 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.
Summary of Third Quarter 2008
Results1
| 3Q 2008 | 2Q 2008 | 3Q 2007 | ||||||||||||||||||
|
Shipments
(tons)
|
1,844,000 | 2,063,000 | -11 | % | 1,788,000 | 3 | % | |||||||||||||
|
Net
Sales (US$ million)
|
2,447.7 | 2,374.8 | 3 | % | 1,506.1 | 63 | % | |||||||||||||
|
Operating
Income (US$ million)
|
524.9 | 610.4 | -14 | % | 222.5 | 136 | % | |||||||||||||
|
EBITDA
(US$ million)
|
638.6 | 714.1 | -11 | % | 318.5 | 101 | % | |||||||||||||
|
EBITDA
Margin (% of net sales)
|
26 | % | 30 | % | 21 | % | ||||||||||||||
|
EBITDA
per Ton, Flat & Long Steel (US$/ton)
|
327 | 337 | -3 | % | 169 | 93 | % | |||||||||||||
|
Discontinued
Operations (US$ million)
|
(2.8 | ) | - | 143.5 | ||||||||||||||||
|
Net
Income (US$ million)
|
247.1 | 498.9 | -50 | % | 214.0 | 15 | % | |||||||||||||
|
Equity
Holders' Net Income (US$ million)
|
211.7 | 415.6 | -49 | % | 159.8 | 32 | % | |||||||||||||
|
Earnings
per ADS (US$)
|
1.06 | 2.07 | -49 | % | 0.80 | 32 | % | |||||||||||||
Operating
income was US$524.9 million in the third quarter 2008, a decrease of 14%
when compared to the second quarter 2008. This resulted mainly from a
US$131.7 million write-down of Ternium’s inventory during the third quarter 2008
primarily related to purchased slabs, reflecting lower prices for finished
products at the end of the quarter. Net sales were stable in the
third quarter 2008 when compared to the second quarter 2008, as an 11% decrease
in shipments due to lower demand was offset by a 14% increase in revenue per
ton. Operating cost per ton increased 22% in the third quarter 2008
compared to the second quarter 2008 as a result of higher raw material, energy
and labor costs, as well as the aforementioned inventory
write-down. Operating income in the third quarter 2008 increased 136%
when compared to the third quarter 2007 mainly as a result of higher prices,
partially offset by higher raw material, energy and labor costs and the
inventory write-down referenced above.
|
1
|
Sidor’s results of operations
have been deconsolidated from Ternium’s Financial Statements and are shown
as Discontinued Operations. Discontinued Operations also
include results from the non-core US assets that were sold during the
first quarter 2008.
|
Net
foreign exchange result was a loss of US$150.1 million in the third quarter 2008
compared to a gain of US$99.7 million in the second quarter
2008. These results were primarily due to the impact of the Mexican
Peso fluctuation on Ternium’s Mexican subsidiary’s US dollar denominated
debt. 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 appreciates or depreciates to
other currencies. 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.
Ternium
does not have a significant position in foreign exchange derivatives and only
uses these instruments for hedging purposes.
Net
income during the third quarter 2008 was US$247.1 million, a decrease of 50%
when compared to the second quarter 2008 mainly due to a US$249.7 million lower
net foreign exchange result related to Ternium Mexico’s financial debt and a
reduction of US$85.5 million in operating income, partially offset by a US$118.2
million lower income tax expense. Net income during the third quarter
2008 increased 15% when compared to the third quarter 2007. This
year-over-year increase was mainly due to an increase of US$302.4 million in
operating income, partially offset by a US$105.8 million lower net foreign
exchange result related to Ternium Mexico’s financial debt and a US$146.4
million lower discontinued operations result.
Summary of Results for the First Nine
Months of 20082
| 9M 2008 | 9M 2007 | |||||||||||
|
Shipments
(tons)
|
5,996,000 | 4,936,000 | 21 | % | ||||||||
|
Net
Sales (US$ million)
|
6,775.1 | 3,936.7 | 72 | % | ||||||||
|
Operating
Income (US$ million)
|
1,498.5 | 635.6 | 136 | % | ||||||||
|
EBITDA
(US$ million)
|
1,822.9 | 876.3 | 108 | % | ||||||||
|
EBITDA
Margin (% of net sales)
|
27 | % | 22 | % | ||||||||
|
EBITDA
per Ton, Flat & Long Steel (US$/ton)
|
291 | 166 | 75 | % | ||||||||
|
Discontinued
Operations (US$ million)
|
157.1 | 462.3 | ||||||||||
|
Net
Income (US$ million)
|
1,229.6 | 780.6 | 58 | % | ||||||||
|
Equity
Holders' Net Income (US$ million)
|
1,049.4 | 618.9 | 70 | % | ||||||||
|
Earnings
per ADS (US$)
|
5.23 | 3.09 | 70 | % |
|
2
|
Sidor’s
results of operations have been deconsolidated from Ternium’s Financial
Statements and are shown as Discontinued
Operations. Discontinued Operations also include results from
the non-core US assets that were sold during the first quarter
2008.
|
Operating
income was US$1.5 billion in the first nine months of 2008, an
increase of 136% when compared to the first nine months of
2007. This resulted mainly from higher revenue per ton and the
consolidation of Grupo Imsa, partially offset by the US$131.7 million write-down
of Ternium’s inventory referenced above and higher raw material, energy and
labor costs during the 2008 period.
During
the first nine months of 2008, results from discontinued operations of US$157.1
million comprised 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 the first nine months of 2007, results from
discontinued operations were an after-tax gain of US$462.3 million mainly
related to Sidor.
Net
income during the first nine months of 2008 was US$1.2 billion, an increase
of 58% when compared to the first nine months of 2007. This increase
in net income was mainly due to higher operating income, partially offset by
lower gains from discontinued operations and higher income tax
expenses.
Outlook
Steel
product demand and prices in the North America Region continue on a downward
trend, reflecting weak end-customer demand and a de-stocking of the steel
industry’s value chain. Demand and prices in the South &
Central America Region are softening as well, as the disruption in the
global financial markets has started to affect the region’s
economy.
Ternium
expects a reduced level of activity resulting in a lower operating income in the
fourth quarter 2008 compared to the operating income it achieved in the third
quarter 2008, with lower shipments and prices in all of its regions partially
offset by a lower cost per ton. Cost of production is expected to
decline due to the devaluation of local currencies to the US dollar and lower
prices for scrap and other inputs.
Analysis
of Third Quarter 2008 Results
Net income attributable to the Company’s equity holders in the third
quarter 2008 was US$211.7 million, compared with US$159.8 million in the third
quarter 2007. Including minority interest, net income for the third
quarter 2008 was US$247.1 million, compared with US$214.0 million in the third
quarter 2007. Earnings per ADS3 for the third quarter
2008 were US$1.06, compared with US$0.80 in the third quarter
2007.
Net sales for the third
quarter 2008 increased 63% to US$2.4 billion compared with the same period in
2007. Net sales increased mainly due to higher steel prices and the
consolidation of Grupo Imsa. Shipments of flat and long products were
1.8 million tons during the third quarter 2008, an increase of 3% compared to
shipment levels in the third quarter 2007. Revenue per ton shipped
increased 57% to US$1,278 in the third quarter 2008 versus the same quarter in
2007, mainly as a result of higher steel prices in all regions.
|
3
|
Each
American Depositary Share (ADS) represents 10 shares of Ternium’s common
stock. Results are based on a weighted average number of shares
of common stock outstanding of
2,004,743,442.
|
|
Net
Sales (million US$)
|
Shipments
(thousand tons)
|
Revenue
/ ton (US$/ton)
|
||||||||||||||||||||||||||||||||||
| 3Q 2008 | 3Q 2007 |
Dif.
|
3Q 2008 | 3Q 2007 |
Dif.
|
3Q 2008 | 3Q 2007 |
Dif.
|
||||||||||||||||||||||||||||
|
South
& Central America
|
784.4 | 528.9 | 48 | % | 680.4 | 637.8 | 7 | % | 1,153 | 829 | 39 | % | ||||||||||||||||||||||||
|
North
America
|
1,273.4 | 731.8 | 74 | % | 901.8 | 834.7 | 8 | % | 1,412 | 877 | 61 | % | ||||||||||||||||||||||||
|
Europe
& other
|
2.6 | 11.5 | -77 | % | 2.8 | 18.5 | -85 | % | 933 | 619 | 51 | % | ||||||||||||||||||||||||
|
Total
flat products
|
2,060.4 | 1,272.2 | 62 | % | 1,585.1 | 1,491.0 | 6 | % | 1,300 | 853 | 52 | % | ||||||||||||||||||||||||
|
South
& Central America
|
104.2 | 28.7 | 262 | % | 86.0 | 52.3 | 64 | % | 1,212 | 550 | 120 | % | ||||||||||||||||||||||||
|
North
America
|
192.0 | 156.0 | 23 | % | 173.3 | 244.8 | -29 | % | 1,108 | 637 | 74 | % | ||||||||||||||||||||||||
|
Europe
& other
|
- | - | - | - | - | - | ||||||||||||||||||||||||||||||
|
Total
long products
|
296.2 | 184.8 | 60 | % | 259.2 | 297.1 | -13 | % | 1,142 | 622 | 84 | % | ||||||||||||||||||||||||
|
Total
flat and long products
|
2,356.6 | 1,457.0 | 62 | % | 1,844.3 | 1,788.1 | 3 | % | 1,278 | 815 | 57 | % | ||||||||||||||||||||||||
|
Other
products
|
91.1 | 49.1 | 86 | % | ||||||||||||||||||||||||||||||||
|
Total
Net Sales
|
2,447.7 | 1,506.1 | 63 | % | ||||||||||||||||||||||||||||||||
(1)
Primarily includes iron ore, pig iron and pre-engineered metal
buildings.
Net sales
of flat products during the third quarter 2008 totaled US$2.1 billion, an
increase of 62% compared with the same quarter in 2007. Net sales of
flat products increased as a result of higher steel prices and higher
shipments. The consolidation of Grupo Imsa, which began on July 26,
2007, was not fully reflected in the third quarter 2007. Shipments of
flat products totaled 1.6 million tons in the third quarter 2008, an increase of
6% compared with the same period in 2007. Revenue per ton shipped
increased 52% to US$1,300 in the third quarter 2008 compared with the same
period in 2007, mainly due to higher steel prices in all regions.
Net sales
of long products were US$296.2 million during the third quarter 2008, an
increase of 60% compared with the same period in 2007 due to higher steel
prices, partially offset by lower shipment levels. Shipments of long
products totaled 259,000 tons in the third quarter 2008, representing a 13%
decrease versus the same quarter in 2007. Revenue per ton shipped
increased 84% to US$1,142 in the third quarter 2008 over the third quarter
2007.
Net sales
of other products totaled US$91.1 million during the third quarter 2008,
compared to US$49.1 million during the third quarter 2007. This
increase resulted mainly from higher iron ore shipments and prices, higher pig
iron prices and higher revenue related to Ternium’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
third quarter 2008, an increase of 65% versus the same period in
2007. Shipments in the region totaled 1.1 million tons during the
third quarter 2008, similar to that of the same period in
2007. Revenue per ton shipped in the region increased 66% to US$1,363
in the third quarter 2008 over the same quarter in 2007 mainly as a result of
higher prices.
Net sales
of flat and long products in the South & Central America Region were
US$888.6 million during the third quarter 2008, an increase of 59% versus the
same period in 2007. This increase was due to higher shipments and
revenue per ton. Shipments in the region totaled 766,000 tons during
the third quarter 2008, or 11% higher than in the third quarter
2007. Revenue per ton shipped in the region increased 43% to US$1,159
in the third quarter 2008 over the same quarter in 2007, mainly due to higher
prices.
Cost of sales totaled US$1.7
billion in the third quarter 2008 compared to US$1.1 billion in the third
quarter 2007. Cost of sales increased as a result of the
consolidation of Grupo Imsa, a US$131.7 million write-down of Ternium’s
inventory primarily related to purchased slabs and higher costs for raw
materials, third party steel and other supplies, as well as for freight,
services and labor.
In the
third 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 third 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.
Selling, General and Administrative
(SG&A) expenses in the third quarter 2008 were US$186.2 million, or
8% of net sales, compared with US$143.8 million, or 10% of net sales, in the
third quarter 2007. The increase in SG&A was due mainly to higher
export volumes and prices, higher taxes as well as higher labor
costs.
Operating income in the third
quarter 2008 was US$524.9 million, or 21% of net sales, compared with US$222.5
million, or 15% of net sales, in the third quarter 2007.
EBITDA4 in the third quarter 2008
was US$638.6 million, or 26% of net sales, compared with US$318.5 million, or
21% of net sales, in the third quarter 2007. Equity holders’ EBITDA
in the third quarter 2008 was 78% of EBITDA.
Net financial expenses were
US$183.7 million in the third quarter 2008, compared with US$87.9 million in the
same period in 2007. During the third quarter 2008 net interest
expenses were US$26.9 million and net foreign exchange losses were US$150.1
million. Net interest expenses in the third quarter 2008 decreased
US$7.3 million over the same period the previous year mainly as a result of
lower interest rates on debt.
|
4
|
EBITDA
in the third quarter 2008 equals operating income of US$524.9 million plus
depreciation and amortization of US$113.7
million.
|
Net
foreign exchange result was a loss of US$150.1 million in the third quarter 2008
compared to a loss of $44.3 million in the third quarter
2007. Ternium does not have a significant position in foreign
exchange derivatives and only uses these instruments for hedging
purposes. These results were primarily due to the impact of the
Mexican Peso fluctuation on Ternium’s Mexican subsidiary’s US dollar denominated
debt. 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 appreciates or depreciates to
other currencies. 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.
Income tax expense for the
third quarter 2008 was US$91.1 million, or 27% of income before income tax,
discontinued operations and minority interest, compared with US$63.7 million in
the third quarter 2007, or 47% of income before income tax, discontinued
operations and minority interest. The relatively higher tax rate in
the third quarter 2007 was mainly the result of net losses in certain
subsidiaries that did not generate tax credits due to their tax-free
status.
Net result of discontinued operations
for the third quarter 2008 was a loss of US$2.8 million. This
comprised an after-tax gain of US$152.6 million related to an excess cash
payment received from Sidor during the quarter, an after-tax loss of US$151.5
million due to the reversal of currency translation adjustments of the
investment in Sidor and an after-tax loss of US$3.9 million due to the
adjustment of the price of the non-core US assets that were sold during the
first quarter 2008. In the third quarter 2007, results from
discontinued operations comprised an after-tax gain of US$137.3 million related
to Sidor and an after-tax gain of US$6.2 million related to the non-core US
assets sold during the first quarter 2008.
Income attributable to minority
interest for the third quarter 2008 was US$35.5 million, compared with
US$54.2 million in the third quarter 2007. Income attributable to
minority interest in Siderar was similar in the third quarter 2008 to that of
the third quarter 2007. No income attributable to minority interest
in Sidor was accounted for in the third quarter 2008.
Analysis
of First Nine Months of 2008 Results
Net income attributable to the Company’s equity holders for the first
nine months of 2008 was US$1.0 billion, compared with US$618.9 million for the
first nine months ended September 30, 2007. Including minority
interest, net income for the first nine months of 2008 was US$1.2 billion,
compared with US$780.6 million for the first nine months of
2007. Earnings per ADS5 were US$5.23 in
the first nine months of 2008, compared with US$3.09 in the first nine
months of 2007.
Net sales for the first nine
months of 2008 increased 72% to US$6.8 billion compared with the same period in
2007. Net sales increased due to higher steel prices and the effect
of the consolidation of Grupo Imsa. Shipments of flat and long
products reached 6.0 million tons during the first nine months of 2008, an
increase of 21% compared to shipment levels in the first nine months of
2007. Revenue per ton shipped increased 42% to US$1,094 in the first
nine months of 2008 versus the same period in 2007, mainly as a result of higher
prices and the consolidation of Grupo Imsa’s higher value added product
mix.
|
5
|
Each
American Depositary Share (ADS) represents 10 shares of Ternium’s common
stock. Results are based on a weighted average number of shares
of common stock outstanding of
2,004,743,442.
|
|
Net
Sales (million US$)
|
Shipments
(thousand tons)
|
Revenue
/ ton (US$/ton)
|
||||||||||||||||||||||||||||||||||
| 9M 2008 | 9M 2007 |
Dif.
|
9M 2008 | 9M 2007 |
Dif.
|
9M 2008 | 9M 2007 |
Dif.
|
||||||||||||||||||||||||||||
|
South
& Central America
|
2,140.2 | 1,429.1 | 50 | % | 2,044.3 | 1,800.1 | 14 | % | 1,047 | 794 | 32 | % | ||||||||||||||||||||||||
|
North
America
|
3,559.0 | 1,695.5 | 110 | % | 3,024.0 | 2,041.3 | 48 | % | 1,177 | 831 | 42 | % | ||||||||||||||||||||||||
|
Europe
& other
|
17.4 | 115.1 | -85 | % | 19.1 | 172.6 | -89 | % | 910 | 667 | 36 | % | ||||||||||||||||||||||||
|
Total
flat products
|
5,716.6 | 3,239.7 | 76 | % | 5,087.5 | 4,014.0 | 27 | % | 1,124 | 807 | 39 | % | ||||||||||||||||||||||||
|
South
& Central America
|
202.7 | 43.1 | 371 | % | 210.6 | 77.6 | 171 | % | 963 | 555 | 73 | % | ||||||||||||||||||||||||
|
North
America
|
632.1 | 531.6 | 19 | % | 688.1 | 844.5 | -19 | % | 919 | 629 | 46 | % | ||||||||||||||||||||||||
|
Europe
& other
|
5.8 | - | 9.8 | - | 591 | - | ||||||||||||||||||||||||||||||
|
Total
long products
|
840.6 | 574.6 | 46 | % | 908.5 | 922.1 | -1 | % | 925 | 623 | 48 | % | ||||||||||||||||||||||||
|
Total
flat and long products
|
6,557.1 | 3,814.3 | 72 | % | 5,995.9 | 4,936.0 | 21 | % | 1,094 | 773 | 42 | % | ||||||||||||||||||||||||
|
Other
products (1)
|
218.0 | 122.5 | 78 | % | ||||||||||||||||||||||||||||||||
|
Total
Net Sales
|
6,775.1 | 3,936.7 | 72 | % | ||||||||||||||||||||||||||||||||
(1)
Primarily includes iron ore, pig iron and pre-engineered metal
buildings.
Net sales
of flat products during the first nine months of 2008 totaled US$5.7 billion, an
increase of 76% compared with the same period in 2007. Net sales
increased mainly due to higher steel prices and the effect of the consolidation
of Grupo Imsa. Shipments totaled 5.1 million tons in the first nine
months of 2008, an increase of 27% compared with the same period in
2007. Revenue per ton shipped increased 39% to US$1,124 in the first
nine months of 2008 compared with 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
of long products were US$840.6 million during the first nine months of 2008, an
increase of 46% compared with the same period in 2007. This was
mainly due to higher prices, as shipments remained relatively
stable. Shipments totaled 908,000 tons in the first nine months of
2008, representing a 1% decrease versus the same period in
2007. Revenue per ton shipped increased 48% to US$925 in the first
nine months of 2008 over the first nine months of 2007.
Net sales
of other products totaled US$218.0 million during the first nine months of 2008
compared to US$122.5 million during the same period in 2007. This
increase resulted mainly from higher iron ore prices and shipments, higher pig
iron 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 totaled US$4.2 billion in
the first nine months of 2008, an increase of 88% versus the same period in
2007, mainly due to higher steel prices and the effect of the consolidation of
Grupo Imsa. Shipments in the region totaled 3.7 million tons during
the first nine months of 2008, or 29% higher than during the same period in
2007. Revenue per ton shipped in the region increased 46% to US$1,129
in the first nine months of 2008 over 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
of flat and long products in the South & Central America Region were US$2.3
billion during the first nine months of 2008, an increase of 59% versus the same
period in 2007. This increase was due to higher volumes and
prices. Shipments in the region totaled 2.3 million tons during the
first nine months of 2008, or 20% higher than in the first nine months of 2007,
due to an increase in demand. Revenue per ton shipped in the region
increased 33% to US$1,039 in the first nine months of 2008 over the same period
in 2007, mainly due to higher prices.
Cost of sales was US$4.8
billion in the first nine months of 2008 compared to US$3.0 billion in the first
nine months of 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
year-over-year cost of sales increase was related to higher costs for raw
materials, third party steel and other supplies, as well as for freight,
services and labor.
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 the first nine
months of 2008 compared to the prior year period. Iron ore costs were
higher during the first nine months of 2008 than they were in the same period 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 the first nine months of 2008 were US$514.6
million, or 8% of net sales, compared with US$354.8 million, or 9% of net sales,
in the first nine months of 2007. The increase in SG&A was due
mainly to the consolidation of Grupo Imsa.
Operating income in the first
nine months of 2008 was US$1.5 billion, or 22% of net sales, compared with
US$635.6 million, or 16% of net sales, in the first nine months of
2007.
EBITDA6 in the first nine months
of 2008 was US$1.8 billion, or 27% of net sales, compared to US$876.3 million,
or 22% of net sales, in the first nine months of 2007. Equity
holders’ EBITDA in the first nine months of 2008 was 80% of EBITDA.
|
6
|
EBITDA
in the first nine months of 2008 equals operating income of US$1.5 billion
plus depreciation and amortization of US$324.4
million.
|
Net financial expenses totaled
US$115.5 million in the first nine months of 2008, compared with US$91.4 million
in the same period in 2007. During the first nine months of 2008 net
debt related expenses were US$87.2 million and net foreign exchange losses were
US$10.2 million. Net debt related expenses in the first nine months
of 2008 increased US$36.7 million over the same period the previous year mainly
as a result of Ternium Mexico’s higher indebtedness, which related in large part
to the acquisition of Grupo Imsa.
Net
foreign exchange losses in the first nine months of 2008 decreased US$33.8
million over the same period the previous year. These results were
primarily due to the impact of the Mexican Peso fluctuation on Ternium’s Mexican
subsidiary’s US dollar denominated debt. 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 appreciates or depreciates to other currencies. 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.
Income tax expense for the
first nine months of 2008 was US$311.3 million, or 22% of income before income
tax, discontinued operations and minority interest, compared with US$224.7
million, or 41% of income before income tax, discontinued operations and
minority interest, in the first nine months of 2007. The income tax
expense for the first nine months of 2008 included a non-recurring gain of
US$96.3 million on account of Hylsa’s reversal of deferred statutory profit
sharing. The relatively higher tax rate in the first nine months of
2007 was mainly the result of net losses in certain subsidiaries that did not
generate tax credits due to their tax-free status.
Net result of discontinued operations
for the first nine months of 2008 was a gain of US$157.1
million. This comprised an after-tax gain of US$211.1 million related
to the results of excess cash payments received from Sidor, an after-tax loss of
US$151.5 million due to the reversal of currency translation adjustments of the
investment in 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 the first nine
months of 2007, net result of discontinued operations was a gain of US$462.3
million, which was mainly related to the results of excess cash payments
received from Sidor.
Income attributable to minority
interest for the first nine months of 2008 was US$180.2 million, compared
to US$161.7 million in the first nine months of 2007, as a result of higher
income attributable to minority interest in Siderar, partially offset by lower
income attributable to minority interest in Sidor.
Cash
Flow and Liquidity
Net cash
used in operating activities in the first nine months of 2008 was US$53.3
million, compared to net cash provided by operating activities of US$756.4
million in the first nine months of 2007. Working capital increased
US$1.7 billion in the first nine months of 2008, compared to a working capital
decrease of US$145.1 million in the first nine months of 2007, mainly due to
higher costs for new inventory and a higher volume of raw materials and goods in
process. In addition, an increase in trade receivables was partially
offset by an increase in accounts payable as a result of higher prices and
costs.
Capital
expenditures in the first nine months of 2008 were US$420.2 million, compared to
US$247.1 million in the first nine months of 2007. Capital
expenditures during the first nine months of 2008 were carried out in Mexico
principally for the expansion of the flat steel shop in Monterrey, the upgrading
of one hot strip mill and the upgrading of one cold rolled
mill. Ternium continued to execute its expansion plan in Argentina,
with capital expenditures during the first nine months of 2008 carried out
mainly for the relining of one blast furnace and the revamping and expansion of
the coking facilities.
In the
first nine months of 2008, Ternium had a negative free cash flow7 of US$473.5 million
compared to free cash flow7 of
US$509.3 million in the first nine months of 2007. Proceeds from the first
quarter 2008 sale of non-core US assets totaled US$718.6 million in the first
nine months of 2008. Net cash provided by discontinued operations
related to Sidor and the results of the non-core US assets that were sold was
US$242.4 million in the first nine months of 2008, compared to US$385.2 million
in the first nine months of 2007.
Ternium’s
net repayment of borrowings in the first nine months of 2008 was US$702.0
million, mostly related to the pre-payment of some of the Company’s Mexican
subsidiaries’ outstanding debt. Ternium’s dividend payment in the
first nine months of 2008 was US$100.2 million, similar to that of the first
nine months of 2007. As of September 30, 2008, Ternium’s net debt
position (borrowings less cash and cash equivalents and other current
investments) was US$2.5 billion, while total financial debt was US$3.2
billion.
Net cash
used in operating activities in the third quarter 2008 was US$10.4 million,
compared to net cash provided by operating activities of US$235.6 million in the
third quarter 2007. Working capital increased US$733.4 million in the
third quarter 2008, compared to a working capital decrease of US$0.4 million in
the third quarter 2007. The increase in working capital in the third
quarter 2008 was mainly the result of higher costs for new inventory and a
higher volume of raw materials and goods in process. In addition, a
decrease in accounts payable was partially offset by a decrease in trade
receivables as a result of lower activity levels toward the end of the
quarter.
Capital
expenditures in the third quarter 2008 were US$169.4 million, compared to
US$84.3 million in the third quarter 2007. In the third quarter 2008,
Ternium had a negative free cash flow8 of US$179.8 million,
compared to free cash flow8 of
US$151.3 million in the third quarter 2007.
|
7
|
Free
cash flow for the first nine months of 2008 equals net cash used in
operating activities of US$53.3 million less capital expenditures of
US$420.2 million, while free cash flow for the first nine months of 2007
equals net cash provided by operating activities of US$756.4 million less
capital expenditures of US$247.1
million.
|
|
8
|
Free
cash flow for the third quarter 2008 equals net cash used in operating
activities of US$10.4 million less capital expenditures of US$169.4
million, while free cash flow for the third quarter 2007 equals net cash
provided by operating activities of US$235.6 million less capital
expenditures of US$84.3 million.
|
Forward
Looking Statements
Some
of the statements contained in this press release are “forward-looking
statements”. Forward-looking statements are based on management’s
current views and assumptions and involve known and unknown risks that could
cause actual results, performance or events to differ materially from those
expressed or implied by those statements. These risks include but are
not limited to risks arising from uncertainties as to gross domestic product,
related market demand, global production capacity, tariffs, cyclicality in the
industries that purchase steel products and other factors beyond Ternium’s
control.
About
Ternium
Ternium
is one of the leading steel companies in Latin America, manufacturing and
processing a wide range of flat and long steel products for customers active in
the construction, home appliances, capital goods, container, food and automotive
industries. With its principal operations in Mexico and Argentina,
Ternium serves markets in the Americas through its integrated manufacturing
system and extensive distribution network. The Company has annual
sales of approximately US$10 billion and ships approximately 8 million tons of
steel products each year. More information about Ternium is
available at www.ternium.com.
Consolidated
income statement
|
US$
million
|
3Q 2008 | 3Q 2007 |
Dif.
|
9M 2008 | 9M 2007 |
Dif.
|
||||||||||||||||||
|
Net
sales
|
2,447.7 | 1,506.1 | 941.6 | 6,775.1 | 3,936.7 | 2,838.4 | ||||||||||||||||||
|
Cost
of sales
|
(1,732.8 | ) | (1,141.4 | ) | (591.4 | ) | (4,769.7 | ) | (2,951.0 | ) | (1,818.7 | ) | ||||||||||||
|
Gross
profit
|
714.9 | 364.7 | 350.2 | 2,005.5 | 985.7 | 1,019.8 | ||||||||||||||||||
|
Selling,
general and administrative expenses
|
(186.2 | ) | (143.8 | ) | (42.4 | ) | (514.6 | ) | (354.8 | ) | (159.8 | ) | ||||||||||||
|
Other
operating (expenses) income, net
|
(3.8 | ) | 1.5 | (5.3 | ) | 7.6 | 4.7 | 3.0 | ||||||||||||||||
|
Operating
income
|
524.9 | 222.5 | 302.4 | 1,498.5 | 635.6 | 862.9 | ||||||||||||||||||
|
Interest
expense
|
(29.1 | ) | (47.1 | ) | 18.1 | (103.4 | ) | (71.7 | ) | (31.8 | ) | |||||||||||||
|
Interest
income
|
2.2 | 12.9 | (10.8 | ) | 26.3 | 27.9 | (1.6 | ) | ||||||||||||||||
|
Other
financial (expenses) income, net
|
(156.8 | ) | (53.7 | ) | (103.0 | ) | (38.4 | ) | (47.6 | ) | 9.2 | |||||||||||||
|
Equity
in (losses) earnings of associated companies
|
(0.1 | ) | (0.3 | ) | 0.2 | 0.8 | (1.2 | ) | 1.9 | |||||||||||||||
|
Income
before income tax expense
|
341.1 | 134.2 | 206.9 | 1,383.8 | 543.0 | 840.7 | ||||||||||||||||||
|
Income
tax (expense) benefit
|
||||||||||||||||||||||||
|
Current
and deferred income tax expense
|
(91.1 | ) | (63.7 | ) | (27.4 | ) | (407.6 | ) | (224.7 | ) | (182.8 | ) | ||||||||||||
|
Reversal
of deferred statutory profit sharing
|
- | - | - | 96.3 | - | 96.3 | ||||||||||||||||||
|
Discontinued
operations
|
(2.8 | ) | 143.5 | (146.4 | ) | 157.1 | 462.3 | (305.2 | ) | |||||||||||||||
|
Net
income for the period
|
247.1 | 214.0 | 33.1 | 1,229.6 | 780.6 | 449.0 | ||||||||||||||||||
|
Attributable
to:
|
||||||||||||||||||||||||
|
Equity
holders of the Company
|
211.7 | 159.8 | 51.8 | 1,049.4 | 618.9 | 430.5 | ||||||||||||||||||
|
Minority
interest
|
35.5 | 54.2 | (18.7 | ) | 180.2 | 161.7 | 18.5 | |||||||||||||||||
| 247.1 | 214.0 | 33.1 | 1,229.6 | 780.6 | 449.0 | |||||||||||||||||||
Consolidated
balance sheet
|
US$
million
|
September
30, 2008
|
December
31, 2007 (1)
|
||||||
|
Property,
plant and equipment, net
|
5,029.5
|
6,858.8
|
||||||
|
Intangible
assets, net
|
1,422.0
|
1,452.2
|
||||||
|
Investment
in associated companies
|
4.6
|
44.0
|
||||||
|
Other
investments, net
|
17.0
|
14.8
|
||||||
|
Deferred
tax assets
|
5.4
|
31.8
|
||||||
|
Receivables,
net
|
57.3
|
217.6
|
||||||
|
Total
non-current assets
|
6,535.6
|
8,619.3
|
||||||
|
Receivables
|
152.4
|
426.0
|
||||||
|
Derivative
financial instruments
|
0.1
|
0.6
|
||||||
|
Inventories,
net
|
2,761.1
|
1,913.1
|
||||||
|
Trade
receivables, net
|
952.3
|
847.8
|
||||||
|
Available
for sale assets
|
1,318.9
|
-
|
||||||
|
Other
investments
|
89.1
|
65.3
|
||||||
|
Cash
and cash equivalents
|
612.5
|
1,126.0
|
||||||
|
Total
current assets
|
5,886.5
|
4,378.9
|
||||||
|
Non-current
assets classified as held for sale
|
6.3
|
769.1
|
||||||
|
Total
assets
|
12,428.4
|
13,767.3
|
||||||
|
Shareholders'
equity
|
5,516.9
|
4,452.7
|
||||||
|
Minority
interest in subsidiaries
|
1,215.1
|
1,914.2
|
||||||
|
Minority
interest & shareholders' equity
|
6,732.0
|
6,366.9
|
||||||
|
Provisions
|
30.7
|
57.3
|
||||||
|
Deferred
income tax
|
1,059.2
|
1,337.0
|
||||||
|
Other
liabilities
|
174.8
|
336.5
|
||||||
|
Trade
payables
|
-
|
6.7
|
||||||
|
Borrowings
|
2,322.8
|
3,677.5
|
||||||
|
Total
non-current liabilities
|
3,587.5
|
5,415.1
|
||||||
|
Current
tax liabilities
|
250.4
|
184.8
|
||||||
|
Other
liabilities
|
134.3
|
182.2
|
||||||
|
Trade
payables
|
810.0
|
983.9
|
||||||
|
Derivative
financial instruments
|
29.9
|
13.3
|
||||||
|
Borrowings
|
884.3
|
407.4
|
||||||
|
Total
current liabilities
|
2,108.9
|
1,771.6
|
||||||
|
Liabilities
related to non-current assets classified as held for sale
|
-
|
213.8
|
||||||
|
Total
liabilities
|
5,696.4
|
7,400.4
|
||||||
|
Total
liabilities, minority interest & shareholders' equity
|
12,428.4
|
13,767.3
|
||||||
|
(1)
According to IFRS 5, balances related to Sidor have been consolidated on a
line-by-line basis as of December 31,
2007.
|
||||||||
Consolidated
cash flow statement
|
US$
million
|
3Q 2008 | 3Q 2007 |
Dif.
|
9M 2008 | 9M 2007 |
Dif.
|
||||||||||||||||||
|
Net
income for the period
|
250.0 | 70.5 | 179.5 | 1,072.5 | 318.3 | 754.2 | ||||||||||||||||||
|
Adjustments
for:
|
||||||||||||||||||||||||
|
Depreciation
and amortization
|
113.7 | 96.0 | 17.7 | 324.4 | 240.8 | 83.6 | ||||||||||||||||||
|
Income
tax accruals less payments
|
38.3 | (15.5 | ) | 53.7 | 112.7 | (16.9 | ) | 129.6 | ||||||||||||||||
|
Equity
in losses (earnings) of associated companies
|
0.1 | 0.3 | (0.2 | ) | (0.8 | ) | 1.2 | (1.9 | ) | |||||||||||||||
|
Interest
accruals less payments
|
(1.1 | ) | 35.4 | (36.4 | ) | (85.7 | ) | 32.7 | (118.4 | ) | ||||||||||||||
|
Changes
in provisions
|
160.0 | 3.1 | 156.8 | 162.0 | (6.6 | ) | 168.6 | |||||||||||||||||
|
Changes
in working capital
|
(733.4 | ) | 0.4 | (733.9 | ) | (1,674.3 | ) | 145.1 | (1,819.4 | ) | ||||||||||||||
|
Others
|
162.0 | 45.3 | 116.7 | 35.8 | 41.9 | (6.1 | ) | |||||||||||||||||
|
Net
cash (used in) provided by operating activities
|
(10.4 | ) | 235.6 | (246.0 | ) | (53.3 | ) | 756.3 | (809.7 | ) | ||||||||||||||
|
Capital
expenditures
|
(169.4 | ) | (84.3 | ) | (85.1 | ) | (420.2 | ) | (247.1 | ) | (173.2 | ) | ||||||||||||
|
Proceeds
from sale of property, plant & equipment
|
0.4 | 0.5 | (0.1 | ) | 1.4 | 6.7 | (5.3 | ) | ||||||||||||||||
|
Acquisition
of business
|
||||||||||||||||||||||||
|
Purchase
consideration
|
- | (1,728.7 | ) | 1,728.7 | - | (1,728.8 | ) | 1,728.8 | ||||||||||||||||
|
Cash
acquired
|
- | 190.1 | (190.1 | ) | - | 190.1 | (190.1 | ) | ||||||||||||||||
|
Income
tax credit paid on business acquisition
|
- | (297.7 | ) | 297.7 | - | (297.7 | ) | 297.7 | ||||||||||||||||
|
(Increase)
in Other Investments
|
(89.1 | ) | (64.5 | ) | (24.6 | ) | (23.8 | ) | (64.5 | ) | 40.8 | |||||||||||||
|
Proceeds
from sale of discontinued operations
|
(3.9 | ) | - | (3.9 | ) | 718.6 | - | 718.6 | ||||||||||||||||
|
Discontinued
operations
|
152.6 | 116.0 | 36.6 | 242.4 | 385.2 | (142.8 | ) | |||||||||||||||||
|
Net
cash (used in) provided by investing activities
|
(109.4 | ) | (1,868.6 | ) | 1,759.3 | 518.5 | (1,756.1 | ) | 2,274.6 | |||||||||||||||
|
Dividends
paid in cash and other distributions to company's equity
shareholders
|
- | - | - | (100.2 | ) | (100.2 | ) | - | ||||||||||||||||
|
Dividends
paid in cash and other distributions to minority
shareholders
|
- | (0.1 | ) | 0.1 | (19.6 | ) | (20.0 | ) | 0.4 | |||||||||||||||
|
Contributions
from shareholders
|
- | 1.1 | (1.1 | ) | - | 1.1 | (1.1 | ) | ||||||||||||||||
|
Proceeds
from borrowings
|
190.7 | 3,869.7 | (3,679.0 | ) | 372.0 | 3,982.0 | (3,610.0 | ) | ||||||||||||||||
|
Repayment
of borrowings
|
(142.5 | ) | (1,889.6 | ) | 1,747.0 | (1,074.0 | ) | (2,417.1 | ) | 1,343.2 | ||||||||||||||
|
Net
cash provided by (used in) financing activities
|
48.1 | 1,981.1 | (1,933.0 | ) | (821.8 | ) | 1,445.7 | (2,267.5 | ) | |||||||||||||||
|
(Decrease)
increase in cash and cash equivalents
|
(71.6 | ) | 348.1 | (419.7 | ) | (356.7 | ) | 445.9 | (802.6 | ) | ||||||||||||||
|
Shipments
|
||||||||||||||||||||||||
|
Thousand
tons
|
3Q 2008 | 2Q 2008 | 1Q 2008 | 3Q 2007 | 9M 2008 | 9M 2007 | ||||||||||||||||||
|
South
& Central America
|
680.4 | 690.9 | 673.0 | 637.8 | 2,044.3 | 1,800.1 | ||||||||||||||||||
|
North
America
|
901.8 | 1,042.2 | 1,080.0 | 834.7 | 3,024.0 | 2,041.3 | ||||||||||||||||||
|
Europe
& other
|
2.8 | 11.6 | 4.8 | 18.5 | 19.1 | 172.6 | ||||||||||||||||||
|
Total
flat products
|
1,585.1 | 1,744.7 | 1,757.7 | 1,491.0 | 5,087.5 | 4,014.0 | ||||||||||||||||||
|
South
& Central America
|
86.0 | 67.9 | 56.7 | 52.3 | 210.6 | 77.6 | ||||||||||||||||||
|
North
America
|
173.3 | 249.6 | 265.3 | 244.8 | 688.1 | 844.5 | ||||||||||||||||||
|
Europe
& other
|
- | 1.0 | 8.8 | - | 9.8 | - | ||||||||||||||||||
|
Total
long products
|
259.2 | 318.5 | 330.7 | 297.1 | 908.5 | 922.1 | ||||||||||||||||||
|
Total
flat and long products
|
1,844.3 | 2,063.2 | 2,088.5 | 1,788.1 | 5,995.9 | 4,936.0 | ||||||||||||||||||
|
Revenue
/ ton
|
||||||||||||||||||||||||
|
US$/ton
|
3Q 2008 | 2Q 2008 | 1Q 2008 | 3Q 2007 | 9M 2008 | 9M 2007 | ||||||||||||||||||
|
South
& Central America
|
1,153 | 1,042 | 945 | 829 | 1,047 | 794 | ||||||||||||||||||
|
North
America
|
1,412 | 1,213 | 945 | 877 | 1,177 | 831 | ||||||||||||||||||
|
Europe
& other
|
933 | 864 | 1,008 | 619 | 910 | 667 | ||||||||||||||||||
|
Total
flat products
|
1,300 | 1,143 | 945 | 853 | 1,124 | 807 | ||||||||||||||||||
|
South
& Central America
|
1,212 | 913 | 643 | 550 | 963 | 555 | ||||||||||||||||||
|
North
America
|
1,108 | 1,017 | 703 | 637 | 919 | 629 | ||||||||||||||||||
|
Europe
& other
|
630 | 587 | - | 591 | - | |||||||||||||||||||
|
Total
long products
|
1,142 | 993 | 689 | 622 | 925 | 623 | ||||||||||||||||||
|
Total
flat and long products
|
1,278 | 1,120 | 905 | 815 | 1,094 | 773 | ||||||||||||||||||
|
Net
Sales
|
||||||||||||||||||||||||
|
US$
million
|
3Q 2008 | 2Q 2008 | 1Q 2008 | 3Q 2007 | 9M 2008 | 9M 2007 | ||||||||||||||||||
|
South
& Central America
|
784.4 | 719.9 | 635.8 | 528.9 | 2,140.2 | 1,429.1 | ||||||||||||||||||
|
North
America
|
1,273.4 | 1,264.6 | 1,021.0 | 731.8 | 3,559.0 | 1,695.5 | ||||||||||||||||||
|
Europe
& other
|
2.6 | 10.0 | 4.8 | 11.5 | 17.4 | 115.1 | ||||||||||||||||||
|
Total
flat products
|
2,060.4 | 1,994.5 | 1,661.6 | 1,272.2 | 5,716.6 | 3,239.7 | ||||||||||||||||||
|
South
& Central America
|
104.2 | 62.1 | 36.4 | 28.7 | 202.7 | 43.1 | ||||||||||||||||||
|
North
America
|
192.0 | 253.8 | 186.4 | 156.0 | 632.1 | 531.6 | ||||||||||||||||||
|
Europe
& other
|
- | 0.6 | 5.2 | - | 5.8 | - | ||||||||||||||||||
|
Total
long products
|
296.2 | 316.4 | 228.0 | 184.8 | 840.6 | 574.6 | ||||||||||||||||||
|
Total
flat and long products
|
2,356.6 | 2,311.0 | 1,889.6 | 1,457.0 | 6,557.1 | 3,814.3 | ||||||||||||||||||
|
Other
products
(1)
|
91.1 | 63.8 | 63.1 | 49.1 | 218.0 | 122.5 | ||||||||||||||||||
|
Total
net sales
|
2,447.7 | 2,374.8 | 1,952.7 | 1,506.1 | 6,775.1 | 3,936.7 | ||||||||||||||||||
|
(1)
Includes iron ore, pig iron and pre-engineered metal
buildings.
|
||||||||||||||||||||||||