Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| You can see a healthy cash generation from operations in the fourth quarter, aided by a decrease in working capital |
| The market environment in Mexico continues to be healthy, industrial activity strong, the auto industry is working at high levels of capacity, rebuilding stocks in the value chains |
| We made good progress in several fronts following the transformation path we envisioned a couple of years ago |
| And hopefully by the end of this year, we should be able to reach better margins and reaching the number of around 15% EBITDA margins, all together in Ternium, of course, and also in Usiminas |
| So I am positive about that |
| In Mexico, Ternium shipments remain strong in a seasonally weaker period, aided by continued growth of commercial customer demand |
| On the other hand, Ternium's new role in Usiminas is already showing good results for the company |
| Equally remarkable, as Maximo mentioned, Ternium shipments in the country for the full year 2023 surged by 22% over the prior year, indicating substantial gain in market share, driven by the ramp up of our new hot rolling mill in Pesqueria |
| In addition to these strategic developments, in 2023 Ternium had a solid year from a financial performance point of view, adjusted EBITDA, and net income was strong as well as cash generation |
| As a result of these good results and strong financial position, Ternium’s Board of Directors proposed an annual dividend of $3.30 per ADS, a significant year-over-year increase |
| This is the highest annual dividend on record |
| We have a strong competitive position in Mexico, a market that is being significantly benefiting by the nearshoring of manufacturing capacity |
| Growth in Mexico's steel market has been strong |
| We see healthy demand in both countries, in the US and in Mexico |
| Our shipments in the country grew by 22% with a significant market share gain, supported by the ramp up of our new hot rolling mill in Pesqueria |
| And finally, this is an important year for Usiminas, it has many opportunities for productivity improvement |
| Both net income and adjusted earnings per ADS drove notable strength during the fourth quarter |
| Ternium delivered strong results in the fourth quarter of this year, 2023 |
| Mexico offers a compelling combination of geographic proximity, skilled labor, and a supportive business environment, contributing to increased supply chain resilience |
| Looking forward, we anticipate an increase in adjusted EBITDA for the first quarter of 2024, primarily driven by an improvement in our margins, resulting from lower steel costs per ton and slightly higher revenue per ton |
| Ternium adjusted EBITDA was $2.7 billion, supported by a record level of finished steel shipments and a healthy adjusted EBITDA margin |
| I will show you the chart at the bottom, net income increase sequentially, driven by several positive factors |
| So with the new CapEx and the new plans that we will have in Mexico, we will be able to supply full range of product for the auto industry, as Maximo mentioned, at the opening remarks and clearly increase our margins |
| And finally, an improved deferred tax |
| The new management team there is taking decisions that are having a significant positive impact on its performance |
| Usiminas mining operation had a very good year with annual shipments reaching an all-time high of 9.1 million tons in 2023 |
| For the first quarter of 2024, Usiminas anticipate a sequential improvement in the profitability of the steel business, mainly as a result of lower cost per ton, as the productivity of the steel business is gradually improving |
| Margins in the period were slightly above our last quarter expectations, mainly due to lower costs |
| Construction activity in the country also remains at good levels with non-residential, like industrial warehouse, natural gas pipelines, and other infrastructure projects doing well |
| As you can see in the chart, Ternium has been consistently increasing its return to shareholders over the last four years |
| Statement |
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| However, there is a downside risk to this short-term volume view as steel prices in the region have recently begun a downward trend |
| Adjusted EBITDA for the fourth quarter was $651 million, a 7% decline from the third quarter 2023 |
| On the other hand, net income was negatively impacted by the decrease in recurrent operating income and an impairment chart on Ternium’s mining assets in the fourth quarter of 2023 |
| Steel shipments in the southern region decreased by 7% in the fourth quarter, as government imposed restriction on import of inputs affected Ternium steel production rates in Argentina |
| On the other hand, Usiminas expects a deterioration in its mining business during the first half of 2024 due to the temporary stoppage of one of its oil processing plants and seasonal rains at the beginning of the year |
| On the other hand, residential construction is being negatively affected by the increasing prices of construction inputs |
| Moving on to steel prices, steel revenue per ton decrease further in the fourth quarter as expected, reflecting lower realized prices in most of Ternium markets |
| Despite the negative effects of the consolidation of Usiminas operation, as it [indiscernible] main blast furnace at Ipatinga |
| In the coming quarter, we expect demand in Argentina to decrease compared to the fourth quarter due to the seasonal slowdown and the impact of the macroeconomic reform in our value chain as Maximo explained |
| Yes, I mean the numbers we are putting up in our forecast, we are seeing a decrease in demand for the year around 10% |
| These much needed reforms, although positive for the medium to long term, are expected to initially have a recessionary effect in Argentina's economy and consequently negatively affect Chinese shipment in the local market |
| Probably with this number we are being a little bit cautious, and by July or August things could start doing better |
| But of course, the recession that we speak is going to take some decrease in the demand in the market |
| As I said, it's not a problem of the demand, but it is a problem of imports that are coming mainly to the US and some part also to Mexico |
| This relatively low level was again affected by the consolidation of Usiminas steel operation, which continued to record low profitability as it ramped up its main blast furnaces at Ipatinga facility |
| Again, because the demand is there, and we know imports for the following months, in May, June, July, are coming much more lower |
| The other issue in the long term is the mining operation |
| I mean, we have been seeing some players trying to announce even further price hikes, but the point is that we're seeing prices trending down |
| Construction is a little bit low, and it's going to be a little bit low, the commercial market for the next probably one or two months before prices settle down and start probably increasing a little bit again |
| Import of steel so below cost of production is having a toll in the Brazilian steel market |
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