With a result that in the first quarter of this year amounts to a profit of $50,349 million and sales of $165,532 millioncompared to $92,904 in the same quarter of 2022, Ternium anticipates “moderate improvements” for its businesses in the remainder of 2023.
The largest steel manufacturer in Argentina understands that steel shipments will increase by several pointsmainly reflecting an increase in sales to the local market after the seasonal low in the first quarter of the year.
Ternium: Argentine steelmaker expects “moderate improvements” by 2023
The firm also expects that the volume of exports remains at relatively low levels and that among the sectors that consume steel, vehicle exports, mining activity, and investment in infrastructure linked to the development of Vaca Muerta will continue to show a favorable evolution.
In the case of agricultural businesses, its executives hope that the decrease in production, the product of an intense drought, will have a negative effect on the level of activity of related sectors and in the balance between the country’s exports and imports.
Through a document sent to the National Securities Commission (CNV), the Techint group company warns that “the aforementioned circumstances, as well as the high degree of uncertainty regarding the evolution of the main local macroeconomic variables could negatively affect the demand for steel in the future”.
The document of the company that guides Paolo Rocca highlights in this sense that the prices of various imported inputs used by the steel industry “they continue to fluctuate at relatively high levels in 2023.”
For Paolo Rocca, the market for the steel produced by Ternium expects a “moderate” year.
Therefore, it is expected that the pressure on the markets for these inputs will continue, mainly in consideration of the increased level of activity in China. In addition, The company anticipates that it will continue developing its medium-term investment plan, “focused on environmental and safety projectsand the construction of the new wind farm in the Olavarría district”.
in this establishment will invest US$160 million and allow the replacement of approximately 65% of the energy that Ternium acquires from third parties with renewable energy in the national interconnected system. Additionally, the company is carrying out a series of innovations in its production processes in the San Nicolás industrial center to continue improving its environmental performance.
Ternium’s steel production in decline
During the first quarter of this year, shipments amounted to 560,000 tons, which represents a decrease of 89,000 tons with respect to the first quarter of the previous year.
Those shipped to the domestic market were 545,000 tons, with an increase of 11,300 tons compared to the quantities dispatched in the first quarter of the previous year, including an increase of 15,100 tons in the dispatch of semi-finished products.
In the case of Steel shipments were 561,000 tons, with a 6% decrease compared to the volumes reached in the fourth quarter of 2022 mainly due to a seasonal drop in shipments to the local market.
Compared to the same period of the previous year, steel shipments decreased by 2% in this first quarter as a reflection of a drop in exports, to the extent that the company adjusted to the limits stipulated for the import of inputs, partially offset by a slight increase in shipments to the Argentine market.
Ternium expects the development of Vaca Muerta and other projects to contain the impact of the drought and the drop in exports.
Shipments to the local market represented 97% of total sales and the consolidated net result of Ternium Argentina, of a profit of $50,349 million includes an operating profit of Ch$43,447 million with an operating margin of 26%.
In the same sense, Ternium Argentina’s net disbursements in property, plant and equipment, and intangible assets were $4,783 million.
Regarding exports, they reached 15,000 tons, with a decrease of 20,200 tons with respect to the volume exported in the first quarter of 2022. In 98%, Foreign sales were directed to Central and South America and 2% to Europe and other destinations.
Ternium’s investment plan: its new works
Among the works completed in the period, the new equalization and sedimentation pools stand out at the San Nicolás unit, aimed at optimizing processing and incorporating advanced technology in the treatment of process effluents.
The company is implementing an ambitious medium-term investment plan focused on environmental and safety improvements, and in the development of the new wind farm in Olavarría.
Regarding cost of sales, it totaled $108,058 million in the first quarter, which represents an increase of $42,044 million compared to the $66,014 million registered in the first quarter of 2022, product of an increase in the cost per ton, partially offset by the decrease in the volume of shipments.
Shipments to the local market represented 97% of total sales and the rest went to the foreign market.
In the variation of the cost per ton stands out the increase in the cost of raw materials and inputsthe increase in labor costs, maintenance and services, and the increase in depreciation and amortization.
The net financial result was a profit of $5,838 million, compared to the loss of $3,655 million in the first quarter of 2022. The same occurred with the net interest result, which was a profit of $2,285 million, compared to a profit of $1,863 million in the first quarter of the previous year.
The change in the market value of financial instruments resulted in a net gain of $3,632, thanks to the net increase in the value of investments, while in the first quarter of 2022 it resulted in a net loss of $1,757 million.
The result of investments in associated companies was a profit of Ch$15,865 million in the first quarter of 2023with a profit from the investment in Ternium México of $14,890 million and one in Usiminas of $975 million.
In the first quarter of 2022, these results of investments in associated companies had been a profit of $14,922 million.
Liquidity and cash flow at Ternium
Regarding the net cash generated by operating activities in the first quarter of 2023, it was $50,243 million. Working capital decreased by $5,595 million, as a result of a net increase in accounts payable and other liabilities of $6,470 million and a decrease of $2,713 million in inventories, partially offset by an aggregate increase in accounts receivable and other credits of $3,588 million.
Ternium’s working capital decreased by Ch$5,595 million due to a net increase in accounts payable.
In the decrease in inventories, the reduction in the value of raw materials and steel products stands out, partially offset by the increase in their volume.
Regarding the cash flow linked to the investment in property, plant and equipment, and intangible assets was $4,783 million.
Borrowing during the period was $240 million and financial lease payments were $468 million, while in this first quarter of 2023, Ternium Argentina allocated $47,047 million to investments in securities.
