Investor Presentation

Investor Presentation
April 2015
Forward-Looking Statements
This presentation contains certain forward-looking statements and information relating to Ternium S.A. and its
subsidiaries (collectively, “Ternium”) that are based on the current beliefs of its management as well as
assumptions made by and information currently available to Ternium. Such statements reflect the current views
of Ternium with respect to future events and are subject to certain risks, uncertainties and assumptions. Many
factors could cause the actual results, performance or achievements of Ternium to be materially different from
any future results, performance or achievements that may be expressed or implied by such forward-looking
statements, including, among others, changes in general economic, political conditions in the countries in which
Ternium does business or other countries which have an impact on Ternium’s business activities and investments,
changes in interest rates, changes in inflation rates, changes in exchange rates, the degree of growth and the
number of consumers in the markets in which Ternium operates and sells its products, changes in steel demand
and prices, changes in raw material and energy prices or difficulties in acquiring raw materials or energy supply
cut-offs, changes in business strategy and various other factors. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated, expected or targeted. Ternium does not intend,
and does not assume any obligation, to update these forward-looking statements.
April 2015
Ternium
2
Profile and Markets
April 2015
Ternium
3
Ternium’s Profile
A leading steel company in Latin America
•
Net sales of USD 8.7 billion
•
Finished products capacity of 10.9 million tons
•
Industrial facilities in Mexico, Argentina, USA, Colombia and Central America
•
Vertically integrated, from iron ore mines to service centers
•
Focus on high value-added products
•
Participation in Usiminas1 control group
Steel Shipments
(2014)
Mexico
60%
Other
Markets
13%
Southern
Region2
27%
1
2
April 2015
Ternium
Usiminas: a leading steel company in the Brazilian flat steel market
Southern Region encompasses the steel markets of Argentina, Bolivia, Chile, Paraguay and Uruguay
4
Ternium’s Profile
Footprint in the Americas
•
9.4 million tons of steel products shipped
in 2014
•
NAFTA accounted for 64% of total
shipments
•
Broad distribution network across Latin
America
•
Iron ore mines in Mexico (50% of
Ternium’s consumption)
USA
0.4 mt (4
(5%)
Mexico
5.6 mt
(60%)
Main Latin America steel markets
•
Mexico, Brazil, Argentina and Colombia account for:
•
•
•
April 2015
Ternium
67% of population
73% of GDP
Shipments 2014
Ternium
Usiminas
Colombia
0.7 mt
(7%)
Usiminas
Other Latam
0.3mt (3%)
Argentina
2.3 mt
(24%)
79% of steel use in Latin America
5
Ternium’s Profile
Strenghts
Superior results based on:
•
Focus on high margin value-added
products
•
Flexible production configuration
•
Upstream and downstream integration
•
Best practices
•
Broad distribution network
•
Innovative culture, industrial expertise
and long-term view
April 2015
Ternium
6
Market Focus - Mexico
Steel market
Steel shipments in Mexico (million tons)
Healthy activity in 2014
•
Ternium’s steel shipments in Mexico up
13% in 2014 versus 2013
•
Vehicle production up 10% in 2014
versus 2013
•
Cement production slightly up in 2014
versus 2013
1.3
1Q13
728
1Q13
761
740
2Q13
3Q13
2Q13
1.3
3Q13
4Q13
1.4
1.4
1.4
1.4
1Q14
2Q14
3Q14
4Q14
Cement production (million tons)
Vehicle production (‘000 units)
775
1.2
1.3
823
799
823
2Q14
3Q14
4Q14
8.7
9.1
8.6
8.9
8.9
3Q13
4Q13
1Q14
9.2
9.1
2Q14
3Q14
9.6
705
4Q13
1Q14
1Q13
2Q13
4Q14
Source: AMIA, INEGI and Ternium
April 2015
Ternium
7
Market Focus - Mexico
Flat steel industrial market
A dynamic market with substantial growth
opportunities
•
Flat steel shipments by market
2010
2015e
Strong link to US industry
•
Increasing demand of high-end steel
•
Import substitution
Ternium’s shipments to the industrial market
are expected to grow, with an increase in
sales to the automotive industry
•
Largest supplier to the Mexican
automotive industry
•
Growth supported by new facilities
•
New product development
April 2015
Ternium
25%
14%
49%
59%
27%
Construction
Automotive
26%
Other industries
8
Market Focus - Mexico
Automotive coated products - Tenigal
•
Automotive industry expanding substantially


Automotive coated steel market
(million tons)
Demand for coated steel is expected to
continue growing
1.5
Other
1.0
Ample opportunities for high-end steel
import substitution
0.5
•
Successful ramp-up of Tenigal’s mill

Certification process ongoing

Tenigal to reach full auto-grade
production by second half 2015
April 2015
Ternium
2.0
2010
2015
Ternium
0.6
2020
9
Market Focus - Mexico
Commercial steel market
•
Positive steel demand prospects


•
Increased expenditures
announced under the National
Infrastructure Plan
New opportunities for private
investment (Energy Reform)
Growth opportunities for Ternium
based on differentiation

Full range and diversified
portfolio including high value
added products

Commercial network (service
and distribution centers)
April 2015
Ternium
Shipments to construction market (2013)
Rebars 20%
Hot-rolled
36%
Wire rod 6%
Tubes &
Profiles 9%
Prepainted
4%
Galvanized
Cold-rolled
11%
15%
Ternium’s commercial
network customers
10
Market Focus - Argentina
Flat steel market
Opportunities in the medium-term
•
Despite softening demand in 2014,
opportunities in the medium-term for:


•
Vehicle production (‘000 units)
Infrastructure
Shale gas development
Targeting higher share in the automotive
industry and in the construction sector
Shipments by market (Argentina)
Source: Adefa
Cement production (million tons)
13%
52%
35%
Construction
April 2015
Ternium
Automotive
Other industries
Source: AFCP
11
Market Focus - Argentina
Flat steel market
Steel shipments in Southern Region (million tons)
Softening activity in 2014
•
Argentina
Ternium’s steel shipments in Argentina
down 6% in 2014 versus 2013
663
609
64
689
673
49
48
62
•
•
Vehicle production down 22% in 2014
versus 2013
546
598
640
625
2Q13
3Q13
4Q13
Other
613
632
625
633
50
77
61
56
563
556
564
577
1Q14
2Q14
3Q14
4Q14
Cement production slightly down in 2014
versus 2013
1Q13
Cement production (million tons)
Vehicle production (‘000 units)
3.1
219
3.1
2.9
214
2.6
147
1Q13
2.6
183
176
2Q13
3Q13
4Q13
1Q14
161
2Q14
153
156
3Q14
4Q14
1Q13
2Q13
3Q13
4Q13
1Q14
3.0
3.0
3Q14
4Q14
2.7
2Q14
Source: AFCP, ADEFA and Ternium
April 2015
Ternium
12
Performance
April 2015
Ternium
13
Performance: Sustainable Growth, Resilient
Profitability and Solid Financial Position
EBITDA (USD million)
•
Shipments reached 9.4 millions tons in
2014
176
187
1,648
•
Average EBITDA per ton* of USD156 over
the last six years
104
EBITDA per ton* (USD)
165
147
1,487
1,418
1,287
157
1,471
664
•
Net debt of USD1.8 billion, equivalent to
1.2 times last 12 months EBITDA
2009
8.8
9.0
2011
2012
2013
2014
Net debt (cash) position (USD billion)
Steel shipments (million tons)
8.8
2010
9.4
8.1
1.8
1.7
1.5
6.4
0.2
2009
2010
2011
2012
2013
2014
-0.5
-0.7
*
Consolidated EBITDA divided by steel shipments
April 2015
Ternium
2009
2010
2011
2012
2013
2014
14
Quarterly Performance
Steel shipments
Mexico
2.2
2.2
0.4
0.4
0.6
0.7
1.2
1.2
Southern Region
2.3
0.3
2.2
0.3
0.7
0.7
1.3
1.3
EBITDA
(USD million)
Other Markets
2.3
2.4
2.3
2.4
0.3
0.3
0.3
0.3
368
0.6
0.6
0.6
0.6
1.4
1.4
1.4
1.4
1Q13
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
371
2Q13
20%
(% of net sales)
17%
17%
17%
18%
19%
423
417
330
4Q13
1Q14
2Q14
301
3Q14
4Q14
(USD)
240
210
19%
180
15%
15%
3Q13
390
EBITDA per ton*
EBITDA Margin
25%
358
14%
164
167
175
181
179
156
140
150
128
120
10%
90
60
5%
30
0%
0
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
* Consolidated EBITDA divided by steel shipments
April 2015
Ternium
15
Performance
US steel markets
Steel price benchmarks (hot rolled coils)
Scrap Shredded USA Midwest (USD/long ton)
Europe domestic (USD/ton)
US domestic (USD/ton)
900
450
800
410
700
370
600
330
500
290
250
400
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
2Q15
US steel imports
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
US service center inventory
Million tons
Million tons
4.2
3.5
2.8
2.1
1.4
0.7
0.0
Months of supply
10.0
4.0
9.5
3.7
9.0
3.4
8.5
3.1
8.0
2.8
7.5
2.5
7.0
2.2
6.5
1.9
6.0
1.6
5.5
1.3
5.0
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
1.0
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
Source: World Steel Dynamics / Metal Bulletin / Steel Business Briefing / MSCI / US Census Bureau / Ternium
April 2015
Ternium
16
Performance
Input costs
Slab price FOB Black Sea (USD/ton)
Iron ore IODEX CFR North China (USD/ton)
165
560
140
510
115
460
90
410
65
360
40
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
310
Hard Coking Coal Contract (USD/ton) FOB
Natural gas - Henry Hub (USD/mmbtu)
250
5.4
220
4.6
190
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
3.8
160
130
Spot
3.0
2.2
100
70
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
1.4
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
Source: Metal Bulletin / Steel Business Briefing / Bloomberg / Ternium estimates
April 2015
Ternium
17
Performance
Flexible production configuration
Mexico
Natural Gas
Argentina
Proprietary Iron Ore
Mines
Iron Ore
(Corumba,
Atlantic)
Pellet
Direct Reduction
Scrap
(2.7 mtpy)
Coking Coal
Pet Coke
Market
Concentrate Sales
Continuous
Casting1
Round Bar / Billet
Sales
(4.0 mtpy)
Blast Furnaces
(3.2 mtpy)
Slab Purchases
Continuous Casting
(5.6 mtpy)
Flat/Long Hot Rolling
Hot Strip Mills
(3.8 mtpy)
(3.4 mtpy)
1
Slab Sales
Hot Strip Mill
(2.9 mtpy)
Value Adding
Processes
Value Adding
Processes
Domestic &
Regional Market
Domestic &
Regional Market
Includes a scrap-only long steel manufacturing facility with capacity of 0.7 mtpy
April 2015
Ternium
18
Performance
Techgen - New power plant to strengthen Mexican steel mills
•
Owned 48% by Ternium, 30% by Tecpetrol and 22% by Tenaris
•
New 900 MW combined cycle power plant in Pesquería, Monterrey
•
Ternium among the largest private energy consumers in Mexico
•
Ternium and Tenaris will contract 78% and 22%, respectively, of Techgen’s power
capacity
•
Project to be completed by the end of 2016 at a cost of USD1.1 billion
April 2015
Ternium
19
Strategic Agenda
April 2015
Ternium
20
Strategic Agenda
Investment plan 2011-2014
Investments focused on differentiation and cost reduction
Market positioning in high-end and value-added products
•
Automotive hot-dip galvanizing mill (Tenigal)
•
Pesquería cold-rolling mill
•
Slab caster and vacuum degassing station
•
Hot-dip galvanizing debottlenecking in Argentina
•
Service centers expansion
Capital Expenditures
(USD million)
Cost reduction initiatives
•
Participation in Techgen (new power plant)
•
Coking facilities expansion
April 2015
Ternium
21
Strategic Agenda
High-end investment plan supports new commercial profile
Increasing shipments to NAFTA market
•
•
Shipments growth
Shipments mix
(base 1000 = 2010)
2015f
142
Expected growth of 42% between
2010 and 2015
110
100
66%
NAFTA will account for 66% of total
shipments by 2015
34%
2010
2015f
NAFTA
Non-NAFTA
Increasing high-end product shipments in Mexico
2010
•
•
High-end products to reach 20% of
shipments to the industrial market in
Mexico
Focus on automotive industry
6%
94%
High-End
April 2015
Ternium
2015f
20%
80%
Non-High-End
22
Strategic Agenda
Envisioning Ternium’s future
Envisioning
Strategic Agenda
•
Leader in key markets,
high market share
•
Expansion in North America
market, mainly Mexico
•
Focus on value-added
products
•
Increase in high-end product
offering
•
Differentiation
•
Slabs supply strategy
•
Profit sustainability
•
Operational excellence
•
Growth
April 2015
Ternium
23
Conclusion
April 2015
Ternium
24
Conclusion
•
Ternium is a leading steel company in an attractive market with
substantial growth opportunities
•
Positioning in the Mexican industrial market through investments in
new facilities to supply high-end products
•
Superior results based on industrial expertise, focus on value-added
products and a diversified production base
•
Unique market positioning supports key drivers of profitability and
provides new opportunities
•
Continued focus on generating long-term shareholder value
April 2015
Ternium
25
April 2015
Ternium
26
Appendix
•
Corporate Structure
•
Production Capacity
•
Shipments and Net Sales
•
Income Statement
•
Cash Flow Statement
•
Balance Sheet
April 2015
Ternium
27
Corporate Structure
Techint Group: 62%
Tenaris: 11%
Ternium (treasury shares): 2%
Public: 24%
71%
27%1
Siderar
Joint operations
Las Encinas
39%
Peña Colorada
50%
Other
CEU: 7%1
6%1
ArcelorMittal
Nippon Steel & Sumitomo Metal: 29%1
Usiminas
TenarisConfab: 5%1
Other (ordinary shares): 26%1
51%
100%3
100%
50%
Tenigal
TerniumGuatemala
50%
Techgen
April 2015
Ternium
Ternium USA
22%
Tecpetrol
Indirect
Total
Ternium Mexico
Siderar
71%
61%
17%
89%
61%
Usiminas2
13%
2%
15%
Tenigal
51%
51%
Ferrasa
100%
100%
TX Guatemala
100%
100%
TX USA
100%
100%
3
30%
100%
Direct
Sumitomo Metal
Tenaris
48%
Economic participation
49% Nippon Steel &
Ferrasa
Exiros
Non-consolidated company
50%
100%
Ternium México
29%
61%
Subsidiaries
Las Encinas
71%
17%
89%
Peña Colorada
36%
9%
45%
1
Participation based on ordinary shares distributed
2
Participation based on total shares distributed
3
Acquisition of 46% to close in April 2015
28
Production Capacity
Ternium’s main steel production facilities are located in Mexico and
Argentina
México
Argentina
slabs
2.3
2.9
billets
1.7
(1 )
Other
Total
Production Capacity (*)
(million metric tons per year)
Crude steel
4.0
2.9
coils
6.1
2.8
rebars & wire rods
1.1
5.2
0.2
1.8
0.2
7.1
8.9
0.2
1.3
0.2
10.2
Hot rolled
7.2
2.8
Cold rolled coils
4.0
1.8
5.8
0.2
0.2
Tinplated products
Galvanized products
1.9
0.7
0.4
3.0
Pre-painted products
0.7
0.1
0.2
0.9
Service center
3.9
2.0
1.2
7.1
(1)
Southern US, Colombia and Central America
(*)
As of year-end 2013
April 2015
Ternium
29
Shipments and Net Sales
Fourth quarter 2014
Net Sales (million USD)
4Q 2014
4Q 2013
1,215.8
1,080.1
Southern Region
667.0
Other Markets
257.3
Shipments (thousand tons)
4Q 2014
4Q 2013
13%
1,425.3
1,274.6
747.1
-11%
640.8
270.6
-5%
288.0
2,140.1
2,097.8
2%
Other products (1)
9.6
10.9
-12%
Total steel segment
2,149.7
2,108.7
2%
Total mining segment
71.4
110.1
-35%
Total intersegment eliminations
(66.5)
(102.8)
Mexico
Total steel products
Total steel and mining segments
2,154.6
2,116.0
Dif.
Dif.
Revenue / ton (USD/ton)
4Q 2014
4Q 2013
Dif.
12%
853
847
1%
672.8
-5%
1,041
1,110
-6%
284.9
1%
894
950
-6%
2,354.1
2,232.3
5%
909
940
-3%
1,021.9
994.1
3%
70
111
-37%
2%
(1) The item "Other products" primarily includes pig iron and pre-engineered metal building systems.
April 2015
Ternium
30
Shipments and Net Sales
Full year 2014 and 2013
Net Sales (million USD)
Revenue / ton (USD/ton)
2014
2013
2014
2014
2013
Mexico
4,863.9
4,230.1
15%
5,632.2
4,984.9
Southern Region
2,641.5
2,944.7
-10%
2,510.9
Other Markets
1,159.3
1,251.2
-7%
1,238.5
8,664.8
8,426.0
3%
Other products (1)
35.8
33.9
5%
Total steel segment
8,700.5
8,459.9
3%
Total mining segment
313.2
386.5
-19%
Total intersegment eliminations
(287.6)
(316.4)
Total steel products
Total steel and mining segments
8,726.1
8,530.0
Dif.
Shipments (thousand tons)
Dif.
2013
Dif.
13%
864
849
2%
2,633.1
-5%
1,052
1,118
-6%
1,370.3
-10%
936
913
3%
9,381.5
8,988.4
4%
924
937
-1%
3,857.3
4,243.0
-9%
81
91
-11%
2%
(1) The item "Other products" primarily includes pig iron and pre-engineered metal building systems.
April 2015
Ternium
31
Income Statement
USD million
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating income, net
Operating income
Financ e expense
Financ e inc ome
Other financial income (expenses), net
Equity in losses of non-consolidated
c ompanies
Inc ome before inc ome tax expense
4Q 2014
4Q 2013
2014
2013
2,154.6
2,116.0
8,726.1
8,530.0
(1,765.1)
(1,610.2)
(6,925.2)
(6,600.3)
1,800.9
1,929.7
389.5
505.8
(201.7)
(210.4)
(816.5)
(843.3)
3.5
0.2
71.8
23.0
191.3
295.6
1,056.2
1,109.4
(28.0)
(32.7)
1.3
(0.9)
(117.9)
(132.1)
5.7
(2.4)
(1.0)
35.4
3.2
42.7
(27.5)
(4.5)
(34.2)
(31.6)
172.5
260.6
952.5
942.3
Inc ome tax expense
(112.4)
(89.6)
(363.7)
(349.4)
Profit for the year
60.1
171.1
588.8
592.9
61.6
125.6
452.4
455.4
45.5
136.4
137.5
171.1
588.8
592.9
Attributable to:
Owners of the parent
Non-controlling interest
Profit for the year
April 2015
Ternium
(1.5)
60.1
32
Cash Flow Statement
USD million
4Q 2014
4Q 2013
(Unaudited)
Profit for the period
Adjustments for:
Depreciation and amortization
Equity in losses of non-consolidated
companies
2013
(Unaudited)
60.1
171.1
588.8
592.9
109.6
94.5
414.8
377.1
27.5
4.5
34.2
31.6
Changes in provisions
(1.6)
1.8
0.1
7.3
Net foreign exchange results and others
(4.3)
Interest accruals less payments
Income tax accruals less payments
Changes in working capital
Net cash provided by operating activities
Capital expenditures
Proceeds from the sale of property, plant & equipment
Acquisition of business/stake - Purchase consideration Usiminas
(46.7)
0.4
1.6
14.4
29.6
2.2
(9.7)
28.7
5.2
(14.9)
(551.0)
208.3
246.7
505.8
(108.7)
(158.2)
(443.5)
0.4
0.6
1.5
9.6
(16.9)
(24.2)
114.6
1,092.2
(883.3)
2.1
(249.0)
-
(249.0)
-
Investment in non-consolidated companies - Techgen
-
-
(3.0)
-
Dividends received from non- consolidated companies
-
0.2
(Increase) Decrease in Other Investments
-
(8.4)
(403.7)
(165.8)
Dividends paid in cash to company's shareholders
-
-
Dividends paid in cash by subsidiary companies
-
Acquisition of non-controlling interest
-
-
Proceeds from borrowings
257.1
890.9
Repayments of borrowings
(191.9)
(943.8)
(773.4)
(2,134.7)
65.3
(92.2)
84.6
(466.1)
(11.3)
(85.4)
(256.7)
Net cash provided by (used in) financing activities
Decrease in cash and cash equivalents
(130.1)
(39.3)
18.3
0.2
(46.4)
Net cash used in investing activities
April 2015
Ternium
2014
(1.8)
(675.8)
(882.8)
(147.2)
(127.6)
(33.6)
(66.7)
1,038.8
(0.9)
1,863.9
33
Balance Sheet
December
31, 2014
December
31, 2013
Property, plant and equipment, net
Intangible assets, net
Investments in non-consolidated
companies
Derivative financial instruments
Deferred tax assets
Rec eivables, net
Trade receivables, net
Total non-current assets
4,481.0
948.9
4,708.9
961.5
1,396.6
1,375.2
31.6
47.5
0.1
6,905.7
1.5
24.9
79.4
1.8
7,153.2
Rec eivables
Derivative financial instruments
Inventories, net
Trade receivables, net
Other investments
Cash and cash equivalents
Total current assets
112.2
4.3
2,134.0
720.2
150.0
213.3
3,334.1
112.4
1,941.1
671.5
169.5
307.2
3,201.7
14.8
17.8
10,254.5
10,372.6
USD million
Non-current assets classified as held for sale
Total assets
April 2015
Ternium
December
31, 2014
December
31, 2013
5,285.0
5,340.0
973.5
998.0
6,258.5
9.1
611.1
371.9
12.0
900.6
1,904.7
6,338.0
14.0
605.9
345.4
15.2
1,204.9
2,185.4
Current income tax liabilities
Other liabilities
Trade payables
Derivative financ ial instruments
Borrowings
Total current liabilities
51.1
210.2
564.5
1.4
1,264.2
2,091.4
92.0
203.3
755.9
797.9
1,849.2
Total liabilities
3,996.1
4,034.6
10,254.5
10,372.6
USD million
Capital and reserves attributable to
the company's equity holders
Non-controlling interest
Total Equity
Provisions
Deferred tax liabilities
Other liabilities
Trade payables
Borrowings
Total non-current liabilities
Total equity and liabilities
34

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