Ternium Q3 2026 Call Reports EBITDA, Dividend and Market Updates

Ternium (NYSE: TX ) reported third-quarter financial results on Wednesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Ternium reported a solid third quarter 2026, with EBITDA up 10% sequentially to $785 million and a margin expansion to 16.9%, driven by higher shipments and improved prices. The company declared an interim dividend of $0.90 per ADS, reflecting strong cash generation of $600 million from operations during the quarter. In Mexico, shipments reached an all-time high due to market share gains and increasing demand, particularly in infrastructure, data centers, and energy projects. Challenges persist in Brazil with a forecasted 2.7% decline in steel consumption, exacerbated by rising imports from Vietnam, South Korea, and Egypt.

In Argentina, growth is driven by energy, mining, and agriculture, while home appliances and automotive sectors face competition from imports. Construction of the new slab mill at Pesquería is progressing as planned, expected to start production in February 2027, enhancing vertical integration and reducing carbon footprint. The company expects fourth-quarter EBITDA to remain broadly in line with the third quarter, despite typical year-end seasonality leading to slightly lower shipments. Management highlighted ongoing efforts to increase market share, particularly in Mexico, and a focus on execution and efficiency across operations.

Full Transcript OPERATOR Good morning, ladies and gentlemen. Welcome to Ternium's conference call to discuss the results for the third quarter 2026. We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer section.

At that time, further instructions will be given. We would like to remind you that this conference call is intended exclusively for investors and market analysts. We request that any questions for journalists be directed to media relations through our website in the press section. With this, I would like now to turn the floor over to Mr.

Sebastian Marty. You may proceed. Sebastian Marty (Global Investor Relations and Compliance Senior Director) Good morning and thank you for joining us today. My name is Sebastian Marty and I am Ternium's Global IR and Compliance Senior Director.

Yesterday we announced our financial results for the third quarter and first nine months of 2026. Today's call is intended to provide additional context to that presentation. I'm joined by Máximo Vedoya, Ternium's Chief Executive Officer, and Pablo Brizzio, the company's Chief Financial Officer, who will discuss Ternium's operating environment and performance. Following our prepared remarks, we will open up the call to your questions.

Before we begin, I would like to remind you that this conference call contains forward-looking information and that actual results may vary from those expressed or implied. Factors that could affect results are contained in our filings with the Securities and Exchange Commission and on page two in today's webcast presentation. You will also find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measure in the press release issued yesterday. With that, I'll turn the call over to Mr.

Vedoya. Máximo Vedoya (Chief Executive Officer) Thank you, Sebastian. Good morning, everyone, and thank you very much for joining Ternium's conference call today. Ternium had a solid third quarter, as we expected in our last call.

EBITDA increased, driven by higher shipments and a stronger margin. Cash generation was healthy, with $600 million from operations in the quarter. In this positive environment, our board of directors declared an interim dividend of $0.90 per ADS, in line with the interim dividends paid in 2025 and 2024. Now let's go through our main markets, starting with Mexico, where we see encouraging signs.

In the third quarter, our shipments to the Mexican market reached an all-time high, and in the first nine months of the year they grew by 13%. Most of this growth comes from market share gains as we continue to replace imports. At the same time, demand is slightly better. We are also starting to see progress in infrastructure projects, which should support our volumes in the coming quarters.

Two trends are also adding demand. The first is data centers, which require steel for racks and generate indirect demand for heavy equipment and air conditioning. The second is energy, with many gas pipeline projects under development. Looking ahead, the fourth quarter will show the usual seasonality.

We expect volumes to keep growing further into the first quarter of 2027. Overall, the outlook for volume and prices in Mexico is positive. In Brazil, the steel market remains complex. Worldsteel now expects apparent steel consumption in Brazil to fall 2.7% this year.

Imports are the main concern. The anti-dumping measures against China introduced early this year have reduced imports from that origin. However, imports from Vietnam, South Korea, and Egypt are growing strongly. Indirect imports of steel also continue to put pressure on the industry, especially through cars that are made abroad or only assembled in Brazil with imported materials.

The government is gradually reinforcing trade defense and we trust it will continue on this path. More is still needed to ensure fair competition, including closing the many loopholes that still make trade measures less effective. In this environment, Usiminas will need to keep working hard on its competitiveness. Our mining business will also require a strong effort given current iron ore prices and freight cost.

We have temporarily stopped part of the operation at Musa, and we are fully focused on restructuring them to adapt to this challenging scenario. With Ternium Brasil and Usiminas, we have a strong industrial base in the country, and we will keep working to make the most of it. In Argentina, our view of the market is similar to last quarter. Energy, mining, and agriculture continue to drive activity.

On the other hand, industries such as home appliances and automotive face a difficult environment with soft local demand and strong competition from unfair imports. Construction, an important sector for us in this market, remains at low levels. In this context, we're working on a productivity and efficiency agenda in our operations with four internal efficiency and lower cost, being close to the industrial customers, defense against unfair trade imports, especially from China, and institutional actions to reduce the tax burden. Before moving on to my conclusions, let me share some recent highlights.

We continue working to stay close to our customers, and this commitment has been recognized. Regal Rexnord gave us its 2026 Strategic Partner Award. Home Depot named us Supplier of the Year 2026, and Caterpillar renewed our Supply Excellence certification at its highest levels across our operations. We also keep raising our environmental and safety standards.

In August, we opened a new environmental monitoring center at our Guerrero plant in Monterrey, adding to those at our main facilities in Brazil and Argentina. And today we are holding our Safe Supplier Award in Mexico to reinforce our commitment to zero accidents. To sum up, this was a solid quarter for Ternium, with higher EBITDA and strong cash generation. Looking ahead, we expect our volume to keep growing in the first half of 2027.

At Pesquería, construction of our new slab mill is progressing as planned, and we expect to start production in February. This mill will increase our vertical integration in Mexico and allow us to offer local supply with short lead times to our industrial customers with a much lower carbon footprint. I am confident in Ternium's prospects for the quarters ahead, and I want to thank our team for their hard work and their commitment. Pablo, please go ahead with our performance in the third quarter.

Pablo Brizzio (Chief Financial Officer) Thanks, Máximo, and thanks everybody for participating today in our call. Let's turn to our performance in the third quarter. Adjusted EBITDA increased 10% sequentially to $785 million in the third quarter, with adjusted EBITDA margin expanding further to 16.9%. Performance was driven by our steel segment, which delivered higher volumes and improved realized prices, especially in Mexico.

These gains were partially offset by higher cost per tonne and a lower contribution from our mining segment. Looking ahead, we expect adjusted EBITDA in the fourth quarter to remain broadly in line with the third quarter. Typical year-end seasonality should lead to slightly lower shipments, but this should be offset by a modest improvement in margin per tonne as higher revenue per tonne more than offset rising raw material and slab costs. Net income was $368 million in the third quarter compared to the second one.

Higher operating income and a positive swing in net financial results were more than offset by higher income tax charges. We had in the third quarter deferred tax losses of $116 million, mostly related to the impact of the Mexican peso depreciation, compared to a gain of $86 million in the previous quarter. Let's review the steel segment performance now. Shipments rose 5% sequentially in the third quarter, reaching 4 million tons.

Mexico has been the main driver of our shipment growth in recent quarters. In the third one we gained market share again. Commercial market shipments kept rising with significant year-over-year growth, and industrial volume also increased both sequentially and versus last year. Moving to the steel segment performance, cash operating income rose 16% sequentially, supported by higher realized steel prices and shipments.

This was partially offset by higher cost per tonne, mainly reflecting increased raw material and purchased slabs, with ongoing efficiency initiatives helping to mitigate this. Steel margin expanded to 17%. Turning now to the mining segment, shipments declined in the third quarter and more are expected for the fourth quarter. This reflects the partial suspension of Musa's operation already mentioned by Máximo.

Cash operating income decreased sequentially on lower volume and slightly lower realized iron ore prices, with the margin narrowing to 16%. Let's now review the cash flow and balance sheet. Cash from operations was $630 million in the quarter. This includes a $148 million increase in working capital.

This increase came mainly from higher receivables, reflecting higher volume and steel prices, and from higher inventory value due to the higher unit cost. Capital expenditure amounted to $398 million, mostly as a result of the construction of the new slab mill at the Pesquería Industrial Center, which continues to advance according to plan. As a result, we generated positive free cash flow of $215 million in the quarter. With this, we ended September with a net cash position of $22 million compared to a net debt position of $112 million at the end of June.

This improvement was partially offset by a $74 million decline in the fair value of Argentine securities. Finally, let me close with a quick look at our performance in the first nine months of the year. Adjusted EBITDA reached nearly $2 billion, up 73% year over year, with the margin expanding to 15% from 10% in the same period of 2025. Higher realized prices were the key driver, rising 8% year over year, while cost per tonne remained stable, supported by several initiatives that enabled an increase in efficiencies and productivity across our operations.

Net income for the period amounted to $1.2 billion, with shareholders' earnings of $4.26 per ADS, close to three times the prior-year level. Capital expenditures reached $1.2 billion in the first nine months, down almost 40% from $2 billion in the same period of last year, as we move beyond the peak of our investment cycle. Finally, Ternium's Board of Directors approved an interim dividend of $0.90 per ADS, or a total of $177 million, payable on November 17th. With this, we are concluding our prepared remarks for this quarter.

We welcome now any question that you may have. Please, operator, go ahead. OPERATOR We will now begin the question and answer session. To ask a question, please press Raise Hand to queue your question.

You can leave the queue by clicking Put Hand Down. Our first question comes from Tatiane Kandini from J.P. Morgan. Tatiane Kandini (Analyst at J.P.

Morgan) Good morning, everyone. Thanks for having my questions here. Maybe to start, I would like to just explore a little bit more on the Mexican prices. You noted in the outlook that we should expect a higher margin per tonne, and we saw already some price hikes during this quarter, like around 5% quarter over quarter.

So I just wanted to explore a little bit more on what are your expectations for the fourth quarter when it comes to prices. What should we expect regarding mix? And my second question is regarding capital allocation. I think we already explored this a bit in the last quarter.

With Pesquería now close to the ramp-up, we should expect lower capex for next year. So I just wanted to take your take and try to understand a bit on what your perspective is on the cash generation for next year. If we could expect some changes on dividends, higher dividends for next year, or if we should expect something more for 2028 still. Thank you.

Máximo Vedoya (Chief Executive Officer) Thank you very much, Adrian. Let me start with the first question. Mexican prices, I would say Mexican prices continue growing or increasing and you saw that in the third quarter. Probably in the fourth quarter it's going to be a little bit more up.

You have to remember that they are not going to get anywhere near the US prices, and we discussed that several times. Why? But we are seeing a strong demand. We are seeing a strong demand in Mexico, as we said.

We are seeing a strong demand in the US. So I think that prices will continue to hold at this level or a little bit up. You also have to consider that the industrial customers have a lag in the prices. So that lag is going to be reflected in the fourth quarter and probably in the first quarter of next year.

I think with that I cover the first one. Do you want, Pablo, the second one? Pablo Brizzio (Chief Financial Officer) Okay, let me take the second one. Thanks, Tatiana, for the question.

So, as usual, we discussed the capital allocation issue. You know that whenever we are ending a big capex plan we need to take capital to digest, to take advantage of everything that we have done in the next couple of years. Difficult to see any big project coming out of Ternium. Of course there is one that you already know, that we already mentioned many, many times, which is our mining activity in Brazil that we will continue to analyze, and probably, Máximo, you can add to that a little after my answer.

But in general what you should see is different things. First of all, we will move into next year with probably higher cash flow generation because of the better performance that Máximo mentioned during the initial remarks and also because of the reduction in capex after the big capex plan and moving from the big number that we had last year. This year will be around $1.2 billion, next year $1.2 billion. So this will add to your point.

So if this is the trend that we will follow and without any big project, we will basically, if this trend continues, reinforce our dividend payment. And besides that we will be adding to the strong financial position of the company to be prepared for the possible next round of capex or decisions that we may take. You know that we have different propositions for the future, but in general this is something that we take very seriously and we take some time to do that. So I don't know, Máximo, you want to add?

Máximo Vedoya (Chief Executive Officer) I think it's clear. I mean our next two years will be—our main agenda is execution. It's to focus on how we digest all the investment that we have done. I mean, you know, Pesquería is something fantastic.

And it's starting now in February. We already have started a lot of lines, but in February the steel shop is starting. And this will give us a huge power of how we can manage even stronger relationships with all our customers. We want to execute that and then probably 2028 we'll see what we do next.

But this is a focus for next year. I hope with that at the end we answer both questions. Tatiane Kandini (Analyst at J.P. Morgan) No, you completely did.

I just wanted to make a follow-up on the Compactos project that you mentioned. So is there any kind of change on the timeline of the decision since we have, as you mentioned, a more challenging environment when it comes to freights and iron ore prices and the partial shutdown of Usiminas' minerals production? Pablo Brizzio (Chief Financial Officer) There's no real change today. As you know, the decision we always said we have to make it in 2027.

Probably that decision is still there in 2027 and we continue analyzing the different options that we have with Compactos. There are several, as you said, several technical solutions that we are finding where maybe we can do a project with a little bit less or much less investment in the first stage and a bigger investment in a second stage. But all those things are things that we are analyzing. There may be changes to what we thought originally was the big Compactos project.