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 08/01/2006
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 __X__ Form 40-F ____
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____ No__X__
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 its results for the
second quarter of the year 2006.
Ternium Announces Second Quarter 2006 Results
LUXEMBOURG--(BUSINESS WIRE)--Aug. 1, 2006--Ternium S.A. (NYSE:TX)
announced today its results for the second quarter ended June 30,
2006.
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.
Summary of Second Quarter 2006 Results
-- Net sales of US$1.7 billion.
-- Shipments of flat and long products of 2.4 million tons.
-- Operating income of US$476.7 million, or 28% of net sales.
-- EBITDA(a) of US$582.2 million, or 34% of net sales.
-- Equity holders net income of US$232.6 million.
-- Earnings per American Depositary Share (ADS) of US$1.16 (each
ADS represents 10 shares of Ternium's common stock).
(a) EBITDA equals operating income plus depreciation, amortization
and other non cash transactions
Ternium's results continued to improve in the second quarter 2006.
Revenue increased compared to the first quarter of 2006 as a result of
better prices and higher sales volumes. The Company's EBITDA margin
also improved due to better prices and relatively stable costs.
Market Background and Outlook
Demand for steel products in Ternium's core markets maintained a
positive trend during the second quarter, as the main economies in the
South & Central America Region continued to perform well.
Additionally, steel prices increased in the period mainly in Ternium's
North American markets. In the immediate future, Ternium expects
demand and prices for its products to remain stable, and does not
foresee any sizeable impact related to fluctuations in raw material
and energy costs.
Production
Ternium's consolidated production increased during the second
quarter of 2006 versus the first quarter of the year. The Company's
production reached 2.5 million tons of crude steel, while 1.9 million
tons of hot rolled coils and 0.5 million tons of long products were
manufactured from semi-finished products, 0.9 million tons of cold
rolled coils were manufactured from hot rolled coils, and 0.4 million
tons of flat products were processed in the coating lines.
Analysis of Second Quarter 2006 Results versus First Quarter 2006
Results
As a result of the consolidation of Amazonia's and Hylsamex's
results and other financial data since February 15, 2005, and August
22, 2005, respectively, Ternium's results and other financial data for
the year 2006 or any quarters in 2006 are likely to vary significantly
from the results and other financial data for the year 2005 or the
corresponding quarters in 2005. Accordingly, Ternium currently intends
to make quarterly comparisons on a sequential basis until the third
quarter of 2006. From the fourth quarter of 2006 onwards, comparisons
are intended to be made on a quarterly year-over-year basis.
Second quarter of 2006 and first quarter of 2006 figures
consolidate the results of Hylsamex, Siderar and Sidor together with
all other consolidating subsidiaries.
Net income for the second quarter was US$289.2 million, compared
to US$194.5 million in the first quarter. Net income attributable to
the Company's equity holders was US$232.6 million in the second
quarter compared to US$165.0 million in the first quarter. Earnings
per ADS were US$1.16 in the second quarter, based on 2,004,743,442
shares outstanding and a conversion rate of 10 shares of common stock
per ADS.
Net sales for the second quarter increased 12% to US$1.7 billion,
compared to net sales of US$1.5 billion in the previous quarter due to
higher volumes and prices. Shipments of flat and long products reached
2.4 million tons, while revenue per ton shipped increased 3% to US$681
in the second quarter.
Net Sales Shipments Revenue / ton
(million US$) (thousand tons) (US$/ton)
-------------------- -------------------- ---------------
2Q 1Q 2Q 1Q 2Q 1Q
2006 2006 Dif. 2006 2006 Dif. 2006 2006 Dif.
-------------------- -------------------- ---- ----- ----
South &
Central
America 772.1 691.2 12% 1,161.9 1,044.7 11% 665 662 1%
North
America 520.1 491.8 6% 656.2 643.2 2% 792 765 4%
Europe &
other 7.8 14.3 -45% 15.9 26.6 -40% 493 537 -8%
-------------------- -------------------- ---- ----- ----
Total flat
products 1,300.0 1,197.3 9% 1,834.1 1,714.5 7% 709 698 2%
South &
Central
America 130.8 121.5 8% 237.3 236.9 0% 551 513 7%
North
America 211.9 161.4 31% 341.5 296.5 15% 620 544 14%
-------------------- -------------------- ---- ----- ----
Total long
products 342.7 282.9 21% 578.8 533.4 9% 592 530 12%
Total flat
and long
products 1,642.7 1,480.2 11% 2,412.9 2,247.9 7% 681 658 3%
Other
products(1) 66.4 48.7 36%
--------------------
Total Net
Sales 1,709.1 1,528.9 12%
(1) Includes pig iron and pellets.
Sales of flat products during the second quarter totaled US$1.3
billion, an increase of 9% compared to the first quarter of the year.
This was the result of higher volumes and prices. Shipments were 1.8
million tons in the second quarter, an increase of 7% compared to the
previous quarter as a result of improved demand in Ternium's core
markets and increased production of hot and cold rolled products.
Revenue per ton shipped increased 2% to US$709 in the second quarter
from the prior quarter. While prices of flat products increased in
several of Ternium's markets, the sales mix during the second quarter
was not as favorable as that of the previous quarter.
Sales of long products were US$342.7 million during the second
quarter, an increase of 21% compared to the previous quarter. This
increase was mainly due to higher volumes and prices. Shipments
increased to 578.8 thousand tons in the second quarter, representing a
9% increase versus the first quarter, due to higher production and a
tighter demand/supply balance for Ternium's long products in the North
America Region. Within this context, revenue per ton shipped increased
12% quarter-over-quarter to US$592.
Sales of other products were US$66.4 million during the second
quarter, an increase of 36% compared to the previous quarter, as
pellet sales recovered from low levels in the first quarter. This
increase was the result of the planned revamping of Ternium's pellet
production facilities in Venezuela during the first quarter.
Flat and long products sales in the South & Central America Region
were US$902.9 million during the second quarter, an increase of 11%
versus the previous quarter. This increase was mainly due to higher
volumes and prices. Shipments reached 1.4 million tons during the
second quarter, or 9% higher than the previous quarter, mainly as a
result of higher shipments of flat products. Revenue per ton shipped
increased 2% quarter-over-quarter to US$645 during the second quarter
mainly supported by increases in long products.
Sales of flat and long products in the North America Region were
US$732.0 million in the second quarter, an increase of 12% compared to
the previous quarter, due to higher volumes and prices. Shipments
totaled 1.0 million tons during the second quarter, or 6% higher than
the previous quarter. This increase was mainly attributable to higher
sales of billets and cold rolled coils. Revenue per ton shipped
increased 6% quarter-over-quarter to US$734 in the second quarter,
mainly due to price increases implemented in both product categories.
Cost of sales totaled US$1.1 billion for the second quarter, or
63% of net sales, compared to US$987.2 million, or 65% of net sales,
in the previous quarter. The increase in shipments drove the increased
cost of sales in the second quarter. Higher prices for raw materials
were offset by the normalization of iron ore pellets production at
Sidor following the revamping of its pellet production facilities
carried out in the previous quarter that allowed the Company to reduce
its purchases of hot briquetted iron.
Natural gas and electricity prices for the Central and South
America operations remained relatively stable compared to the previous
quarter, while Ternium's Mexican subsidiary experienced a decrease in
electricity prices and stable natural gas costs. Labor costs remained
at similar levels to those of the previous quarters.
Selling, general and administrative (SG&A) expenses in the second
quarter were US$155.4 million, or 9% of net sales, compared to
US$151.0 million, or 10% of net sales, in the previous quarter. The
increase in the SG&A figure versus the previous quarter is mainly due
to higher freight charges for Ternium's finished products caused by
the increase in shipments during the second quarter.
Operating income in the second quarter was US$476.7 million, or
28% of net sales, compared to US$392.5 million, or 26% of net sales,
in the previous quarter. EBITDA(b) in the second quarter was US$582.2
million, or 34% of net sales, compared to US$500.5 million, or 33% of
net sales, in the previous quarter.
Net financial expenses were US$108.2 million in the second
quarter, compared to US$123.5 million in the previous quarter. This
reduction was primarily the result of a US$6.0 million decrease in net
interest expenses mainly associated with a reduction in net debt,
US$8.6 million in lower bank commissions related to the absence of a
one-time charge for debt issuance recognized in the previous quarter
and US$9.1 million in lower excess cash distribution related to the
participation accounts in Sidor. This was partially offset by a higher
loss of US$10.4 million related to changes in the fair value of some
derivative instruments entered into by Ternium in order to mitigate
energy prices and interest rates fluctuations.
Sidor's excess cash distribution related to the participation
account was US$184.4 million in the second quarter compared to
US$206.9 million in the previous quarter. Ternium subsidiaries
received US$110.2 million in the second quarter compared to US$123.6
million in the first quarter, while payments to minority shareholders
of Sidor resulted in expenses of US$74.2 million in the second
quarter, compared to expenses of US$83.3 million in the previous
quarter.
Income tax expense for the second quarter was US$80.2 million, or
22% of income before income tax and minority interest.
Income attributable to minority interest for the second quarter
was US$56.6 million, compared to income of US$29.5 million in the
previous quarter.
(b) EBITDA equals operating income of US$476.7 million plus
depreciation and amortization of US$105.4 million and other
non-cash items of US$0.1 million.
Cash Flow and Liquidity
Net cash provided by operating activities in the second quarter
was US$357.0 million. This included an increase in working capital of
US$71.4 million mainly due to a higher activity level partially offset
by a decrease in tax credits.
Net cash used in investing activities during the second quarter
was US$140.1 million, mainly due to capital expenditures of US$98.2
million and Ternium's purchase of Worthington Industries' remaining
50% equity interest in Acerex for US$44.6 million, which was approved
by Mexico's antitrust authorities on May 11, 2006.
Net cash used in financing activities during the second quarter
was US$203.4 million. Financial debt decreased by US$176.2 million
quarter-over-quarter to US$1.6 billion, mainly due to the repayment of
certain borrowings. Net debt as of June 30, 2006 was US$670.2 million.
In addition, dividends paid to minority shareholders in Siderar and
Acerex totaled US$27.2 million during the second quarter.
Forward-Looking Statements
Some of the statements contained in this press release are
"forward-looking statements." Forward-looking statements are based on
management's current views and assumptions and involve known and
unknown risks that could cause actual results, performance or events
to differ materially from those expressed or implied by those
statements. These risks include but are not limited to risks arising
from uncertainties as to gross domestic product, related market
demand, global production capacity, tariffs, cyclicality in the
industries that purchase steel products and other factors beyond
Ternium's control.
About Ternium
Ternium is one of the leading steel companies in the Americas,
offering a wide range of flat and long steel products. Ternium has
operating locations in Mexico, Argentina and Venezuela that provide it
with a strong position from which to serve its core markets. In
addition, Ternium reaches the global markets through its own
distribution network. More information about Ternium is available at
www.ternium.com.
Consolidated income statement
2Q 1Q
US$ million 2Q 2006 1Q 2006 6M 2006 2005(1) 2005(1) 6M 2005(1)
------------ --------- -------- --------- -------- -------- ----------
Net sales 1,709.1 1,528.9 3,238.0 1,060.3 767.6 1,827.8
Cost of
sales (1,078.1) (987.2) (2,065.2) (493.4) (418.2) (911.5)
--------- -------- --------- -------- -------- ----------
Gross profit 631.0 541.7 1,172.7 566.9 349.4 916.3
SG&A
expenses (155.4) (151.0) (306.4) (114.6) (65.0) (179.6)
Other
operating
income
(expense),
net 1.1 1.8 2.9 (6.8) (1.0) (7.8)
--------- -------- --------- -------- -------- ----------
Operating
income 476.7 392.5 869.2 445.5 283.4 728.9
Financial
expenses,
net (108.2) (123.5) (231.7) (63.8) (38.9) (102.7)
Excess of
fair value
of net
assets
acquired
over cost -- -- -- -- 188.4 188.4
Equity in
earnings
(losses)
of
associated
companies 0.9 (1.8) (0.9) (0.2) 19.3 19.1
--------- -------- --------- -------- -------- ----------
Income
before
income tax
expense 369.4 267.2 636.5 381.5 452.2 833.7
Income tax
expense (80.2) (72.7) (152.8) (57.1) (48.6) (105.7)
Net income
for the
period 289.2 194.5 483.7 324.4 403.6 727.9
Attributable
to:
Equity
holders
of the
Company 232.6 165.0 397.6 140.0 337.6 477.6
Minority
interest 56.6 29.5 86.1 184.4 66.0 250.3
--------- -------- --------- -------- -------- ----------
289.2 194.5 483.7 324.4 403.6 727.9
(1) Combined consolidated financial information on the basis of common
control.
Consolidated balance sheet
June 30, December 31,
US$ million 2006 2005
--------------------------------------------- ----------- ------------
Property, plant and equipment,
net & other assets 5,332.0 5,464.8
Intangible assets, net 524.6 552.9
Investment in associated companies, net 8.2 9.1
Other investments, net 12.4 12.6
Deferred tax assets 35.2 29.1
Trade & other receivables, net 60.2 47.9
----------- ------------
Total non-current assets 5,972.7 6,116.4
Receivables 219.4 291.3
Other assets -- 3.2
Derivative financial instruments 11.6 5.4
Inventories, net 1,113.4 1,000.1
Trade receivables, net 551.9 472.8
Other investments -- 5.2
Cash and cash equivalents 915.6 765.6
----------- ------------
Total current assets 2,812.0 2,543.6
Non-current assets classified
as held for sale 9.4 --
----------- ------------
Total assets 8,794.1 8,660.0
Shareholders' equity 3,276.9 1,842.5
Minority interest in subsidiaries 1,693.3 1,733.5
Minority interest & shareholders' equity 4,970.2 3,575.9
Provisions 57.9 53.5
Deferred income tax liabilities 991.2 1,048.2
Other liabilities 206.3 187.9
Trade payables 1.1 1.2
Borrowings 1,088.0 2,399.9
----------- ------------
Total non-current liabilities 2,344.5 3,690.6
Provisions -- 0.7
Current tax liabilities 143.0 127.0
Other liabilities 179.7 194.1
Trade payables 648.8 555.3
Derivative financial instruments 10.2 --
Borrowings 497.8 516.4
----------- ------------
Total current liabilities 1,479.4 1,393.4
----------- ------------
Total liabilities 3,823.9 5,084.1
Liabilities, minority interest
& shareholders' equity 8,794.1 8,660.0
Consolidated cash flow statement
US$ million 2Q 2006 1Q 2006 6M 2006 6M 2005(1)
---------------------------------- ------- ------- -------- ----------
Net income 289.2 194.5 483.7 727.9
Adjustments for:
Depreciation and amortization 105.5 106.3 211.8 117.6
Income tax accruals
less payments (7.4) 10.9 3.5 (87.3)
Excess of fair value of net
assets acquired over cost -- -- -- (188.4)
Equity in (earnings) losses
of associated companies (0.9) 1.8 0.9 (19.1)
Derecognition of property,
plant & equipment 0.1 1.6 1.7 --
Interest accruals less
payments 17.8 (15.9) 1.9 0.2
Changes in provisions 13.6 11.4 25.0 4.5
Changes in working capital (71.4) (12.6) (84.0) (17.1)
Currency translation adjustment
and others 10.6 (3.0) 7.6 62.8
------- ------- -------- ----------
Net cash provided by operating
activities 357.0 295.2 652.1 601.1
Capital expenditures (98.2) (88.1) (186.3) (81.4)
Change in trust funds 5.2 -- 5.2 88.8
Acquisition of business(2) (47.9) (55.2) (103.1) --
Proceeds from sale of property,
plant & equipment 0.7 0.5 1.3 1.4
------- ------- -------- ----------
Net cash (used in) provided by
investing activities (140.1) (142.8) (282.9) 8.8
Dividends paid in cash and other
distributions to company's
equity shareholders -- -- -- (171.4)
Dividends paid in cash
and other distributions
to minority shareholders (27.2) -- (27.2) (108.7)
Net proceeds
from Initial Public Offering -- 525.0 525.0 --
Contributions from shareholders -- 3.1 3.1 54.8
Proceeds from borrowings 25.2 11.4 36.5 102.4
Repayment of borrowings (201.4) (553.5) (754.8) (367.2)
------- ------- -------- ----------
Net cash used in financing
activities (203.4) (14.0) (217.4) (490.2)
Increase (decrease) in cash and
cash equivalents 13.4 138.4 151.9 119.7
(1) Combined consolidated financial information on the basis of common
control.
(2) Corresponds to the purchase of Impeco and other assets from
Acindar in 1Q 2006 and to the purchase of Worthington Industries'
50% equity interest in Acerex in 2Q 2006.
Shipments
-------------------------------------------------------
2Q 1Q
Thousand tons 2Q 2006 1Q 2006 6M 2006 2005(1) 2005(1) 6M 2005(1)
-------------- -------- -------- -------- -------- -------- ----------
South &
Central
America 1,161.9 1,044.7 2,206.6 926.9 593.5 1,520.4
North
America 656.2 643.2 1,299.5 260.3 245.6 505.9
Europe &
other 15.9 26.6 42.5 145.4 171.5 316.9
-------- -------- -------- -------- -------- ----------
Total flat
products 1,834.1 1,714.5 3,548.6 1,332.6 1,010.6 2,343.2
South &
Central
America 237.3 236.9 474.3 168.4 89.0 257.4
North
America 341.5 296.5 638.0 30.2 37.8 68.0
-------- -------- -------- -------- -------- ----------
Total long
products 578.8 533.4 1,112.2 198.7 126.8 325.4
Total flat and
long products 2,412.9 2,247.9 4,660.8 1,531.3 1,137.3 2,668.6
(1) Combined consolidated financial information on the basis of common
control.
Revenue / ton
-------------------------------------------------------
2Q 1Q 6M
US$/ton 2Q 2006 1Q 2006 6M 2006 2005(1) 2005(1) 2005(1)
-------------- -------- -------- -------- -------- -------- ----------
South &
Central
America 665 662 663 725 704 717
North
America 792 765 779 549 577 562
Europe &
other 493 537 520 607 712 664
-------- -------- -------- -------- -------- ----------
Total flat
products 709 698 704 677 674 676
South &
Central
America 551 513 532 498 550 516
North
America 620 544 585 526 556 542
-------- -------- -------- -------- -------- ----------
Total long
products 592 530 562 502 552 521
Total flat and
long products 681 658 670 655 661 657
(1) Combined consolidated financial information on the basis of common
control.
Net Sales
-------------------------------------------------------
2Q 1Q
US$ million 2Q 2006 1Q 2006 6M 2006 2005(1) 2005(1) 6M 2005(1)
-------------- -------- -------- -------- -------- -------- ----------
South &
Central
America 772.1 691.2 1,463.3 671.7 417.9 1,089.5
North America 520.1 491.8 1,011.9 142.9 141.6 284.5
Europe & other 7.8 14.3 22.1 88.2 122.1 210.4
-------- -------- -------- -------- -------- ----------
Total flat
products 1,300.0 1,197.3 2,497.3 902.8 681.6 1,584.4
South &
Central
America 130.8 121.5 252.3 83.9 48.9 132.8
North America 211.9 161.4 373.3 15.9 21.0 36.9
-------- -------- -------- -------- -------- ----------
Total long
products 342.7 282.9 625.6 99.8 69.9 169.7
-------- -------- -------- -------- -------- ----------
Total flat and
long products 1,642.7 1,480.2 3,122.9 1,002.6 751.5 1,754.1
Other
products(2) 66.4 48.7 115.1 57.7 16.1 73.8
-------- -------- -------- -------- -------- ----------
Total net
sales 1,709.1 1,528.9 3,238.0 1,060.3 767.6 1,827.8
(1) Combined consolidated financial information on the basis of common
control.
(2) Includes pig iron and pellets.
CONTACT: Ternium S.A.
Investor Relations:
Sebastian Marti
USA: +1-866-890-0443
Mexico: +52-81-8865-1240
Argentina: +54-11-4018-2389
www.ternium.com
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: August 1, 2006