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    Earnings call· Jun 2026(Q2 FY26)

    Ternium S.A. Q2 FY26 earnings call TX

    Aug 5, 2026 Source

    Executive summary

    Ternium Q2 FY26 — Profitability Recovery and Strategic Project Progress

    Ternium delivered a solid Q2 FY26, marked by a significant sequential recovery in profitability driven by higher volumes and improved margins in Mexico and Brazil. The company is nearing the peak of its major investment cycle with the Pesqueria slab facility on track for early 2027 startup, which is expected to enhance its position in the North American automotive market. While geopolitical uncertainties remain, management anticipates continued strong performance, supported by strategic project execution and a focus on capital allocation.

    Highlights

    5

    • Adjusted EBITDA increased 50% sequentially, reaching a 16.5% margin.

    • Consolidated steel shipments increased by 4% sequentially, driven by Mexico's commercial market and market share gains.

    • Net income reached $465 million in Q2, contributing to $837 million in H1, nearly double the prior year.

    • Strong balance sheet with net debt of $112 million, and CapEx expected to decline significantly after 2026.

    • Progress on Pesqueria slab facility, with start-up expected early 2027, positioning for integrated North American market.

    Concerns

    4

    • Section 232 tariffs continue to affect industrial customers in Mexico, impacting steel demand in manufacturing sectors.

    • Net debt position shifted from $327 million net cash to $112 million net debt due to a $418 million working capital buildup and $255 million dividend payment.

    • The ramp-up of the new Pesqueria slab facility is complex and will take several quarters, limiting immediate EBITDA impact in 2027.

    • Uncertainty in the global economy persists, requiring deep monitoring despite improving results.

    Guidance & targets

    6
    CategoryTargetConfidence
    Adjusted EBITDA
    increase sequentially
    high materiality
    High
    Adjusted EBITDA margin
    improved
    medium materiality
    High
    Shipments
    keep recovering
    medium materiality
    High
    Capital expenditure
    $1.6 billion
    high materiality
    High
    Capital expenditure
    around $1.2 billion
    high materiality
    High
    Emissions intensity reduction
    50%
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Steel
    Consolidated shipments increased, driven by Mexico's commercial market, lower imports, and market share efforts. Sales volumes in Brazil were steady, focusing on margin. Southern region saw seasonal recovery.
    Shipments: increased by 4% sequentiallyCash operating income: rose by $204 million sequentially
    		————
    Mining
    Shipments normalized due to seasonal recovery of iron ore shipments in Brazilian operations. Cash operating income declined due to lower realized iron ore prices, partially offset by higher sales volume.
    Shipments: normalized in Q2Cash operating income: declined slightly sequentially
    		————
    Mexico
    Volumes supported by strengthening commercial market, lower imports due to effective trade defense, and efforts to improve market share. Industrial market demand did not grow at the same pace due to Section 232 tariffs.
    Shipments: continue to riseMarket share: gaining in commercial market
    		————
    Brazil
    Sales volumes steady with Usiminas focusing on margin. Trade defense advancing with quota system renewal and antidumping case. Automotive sector solid (6% production growth expected), but other sectors weaker.
    Sales volumes: broadly steady versus Q1Usiminas profitability: improved over last few quarters
    		————
    Argentina
    Shipments increased sequentially, mostly for seasonal reasons. Energy, mining, and agriculture expected to be most dynamic sectors, with construction recovering gradually. Manufacturing remains weak.
    Shipments: increased sequentially
    		————

    Operational metrics

    13
    Adjusted EBITDA
    $1.2 billionrising 65% year-over-year
    H1 FY26

    Adjusted EBITDA for the first 6 months of 2026.

    Adjusted EBITDA margin
    14%from 9% in the same period of last year
    H1 FY26

    Adjusted EBITDA margin for the first 6 months of 2026.

    Adjusted EBITDA margin
    16.5%from 12.2% in the first quarter
    Q2 FY26

    Adjusted EBITDA margin for the second quarter of 2026.

    Net debt
    $112 millioncompared to a net cash position of $327 million at the end of March
    as of June 2026

    Net debt position at the end of Q2 FY26.

    Working capital buildup
    $418 million
    Q2 FY26

    Buildup in working capital, consistent with higher sales and increased raw material prices and steel costs.

    Dividend paid
    $255 million
    Q2 FY26

    Corresponding to the balance of the total dividend declared for the fiscal year 2025.

    Shareholders earning per ADS
    $2.84almost double the prior year level
    H1 FY26

    Supported by stronger operational results on higher steel margins.

    Mexico steel consumption growth
    4%
    FY26

    World Steel's expectation for annual consumption improvement in Mexico.

    Mexico steel consumption decline
    10%
    FY25

    Steel consumption decreased in the prior year.

    Steel demand from infrastructure projects
    600,000 to 700,000 tons
    over 1.5-2 years

    Projects being discussed under the agreement to promote the Mexican steel industry.

    HRC price gap
    $300 per tonexpanding over the past year
    current

    Gap between HRC prices in Mexico and the U.S., primarily due to Section 232 tariffs and trade measures.

    Automotive production growth
    6%
    FY26

    Expected growth in automotive production for the year.

    Emissions intensity reduction target
    50%
    by 2030

    Revised decarbonization target for the company.

    Industry KPIs

    3
    MetricValueDetails
    Safety—
    Growth project CAPEX first productionearly 2027
    Production sales volume by metal and by mine4%%

    Deals & partnerships

    2
    Mexican administrationAgreement to promote the Mexican steel industry

    Public infrastructure projects under this agreement should add further demand ahead.

    Brazilian governmentRenewal of steel quota systemuntil June 2027

    The steel quota system was renewed until June 2027, contributing to a more balanced trade environment in Brazil.

    Capital programs

    2
    Pesqueria Slab Facilityprogressing well

    Benefit: more than 2.5 million tons

    The new slab facility is progressing well with start-up expected in early 2027. It will position Ternium for a more integrated and better defended North American market, serving automotive customers with local capacity and lower carbon footprint steel. The ramp-up will take several quarters.

    Usiminas Pulverized Gold Injection Projectcompletion

    Benefit: greater efficiency and lower cost while also reducing emissions intensity

    A key milestone for Usiminas' competitiveness, bringing great efficiency and lower cost while also reducing emissions intensity.

    Risks & headwinds

    4
    Section 232 tariffs affecting industrial customers in Mexicoongoing

    affecting production of industrial base customers

    Mitigation: Ongoing discussions between U.S. and Mexico to resolve trade issues; company gaining market share in commercial segment.

    Global economic uncertaintyongoing

    not over yet

    Mitigation: Company monitoring deeply; maintaining strong financial position.

    Unfair competition from imported finished goods in Brazilongoing

    affecting some sectors

    Mitigation: Trade defense advancing, steel quota system renewed until June 2027, antidumping case on HRC from China expected this year.

    Slow demand growth in Mexico's commercial marketcurrent

    steel consumption expected to increase by 4% this year, still way back of our peak in 2023

    Mitigation: Company gaining market share against imports; public infrastructure projects expected to add demand.

    What to watch in Q3 FY26

    5

    Adjusted EBITDA sequential increase

    Q3 FY26
    Current50% higher sequentially in Q2
    TargetIncrease sequentially

    Why it matters

    Indicates continued profitability recovery and market strength.

    Looking ahead, we expect adjusted EBITDA to increase sequentially in the third quarter, driven by higher shipments and an improved adjusted EBITDA margin.

    Q&A highlights

    5

    Why Q2 price realization wasn't higher given market trends, and if Q3 will see stronger price increases. Also, likelihood of USMCA agreement before year-end.

    Maximo explained that the mix shift towards the commercial market (spot prices) due to Section 232 tariffs affecting industrial customers impacted Q2 realization. Q3 will see price increases but not huge movements. He noted that USMCA talks are ongoing, with Mexico prioritizing 232 removal and the U.S. seeking stronger trade defenses against unfair trade. An agreement could reduce the price gap.

    “prices in the commercial market are more on a spot basis. And so that's why I guess your comment on the realization price are a little bit lower of what you expect. We expect some changes in the third quarter, but don't expect huge movements because this dynamic is still going on in Mexico.”

    asked by Rafael Barcellos · answered by Maximo Vedoya

    2 min read6 chapters

    Detailed Narrative

    01

    Mexico Market Dynamics

    Mexico's steel market is gradually improving, with shipments increasing due to government measures against unfair trade and restocking. Ternium is gaining market share in the commercial segment, though industrial demand is slower due to Section 232 tariffs. The company is supplying steel for new gas pipeline projects and automotive OEMs, with public infrastructure projects expected to add further demand. World Steel projects 4% growth in Mexican steel consumption for FY26, following a 10% decline in FY25.

    02

    USMCA and Trade Relations

    Discussions between the U.S. and Mexico regarding trade, including Section 232 tariffs, are ongoing, with a fourth round of talks scheduled for early September. Mexico prioritizes the removal of Section 232 tariffs, while the U.S. seeks stronger trade defenses against unfair trade practices in Mexico. Management believes an agreement can be reached that addresses both objectives, potentially reducing the current $300 per ton HRC price gap between Mexican and U.S. markets.

    03

    Pesqueria Expansion and Strategic Positioning

    The new downstream lines at Pesqueria continue to ramp up, and the slab facility is progressing well, with start-up expected in early 2027. This expansion aims to position Ternium for a more integrated North American market, providing local capacity, short lead times, and lower carbon footprint steel for the automotive industry. The ramp-up and certification process for the slab facility, which will produce over 2.5 million tons, are complex and expected to take several quarters, limiting immediate EBITDA impact in 2027.

    04

    Brazil Market and Usiminas Performance

    Brazil's trade defense is advancing, with the steel quota system renewed until June 2027 and an antidumping decision on hot-rolled coil from China expected this year. Usiminas has improved profitability through better industrial performance, strict cost control, and higher productivity, including the completion of a pulverized gold injection project. Automotive sector production is solid, expected to grow by 6% this year, but other sectors face challenges from slow demand and unfair competition from imported finished goods.

    05

    Sustainability and Decarbonization

    Ternium published its 2025 Sustainability Report, revising its 2030 decarbonization target to include Usiminas and using 2024 as a new base year. The company is committed to reducing emissions intensity per ton of hot-rolled steel by 50% across Scope 1, 2, and 3 under the GHG protocol methodology. The report also details progress in energy efficiency, environmental management, safety, and community engagement.

    06

    Capital Allocation Strategy

    Following a period of significant CapEx, particularly for the Pesqueria project, Ternium expects CapEx to moderate to around $1.2 billion in 2027 from $1.6 billion in 2026. The company aims to consolidate recent investments and maintain a strong financial position. While geopolitical uncertainties persist, the improving results and reduced CapEx could lead to increased dividend payments in the future, aligning with the company's tradition of returning value to shareholders, and potentially simplifying its corporate structure in the long run.

    AI-generated summary of the company’s earnings call. Not investment advice.