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Ternium (TX) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Materials· Aug 5, 2026

Source: earnings call transcript

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

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

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
————

Deals & partnerships

Mexican administration Agreement to promote the Mexican steel industry

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

Brazilian government Renewal of steel quota system until June 2027

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

Capital programs

Pesqueria Slab Facility progressing 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 Project completion

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

Section 232 tariffs affecting industrial customers in Mexico ongoing

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 uncertainty ongoing

not over yet

Mitigation:Company monitoring deeply; maintaining strong financial position.

Unfair competition from imported finished goods in Brazil ongoing

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 market current

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

Adjusted EBITDA sequential increase

Q3 FY26
Current 50% higher sequentially in Q2
Target Increase 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.

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Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.