Ternium S.A. Annual Report - How They Did This Year

I’ve put together this guide to help you understand Ternium’s performance. My goal is to break down their complex filings into simple terms so you can decide if this company fits your investment goals.

1. What does this company do?

Ternium is a leading steel producer in Latin America. They make flat and long steel products for the automotive, construction, appliance, and energy industries. They operate mainly in Mexico, Argentina, Brazil, Colombia, and the U.S.

They are "vertically integrated," meaning they own much of their supply chain. This includes iron ore mines in Mexico and a majority stake in the Brazilian steelmaker Usiminas. This setup helps them control costs and stay stable when global commodity prices swing.

2. Financial performance: A tougher year

The 2025 numbers show a challenging year. Total sales fell to $15.6 billion, down from $17.6 billion in the previous two years. This is an 11.4% drop in revenue.

• The Steel Slump: Steel makes up 96% of their revenue. Sales in this segment fell to $15 billion. This happened because they shipped 6% less steel (11.5 million tons) and the average price per ton dropped 5% to $1,304.
• The "Paper Loss" Hit: The company recorded $428 million in one-time charges. This includes a $320 million drop in the value of mining assets and a $108 million write-down of tax assets in Brazil. These accounting losses dragged profit down to $845 million, compared to $2.9 billion the year before.

3. Major wins and challenges

The biggest story is the pressure on the Mexican market, where steel shipments fell about 9% to 6.4 million tons. This was caused by U.S. trade rules, specifically tariffs and requirements that steel used in North American cars must be made within the USMCA region.

• The "China Factor": Cheap steel from China is flooding the market and pushing prices down. In Brazil, Chinese steel imports jumped 40% early in the year. The Brazilian government responded with a 25% tariff on certain imports to protect local producers like Ternium.
• Regional Shifts: Mexico is still their biggest market, making up 48% of shipments. However, Brazil is growing in importance. It now accounts for 25% of sales after Ternium fully took over Usiminas in 2023, adding 3.5 million tons of capacity.

4. Mining: The "Pantry" Update

Mining is a vital safety net, but it requires heavy spending.

• Replenishing the Pantry: Their reserves of high-quality "friable" iron ore dropped by 11 million tons. They have about 120 million tons left.
• The "Compact" Hurdle: They have 642 million tons of "compact itabirite" ore, which is harder to process. To use it, they must spend roughly $450 million on a new plant and infrastructure. Until that is built, this ore remains unusable for their current furnaces.

5. Key risks for investors

• Trade Whiplash: Ternium is caught in global trade tensions. If their supply chain fails to meet strict U.S. regional content rules, they face a 25% tariff. This would wipe out their profit on those shipments.
• Control and Legal Hurdles: One group, San Faustin S.A., controls 76% of the voting power. This means minority shareholders have almost no say in company strategy. Also, because the company is based in Luxembourg, it is very difficult for international investors to take legal action if problems arise.

Investor Takeaway: Ternium is currently navigating a difficult cycle of lower prices and trade-related headwinds. While their vertical integration provides a strong foundation, the heavy capital requirements for mining and the concentration of voting power are factors to weigh carefully against their market position in Latin America.