Earnings stock to watch: Ternium SA (NYSE: TX)

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Ternium SA (NYSE: TX) in the fourth quarter of FY 19 has reported the net income of $89.9 million. Compared to net income of $111.9 million in the third quarter 2019

Net income in the fourth quarter 2019 have declined $22 million mainly due to lower operating income, which was partially offset by a lower effective tax rate. Compared to the prior-year-period, the net income in the fourth quarter 2019 fell $345.5 million on the back of lower operating income and lower financial results, partially offset by a lower effective tax rate. The year-over-year decline in financial results was mainly due to the effect of the Argentine peso’s and Mexican peso’s fluctuation against the US dollar in the fourth quarter 2019 versus the fourth quarter 2018. During FY 19, the company incurred capital expenditures of $1.1 billion, as Ternium’s investment program progresses as planned. The company has generated the free cash flow of $595.4 million, with a reduction of working capital. Net debt position stood at $1.5 billion at the end of December 2019, with a net debt to last twelve months EBITDA ratio of 1.0. The company has generated the free cash flow in the fourth quarter 2019 of $85.5 million after capital expenditures of $307.4 million.

Moreover, Ternium has posted the operating income in the fourth quarter 2019 of $92.2 million, with low operating margin and seasonally weak shipments. Operating income in the fourth quarter 2019 fell $136.4 million sequentially, mainly on the back of a $23 decrease in steel revenue per ton and a 139,000-ton decrease in shipments, that includes the lower finished steel shipments and lower slab shipments to third parties. Steel revenue per ton fell sequentially, as it continued to reflect the lagged effect in contract pricing of a weak pricing environment in North America during the second half of 2019.

Additionally, the company plans to declare an annual dividend of $0.12 per share ($1.20 per ADS), or approximately $235.6 million in the aggregate. If the annual dividend is approved at the shareholders’ meeting, it will be paid on May 5, 2020, with record-date of April 30, 2020.

In addition, the steel demand in 2020 is expected to recover in Brazil and Colombia and to a lesser degree in the United States and Mexico.

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